TaxTMI 
TaxTMI 
TaxTMI 
2022 (10) TMI 1150
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....l Housing Finance & Leasing Company Ltd. 354 ITR 180." ii) "On the facts and circumstances of the case and in law, the Ld CIT(A) has erred in restricting the disallowance u/s 14A of the IT Act to the extent of exempt income received by the assessee during the year under consideration without appreciating the Circular No. 5 of 2014 dated 11.02.2014 of CBDT." iii) On the facts and circumstances of the case and in law, the Ld. CIT (A) erred in deleting the disallowance u/s 14A of the IT Act while computing the book profits u/s 115JB of the IT Act without realizing the fact, that clause (f) of explanation (1) to section 115JB requires such adjustment to be made. iv) "The appellant craves to leave, to add, to amend and / or to alter any of the ground of appeal, if need be." 2. The facts and briefs with regard to issue raised in ground no.1 are that, Assessee is engaged in the business of Real Estate development, leasing and management of shopping malls etc. During the course of assessment proceeding the Assessing Officer has noted that the appellant has a stock of completed units totaling to Rs. 151,13,53,919/- out of which, it has received advances in respect of properties to th....
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....T (A) are as under: i) Hon‟ble Mumbai ITAT in the case of Runawal Constructions (ITA.No.5408 & 5409/Mum/2016). ii) Hon‟ble Mumbai Tribunal in case of Arihant Estates Pvt. Ltd (ITA No.6037/Mum/2016). iii) Hon‟ble Pune Tribunal in the case of M/s Kolte Patil Developers Limited V. DCIT (ITA No. 2206/PUN/2016). The Tribunal in all these decisions have followed the Gujarat High Court judgment in CIT Vs. Neha Builders Pvt. Ltd (Supra) to decide this issue in favour of the assessee that notional rent cannot be taken as ALV for computing the income from house property on unsold inventory of flats. 5. Before us, the Ld. DR has referred to the decision of co-ordinate Bench decision of ITAT Mumbai in the case of Dimple Enterprises proceed DCIT, reported in 190 ITD 199, wherein the Tribunal has held that if Assessee is a builder but business of the Assessee is not letting of property, then rent from unsold stock is to be assets has income from house property, after following the decision of Hon‟ble Delhi High Court in the case of CIT vs. Ansal Housing Financial and Leasing Company Ltd (Supra). He pointed out that Tribunal has also considered the decision of Guja....
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....led a revised return submitting that a part of its property was given on rent and the income derived on that basis should be computed under the head "Income from house property and not as business income. The Assessing Officer, during the course of the assessment proceedings, observed that the expenses on maintenance of the property were debited to the profit and loss account and so also the building was shown as stock-in-trade, therefore, the prop would partake the character of the stock and any income derived from the stock cannot be taken to be income from the property. The Tribunal allowed the appeal observing inter alia, that any dividend received on the shares or any interest received from the bank would be taken to be income from other sources, therefore, any income derived under the head of "rent" would also become income from the property, it accordingly allowed the appeal and directed reconsideration of the matter." 8.1 The Hon‟ble High Court, then observed and held as under; "9. From the order passed by the learned Commissioner of Income-tax 7 (Appeals), it would clearly appear that the case of the assessee was that the company was incorporated with the main obj....
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....ng stock and the controversy was, whether the rental income derived from letting out the flat is assessable under the head income from house property or business income, which Hon‟ble High Court held that it should be assessed as business income. 10. On the contrary, on this point, Hon‟ble Jurisdictional High Court in the case of Mangla Homes Pvt. Ltd. Vs. ITO, reported in (2010) 325 ITR 281(Bombay) wherein, the Hon‟ble Bombay High Court on the facts where the Assessee Company was incorporated with the object of dealing in properties and the main object of the company as contained in the memorandum of association was to carry on business of dealing and investment in properties, flats, warehouses, shops, commercial and residential houses. The ancillary object was to carry on business of leasing, hire purchase, renting, selling, re-selling or otherwise dispose of all forms of movable or immovable properties and assets including buildings, godowns, warehouses and real estate of any kind. The Assessee claimed by the assessee that the flat could not be sold because of recession in the market and hence it let out the flats on license basis for temporary period and earn....
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....io and principle, either of the Hon‟ble Gujarat High Court or the Hon‟ble Bombay High Court is not applicable on the facts of the present case, because, here in this case the Assessee had unsold units which were lying vacant and were in the possession of the Assessee Company. Assessing Officer held that these properties are liable to be taxed on notional rental income under the head "income from house property‟ on the basis of ALV. It is not a case that there is any actual receiving of rent as was the case before the Hon‟ble Gujarat High Court and Hon‟ble Bombay High Court. Had it been a case were Assessee have fetched rental income from the unsold stock, then following the principle laid down by the Hon‟ble Bombay High Court same would have been assessed under the head income from house property. 15. Now, coming to the decision of Hon‟ble Delhi High Court in the case of CIT Vs. Ansal Housing Finance & Leasing Company Ltd (Supra), one of the question of law referred before the Hon‟ble High Court was as under; "Whether the assessee was liable to pay income tax on the annual letting value of unsold flats owned by it under the head "i....
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.... and selling flats in housing estates. The argument that income tax is levied not on the actual receipt (which never arose in this case) but on a notional basis, i.e. ALV and that it is therefore not sanctioned by law, in the opinion of the Court is meritless. ALV is a method to arrive at a figure on the basis of which the impost is to be effectuated. The existence of an artificial method itself would not mean that levy is impermissible. Parliament has resorted to several other presumptive methods, for the purpose of calculation of income and collection of tax. Furthermore, application of ALV to determine the tax is regardless of whether actual income is received; it is premised on what constitutes a reasonable letting value, if the property were to be leased out in the marketplace. If the Assessee's contention were to be accepted, the levy of income tax on unoccupied houses and flats would be impermissible which clearly not the case is". 17. Though, the judgment which has been referred by the Hon‟ble Delhi High Court in the case in "East India Housing & Land Development Trust (Supra)", "Sultan Bros" and "Karan Pura Development Company Ltd". (Supra) wherein, in all the c....
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....tion is that the law should govern current activities; i.e. to say "lex prospicit non respicit", which means that "The Law looks forward and not backward." 19. Now, that specific provision has been brought in the statute which provides that, if building or land held as stock in trade and the property has not been let out during the whole or any part of the previous year, then annual value of such property after the period of one year (which was increased 2 years), shall be computed as income from house property and up to period of one year/two years income shall be taken to be "nil‟. Thus, when specific provision has been brought with the effect from 01.04.2018 which cannot be applied retrospectively, then in our humble opinion it cannot be imputed that ALV of the flats held as stock in trade should be taxed on notional basis prior to AY 2018-19. Without any legislative intent or specific provision under the Act, such notional or deeming income should not be taxed as cardinal principle, because assessee is not aware that any hypothetical income is to be shown when he has not received any real or actual income. In our view of Hon‟ble Delhi High Court is too harsh an int....