TaxTMI 
TaxTMI 
2019 (5) TMI 1640
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....ed by the assessee, he observed that the assessee held finished apartment having cumulative value of Rs. 4,86,600/- under the head 'Inventories' in its balance sheet. During the course of the scrutiny proceedings, the AO asked the assessee to explain as to why income from house property should not be assessed on the annual letable value of such finished apartments as the assessee was the owner of such apartments and as such, the same should be assessed for income from house property arising from such premises. In its reply, the assessee submitted that it was not the owner of the said premises as they had already been allotted to various allottees. The AO acknowledges that the assessee had furnished the copies of terms and conditions of the allotment. The AO after perusal of the terms and conditions of allotment noted that point No. 2 of the terms and conditions mentions: "2. The expression 'Allotment' wherever used herein shall always mean 'Provisional Allotment' and will remain so till such time a formal deed of transfer is executed and registered in favour of the Allotte for his / her respective Apartment" 4. After taking note of the aforesaid point No. 2 of the terms....
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....l for the assessee contended that the assessee firm was engaged in the business of construction of multistoried buildings and sale of flats therein. According to the learned senior counsel, the assessee treated the constructed and unsold flats area as stock-in-trade and not as capital assets. The assessee completed construction of certain flats and it received consideration from the purchasers of the flats from time to time in accordance with the agreed terms and, on final payment, possession was handed over to the respective buyers. According to the learned senior counsel, the assessee was duly assessed to income-tax in respect of profits and gains arising on construction and sale of flats in the years in which the construction was completed and possession was handed over to the purchasers concerned notwithstanding the fact that the deeds of conveyance had not been executed and is registered in favour of the purchasers. According to the learned senior counsel, the buyers of the respective flats were in exclusive possession of the respective units purchased by them against full and valuable consideration paid to the assessee. In order to buttress the fact, the learned counsel drew ....
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....ch 16, 2011 and inspector report was placed at page 192 wherein he has pointed out certain infirmities and the assessee was following it up with the NTKDA authority and finally after addressing all their concerns the assessee got the occupancy certificate on 01.07.2015 which is placed at page 194-196 of the Paper Book. The learned senior counsel drew our attention to the NTKDA Act, 2007 placed at page No. 207 of the Paper Book and from where we note that as per Section 77 of the said Act, completion certificate is mandatory. According to Section 77(2) no person shall occupy or permit to be occupied any such building or use or permit to be used any building or any part thereof affected by any such work until permission has been granted by the Development Authority in this behalf in accordance with the rules and the regulations made under this Act. The learned senior counsel drew our attention to relevant portions of section 22 and 23(a) of the Act which is as under: "22. The annual value of property consisting of any buildings or lands appurtenant thereto of which the assessee is the owner, other than such portions of such property as he may occupy. For the purposes of any ....
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....come tax under the head Income from house property. According to sec. 23 of the Act, the determination of annual value of the property shall be deemed to be as prescribed in sub-clause (a) to sub-section (1) of section 23 of the Act, the same for which the property might reasonably be expected to let from year to year and sub-clause (b) also says about the property or any part of the property which is let and the actual rent received or receivable by the owner which is in excess of the same referred to in sub-clause (a) of sub-section (2), (3) and (4). We note that the annual value for the purpose of sec. 22 shall be deemed to be the sum of money which the owner/assessee might reasonably be expected to get by letting the property. We note that sub-section (5) has been inserted in sec. 23 by the Finance Act, 2017 w.e.f. 01.04.2018 which states that where the assessee has property which consists of any building or land appurtenant thereto which 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 year from the end of the financial year in which the certificate of completion of construction of the property is obtained fr....
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....nging to him, the annual value of such house or part of the house shall be taken to be nil. (3) The provisions of sub-section (2) shall not apply if- (a) the house or part of the house is actually let during the whole or any part of the previous year; or (b) any other benefit therefrom is derived by the owner. (4) Where the property referred to in sub-section (2) consists of more than 35[one house]- (a) the provisions of that sub-section shall apply only in respect of 36[one] of such houses, which the assessee may, at his option, specify in this behalf; (b) the annual value of the house or houses, 37[other than the house] in respect of which the assessee has exercised an option under clause (a), shall be determined under sub-section (1) as if such house or houses had been let. ^38[(5) Where the property consisting of any building or land appurtenant thereto is held as stock-intrade 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 ^39[one year] from the end of the financial ye....
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....be permitted to hold and own the completed apartments on its own accord or that the appellant would act as the landlord / owner of the property. Since the appellant was an SPV promoted by the Housing Board for undertaking the construction of the housing complex, immediately after the project was launched the appellant and the Housing Board had undertaken drive to allot the apartments amongst the willing purchasers of these apartments. Considering these events harmoniously the only conclusion that one can draw is that the appellant was never owner of the apartments but its role was limited only to the Developer who held the apartments under construction in trust to be ultimately owned by the persons to whom the allotments were approved by the Board. We therefore find merit in the submissions of the Ld. AR that the appellant could never be regarded as 'owner' of the finished apartments and in that view of the matter the provisions of Chapter IV-C was not applicable and therefore the notional annual value of the unsold flats could not be assessed in the hands of the appellant under Section 23 of the Act. 10. We also find merit in the submission that even though the value of fini....
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.... In this regard we rely on the following observations of the Hon'ble Bombay High Court in the case of Shree Nirmal Commercial Ltd Vs CIT (193 ITR 694) wherein it was held as under: "14. The contention raised by Dr. Balasubramanian appears attractive at first blush, but on closer examination falls to ground. Even assuming that after the shareholders were allotted the floor space area and the right of occupancy thereof was completely transferred to the shareholders, the assessee still retained some residuary or vestigial rights of ownership, there are two difficulties in the way of the contention being accepted. First, the revenue had made no attempt to identify, quantify or evaluate such residuary rights of ownership. The second, and more formidable, difficulty is that the revenue is not able to show that the residuary or vestigial rights of ownership were of such nature as could be let out. In our view, unless the property owned by the assessee is of such nature as could be let out, the charge under section 22 of the Act cannot be attracted. In our view, if the property is of such nature that it is inherently incapable of being let out and the assessee owner thereof, then ....