Unsold stock-in-trade flats not taxed as house property when occupation approval is still pending

Notional annual value of unsold finished apartments held as stock-in-trade was treated as outside "Income from house property" where the units had been allotted, substantial consideration had been received, and occupancy approval had not yet been granted. The Tribunal reasoned that sections 22 and 23 of the Income-tax Act apply only to property owned by the assessee and capable of being let, and that the developer did not retain ownership in the relevant sense while executing its obligations. It also relied on section 77(2) of the New Town Kolkata Development Authority Act, 2007, which barred occupation before permission or completion approval, and noted that section 23(5) later reinforced this position. The additions were deleted.

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Issues: Whether the notional annual value of unsold finished apartments held as stock-in-trade could be assessed as income from house property for the relevant assessment years when the flats had been allotted and substantial consideration received, but the occupancy certificate had not yet been granted.

Analysis: The statutory charge under sections 22 and 23 of the Income-tax Act, 1961 applies only to property owned by the assessee and capable of being let. The apartments in question had been allotted to purchasers under the development arrangement, consideration had substantially been received, and the developer retained the units only in the course of executing its obligations. The Tribunal held that this did not make the developer the owner for the purposes of section 22. It further noted that, under section 77(2) of the New Town Kolkata Development Authority Act, 2007, occupation was impermissible until permission or completion/occupancy approval was granted, and the certificate was issued only later. The subsequent insertion of section 23(5) also supported the position that unsold stock-in-trade is not to be subjected to notional annual value before completion approval, and for the period under appeal the property could not legally be treated as lettable.

Conclusion: The notional annual value of the unsold apartments was not chargeable under the head 'Income from house property', and the additions were deleted in favour of the assessee.

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