TaxTMI 
TaxTMI 
2019 (10) TMI 278
X X X X Extracts X X X X
X X X X Extracts X X X X
....y the assessing officer and confirmed by CIT (Appeals) may please be deleted. 3. Appellant craves to add, alter or delete any grounds either before in the course of hearing of the appeal. The only issue raised by the assessee is that the Ld.CIT(A) erred in upholding the order of the AO for the deemed rental income with respect to the properties held as stock in trade under section 23 of the Act. 2. The facts, in brief, are that the assessee in the present case is a private limited company and engaged in the activity of building and developing of the real estate. The assessee in the year under consideration has shown certain unsold properties as stock in trade worth of Rs. 2,38,15,000 only. The AO was of the view that the assessee is liable to offer the income in respect of such flats as deemed rental income under section 23 of the Act. 2.1 On a question by the AO, the assessee submitted that it has been showing unsold properties as stock in trade consistently which was accepted by the Revenue and there was no addition on account of deemed rental income. The assessee claimed to apply the principles of consistency as held by the Hon'ble Supreme Court in the case of Radhasoami Sa....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ify that the superstructure of the building is complete. As such, the interiors of the properties are pending. Similarly, the electric, drainage, and water connection is yet to be obtained. Accordingly, these properties cannot be used for the habitable purpose though the municipal authorities have issued the BU. 3.1 There is an amendment in the Finance Bill 2017 effective from 1 April 2018 for computing the deemed rental income with respect to the properties held as stock in trade. But such amendment cannot be applied retrospectively, i.e. for the year under consideration. 3.2 The assessee reiterated the submissions as made before the AO. 3.3 However, Ld. CIT (A) disregarded the contention of the assessee by observing that the assessee being the owner of the properties shall be subject to tax on the deemed rental basis under section 23 of the Act in respect of the properties held as stock in trade. It is because the assessee did not use such properties for its business purposes/operations. 3.4 Similarly, Ld. CIT (A) observed that merely receipt of an advance against the property to sell does not debar the assessee from the ownership of such property. As such, the assessee is un....
X X X X Extracts X X X X
X X X X Extracts X X X X
....6. We have heard the rival contentions of both the parties in the light of the materials available on record. The issue in the instant case relates whether the properties held as stock in trade will be subject to the deemed rental income under the provisions of section 23 of the Act. In this regard, we are inclined to refer to the judgment of Hon'ble Gujarat High Court in the case of NEHA builders private Ltd (supra) wherein it was held that the income from the property held as stock in trade should be treated as business income. The relevant extract of the order is reproduced as under: "True it is, that income derived from the property would always be termed as 'income' from the property, but if the property is used 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 ....
X X X X Extracts X X X X
X X X X Extracts X X X X
..... 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 ITA No.4420/Mum/2017 M/s. Saranga Estates Pvt. Ltd., 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 stockin- trade of his business as that of a developer would loose its color and character as that of a property simpliciter owned by him. Our aforesaid view is fortified by the judgment of the Hon'ble High Court of Gujarat in the case of CIT Vs. Neha Builders (P) Ltd. (2008) 296 ITR 661 (Guj). The Hon'ble High Court while disposing off the appeal filed by the revenue in the case of an assessee company which w....
X X X X Extracts X X X X
X X X X Extracts X X X X
....efore 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 (1973) 88 ITR 192 (SC), wherein the Hon'ble Apex Court had observed that if two reasonable constructions of a taxing provision is possible, then that construction which favours the tax payer must be adopted. Further, we find that ITAT, Mumbai in the case of ACIT-15(2)(1) Vs. M/s Haware Construction Pvt. Ltd. [ITA no. 3321 & 3172/Mum/2016; dated 31.08.2018] had after delibera....