9911796707
TMI Blog2019 (12) TMI 486X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee is rejected. I ncome from House Property - property is used as stock in trade - notional annual letting value made u/s. 23 - HELD THAT:- Hon ble Jurisdictional High Court of Gujarat in the case of CIT vs. Neha Builders Pvt. Ltd. [ 2006 (8) TMI 105 - GUJARAT HIGH COURT] held that if property is used as stock in trade, then, said property would become partake character of stock and any income derived from stock would be income from business and not income from house property. We have further noticed that on identical issue on similar fact, the Co-ordinate Bench of the Bombay in the case of M/s. Runwal Constructions Runwal Omkar Esquare [ 2018 (2) TMI 1707 - ITAT MUMBAI] to hold that the unsold flats which are stock in trade when they were sold they are assessable under the head income from business when they are sold and therefore the AO is not correct in bringing to tax notional annual letting value in respect of those unsold flats under the head income from house property. we direct the assessing officer to delete the addition on account of notional annual letting value made u/s. 23 of the act as income from house property, therefore, this ground of appeal of the assessee is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 17 involved common issue on identical facts 3. The fact in brief is that return of income declaring income of ₹ 2,05,84,525/- was filed on 14th August, 2013. The case was subject to scrutiny assessment. Assessment order u/s. 143(3) of the act was passed on 12 Feb, 2016 and total income was determined at ₹ 2,38,21,080/- after making disallowance of ₹ 5,885/- u/s. 2(24) r.w.s. 36(1)(va), disallowance of foreign travel expenses of ₹ 1,10,000/- and addition on account of income from house property of ₹ 31,20,700/-. The assessee has not pressed the ground no. 1 pertaining to disallowance of ₹ 5,885/- on account of delay in making employee's contribution to provident fund and ESIC, therefore, this ground of appeal of the assessee is dismissed as not pressed. Other grounds of appeal pertaining to the aforesaid additions are adjudicated as under:- Ground No. 1 (Disallowance of travelling expenses of ₹ 1,10,000) 4. During the course of assessment, the assessing officer noticed that assessee has claimed an amount of ₹ 1,10,000/- as foreign travelling expenses. The assessing officer asked the assessee to justify its claim of incurring of fore ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pted 8% as ALV(Annual Let out Value) of the property of Vendemataram Prima at ₹ 1,12,22,207/- and worked out at pro rata basis income from house property at ₹ 31,20,700/-. 7. Aggrieved assessee has filed appeal before the ld. CIT(A). The ld. CIT(A) has dismissed the appeal of the assessee. 8. We have heard the rival contentions. The assessee company is engaged in the business of building and developing commercial and residential complexes. During the course of assessment, the assessing officer has computed notional rental income in respect of unsold units of the scheme Vendematram Prima. The assessee has shown the unsold units in the stock in trade as work in progress as per balance sheet as on 31st March, 2013. The assessee has also submitted that in respect of stock in trade there is no question of addition on account of income from house property and no notional rent can be attributed to the vacant flats. During the course of appellate proceedings before us, the assessee has placed reliance on the following judicial pronouncements:- Sr. No. Particulars 1. CIT Vs. Neha Builders (P.) Ltd. [2007] 164 taxman 342 (Guj) (Gujarat High Court) 2. Sarovar Developer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the addition on account of adopting 8% of the ALV of the properties as income of the assessee. This ground of appeal is based on similar facts on identical issue as adjudicated above in this order vide ITA No. 2120/Ahd/2017. On the similar reasons after applying the findings of the ITA No. 2120/Ahd/2017, the impugned addition is deleted. Accordingly, this ground of appeal is allowed. ITA No. 2688/Ahd/2017 filed by revenue and Cross Objection No. 22/Ahd/2019 filed by the assessee 10. All the grounds of appeal of the revenue and cross objection of the assessee are inter connected to the common issue of disallowance of forfeited amount as trade loss, therefore, for the sake of convenience, these grounds of appeal are adjudicated together by this common order. 