TaxTMI 
TaxTMI 
2024 (2) TMI 388
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....y the Assessing Officer under the head "Income from Property" for the assessment year under appeal. 2. On the facts and in the circumstances of the case and in law, the Commissioner of Income-tax (Appeals) was not justified in confirming the addition of notional income in respect of 13 flats held by the appellant partly as stock in trade and partly as fixed assets holding that the appellant was liable to notional income on the same under the provisions of S. 22 of the Income-tax Act 1961. 3. On the facts and in the circumstances of the case and in law, the Commissioner of Income-tax (Appeals) has grossly erred in applying the decision of the Delhi High Court in the case of Ansal Housing Finance Leasing Co. Ltd. WITHOUT PREJUDICE 4. On the facts and in the circumstances of the case and in law, the Commissioner of Income-tax (Appeals) was not justified in confirming the estimation of the ALV of the flats on the basis of the proportionate rent received in respect of flat no. 20 without which was made by the Assessing Officer without issuing any show cause notice to the 5. On the facts and in the circumstances of the case and in law the Commissioner of Income-tax (Appeals) ....
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....house property. In compliance to notice, the assessee has filed the reply by letter dated 29.03.2015 dealt at Para 4.3 of the order as under:- "4.3...... "In this regard, I have to state that the claim of vacancy allowance is very much a part of the Income-tax Act, 1961. S.23(c) dealing with the method of determination of Annual Value states that where the property or any part of the property is let and was vacant during the whole or any part of the previous year and owing to such vacancy the actual rent received or receivable by the owner in respect thereof is less than the sum referred t in clause (1), the amount so received or receivable would be the annual rent. The sum referred to in S.23(a) is the sum for which the property might reasonable be expected to let from year to year. Hence since the property was intended to be let but the owner could not get any tenant / licensee and hence the said property was vacant during the whole year, the annual value of the same would be NIL as the assessee would be entitled to vacancy allowance.". "As regards the query relating to conversion of the stock in trade into fixed assets, and estimation of notional rent for the same,....
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....per the Accounting standards and policies being fallowed consistently by the assessee. Further, the Ld. AR referred to the audited profit & loss account at Page 5 of the paper book, disclosing the revenue from operations as per note 12, includes rental income from flats disclosed under Fixed Assets and further in the computation of income of the assessee the rental income was excluded from business operations income and was disclosed separately under Income from House Property. We on perusal of the balance sheet find, under inventories note 8, were the assessee has disclosed the cost of flats of Rs. 45,91,896/- which is opening balance for the subsequent F.Y.2012-13. The Ld.AR relied on the Hon'ble Tribunal decision on the similar and identical facts, on the determination of ALV of unsold flats disclosed under stock in trade is not sustainable. We find Hon'ble Tribunal in the case of Unique Estates Development Co Ltd vs DCIT in ITA No. 4598/M/2019 for A.Y 2016-17 dated 22.03.2021 has dealt on the provisions of the Act, judicial decisions and granted the relief observing at Page 7 Para 6 to 9 of the order as under:- "6. We have heard the rival submissions and perused the material ....
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....d on the file, we noticed that the object of the assessee is deriving of income from Hotel Business and Construction. The assessee company is running a five star hotel in the name and style of The Carlton at Kodaikannal, Tamil Nadu, having rooms and other facilities. The assessee also derived income from dividend, share of profit from partnership firm and profit from sale of flats. The assessee failed to sold the flat which was being treated by him as stock in trade. The AO assessed the notional income and brought to tax as income as house property which has no doubt confirmed by CIT(A). It is to be seen whether the income of the assessee is liable to be treated as house property or business income. It is necessary to discuss the finding in the case of M/s. Runwal Constructions Vs. ACIT in ITA. No.5409/M/2016 dated 22.02.2018 which has been given in para no. 7 to 10 and are hereby reproduced as under.: - "7. We have heard the rival submissions and perused the orders of the authorities below and the decisions relied upon. It is an undisputed fact that the assessees are in the business of builders, developers and construction. Both the assessees have constructed various projects a....
