Notional annual letting value on unsold stock-in-trade flats not taxable under sections 22 and 23 for the year in question.

Unsold completed flats held as stock-in-trade were held not to attract notional annual letting value under the pre-existing scheme of sections 22 and 23(1)(a), because builder stock-in-trade does not retain the same character as income-generating house property for such notional taxation. The Tribunal preferred the view favourable to the assessee where non-jurisdictional High Court authorities diverged, and treated section 23(5) as prospective only, inapplicable to the assessment year concerned. The addition on account of notional annual letting value was deleted.

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Issues: Whether notional annual letting value could be brought to tax in respect of unsold flats held as stock-in-trade.

Analysis: The dispute concerned completed unsold units treated by the assessee as stock-in-trade. The statutory scheme of section 22 of the Income-tax Act, 1961 brings to tax the annual value of property owned by an assessee, while section 23(1)(a) provides the basis for determining such annual value. The Tribunal followed the view that a property held as stock-in-trade by a builder does not retain the same character as an income-generating house property for the purpose of notional taxation, and relied on the line of authority favouring the assessee where divergent non-jurisdictional High Court views existed. It also noted that section 23(5), inserted later, was prospective and could not govern the assessment year in question.

Conclusion: The addition on account of notional annual letting value of the unsold stock-in-trade flats was deleted and the issue was decided in favour of the assessee.

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