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2019 (3) TMI 1672 - AT - Income TaxIncome from House Property - imaginary income - hypothetical income - protective addition made by AO on account of notional rent of unsold area - property held as stock-in-trade - HELD THAT:- Once it is held that the income of a Builder in respect of letting out of the properties is chargeable under the head “Profit and gains of business or profession”, the provisions enshrined in Chapter IV-D get magnetized and not those under the head “Capital gains”. It is no doubt true that section 23 of the Act deems the determination of income from house property, which is not let out, but it is equally trite that a deeming provision cannot be extended beyond its ambit, so as to cover the heads of income or the sections, to which it does not operate. My attention has not been drawn by the ld. DR towards any specific provision under Chapter IV-D of the Act which deems rental income on the properties held as stock in trade, waiting for sale and not actually let out, as chargeable to tax under the head “Profit and gains of business or profession”. As the assessee admittedly did not earn any rental income from letting out of these two units which position has also not been disputed by the AO, in my considered opinion, taxing any hypothetical income which is otherwise not sanctioned by any provision under Chapter IV-D, cannot be permitted. The legal sanctity drawn pertains to the very spirit and soul of the Income Tax Act, 1961. Meaning thereby, Section 5 of the Act stipulates that a person who is a resident can be subjected to tax in respect of income from whatever source which is received or is deemed to be received in India or accrues or arises or deemed to accrue or arise to him in or outside India during such year but there is no provision for charging any imaginary income. Disallowance u/s.14A to the extent of exempt income - HELD THAT:- CIT(Appeals) upheld the addition made by the Assessing Officer relying on the decision of the Hon'ble Bombay High Court in the case of Godrej & Boyce [2010 (8) TMI 77 - BOMBAY HIGH COURT] which authorizes the Assessing Officer to recompute the disallowance u/s.14A of the Act as per prescribed method under Rule 8D in case he is not satisfied with the claim of the assessee having regard to the accounts. CIT(Appeals) has not brought out any sanctity as to the fact whether disallowance is to be restricted to the extent of exempt income or it can travel beyond that also. It is admitted by the Revenue that the assessee has received exempt income of ₹ 22,000/-. The disallowance, in our view, should be restricted to the extent of exempt income earned. Denial of deduction/proportionate deduction claimed u/s.80IB(10) - HELD THAT:- The assessee was held to be entitled to proportionate deduction under section 80IB (10) in respect of units which fulfills the conditions laid down of having built up area of 1500 sq.ft.
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