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TaxTMI 
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2019 (7) TMI 929
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.... 1.2 That the learned CIT(A) having admitted the additional evidence furnished by the assessee, failed to comprehend such evidences more particularly when no adverse comments had been made by the AO in his report in respect of such evidences and as such the findings recorded by the learned CIT(A) in his order while confirming the order of assessment and holding that 'said transaction' is not genuine is apparently arbitrary and is thus misconceived both on facts and in law. In fact the findings recorded by the learned CIT(A) in his order are highly vague. 1.3 That the learned CIT(A) has further erred when he held that the documentary evidences have been created only to create smoke screen, is based on no material. No such adverse finding could have been recorded by him without bringing any evidence whatsoever. The findings are based on mere assumptions and presumptions and upon ignoring documentary evidences furnished by the assessee. 2. That the learned CIT(A) has erred both on facts and in law in sustaining the disallowance of loss of Rs. 103.50 crores out of the loss suffered of Rs. 104.50 crores on redemption of debentures. The findings thus are apparently contradictory....
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....vidences placed on record. 2.8 That the learned CIT(A) has erred in placing to reliance on the judgments referred to by him in para 4.1.6 which have no semblance of resemblance with the facts of the instant case. 2.9 That the findings recorded by the learned CIT(A) confirming a disallowance of Rs. 103.50 crores is contradictory since the loss suffered by the assessee aggregated to Rs. 104.50 crores. In fact, in the absence of any adverse finding in respect of the transaction where assessee had earned a gain of Rs. 1 crores on sale of debentures subscribed by it, the findings recorded by the learned CIT(A) is without application of mind. 3. That the learned CIT(A) has further erred in sustaining an addition of Rs. 13.92 crores and that too on an assumption that there was an obligation of the assessee to deduct tax at source in respect of expenditure incurred by M/s DLF Universal Ltd.; whereas neither there was any such obligation to deduct tax at source by the assessee nor there was any failure to do so. 4. That the learned CIT(A) has thus grossly erred thus in sustaining the addition made of Rs. 13.92 crores and disregarding that the assessee had offered the income as a....
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....e and revenue have contended on merits of the disallowances/addition made by authorities below. No submissions were made in respect of Grounds No. 1 to 1.3 of Grounds of Appeal separately and otherwise too are general and therefore dismissed as such. 6. Ground Nos. 2 to 2.9 relates to disallowance of expenditure incurred of Rs. 103.50 crores under the head 'finance cost' by the assessee company. Relevant facts qua this issue are that the assessee company during the year, had issued secured unrated fully transferable unlisted 9,500 debentures of face value of Rs. 10 lacs each aggregating to Rs. 950 crores at a discount of Rs. 3,62,421/- per debenture aggregating to total discount of Rs. 350 crores, i.e., at net issue price of Rs. 6,31,579/- per debenture, aggregating to Rs. 600 crores for a tenure of three years at a coupon rate of 2% per annum to M/s. India Bulls Housing Finance Ltd. These debentures were issued on 17.12.2015 and redeemed from the open market from 30.3.2015 at a price of Rs. 104.50 crores. Thus, as a consequence of redemption of debentures, the appellant incurred expenditure on redemption of debentures of Rs. 104.50 crores (704.50 crores - 600 crores). 6.1 Apart ....
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....ck to India Bulls Group companies, M/s. India Bulls Housing Finance Ltd. (Rs. 550 crores) and M/s. India Bulls Infrastructure Ltd. (Rs. 50 crores). Likewise, he has held that from the flow chart B, even on redemption of debentures, i.e., on 30.3.2015, the money originating from M/s. India Bulls Group companies, India Bulls Housing Finance Ltd. - Rs. 550 crores and M/s. India Bulls Commercial Rs. 50 crores has been routed through the same companies to which the assessee had given loans and finally it is finding its way back to M/s. India Bulls Housing Finance Ltd (Rs. 703.61 crores). He also held that from flow chart C, it is evident that the assessee company took advances aggregating to Rs. 588 crores from five independent entities namely, Mendell Developers (P) Ltd., Caspar Developers (P) Ltd., Espo Developers (P) Ltd., Sanaskar Buidtech (P) Ltd., Nakshtra Buildcon (P) Ltd. and paid Rs. 588 crores to Dewu Developers Pvt. Ltd. It has been stated that even in the aforesaid layers of transactions, it will be seen that through a web of companies, the funds originated from M/s. Vatika Ltd. on 10.12.2014 were channeled back to M/s. Vatika Ltd. on the same day. Thus, it has been held tha....
