Assessees win case: Unsold flats as stock-in-trade, not house property income. AO directed to delete addition.

The Tribunal ruled in favor of the assessees, holding that unsold flats held as stock in trade should be assessed as income from business and not as income from house property. The AO was directed to delete the addition made under Section 23 of the Act.

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Issues:
The common issue in the appeals is whether the AO erred in making an addition on account of alleged notional annual letting value of unsold flats held as stock in trade.

Analysis:
The assessees, engaged in the business of builders and developers, filed returns for A.Y. 2012-13. The AO computed the annual letting value of unsold flats held as stock in trade, treating them as income from house property. The assessees argued that income from sale of developed property should be assessed as business income and not under income from house property. The AO referred to a decision and computed the notional annual letting value, which was upheld by the CIT(A).

The assessees contended that if the property is used as stock in trade, income derived should be considered business income. They cited a decision and argued that unsold flats in stock in trade should not be assessed under income from house property. The D.R. supported the lower authorities' orders and cited a different decision.

The Tribunal noted that the assessees were engaged in the business of builders and developers, treating their projects as stock in trade. Flats sold were assessed as business income, but unsold flats were treated as income from house property. Citing a decision, the Tribunal held that income from unsold flats in stock in trade should be assessed as business income, not under income from house property. The appeals were allowed, directing deletion of the addition under Section 23 of the Act.

The judgments highlighted the distinction between income from business and income from property, emphasizing that income from stock in trade should be assessed as business income. The decisions considered the main objective of the assessees' business activities and concluded that unsold flats held as stock in trade should not be taxed as income from house property. The Tribunal's decision aligned with the principles established in the cited judgments, leading to the allowance of the appeals.

In conclusion, the Tribunal ruled in favor of the assessees, holding that unsold flats held as stock in trade should be assessed as income from business and not as income from house property. The AO was directed to delete the addition made under Section 23 of the Act.

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