RAFIAHAMAD RASUL PATEL,SANGLI vs. INCOME-TAX OFFICER, WARD - 1 (5), SANGLI

Brief facts of the case are that the assessee is a builder and developer. During the course of assessment proceedings it was found that the assessee was having unsold flats/shops. The Assessing Officer computed notional rental on such stock-in-trade under the head `Income from house property‟ at Rs.5,54,400/-. The assessee prayed before the CIT(A) that the income ought to have been considered under the head „Profits and gains of business and profession‟. The ld. CIT(A), relying on an order passed by Pune Bench Tribunal in the case of M/s. Cosmopolis Construction Vs. ITO in ITA Nos.230 & 231/PUN/2018, upheld the contention of assessee in taxing the income as income from Business. The assessee is aggrieved by the impugned order on the ground that even if the amount is taken as chargeable to tax as income from business, still the same should not be included in the total income. 4. Having heard both the sides and gone through the relevant material on record, it is seen that similar issue came up for consideration before the Pune Benches of the Tribunal in M/s. Cosmopolis Construction vs. ITO. Vide its order dated 12-09-2018, the Tribunal in ITA Nos. 230 & 231/PUN/2018 has held that no rental income can be computed when flats are held as stock in trade. In reaching this conclusion, the Tribunal relied on certain other judgments and the orders. In the absence of any distinguishing fact having been brought to my notice by the ld. DR and respectfully following the precedent, I overturn the impugned order on this score and direct to delete the addition. Similar view has been taken by the Pune benches of the Tribunal in M/s. Tricon

At this stage, it is pertinent to note that the Finance Act, 2017, w.e.f. 1.4.2018 has inserted sub-section (5) of section 23 providing that : `Where the property consisting of any building or land appurtenant thereto is held as stock-in-trade and the property or any part of the property is not let during the whole or any part of the previous year, the annual value of such property or part of the property, for the period up to two years from the end of the financial year in which the certificate of completion of construction of the property is obtained from the competent authority, shall be taken to be nil.‟ This amendment has the effect of providing that from the A.Y. 2018-19, stock in trade of buildings etc. shall be liable to be considered for computation of annual value under the head `Income from house property‟ after two years from the end of the financial year in which the certificate of completion of construction of the property is obtained. As the assessment year under consideration is 2015-16, the amended section 23 will not apply and the case will be governed by the decisions as discussed above.

In the result, the appeal is allowed.