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....nd that (which is a matter of record): * Many companies have similar addresses. In fact the undersigned would like to mention that more apt word is same address for most companies; * Common email id meaning thereby that they are being controlled b the same person and are group entities. The undersigned agrees this factual observation of the AO; and * The capital base of these companies is very low meagre, meaning that such companies have been working as a pure conduits to create fictitious expenses. The undersigned agreed to till observation of the AO. The AO has done an extremely essential exercise and has mapped the money trail in the assessment order, by way of detailed flowchart showing the movement of money from the Indiabulls groups of companies and he receipt of money back to the Indiabulls groups of companies. The whole chain of events shows that the assessee had some preconceive notion to siphon off money and book losses to evade tax. This fact is further strengthened by the fact which has also. been mentioned in the assessment order by the AO, that the dates of the events in terms of banking transactions activities at ground level took place prior to the date ....
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....nt totally fails." 8. Before us, the learned Senior Advocate for the appellant assessee contended that the authorities below have failed to appreciate the factual matrix of the claim of the appellant company and also the statutory provisions of law. He submitted that the appellant had issued debentures on 17.12.2014 to M/s. India Bulls Housing Finance Ltd. and same were redeemed on 30.3.2015. It was contended that the amount borrowed had been utilized for the purpose of business and it was supported by documents placed on record in the Paper Book. It was also submitted that the utilization of funds was done for the purpose of business by advancing the same to three companies for the purpose of acquiring the land. The details of the advances made in the agreements as tabulated in the synopsis is as under: Sr. No. Particulars Amount (Rs. in crores) Date of agreement Copy of agreement i) M/s Winston Developers Pvt. Ltd 70 15.8.2013 232-235 236-237 ii) Avenio Developers Pvt. Ltd. 340 14.10.2013 239-242 iii) Famous Dwellers Pvt. Ltd 190 20.11.2013 244-247 8.1 It was thus submitted that the appellant had borrowed money for the purpose of arrangin....
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....y the AO allegedly reflects the money trail on 17.12.2014 (copy enclosed as Annexure "A" of synopsis). Findings of AO: The learned Assessing Officer has held the said chart establishes the amounts advanced to the assessee of Rs. 600 crores on 17.12.2014 by M/s Indiabulls Housing Finance Ltd. had reached back to M/s Indiabulls Housing Finance Ltd. Contention of the appellant: The case of the assessee is that in so far as the said chart is concerned, it shows the utilisation of the funds by the assessee which itself establishes that it had advanced the said sum to the three companies for the purpose of its business who had further advanced the amounts from the sums received by it from the assessee. On the contrary it establishes that monies received and were utilised by it for the purpose of business. The mere fact the amounts were received by M/s Indiabulls Group of companies in no manner shows that the assessee has not received the funds or that it had not been utilised by it for the purpose of its business. II Flow Chart 'B' allegedly reflects that as on 30.03.2015 when the assessee had redeemed the debentures, the funds were received by it from M/s Indiabulls Housing ....
