Notional rent on unsold flats held as stock-in-trade cannot be taxed as house property income without an enabling provision.

Notional annual letting value of unsold flats held as stock-in-trade by a real estate developer was treated as not taxable under the head "Income from House Property" where no actual rent was received. The Tribunal followed consistent co-ordinate bench views that, in the absence of an enabling provision for the relevant year, a developer's unsold inventory cannot be assessed on a hypothetical rental basis, and rental material from another flat could not justify the addition. It further noted that section 23(5) of the Income-tax Act, 1961, inserted later, did not apply to the year under consideration. The addition was deleted.

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Issues: Whether the notional annual letting value of unsold flats held as stock-in-trade could be assessed under the head "Income from House Property" in the hands of a real estate developer.

Analysis: The assessee was engaged in the business of builders, promoters and developers and the flats in question were unsold inventory, never actually let out. The addition was made by estimating annual letting value on the basis of rental material from a different flat and was sustained by the first appellate authority. The Tribunal noted the consistent view taken in earlier co-ordinate bench decisions that, where unsold flats are held as stock-in-trade and no actual rental income is earned, the notional rental value cannot be brought to tax under the head "Income from House Property". It also noted that the special provision in section 23(5) of the Income-tax Act, 1961, inserted later, did not assist the Revenue for the year under consideration.

Conclusion: The addition of notional annual letting value was unsustainable and was deleted; the assessee succeeded.

Ratio Decidendi: In the absence of an enabling provision for the relevant year, notional rental value of unsold flats held as stock-in-trade by a real estate developer cannot be taxed under the head "Income from House Property" when no actual rent is received.

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