2021 (7) TMI 217 - AT - Income Tax

Assessee's Appeal Allowed: Unsold Flats Not Taxed as Income

M/s. Palm Grove Beach Hotels Pvt. Ltd. Versus The Deputy Commissioner of Income Tax Central Circle-4 (1), Mumbai

M/s. Palm Grove Beach Hotels Pvt. Ltd. Versus The Deputy Commissioner of Income Tax Central Circle-4 (1), Mumbai - TMI Issues Involved:1. Condonation of delay in filing the appeal.2. Taxability of annual letting value of unsold flats under the head 'Income from House Property'.Issue-wise Detailed Analysis:1. Condonation of Delay in Filing the Appeal:The assessee filed appeals for A.Y. 2014-15 and 2015-16 with delays of 382 days and 233 days, respectively. The assessee argued that the delay was due to a lack of clarity on whether the annual letting value of unsold flats in the case of builders and construction companies would be taxable under 'Income from House Property'. The Tribunal had divergent views on this issue, and the assessee waited for a consistent decision. The Tribunal noted several cases where the issue was decided in favor of the assessee, including decisions by the Hon’ble Gujarat High Court and other High Courts, which constituted sufficient cause for the delay. The Tribunal referred to guidelines laid down by the Hon'ble Supreme Court and various High Courts, emphasizing a liberal approach towards condonation of delay to ensure substantial justice. The Tribunal found no evidence of deliberate delay or malafide intent by the assessee and thus condoned the delay, admitting the appeals for adjudication.2. Taxability of Annual Letting Value of Unsold Flats:The core issue was whether the annual letting value of unsold flats, considered as closing stock, should be taxed under 'Income from House Property'. The Tribunal observed that both parties agreed that the issue had been decided in favor of the assessee in its own case for A.Y. 2013-14. The Tribunal cited multiple decisions, including those of the Hon’ble Gujarat High Court in CIT vs. Neha Builders Pvt. Ltd., which held that if properties are treated as stock-in-trade, any income derived from them should be considered 'Income from Business' and not 'Income from House Property'. The Tribunal also referenced decisions in cases like Ferani Hotels Pvt. Ltd., Runwal Constructions, and C.R. Developments Pvt. Ltd., where it was consistently held that unsold flats held as stock-in-trade should not be taxed under 'Income from House Property'. The Tribunal concluded that the assessee's unsold flats, being stock-in-trade, should be assessed under 'Income from Business' and directed the AO to delete the addition made under Section 23 of the Act.Conclusion:The Tribunal allowed the appeals of the assessee, condoning the delay in filing and ruling that the annual letting value of unsold flats held as stock-in-trade should not be taxed under 'Income from House Property'. The decision was pronounced on 01/07/2021.