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....claimed deduction of Rs. 1,03,50,00,000 2. The assessee had taken loan of Rs. 6,00,00,000 against issue of debentures from India Bulls Housing Finance Ltd. on 17.12.2014. As per flow chart "A" in assessment order, the entire amount went back to India Bulls Group Companies (India Bulls Housing Finance Ltd. and India Bulls Infrastructure) on the same date i.e. 17.12.2014 through a maze of companies. Mainly conduit companies. 3. The assessee redeemed debentures on 30.3.2015. As per flow chart "B" in assessment order, the money flow was actually reversed. This time money originated from to India Bulls Group Companies (India Bulls Housing Finance Ltd. and India Bulls Commercial). 4. As per flow chart "C" in assessment order, it is evident as to how assessee company took advances from Mendell, Caspar, Espo, Sanaskar, Nakshtra and paid to Dewu developers Pvt. Ltd. It will be seen that through a web of companies the funds originated from M/s Vatika Ltd. on 10.12.2014 and were channeled back to M/s Vatika Ltd. on same day. Thus, above companies are nothing but conduit companies. 5. The details of bank accounts depicting money trail on 10.12.2014, 17.12.2014 & 30.3.2015 is enclos....
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....r any other documentation. 16. As mentioned in para 3.36, the assessee has treated income as capital receipts, expenses have been treated as business loss/interest expense. 17. As mentioned in para 3.39, in no money lending business, interest rates are as high as 70% which assessee has paid to India Bulls." 9.1 The learned CIT DR further placed reliance on the following judgments: 1. CIT Vs. Durga Prasad More (82 ITR 540) (SC) 2. ITO Vs. Shiva Gases (1 SOT 21) (Delhi) 3. CIT Vs. Wipro Ltd. (50 Taxman.com 421) (KHC) 4. DCIT Vs. Pawan Kumar Malhotra [2 ITR (T) 250] (Delhi) 10. We have considered the rival submissions and perused the relevant material placed on record. The undisputed factual matrix is that during the year, the appellant had raised borrowings of Rs. 600 crores from M/s. India Bulls Housing Finance Ltd. These borrowings were raised on 17.12.2014. The claim of the appellant is that money has been raised in the course of business for development of real estate. It is also a matter of record that the aforesaid debentures issued on 10.12.2014 were redeemed on 30.3.2015 for a sum of Rs. 704.50 crores. The claim of the appellant is that it had incurred an....
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.... sufficient amount of its own, the deduction could not be allowed. Similarly, the Madras High Court in Amna Bai Hajee Issa v. Commissioner of Income-tax [1964] 51 ITR 835 has held that in deciding whether a claim for interest on borrowing can be allowed the fact that the assessee had ample resources at its disposal and need not have borrowed, is not a relevant matter for consideration. The matter to be decided is whether the amount of interest was paid in fact in respect of the capital borrowed for business. 11.2 Likewise Hon'ble Delhi High Court in the case of CIT vs. Regal Theatres reported in 225 ITR 205 in the above context has held as under: "..... Conditions for getting deduction in respect of interest are (i) money must have been borrowed by the assessee, (ii) it must have been borrowed for the purpose of business, and (iii) the assessee must have paid interest on the said amount and claimed it as deduction - See Madhav Prasad Jatia v. CIT [1979] 118 ITR 200 at p. 208. .... The learned Judges held that the view taken by the ITO was unsustainable, that as had been pointed out by the Madhya Pradesh High Court in Ram Kishan Oil Mills v. CIT [1965] 56 ITR 186, the o....
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....nio Developers Pvt. Ltd. is dated 14.10.2013 and agreement with M/s. Famous Dwellers Pvt. Ltd. is dated 20.11.2013. Each of the aforesaid agreements were for purchase of land situated at Sectors 88A, 888B and 93, Gurgaon, Near Dwarka. Expressway had been entered much prior to the issue of debentures by the appellant company on 17.12.2014. It is further noted that under the aforesaid arrangement with M/s. Winston Developers Pvt. Ltd., the appellant company had advanced a sum of Rs. 11,40,00,000/- in financial year 2013-14 itself and another sum of Rs. 20 crores in financial year 2014-15 prior to the issue of debentures. In other words, on the date of issue of debentures, total sum outstanding against the advances given by the appellant to M/s. Winston Developers Pvt. Ltd. was Rs. 26.16 crores, as out of the sum advanced, sum of Rs. 5.23 crores had also been repaid by M/s. Winston Developers Pvt. Ltd. Apart from the above agreement, confirmations from all the three parties as to utilization of funds towards purchase of utilization has also been placed in the Paper Book by the three companies, on which our attention was drawn. All the three companies are separately assessed to tax wit....
