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TMI Blog2019 (9) TMI 1403X X X X Extracts X X X X X X X X Extracts X X X X ..... honorable CIT (Appeals) - 5, Pune erred in confirming the addition of Rs. 11,59,200/- being the Annual Letting Value of the unsold units lying as Stock in Trade of the appellant without considering the annual letting value as calculated by the appellant based on leave and license agreement of one of the flat situated in the said project. The appellant hereby prays that the addition may please be restricted to Rs. 5,19,960/-. 3) The appellant hereby reserves the right to add, amend, alter, delete or raise any additional ground of appeal." 3. Briefly stated the relevant facts include that the assessee is a partnership firm and is engaged in the business of Builders, Promoters and Developers. The assessee filed the return of income declaring Nil income. During the year under consideration, the assessee reported 6 unsold flats, which were never let out and the assessee never earned rental income for the same. Relying on a rental agreement relating to the flats actual let out the Annual Letting Value (ALV) of these unsold flats are calculated by the Assessing Officer and added Rs. 11,59,200/- as per the discussion given in para 8 of the assessment order of the Assessing Officer. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be one of the businesses for which the company was incorporated. 8. True it is, that income derived from the property would always be termed as 'income' from the property, but if the property is used as 'stock-in-trade', then the said property would become or partake the character of the stock, and any income derived from the stock, would be 'income' from the business, and not income from the property. If the business of the assessee is to construct the property and sell it or to construct and let out the same, then that would be the 'business' and the business stocks, which may include movable and immovable, would be taken to be 'stock-in-trade', and any income derived from such stocks cannot be termed as 'income from property'. Even otherwise, it is to be seen that there was distinction between the 'income from business' and 'income from property' on one side, and 'any income from other sources'. The Tribunal, in our considered opinion, was absolutely unjustified in comparing the rental income with the dividend income on the shares or interest income on the deposits. Even otherwise, this question was not raised before the subordinate Tribunal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a) it was the case of actual rental income earned by the assessee from renting of flats constructed by it. Hence, the decision rendered in the case of Commissioner of Income Tax Vs. Sane & Doshi Enterprises (supra) would not apply in the facts of the present case. 10. We further find that Mumbai Bench of the Tribunal in M/s. C.R. Developments Pvt. Ltd. Vs. JCIT (supra), M/s. Runwal Constructions Vs. ACIT (supra) and Shri Girdharilal K. Lulla Vs. DCIT (supra) under similar set of facts have taken a consistent view in holding notional annual rental value on unsold flats held as stock-in-trade by the assessee engaged in construction and development activities as "Business Income‟." 6. Further, we considered the decision of the Tribunal in the case M/s. Shree Balaji Ventures (supra) and find relevant to extract the relevant lines from para 5 to 6 of the said order of the Tribunal (supra) where the Tribunal overturned the impugned order and direct to delete the addition. The said relevant lines are extracted hereunder :- "5. ........... 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the ld. AR fairly admitted that the decision is against the assessee. However, the ld. AR submitted that in view of the decision of Hon‟ble Supreme Court of India in the case of Commissioner of Income Tax Vs. Vegetable Products Ltd. reported as 88 ITR 192 the ratio laid down by the Hon‟ble Gujarat High Court in the case of Commissioner of Income Tax Vs. Neha Builders (P.) Ltd. (supra) has to be followed. 6. We have heard the submissions made by representatives of rival sides and have perused the orders of authorities below. The solitary issue in the appeal by assessee is against the addition of Rs. 75,50,995/- under the head "Income from House Property‟ in respect of notional rental income on the flats held as stock-in-trade. In so far as the facts narrated by the ld. AR of the assessee, there is no dispute. 7. The issue before us for adjudication is whether the notional annual rental value on unsold flats held as stock-in-trade by the assessee is to be assessed under the head "Business Income" or under the head "Income from House Property". The Hon‟ble Gujarat High Court in the case of Commissioner of Income Tax Vs. Neha Builders (P.) Ltd. (supra) has h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l rental value on unsold flats built by assessee engaged in construction business is assessable as income from house property. It is a well settled law that when two divergent views of non-jurisdictional High Courts are available and there is no decision on the issue from the Jurisdictional High Court, the view in favour of the assessee has to be adopted [Commissioner of Income Tax Vs. Vegetable Products Ltd.(supra)]. 9. In so far as the decision of Hon‟ble Bombay High Court in the case of Commissioner of Income Tax Vs. Sane & Doshi Enterprises (supra) is concerned we find that the facts in the said case are at variance. In the said case the assessee was engaged in construction business. The assessee rented out unsold flats and suo-motu offered rental income from the flats under the head "Income from House Property". On the contrary the Revenue wanted to tax rental income under the head "Business Income". The matter travelled to the Tribunal. The Tribunal held that the income earned by the assessee from renting of flats is to be assessed under the head "Income from House Property". The Department carried the matter in appeal before the Hon‟ble High Court. The Hon̶ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e cases, the Revenue's argument is that such income should be taxable under the head 'business income'. This argument of the Revenue stands rejected by the Hon'ble Bombay High Court (supra). 11. Flat not actually rented out: In case of notional/deemed rental income calculated by the Assessing Officers in various cases, the Tribunal took a consistent view that such notional/deemed rental income is taxable under the head 'business income' and not under the head 'income from house property'. The decision of the Tribunal in the cases of (i) M/s. C. R. Developments Pvt. Ltd. vs. JCIT in ITA No.4277/Mum/2012 for the assessment year 2009-10, order dated 13.05.2015 (Mum.-Trib.); (ii) M/s. Runwal Constructions vs. ACIT in ITA No.5408/Mum/2016 for the assessment year 2012-13, order dated 22.02.2018 (Mum.-Trib.); and, (iii) Shri Girdharilal K. Lulla vs. DCIT in ITA No.1604/Mum/2016 for the assessment year 2011-12, order dated 17.11.2017 (Mum.-Trib.) support the taxation of such notional rental income under the head' business income'. The undersigned are party to the decision of the Tribunal in the case of M/s. Cosmopolis Construction (supra). 12. In the present case, it is an undisputed f ..... X X X X Extracts X X X X X X X X Extracts X X X X
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