COMMISSIONER OF NCOME TAX vs. ANSAL BUILDWELL LIMITED

$-36 to 40 '! * IN THE HIGH COURT OF DELHI AT NEW D]|LHI + ITA 933/2005 |i li COMMISSIONER OF INCOME TAX ...li. Appellant Through; Mr. N.P. Sahni and ]|ls. Suruchi Aggarwal, Advocates, jl li Versus ANSAL BUILDWELL LTD. Respondent Through; Mr. Satyen Sethi and Mr. Arta Trana Panda, Advocates. |i WITH ij + ITA 148/2007 H !j COMMISSIONER OF INCOME TAX ...j. Appellant Through; Mr. N.P. Sahni and Ms. Suruchi Aggarwal, Advocates, ij !i Versus |i ANSAL BUILDWELL LTD. Respondent Through; Mr. Satyen Sethi and Mr. Arta Trana Panda, Advocates. [i WITH If ii + ITA 169/2008 COMMISSIONER OF NCOME TAX ....: Appellant Through; Mr. N.P. Sahni and Ms. Suruchi Aggarwal, Advocates, 'j Versus ITA 933/2005 and connected matters ;| Page 1 to 6 2012:DHC:7780-DB

J) + ANS AL B UILDWELL LIMITED Respondent Through: Mr. Satyen Sethi and-Mr. Arta Trana Panda, Advocates. h WITH ITA 1071/2008 COMMISSIONER OF INCOME TAX DELHI i CENTRAL-I Appellant Through: Mr, N.P. Sahni and Ms. Suruchi Aggarwal, Advocates. ;; Versus ANSAL BUILDWELL LTD. Respondent Through: Mr. Satyen Sethi and Mr. Arta Trana Panda, Advocates. AND ; + ITA 582/2010 COMMISSIONER OF INCOME TAX . .. Appellant Through: Mr. N.P. Sahni and Ms. Suruchi Aggarwal, Advocates. ii versus ANSAL BUILDWELL LTD Respondent Through: Mr. Satyen Sethi and Mr. Arta Trana Panda, Advocates. CORAM: HON'BLE MR. JUSTICE S. RAVINDRA BHAT HON'BLE MR. JUSTICE R.V.EASWAR ITA 933/2005 and connected matters Page 2 to 6 2012:DHC:7780-DB

ORDER % 29.11.2012 1. The common question which arises for consideration in these appeals is as follows: "Whether the ITAT was correct in law in deleting the addition made by the Assessing Officer on account of notional annual letting value of unsold flats and spaces owned by the assessee by applying the provisions of sections 22 & 23 of the Income Tax Act, 1961?" 2. The instant question has been decided Tn respondent's own sister concern, namely, Ansal Housing Finance and Leasing Company Limited in ITA No. 18 of 1999 and other connected cases by a common judgment dated 3L' October 2012. The discussion answering the question is extracted as follows: 13. In the present case, the assessee is engaged in building activities. It argues that flats are held as part of its inventory of stock in trade, and are not let out. The further argument is that unlike in the other instances, where such builders let out flats, here there is no letting out and that deemed income — which is the basis for assessment under the ALV method, should not be attributed. This Court is of the opinion that the argument, though attractive, cannot be accepted. As repeatedly held, in East India, Sultan, and Karanpura, the levy of income tax in the case ofone holding house, property is premised not on whether the assessee carries on business, as landlord, but on the ownership. The incidence of charge is because of the fact of ownership. Undoubtedly, the decision in Vikram Cotton indicates that in every case, the Court has to discern the intention of the assessee; in this case the ITA 933/2005 and connected matters Page 3 to 6 2012:DHC:7780-DB

17 inlention of the assessee was to hold the properties till they were sold. The capacity of being an own^r was not diminished one whit, because the assessee carried on business of developing, building and selling flats in housing estates. The argument that income tax is levied not op the actual receipt (which never arose in this case) but on a notional basis, i.e. ALVand that is therefore not sanctioned by law, in the opinion of the Court is meritless. ALV is a method to arrive at a figure on the basis of which the impost is to be effectuated. The existence of an artificial method itself would not mean that levy is impermissible. Parliament has restored to several other presumptive methods, for the;purpose of calculation of income and collection of tax. Furthermore, application of ALV to determine the tax is regardless of whether actual income is received; it is premised on what constitutes a reasonable letting value, if the property were to be leased out in the marketplace. If the assessee's contention were to be accepted, the levy of income tax on unoccupied houses and fiats would be impermissible - which is clearly not the case. |! 14. As far as the alternative argument that the assessee itself is occupier, because it holds the property till it is sold, is concerned, the Court does not find any merit in this submission. While there can be no quarrel with the proposition that "occupation" can be synonymous with physical possession, in law, when Parliament intended a property occupied by one who is carrying on business, to be exempted from the levy of income tax was that such property should be used for the purpose of business. The intention of the lawmakers, in other words, was that occupation of one s own property, in the course of business, and for the purpose of business, i.e. in active use of the property, (instead of mere passive possession) qualifies as "own" occupation for business purpose. This contention is, therefore, rejected. Thus, this question is answered in favour of the revenue, and against the assessee." 3. Learned counsel for the respondent-assessee urged that even though on ITA 933/2005 and connected matters ' ^"8® ^ 2012:DHC:7780-DB

facts, for some years, the Revenue cannot seek to assess the property since li ;( they had already sold the same. It is urged that this position arpse for the II Assessment Year 2004-05 when the assessee's contention in that Regard was accepted by the Commission of Income Tax (Appeals) [CIT(A)]. It is further submitted that this question being purely factual should ^e recorded !i and the concemed lower authorities should be directed to conduct proper h i' II inquiries while finally assessing the tax liability of the assessee. j il II 4. This Court has considered the submissions of leamed counsel for the |i parties. il li I! 5. The record would indicate that the only question of law Which was ii considered and framed on October 2010 pertained to whether the |! notional annual letting value can be adopted in respect of the flks, held as stock-in-trade, lying unsold at the end of the year. According to the assessee, relief was accorded by the CIT(A) for the Assessment Year 2004- 05 having regard to the facts of the case. However, that year was not under consideration before this Court. 6. In view of the above developments and position, the question is answered !l 0 in favour of the Revenue and against the assessee. ITA 933/2005 and connected matters Page 5 to 6 d 2012:DHC:7780-DB