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2022 (10) TMI 1150 - AT - Income TaxIncome from house property - ALV of the flats held as stock in trade - notional income as income from house properties in respect of unsold units held by the assessee as its stock in trade - HELD THAT:- 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 should be taxed on notional basis prior to AY 2018-19. Without any legislative intent or specific provision under the Act, such notional or deeming income should not be taxed as cardinal principle, because assessee is not aware that any hypothetical income is to be shown when he has not received any real or actual income. In our view of Hon‟ble Delhi High Court East India Housing & Land Development Trust [1960 (11) TMI 7 - SUPREME COURT] is too harsh an interpretation. Since, even prior to the amendment, there is one High Court judgment of Hon‟ble Delhi High Court which is directly on this issue and against the Assessee, therefore same needs to be followed. Accordingly, we hold that Assessing Officer is correct in computing ALV on notional rent on unsold stock, but with following riders and directions to the AO as discussed herein after. Firstly, the flats or units on which assessee has received any advance in this year or in the earlier years but has not delivered or given final possession of the said flat/unit to the buyer, then no notional rent can be charged as it tantamount to sale. Secondly, if unit of flat is shown as work-in-progress in the books then also no notional rent can be computed. And Lastly, Ld. Assessing Officer is not justified in making estimate of 8.5% of investment as ALV which is unsustainable in view of the decision of Hon‟ble Bombay High Court in the case CIT Vs. Tip top Typography [2014 (8) TMI 356 - BOMBAY HIGH COURT] wherein, it has been held that rent should be computed at Municipal ratable value. We accordingly direct the AO to ascertain the Municipal rateable value for computing the notional rent. This is also been held by ITAT Mumbai Bench in the case of Dimple Enterprise [2021 (6) TMI 132 - ITAT MUMBAI] AO is directed to compute accordingly as per direction given above. Accordingly, ground No.1 of the revenue is partly allowed for statistical purposes. Disallowance u/s 14A - Admittedly the AO has made disallowance u/s 14A much beyond the exempt claimed by the Assessee - Assessee has claimed exempt income and has suo motto disallowed the entire exempt income - CIT (A) has restricted the disallowance to the extent of exempt of income after following the judgment of M/s. Nirved Traders Pvt.Ltd. [2019 (4) TMI 1738 - BOMBAY HIGH COURT] - HELD THAT:- CIT (A) is justified in restricting the disallowance to the extent of exempt of income. Accordingly, the order of the CIT (A) is confirmed and ground no.2 of the revenue is dismissed. MAT Computation - Disallowance u/s 14A, r.w.s 115JB is also dismissed as already we have deleted the disallowance u/s 14A.
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