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TMI Blog2019 (5) TMI 1727X X X X Extracts X X X X X X X X Extracts X X X X ..... se of CIT Vs. V.R. Ringmallu Rahukumar ( 1997 (1) TMI 74 - SUPREME COURT ) . Further to the same effect is order of the honourable Hon ble Jurisdictional High Court in the case of Riaz A. Saikh ( 2013 (12) TMI 248 - BOMBAY HIGH COURT ) . - Decided against revenue Deemed rental income from unsold flats - AO has added notional rental income for the unsold flats in the hands of the assessee - HELD THAT:- Upon careful consideration we note that the amendment in the Act bringing into the ambit of taxation the annual value of unsold flats in the hands of the real estate developer has been brought into the statue books by amendment w.e.f. 1.4.2018. The same has been held to be prospective. Hence, on the touchstone of this amendment the additions made in the hands of the assessee for the present assessment year is not sustainable. As regards decision of Hon ble Delhi High Court in the case of Ansal Housing Finance and Leasing Co. Ltd. ( 2012 (11) TMI 323 - DELHI HIGH COURT ) relied upon by learned CIT(A), we note that there is a decision of Hon ble Gujarat High Court in the case of Neha Builders Pvt. Ltd. ( 2006 (8) TMI 105 - GUJARAT HIGH COURT ) , in which identical issue has been decided ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onal addition on account of deemed rental income on unsold flats/units held by the Appellant as stock in trade 4. erred in upholding the action of the learned AO in making notional addition to the income of the Appellant under the head Income From House Property (IFHP) of ₹ 287,000 (i.e. 70% of 410,000) under section 23(4) of the Act, on account of deemed rental income on unsold flats( i.e. flat in Monami CHSJuhu) held as stock in trade; 5. failed to appreciate that, the unsold flats which are held as inventory in the business of construction, would amount to flats occupied for the purpose of Appellant's business and therefore by virtue of exemption given in section 22 of the Act, annual value of such flats cannot be brought to tax under the head IFHP; 6. without prejudice to the above, erred in upholding the action of the AO in not granting vacancy allowance with respect to the unsold stock in trade, as the entire stock in trade were vacant during the year under appeal; 7. without prejudice to the above, erred in upholding the action of the AO in computing the fair market rent at notional adhoc rate of ₹ 11 per square feet as deemed rent from such house ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s and credits, goodwill, book debts, fittings and fixtures, benefits of all contracts and orders and all effects thereof to the use of the continuing partners absolutely and forever; and that the assessee, in lieu of retirement from the partnership, received an amount of ₹ 4,74,01,447/- over and above its capital contribution to the firm. Considering the above facts, the AO held the view that by retiring from the partnership from through a written agreement, the assessee had relinquished and extinguished its rights over the assets and rights for profits of the firm, for a compensation of ₹ 4,74,01,447/- over and above its capital contribution to the firm. Accordingly, he required the assessee to explain as to why the amount received on retirement from the partnership firm should not be charged to tax under the head capital gain. The assessee objected to the proposal Of the AO, and contended that as long as there was no change in ownership of the firm and its properties for the simple reason that the partnership of the firm stood reconstituted, there was no transfer of capital asset. It was further contended by the assessee that when a partner retires, he does not transf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, such decisions were not relevant to the facts of the present case. On the other hand, the AO stated that the decision of Hon'ble ITAT, Mumbai, in the case of Sudhakar Shetty -130 ITD 197 is applicable to the facts of the assessee's case. Considering the above facts, the AO held that on assessee's retirement from the partnership firm, there was a transfer of interest of the retiring partner over the assets of the partnership firm, and, therefore, long-term capital gains arising on such transfer is liable to be taxed in the hands of the assessee. He also held that the long-term capital gain should be worked out on the basis of capital introduced by the assessee and accretion of profit from year to year and allowing indexation for the years concerned. Accordingly, the long-term capital gain was worked out by the AO as under :- Financial Year Working of Indexation Indexed cost (Rs.) 2005-06 499955 * 785/495 7,89,667 2007-08 11133 *785/551 15,861 2010-11 23760000 * 785/711 2,62,32,911 Total Indexed Cost 2,70,38,440 Amount received on retirement 7,16,72,536 Long-Term Capital Gain 4,46,34,096 The AO, accordingly, brought an amount of ₹ 4,46,34 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the Hon'ble ITAT Pune Bench in case of Riaz A. Saikh dated 29/10/2010 and revenue's appeal against the said order was dismissed by the Hon'ble Mumbai High Court vide order dated 26/02/2013 in appeal no.1969 of 2011. 15. The AO relied upon the judgement of Hon'ble ITAT Mumbai in case of Sudhakar M. Shetty. However, in doing so the Hon'ble ITAT had followed ratio of Hon'ble Bombay High Court judgement in case of Tribhuvandas G. Patel vs CIT 155 ITR. However, judgement in this case was reversed by the Hon'ble Apex Court as per the order reported in 236 ITR 515. Therefore, the judgement in case of Sudhakar Shetty is no more a good precedent. On the contrary various judgements cited herein above are quite recent and from higher judicial authority. 16. In view of the above facts and legal position, I am of the view that no addition is warranted in the hands of the assessee u/s 45(4) of the Act, in respect of amount received by it on retirement from partnership. The same is therefore directed to be deleted." Against the above order Revenue is in appeal before us. 8. We have heard both the counsel and perused the records. Learned counsel of the assessee submitted that assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e to be taxed as long term capital gain. Similar view was expounded by the Hon'ble Apex Court in the case of CIT vs. R. Lingmallu Raghukar (124 taxman 127 (SC)). In this case it was held that excess amount received by assessee on retirement from partnership firm was not assessable to capital gains as there was no transfer of any assets as contemplated by expression 'transfer' as defined in section 2(47) of the Act. Furthermore, Hon'ble Jurisdictional High Court in recent order in ITA No. 33 of 2016 vide order dated 18.4.2018 has affirmed the view expounded in the case of Riyaz A. Sheikh (supra). 13. Accordingly in the background of aforesaid discussion and precedent we affirm the order of learned CIT(A). 14. Accordingly, Revenue's appeal on this issue stands dismissed. CO No.311/Mum/2017 15. Ground No.1 to 3 are supportive of the order of the Ld. CIT(A) in Revenue's appeal. 16. Other ground relates to deemed rental income from unsold flats. The assessee is a real estate developer. The AO has added notional rental income for the unsold flats in the hands of the assessee. 17. Upon assessee's appeal learned CIT(A) referred to Hon'ble Delhi High Court deci ..... X X X X Extracts X X X X X X X X Extracts X X X X
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