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2018 (12) TMI 1963 - AT - Income TaxAddition on deemed income from house property lying in stock in trade - unsold flats and shops in stock in trade - HELD THAT:- It is an undisputed fact the assessee has shown the properties as stock in trade in the books of accounts. The shops and flats sold by the assessee were assessed under head income from business. There were certain unsold flats and shops in stock in trade which the AO treated the property assessable under the head Income from House Property and computed notional annual netting value on such unsold flats placing reliance in the case of Ansal Housing Finance & Leasing Co. Ltd.[2012 (11) TMI 323 - DELHI HIGH COURT] The Hon'ble Gujarat High Court in the case of Neha Builders Pvt. Ltd. [2006 (8) TMI 105 - GUJARAT HIGH COURT]considered the question whether the rental income received from any property in the construction business can be claimed under the head ‘income from property’ even though the said property was included in the closing stock. The Hon'ble Gujarat High Court held that if the business of the assessee is to construct the property and sell it or to construct and let out the same, then that would be the business and the business stocks, which may include movable and immovable, would be taken to be stock in trade and any income derived from such stocks cannot be termed as income from house property. As in the case of Runwal Builders Pvt. Ltd. [2018 (2) TMI 1707 - ITAT MUMBAI] 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 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. [2015 (5) TMI 46 - SUPREME COURT] held that unsold flats which are in stock in trade should be assessed under the head ‘business income’ and there is no justification in estimating rental income from those flats are notionally computing annual letting value under Section 23. We are of the considered opinion that provisions of section 23 of the Act are not applicable in the case of the assessee. Accordingly, the AO is directed to delete the addition made by estimating letting value of the flats u/s.23. Disallowance of interest payment - AO found that the assessee could not furnish any details regarding the interest expenses - HELD THAT:- We find that the assessee has sufficient capitals to invest in non-business investment, therefore disallowance of interest expenditure made by the AO is without any basis in the light of decision of Jurisdiction High Court of Gujarat in the case of Nirma Credit and Capital Pvt. Ltd.[2017 (9) TMI 485 - GUJARAT HIGH COURT] accordingly disallowance of interest is deleted. Appeal of the assessee is allowed.
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