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....v) 3.10.2013 Copy of letter to M/s Avenio Developers (P) Ltd. regarding terms and conditions for acquiring land 592 xv) 12.11.2013 Copy of letter to appellant company from M/s Avenio Developers (P) Ltd. enclosing original agreement dated 14.10.2013 signed by them 593-597 xvi) 11.12.2013 Copy of letter to M/s Avenio Developers (P) Ltd. by the appellant company for receiving of agreement and further request for identifying the land parcels as per the agreement 598 xvii) 17.3.2014 Copy of letter from M/s Avenio Developers (P) Ltd. for land parcel at Sectors 93, Gurgaon enclosing land detail 599-601 xviii) 22.7.2014 Copy of letter to M/s Avenio Developers (P) Ltd. by the appellant company 602 xix) 25.11.2014 Copy of letter from M/s Avenio Developers (P) Ltd. providing details of land admeasuring 37.618 acres owned by Ramprastha group of companies and requesting for advance of payment 603-606 xx) 9.12.2014 Copy of letter to M/s Avenio Developers (P) Ltd. from appellant company enclosing copy of cheque no. 234649 dated 11.12.2014 of Rs. 340 crores 607 xxi) 17.3.2015 Copy of letter to M/s Avenio Developers (P) Ltd. from appellant company requesting cancellati....
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.... Officer without making any enquiries has reiterated his earlier conclusion that the loss / expenditure claimed is a contrived/artificial loss to evade the tax. It is thus matter of record now that so far as evidences furnished by the appellant company before the authorities below, have remained un-rebutted in respect of utilization of the funds for the business of the appellant company and therefore, in absence of any enquiries having been made so as to negate the above evidences furnished by the appellant company, prima facie utilization of funds for the business of the appellant company cannot be denied. 13. Moreover, it appears that the revenue has tried to examine the entire transaction in a truncated manner. The case of the revenue flows from the emphasis that the money never remained with the appellant company and therefore, there could not be any occasion for the appellant company to have utilized the funds for the purpose of the business of the appellant company and as such, the expenditure so incurred and claimed is a mere colourable device which is not allowable expenditure and or is a contrived loss. The fallacy in the aforesaid view becomes so apparent in the face of ....
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....se was discussed with him. The details asked for have been submitted by the AR and duly placed on records. 2. During the year under consideration, the assessee company is engaged in the business of real estate. 3. During the course of assessment proceedings, it is observed that assessee has purchased debentures of Shivsagar Builder Private Limited in total purchase consideration of Rs. 7,04,00,00,000/- from M/s Youthstar Tradelink Private Limited and the same were redeemed in total consideration of Rs. 7,04,50,00,000/-. In the total transaction assessee earned profit of Rs. 50,00,000/- and treated it as its capital gain. The above said debenture in initially purchased by M/s Indiabullls Housing Finance Limited and subsequently sold it to M/s Youthstar Tradelink Private Limited. However, as per CBDT Circular dated 15.02.2002, the profit from redemption of debenture by intermediate purchaser will be taxable as interest or business income. The relevant portion of the same is being reproduced as under: "6.1 Where the bond is redeemed by an intermediate purchaser, the difference between the redemption price and the cost of the bond to such purchaser will be taxable as intere....
