Notional annual letting value of unsold stock-in-trade is not taxable as house property income when units are held for sale.

Unsold units held by a real estate developer as stock-in-trade are not assessable on a notional annual letting value under the head income from house property when they are neither let out nor intended to be let out. Where the units remain part of closing inventory and are meant for sale in the ordinary course of business, their deemed rental value cannot be brought to tax as house property income. If two interpretations of the taxing provision are possible, the construction favourable to the assessee applies. The operative tax treatment is that such units are dealt with as business stock, not as property yielding notional rental income.

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Issues: Whether notional annual letting value of unsold units held as stock-in-trade by a real estate developer could be assessed as income from house property.

Analysis: The units remained part of the closing inventory and were treated in the books as stock-in-trade. The assessee's business was construction and development, and the unsold units were meant for sale in the ordinary course of business. In the absence of any material showing that the units were let out or intended to be let out, their notional rental value could not be brought to tax under the head income from house property. The view favourable to the assessee was adopted where two possible constructions of the taxing provision existed.

Conclusion: The addition based on notional annual letting value was not sustainable and was deleted, in favour of the assessee.

Ratio Decidendi: Unsold units held as stock-in-trade by a developer, when neither let out nor intended for letting, cannot be assessed to notional annual letting value as income from house property; their sale proceeds are taxable as business income.

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