DCIT CENTRAL CIRCLE-4 (1), MUMBAI vs. OBEROI REALTY LIMITED, MUMBAI

IN THE INCOME-TAX APPELLATE TRIBUNAL “C” BENCH,
MUMBAI
BEFORE SHRI SANDEEP GOSAIN, JUDICIAL MEMBER
&
SHRI PRABHASH SHANKAR, ACCOUNTANT MEMBER
Oberoi
Realty
Limited,
Mumbai, 3rd Floor, Commerz,
International
Business
Park,
Oberoi
Garden
City,
Off.
Western
Express
Highway,
Goregaon
(E)
-
400
063,
Maharashtra v/s.
बनाम
Deputy
Commissioner of Income Tax, Central Circle
–
4(1),
Room
No.
419,
Kautilya Bhavan, Bandra Kurla
Complex,
Bandra
(East),
Mumbai
-
400051,
Maharashtra
स्थायी लेखा सं./जीआइआर सं./PAN/GIR No: AABCK0235H
Appellant/अपीलार्थी
..
Respondent/प्रतिवादी
Deputy
Commissioner of Income Tax, Central Circle
– 4(1), Room No. 418, Kautilya
Bhavan,
Bandra
Kurla
Complex,
Bandra
(East),
Mumbai
-
400
051,
Maharashtra v/s.
बनाम
Oberoi
Realty
Limited,
Mumbai, 3rd Floor, Commerz,
International Business Park,
Oberoi
Garden
City,
Off.
Western
Express
Highway,
Goregaon
(E)
-
400
063,
Maharashtra
स्थायी लेखा सं./जीआइआर सं./PAN/GIR No: AABCK0235H
Appellant/अपीलार्थी
..
Respondent/प्रतिवादी

Appellant by :
Shri Yogesh Thar,AR
Respondent by :
Shri Mahesh Pamnani (Sr. DR)

[

Date of Hearing
25.02.2025
Date of Pronouncement
10.03.2025

P a g e | 2

ITA No. 4802, 4803, 4804, 5128 & 5130/Mum/2024
A.Y. 2015-16, 2016-17, 2017-18

Oberoi Realty Limited, Mumbai

आदेश / O R D E R

PER BENCH :-

The above captioned appeals have been filed by the Assessee and Cross appeals by the Revenue against the orders passed by the Learned
Commissioner of Income-tax (Appeals), CIT (A) 52, Mumbai
[hereinafter referred to as “CIT(A)”] pertaining to assessment order passed u/s. 143(3) of the Income-tax Act, 1961 [hereinafter referred to as “Act”] for the Assessment Years [A.Y.] 2015-16, 2016-17 and 2017-18. Since the issues are common and interlinked, these appeals are being taken up together for adjudication vide this composite order for the sake of brevity. We take up assessee’s appeal first as below as the ‘Lead case’.
2. The grounds of the appeals are as under:-
ITA No. 4802/MUM/2024 (A.Y. 2015-16)(Assessee)

The learned A.O. had erred in law and facts in adding Annual Let Out
Value of Rs 23,57,122/- under the head Income from House Property as per the provisions of section 22 of the Act by estimating deemed rent at Rs.33,67,317/- at the rate of 10% on unsold Stock of Finished Goods ie, residential units of the Project developed and constructed by the Appellant and the Hon'ble Commissioner of Income-tax (Appeals) has erred in law and facts in confirming the aforesaid addition to the extent of Rs. 5,89,281/- by applying a rate of 2.50% on unsold Stock of Finished Goods ie, residential units of the Project developed and constructed by the Appellant by estimating the deemed rent at Rs.
8,41,830/-, and the learned A.O. and the Hon'ble Commissioner of P a g e | 3

ITA No. 4802, 4803, 4804, 5128 & 5130/Mum/2024
A.Y. 2015-16, 2016-17, 2017-18

Oberoi Realty Limited, Mumbai

Income-tax (Appeals) have ignored the facts that Section 23(5) of the Act came into effect from Assessment Year 2018-19. 3. Facts in brief are that the assessee is in the business of construction and is a Builder and Developer of projects. The AO noticed on examining the Balance-sheet that under the head ‘Inventories’, the assessee was holding finished goods of Rs. 124,91,70,704/-. The stock of finished goods consisted of unsold immovable property in the projects developed by the assessee. It was stated by him that as per provisions of section 22 of the I.T. Act, the annual value of property consisting of any buildings or lands appurtenant thereto of which the assessee is the owner, other than such portions of such property as he may occupy for the purposes of any business or profession carried on by him the profits of which are chargeable to income-tax, shall be chargeable to income-tax under the head “Income from House Property”. The Annual value has to be determined as per section 23 of the Act. He referred to the decision of Hon’ble Delhi High Court in the case of Ansal Housing Finance &
Leasing Co Ltd [2013] 354 ITR 180 (Del). Also in order to arrive at the annual letting value of the property, reliance was placed on the ratio laid down by Hon’ble Allahabad High Court in the case of Radha Devi
Dalmia 4 Taxmann 183 (All). The total investment of the assessee in two properties was worked out to Rs. 124,91,70,704/-. Therefore, the annual

