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TMI Blog2018 (12) TMI 211X X X X Extracts X X X X X X X X Extracts X X X X ..... ck-in-trade of completed projects. 3. The learned Commissioner of Income Tax (Appeals) erred in confirming the Gross Annual Value of Rs. 4,51,29,000/- in respect of unsold flats of total area 75,215 sq. Feet in the project RNA Mirage at Worli, Mumbai at the rate of Rs. 50 per sq. feet per month. 4. The learned Commissioner of Income Tax (Appeals) erred in not allowing deduction u/s 24 of the Income Tax Act, 1961 of 30% of the Gross Annual Value computed. 5. The appellant craves to add to, alter or amend the foregoing grounds, which are without prejudice to one another, at the time of hearing." 2 Briefly stated, the assessee company which is engaged in the business as that of a builder and property developer had e-filed its "return of income" for A.Y. 2012-13 on 29.09.2012, declaring a loss of Rs. 6,03,22,822/-. Subsequently, the case of the assessee was selected for scrutiny assessment under Sec. 143(2) of the Act. 3. In the course of the assessment proceedings it was observed by the A.O that the assessee which was engaged in real estate business, had an inventory of several unsold flats (area of 75215 sq. ft.) at RNA mirage at Worli, Mumbai. The A.O holding a conviction th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s had erred in determining the notional lettable value of the unsold flats held by the assessee developer as stock-in-trade and had wrongly brought the same to tax under the head "Income from house property". In support of his aforesaid contention the ld. A.R placed heavy reliance on the judgment of the Hon"ble High Court of Gujarat in the case of CIT Vs. Neha Builders (Pvt. Ltd.) (2008) 296 ITR 661 (Guj). The ld. A.R taking us through the aforementioned judgment submitted, that the Hon"ble High Court had observed that though the income derived from a property would always be termed as income from the property, but if the property is used as "stock in trade", then the same would partake the character of stock and any income derived therefrom would be income from business and not the income from property in the hands of the assessee. The ld. A.R taking support from the aforesaid judgment submitted that as in the case of present assessee the property viz. unsold flats at RNA mirage, Worli, Mumbai, were admittedly held by the assessee as stock-in-trade, therefore, there was no occasion for deeming the annual value of the same as per the provisions of Sec. 23(1) of the Act. In order to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se of Ansal Housing Finance & Leasing Company Ltd.(supra). The ld. A.R further relied on a host of certain other orders of the coordinate benches of the Tribunal. 6. Per contra, the ld. Departmental Representative (for short "D.R") relied on the orders of the lower authorities. The ld. D.R relying on the judgment of the Hon"ble High Court of Delhi in CIT Vs. Ansal Housing Finance & Leasing Company Ltd. (2013) 354 ITR 180 (Delhi), submitted that the "ALV" of the unsold flats held by the assessee as stock-in-trade was rightly brought to tax by the lower authorities under the head "Income from house property". 7. We have heard the authorized representatives of both the parties, perused the orders of the lower authorities and the material available on record. We find that our indulgence has been sought by the assessee by preferring the present appeal, for adjudicating as to whether the CIT(A) is right in law and facts of the case in concluding that the deemed notional lettable value of the completed unsold flats held by the assessee company as stock-in-trade was liable to be determined and brought to tax under the head "Income from house property". We find from a perusal of Sec. 22 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t income derived from the property would always be termed as "income" from the property, but if the property is used as "stock-in-trade", then the said property would become or partake the character of the stock, and any income derived from the stock, would be "income" from the business, and not income from the property. 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 property". Even otherwise, it is to be seen that there was distinction between the "income from business" and "income from property" on one side, and 'any income from other sources'. The Tribunal, in our considered opinion, was absolutely unjustified in comparing the rental income with the dividend income on the shares or interest income on the deposits. Even otherwise, this question was not raised before the subordinate Tribunals and, all of sudden, the Tribunal started applying the analogy." 9. Admittedly, the lower authorities had rel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Tribunal that estimating of the rental income of the flats held by the assesses as stock-in-trade was not justified, as the said flats were neither given on rent nor the assessee had any intention to earn rent by letting out the same. We further find that another coordinate bench of the Tribunal i.e. ITAT, Mumbai Bench "G", Mumbai in ITO-2(1)(1), Mumbai Vs. M/s Arihant Estates Pvt. Ltd. [ITA No. 6037/Mum/2016; dated 27.06.2018] had relied on an earlier view taken by the Tribunal in the case of M/s Runwal Constructions Vs. ACIT in [ITA No. 5408 & 5409/Mum/2016; dated 22.02.2018], and after deliberating on the judgment of the Hon"ble High Court of Gujarat in CIT Vs. Neha Builders Pvt. Ltd. (2008) 296 ITR 661 (Guj) and that of the Hon"ble High Court of Delhi in Ansal Housing Finance & Leasing Company Ltd. (2013) 354 ITR 186 (Del), has held that the assessing officer was not correct in bringing to tax the notional annual lettable value of the unsold flats which were held by the assessee as stock-in-trade. On a similar footing a similar view had also been taken by the ITAT, Mumbai Bench "G", Mumbai in the case of Progressive Homes, Mumbai Vs. ACIT-Circle 4(4), Mumbai [ITA No. 5082/M ..... X X X X Extracts X X X X X X X X Extracts X X X X
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