DISCOVERY ESTATES PVT. LTD. vs. PR. COMMISSIONER OF INCOME TAX-XIII, & ANR.

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ITA/366/2018HC DelhiDLHC01074431201802 April 2018Bench: HON'BLE MR. JUSTICE S. RAVINDRA BHAT,HON'BLE MR. JUSTICE A. K. CHAWLA2 pages
AI SummaryDismissed

What did the High Court hold?

The Delhi High Court held that the Tribunal did not commit any error in following its previous ruling in CIT v. Discovery Estates Private Ltd. (2013) for the assessment year 2006-07, which was applicable to the present appeal for AY 2010-11. The court acknowledged that the rental income from unsold shops, claimed as stock-in-trade by the assessee, was taxed as income from house property. The High Court stated that its previous ruling in the assessee's own case would bind it. Furthermore, the court clarified that the parties would be finally bound by the judgment of the Supreme Court in the pending batch of appeals and special leave petitions, which would definitively settle the question of law. The appeal was dismissed subject to these observations.

What were the facts?

The assessee, Discovery Estates Pvt. Ltd., is in appeal before the Delhi High Court against an order of the Income Tax Appellate Tribunal (ITAT). The appeal pertains to Assessment Year (AY) 2010-11. The core issue is whether rental income from unsold shops, claimed by the assessee as stock-in-trade, should be taxed as income from business or as income from house property. The High Court noted that the ITAT had followed a previous ruling of the same court in CIT v. Discovery Estates Private Ltd. (2013) for AY 2006-07. The court was also informed that this matter, along with similar appeals, was pending before the Supreme Court in a batch of appeals arising from the judgment in CIT v. Ansal Housing Finance and Leasing Co. Ltd. (2013).

What were the issues?

1. Whether the rental income from unsold shops, treated by the assessee as stock-in-trade, could be taxed as 'income from house property' instead of 'profits and gains of business'? (Question of law) Assessee's Contention: The assessee argued that the rental income from unsold shops should be taxed under the head 'profits and gains of business' as these shops constituted stock-in-trade. The assessee relied on the previous ruling of the Delhi High Court in its own case for AY 2006-07. Revenue's Contention: The revenue contended that the rental income should be taxed under the head 'income from house property'. The revenue's position was implicitly upheld by the ITAT's decision to tax it as such, following the previous High Court ruling.

Which sections of the Income-tax Act were involved?

Section 2(47)

AI-generated summary — verify with the full judgment below

$~24 * IN THE HIGH COURT OF DELHI AT NEW DELHI + ITA 366/2018

DISCOVERY ESTATES PVT. LTD.

..... Appellant Through : Sh. Satyen Sethi and Sh. Arta Trana Panda, Advocate, for appellant.

versus

PR. COMMISSIONER OF INCOME TAX-XIII, & ANR. ..... Respondents Through : Sh. Ruchir Bhatia, Advocate, for respondent.

CORAM: HON'BLE MR. JUSTICE S. RAVINDRA BHAT HON'BLE MR. JUSTICE A. K. CHAWLA

O R D E R %

02.04.2018

The question of law sought to be urged in this appeal is whether the rental from unsold shops, which the appellant claimed as ‘stock-in-trade’ could be taxed as ‘income from house property’ and not under the ‘profits and gains of business’, as claimed? The records indicate that the Tribunal followed the previous ruling of this Court in CIT v. Discovery Estates Private Ltd. 2013 (356) ITR 159. That was in the previous AY 2006-07. This appeal pertains to AY 2010-11. This Court is informed that the appeal by special leave petition is listed along with the batch of appeals arising out of the judgment of this Court in CIT v. Ansal Housing Finance and Leasing Co. Ltd. 2013 (354) ITR 180 before the Supreme Court. Page 1 of 2

In these circumstances, the Court is of the opinion that the previous ruling in the assessee’s case would bind it. The Tribunal did not commit any error in following that previous order of this Court. However, it is also clarified that in any event, the parties shall be finally bound on the question of law by the judgment/ruling of the Supreme Court in the pending batch of appeals and the special leave petitions. The petition is dismissed subject to the above observations.

S. RAVINDRA BHAT, J

A. K. CHAWLA, J APRIL 02, 2018/ajk

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