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2021 (5) TMI 636
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.... Housing Finance & Leasing Co. Ltd. (2013) 29 taxmann.com 303 wherein it has been held that the assessee is liable to pay income tax on the annual lettable value of finished flats owned by it under the head Income from House Property, is clearly in favour of Revenue? 2. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) was correct in deleting the addition of Rs. 2,98,51,737/- made by the Assessing Officer on account of notional rent u/s.23 relying on the decision of the Hon'ble ITAT in the case of C.R. Developments Pvt. Ltd. V. JCIT (OSD) (ITA No.4277/Mum/2012) without appreciation that the decision of the Hon'ble ITAT was not accepted by the Revenue and further appeal was filed before Hon'ble High Court which was later withdrawn following CBDT instructions applicable at that time due to low tax effect? 3. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) was correct in deleting the addition of Rs. 2,98,51,737/- made by the Assessing Officer on account of notional rent u/s.23 relying on the decision of the Hon'ble ITAT in the case of Runwal Constructions vs. ACIT (ITA No.5408/Mum/2016) without appreciating th....
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....urt which was later withdrawn following CBDT Instructions applicable at that time due to low tax effect and the decision in the case of Runwal Constructions was not ITA No. 4369/Mum/2019 A.Y. 2013-14 DCIT, Circle -3(1)(1) Vs. M/s Bengal Shapoorji Housing Development Pvt. Ltd. 2 accepted by the Revenue, but appeal was not filed following CBDT Instructions applicable at that time due to low tax effect? 3. The appellant prays that the order of CIT(A) on the above grounds be set aside and that of Assessing Officer be restored 4. The appellant craves leave to amend, alter, delete or add grounds which may be necessary." 2. Briefly stated, the assessee company which is engaged in the business of construction and development of real estate properties had filed its return of income for A.Y. 2013-14 on 29.11.2013, declaring a total loss of Rs.(-)10,52,38,092/-. Subsequently, the case of the assessee was selected for scrutiny assessment under Sec. 143(2) of the Act. 3. During the course of the assessment proceedings it was observed by the A.O that the assessee company was holding finished flats as its closing stock valued at Rs. 43,58,01,371/-. Being of the....
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....he Hon'ble High Court of Delhi in the case of CIT Vs. Ansal Housing Finance & Leasing Company Limited Ltd. (2013) 354 ITR 180 (Del) and submitted that the A.O had rightly concluded that the ALV of the flats though held by the assessee as its stock-in-trade was liable to be assessed under Sec.22 of the Act. 6. The ld. Authorized Representative (for short 'A.R') for the assessee Dr. K. Shivaram, Senior Advocate took us through the facts of the case. The ld. A.R assailed the assessing of the ALV of the flats that were held by the assessee firm, a real estate developer, as it stock-in- trade of its business for the year under consideration. It was the claim of the ld. A.R that as the flats in question were held by the assessee firm as stock-in-trade and not as an investment, therefore, the ALV of the same could not have been determined and brought the tax in its hands. It was submitted by the ld. A.R that the issue involved in the present appeal was squarely covered by the order of a coordinate bench of the Tribunal i.e ITAT 'C' bench, Mumbai in the case of M/s Osho Developers Vs. ACIT-32, Mumbai, ITA Nos. 2372 and 1860/Mum/2019, dated 03.11.2020 (copy placed on record). A....
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....iew taken by the lower authorities that the ALV of the flats held by the assessee as stock-in-trade was liable to be determined and therein brought to tax under the head 'house property'. As is discernible from the assessment order, the A.O by relying on the order of the Hon'ble High Court of Delhi in the case of CIT Vs. Ansal Housing Finance and Leasing Company Ltd. (2013) 354 ITR 180 (Del), had determined the ALV of the flats which were held by the assessee as part of the stock-in-trade of its business of a builder and developer, and had brought the same to tax under the head 'house property'. On appeal, the CIT(A) had found favour with the view taken by the A.O by drawing support from the order of the Hon'ble High Court of Bombay in the case of CIT Vs. Gundecha Builders (2019) 102 CCH 426 (Bom). 8. On a perusal of the order of the Hon'ble Jurisdictional High Court in the case of Gundecha Builders (supra), we find, that the issue before the High Court was that where an assessee, a real estate developer, was in receipt of rental income from a property held as stock-in-trade of its business as that of a real estate developer, then, whether the said receipts were to....
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....e the other builders as it was not into letting out of properties, the determination of deemed income which had formed the basis for assessment under the ALV method, was not called for in its case. However, the High Court being of the view that the levy of income tax in the case of an assessee holding house property was premised not on whether the assessee carries on business, as landlord, but on the ownership, thus, turned down the aforesaid claim of the assessee. To sum up, in the backdrop of its conviction that the incidence of charge under the head house property was based on the factum of ownership of property, the High Court was of the view that as the capacity of being an owner was not diminished one whit, because the assessee carried on the business of developing, building and selling flats in housing estates, therefore, the ALV of the flats held as stock-in-trade by the assessee in its business of a builder and developer was liable to be determined and brought to tax under the head 'house property'. But then, we find, that taking a contrary view the Hon'ble High Court of Gujarat had way back in the case of CIT vs. Neha Builders (2008) 296 ITR 661 (Guj), observed, that ....
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....his appeal is the validity of addition sustained by the CIT(A) on account of notional ALV of the unsold flat, which is held by the assessee as stock-in-trade. Factually speaking, it is not in dispute that the flat in question is not yielding any rental income to the assessee, as it has not been let-out. It is also not in dispute that the project in question has been completed during the year under consideration, and the said flat is shown as stock-in-trade at the end of the year. At the time of hearing, the learned representative also pointed out that the flat has been ultimately sold on 06.11.2012. We find that our coordinate Bench in the case of C.R. Developments Pvt. Ltd. (supra) dealt with charging of notional income under the head 'Income from House Property' in respect of unsold shops which were shown by assessee therein as part of 'stock- in-trade'. As per the Tribunal "The three flats which could not be sold at the end of the year was shown as stock-in-trade. Estimating rental income by the AO for these three flats as income from house property was not justified insofar as these flats were neither given on rent nor the assessee has intention to earn rent by ....
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....ome' or as 'Income from House Property'. In the present case, the facts are quite different inasmuch as the unsold flat in question has not yielded any rental income as the flat has not been let-out, and is being held by the assessee purely as stock-in-trade; and, what the Assessing Officer has tried to do is to assess only a notional income thereof. Thus, the ratio of the judgment of the Hon'ble Bombay High Court in the case of Sane & Doshi Enterprises (supra) has been rendered in the context of qualitatively different facts, and is not applicable in the present case." 7 Accordingly, preferring the view taken by the Hon'ble High Court of Gujarat in CIT vs. Neha Builders Pvt. Ltd. (2008) 296 ITR 661 (Guj), as per which the ALV of the unsold property held by an assessee as stock-in-trade could not be determined and brought to tax under the head 'house property', as against that arrived at by the Hon'ble High Court of Delhi holding to the contrary in CIT Vs. Ansal Housing Finance and Leasing Company Ltd. (2013) 354 ITR 180 (Del); and also following the order of ITAT, Mumbai in Shri. Rajendra Godshalwar Vs. ITO- 21(3)(1), Mumbai [ITA No. 7470/Mum/2017, dated 3....