Tribunal rules rental income on unsold flats as business income not applicable for 2015-16 assessment

The Tribunal overturned the decision to tax notional rental income on unsold stock-in-trade as Business income for the assessment year 2015-16. It was held that rental income cannot be computed when flats are held as stock in trade. The Tribunal cited previous judgments and orders, directing the deletion of the addition based on similar views taken in other cases by Pune benches. The appeal was allowed, emphasizing that the Finance Act, 2017, which provided guidelines for such computation, did not apply to the assessment year in question.

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Issues:
Taxation of notional rental income on unsold stock-in-trade as Business income.

Analysis:
The appeal pertains to the assessment year 2015-16 where the only issue raised is the taxation of notional rental income of &8377; 5,54,400 on unsold stock-in-trade as Business income. The assessee, a builder and developer, contested that the income should be considered under the head "Profits and gains of business and profession." The CIT(A) upheld the contention based on a Pune Bench Tribunal order and taxed the income as income from Business. However, the assessee challenged the inclusion of the amount in the total income. The Tribunal, after considering relevant material and precedent, overturned the impugned order. It was held that no rental income can be computed when flats are held as stock in trade, as per previous judgments and orders. The Tribunal directed the deletion of the addition, citing similar views taken in other cases by the Pune benches of the Tribunal.

Additionally, it was noted that the Finance Act, 2017, inserted sub-section (5) of section 23, effective from 1.4.2018, which provides guidelines for the computation of annual value of stock-in-trade properties under the head "Income from house property." However, since the assessment year in question is 2015-16, the amended section 23 does not apply, and the case is governed by the decisions discussed earlier. Therefore, the appeal was allowed, and the order was pronounced on 23rd December 2019.

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