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TMI Blog2017 (10) TMI 1603X X X X Extracts X X X X X X X X Extracts X X X X ..... covered by the provision itself, is where the property is occupied by the owner for the purpose of his business or profession. Fiscal statutes, it is again trite law, have to be strictly construed. What all is therefore relevant, and the only caveat, is that the annual value assessed should capture the fair rental value of the property, qua which we observe no dispute in the present case; the AO having adopted the same on the basis of reliable data. We, therefore, find no legal infirmity in the Revenue assessing the fair rental value of the, since completed, unsold residential flats at Victoria Towers to tax as income from house property u/s. 22. In fact, sec. 23(5) stands inserted by Finance Act, 2017 (w.e.f. 01.04.2018), specifically providing that the annual value of a house property held as stock-in-trade of his business by the assessee shall be taken at nil for a period of one year from the end of the year in which a completion certificate is obtained in its respect. Further endorsing, if it was necessary, that the annual value of a house property held as stock-in-trade is equally assessable u/s. 22, i.e., irrespective of whether the same is actually let or not. The sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... esidential building by the name Victoria Towers at Siruseri, OMR, Chennai. Similarly, it held unsold area to the extent of 40,477 sq. ft. in a shopping complex by the name Corromandel Plaza , at Navalur, OMR, Chennai. The annual value (AV) thereof in terms of s. 23 was, is in his view, liable to be assessed as income from house property u/s. 22 of the Act. Accordingly, the average rental value realized by the assessee during the year was applied by him to the unsold area as at the year-end, and brought to tax as income from house property at . 4,04,37,950/-, i.e., after allowing standard deduction @ 30% of the annual value u/s. 24(a). In appeal, the ld. CIT(A) was of the view that in-as-much as the residential apartments in Victoria Towers represent the assessee s trading stock, i.e., business assets, there was no question of their rental value being assessed as income from house property, i.e., where the main object of the appellant company is, as stated, to acquire and hold properties. Subject to the direction to the AO to verify the main objects as being in consonance with its activities, he allowed the assessee s claim. The issue of assessment of the annual letting value (A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .e., qua the Victoria Tower construction. He should have, instead, admitting additional evidence in the form of MoA u/r. 46A, sought the AO s consideration in the matter and decided accordingly. On merits, the Revenue s grievance (per Gd.2.1 (part) 2.6) is that the rental income of house property, even if a commercial complex, was assessable as income from house property u/s. 22, relying on the decision in the case of Keyaram Hotels P. Ltd. v. Dy. CIT [2015] 373 ITR 494 (Mad), SLP against which stands dismissed vide [2015] 325 taxmann 512 (SC). Gd. 2.5, we may clarify, speaks of investment of net consideration within the stipulated period as a basis of the extension of benefit u/s. 54/54F. We find no relevance of the same in the present case nor any argument in respect of this ground was advanced during hearing, so that the same is dismissed as without merit. 3. We have heard the parties, and perused the material on record. The issue, on merits, which is qua both the properties, is clearly as to whether a house property owned by the assessee, held for being either sold, as in the case of residential flats at Victoria Towers, or for being let, as in the case of the shopping ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income is assignable to one, it cannot be taxed under another; the relevant part of the judgment reading as under: The several heads of income mentioned in section 6 of the Income Tax Act, 1922, and dealt with separately in sections 7 to 12 are mutually exclusive, each head being specific to cover the income arising from a particular source, and it cannot be said that any one of these sections is more specific than another. Therefore, a particular variety of income must be assignable to one or the other of these sections. If the income under consideration is taxable under section 9 or section 10, then it cannot be taxed under section 12. [emphasis, ours] Incomes not falling under any of the specified sources would fall under the residuary head, i.e., Income from other sources (Chapter IV-F), which specifies certain categories of incomes as well, viz., dividend income; income from letting of house property by a person who is not the owner thereof; where the same is let (by the owner) along with other assets, i.e., furniture, plant or machinery, under the condition of the two lettings being inseperable, etc. In this context, it may be clarified that, for the purpose ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... come from house property would stand to be assessed even if the property under reference is not actually let, i.e., on the basis of the reasonable rent that it is expected to fetch on a regular basis. That is, seeks to bring to tax the income potential of a property irrespective of whether it is realized or not. It is for this reason that the Hon'ble Courts have regarded the ownership (of the house property) per se as the basis for the charge of rental income to tax under the Act. The conclusions drawn in the matter in National Storage Pvt. Ltd. (supra) (affirmed in [1967] 66 ITR 596 (SC), a larger bench decision) after an exhaustive review of the authorities on the subject, are as under: 1. Income-tax is a single tax levied on the total income classified and chargeable under the various heads and not an aggregate of the distinct taxes levied separately on each head of income. 2. That the heads of income in section 6 of the Act are specific heads, which are exclusive and exhaustive. 3. The income which falls under any of these specific heads has got to be computed under that head only in the manner specified in the following sections 7 to 12. 4. If the income fa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nly incidental and subservient to the main business of the assessee, the income derived from the letting will not be the income from property falling under section 9 and the exception to section 9 may also come into operation in such cases. The word business is defined in section 2(13) to include any trade, commerce or manufacture or any adventure or concern in the nature of trade, commerce or manufacture . It, therefore, follows that if the assessee owner is occupying the property for carrying on any adventure or concern in the nature of trade the profits whereof are chargeable to income-tax, section 22 specifically excludes such property from the scope and operation of sections 22 to 27. The Apex Court had earlier, per its larger bench decision in East India Housing Land Development Trust Ltd. [1961] 42 ITR 49 (SC), clarified that the character of income is not altered because it was received by a company formed with the object of developing landed properties and setting up of markets. This aspect, i.e., the company being registered with the sole object to acquire land, build houses and let premises to tenants, was again found of no moment, as the income continued t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... may be drawn, for better comprehension, to East India Housing Land Development Trust Ltd. (supra); its observations, succinctly put, being as under: Income-tax is undoubtedly levied on the total taxable income of the taxpayer and the tax levied is a single tax on the aggregate taxable receipts from all the sources; it is not a collection of taxes separately levied on distinct heads of income. But the distinct heads specified in s. 6 indicating the sources are mutually exclusive and income derived from different sources falling under specific heads has to be computed for the purpose of taxation in the manner provided by the appropriate section. If the income from a source falls within a specific head set out in s. 6, the fact that it may indirectly be covered by another head will not make the income taxable under the latter head. (at pg. 51) [emphasis, ours] To the same effect is its decision in Rajasthan State Warehousing Corporation vs. CIT [2000] 242 ITR 450 (SC). Income, therefore, stands classified under the Act source-wise, i.e., on the basis of its defining origin and character. It is thus only where the source does not fully capture the intrinsic nature of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the basis of reliable data. We, therefore, find no legal infirmity in the Revenue assessing the fair rental value of the, since completed, unsold residential flats at Victoria Towers to tax as income from house property u/s. 22 of the Act. In fact, sec. 23(5) stands inserted by Finance Act, 2017 (w.e.f. 01.04.2018), specifically providing that the annual value of a house property held as stock-in-trade of his business by the assessee shall be taken at nil for a period of one year from the end of the year in which a completion certificate is obtained in its respect. Further endorsing, if it was necessary, that the annual value of a house property held as stock-in-trade is equally assessable u/s. 22, i.e., irrespective of whether the same is actually let or not. The same, it needs to be appreciated, is not in occupation of the owner, much less for the purposes of his business, but represents the inventory of his trade, to be sold or even let. Even as our view is based on and, as such, in conformity with the settled law, as explained by the larger benches of the Hon ble Apex Court, cited supra, the same, we may add, has found endorsement by the recent decisions by it as well as the H ..... X X X X Extracts X X X X X X X X Extracts X X X X
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