TaxTMI 
TaxTMI 
2019 (4) TMI 389
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....se, there was no reason to tax the annual value of such unsold units u/s 22 of the Act. 3] Without prejudice to the above grounds, the assessee submits that assuming without admitting that the income of such unsold units was taxable as income from house property u/s 22, it is submitted that the unsold units were vacant for the entire year and accordingly, the income thereon was to be considered at Rs.NIL in view of the provisions of Section 23(1)(c) and hence, the entire addition made by the learned CIT(A) may kindly be deleted. 4] Without prejudice to the above grounds, the assessee submits that the net annual retable value adopted by the A.O. is on an adhoc basis and the same should be substituted by the municipal retable value determined for the various units by the local authorities. 5] The appellant craves leave to add, alter, amend or delete any of the above grounds of appeal." 4. Briefly stated the relevant facts included that the assessee is a firm engaged in the business of builders and land developers. The assessee filed the return of income declaring total income of Rs. 12,89,939/-. At the end of the assessment, the Assessing Officer made an....
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.... 192 was involved and deemed rented income was not deleted. Further, ld. AR read out at para 5 onwards of the said order of the Tribunal in the case of M/s. Cosmopolis Construction (supra). 8. The ld. DR for the Revenue, on the other hand, relied heavily on the orders of the Assessing Officer as well as CIT(A) and also the Hon'ble Delhi High Court's judgement in the case of Ansal Housing Finance & Leasing Co. Ltd. (supra). 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 busines....
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....ed as 'stock-in-trade', then the said 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 onl....
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.... apply in the facts of the present case. 10. We further find 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 on unsold flats held as stock-in-trade by the assessee reenngtaalg evda luine 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 calc....