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....ised before the subordinate Tribunals and, all of sudden, the Tribunal started applying the analogy. 9. From the statement of the assessee, it would clearly appear that it was treating the property as 'stock-in trade'. Not only this, it will also be clear from the records that, except for the ground floor, which has been let out by the assessee, all other portions of the property constructed have been sold out. If that be so, the property, right from the beginning was a 'stock-in-trade'." 9. Similarly the Coordinate Bench has considered similar issue as to whether the unsold property which is held as stock in trade by the assessee can be assessed under the head 'income from house property' by notionally computing the annual letting value from such property and the Coordinate Bench considering the decision of the Hon'ble Delhi High Court in the case of Ansal Housing Finance & Leasing Co. Ltd. (supra) which the AO relied upon and the decision of the Hon'ble Supreme Court in the case of Chennai Properties & Investments Ltd. vs. CIT reported in 373 ITR 673, held that unsold flats which are in stock in trade should be assessed under the head 'business incom....
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....ion in the order of AO for estimating rental income from these vacant flats u/s. 23 which is assessee's stock in trade as at the end of the year. Accordingly, the AO is directed to delete the addition made by estimating letting value of the flats u/s.23 of the I.T. Act." 10. In the case on hand before us it is an undisputed fact that both assessees have treated the unsold flats as stock in trade in the books of account and the flats sold by them were assessed under the head 'income from business'. Thus, respectfully following the above said decisions we hold that the unsold flats which are stock in trade when they were sold they are assessable under the head 'income from business' when they are sold and therefore the AO is not correct in bringing to tax notional annual letting value in respect of those unsold flats under the head 'income from house property'. Thus, we direct the AO to delete the addition made under Section 23 of the Act as income from house property. 7. In the case of titled as M/s. C.R. Developments P. Ltd. Vs. JCIT. The relevant para in 5 is hereby reproduced as under:- "5. We have considered rival contentions and perused the record. The issue under consi....
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.... issue is decided in favour of the assessee against the revenue." 9. The facts and the issue involved in the present case are similar to the facts of the case and the issue involved in the case of Ferani Hotels Pvt. Ltd. (supra). In the said case, the coordinate Bench has deleted the addition confirmed by the CIT (A) on account of notional rent determined by the AO by holding that the ALV of the unsold unit of assessee project is assessable under the head 'income from house property'. Since, the findings of the Ld.CIT (A) is not in accordance with the decision of the coordinate Bench rendered in the case of Ferani Hotels Pvt. Ltd. (supra), we respectfully following the decision of the coordinate Bench set aside the order of the Ld. CIT (A) and allow the appeal of the assessee and direct the AO to delete the addition made under the head 'income from house property'. On perusal of the said order, we find that the issue is squarely covered in favour of the assessee and, hence, the order of the CIT(A) upholding the addition made by AO estimating the ALV in respect of unsold flats cannot be sustained. The decision relied upon by the learned DR in the case of CIT vs. Gundecha Build....
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....come under income from house property applying the deemed provisions is applicable from A.Y.2018- 19 is a debatable and therefore revision proceedings shall not sustained. The Ld. AR substantiated the submissions relying on the judicial decisions: (i) M/s. C.R. Development Pvt. Ltd.-vs-JCIT, ITA No. 4277/M/2012 order dt. 13.05.2015 (ii) M/s Runwal Constructions -vs- ACIT ITA No.5408/Mum/2016, order dt.22.02.2018, Hon. Members, "G" Bench of the Mumbai Tribunal. (iii) Progressive Homes-Vs-ACIT ITA No. 5082/Mum/2016 dated 16.05.2018, Hon. Members, "G" Bench, ITAT Mumbai. (iv) ACIT-vs-Haware Construction Private Limited ITA No.3321/Mum/2016 and 3172/Mum/2016 dated 31.08.18, Hon. Members, "C" Bench, ITAT Mumbai. (v) Haware Engineers and Builders Pvt. Ltd. -vs- DCIT ITA No.7155/Mum/2016 dated 10.10.2018, Hon. Members, "H" Bench, ITAT Mumbai. (vi). M/s Cosmopolis Constructions Vs ACIT CC Pune ITA No 191/Pun/2022 dated 11-1-2013. 8. Finally the Ld. AR explained that the disputed was dealt by the A.O. and the assessee has complied with the notices which cannot be ignored. The AO in the assessment proceedings having satisfied with the claim has not made any comment on th....