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2022 (6) TMI 1271 - AT - Income TaxIncome from house property - notional rent from house property in respect of flats held as ‘stock in trade’ by the assessee - deemed rental income on unsold flats / units held by the assessee as ‘stock in trade’ - assessee is in the business of real estate construction and development in India - AO noted that assessee had certain flats as ‘unsold finished stock’ in its balance sheet and these represented the house properties owned by the assessee - HELD THAT:- It is not in dispute that the unsold flats lying in the balance sheet with the assessee were held as stock in trade by the assessee. It is not in dispute that the sale of flats shall be assessable as business income in the hands of the assessee, being stock in trade. We find that the provisions of Section 23(5) of the Act had been introduced in the statute for taxability of notional rent in respect of properties held as ‘stock in trade’, has been introduced only from A.Y.2018-19 onwards. Hence, the said provision cannot be made applicable upto A.Y.2017-18. We find that the issue in dispute is no longer res-integra in view of the decision of this Tribunal in the case of Pegasus Properties (P) Ltd [2021 (12) TMI 1210 - ITAT MUMBAI] to hold that no addition on account of deemed rental income could be made in respect of unsold stock of flats held as “stock in trade” upto A.Y.2017-18. However, the amendment has been brought in the statute in Section 23(5) from A.Y.2018-19 providing a moratorium period of two years. Hence, no addition could be made even for A.Y.2018-19 also. Accordingly, the addition made towards notional rent is hereby directed to be deleted both under normal provisions of the Act as well as in the computation of book profits u/s.115JB. Addition u/s.43CA - Addition deleted as difference in value between the stamp duty authority and the consideration reported by the assessee is less than 10% - whether this proviso could be given retrospective effect so as to confer benefit to the assessee in the instant case? - HELD THAT:- We find that this issue is no longer res integra in view of the decision of this Tribunal in the case of Maria Fernandes Cheryl vs. Income Tax Officer [2021 (1) TMI 620 - ITAT MUMBAI] wherein the third proviso inserted in Section 50C of the Act has been held to be retrospective in operation from 01/04/2003 onwards. Though this decision has been rendered in the context of Section 50C of the Act for a capital asset, the same analogy could be drawn for Section 43CA also for asset held as ‘stock in trade’. CIT(A) had rightly deleted the addition made u/s.43CA of the Act both under normal provisions of the Act as well as in the computation of book profits u/s.115JB of the Act. In any case, this sum does not fall within the ambit of Explanation to Section 115JB (2) of the Act and hence, the same can never be added back in the computation of book profits u/s.115JB of the Act. Accordingly, the grounds raised by the Revenue in this regard are dismissed. Carry forward losses on sale of redeemable non-convertible zero coupon bonds, which was neither claimed by the assessee in the original return of income u/s.139(1) of the Act nor in the revised return filed u/s.139(5) of the Act but claimed during the course of assessment proceedings - HELD THAT:- The assessee succeeded on this issue before the ld. CIT(A) who by placing reliance on the decision of the Hon’ble Jurisdictional High Court in the case of CIT vs. Pruthvi Brokers and Shareholders Pvt. Ltd [2012 (7) TMI 158 - BOMBAY HIGH COURT] and also by placing reliance on the decision of the Hon’ble Supreme Court in the case of Goetze India Ltd., referred to supra stating that the claim of carry forward of loss of Rs.188 Crores could be allowed by the ld. CIT(A) even though it is not claimed in the return of income by the assessee. CIT(A) also observed that the restriction placed by the Hon’ble Supreme Court in the case of Goetze India Ltd. [2006 (3) TMI 75 - SUPREME COURT] relied upon by the ld. AO does not apply to appellate authorities and the same applies only to the ld. AO. Accordingly, he directed the ld. AO to allow the long term capital loss after examining the correctness of its computation. The genuinity of the claim of this loss was not doubted by the lower authorities in the instant case. Even the ld. CIT(A) had merely directed the ld. AO to ascertain the correctness of the computation of loss claimed by the assessee. It is a fact that assessee had actually incurred a loss of Rs.188 Crores in the instant case on sale of non-convertible zero coupon bonds. In view of the decision of Hon’ble Jurisdictional High Court in the case of Pruthvi Share Brokers referred to supra, the loss even though not claimed by the assessee in the return of income would be eligible for carry forward to subsequent years. In any case, the law is very settled that there is no estoppel against this statute and Revenue cannot take undue advantage of the ignorance of the assessee and that Article 265 of the Constitution clearly mandates that no tax shall be collected except by an authority of law. Hence, it is obligatory on the part of the ld. AO to educate the assessee of its legitimate rights and duties. Accordingly, we do not find any infirmity in the action of the ld. CIT(A) granting relief to the assessee in this regard. Accordingly, the ground No.2 raised by the Revenue is dismissed. MAT computation - whether the assessee is entitled for reduction towards an item which is mentioned as an audit qualification in the statutory audit report, while computing book profits u/s.115JB? - HELD THAT:- As the financial statements prepared in accordance with part II & part III of the Schedule-VI of the Companies Act, 1956, should be read together with notes on accounts and the audit qualifications for the purpose of computing the book profits u/s.115JB - this conjoint reading of financial statements together with notes on accounts and audit report alone would be in full compliance with the provisions of Section 211 of the Companies Act, 1956. Section 115JB mandates that the accounts of the assessee company should be prepared as per the mandate provided in Section 211 of the Companies Act. Hence, we hold that audit report together with the audit qualification and notes on accounts should be read together with the balance sheet and profit and loss account for the purpose of determination of book profits u/s.115JB - Hence, the adjustment made by the statutory auditor in the revised form No.29B while computing revised book profits u/s.115JB is in order. Accordingly, we direct the ld. AO to grant deduction while computing book profits u/s.115JB of the Act. Accordingly, the grounds raised by the assessee are allowed.
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