P a g e | 4

ITA No. 4802, 4803, 4804, 5128 & 5130/Mum/2024
A.Y. 2015-16, 2016-17, 2017-18

Oberoi Realty Limited, Mumbai letting value is worked out at seven per cent of the same i.e. Rs.
5,12,82,802/- was added to the income.
4. In the subsequent appeal, the ld.CIT(A) observed the property under reference is in the project named ‘Oberoi Seven’ which is located in Goregaon (East). The project was completed in AY 2011- 12 as per the appellant’s own submission during the appellate proceedings for AY
2017-18.Thus, the property had remained in the possession of the appellant for the last 4 years. Taking into account the provisions of section Sec. 23(5) inserted w.e.f. 01.04.2018, he concluded that till AY
2017-18 the house property, even if held as stock-in-trade was liable to be taxed by computing the annual lettable value. It is only from AY 2018-
19 that the Parliament in its wi om has provided for certain exception of one year while computing the ALV.After taking into account certain decisions of the coordinate bench in the case of in the case of Inorbit
Malls Pvt. The Hon’ble ITAT in ITA No. 2220/Mum/2021 Ltd. dt.
11.10.2022 and Dimple Enterprises v. DCIT, 154 taxmann.com 653 dt.
28.08.2023, which upheld the view that annual lettable value on notional rent on unsold stock was to be taxed,the action of the AO in computing the income from house property was affirmed by him.

P a g e | 5

ITA No. 4802, 4803, 4804, 5128 & 5130/Mum/2024
A.Y. 2015-16, 2016-17, 2017-18

Oberoi Realty Limited, Mumbai

“The 2nd ground of appeal
2. The AO has erred in law and facts in adding annual let out value of Rs.44,76,011/-under the head "Income from House Property under the provisions of section 22 of the Act by estimating deemed rent at Rs.63,94,301/- on unsold property of the Project developed and constructed by the appellant held as stock in trade for sale and, the Commissioner of Income-tax (Appeals) has erred in confirming the above actions of the learned A.O.

P a g e | 6

ITA No. 4802, 4803, 4804, 5128 & 5130/Mum/2024
A.Y. 2015-16, 2016-17, 2017-18

Oberoi Realty Limited, Mumbai deduction of Rs.19,18,290/- u/s 24(a) of the Act. In appeal, the CIT(A) also following the above decisions confirmed the disallowance made by the AO.

We 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 Pvt.Ltd.(supra) is for the assessee, whereas the decision in Ansal Hsg. Finance & Leasing Co. Ltd.,
(supra) is for the Revenue. The Hon'ble Supreme Court in the case of CIT vs.
Vegetable Products 88 ITR 192 (SC) 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 facts, we will follow the decision in Neha Builders
Pvt.Ltd.(supra).
4.5.1. We now come to the relevant provisions in the Act. The following sub-section (5) has been inserted after sub-section (4) of section 23 by the Finance Act, 2017, w.e.f. 01.04.2018:
“(5) Where the property consisting 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 one year 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 nil.”
Thus, in order to give relief to Real Estate Developers, section 23 has been amended w.e.f. AY 2018-19 (FY 2017-18). By this amendment, it is provided that if the assessee is holding any house property as his stock-in-trade which is not let out for the whole or part of the year, the annual value of such property will be considered as Nil for a period up to one year from the end of the financial year in which a completion certificate is obtained from the competent authority.
In view of the above amendment to section 23, we are not adverting to the other case laws relied on by the Ld. counsel.
In the instant case, the assessee is a builder and developer. The issue of taxability is with regard to unsold flats. The AY is 2011-12. In view of the insertion of sub-section P a g e | 7

ITA No. 4802, 4803, 4804, 5128 & 5130/Mum/2024
A.Y. 2015-16, 2016-17, 2017-18

Oberoi Realty Limited, Mumbai

(5) in section 23 by the Finance Act, 2017, w.e.f 01.04.2018 narrated hereinbefore, we uphold the order of the Ld. CIT(A) and dismiss the second Ground of appeal filed by the revenue.”
In the instant case, the assessment year is 2012-13. Facts being identical, we follow the above order of the Co-ordinate Bench and allow the 2nd ground of appeal.
9. In the result, the appeal is partly allowed.”
6. We find that the facts and the circumstances involved in the present appeal are identical to the decision cited above barring figures.
Respectfully,we follow the above orders of the coordinate bench and allow the above ground of the assessee.
ITA No. 4804/MUM/2024 (A.Y. 2016-17)(Assessee)

