OBEROI REALTY LIMITED,MUMBAI vs. DEPUTY COMMISSIONER OF INCOME TAX , CENTRAL CIRCLE -4(1), MUMBAI

Facts

The assessee, a builder and developer, was assessed for the annual letting value of unsold properties held as stock-in-trade. The Assessing Officer (AO) made additions based on a rate of 7%, which was later reduced by the Commissioner of Income-tax (Appeals) to 2.5%. The Revenue also questioned the disallowance u/s 14A, which was settled through a Settlement Commission application.

Held

The Tribunal held that for assessment years prior to 2018-19, unsold properties held as stock-in-trade are taxable on their annual letting value. However, for AY 2012-13, they followed a coordinate bench decision and allowed the appeal on this ground. For AY 2016-17 and 2017-18, the revenue's grounds regarding disallowance u/s 14A were dismissed due to settlement. The ground regarding club house extension fine was also dismissed.

Key Issues

Whether unsold properties held as stock-in-trade are taxable on their annual letting value for AYs prior to 2018-19? Whether the disallowance u/s 14A is sustainable given the settlement order? Whether the fine for club house extension is deductible?