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..... is an independent company and big reputed company. 14. There could be another angle to analyse the so called colourable transaction solely to contrived loss by the assessee company to reduce its taxable income. * Firstly, Assessee Company would pay huge sum by way of interest on debenture, (which is akin to a loan) from its own capital duly disclosed in the books of account in the garb of business expenditure to a reputed public limited company, M/s. India Bulls Housing Finance Ltd. * Secondly, M/s. India Bulls Housing Finance Ltd. in return would have paid equal amount in cash back to the assessee, i.e., facilitating some kind of accommodation entry; and * Lastly, M/s. India Bulls Housing Finance Ltd. will then pay huge taxes on the entire interest received from assessee. Such an arrangement is unfathomable, firstly, for the reason that no material has been brought on record to allege such kind of arrangement; neither there has any been inquiry conducted by the revenue from M/s. India Bulls Housing Finance Ltd. to prove such colorable transaction. Secondly, why a public limited company like India Bulls Finance Ltd. would connive with assessee and pay not only cash in ret....
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....s Housing Finance Ltd. This expenditure in the hands of M/s. Vatika Ltd. has been allowed as business expenditure and has been accepted by the revenue. Thus, once the revenue accepts the set of transaction of issue of debentures of M/s. Vatika Ltd. to M/s. India Bulls Housing Finance Ltd. as genuine transaction whereby expenditure incurred by M/s. Vatika Ltd. for issue of debentures is genuine expenditure then having the same parallel, it would be incorrect for the revenue to contend that the expenditure incurred by the appellant on issue of redemption of debentures to M/s. India Bulls Housing Finance Ltd. is a contrived expenditure. In our considered opinion, the revenue merely by relying on flow charts could not have fairly treated the expenditure claimed as an artificial expenditure which is not allowable as genuine business expenditure. 16. Moreover, emphasis has also been made is the common addresses of various companies to whom advances had been given by the appellant company. This fact does raises some doubt, but that alone on the facts of the case cannot be conclusive to draw adverse inference as no further logical inquiry has been done to implicate assessee's involvement.....
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....wever strong may be cannot partake the character of evidence of proof. Here, the appellant company has discharged its onus by placing on record material to prove utilization of funds for the purpose of business of the appellant company and the revenue merely on theoretical surmises and hypothetical presumptions has proceeded to deny the claim. In our opinion, half baked enquires without taking them to a logical conclusion and proceeding on notions which are contrary to the evidence on record does not form part of due process of rule of law and therefore, could not be a foundation to deny the claim of the appellant company. 18. The next related aspect of the matter is in respect of investment made in debentures by the appellant company. The appellant has contended that M/s. Vatika Ltd. had issued debentures on 13.6.2014 to M/s. India Bulls Housing Finance Ltd. for Rs. 500 crores. It has been further stated that these debentures were transferred by M/s. India Bulls Housing Finance Ltd. to M/s. Sunrise Stock Broking (P) Ltd. and M/s. Tower Securities Services (P) Ltd. and on 14.7.2014, aforesaid companies transferred the same to M/s. Dewu Developers (P) Ltd. for Rs. 587.92 crores. Th....
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....the above debentures was also a contrived income. The issue of debentures is otherwise too supported by documentary evidence which includes terms and conditions of the issue of debentures and Board resolutions of M/s Vatika Ltd. including resolution filed with the Registrar of Companies of Vatika Ltd. Demat statement of investment in debentures is also placed on record and thus having regard to the aforesaid, in our considered opinion, there is no justification to mix two independent transactions of issue and redemption of debentures by the appellant company and investment and disinvestment of debentures of M/s. Vatika Ltd. by the appellant company. Both are independent transactions and had to be holistically examined independently and therefore, revenue was therefore, entirely incorrect to have regarded the same as one transaction and denying the legitimate claim incurred by the appellant company. 20. One of the arguments raised during course of hearing by the ld. CIT DR was based on the quantum of borrowing made together with the period of borrowings and that such rates of interest are highly excessive. The aforesaid argument though attractive at first blushes but on a closer ex....
