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TMI Blog2024 (1) TMI 742X X X X Extracts X X X X X X X X Extracts X X X X ..... evelopment Pvt. Ltd. [ 2021 (5) TMI 636 - ITAT MUMBAI] and Sheth Developers Pvt. Ltd [ 2022 (6) TMI 1271 - ITAT MUMBAI] by holding that deemed notional rental income with regard to unsold flats held as stock in trade cannot be taxed. The co-ordinate Bench of the Tribunal in case of Pegasus Properties Pvt. Ltd [ 2021 (12) TMI 1210 - ITAT MUMBAI] by considering the decision rendered by the Hon ble Delhi High Court in case of Ansal Housing Finance Leasing Co. Pvt. Ltd. [ 2012 (11) TMI 323 - DELHI HIGH COURT] held that such addition is not sustainable up to 2017-18. Thus we are of the considered view that the Ld. CIT(A) has rightly deleted the addition made by the AO on account of deemed rental income qua the unsold stock of flats held in stock in stock in trade up to A.Y 2017-18. Addition u/s 43CA being the excess value of the fair market value than the sale consideration value taken by the assessee - difference of 1.67% in the sale consideration vis- -vis stamp duty valuation - HELD THAT:- The co-ordinate Bench of the Tribunal in case of Sai Bhargavanath Infra [ 2022 (8) TMI 799 - ITAT PUNE] held that first proviso to section 43CA inserted by Finance Act, 2020 with ef ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... irming addition of Rs. 2,29,500/- u/s 43CA of the Income Tax Act, 1961 with reference to agreement of Sale for Flat No 1106, Ebony with Mrs. Pushpa S. Hajare without appreciating that difference between stamp value and agreement value is only 1.67% and thus Section 43CA has no application and hence addition of Rs. 2,29,500/- may be deleted. 2) The cross-objector craves leave to amend, alter, add or delete any cross- objections. 3. Briefly stated facts necessary for consideration and adjudication of the issues at hand are : the assessee is a private company into the business of development of residential and commercial project in the name of Vasant Oasis which was to be developed in three phases. In phase-I consisting of six buildings, occupation certificate (OC) was issued during Financial Year (F.Y.) 2016-17 for three buildings namely Ornella, Tiffany and Emrald. Work on phase-II was not started up to 31.03.2017. Phase-III consists of nine buildings and OC was not received qua any buildings during F.Y. 2016-17. The assessee brought on record building wise details of total flats in each building, number of flats sold and inventory of unsold flats in each building in A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rat High Court and Hon ble Supreme Court in cases of CIT vs. Neha Builders (P) Ltd. (2008) 296 ITR 661 (Guj.) (HC) and Chennai Properties and Investment Ltd. vs. CIT (2015) 373 ITR 673 (SC). 8. The Ld. A.R. for the assessee further contended that after considering the decision rendered by Hon ble Delhi High Court in case of CIT vs. Ansal Housing Finance Leasing Co. Pvt. Ltd. (supra) the co-ordinate Benches of the Tribunal in cases of Modern Abodes Pvt. Ltd. vs. ITO in ITA No.2735/M/2022 dated 03.04.2023 (Mum-Trib.), Pegasus Properties Pvt. Ltd. vs. Dy. CIT (2022) 193 ITD 514 (Mum-Trib.) Sheth Developers Pvt. Ltd. ITA No.1953 1954/M/2020 held that notional rent of unsold stock cannot be taxed. It is also held in the aforesaid order passed by the co-ordinate Bench of the Tribunal that section 23(5) is prospective in nature and applicable from 2018-19. 9. We have perused the order passed by the Ld. CIT(A) deleting the addition made by the AO who has duly thrashed the facts in the light of the provisions contained under section 23(5) applicable w.e.f. 01.04.2018 and order passed by the co-ordinate Bench of the Tribunal in case of Sheth Developers Pvt. Ltd. (supra) and in ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... computing the annual lettable value. It is only from AY 2018-19 that the Parliament in its wisdom has provided for certain exception while computing the ALV. Hence, in my view, the appellant is not entitled to claim the benefit of S. 23(5) for the year under reference, being prior to AY 2018-19. 4.8. At the same time, the Hon'ble ITAT Mumbai in the cases of M/s Seth Developers Pvt. Ltd. v. DCIT (ITA No. 1953/Mum/2019 and ITA No. 1954/Mum/2020 dated 27.06.2022) and DCIT v. Bengal Shapoorji Housing Development Pvt. Ltd. (ITA No. 2927/Mum/2019 dated 13.05.2021), held that the deemed notional rental income in respect of unsold flats held as stock-in-trade cannot be taxed. The Hon'ble ITAT has in the case Pegasus Properties (P) Ltd. v. DCIT (193 ITD 514) has considered the decision of Hon'ble Delhi High Court in Ansal Housing Finance, 354 ITR 180, and yet held that addition could not be made up to AY 2017-18. 4.9. In deference to the superior wisdom of the higher judicial forum, respectfully following the decisions of Hon'ble ITAT Mumbai, this addition stands deleted. 10. With the insertion of section 23(5) of the Act by Finance Act, 2017 w.e.f. 01.04. