Notional annual letting value on unsold stock-in-trade is inapplicable before section 23(5) took effect.

Unsold residential units held as stock-in-trade by a builder were not taxable on a notional annual letting value basis for assessment year 2014-15 under section 23 of the Income-tax Act, 1961. The deeming provision specifically covering stock-in-trade was inserted only later by Finance Act, 2017 as section 23(5), effective from 1 April 2018. Because that amendment was not in force for the relevant year and had no retrospective operation, the unsold units could not be brought to tax under the head Income from House Property.

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Issues: Whether unsold residential units held as stock-in-trade by a builder could be subjected to annual letting value for assessment year 2014-15 under section 23 of the Income-tax Act, 1961.

Analysis: The impugned addition rested on the view that notional annual value of unsold units could be brought to tax under the head Income from House Property. The provision specifically dealing with stock-in-trade was inserted later by Finance Act, 2017 as section 23(5), with effect from 01.04.2018. For the assessment year in question, the statutory deeming provision was not applicable, and the unsold units could not be taxed on notional letting value under the unamended law.

Conclusion: The addition on account of annual letting value of the unsold residential units was not sustainable and was deleted in favour of the assessee.

Final Conclusion: The appeal succeeded, and the notional house property addition relating to unsold stock-in-trade was set aside for the relevant assessment year.

Ratio Decidendi: A deeming provision taxing unsold stock-in-trade under the head Income from House Property applies only from its stated effective date and cannot be applied to earlier assessment years in the absence of express retrospective operation.

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