TMI Blog2021 (4) TMI 1163X X X X Extracts X X X X X X X X Extracts X X X X ..... ed, shall be taken as Nil. The amendment has been carried out w.e.f. 1.4.2018 and the Memorandum explaining the provisions of the Finance Bill also clearly provides that this amendment will take effect from 01.04.2018 and will, accordingly apply in relation to the assessment year 2018-19 and subsequent years.stantly, we are concerned with the assessment year 2013-14. As such, the amendment cannot apply to the year under consideration. In the absence of the applicability of such an amendment, no income can be said to have accrued to the assessee from unsold flats available as stock-in-trade. We, therefore, overturn the impugned order on this score and delete the addition of ₹ 1.47 crore sustained in the first appeal. Addition u/s.41(1) - a company, namely, M/s. JVS Komatsco Industries Pvt. Ltd. (JVSK) had to receive a sum from the assessee and the said amount was written off by the company as bad debt in its accounts for the year under consideration - HELD THAT:- The controversy has arisen out of certain purchase transactions of the assessee from JVSK during the course of its business. JVSK wrote off the sum in question its books of account, but the assessee chose not to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee is directed against the order passed by the CIT(A)-7, Pune on 01.09.2017 in relation to the assessment year 2013-14. 2. The assessee has assailed confirmation of addition of ₹ 1,47,65,688/- towards deemed rental income on stock-in-trade of unsold flats/bungalows held by the assessee, as a first major issue. Succinctly, the factual panorama of the case is that the assessee has been engaged in the business of development of properties with the projects `Kumar Infinia and `Kumar Picasso having certain unsold flats/bungalows for ready possession at the year end. The AO opined that the assessee ought to have offered deemed notional rental income on such vacant flats/bungalows. The assessee submitted that the flats/bungalows were its stock-in-trade, from which no income could be taxed under the head Income from house property . Relying on judgment of the Hon ble Delhi High Court in CIT Vs. Ansal Housing Finance and Leasing Company Ltd. (2013) 354 ITR 180 (Del), the AO computed the annual letting value of the unsold flats u/s.23 of the Income-tax Act, 1961 (hereinafter also called `the Act ) at ₹ 1,47,65,688/- and made addition for the same. The ld. CIT(A) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oping buildings. Admittedly, the assessee is owner of the flats/bungalows lying unsold at the year end. Now the question is whether these flats etc. can be said to be `occupied by the assessee? The term `occupy has neither been defined in section 2 (general definitions under the Act) nor section 27 (definitions relating to income from house property). Rather it is defined nowhere in the Act. In such a scenario, we will have to understand its connotation in common parlance. The term `occupation (in land law) has been defined in the Oxford Dictionary of Law to mean `the physical possession and control of land . Thus, occupation of a property means having its physical possession coupled with dominion rather than the physical possession coupled with actual use. Once a property is in physical possession and control of a person, it is said to be in his occupation, even if it is not actually used by him. Adverting to the facts of the extant case, we find it not to be a case of the AO or that of the ld. DR that the unsold flats etc. were not in the physical possession and control of the assessee. In fact, there is no one other than the assessee having physical possession and control ove ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roperty development is carried on by the assessee; the occupation of the flats etc. is for the purpose of business; and profits of such business are chargeable to income-tax. Ergo, all the four conditions for exclusion from section 22 of the Act are cumulatively satisfied in the present case. 11. The authorities below have canvassed a view that the annual letting value of flats/bungalows is income chargeable to tax as `Income from house property by relying on Ansal Housing Finance and Leasing Company Ltd. (supra). There is no doubt that the Hon ble Delhi High Court in the said case has held that Annual letting value of unsold flats at the year end is chargeable to tax under the head Income from house property . At the same time, we find that the Hon ble Gujarat High Court in CIT Vs. Neha Builders (Pvt.) Ltd. (2008) 296 ITR 661(Guj) has held that income from the properties held as stock in trade can be treated as Income from business and not as `Income from house property. Our attention has been drawn towards certain Tribunal decisions including Cosmopolis Construction, Pune vs. ITO dated 18.06.2018 (ITA NO. 230 231/PUN/2018), wherein, after taking note of both the above judg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpugned order on this score and delete the addition of ₹ 1.47 crore sustained in the first appeal. 14. The next issue raised in this appeal is against the confirmation of addition of ₹ 77,021/- made by the Assessing Officer (AO) u/s.41(1) of the Act. 15. During the course of assessment proceedings, the AO observed that a company, namely, M/s. JVS Komatsco Industries Pvt. Ltd. (JVSK) had to receive a sum of ₹ 77,021/- from the assessee and the said amount was written off by the company as bad debt in its accounts for the year under consideration. Since the liability of the assessee to pay the amount ceased to survive, the AO held that the assessee was liable to tax u/s.41(1) of the Act on this score. The assessee did not raise any objection to the proposed addition before the AO which led to the making of addition. However, the same was challenged before the ld. CIT(A), who upheld the same. Aggrieved thereby, the assessee has come up in appeal before the Tribunal. 16. We have heard the rival submissions and gone through the relevant material on record. The controversy has arisen out of certain purchase transactions of the assessee from JVSK during the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... no disallowance was offered u/s 14A on this count. The assessee submitted that no exempt income was earned during the year from such investment because Marigold Properties returned loss. Not convinced, the AO made disallowance at 0.5% of the average value of investment. The ld. CIT(A) confirmed the disallowance by holding that even though Marigold Properties returned a loss but it was a case of negative income and not Nil income. 18. Having heard the rival submissions gone through the relevant material on record, it is found as an admitted position that the assessee, in fact, did not earn any exempt income from the investment made in Marigold Properties during the year under consideration. The Hon'ble Delhi High Court in Cheminvest Ltd. vs. CIT (2015) 378 ITR 33 (Del) has held that if there is no exempt income, there can be no question of making any disallowance u/s 14A of the Act. Similar view has been taken by the Hon'ble Delhi High Court in CIT vs. Holcim India P. Ltd. (2014) 90CCH 081-Del-HC. More recently the Hon ble jurisdictional High Court in Pr. CIT VS. Kohinoor Projects Pvt. Ltd. (2020) 425 ITR 700 (Bom) has held that in the absence of any exempt income, there ..... X X X X Extracts X X X X X X X X Extracts X X X X
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