TMI Blog2022 (7) TMI 741X X X X Extracts X X X X X X X X Extracts X X X X ..... antees) were obtained for the purpose of project, investment in fixed deposits also would have to be construed for the purpose of the project undertaken by the assessee, as admittedly the fixed deposits were invested only as cash margins for the purpose of obtaining those bank guarantees. Hence the business nexus is clearly proved. Under these circumstances, the interest income earned on fixed deposits should have to be construed as inextricably linked with the project and should be treated as recovery of part of the project cost and cannot be treated as income from other sources. As we hold that the interest income earned on fixed deposits should be treated as capital receipt and to be reduced from the project cost. Hence we do not find any infirmity in the treatment given by the assessee in the instant case. Accordingly, the Ground No.2 raised by the assessee is allowed. - ITA No.2188/Mum/2021 And ITA No.2187/Mum/2021 And ITA No.2193/Mum/2021 And ITA No.2192/Mum/2021 And ITA No.2194/Mum/2021 And ITA No.2190/Mum/2021 - - - Dated:- 15-7-2022 - Shri Vikas Awasthy, Judicial Member And Shri M.Balaganesh, Accountant Member For the Assessee : Shri Jayant Bhatt For the R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le Supreme Court, still there would be delay of 124 days in filing of appeals by the assessee, which in our considered opinion, had been duly explained by the assessee as it was prevented from reasons beyond the control due to illness of the handling partner as detailed supra. In view of these, we hold that the assessees had practically explained the delay and they were prevented from reasonable cause in filing of appeals in time and hence we are condoning the delay in filing of appeals by the assessee before us especially in view of the fact that none of the contents of the affidavit had been found to be false by the revenue. Accordingly, the appeals of the assessee are hereby admitted and taken up for the purpose of adjudication. 3. Identical issues are involved in all these appeals and hence they are taken up together and disposed of by this common order for the sake of convenience. 4. Both the parties mutually agreed to take up the appeal of the assessee in the case of Shree Sai Sagar Consultants in ITA No. 2194/Mum/2021 for the Asst Year 2014-15 first. 5. The Ground No.1 raised by the assessee is challenging the action of the ld. CIT(A) in confirming the addition made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d in the business of real estate developers and builders under the name and style of Godshalwar Project Consultants Developers . During the year under consideration, the project undertaken by the assessee, namely, Bhola Bhagwan Project was completed. It was noted by the Assessing Officer that flats constructed by the assessee in the said project were sold except two flats. One of the flats was retained by the assessee for himself and the other flat remained unsold. Such unsold flats represented stock-in-trade of the assessee. The Assessing Officer proceeded to tax the notional Annual Letting Value (ALV) of both the flats in terms of Sec. 22 of the Act as deemed let out properties. An addition of ₹34,16,679/- was thus made, which has since been reduced to ₹18,50,176/- by the CIT(A). The CIT(A) allowed relief with regard to the value of the flat retained by the assessee for his self-occupation. The remaining flat having an area of 2022 sq. ft. has been treated as deemed let-out and its ALV has been calculated at ₹34,16,679/-, which is the subject matter of dispute before us. 4. Before us, the learned representative for the assessee vehemently pointed out tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 of the I.T. Act. 7. In our view, the aforesaid observation of our coordinate Bench squarely applies to the facts of the present case. In the case of M/s. Runwal Constructions (supra) also, similar issue has been dealt with by our coordinate Bench. In the case of M/s. Runwal Constructions (supra), the Bench noted the judgment of the Hon'ble Gujarat High Court in the case of CIT vs Neha Builders Pvt. Ltd., 296 ITR 661 (Guj.) as also the judgment of the Hon'ble Delhi High