TaxTMI 
TaxTMI 
2019 (4) TMI 2016
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....l grounds of appeal in their respective appeals, therefore, all the appeals were clubbed heard and are decided by common order for the sake of convenience. For appreciation of facts, the appeals for Assessment Year 2013-14 are treated as lead case. The assessee has raised the following grounds of appeal. 1. The learned Commissioner of Income Tax Appeal-52, erred in law & on facts in confirming order of the assessing Officer in adding the ALV of the unsold units which constitutes stock in trade of the appellant as "Income from house Property" u/s 22 of the Income Tax Act, 1961. 2. The appellant prays that the order passed u/s. 143(3) adding sum of Rs. 1,10,11,692/- as ALV of the unsold units under the head "Income from house property" is bad in law & should be quashed. 2. The revenue in its cross appeal has raised the following grounds of appeal: "Whether on the facts and in the circumstances of the case and in law, Ld. CIT(A) erred in deleting the disallowance of interest expenditure of Rs. 2,23,67,733/- u/s 36(1)(iii) of the Act, when the assessee failed to prove that the interest paid has been utilized wholly and exclusively for the business pur....
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....rofession". They never have intention to hold the premises as investment and to earn rental income. When there was intention to earn rental income from the premises constructed, the assessee-company has already transferred the premises on lease to investment account at cost. The income tax is leviable on the income earned or received and not on any notional calculations. The assessee-company holding the units/premises as stock-in-trade to earn business income. There is no intention on the part of assessee-company to earn rental income of those unsold units. Thus, the same cannot be taxed on the basis of notional ALV because the assessee-company is in occupation in the course of their business. The contention of assessee was not accepted by Assessing Officer. The Assessing Officer by relying on the decision of Hon'ble Delhi High Court in Ansal Housing Finance and Leasing Company Ltd. (344 ITR 180 (Del) concluded that ALV of finished goods/units held by assessee at closing stock has to be treated as "Income from House Property". The Assessing Officer worked out the ALV of unsold units at Rs. 1,57,30,988/- and after granting 30% deduction of Rs. 47,19,296/- treated the remaining ....
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....t assessee has given interest free loans and advances, the outstanding of which at the end of year was Rs. 13.77 Crore. The assessee have borrowed the fund from various sources and claimed expenditure of Rs. 86.69 Crore after considering the interest received during the year, the net outgo on interest is Rs. 17.11 Crore. The assessing officer further took his view that the assessee has not brought on record any commercial expediency for advancing interest free friendly loan. The assessee has paid interest ranging from 9% to 21%. The Assessing Officer worked out 17% interest on friendly loan and thereby disallowed Rs. 2.35 Crore under section 326(1)(iii). 6. On appeal before the ld. CIT(A), the addition on account of ALV of unsold unit was upheld. However, the addition on account of disallowance under section 36(1)(iii) was deleted. Thus, aggrieved by the order of ld. CIT(A), both the parties have filed their respective cross appeals by raising the grounds of appeal which we have referred above. 7. We have heard the submissions of the ld. Authorized Representative (AR) of the assessee and ld. Departmental Representative (DR) for the revenue and have gone through the order....
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....onscious of the facts that that the legislature has inserted sub-section (5) in section 23 of the Act by Finance Act, 2017, with effect from 01.04.2018, which is not applicable for the years under consideration. 10. We have noted that in assessee's own case for AY 2012-13, similar addition was made by assessing officer was upheld by ld CIT(A), however on appeal before Tribunal the same was deleted in ITA No. 6686/Mum/2016 vide order dated 31.10.2018. The relevant part of the decision is extracted below: "7. We have heard the rival submissions and perused the relevant materials on record. The reasons for our decision are given below. On the above issue, we come across one decision for the assessee and another decision for the revenue. The decision in Neha Builders Pvt.Ltd.(supra) is for the assessee, whereas the decision in Ansal Hsg. Finance & Leasing Co. Ltd.,(supra) is for the Revenue. The Hon'ble Supreme Court in the case of CIT v. Vegetable Products 88 ITR 192 (SC) has held that "if two reasonable constructions of a taxing provisions are possible, that construction which favours the tax payer must be adopted." Thereby, we will follow the decision in Neha Bu....
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....urt in CIT vs. Neha Builders P. Ltd. (supra) wherein it was held that when the assessee-company engaged in the business of construction of property and one of the building/property was included in the closing stock in the balance-sheet drawn by assessee, the property would partake the character of "stock" and any income derived from stock would not be taken to be Income from House Property. The Hon'ble High Court further held that business of the assessee is to construct the property and sale it, then that would be the business and business stock, would be taken as "stock-in-trade" and any income derived from such stock cannot be termed as 'Income from House Property'. 5. In the case in hand, there is no dispute that assessee treated the unsold unit is treated as 'stock-in-trade' in its books of account. Further, the unit sold by the assessee has been offered under the head "Income from Business". Thus, the unsold flat which are stock-in-trade, when are sold, they are assessable under the head "Income from Business" and therefore, the Assessing Officer is not correct in bringing those units to tax on the basis of notional ALV under the head "Income from House Property". ....
