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TMI Blog2021 (5) TMI 850X X X X Extracts X X X X X X X X Extracts X X X X ..... ellant craves leave to add, amend, alter, vary and / or withdraw any or all the above ground of Appeal." 2. The relevant material facts, as culled out from the material on record, are as follows. The assessee before us is a society and engaged in the business of development and maintenance of estate/buildings. The books of accounts of the assessee were called for and the same were examined by the assessing officer. It was noticed by the Assessing Officer (AO) that the society is the developer and having unsold property in the balance sheet and the assessee has not declared any rental or business income out of the unsold shops lying with the assessee. The assessee was asked to provide the details of number of shops which were unsold, their use, whether rented out and prevailing market rent in the area where the shops are located. 3. In response, the assessee-society submitted the written submissions before the assessing officer which are reproduced below: "Firstly, the assessee society is in the business of developing & maintaining the estate. The shops were constructed few years back out of which the unsold shops remind with the assessee in its possession & used as warehouse pu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee-society. 5. Aggrieved by the order of the assessing officer, the assessee carried the matter in appeal before the ld. CIT(A) who has partly confirmed the addition made by the assessing officer. The ld. CIT(A) noticed that out of the 55 shops on which deemed rental income of Rs. 13,20,000/- had been calculated, the assessee had already shown rental income of Rs. 2,07,280/-. Therefore, the addition made by the assessing officer up to Rs. 11,12,720/- (Rs. 13,20,000 - Rs. 2,07,280) was upheld by ld. CIT(A). 6. Aggrieved by the order of the ld. CIT(A), the assessee is in appeal before us. 7. We have heard both the parties and carefully gone through the submission put forth on behalf of the assessee along with the documents furnished and the case laws relied upon, and perused the fact of the case including the findings of the ld. CIT(A) and other materials brought on record. The Learned Counsel for the assessee submitted before us that assessee`s main business is not of leasing and renting of property but maintenance and development of estate projects. The ld. Counsel contended that the vacant shops are not vacant and are under use for storage purpose and therefore it is n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... above, was inserted by the Finance Act 2017 w.e.f. 1-4-2018, therefore it does not apply to the assessee society under consideration. 10. If the property is used as 'stock-in-trade', then the said property would become the stock-in trade, and any income derived from the stock-in trade, would be 'income' from the business, and not income from the house property. If the business of the assessee is to construct and develop the property then that would be the business of the assessee and the business stocks, which may include movable, immovable and unsold shops etc. would be taken to be 'stock-in-trade', and any income derived from such stocks cannot be termed as 'income from property' for that we rely on the judgment of the Hon'ble High Court of Gujarat in the case of Neha Builders (P) Ltd. vs. Commissioner of Income Tax, [ (2007) 164 Taxmann 342 (Guj.), wherein it was held as follows:- "6. We have heard Mr. Naik at length. None appears for the respondent despite service of notice. 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 p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... held as follows: "7. We have heard the rival submissions and perused the orders of the authorities below and the decisions relied upon. It is an undisputed fact that the assessees are in the business of builders, developers and construction. Both the assessees have constructed various projects and the projects were treated as stock in trade in the books of account. Flats sold. by the assessees were assessed under the head 'income from business'. There were certain unsold flats in stock in trade which the AO treated as property assessable under the head 'income from house property' and computed notional annual letting value on such unsold flats placing reliance on the decision in the case of Ansal Housing Finance & 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 Build.ers 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 i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g Finance & Leasing Co. Ltd. (supra) which the AO relied upon and the decision of the Hon'ble Supreme Court in the case of Chennai Properties & Investments Ltd. vs. CIT reported in 373 ITR 673, held that unsold flats which are in stock in trade should. be assessed under the head 'business income' and there is no justification in estimating rental income from those flats and notionally computing annual letting value under Section 23 of the Act. While holding so the Coordinate Bench observed as under: - "3. The ld.. AR placed the order of Bombay Tribunal in the case of M/s Perfect Scale Company Pvt. Ltd., ITA Nos.3228 to 3234/Mum/2013, order dated 6-9-2013, wherein it was held that in respect of assets ITA Nos. 5408 & 5409/Mum/2016 Runwal Constructions & Runwal Builders 5 held as business, income 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 contenti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under the head 'income from house property'. Thus, we direct the AO to delete the addition made under Section 23 of the Act as income from house property." 12. From the facts of the assessee`s case, it would clearly appear that assessee was treating the property as 'stock-in-trade'. It is also clear from the records that, except for the eight unsold shops, which has been let out by the assessee for the time being on temporary basis, all other forty five unsold shops were used by the assessee for his business storage purposes. The ld. Counsel submits that object of the assessee is to sale all the fifty five shops (including eight shops) to earn business income therefore all fifty five shops should be treated as stock-in trade. We note that assessee has constructed buildings/ projects and these projects were treated as stock in trade in the books of accounts of the assessee society. The income arising on its sale is liable to be taxed as business income. The Shops and Flats already sold by the assessee were assessed under the head 'income from business'. Therefore, the unsold fifty five shops should be treated as 'stock in trade. We have also clarified in para No. 9 of th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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