TaxTMI 
TaxTMI 
2018 (5) TMI 1771
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....he Ld. CIT(A) confirming the addition of Rs. 55,69,200/- (out of Rs. 64,26,000/-) on account of notional income under the head 'Income from House Property' made by the AO in respect of unsold flats shown as stock-in-trade. 3. Briefly stated, the facts of the case are that the assessee, a builder and developer, filed its return of income for the assessment year (AY) 2012-13 on 28.09.2012 declaring total income of Rs. 5,46,61,400/-. During the course of assessment proceedings, the Assessing Officer (AO) observed from the books of accounts that the assessee had an inventory of 47 unsold flats in Highness Project and 4 unsold flats in Sea Loung Project. In response to a query raised by the AO to explain why deemed house property income be not ....
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....-15 as fair market rent for the year under consideration, i.e. A.Y. 2012-13. The appellant in its submissions has mentioned that there would be appreciation by 10% every year in the rent rates, and, accordingly, the fair market rent for the year under consideration (F.Y. 2011-12) may be considered at Rs. 11,300/- per month per flat. In my view, the yearly appreciation in rent rates is not likely to be as high as 10%, as contended by the appellant, and it may be in the range of 5% - 7%. Therefore, considering the overall facts of the case, it will be appropriate to adopt the fair market rent for the unsold flats in question at Rs. 13,000/- per month per flat. Consequently, the annual letting value of the 51 unsold flats may be worked out at ....
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....struction Ltd. (supra) and supports the order passed by the Ld. CIT(A). 7. We have heard the rival submissions and perused the relevant materials on record. The reasons for our decisions are given below. The following sub-section (5) has been inserted after sub-section (4) of section 23 by the Finance Act, 2017, w.e.f. 01.04.2018: "(5) Where the property consisting any building or land appurtenant thereto is held as stock-in-trade and the property or any part of the property is not let during the whole or any part of the previous year, the annual value of such property or part of the property, for the period up to one year from the end of the financial year in which the certificate of completion of construction of the property is obtain....
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....4A are not applicable in its case. However, the AO was not convinced with the reply and made a disallowance Rs. 1,76,676/- u/s 14A r.w. Rule 8D. [Rs.12,000/- under Rule 8D(2)(i); Rs. 1,38,951/- under Rule 8D(2)(ii) and Rs. 25,725/- under Rule 8D(2)(iii)]. 10. In appeal, the Ld. CIT(A) agreed with the computation made by the AO u/s 14A r.w. Rule 8D and confirmed the said disallowance of Rs. 1,76,676/-. 11. Before us, the Ld. counsel of the assessee submits that the partners' capital account as on 31.03.2012 showed a credit balance of Rs. 19,28,71,467/- which was more than enough to cover the investment in mutual funds to the tune of Rs. 51,45,000/- and therefore, interest expenditure cannot be attributed to tax-free income either in whole ....
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....s Court in HDFC Bank Ltd. (supra) on the above issue has also been accepted by the Revenue in as much as even though they have filed an appeal to the Supreme Court against that order on the other issue therein viz. broken period interest, no appeal has been preferred by the Revenue on the issue of invoking the principles laid down in Reliance Utilities & Power Ltd. (supra) in its application to Section 14A of the Act." In view of the above position of law, we delete the disallowance of Rs. 1,38,951/- made by the AO under Rule 8D(2)(ii). 13.1 In Godrej & Boyce Mfg. Co. Ltd. v. Dy. CIT (2010) 194 Taxman 203 (Bom.) the Hon'ble Bombay High Court has explained Rule 8D as under : "As regard Rule 8D(2)(iii), it had been submitted that some....