TMI Blog2021 (7) TMI 40X X X X Extracts X X X X X X X X Extracts X X X X ..... xed 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. Accordingly, the AO is directed to delete the addition made by estimating letting value of the flats u/s.23 Thus as relying on assessee's own case above [ 2019 (3) TMI 1892 - ITAT MUMBAI] delete addition raised by AO on account of notional income of the vacant flats. Accordingly, these issues are decided in favour of the assessee against the revenue. - ITA No. 4296/Mum/2019 - - - Dated:- 22-6-2021 - Shri Mahavir Singh, VP And Shri M. Balaganesh, AM For the Appellant : None For the Respondent : Ms. Shreekala pardeshai, DR ORDER PER M. BALAGANESH, AM: This appeal of assessee is arising out of the order of the Commissioner of Income Tax (Appeals)]-52, Mumbai [in short CIT(A)], dated 30.04.2019. The assessment was framed by the Asst. Commissioner of Income Tax, Circle 4(1) Mumbai (in short ACIT/ AO) for the A.Y. 2016-17 vide order dated 13.01.2018 under section 143(3) of the Income-tax Act, 1961 (hereinafter the Act ). ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the addition in sum of ₹ 39,75,545/- under the head of income form house property on account of deemed income from unsold unit/flats which was the closing stock of the assessee under the year of consideration in view of the provisions u/s 22 23 of the Act. At the very outset, the Ld. Representative of the assessee has argued that the assessee was carrying the business of construction and builder and development of project and was having finished unit in three project namely Wanwadi Project- Pune in sum of ₹ 6,97,95,580/-, Vakola Project in sum of ₹ 43,01,115/- Radhanarayan in sum of ₹ 1,13,38,000/-, the total in sum of ₹ 8,54,34,695/- but the AO has wrongly assessed the notional income and assessed the tax in view of the provisions u/s 23/ 24 of the Act and added in sum of ₹ 39,75,545/- to the income of the assessee, hence, the finding of the CIT(A) confirming the order of the AO is wrong against law and facts and are liable to be set aside. The Ld. Representative of the assessee has argued that the case of the assessee has duly being covered by the decision of the Hon ble ITAT in the case of Ferani Hotels Pvt. Ltd. Vs. ACIT Central Circle ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oticed that the object of the assessee is deriving of income from Hotel Business and Construction. The assessee company is running a five star hotel in the name and style of The Carlton at Kodaikannal, Tamil Nadu, having rooms and other facilities. The assessee also derived income from dividend, share of profit from partnership firm and profit from sale of flats. The assessee failed to sold the flat which was being treated by him as stock in trade. The AO assessed the notional income and brought to tax as income as house property which has no doubt confirmed by CIT(A). It is to be seen whether the income of the assessee is liable to be treated as house property or business income. It is necessary to discuss the finding in the case of M/s. Runwal Constructions Vs. ACIT in ITA. No.5409/M/2016 dated 22.02.2018 which has been given in para no. 7 to 10 and are hereby reproduced as under.: - 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erwise, 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-intrade'. 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 been sold out. If that be so, the property, right from the beginning was a 'stock-in-trade'. 9. Similarly the Coordinate Bench has considered similar issue as to whether the unsold property which is held as stock in trade by the assessee can be assessed under the head income from house property‟ by notionally computing the annual letting value from such property and the Coordinate Bench considering the decision of the Hon'ble Delhi High Court in the case of Ansal Housing 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 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is not correct in bringing to tax notional annual letting value in respect of those unsold flats 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. 7. In the case of titled as M/s. C.R. Developments P. Ltd. Vs. JCIT. The relevant para in 5 is hereby reproduced as under: - 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 pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... result, the appeal of the assessee is hereby ordered to be allowed. 5. We find that similar decisions were rendered by this tribunal in following cases:- Sr. No. i. Makewaves Sea Resort Pvt. Ltd. V/s DCIT, Central Circle- 4(1), Mumbai ITA No. 36/Mum/2018 and 37/Mum/2018 decided on 20th March, 2019. ii. Ferani Hotels Pvt. Ltd. V/s ACIT, Central Circle 4(1), Mumbai, ITA No. 6332/Mum/2016 decided on 21st December, 2018. iii. ITO 2(1)(1), Mumbai v/s Arihant Estates Pvt. Ltd., Mumbai, ITA No. 6037/Mum/2016 decided on 27th June, 2018. iv. M/s C.R. Development Pvt. Ltd V/s JCIT 8(1)(OSD), Mumbai (ITA No.4277/Mum/2013). v. M/s Runwal Constructions V. Asst. CIT, Central Circle -4 (1), Mumbai (I.T.A. No. 5408-5409/Mum/2016). vi. Progressive Homes V/s ACIT, Circle -4(4), Mumbai, (I.T.A. No. 5082/Mum/2016). vii. ACIT- 15(2)(1), Mumbai V/s Haware Con ..... X X X X Extracts X X X X X X X X Extracts X X X X
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