TaxTMI 
TaxTMI 
2024 (3) TMI 1557
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....ount of notional rent on flats held by the assessee as stock in trade ignoring the fact that the provision of Section 23(5) were introduced in the Act, from the A.Y. 2018-19 onwards merely for granting relief to the builders. 2. The appellant prays that the order of the CIT(A) on the above grounds be set aside and that of the Assessing Officer be restored." 3. The relevant facts in brief are that the Assessee is a domestic company engaged in the business of builders and developers. The Assessee filed return of income for the Assessment Year 2017-18 on 31/03/2018 declaring total Income of INR 6,54,46,210/-. The case of the Assessee was selected for scrutiny. During the assessment proceedings Assessing Officer issued notice, dated 09/12/2019, to the Assessee requiring the Assessee to show cause why notional rental income in respect of closing stock of flats/shops/offices should not be brought to tax as income from house property in hands of the Assessee as per Section 23(1)(a) of the Act. In response, the Assessee filed reply letter, dated 18/12/2019, contending that notional rental income in respect of units forming part of the closing stock could not be brought to tax a....
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....d 11/10/2022.] and submitted that the issue raised in the present appeal stands decided in favour of the Revenue. It was further submitted that the Assessing Officer was justified in bringing to tax the notional rental income computed at the rate of 8% of the value of closing stock of units held by the Assessee. The CIT(A) had incorrectly concluded that there was no provision to bring to tax the aforesaid rental income in the hands of the Assessee prior to the insertion of Section 23(5) of the Act which was applicable from Assessment Year 2018-19. 7. Per contra, the Ld. Authorised Representative for the Assessee supported the order passed by the CIT(A) and submitted that the issue raised in the present appeal stood decided in favour of the Assessee by the judgment of the Hon'ble Gujarat High Court in the case of CIT Vs. Neha Builders (Pvt.) Ltd. (supra) which has since been followed by the Mumbai Bench of the Tribunal in the case of M/s C.R. Developments Pvt. Ltd. Vs. JCIT-8(1)(OSD), Mumbai [ITA No. 4277/Mum/2012, dated 13/05/2015] and in the case of Shri Rajendra Godshalwar Vs. ITO-21(3)(1), Mumbai [ITA No. 7470/Mum/2017, dated 31/01/2019]. He vehemently contended that a view t....
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....essable as "income from house property" and not as a "business income". 14. The aforesaid ratio 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. 11. After making the above observations, the Tribunal, taking into consideration the judgment of the Hon'ble Delhi High Court in the case of CIT Vs. Ansal Housing Finance & Leasing Company Limited: [2013] 354 ITR 180 (Delhi) [31-10-2012], as well as the provisions of Section 23(5) of t....
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....he fact of ownership. Undoubtedly, the decision in Vikram Cotton Mills Ltd. case (supra) indicates that in every case, the Court has to discern the intention of the assessee; in this case the intention of the assessee was to hold the properties till they were sold. The capacity of being an owner was not diminished one whit, because the assessee carried on business of developing, building 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&....
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....that the said amendment has to be given effect prospectively from 01.04.2018 as mentioned in the Explanatory Notes to the provisions of the Finance Act, 2017. It is a cardinal principle of the interpretation that the normal presumption which respect to an amendment is that is applicable prospectively unless and until specifically stated otherwise. The logic behind such as interpretation 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 sh....
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....le on the touchstone of Hon'ble Bombay High Court decision in the case of Tip Top Typography (supra). In our considered opinion nothing stops the assessing officer from obtaining the municipal ratable value from Departmental or government machinery. Hence we direct the assessing officer to compute the valuation of deemed rent in accordance with our observation as above and take into account the Hon'ble Jurisdictional High Court decision as above. Since we have decided the issue by duly taking note of Hon'ble Jurisdictional High Court decision and have also applied Hon'ble High Court decision, the reference to other decision in this case is not considered relevant to adjudication in this case." 22. Thus, AO is directed to compute accordingly as per direction given above. Accordingly, ground No.1 of the revenue is partly allowed for statistical purposes." (Emphasis Supplied) 12. Thus, on perusal of above it can be seen that in the above decision the Tribunal had, after considering contentions identical to those raised by the parties before us, concluded that notional rental income on unsold stock can be brought to tax as income from house property in th....