TaxTMI 
TaxTMI 
2019 (3) TMI 1649
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.... brief facts of this issue are that the assessee company is engaged in the business of construction and is a builder and developer of housing projects. It filed its return of income for the A.Y.2012-13 on 29/09/2012 declaring total income of Rs. 9,79,23,426/-. The assessee had the following flats as unsold in its project as at the end of the financial year:- a. Flat at Jolly Bhavan having total area of 1815 sq.ft at Khar, Mumbai b. Flat at Aurovilla having total area of 3125 sq.ft at Santacruz, Mumbai. 3.1. The Ld. AO show-caused the assessee to explain as to why the annual letting value of these two unsold units should not be assessed in its hands as 'income from house property'. In response, the assessee submitted that it is in the business of real estate development activity and had never contemplated into leasing or renting of flats. Further, it was stated that the assessee continued to occupy the said flats for the purpose of its business and that the same are outside the purview of Section 22 of the Act. Further, it was pleaded that these unsold flats are part of its inventory of stock in trade and hence, income derived from such property, if any, cannot ....
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....e Gujarat High Court in the case of CIT vs. Neha Builders Pvt. Ltd., reported in 296 ITR 661 (Guj) which had held that where the property was held as stock in trade of the assessee, then the said property would partake character of stock and any income derived from stock would be income from business and not income from house property. In the instant case, admittedly, the assessee had treated the unsold flats at Jolly Bhavan and Aurovilla as its stock in trade. It is not in dispute before us that the assessee had not let out its unsold flats at Jolly Bhavan and Aurovilla to any person and had rather actually occupied the same for the purpose of its business. Hence, there cannot be any assessment of notional rental income or deemed rental income under the head 'income from business' in the absence of specific provisions contained in the statute. At this juncture, it would be pertinent to note that the amendment brought in by the Finance Act 2017 w.e.f. 01/04/2018 wherein a new sub-section (5) has been inserted in Section 23 of the Act wherein the properties held as stock in trade which are not let out during the previous year, the annual value of the said property, for a period up t....
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....f such property as he may occupy for the purposes of any business or profession carried on by him the profits of which are chargeable to income tax, shall be chargeable to income tax under the head "Income from house property‟. Further, the determination of the "annual value‟ of the property is envisaged in Sec. 23 of the Act. Sec. 23(1)(a) contemplates that the sum for which the property might reasonably be expected to let from year to year is to be deemed as the "annual value‟ of the property which though might not have been let out by the assessee. 8. We have deliberated at length on the issue under consideration in the backdrop of the aforesaid statutory provisions, and are of the considered view that though the "annual value‟ of a property simpliciter owned by an assessee would be liable to be assessed under the head "Income from house property‟, however a similar treatment cannot be accorded to a property which is held by the assessee as stock-in-trade of his business. In our considered view a property which is held by an assessee as stock-in-trade of his business as that of a developer would loose its color and character as that of a pr....
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....ourt of Delhi in the case of CIT Vs. Ansal Housing Finance & Leasing Company Ltd. (2013) 354 ITR 180 (Delhi) and had therein concluded that the notional lettable value of the unsold flats held by the assessee was liable to be determined and brought to tax under the head "Income from house property‟. We find that the issue under consideration before us i.e whether the notional lettable value of the property held by an assessee as stock-in-trade in its business as that of a developer is liable to be assessed under the head "income from house property‟, has been differently answered by the Hon‟ble High Court of Gujarat in CIT Vs. Neha Builders Pvt. Ltd. (2008) 296 ITR 661 (Guj) and the Hon‟ble High Court of Delhi in CIT Vs. Ansal Housing Finance and Leasing Ltd. (2013) 354 ITR 186 (Del). We are of the considered view that in the backdrop of the aforesaid conflicting views of the aforesaid non-jurisdictional High Courts, the view in favour of the assessee as had been arrived at by the Hon‟ble High Court of Gujarat is to be preferred. Our aforesaid view is fortified by the judgment of the Hon‟ble Supreme Court in the case of CIT Vs. Vegetable Products....