TMI Blog2019 (3) TMI 1871X X X X Extracts X X X X X X X X Extracts X X X X ..... use property . - ITA Nos.36, 37/Mum/2018 - - - Dated:- 20-3-2019 - SHRI RAJESH KUMAR AND SHRI RAM LAL NEGI, JJ. Appellant By : Shri Sanjay B. Sawant (AR) Respondent By : Shri D.G. Pansari (DR) ORDER RAM LAL NEGI, J. The assessee has filed these appeals against the two orders dated 06.11.2017 passed by the Ld. Commissioner of Income Tax (Appeals)-52, Mumbai (for short the CIT (A) ), pertaining to the assessment years 2013-14 and 2014-15, whereby the Ld. CIT (A) has dismissed both the appeals filed by the assessee against the assessment orders passed u/s 143 (3) of the Income Tax Act, 1961 (for short the Act ). 2. Since, the appeals pertain to the same assessee and issues involved are identical, these were clubbed, heard together and are being disposed of by this common and consolidated order for the sake of convenience. ITA No. 36/MUM/2018 (Assessment Year: 2013-14) 3. Brief facts of the case are that the assessee, a builder and developer also engaged in the business of Hotels, filed its return of income for the assessment year under consideration declaring nil income. Since, the case was selected for scrutiny, notice u/s 143 (2) and 142 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 15, in favour of the assessee. Since the findings of the Ld. CIT(A) are contrary to the decision of the Mumbai Tribunal, the same is liable to be set aside. 7. On the other hand, the Ld. Departmental Representative (DR) relied on the order passed by the Ld. CIT (A). 8. We have heard the rival submissions of the parties and also perused the material on record including the decision relied upon by the assessee. As pointed out by the Ld. counsel the coordinate Bench has decided the identical issue in favour of the assessee in the case of Ferani Hotels Ltd. vs. ACIT (supra). The findings of the coordinate Bench are as under:- 6. Under this issue the assessee has challenged the confirmation of the addition of ₹ 13,22,90,044/- under the head of income from house property on account of deemed income from unsold unit/ flat which was closing stock of the appellant as per provisions of Sections 22 and 23 of the Act. At the very outset, the Ld. Representative of the assessee has argued that the assessee is deriving its income from hotel business and construction. The assessee was also deriving income from dividend, share of profit and sale of flats and due to the recession, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Leasing Co. Ltd. (supra). The action of the AO was upheld by the learned CIT(A). 8. The Hon'ble Gujarat High Court in the case of Neha Builders Pvt. Ltd. (supra) considered the question whether the rental income received from any property in the construction business can be claimed under the head income from property even though the said property was included in the closing stock. The Hon'ble Gujarat High Court held that 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 house property. While holding so the Hon'ble High Court observed as under: - 8. True it is, that 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. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from the same is not assessable u/s.23(1) of the IT Act. 4. On the other hand, ld. DR relied on the order of Hon ble Delhi High Court in the case of Ansal Housing Finance Leasing Co. Ltd., 354 ITR 180 (Delhi) in support of the proposition that even in respect of unsold flats by the developer is liable to be taxed as income from house property. 5. We have considered rival contentions and perused the record. The issue under consideration has been restored by the CIT(A) to the file of AO to compute the annual value. Recently the Hon ble Supreme Court in the case of M/s Chennai Properties Investments Ltd. Vs. CIT, reported in (2015) 42 SCD 651, vide judgment dated 9-4-2015 has held that where assessee company engaged in the activity of letting out properties and the rental income received was shown as business income, the action of AO treating the rental income as income from house property in place of income from business shown by the assessee was held to be not justified. The Hon ble Supreme Court held that since the assessee company s main object, is to acquire and held properties and to let out these properties, the income earned by letting out these properties is main objectiv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncome from house property in place of income from business shown by the assessee was held to be not justified. The Hon ble Supreme Court held that since the assessee company s main object, is to acquire and held properties and to let out these properties, the income earned by letting out these properties is main objective of the company, therefore, rent received from the letting out of the properties is assessable as income from business. On the very same analogy in the instant case, assessee is engaged in business of construction and development, which is main object of the assessee company. The three flats which could not be sold at the end of the year was shown as stock-in-trade. Estimating rental income by the AO for these three flats as income from house property was not justified insofar as these flats were neither given on rent nor the assessee has intention to earn rent by letting out the flats. The flats not sold was its stock-intrade and income arising on its sale is liable to be taxed as business income. Accordingly, we do not find any justification in the order of AO for estimating rental income from these vacant flats u/s.23 which is assessee s stock in trade as at the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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