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....ompanies for purchase of land were repaid prior to redemption of debentures. In our opinion, the relevant test is the borrowing and utilisation for the purpose of business. The fact that aforesaid funds utilised for the purpose business did not result into any income or any tangible business assets is not a relevant consideration. The Hon'ble Apex Court in the case of Apex Court in the case of CIT v. Rajendra Prasad Mody reported in 115 ITR 519 has held that relevant consideration is purpose test and not fulfillment of not "fulfillment of purpose test". While holding so, their lordships held as under: "4. What s. 57(iii) requires is that the expenditure must be laid out or expended wholly and exclusively for the purpose of making or earning income. It is the purpose of the expenditure that is relevant in determining the applicability of s. 57(iii) and that purpose must be making or earning of income. Sec. 57(iii) does not require that this purpose must be fulfilled in order to qualify the expenditure for deduction. It does not say that the expenditure shall be deductible only if any income is made or earned. There is in fact nothing in the language of s. 57(iii) to suggest that t....
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....ing the course of proceedings has relied on the judgment of Karnataka High Court in the case of CIT vs. Wipro Ltd. In the said case, the assessee was engaged in the business of software exports, computer peripherals, manufacture and sale of various products etc. It acquired shares of a company on 31.3.1999 namely WNL for a consideration of Rs. 15.11 crores. It sold certain shares on 5.8.1999 to KPN for a consideration of Rs. 20.31 crores. Further shares were also sold on 28.12.1999 to ICICI Ltd. for a consideration of Rs. 99.42 crores. Therefore, assessee declared short term capital gains of Rs. 109.54 crores under section 48 of the Act from sale of shares. Further, during the said year, the appellant also claimed to have incurred long term capital loss of Rs. 107.97 crores on sale of shares of WFL, a non-banking financial company, whose registration before RBI was withdrawn and was a subsidiary of Assessee Company. The claim of the assessee was that short term capital gain be set off against the long term capital loss incurred by the appellant. The Assessing Officer however held that sale of shares of WFL was a sham transaction and was intent to set off under section 70 of the Act....
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....d the facts in the case of appellant are totally distinguishable. Here it is not a case that the transaction of issue of debentures by the appellant company and thereafter, redemption of debentures with M/s. Indiabulls Housing Finance Ltd. is a sham transaction. It is a matter of record that M/s. Indiabulls Housing Finance Ltd. is a well recognized company in the field of housing finance. There is no relationship either pointed out or alleged between the appellant company and M/s. Indiabulls Housing Finance Ltd. On the contrary, in respect of expenditure incurred by the appellant company on borrowings and redemption of debentures, corresponding income declared by M/s. Indiabulls Housing Finance Ltd. and two other entities namely M/s. Youthstar Trade Link (P) Ltd. and Dreamcart Realty Services (P) Ltd. stand accepted. In such circumstances, mere fact that appellant incurred loss on issue and redemption of debentures to well recognized independent and unrelated companies after complying with all the statutory regulations and in accordance with law, then the commerciality of the transaction and the legal effect of the transaction cannot be denied. Further even otherwise, Vatika Ltd. i....
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....ompany was taxable as business income as declared in the return of income. As a result, grounds raised by the appellant are allowed. 26. Grounds No. 3 and 4 relate to addition of Rs. 13.92 crores in respect of sale of commercial area by the appellant company. The factual matrix is that appellant in 2006, acquired 10.356 acres of land at Gurugram. On 14.2.2017, a collaboration agreement was also entered between the appellant and M/s. DLF Ltd. to develop the aforesaid land. According to the aforesaid agreement, M/s. DLF Housing Ltd. was to act as developer to develop the commercial projects with its own investment and in view of the aforesaid, it would be entitled to retain 55% of the total super area of the said land and balance 45% of the super area to be handed over to the appellant. On 19.3.2008, license was granted by the Director, Town and Country Planning, Haryana. On 13.11.2008, a supplementary agreement was entered between by the appellant company and developer DLF. According to the said agreement, developer was authorized to receive payments of all sale consideration for the area in its own name and deposit the same in the account alongwith the proceeds received for the sh....
