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TMI Blog2019 (8) TMI 1668X X X X Extracts X X X X X X X X Extracts X X X X ..... he AO to delete the addition made under the head income from house property . We find that the issue is squarely covered in favour of the assessee and, hence, the order of the CIT(A) upholding the addition made by AO estimating the ALV in respect of unsold flats cannot be sustained. The decision relied upon by the learned DR in the case of CIT vs. Gundecha Builders [ 2019 (1) TMI 112 - BOMBAY HIGH COURT] is distinguishable on facts as in that case the unsold portion of the property constructed by the builder was given on rent and rental income was treated as business income. Whereas, in the present case, the assessee has not let out any flats and all were lying unsold as stock in trade. Accordingly, we are inclined to set aside the order of the CIT(A) and direct the AO to delete the addition on account of estimation of ALV in respect of unsold flats for A.Y. 2013-14. Appeal of the assessee is allowed. - ITA Nos.2811 & 2812/Mum/2018 - - - Dated:- 22-8-2019 - Shri Rajesh Kumar And Shri Ram Lal Negi, JJ. Appellant By : Shri Sanjay Sawant Respondent By : Shri Rajeev Gubgotra ORDER Rajesh Kumar, J. The captioned appeals filed by the assessee pertaini ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Court upheld the order of the Tribunal wherein income was held to be assessed as Income from house property . 5. After hearing both the parties and perusal of material available on record, we observe that the issue of estimation of notional rent in respect of unsold plots has been decided in the case of assessee s sister concern Makewaves Sea Resort Pvt. Ltd (supra), wherein it has been held as under: 8. We have heard the rival submissions of the parties and also perused the material on record including the decision relied upon by the assessee. As pointed out by the Ld. counsel the coordinate Bench has decided the identical issue in favour of the assessee in the case of Ferani Hotels Ltd. vs. ACIT (supra). The findings of the coordinate Bench are as under:- 6. Under this issue the assessee has challenged the confirmation of the addition of ₹ 13,22,90,044/- under the head of income from house property on account of deemed income from unsold unit/ flat which was closing stock of the appellant as per provisions of Sections 22 and 23 of the Act. At the very outset, the Ld. Representative of the assessee has argued that the assessee is deriving its income from hot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... operty and computed notional annual letting value on such unsold flats placing reliance on the decision in the case of Ansal Housing Finance Leasing Co. Ltd. (supra). The action of the AO was upheld by the learned CIT(A). 8. The Hon'ble Gujarat High Court in the case of Neha Builders Pvt. Ltd. (supra) considered the question whether the rental income received from any property in the construction business can be claimed under the head income from property even though the said property was included in the closing stock. The Hon'ble Gujarat High Court held that 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 house property. While holding so the Hon'ble High Court observed as under: - 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 p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... M/s Perfect Scale Company Pvt. Ltd., ITA Nos.3228 to 3234/Mum/2013, order dated 6-9-2013, wherein it was held that in respect of assets held as business, income from the same is not assessable u/s.23(1) of the IT Act. 4. On the other hand, ld. DR relied on the order of Hon ble Delhi High Court in the case of Ansal Housing Finance Leasing Co. Ltd., 354 ITR 180 (Delhi) in support of the proposition that even in respect of unsold flats by the developer is liable to be taxed as income from house property. 5. We have considered rival contentions and perused the record. The issue under consideration has been restored by the CIT(A) to the file of AO to compute the annual value. Recently the Hon ble Supreme Court in the case of M/s Chennai Properties Investments Ltd. Vs. CIT, reported in (2015) 42 SCD 651, vide judgment dated 9-4-2015 has held that where assessee company engaged in the activity of letting out properties and the rental income received was shown as business income, the action of AO treating the rental income as income from house property in place of income from business shown by the assessee was held to be not justified. The Hon ble Supreme Court held that s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee company engaged in the activity of letting out properties and the rental income received was shown as business income, the action of AO treating the rental income as income from house property in place of income from business shown by the assessee was held to be not justified. The Hon ble Supreme Court held that since the assessee company s main object, is to acquire and held properties and to let out these properties, the income earned by letting out these properties is main objective of the company, therefore, rent received from the letting out of the properties is assessable as income from business. On the very same analogy in the instant case, assessee is engaged in business of construction and development, 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-intrade. 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-intrade and income arising on its sale is liable to be taxed as business in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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