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TMI Blog2020 (11) TMI 218X X X X Extracts X X X X X X X X Extracts X X X X ..... stock-in-trade of its business as that of a builder and developer. - Decided in favour of assessee - Shri Shamim Yahya, Accountant Member And Shri Ravish Sood, Judicial Member For the Appellant : Dr. K. Shivram, Senior Advocate And Ms.Ne elam J adhav, A.R For the Respondent : Shri Uodal Raj Singh, D.R ORDER PER RAVISH SOOD, JM The captioned appeals filed by the assessee are directed against the respective orders passed by the CIT(A)-44, Mumbai, dated 08.02.2019, which in turn arises from the assessment orders passed under Sec.143(3) of the Income Tax Act, 1961 (for short Act ), dated 02.12.2016 and 30.11.2017 for A.Y. 2014-15 and A.Y. 2015-16, respectively. As the issues involved in the captioned appeals are inextricably interlinked or in fact interwoven, the same are therefore being taken up and disposed off by way of a consolidated order. We shall first take up the appeal of the assessee for A.Y. 2014-15 wherein the impugned order has been assailed before us on the following effective grounds of appeal: 1. The learned CIT(A) erred in confirming the addition of ₹ 43,15,097/- made by the AO in respect of unsold f lats which were held as stock in trade as income from house p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee that as the income on the sale of the unsold flats forming part of its closing stock was liable to be assessed as its business income and not as income from house property, therefore, the ALV of the said flats was not exigible to tax under the head income from house property. It was further submitted by the assessee that as the aforesaid property was acquired in the course of its business as that of a builder and developer and not for the purpose of letting out, therefore, it could not be subjected to tax under the head house property. The assessee tried to distinguish the facts involved in its case as against those which were there before the Hon ble High Court of Delhi in the case of Ansal Housing Finance and Leasing Company Ltd.(supra). However, the A.O was not persuaded to subscribe to the aforesaid claim of the assessee. Observing, that the Hon ble High Court of Delhi in the case of Ansal Housing Finance and Leasing Company Ltd. (supra), had held, that the tax incidence did not depend upon whether the assessee had actually rented out the property with an intention of carrying on business but on the factum of ownership, the A.O held a conviction that the ALV of the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alue (ALV) = ₹ 21,25,290 On the basis of his aforesaid deliberations the A.O made an addition of ₹ 43,15,097/- towards ALV of the aforesaid flats in the hands of the assessee. 4. Aggrieved, the assessee assailed the assessment order before the CIT(A). After deliberating on the contentions advanced by the assessee, it was observed by the CIT(A) that the primary claim of the assessee was that as it was holding the flats in question as stock-in-trade of its business as that of a real estate developer and not with a purpose of letting out the same, the ALV of the said flats could thus not be determined and therein brought to tax in its hands under the head house property . However, the CIT(A) did not find favour with the aforesaid claim of the assessee. Relying on the judgement of the Hon ble High Court of Bombay in the case of CIT Vs. Gundecha Builders (2019) 102 taxman.com 27 (Bom), the CIT(A) observed, that as held by the Hon ble High Court even in a case of a real estate developer who was not engaged in the business of letting out its property, the rental income derived from the property held as stock-in-trade was taxable under the head house property . In the backdrop ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the lower authorities were in error in computing the ALV of the flats held by the assessee firm as stock-in-trade of its business of a builder and developer the ld. A.R relied on a host of orders of the coordinate benches of the Tribunal viz. (i) C.R. Development Pvt. Ltd. Vs. JCIT, ITA No. 4277/Mum/2012, dated 13.05.2015; (ii) Runwal Constructions Vs. ACIT, ITA No. 5408 5409/Mum/2016, dated 22.02.2018 (Mum); (iii) Balaji Ventures Vs. ITO, ITA No. 1914/Pune/2018, dated 19.02.2019 (Pune); (iv) Rafiaahmad Patel Vs. ITO, ITA No. 898/Pune/2019, dated 23.12.2019 (Pune); and (v) ITO, Vs. Arihant Estates Pvt. Ltd., ITA No.7037/Mum/2016, dated 27.06.2016 (Mum). On the basis of his aforesaid submissions, it was the claim of the ld. A.R that the addition made/sustained by the A.O/CIT(A) towards ALV of the flats held by the assessee firm as stock-in-trade of its business of a builder and developer could not be sustained and was liable to be vacated. Adverting to the judgment of the Hon ble High Court of Bombay in the case of CIT Vs. Gundecha Builders (2019) 102 taxman.com 27(Bom) as was relied upon by the CIT(A), it was submitted by the ld. A.R that the facts involved in the said case were ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e ALV of the aforesaid flats under the head house property in the hands of the assessee firm. Our indulgence in the present appeal has been sought by the assessee, to adjudicate, the sustainability of the view taken by the lower authorities that the ALV of the flats held by the assessee as stock-in-trade was liable to be determined and therein brought to tax under the head house property . As is discernible from the assessment order, the A.O by relying on the order of the Hon ble High Court of Delhi in the case of CIT Vs. Ansal Housing Finance and Leasing Company Ltd. (2013) 354 ITR 180 (Del) , had determined the ALV of the flats which were held by the assessee as part of the stock-in-trade of its business of a builder and developer, and had brought the same to tax under the head house property . On appeal, the CIT(A) had found favour with the view taken by the A.O by drawing support from the order of the Hon ble High Court of Bombay in the case of CIT Vs. Gundecha Builders (2019) 102 CCH 426 (Bom) . 