Tribunal rules unsold units income as business, aligning with Supreme Court

The Tribunal allowed the appeal, ruling that income from unsold units should be treated as business income, not income from house property. The decision aligned with the Supreme Court's interpretation, considering the unsold units as stock-in-trade of the appellant's construction business. Consequently, the Tribunal set aside the CIT(A)'s order, deleting the addition based on the estimated letting value of the unsold units. This outcome favored the appellant and ensured consistency in tax treatment for similar cases.

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Issues:
Estimation of income from unsold vacant units as income on a notional basis.

Analysis:
The appellant, engaged in construction of residential-cum-commercial complexes, appealed against the CIT(A)'s order for A.Y. 2011-12, primarily challenging the estimation of income from unsold vacant units. The Assessing Officer (AO) considered the unsold units as owned house properties, applying Section 23(4) and estimating their annual letting value, which was added to the appellant's income under the head "Income from House Property." The CIT(A) upheld the AO's decision. The appellant cited a Tribunal decision that income from unsold units should be taxed as business income, not house property income. The Departmental Representative relied on a Delhi High Court decision supporting taxing such income as house property income.

The Tribunal reviewed the Delhi High Court decision and a Supreme Court judgment, concluding that the appellant, being in the business of construction and development, should not be taxed on the rental income of unsold units as house property income. Following the Supreme Court's reasoning, the Tribunal held that the unsold units were stock-in-trade, and the income from their sale should be taxed as business income. Thus, the Tribunal set aside the CIT(A)'s order and deleted the addition made by estimating the letting value of the unsold units. The decision favored the appellant, aligning with the Supreme Court's interpretation and previous Tribunal rulings.

Therefore, the appeal by the assessee was allowed, emphasizing that the income from unsold units should be treated as business income, not income from house property. The Tribunal's decision was based on the precedent set by the Supreme Court, ensuring consistency in tax treatment for similar cases.

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