ITAT rules no deemed rent addition for unsold units held as stock in trade

The Income Tax Appellate Tribunal (ITAT) ruled in favor of the assessee, holding that no addition on account of deemed rent of unsold units held as stock in trade could be made. The ITAT found no distinguishing features between the present case and a previous decision involving the assessee's sister concern, where the issue was decided in favor of the assessee. Therefore, the ITAT set aside the Assessing Officer's addition and allowed the appeal of the assessee.

---

---

Issues involved:
Taxability of deemed rent on unsold units held as stock in trade by the assessee under section 22 r.w.s. 23(4) of the Income Tax Act for the assessment year 2014-15.

Detailed Analysis:
The appeal filed by the assessee challenges the addition of deemed rent on unsold units held as stock in trade. The assessee argued that since the units were held for business purposes, there was no basis to tax them as income from house property under section 22. The assessee further contended that even if the units were taxable under section 22, since they were vacant throughout the year, the income should be considered as nil under section 23(1)(c). The grounds raised were considered inter-connected.

During assessment, the Assessing Officer (AO) noted that the assessee had unsold flats/bungalows but had not offered any deemed rent. The AO calculated deemed rent based on Annual Letting Value (ALV) and made an addition to the total income. The Commissioner of Income Tax (Appeals) upheld the AO's decision, citing relevant case laws. The assessee then appealed to the Income Tax Appellate Tribunal (ITAT).

The ITAT analyzed a similar case involving the assessee's sister concern for the assessment year 2012-13, where the issue was decided in favor of the assessee. The Tribunal referenced various judicial decisions, including the Hon'ble Gujarat High Court ruling that income from property held as stock-in-trade is considered business income, not income from house property. The ITAT also highlighted the decision of the Hon'ble Delhi High Court, which held that annual rental value on unsold flats built by a construction business is assessable as income from house property.

The ITAT compared the facts of the present case with the previous decision involving the assessee's sister concern and found no distinguishing features. As the Revenue failed to demonstrate any overruling of the previous decision, the ITAT concluded that no addition on account of deemed rent could be made in the present case. Therefore, the ITAT set aside the AO's addition and allowed the appeal of the assessee.

In conclusion, the ITAT ruled in favor of the assessee, holding that no addition on account of deemed rent of unsold units held as stock in trade could be made. The ITAT's decision was based on the precedent set by the previous case involving the assessee's sister concern and the interpretation of relevant legal provisions and judicial decisions.

---