8. On a perusal of the order of the Hon ble Jurisdictional High Court in the case of Gundecha Builders (supra), we find, that the issue before the High Court was that where an assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... said case, it was the claim of the assessee that unlike the other builders as it was not into letting out of properties, the determination of deemed income which had formed the basis for assessment under the ALV method, was not called for in its case. However, the High Court being of the view that the levy of income tax in the case of an assessee holding house property was premised not on whether the assessee carries on business, as landlord, but on the ownership, thus, turned down the aforesaid claim of the assessee. To sum up, in the backdrop of its conviction that the incidence of charge under the head house property was based on the factum of ownership of property, the High Court was of the view that as the capacity of being an owner was not diminished one whit, because the assessee carried on the business of developing, building and selling flats in housing estates, therefore, the ALV of the flats held as stock-in-trade by the assessee in its business of a builder and developer was liable to be determined and brought to tax under the head house property . But then, we find, that taking a contrary view the Hon ble High Court of Gujarat had way back in the case of CIT vs. Neha B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e short point involved in this appeal is the validity of addition sustained by the CIT(A) on account of notional ALV of the unsold flat, which is held by the assessee as stock-in-trade. Factually speaking, it is not in dispute that the flat in question is not yielding any rental income to the assessee, as it has not been let-out. It is also not in dispute that the project in question has been completed during the year under consideration, and the said flat is shown as stock-in-trade at the end of the year. At the time of hearing, the learned representative also pointed out that the flat has been ultimately sold on 06.11.2012. We find that our coordinate Bench in the case of C.R. Developments Pvt. Ltd. (supra) dealt with charging of notional income under the head 'Income from House Property' in respect of unsold shops which were shown by assessee therein as part of 'stockin- trade'. As per the Tribunal The three flats which could not be sold at the end of the year was shown as stock-in-trade. Estimating rental income by the AO for these three flats as income from house property was not justified insofar as these flats were neither given on rent nor the assessee has i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9;Income from House Property'. In the present case, the facts are quite different inasmuch as the unsold flat in question has not yielded any rental income as the flat has not been let-out, and is being held by the assessee purely as stock-in-trade; and, what the Assessing Officer has tried to do is to assess only a notional income thereof. Thus, the ratio of the judgment of the Hon'ble Bombay High Court in the case of Sane Doshi Enterprises (supra) has been rendered in the context of qualitatively different facts, and is not applicable in the present case. Accordingly, preferring the view taken by the Hon ble High Court of Gujarat in CIT vs. Neha Builders Pvt. Ltd. (2008) 296 ITR 661 (Guj), as per which the ALV of the unsold property held by an assessee as stock-in-trade could not be determined and brought to tax under the head house property , as against that arrived at by the Hon ble High Court of Delhi holding to the contrary in CIT Vs. Ansal Housing Finance and Leasing Company Ltd. (2013) 354 ITR 180 (Del); and also following the order of ITAT, Mumbai in Shri. Rajendra Godshalwar Vs. ITO-21(3)(1), Mumbai [ITA No. 7470/Mum/2017, dated 31.01.2019], we herein conclude tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Sec. 23(5) of the Act, no addition is permissible in the instant assessment year. Be that as it may, we are only trying point out that the assess ability of notional income in respect of unsold flat, which is taken as stock-in-trade, is not merited in the instant case. Thus, we set-aside the order of CIT(A) and direct the Assessing Officer to delete the addition. 11. We, thus, in the backdrop of our aforesaid deliberations not being able to concur with the view taken by the lower authorities, therein, set aside the order of the CIT(A) and direct the A.O to delete the addition made by him towards the ALV of the flats held by the assessee as stock-in-trade of its business as that of a builder and developer. The Grounds of appeal Nos. 1 to 4 are allowed in terms of our aforesaid observations. 12. As we have concluded that the assess ability of notional income i.e ALV in respect of unsold flats held by the assessee as stock-in-trade of its business as that of a builder and developer is not merited in the instant case, therefore, the grounds of appeal nos. 5 to 7 having been rendered as merely academic are not being adverted to and therein adjudicated upon. The Grounds of appeal nos. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ined the ALV of the flats held by the assessee as stock-in-trade of its projects viz. (i) Ashwin CHS Ltd: and (ii) Infinity Project, and therein made an addition of ₹ 49,17,907/- under the head income from house property. Accordingly, the A.O vide his order passed under Sec. 143(3), dated 30.11.2017 scaled down the returned loss of the assessee to (-) ₹ 1,54,81,960/-. 17. Aggrieved, the assessee assailed the assessment order before the CIT(A). However, the CIT(A) not finding favour with the contentions advanced by the assessee upheld the addition made by the A.O. 18. The assessee being aggrieved with the order of the CIT(A) has carried the matter in appeal before us. As the facts and the issue involved in the present appeal remains the same as were there before us in the appeal of the assessee for A.Y. 2014-15 in ITA No. 2372/Mum/2019, our order therein passed shall thus apply mutatis mutandis for the purpose of disposal of the present appeal. Accordingly, the appeal filed by the appeal for A.Y 2015-6 in ITA No. 1860/Mum/2019 is allowed in terms of our observations recorded while disposing off its appeal for A.Y 2014-15 in ITA No. 2372/Mum/2019. 19. The appeal of the as ..... X X X X Extracts X X X X X X X X Extracts X X X X
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