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.... of Rs. 13.92 crores had been offered for tax by DLF under the percentage of completion method which has been duly assessed to tax in their order of assessment. In such circumstances, it was prayed that addition so made and sustained was not in accordance with law and therefore, may kindly be deleted. The learned CIT DR on the other hand supported action of the authorities below and prayed for confirmation of the action. 29. We have considered rival submissions, perused the material placed on record. The essential controversy involved is in respect of the disallowance of the amount accrued to the appellant on sale of commercial area by DLF in respect of commercial projects developed by DLF on the land owned by the appellant company. According to the appellant company, gross receipt taxability in the hands of the appellant was Rs. 89.50 crores whereas claim of the revenue is that sum taxed as gross receipts is Rs. 103.42 crores. According to the supplementary agreement dated 13.11.2008 between the appellant company and DLF Ltd., it is provided as under: "7. The Developer shall reimburse to the Land Owner proportionate revenue proceeds of the said 200225 sq. feet after adjusting p....
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....nfirmation obtained under section 133(6) of the Act by the learned Officer in the remand proceedings, to which, no contrary evidence has been placed on record, we are of the opinion sum taxable is Rs. 89.50 crores and not at Rs. 103.42 crores as taxed in the impugned orders. In our considered opinion, income accrued is only Rs. 89.50 crores which is also supported by an audited certified statement and thus, addition so made is not in accordance with law and therefore, is deleted. Grounds raised by the appellant are allowed. 31. Ground No. 5 relate to addition of Rs. 18.90 lacs representing the addition made under the head 'income from house property'. The facts in brief are that, ld. Assessing officer during assessment proceedings issued show cause notice dated 22.12.2017 stating that appellant is having a residential property at Vasant Vihar which has been left vacant and not forming part of block of assets and shown under the head 'inventory'. In reply thereto appellant vide its reply dated 27.12.2017 submitted that the said property had been acquired with the intention of selling the same as one of the object of the appellant company is to deal in the real estate and it is for ....
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....ermined u/s 23(1). The Assessing Officer is thus directed to exclude the ALV of the two properties which were under construction and also the property which was used by the assessee for his own business/profession purposes...." 32.1 Even otherwise as brought to our notice by the Ld. Sr. Counsel that, coordinate bench of Pune in case of Shree Balaji Ventures vs. ITO in ITA No. 1914/Pun/2018 dated 19.2.2019 held that annual letting Value in respect of unsold properties lying with the assessee as a stock in trade should not be determined u/s. 23(1) of the Act. Relevant finding of the order is reproduced hereunder: "4. I have heard the rival submissions and perused the relevant material on record. It is an undisputed fact that the assessee, a Builder and Developer, was holding two properties as its stock in trade, from which the deemed rental income has been computed u/s 23 of the Act and added to its total income. The AO has made out a case that levy of income tax in respect of properties held by the assessee as an owner, cannot be marred even if the same have been held as stock in trade. The bedrock of the action of the authorities below is certain decisions which, in turn, are b....
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....ng Value in respect of unsold properties lying with the assessee as a stock in trade, should be determined u/s. 23 of the Act, cannot be countenanced in the hue of the later judgments of the Hon'ble Summit Court. Once it is held that the income of a Builder in respect of letting out of the properties is chargeable under the head "Profit and gains of business or profession", the provisions enshrined in Chapter IV-D get magnetized and not those under the head "Capital gains". It is no doubt true that section 23 of the Act deems the determination of income from house property, which is not let out, but it is equally trite that a deeming provision cannot be extended beyond its ambit, so as to cover the heads of income or the sections, to which it does not operate. My attention has not been drawn by the ld. DR towards any specific provision under Chapter IV-D of the Act which deems rental income on the properties held as stock in trade, waiting for sale and not actually let out, as chargeable to tax under the head "Profit and gains of business or profession". As the assessee admittedly did not earn any rental income from letting out of these two units, which position has also not been d....