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TMI Blog2019 (3) TMI 1672X X X X Extracts X X X X X X X X Extracts X X X X ..... not actually let out, as chargeable to tax under the head Profit and gains of business or profession . As the assessee admittedly did not earn any rental income from letting out of these two units which position has also not been disputed by the AO, in my considered opinion, taxing any hypothetical income which is otherwise not sanctioned by any provision under Chapter IV-D, cannot be permitted. The legal sanctity drawn pertains to the very spirit and soul of the Income Tax Act, 1961. Meaning thereby, Section 5 of the Act stipulates that a person who is a resident can be subjected to tax in respect of income from whatever source which is received or is deemed to be received in India or accrues or arises or deemed to accrue or arise to him in or outside India during such year but there is no provision for charging any imaginary income. Disallowance u/s.14A to the extent of exempt income - HELD THAT:- CIT(Appeals) upheld the addition made by the Assessing Officer relying on the decision of the Hon'ble Bombay High Court in the case of Godrej Boyce [ 2010 (8) TMI 77 - BOMBAY HIGH COURT ] which authorizes the Assessing Officer to recompute the disallowance u/s.14A of the Act as per ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the CBDT circular, we are of the opinion that the present appeal of the Revenue is liable to be dismissed on account of low tax effect. Before parting, we clarify here that the Revenue shall be at liberty to approach the Tribunal for restoration of appeal/s with the requisite submissions indicating that the appeals are protected by the exceptions prescribed in para 10 of the Circular (supra). 5. In the result, appeal of the Revenue is dismissed. ITA No.2225/PUN/2016 ( By Assessee) A.Y.2012-13 6. Coming to the assessee s appeal in ITA No.2225/PUN/2016, grounds of appeal raised by the assessee are as under: 1.The learned CIT(A)-3 erred in law and on facts in confirming protective addition made by AO on account of notional rent of unsold area of 58,965 Sq Ft as Income from House Property disregarding the fact that the same was held as stock-in-trade of the appellant. 2. Alternatively and without prejudice to Ground No.1, the learned CIT(A)II erred in law and on facts in not confining the protective addition of lease rent only on area for which completion certificate received. Learned AO CIT(A) ought to have appreciated that 40,490 sq.ft. area out of 58,965 sq.ft. unsold area has n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me could be determined thereon under this head, did not find favour with the Revenue Authorities. With regard to these issues, the Co-ordinate Bench of the Pune Tribunal has held as follows: 4. I have heard the rival submissions and perused the relevant material on record. It is an undisputed fact that the assessee, a Builder and Developer, was holding two properties as its stock in trade, from which the deemed rental income has been computed u/s 23 of the Act and added to its total income. The AO has made out a case that levy of income tax in respect of properties held by the assessee as an owner, cannot be marred even if the same have been held as stock in trade. The bedrock of the action of the authorities below is certain decisions which, in turn, are based on the judgments of Hon ble Supreme Court in East India Housing Land Development Trust VS. CIT (1961) 42 ITR 49 (SC) and S.G. Mercantile Corporation Pvt. Ltd. Vs. CIT (1972) 83 ITR 700 (SC). It has been held in the latter decision that where a builder, being, owner lets out property for some time pending sale, the income so derived is to be taxed under the head Income from house property and not as Business income .So the ra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e under the head Capital gains . It is no doubt true that section 23 of the Act deems the determination of income from house property, which is not let out, but it is equally trite that a deeming provision cannot be extended beyond its ambit, so as to cover the heads of income or the sections, to which it does not operate. My attention has not been drawn by the ld. DR towards any specific provision under Chapter IV-D of the Act which deems rental income on the properties held as stock in trade, waiting for sale and not actually let out, as chargeable to tax under the head Profit and gains of business or profession . As the assessee admittedly did not earn any rental income from letting out of these two units which position has also not been disputed by the AO, in my considered opinion, taxing any hypothetical income which is otherwise not sanctioned by any provision under Chapter IV-D, cannot be permitted. 6. Even otherwise, section 5 of the Act clearly stipulates that a person who is a resident can be subjected to tax in respect of income from whatever source which is received or is deemed to be received in India or accrues or arises or deemed to accrue or arise to him in or outsi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any satisfaction in this regard as to the incorrect working of the assessee and there is no interest bearing loan and accordingly, u/s.14A be not applicable. The Ld. CIT(Appeals) upheld the addition made by the Assessing Officer relying on the decision of the Hon'ble Bombay High Court in the case of Godrej Boyce reported as 328 ITR 81 (Bom.) which authorizes the Assessing Officer to recompute the disallowance u/s.14A of the Act as per prescribed method under Rule 8D in case he is not satisfied with the claim of the assessee having regard to the accounts. The Ld. CIT(Appeals) has not brought out any sanctity as to the fact whether disallowance is to be restricted to the extent of exempt income or it can travel beyond that also. It is admitted by the Revenue that the assessee has received exempt income of ₹ 22,000/-. The disallowance, in our view, should be restricted to the extent of exempt income earned. We hold accordingly. Thus, ground No.5 raised in appeal by the assessee is allowed. 13. Ground Nos. 6 and 7 relates to denial of deduction/proportionate deduction claimed u/s.80IB(10) of the Act. The Ld. AR of the assessee submitted that these grounds are covered in favo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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