Tribunal rules unsold flats as stock-in-trade, excludes deemed rent.

The Tribunal held that the CIT(A) erred in confirming the AO's decision to levy deemed rent under section 23(4) of the Act. The Tribunal found that the appellant's unsold flats were treated as stock-in-trade and not let out, meeting the conditions for exclusion under section 22 of the Act. As a result, no addition on account of deemed rent was warranted. The appeal was allowed in favor of the appellant.

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Issues:
Questioning the action of CIT(A) in confirming the order of AO on account of deemed rent u/s. 23(4) of the Act.

Analysis:
The appellant, a company engaged in property development, contested the levy of deemed rent on unsold units under the head "Income from house property." The AO and CIT(A) held that the appellant, having passive possession of unsold flats, should be charged deemed rent under section 23(4) of the Act. The appellant argued that no rent was derived from the unsold flats as they were not let out and treated them as closing stock. The appellant cited case laws supporting their stance. The DR, however, referenced judgments holding that deemed rent on unsold flats is chargeable. The Tribunal examined the facts, distinguishing them from previous cases, and concluded that no addition on account of deemed rent could be made in the appellant's case, as the flats were treated as stock-in-trade and not let out. The Tribunal highlighted the conditions for exclusion under section 22 of the Act, which were satisfied in the appellant's case, leading to the allowance of the appeal.

In light of the above analysis, the Tribunal held that the CIT(A) erred in confirming the AO's decision to levy deemed rent under section 23(4) of the Act. Consequently, the grounds raised by the appellant were allowed, and the appeal was allowed in favor of the appellant.

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