ITA No. 4803/MUM/2024 (A.Y. 2017-18)(Assessee)

ITA No. 5128/MUM/2024 (A.Y. 2016-17) (Revenue)

P a g e | 8

ITA No. 4802, 4803, 4804, 5128 & 5130/Mum/2024
A.Y. 2015-16, 2016-17, 2017-18

Oberoi Realty Limited, Mumbai

P a g e | 9

ITA No. 4802, 4803, 4804, 5128 & 5130/Mum/2024
A.Y. 2015-16, 2016-17, 2017-18

Oberoi Realty Limited, Mumbai of Chief Commissioner of Income Tax. It is also seen that the appellant has made the offer of additional income which has been accepted by the Hon’ble IBS-1. Hence, the total disallowance u/s. 14A was restricted by him to Rs.9,89,136/-under both regular and MAT provisions deleting the balance excess.
10. Before us, it the ld.DR has relied on the assessment order.
Before us, the ld.AR has submitted that the assessee preferred a Settlement Application u/s 245C of the Act before the hon’ble
Settlement Commission on 22.01.2021 for AYs 2010-11 to 2020-21 and in the said application,the issue of disallowance u/s 14A was also offered for settlement.The hon’ble Interim Board of Settlement-I has settled the application by accepting the above disallowance offered by the assessee in its order dated 28.04.2023.A copy of the above order u/s 245C(4) in MH/MUCC-2/012/2020-21/IT is placed on record. Paras 5.1.9 to 5.1.9.3
deal with the matter involving disallowance u/s 14A of the Act. The hon’ble Bench has accepted the offer of the assessee for several years which is inclusive of the assessment year under consideration also.
Respectfully following the said decision, we uphold the conclusion of the ld.CIT(A) and thus, dismiss the ground.
11. Ground no.2 pertains to the addition in respect of Annual value of unsold stock.The rate adopted by the ld.CIT(A) has been P a g e | 10

ITA No. 4802, 4803, 4804, 5128 & 5130/Mum/2024
A.Y. 2015-16, 2016-17, 2017-18

Oberoi Realty Limited, Mumbai agitated by the revenue.However,as the addition itself has been deleted in toto in the preceding paras in appeals of the assessee, the ground being infructuous is dismissed.
1. “Whether on the facts and in the circumstances of the case, the Ld.CIT(A) is justified in not sustaining the disallowance u/s 14A of Income Tax Act, 1961 and restricting it to Rs. 11,75,962/- without considering the Circular No.5 of 2014 dated 11.02.2014 and decision of Hon'ble Bombay High Court in the case of Godrej & Boyce Mfg. Co.
Ltd. [328 ITR 81]?”

P a g e | 11

ITA No. 4802, 4803, 4804, 5128 & 5130/Mum/2024
A.Y. 2015-16, 2016-17, 2017-18

Oberoi Realty Limited, Mumbai in ITA NO.502/Mum/2018 dated 20.08.2019 for AY 2014-125 holding that the impugned sum by holding that the said amount pertained to regularization of construction and was not penal in nature as there was no contravention of law was done.
14. We find that the issue in hand is already decided in assessee own case in appeal for AY 2009-10 by the coordinate bench in ITA
No.1050/M/2013 dated 04.11.2015 holding that such expenses for regularization of the Club house is not an offence under the statutory and by-laws of BMC. Respectfully following this order, we uphold the appellate order and the departmental ground is dismissed.
15. In the result, the appeals of the assessee in ITA No. 4802,
4803, 4804/Mum/2024 are allowed and Revenue’s appeals in ITA
No. 5128 & 5130/Mum/2024 are dismissed.
Order pronounced in the open court on 10/03/2025. SANDEEP GOSAIN
PRABHASH SHANKAR
(न्याययक सदस्य /JUDICIAL MEMBER)
(लेखाकार सदस्य/ACCOUNTANT MEMBER)

Place: म ुंबई/Mumbai
ददनाुंक /Date 10.03.2025
Lubhna Shaikh / Steno

आदेश की प्रयियलयि अग्रेयिि/Copy of the Order forwarded to :

P a g e | 12

ITA No. 4802, 4803, 4804, 5128 & 5130/Mum/2024
A.Y. 2015-16, 2016-17, 2017-18

Oberoi Realty Limited, Mumbai

सत्यावपि प्रवि ////
आदेशानुसार/ BY ORDER,

उि/सहायक िंजीकार (Dy./Asstt.