ITAT rules in favor of assessee, deletes deemed rent addition on unsold flats. The ITAT ruled in favor of the assessee, citing the decision of the Gujarat High Court and the principle from the Supreme Court, thereby deleting the ...
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ITAT rules in favor of assessee, deletes deemed rent addition on unsold flats.
The ITAT ruled in favor of the assessee, citing the decision of the Gujarat High Court and the principle from the Supreme Court, thereby deleting the addition of deemed notional rent on unsold stock of flats.
Issues: 1. Addition of deemed notional rent on unsold stock of flats.
Analysis: The appeal was against the order of the CIT(A) regarding the addition of rupees 3,40,459/- as deemed notional rent on unsold stock of flats for the assessment year 2016-17. The Assessing Officer (AO) added this amount under the head "Income from House Property" based on the provisions of section 22 of the Income Tax Act. The AO computed the deemed rental income on unsold units and added it to the total income of the assessee.
The assessee, engaged in real estate development, argued that the unsold flats were part of its stock-in-trade and not intended for rental purposes. However, the AO, relying on Sec. 22 of the Act and a decision of the Delhi High Court, held that the annual letting value of unsold units should be assessed as income from house property. Due to the lack of rent details for the area, the AO adopted a specific annual letting value for the calculation.
The CIT(A) upheld the addition, leading to the appeal before the ITAT. During the appeal, the assessee cited a decision of the Gujarat High Court in favor of developers regarding notional rent on unsold stock. The departmental representative supported the lower authorities' orders.
After considering the arguments and legal precedents, the ITAT noted conflicting decisions from different High Courts but found no direct ruling from the jurisdictional High Court. Following the principle that when two views are possible, the one favoring the assessee should be chosen, the ITAT relied on the Supreme Court decision in Vegetables Product Ltd. case. Consequently, the ITAT allowed the appeal, directing the deletion of the addition of deemed notional rent on unsold flats.
In conclusion, the ITAT ruled in favor of the assessee, citing the decision of the Gujarat High Court and the principle from the Supreme Court, thereby deleting the addition of deemed notional rent on unsold stock of flats.
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