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Budget 2017 – Clause 12 -Property held as stock-in-trade - anomalies in proposed amendment with some suggestions.

Income Tax - By: - CA DEV KUMAR KOTHARI - Dated:- 3-2-2017 - Section 22- 26 relates to income from house property As per Section 22 of the Income-tax Act, 1961 annual value of any house property is taxable as income (subject to some exceptions). Section 23 of the Income-tax Act provide about determination of annual value of property. Budget proposal: Clause 12 of the Bill seeks to amend section 23 of the Income-tax Act relating to annual value how determined, to prescribe for how annual value sh .....

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hole or any part of the previous year, the annual value of such property or part of the property, for the period up to one year from the end of the financial year in which the certificate of completion of construction of the property is obtained from the competent authority, shall be taken to be nil. The notes on clause is also almost reproduction of the proposed clause and does not help in understanding or clarifying the proposal. Anomalies in proposal: The amendment is to give a benefit of tra .....

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to earn rent and not for immediate use. Difficulties in increasing rent and getting properties vacated are also main causes which force properties to be kept as unused and kept under lock and key. Therefore, proposition that a property which is stock-in-trade can be let out is very difficult in view of ground realities. Stock-in-trade of properties: A property can be held as stock-in-trade in different manner and situations, for example: A dealer in property who just purchase and sell completed .....

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however, it seems that it will not benefit to completed properties purchased and held as stock-in-trade. Whereas it may be applicable to a property purchased even a day before completion certificate is granted. Anomalies for let out: Use of expressions the property or any part of the property and is not let during the whole or any part of the previous year , can lead to interpretation that even if a pat of property is not let out for any part of the year then annual value will be taken to be ni .....

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31.03.2018 01.04.2018 to 31.03.2019 12 It is not likely to be intention behind amendment. Therefore the language of proposed amendment need to be revised. If an exception for only twelve months is intended, then expression twelve months from the end of month in which completion certificate is granted can be used. Business income: After this amendment a new controversy is likely to arise as to whether any rent earned during any part of year can be assessed as business income ? After this amendme .....

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of such property which is held as stock-in-trade as business income. The owner may be allowed an option to claim or not to claim depreciation on cost of construction of building. For this purpose suitable clause in section 28 can be inserted and an exception in section 22 can be provided. Better course for owner: In many situations it would be better option for a buyer of property or even a trader or trade or developer to hold (originally or on conversion or treatment as such) to hold land and b .....

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