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TMI Blog2021 (1) TMI 360X X X X Extracts X X X X X X X X Extracts X X X X ..... ri Dharan Gandhi, AR ORDER PER S. RIFAUR RAHMAN, ACCOUNTANT MEMBER: The present appeal has been filed by the revenue against the order of Ld. Commissioner of Income Tax (Appeals) 4 in short referred as Ld. CIT(A) , Mumbai, dated 13.11.2018 for Assessment Year (in short AY) 2014-15. 2. The brief facts of the case are, assessee is engaged in the business of construction activity and filed its return of income on 29/09/2014 for assessment year 2014-15 declaring total income of ₹ 4,65,800/-. Subsequently, the case was selected for scrutiny under compulsory basis. Accordingly, notices u/s 143(2) and 142(1) of the Act were issued and served on the assessee. In response, AR of the assessee filed the relevant information as called for. AR of the assessee submitted that since the assessee is into the business of construction and development of properties, the income from trading assets will not be chargeable to tax u/s.22 and thus, Section 23 would not have any application. Further, relying on the decision of the Hon'ble Apex Court in the case of M/s. Chennai Properties Investments Ltd. vs. CIT, he submitted that since the assessee has constructed a mall/sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... :- 1. Whether on the facts and in circumstances of the case and law, the Ld. CIT(A) was correct in deleting the addition made on account of income from House Property on shops /Commercial premises held as closing stock by assessee having regard to the nature of business of the assessee and having received Occupancy Certificate from the statutory authorities? 2. Whether on the facts and circumstances of the case and law, the Ld. CIT(A) was correct in deleting the addition made on account of income from house property despite the facts that the assessee owns more than one property capable of fetching fair market rent and disregarding the provisions of section 23(4)(b) and section 23(l)(a) of the Act., which mandates taxability of notional rent in the hands of owner of such house property? 3. Whether on the facts and circumstances of the case and law, the Ld. CIT(A) was correct in deleting the addition made on account of income from house property despite the fact that the provision of the act does not distinguish or exempt any business asset being the closing stock in the instant case from chargeability of income from house property? 7. At the outset, Ld. AR appea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 23 of the Act as income from house property. 4. On appeal the learned CIT(A) sustained the action of the AO in bringing to tax the notional annual letting value under the head income from house property in respect of the unsold flats. Aggrieved, assessees are in appeal before us. 5. The learned A.R. before us strongly placing reliance on the decision of the Hon'ble Gujarat High Court in the case of Neha Builders Pvt. Ltd. (supra) submitted that if the property is used as stock in trade then such property would become or partake the character of stock and any income derived from such stock in trade would be income from business and not income from house property. The learned counsel also placed reliance on the decision of the Coordinate Bench in the case of C.R. Developers Pvt. Ltd. vs. JCIT in ITA No. 4277/Mum/2013 dated 13.05.2015 and submitted that identical issue has been decided by the Coordinate Bench holding that in the case of property held as stock in trade the income should be assessable under the head income from business and no income shall be brought to tax as notional annual letting value under the head income from house property . 6. The l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e', 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 Tribunals and, all of sudden, the Tribunal started applying the analogy. 9. From the statement of the assessee, it would clearly appear that it was treating the property as 'stock-in-trade'. Not only this, it will also be clear from the records that, except for the ground floor, which has been let out by the assessee, all other portions of the property constructed have been sold out. If that be so, the property, right from the beginning was a 'stock-in-trade'. 9. Similarly the Coordinate Bench has considered similar issue as to whether the unsold property which is held as stock in trade by the assessee can be assessed under the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which is main object of the assessee company. 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 intention to earn rent by letting out the flats. The flats not sold was its stock-in-trade and income arising on its sale is liable to be taxed as business income. Accordingly, we do not find any justification in the order of AO for estimating rental income from these vacant flats u/s.23 which is assessee s stock in trade as at the end of the year. Accordingly, the AO is directed to delete the addition made by estimating letting value of the flats u/s.23 of the I.T.Act. 10. In the case on hand before us it is an undisputed fact that both assessees have treated the unsold flats as stock in trade in the books of account and the flats sold by them were assessed under the head income from business . Thus, respectfully following the above said decisions we hold that the unsold flats which are stock in trade when they were sold they are assessable under the head income fr ..... X X X X Extracts X X X X X X X X Extracts X X X X
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