SHI vs. HANKAR SINGH & OTHERS,MUMBAI

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ITA 8045/MUM/2019Status: DisposedITAT Mumbai28 September 2021AY 2013-145 pages
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What did the Tribunal hold?

The Tribunal held that unsold stock held as stock-in-trade cannot be taxed as notional house property income, as profit from sale is assessed as business income. The claim for Section 80G deduction was not adjudicated by the lower authorities.

What were the facts?

The assessee's appeal concerned the addition of unsold stock as deemed income from house property and a claim for deduction under Section 80G. The addition of unsold stock was based on estimated annual letting value.

What were the issues?

Whether unsold stock held as stock-in-trade can be treated as deemed income from house property. Whether the claim for deduction under Section 80G was properly adjudicated.

Which sections of the Income-tax Act were involved?

Section 23,Section 80G

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Income Tax Appellate Tribunal, “SMC” BENCH, MUMBAI

Before: SRI MAHAVIR SINGH

For Appellant: Shri Narendra Porwal, AR
Hearing: 28.09.2021Pronounced: 28.09.2021

O R D E R भहावीय स िंह, उऩाध्मक्ष के द्वाया / PER MAHAVIR SINGH, VP: This appeal of the assessee is arising out of order of the Commissioner of Income Tax (Appeals)]-40, Mumbai [in short CIT(A)], in Appeal No. CIT(A)-40/10404/2016-17, vide dated 23.10.2019. The Assessment was framed by the Income Tax Officer, Ward 29(3)(4), Mumbai (in short ITO/ AO) for the A.Y. 2013-14 vide order dated 11.03.2016 under section 143(3) of the Income-tax Act, 1961 (hereinafter ‘the Act’).

2.

The first issue in this appeal of assessee is as regards to the order of CIT(A) confirming the action of the Assessing Officer in considering the closing stock of unsold premises and estimating from the same unsold closing stock as deemed income from house property at ₹4,64,892/-.

1.

2 Shivshankar Singh & Others; AY 13 -14 3. At the outset, the learned Counsel for the assessee stated that exactly identical issue on the same unsold stock, the Assessing Officer has assessed the deemed income from house property by assessing the Annual Letting Value and Tribunal in for Assessment Year 2012-13 vide order dated 23.05.2018 deleted this addition by observing in Para 6 as under:-

“6. We have considered rival submissions and perused the material on record. It is accepted by the department that assessee is a builder and constructs buildings comprising of shops and residential premises. It is evident, in course of such business activities some flats and shops remain unsold and are shown as stock in trade. There is no dispute that the profit derived by the assessee from sale of flats/shops in the building project has been assessed as business income. However, the AO has proceeded to determine notional house property income on the unsold stock of flats and shops by determining the annual letting value. As could be seen, prior to 01.04.2018 there was no provision under Section 23 of the Act to determine the annual value of unsold flat/shop held as stock in trade. In the Finance Act, 2017 an amendment was made to section 23 of the Act by inserting sub-clause (v), which provides for determination of annual value of any building or land appurtenant thereto held as stock in trade and which has not been let out. However, the aforesaid provision has been made effective from 01.04.2018. The Coordinate Bench in the case of M/s. Runwal Constructions (supra), following the decision of the Hon'ble Gujarat High Court in the case of CIT vs. Neha Builders Pvt. Ltd. 296 ITR 661 and the decision of the ITAT Mumbai Benches in the case of C.R.

3 Shivshankar Singh & Others; AY 13 -14 Developers P. Ltd (supra) has held that unsold flats held as stock in trade in the books of account when sold, the profit derived there from will be assessable under the head „income from business‟. That being the case, notional house property income on such unsold stock in trade cannot be brought to tax. In view of the aforesaid decision of the Coordinate Bench we hold that the departmental authorities were not justified in determining the deemed annual letting value of the unsold stock and bringing it to tax as notional house property income. Accordingly, we delete the addition made by the AO and sustained by the CIT(A).”

4.

The learned Counsel for the assessee stated that this issue is squarely covered in favour of assessee in this year also, as the facts are exactly identical and the remaining unsold stock is carried from earlier year. When this was point out to learned Sr. Departmental Representative Smt. Smita Verma, she could not controvert that the issue is not covered but she relied on the assessment order and the order of CIT(A).

5.

After hearing the rival contentions I am of the view that the issue of unsold stock treated as deemed income from house property, is squarely covered in favour of assessee in the immediate preceding assessment year i.e. Assessment Year 2012-13 in assessee’s own case. Hence taking a consistent view, I direct the Assessing Officer to delete this disallowance. The orders of the lower authorities are reversed and issue of assessee’s appeal is allowed.

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