11. During the course of assessment, the assessing officer noticed that assesse has claimed an amount of ₹ 3,50,00,00/- as trade loss forfeited as per arbitration award. The assessing officer noticed that assessee company has entered into an agreement for sale without possession with Shukham Properties for a fixed consideration of ₹ 13 crores and payment of ₹ 5 crores was made shown as advance in the balance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s loss. The AO has disallowed the amount on the ground that it was in the nature of penalty. Forfeiture of EMD on account of nonfulfillment of quota allotted to the assessee cannot be treated penal in nature, as held by the AO. In the case of Tarun Commercial Mills Co. Ltd. (supra) the assessee executed a bond towards shortfall in export obligations. Under the terms of bond executed with the Government the assessee had option to either achieve the target or pay for the shortfall. The terms of the bond clearly indicated that the auction with the manufacturer assessee of paying for the shortfall could be for variety of reasons in the interest of commercial expediency. Hon'ble Gujarat High Court has held that the exercise of option of the assessee for payment on account of shortfall was not in the nature of penalty. In the case of CIT v. Surya Prabha Mills (supra) the assessee company was running a textile mill, was a member of cotton mill association, which allotted quota of foreign cotton to its members. The allotment was made on the basis of number of spindles working on higher counts. The assessee did not import the allotted quantify of cotton, but paid the agreed guarantee am ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , forfeiture of security deposit is in the nature of business loss and has to be allowed as deduction. Accordingly, neither the AO was justified in treating neither the forfeiture of security deposit as penal in nature nor the learned CIT(A) was justified in holding the security deposit in the nature of capital expenditure. Accordingly, we set aside the order of the learned CIT(A) and direct the AO to allow the claim of the assessee." 11.7. Now in the present case, the appellant is engaged in the business of development of properties and also buying and selling of the properties. The appellant has shown the revenues from sale of properties. Thus, in connection with the business, the appellant entered into a contract for the purchase of certain shopping area which was under development from Shukam Properties Private Ltd. and the amount was shown in the balance sheet under note 10 as advance given. The appellant company explained that in the Profit & Loss Account for the year ending 31.03.2014, under the head "Expenses -Trading Loss - Forfeited amount as per Arbitration Award, an amount of ₹ 3,50,00,000/- has been claimed as Revenue Expenditure and in Note No.25(HI) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch loss as business loss. Supereme Court held that taking into consideration the facts and circumstances of the case the loss occurred must be held to be a loss incidental to the business carried on by the assessee in Malaya.during the war. iii] That a trade loss is considered deductible because it comes in the process of ascertainment of chargeable income by way of profits and gains of the business/profession. Section 28 of the Income-tax Act refers to profits and gains of business/profession and such profits can be only the net profits and not the gross receipts of the business/profession [CIT Vs. S.C. Kothari (1971) 82 ITR 794 (SC,)] 1 l.8. In the normal course of business by paying the advance and also by entering into an agreement the assessee had acquired right to purchase the property as per the terms and schedule mentioned in the agreement for sale entered by the appellant. The property was being purchased for its normal business as stock-in-trade. Later, on realizing that price of the property was very high, the appellant choose to cancel the transaction. Due to cancelling deal, there was possibility of whole advance getting forfeited. The assessee, by way of arbitrati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ated 30th March, 2012 and the same was shown as advance in the balance sheet of the company for the ended 30th March, 2012. Further payment of ₹ 8 crore was to be made to the vendor as per the terms of agreement to sale dated 30th March, 2012. However, due to market condition which was deteriorating in the real estate business and particularly the price of the property in Dev Arc Mall was also getting deteriorated, the assessee company made proposition to the vendor to revise the sale consideration of ₹ 13 crore as agreed upon in the agreement for sale without possession on 30th March, 2012 to a reduced sale consideration at ₹ 8 crore. However, the vendor did not agree to the proposal of the company, therefore, the vendor has decided to forfeit the advance payment of ₹ 5 crore already made to the vendor in pursuance of the agreement for sale without possession dated 30th March, 2012. The assessee was of the view that if the assessee company purchases the said property at a price consideration of ₹ 13 crores in the subsequent sale, the company would not fetch more than ₹ 8 crores and there was likely loss to the company as the assessee could not ..... X X X X Extracts X X X X X X X X Extracts X X X X
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