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the factual panorama of the case is that the assessee has been engaged in the business of development of properties with the projects 'Kumar Infinia' and 'Kumar Picasso' ITA No. 2977/PUN/2017 Kumar Properties and Real Estate (P.) Ltd. having certain unsold flats/bungalows for ready possession at the year end. The AO opined that the assessee ought to have offered deemed notional rental income on such vacant flats/bungalows. The assessee submitted that the flats/bungalows were its stock-in-trade, from which no income could be taxed under the head 'Income from house property. Relying on judgment of the Hon'ble Delhi High Court in CIT v. Ansal Housing Finance and Leasing Company Ltd. [2013] 354 ITR 180 (Delhi), the AO computed the annual letting value of the unsold flats u/s. 23 of the Income-tax Act, 1961 (hereinafter also called the Act) at Rs. 1,47,65,688/- and made addition for the same. The Id. CIT(A) echoed the addition, against which the assessee has approached the Tribunal. 3. We have heard the rival submissions through Virtual Court and gone through the relevant material on record. Indisputably, the assessee has been engaged in the business of de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he year end. Now the question is whether these flats etc. can be said to be 'occupied' by the assessee? The term 'occupy' has neither been defined in section 2 (general definitions under the Act) nor section 27 (definitions relating to income from house property). Rather it is defined nowhere in the Act. In such a scenario, we will have to understand its connotation in common parlance. The term 'occupation' (in land law) has been defined in the Oxford Dictionary of Law to mean 'the physical possession and control of land'. Thus, occupation of a property means having its physical possession coupled with dominion rather than the physical possession coupled with actual use. Once a property is in physical possession and control of a ITA No. 2977/PUN/2017 Kumar Properties and Real Estate (P.) Ltd. person, it is said to be in his occupation, even if it is not actually used by him. Adverting to the facts of the extant case, we find it not to be a case of the AO or that of the Id. DR that the unsold flats etc. were not in the physical possession and control of the assessee. In fact, there is no one other than the assessee having physical possession and contr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... P.) Ltd. profits of the business of property development by the assessee are chargeable to income-tax. 10. On a bird's-eye view, we find that flats/bungalows are occupied by the assessee owner; business of property development is carried on by the assessee; the occupation of the flats etc. is for the purpose of business; and profits of such business are chargeable to income- tax. Ergo, all the four conditions for exclusion from section 22 of the Act are cumulatively satisfied in the present case. 11. The authorities below have canvassed a view that the annual letting value of flats/bungalows is income chargeable to tax as 'Income from house property by relying on Ansal Housing Finance and Leasing Company Ltd. (supra). There is no doubt that the Hon'ble Delhi High Court in the said case has held that Annual letting value of unsold flats at the year end is chargeable to tax under the head 'Income from house property. At the same time, we find that the Hon'ble Gujarat High Court in CIT v. Neha Builders (P) Ltd. [2008] 296 ITR 661(Guj) has held that income from the properties held as stock-in-trade can be treated as Income from business and not as 'I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erty is obtained on and from the A.Y. 2018-19. Instantly, we are concerned with the assessment year 2013-14. As such, the amendment cannot apply to the year under consideration. In the absence of the applicability of such an amendment, no income can be said to have accrued to the assessee from unsold flats available as stock-in-trade. We, therefore, overturn the impugned order on this score and delete the addition of Rs. 1.47 crore sustained in the first appeal. 5.14 In view of the aforesaid observations and respectfully following the judicial precedents relied upon herein above, we hold that no addition on account of deemed rental income could be made in respect of unsold stock of flats held as 'stock-in-trade' upto A.Y. 2017-18. However, the amendment has been brought in the statute in section 23(5) from A.Y. 2018-19 providing a moratorium period of two years. Hence, no addition could be made even for A.Y. 2018-19 also. 13. In view of what has been discussed above and following the decision rendered by the Hon ble Gujarat High Court in case of Neha Builders (P) Ltd. (supra) and order passed by the co-ordinate Benches of the Tribunal in cases of Kumar Properti ..... X X X X Extracts X X X X X X X X Extracts X X X X
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