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Income Tax Appellate Tribunal, AHMEDABAD “B” BENCH
Before: Shri Amarjit Singh
IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD “B” BENCH Before: Shri Amarjit Singh , Accountant Member And Ms. Madhumita Roy, Judicial Member ITA No. 1278/Ahd/2017 Assessment Year 2013-14
M/s. Servshanti Properties The ITO, Pvt. Ltd. 1st Floor, Ward-4(1)(1), Sanidhya, Opp Sanyas Vs Ahmedabad Ashram, Ashram Road, (Respondent) Ahmedabad PAN: AAICS1693J (Appellant)
Revenue by: Shri/Ms Sonia Kumar, Sr. D.R. Assessee by: Shri Tushar Hemani and Shri P.B. Parmar, ARs
Date of hearing : 12-03-2019 Date of pronouncement : 19-03-2019 आदेश/ORDER PER : AMARJIT SINGH, ACCOUNTANT MEMBER:- The solitary ground of appeal of the assessee filed against the order of Ld. CIT(A)-8, Ahmedabad in confirming the action of the assessing officer in making an addition of Rs. 46,84,2,06/- as income from house property u/s. 23 of the act. The other grounds of appeal of the assessee is also connected to the above referred issue that alternatively ALV is to be
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computed by taking 6% as the average rate of investment as against 8% of average rate of investment adopted by the assessing officer.
The fact in brief is that assessee has filed return of income on 29th 2. Sep, 2013. Subsequently, the case was selected under scrutiny by issuing of notice u/s. 143(2) of the act on 4th Sep, 2014. The nature of business of the assesse is builder and developer of property. During the course of assessment on verification of the details filed, the assessing officer noticed that assessee has shown in the balance sheet unsold finished property having total square ft. of 174109 and value of this property was shown at Rs. 33,34,51,476/-. The assessing officer observed that assessee has not declared any income from the aforesaid property u/s. 23 of the act. Therefore, assessee was asked to furnish the working of annual letting Value (ALV) of the aforesaid unsold property and also to explain why the ALV of the unsold property should not be taxed u/s. 23 of the act. The assessee has not agreed for chargeability of deemed ALV on the aforesaid unsold properties. However, it has furnished the working of ALV taking into consideration the date of BU permission received and ALV @ 6% of unsold property which worked to Rs. 35,13,155/- after claiming standard deduction at 30%, The assessing officer has not accepted the submission of the assessee and adopted 8% of the cost of construction as ALV which worked to Rs. 66,91,723/- after allowing standard deduction of 30% therefore an amount of Rs. 46,84,206/- was added to the total income of the assessee as income from house property.
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Aggrieved assesse has filed appeal before the ld. CIT(A). The ld. CIT(A) has dismissed the appeal of the assessee after placing reliance on the decision of Hon’ble High Court of Delhi in the case of CIT Delhi vs. Ansal Housing and Construction (2016) 272 taxman.com 254 (Delhi) in Tax Appeal No. 442 of 2003 order daed 26-07-2016. During the course of appellate proceedings before us, the ld. counsel has submitted paper book containing detail of submission made before the assessing officer and before the ld. CIT(A) during the course of assessment and appellate proceedings. The ld. counsel contended that income earned by the assesse has been declared under the head income from business or profession and as per the memorandum of association and article of association, the main object of the assessee is to carry on the business as promoter and developer of various kinds of properties. The unsold properties are shown as closing stock. He has vehemently contended that the aforesaid property was held as stock in trade and any income derived from stock shall be taxable as business income. The ld. counsel has also placed reliance on the following judicial pronouncements:-
(i) Chennai Properties and Investment Ltd. vs. CIT 373 ITR 673 (SC) (ii) CIT vs. Neha Builders 296 ITR 661 (Guj) (iii) ACIT vs. Haware Construction Pvt. Ltd. (2019) 101 taxman.com 168 (Mumbai Trib) dated 31st August, 2018.
On the other hand, the ld. counsel has supported the order of lower authorities.
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We have heard the rival contentions and perused the material on record carefully. The ld. CIT(A) has sustained the addition made by the assessing officer after placing reliance on the decision of Ansal Housing Properties wherein the Hon’ble Delhi High Court has decided that the assessee engaged in business of construction and house property would be liable to pay of ALV of flats laying unsold during the year as income from house property. We have also noticed that an amendment has been made by the Finance Act in sub-section (5) of section 23 of the act w.e.f. 01-04-2018. However, this amendment is not applicable for the year under consideration. With the assistance of ld. representatives, we have gone through the decision of Hon’ble Jurisdictional High Court in the case CIT vs. Neha Builder Pvt. Ltd. (2007) 164 taxman 342 (Guj) wherein it is held that if property is used as stock in trade, then, such property would become or partake character of stock and any income derived from stock would be income from business and not income from property. We have also gone through the judgment of ITAT Mumbai in the case of ACIT vs. Haware Construction Pvt. Ltd. (supra) on identical issue wherein as per para 4.5 of the order, it is held as under:- “4.5 have heard the rival submissions and perused the relevant materials on record. On the above issue, we come across one decision for the assessee and another decision for the revenue. The decision in Neha Builders (P.) Ltd. 's case (supra) is for the assessee, whereas the decision in Ansal Housing Finance & Leasing Co. Ltd. 's case (supra) is for the Revenue. The Hon'ble Supreme Court in the case of CIT v. Vegetable Products Ltd. [1973] 88 ITR 192 has held that "if two reasonable constructions of a taxing provisions are possible, that construction which favours the tax payer must be adopted." In view of the above position of law, we shall follow the decision in Neha Builders (P.) Ltd. 's case (supra).”
In the light of the above facts and judicial findings of the Hon’ble Jurisdictional High Court in the case of Neha Builder Pvt. Ltd. (supra) and after considering the decision of ITAT Mumbai Bench as cited above, we set
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aside the order of the ld. CIT(A) and consider that in the case of the assessee any income derived was stock would be income from business and not income from property, therefore, allow the appeal of the assessee. Accordingly the appeal of the assessee is allowed.
In the result, the appeal of the assesse is allowed.
Order pronounced in the open court on 19-03-2019
Sd/- Sd/- (MADHUMITA ROY) (AMARJIT SINGH) JUDICIAL MEMBER ACCOUNTANT MEMBER Ahmedabad : Dated 19/03/2019 आदेश क� ��त�ल�प अ�े�षत / Copy of Order Forwarded to:- 1. Assessee 2. Revenue 3. Concerned CIT 4. CIT (A) 5. DR, ITAT, Ahmedabad 6. Guard file. By order/आदेश से, उप/सहायक पंजीकार आयकर अपील�य अ�धकरण, अहमदाबाद