TMI Blog2021 (5) TMI 850X X X X Extracts X X X X X X X X Extracts X X X X ..... of section 23, as noted above, was inserted by the Finance Act 2017 w.e.f. 1-4-2018, therefore it does not apply to the assessee under consideration. No justification in the order of assessing officer for estimating rental income from these unsold fifty five shops under section 23 of the Act, which is assessee s stock in trade as at the end of the year. Hence, we are not inclined to accept the contention of the Assessing Officer in any manner and hence the addition so made should be deleted. Accordingly, the assessing officer is directed to delete the addition, made by him, estimating letting value of the unsold fifty five shops, under section 23 - Decided in favour of assessee. - ITA No.159/SRT/2017 - - - Dated:- 13-10-2020 - Shri Pawan Singh, JM And Dr. A. L. Saini, AM For the Assessee : Shri Rushi Parekh - CA For the Respondent : Shri O P Meena Sr. DR ORDER PER DR. A. L. SAINI, ACCOUNTANT MEMBER: By way of this appeal, the assessee has challenged correctness of the order dated 08.08.2017 passed by the learned CIT(A), in the matter of assessment under section 143(3) of the Income Tax Act 1961 ( for short the Act ), for the assessment year 2013 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ired to be prepared as the construction at site is in abeyance for few years. Fourth the electricity bill of the shops are paid by the assessee society from its own meter which is testimony to the facts that the shops are used occupied for the business of assessee society for day to day factions. Fifth the stand of assessee is accepted continuously for last 4 to 5 years in as assessment framed u/s. 143(3) hence for the sake of consistency as held by SC in case of Radha Soami Satsang 100 CTR (SC) 267, the same stand may please be accepted continued. There are 55 unsold shops, against which the assessee society has given on rent 10 shops at annual rent of approx. of ₹ 200000/- i.e. ranging 1500/-to 2000/- P.M. per shop. Whereas 45 shops are used as warehouse godown, the photographs of which will be produced before your honour. 4. However, the assessing officer has rejected the contention of the assessee and held that since the assessee-society could not produce sufficient evidences for use of unsold shops therefore the reasons stated by the assessee were not accepted as it is not practically possible that shop will remain vacant or unused in the running ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erefore ld. Counsel prayed the Bench that addition confirmed by the ld. CIT(A) may be deleted. 8. On the other hand, ld. DR for the Revenue submits before the Bench that assessee himself has shown rental income of ₹ 2,07,280/- on the eight shops, therefore deemed rental income in respect of remaining shops have rightly been computed by the assessing officer under the head Income from House Property . Hence, ld. DR prayed the Bench that order passed by the assessing officer may be upheld. 9. We note that issue under consideration is no longer res integra. The assessee is engaged in the business of builders, developers and estate maintenance. The assessee`s main object is to develop and maintenance of the estate projects/buildings. The fifty five unsold shops are located in the complex viz. Udhna Udyognagar Commercial Complex and profit on sale of which are treated as business income from initial stage. In the light of the above facts, first of all, it is useful to refer the provisions of subsection (5) of section 23 of the Act. We note that sub- section (5) of section 23 was inserted by the Finance Act 2017 w.e.f. 1-4-2018, which reads as follows: 5.Wher ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. From the statement of the assessee, it would clearly appear that it was treating the property as 'stock-in-trade'. Not only this, it will also be clear from the records that, except for the ground floor, which has been let out by the assessee, all other portions of the property constructed have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... de', 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. From the statement of the assessee, it would clearly appear that it was treating the property as 'stock-in-trade' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erty 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-in-trade 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 end of the year. A ..... X X X X Extracts X X X X X X X X Extracts X X X X
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