TMI Blog2019 (10) TMI 278X X X X Extracts X X X X X X X X Extracts X X X X ..... e properties held as stock in trade on account of deemed rental income. As the assessee succeeds on the reasoning as elaborated in the preceding paragraph, therefore we are not inclined to adjudicate the other contentions raised by the assessee. Hence the ground of appeal of the assessee is allowed. - ITA No.2625/AHD/2017 - - - Dated:- 19-7-2019 - Shri Waseem Ahmed, Accountant Member And Ms. Madhumita Roy, Judicial Member For the Assessee : Shri Hardik Vora, A.R For the Revenue : Shri Shiv Sevak, Sr. D.R ORDER PER WASEEM AHMED, ACCOUNTANT MEMBER: The captioned appeal has been filed at the instance of the Assessee against the order of the Learned Commissioner of Income Tax (Appeals)-8, Ahmedabad dated 16/10/2017( in short Ld.CIT(A) ) arising in the matter of assessment order passed under s.143(3) of the Income Tax Act, 1961 (here-inafter referred to as the Act ) dt.22/12/2016 relevant to the Assessment Year 2014-2015. The assessee has raised the following grounds of appeal; 1. On the facts and circumstances of the case as well as law on t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed that the proposed annual letting value computed at the rate of 12% of the value of the closing stock lacks any rational basis. As such, the prevailing market yield is less than 7% of the investment. Thus the rate of ALV proposed by the AO is baseless. The assessee further submitted that if the income needs to be worked out on deemed rental basis under section 23 of the Act, then it is entitled to the deduction of the proportionate interest expenses against such deemed rental income. 2.4 The assessee also submitted that if the deemed rental income is calculated with respect to the value of the properties held as stock in trade amounting to ₹ 2,38,15,000.00 than the same should be reduced for the purpose of computing business income. 2.5 However, the AO disagreed with the contention of the assessee and calculated the ALV at the rate of 8% on the value of the closing stock shown by the assessee, which works out to ₹ 19,05,200/- under section 23 of the Act. Nevertheless, the AO allowed a deduction to the assessee under section 24 on account of repair and maintenance at the rate of 30% of the ALV. Thus the AO determined t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to tax under the head business and profession as well as house property. Therefore, the argument of the assessee that the amount of closing stock with respect to the impugned properties for ₹ 2,38,15,00/- should be reduced from the business income was rejected. 3.8 Similarly, Ld. CIT (A) also observed that the assessee has already claimed the deduction of interest expenses while computing the income under the head business and profession. Accordingly, the claim of the assessee for the deduction of the interest expenses against the property income was denied. Being aggrieved by the order of the Ld.CIT (A), the assessee is in appeal before us. 4. The learned AR before us reiterated the submissions as made before the respective IT authorities being AO and CIT(A) and further submitted that the income from the properties being held as stock in trade is liable to be taxed under the head business and profession. The Ld. AR in support of his argument, relied on the judgment of Hon ble Gujarat High Court in the case of CIT Vs. Neha builders private Ltd reported in 296 ITR 661. Accordingly, the Ld. AR emphasized that there cannot be a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ness and profession. Thus there is no question of computing the income qua the properties held as stock in trade under the head income from house property. We further hold that there is no provision under the head of income, namely income from the business and profession for computing the deemed rental income qua the properties held as stock in trade. Therefore, we are of the view that there cannot be any income under the head house property on account of deemed rent with respect to such properties held as stock in trade. 6.2 We also note that the Mumbai Tribunal in the case of Saranga Estate Private Limited VS DCIT in ITA No. 4420/Mum/2017 after considering the judgment in the case of Ansal housing finance and leasing company Ltd (supra) has decided the issue in favor of the assessee. The relevant extract of the order is reproduced as under: In any case, this issue had been duly adjudicated by the Co-ordinate Bench of this Tribunal in the case of Chamber Construction Pvt. Ltd., vs. DCIT in ITA No.4418/Mum/2017 for A.Y.2012-13 dated 30/11/2018 wherein it has been held as under:- 7. We have heard t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... igh Court of Gujarat in the case of CIT Vs. Neha Builders (P) Ltd. (2008) 296 ITR 661 (Guj). The Hon ble High Court while disposing off the appeal filed by the revenue in the case of an assessee company which was engaged in the business of construction of property, had observed that where a property is held as stock-in-trade, then the same would become or partake the character of the stock, and any income derived therefrom would be income from business and cannot be held as income from property. The Hon ble High Court while concluding as hereinabove had observed as under: 7. From the order passed by the learned CIT(A), it would clearly appear that the case of the assessee was that the company was incorporated with the main object of purchase, take on lease, or acquire by sale, or let out the buildings constructed by the assessee. Development of land or property would also be one of the businesses for which the company was incorporated. 8. True it is, that income derived from the property would always be termed as income from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ance and Leasing Ltd. (2013) 354 ITR 186 (Del). We are of the considered view that in the backdrop of the aforesaid conflicting views of the aforesaid non- jurisdictional High Courts, the view in favour of the assessee as had been arrived at by the Hon ble High Court of Gujarat is to be preferred. Our aforesaid view is fortified by the judgment of the Hon ble Supreme Court in the case of CIT Vs. Vegetable Products (1973) 88 ITR 192 (SC), wherein the Hon ble Apex Court had observed that if two reasonable constructions of a taxing provision is possible, then that construction which favours the tax payer must be adopted. Further, we find that ITAT, Mumbai in the case of ACIT-15(2)(1) Vs. M/s Haware Construction Pvt. Ltd. [ITA no. 3321 3172/Mum/2016; dated 31.08.2018] had after deliberating on the aforesaid judgments of the Hon ble High Court of Gujarat in Neha Builders (P) Ltd.(supra) and that of the Hon ble High Court of Delhi in Ansal Housing Finance Leasing Company Ltd.(supra), had by taking support of the judgment of the Hon ble Supreme Cou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... we are of the considered view that the lower authorities had erred in determining the notional lettable value of the unsold flats held by the assessee company as stock-in-trade of its business of builders and property developers, and bringing the same to tax in the hands of the assessee under the head Income from house property . We thus in terms of our aforesaid observations set aside the order of the CIT(A). 11. The appeal of the assessee is allowed. 7.2. In view of the aforesaid observations and respectfully following the judicial precedents relied upon hereinabove, we direct the Ld. AO to delete the addition made towards annual letting value of ₹ 23,71,200/- in respect of two unsold flats. Accordingly, grounds raised by the assessee are allowed 6.3 In view of the above, we hold that there cannot be any income under the head house property qua the properties held as stock in trade on account of deemed rental income. 6.4 As the assessee succeeds on the reasoning as elaborated in the preceding paragraph, therefore we are not inclined to adjudicate the other conte ..... X X X X Extracts X X X X X X X X Extracts X X X X
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