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....perty' and computed notional annual letting value on such unsold flats placing reliance on the decision in the case of Ansal Housing Finance & Leasing Co. Ltd. (supra). The action of the AO was upheld by the learned CIT(A). 8. The Hon'ble Gujarat High Court in the case of Neha Builders Pvt. Ltd. (supra) considered the question whether the rental income received from any property in the construction business can be claimed under the head 'income from property' even though the said property was included in the closing stock. The Hon'ble Gujarat High Court held that 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 derived from such stocks cannot be termed as income from house property. While holding so the Hon'ble High Court observed as under: - "8. 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 'stockin-trade', then the said pro....
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....d. AR placed the order of Bombay Tribunal in the case of M/s Perfect Scale Company Pvt. Ltd., ITA Nos.3228 to 3234/Mum/2013, order dated 6-9-2013, wherein it was held that in respect of assets Runwal Constructions & Runwal Builders held as business, income from the same is not assessable u/s.23(1) of the IT Act. 4. On the other hand, ld. DR relied on the order of Hon'ble Delhi High Court in the case of Ansal Housing Finance & Leasing Co. Ltd., 354 ITR 180 (Delhi) in support of the proposition that even in respect of unsold flats by the developer is liable to be taxed as income from house property. 5. We have considered rival contentions and perused the record. The issue under consideration has been restored by the CIT(A) to the file of AO to compute the annual value. Recently the Hon'ble Supreme Court in the case of M/s Chennai Properties & Investments Ltd. Vs. CIT, reported in (2015) 42 SCD 651, vide judgment dated 9-4-2015 has held that where assessee company engaged in the activity of letting out properties and the rental income received was shown as business income, the action of AO treating the rental income as income from house property in place of income fro....
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.... house property as his stock-in-trade which is not let out for whole or part of year, annual value of such property will be considered as Nil for a period up to one year from end of financial year in which a completion certificate is obtained. 10. The Hon'ble Delhi High Court in CIT Vs Ansal Housing Finance Ltd (supra) has taken a view that ALV of unsold flat built by the builder is assessable as income from the house property. However, there is contrary view of Hon'ble Gujarat High Court in Neha Builders (supra) 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 income derived from the stock, would be 'income' from the business, and not from the property. If the business of the assessee is to construct the property and to sell it or to construct and let out the same, then would be the 'business' and the business stocks, may included moveable or immoveable, would be taken to be 'stock in trade' and any income from such stock cannot be termed as 'income from property'. There is no direct decision on this issu....
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.... SC). In alternative submissions that the assessee has sufficient interest free funds the ld AR for the assessee relied on the decision of Hon'ble Bombay High Court in CIT Vs Reliance Utilities & Power ltd (313 ITR 340 Bom). 15. We have considered the rival submissions of the parties and have gone through the order of the lower authorities below. We have also deliberated on various case law relied by the lower authorities and the ld Representatives. We have noted that the ld CIT(A) while granting relief to the assessee has not given any finding that he has examined the facts and the books of accounts of the assessee if the assertion of the assessee that out of Rs. 151.06 Crore a sum of Rs. 50.74 Crore was business advances, Rs. 80.78 Crore was advanced to subsidiary and Rs. 6.37 to associate concerns or when the interest free loans of Rs. 86.95 Crore was received by the assessee. We have further noted that similar disallowances was made against the assessee for AY 2012-13 and on appeal before the Tribunal the issue was restored to the file of assessing officer vide order dated 31.10.2018 in ITA No. 6686/Mum/2016 with the following directions: "12.We have heard the ....
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....of appeal to the file of the AO to make a de novo order as per the ratio laid down in Madhav Prasad Jatia (supra) and Reliance Utilities & Power Ltd. (supra), after giving reasonable opportunity of being heard to the assessee. We direct the assessee to file the relevant documents/evidence before the AO. Thus the 3rd and 4th grounds of appeal are allowed for statistical purposes." 16. Considering the decision of Tribunal in assessee's own case for earlier year and the facts that the ld CIT(A) has nor recorded its satisfaction that that he has examined the facts and the books of accounts of the assessee if the assertion of the assessee that out of Rs. 151.06 Crore a sum of Rs. 50.74 Crore was business advances, Rs. 80.78 Crore was advanced to subsidiary and Rs. 6.37 to associate concerns or when the interest free loans of Rs. 86.95 Crore was received by the assessee. Therefore, the grounds of appeal raised by the revenue are also restored back to the file of assessing officer to verify the facts and pass the order in accordance with law and as per the directions of the order dated 31.10.2018 in ITA No. 6686/Mum/2016. In the result the grounds of appeal raised by the ....