Court in the case of Ansal Housing Finance Leasing Co. Ltd., 354 ITR 180 (Delhi) and finally observed as under :- 10. In the case on hand before us it is an undisputed fact that both assessees have treated the unsold flats as stock in trade in the books of account and the flats sold by them were assessed under the head income from business . Thus, respectfully following the above said decisions we hold that the unsold flats which are stock in trade when they were ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ificate is stated to have been obtained on 28.11.2011 and going by the provisions of Sec. 23(5) of the Act, no addition is permissible in the instant assessment year. Be that as it may, we are only trying point out that the assessability of notional income in respect of unsold flat, which is taken as stock-in-trade, is not merited in the instant case. Thus, we set-aside the order of CIT(A) and direct the Assessing Officer to delete the addition. 10. In the result, appeal of the assessee is allowed, as above. 5.3. We find that similar views were expressed by the Pune Bench of Tribunal in the case of Shree Balaji Ventures vs ITO in ITA No. 1914 /PUN/2018 dated 19.2.2019 for Asst Year 2015-16 ; Pune Bench of Tribunal in the case of Rafiahamad Rasul Patel vs ITO in ITA No. 898 /PUN/2019 dated 23.12.2019 for Asst Year 2015-16 ; Mumbai Bench of Tribunal in the case of Osho Developers vs ACIT in ITA Nos. 2372 1860/Mum/2019 dated 03.11.2020 for Asst Years 2014-15 and 2015-16 respectively ; Delhi Bench of Tribunal in the case of Shivsagar Builders P Ltd vs ACIT in ITA No. 1554 /Del/2019 dated 28.06.2019 for Asst Year 2015-16 ; Pune Bench of Tribunal in the case of Cosmopolis Con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ry of the part of the capital cost of project incurred by the assessee. 6.2. We find that the lower authorities however did not heed to the aforesaid contentions of the assessee and treated the interest income on fixed deposits as income from other sources. 6.3. We find that the aforesaid facts are not in dispute and hence the same are not reiterated for the sake of brevity. We find that since the bank guarantees (both performance and financial guarantees) were obtained for the purpose of project, investment in fixed deposits also would have to be construed for the purpose of the project undertaken by the assessee, as admittedly the fixed deposits were invested only as cash margins for the purpose of obtaining those bank guarantees. Hence the business nexus is clearly proved. Under these circumstances, the interest income earned on fixed deposits should have to be construed as inextricably linked with the project and should be treated as recovery of part of the project cost and cannot be treated as income from other sources. We find that the ld. AR had rightly placed reliance on the decision of the Hon ble Apex Court in the case of CIT vs Karnal Cooperative Sugar Mills Ltd re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the case of Sai Siddhi Developers in ITA No. 2190/Mum/2021 for Asst Year 2014-15 - The Ground raised herein is similar to Ground No. 1 disposed of hereinabove in the case of Shree Sai Sagar Consultants in ITA No. 2194/Mum/2021 for Asst Year 2014-15. b) In the case of Shree Sai Consultants in ITA No. 2187/Mum/2021 for Asst Year 2014-15 - The Ground raised herein is similar to Ground No. 2 disposed of hereinabove in the case of Shree Sai Sagar Consultants in ITA No. 2194/Mum/2021 for Asst Year 2014-15. c) In the case of Shree Sai Consultants in ITA No. 2188/Mum/2021 for Asst Year 2015-16 - The Ground raised herein is similar to Ground No. 2 disposed of hereinabove in the case of Shree Sai Sagar Consultants in ITA No. 2194/Mum/2021 for Asst Year 2014-15. d) In the case of Sai Siddhant Developers in ITA No. 2192/Mum/2021 for Asst Year 2014-15 - The Ground raised herein is similar to Ground No. 2 disposed of hereinabove in the case of Shree Sai Sagar Consultants in ITA No. 2194/Mum/2021 for Asst Year 2014-15. e) In the case of Sai Siddhant Developers in ITA No. 2193/Mum/2021 for Asst Year 2012-13 - The Ground raised herein is similar to Ground No. 2 disposed of hereinabove i ..... 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