TaxTMI 
TaxTMI 
TaxTMI 
2019 (4) TMI 368
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....on facts and circumstances prevailing in the case and as per provisions & scheme of the Act if at all it is held that the annual letting value has to be assessed as income of the appellant, it be held that said income arising out of unsold units of 80IB(10) compliant housing project and the same is eligible for deduction u/s 80IB(10) of the Act while computing the total income. The appellant be granted just and proper relief in this respect. 3. Without prejudice to Ground No.1, on facts and circumstances prevailing in the case and as per provisions and scheme of the Act, if for any reason, the addition made by the A.O. is held to be sustainable then the assessee be allowed to claim deduction of interest on borrowed capital amounting to Rs. 87,941/- as per section 24(b) of the Act. The appellant be granted just and proper relief in this respect. 4. Without prejudice to Ground No.1, on facts and circumstances prevailing in the case and as per provisions & scheme of the Act it be held that, Hon'ble Commissioner of Income Tax (Appeals) erred in confirming the annual lettable value considered by the Ld. A.O. for computing the deemed income under the head income from house property. ....
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.... one another. Otherwise, the main issue raised in ground no.1 and the same relates to the incorrectness of the decision of the Assessing Officer and the CIT(A) in taxing the deemed rent on notional basis qua the unsold flats of the builder under the head 'income from house property'. 7. Before us, ld. Counsel for the assessee submitted that this is a case where the couple of unsold flats were being used for storage purposes as well as for the purpose of guest house. Otherwise, the assessee did not earn any income from the said flats. As per the ld. Counsel for the assessee, this is not a fit case for invoking the provisions of sections 22 to 24 of the Act. In this regard, he relied on the various decisions of the Tribunal to hold that for the purpose of provisions relating to the said income from house property are not applicable. Referring to the various other decisions which support the view of taxing such notional income as "business income" of the assessee, ld. Counsel for the assessee submitted that the said unsold flats constitute stock-in-trade and not the depreciable fixed assets of the company. Ld. Counsel took me through various decisions on this subject such as (i) Hon'....
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....order of the Tribunal (supra). Similar views are taken in the case of Kumar Beharay Rathi in ITA No.327/PUN/2018 for the assessment year 2014-15, where the order of the Tribunal in the case of M/s. Cosmopolis Construction (supra) was heavily relied. For the sake of completeness, the relevant paragraphs of the said order of the Tribunal in the case of Kumar Beharay Rathi (supra) are extracted hereunder :- "9. On hearing both the sides and perused the order of the Tribunal in the case of M/s. Cosmopolis Construction (supra), I proceed to extract the relevant paras of the said order of the Tribunal (supra) as under :- "5. The ld. AR controverting the submissions of the DR submitted that the case laws relied upon by the Department is distinguishable. The ld. AR pointed that in the instant case the addition has been made by determining notional annual rental value on unsold units. Whereas, in the case of Commissioner of Income Tax Vs. Sane & Doshi Enterprises (supra) the assessee had actually rented out the flats and had offered the rental income under the head „Income from House Property'. The Department intended to tax the amount under the head business income. The Tribunal ....
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....d property would become or partake the character of the stock, and any income derived from the stock, would be 'income' from the business, and not income from the property. If the business of the assessee is to construct the property and sell it or to construct and let out the same, then that would be the 'business' and the business stocks, which may include movable and immovable, would be taken to be 'stock-in-trade', and any income derived from such stocks cannot be termed as 'income from property'. Even otherwise, it is to be seen that there was distinction between the 'income from business' and 'income from property' on one side, and 'any income from other sources'. The Tribunal, in our considered opinion, was absolutely unjustified in comparing the rental income with the dividend income on the shares or interest income on the deposits. Even otherwise, this question was not raised before the subordinate Tribunals and, all of sudden, the Tribunal started applying the analogy. 9. From the statement of the assessee, it would clearly appear that it was treating the property as 'stock-in-trade'. Not only this, it will also be clear from the records ....
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....ind that Mumbai Bench of the Tribunal in M/s. C.R. Developments Pvt. Ltd. Vs. JCIT (supra), M/s. Runwal Constructions Vs. ACIT (supra) and Shri Girdharilal K. Lulla Vs. DCIT (supra) under similar set of facts have taken a consistent view in holding notional annual rental value on unsold flats held as stock-in-trade by the assessee engaged in construction and development activities as "Business Income". 11. Thus, in view of the facts of the case and the decision rendered in the case of Commissioner of Income Tax Vs. Neha Builders (P.) Ltd. (supra) we find merit in the submissions of assessee and allow the appeal. 12. In the result, the impugned order is set aside and the appeal of assessee is allowed." 10. From the above extracts, it is evident that the taxation of rental income earned out of stock-in-trade i.e. unsold flats of the construction company, depends on various facts such as if the flats are rented out actually or not. As held by various decisions, the rental income can be actual rent received by the assessee out of renting of the unsold flats or deemed rental/notional rental income calculated by the Assessing Officer attributable to such unsold flats which were n....