TaxTMI 
TaxTMI 
2025 (5) TMI 1952
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....8,27,567/-. The return was selected for complete scrutiny under CASS, and notice under section 143(2) of the Act was issued on 09.08.2018. The case was subsequently transferred on change of jurisdiction, and further notices under section 142(1) along with detailed questionnaires were issued from time to time, calling for various details including explanation for valuation of land purchases and justification for not disclosing any income under the head "Income from House Property" in respect of unsold flats held as stock-in- trade. During the course of assessment proceedings, the AO observed that the assessee was carrying unsold finished flats forming part of closing stock valued at Rs. 2,23,24,485/- in respect of its project "Galaxy Opal". The building use (BU) permission in respect of the said project had been obtained in the financial year 2011-12. It was noted that 16 flats remained unsold as on 31.03.2017 and continued to be reflected as stock-in-trade in the books of the assessee. The AO issued a show cause notice proposing to treat notional rental value on such unsold flats as taxable under the head "Income from House Property" in terms of the conditions laid down in section....
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....tration and vakil fees incurred for perfecting title and execution of special Power of Attorney in favour of its partner. However, in absence of any external documentary evidence such as stamp duty receipts, registration slips or vakil fee vouchers and further noting that the said transactions pertained to F.Y. 2010-11 and were included in the purchases for F.Y. 2016-17, the AO held that the explanation lacked evidentiary support and disallowed the differential amount of Rs. 10,30,580/- by treating it as unverifiable expenditure. 7. The assessee carried the matter in appeal before the Ld. CIT(A) and reiterated its objections both in respect of the addition of notional rent and the disallowance of purchase-related expenses. It was submitted that since the property constituted trading stock, any notional income could not be brought to tax under the head "Income from House Property", particularly when section 23(5) was made effective only from A.Y. 2018-19. It was also submitted that the expenses disallowed had been incurred in earlier years and duly accounted for during block assessment under section 153A, and the corresponding purchase had been accepted. 8. The Ld. CIT(A), however....
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....isallowance of expenses incurred by the appellant firm towards Stamp Duty, Registration Fees and Vakils fees of Rs. 10,30,580/- merely on surmises and conjectures. 2. The Ld. CIT(A) has erred in law and on facts in making an observation that during the course of appeal proceedings, the appellant did not provide any credible documentary evidence which can be relied upon regarding the allowability of these expenses. The appellant humbly submits that as the payment for purchase was done in F.Y. 2010-11, the appellant had submitted the ledger copy from the books, of said land. Said expense was incurred while executing special Power of Attorney (POA) in favour of one of the partner of the firm to carry out all the work related to these parcel of land and the same was also duly scrutinized U/s 143(3) r.w.s. 153A, by the then DCIT, Central Circle of Income, Tax and the assessment order was also rendered. 3. The Ld. CIT (A) has erred in law and on facts in not properly considering the written submission filed by the appellant during the course of appeal proceedings wherein the appellant has already submitted the relevant details in respect difference due to Stamp Duty, Registration Fee....
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.... (P.) Ltd. [2025] 717 taxmann.com 56 (Mumbai-Trib.) iv. Vyapti Infrabuild Pvt. Ltd. v. DCIT, Central Circle-4(1)(2), Ahmedabad - ITA Nos. 2120, 2505/Ahd/2017 (AYs 2013-14 & 2014-15) and ITA No. 2688 & CO No. 22/Ahd/2017 (AY 2014-15) v. DCIT v. Ganga Developers - [2022] 145 taxmann.com 515 (ITAT Mumbai - Trib.) vi. Othello Developers v. Pr. CIT - [2023] 151 taxmann.com 519 (ITAT Ahmedabad - Trib.) vii. DCIT v. Zen Matrix (P) Ltd. - [2023] 152 taxmann.com 395 (ITAT Ahmedabad - Trib.) viii. Takshashila Realities (P) Ltd. v. DCIT - [2023] 156 taxmann.com 175 (ITAT Ahmedabad - Trib.) 11. Regarding Disallowance of Rs. 10,30,580/- towards Stamp Duty, Registration Fees, and Vakil Fees, the AR submitted that while the banakhat (agreement to purchase) was executed in respect of both survey numbers, formal registered sale deeds could not be executed due to certain defects in title which remained uncured by the sellers. As a result, the assessee executed a Special Power of Attorney (POA) in favour of its partner to act and transact on behalf of the firm with respect to these land parcels. In support of the above, the AR made detailed reference to the paper book. The AR referred to p....
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..... 14. We have carefully considered the rival submissions, perused the assessment order, the impugned appellate order, the paper book placed on record, and the extensive judicial authorities cited on both sides. The dispute in this ground is centred around the addition of Rs. 10,93,898/- made by the Assessing Officer and confirmed by the CIT(A), being deemed rental income attributed to 16 flats held by the assessee as unsold closing stock in its real estate project "Galaxy Opal." The core question that arises is whether notional income can be brought to tax under the head "Income from House Property" under section 22 of the Act in respect of flats held as stock-in-trade by a real estate developer for A.Y. 2017-18. 15. Section 22 provides the charging provision for "Income from House Property" and reads: "The annual value of property consisting of any buildings or lands appurtenant thereto of which the assessee is the owner, other than such portions of such property as he may occupy for the purposes of any business or profession carried on by him the profits of which are chargeable to income-tax, shall be chargeable to income-tax under the head 'Income from house property." To i....
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....This insertion of section 23(5) by Parliament clearly indicates that prior to A.Y. 2018-19, the legislature did not treat such unsold stock-in-trade as taxable under the head 'Income from House Property'. The provision is prospective in nature, and its very introduction signals that no such tax charge existed in earlier years. This view is fortified by several decisions of coordinate benches as relied on by the assessee. 20. The Revenue has placed reliance on the decision of the Hon'ble Delhi High Court in CIT v. Ansal Housing & Construction Ltd. [(2016) 389 ITR 373 (Del)], where it was held that the ALV of unsold flats held by a construction company is taxable under section 22. However, that decision is clearly distinguishable as the facts involved treatment of unsold flats as fixed assets, not stock-in-trade and the judgment does not consider or discuss the Gujarat High Court's binding decision in Neha Builders (P.) Ltd. Subsequent legislative clarification by insertion of section 23(5) postdates that ruling and effectively limits its reach. Accordingly, the reliance on the judicial precedent in case of Ansal Housing(supra) does not override the jurisdictional bindin....
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....s executed in favour of the partner of the firm, copies of which were placed on record, the vakil fees, though paid in cash, are substantiated by signed internal vouchers, and the entries were contemporaneously recorded in the ledger account of the respective land parcels. The AR further explained that the entire set of entries were accounted for in the books during the course of F.Y. 2010-11, and no contrary finding was ever made during the assessment proceedings of the related year. 24. On the basis of the materials placed before us, we find merit in the explanation offered by the assessee. The expenses in question form part of the cost of acquiring trading stock, and in the business of real estate development, such incidental costs incurred for legal formalities, title documentation, and POA registration constitute allowable additions to the book value of inventory. The stamp duty and registration fees were admittedly incurred in connection with a registered Power of Attorney, which is a public document. In commercial transactions, especially where the seller cannot deliver formal title due to pending issues, the execution of a POA backed by registration and statutory fees is a....