JANTA LAND PROMOTERS PRIVATE LIMITED ,MOHALI vs. INCOME TAX OFFICER WARD 6(1) CHANDIGARH , MOHALI

4.1. The ld. counsel for the assessee further submitted that contribution pertaining to the month of January,2017 and ITA 907/CHD/2024 A.Y. 2017-18 3 onwards were paid within due date amounting to Rs.4,29,357/- within the grace period. In the written submission filed before the Tribunal, assessee has reproduced the complete details in tabular form at page No. 8 and 9. It has provided that Sr.No. 14 onwards, the payments have been made by the assessee within due date because grace period of 5 days was available with the assessee. In other words, due date was enhanced by five more days, hence this payment is not hit by the judgement of Hon'ble Supreme Court in the case of Checkmate Services P. Ltd. & Ors. VS. CIT & Ors. (2022) 448 ITR 518 (SC).

5.1 As far as assessment of notional rent qua inventory of flats unsold, the assessee has filed written submissions.

ITA 907/CHD/2024 A.Y. 2017-18 4

“GROUND NO 1 & 2 That The Ld. C.I.T.(A), NFAC, Delhi has wrongly passed the order u/s 250(6) of the Income Tax Act, 1961 against law and facts of the case. That the Ld. C.I.T.(A), NFAC, Delhi was not justified in confirming the addition of Rs. 13,81,464/ made by the Assessing Officer under the head "Income from Property" for the assessment year under appeal without appreciating nomenclature of business of assessee and without appreciating that any income from these flats, in the form of rent, can also only be taxed u/s 28 of the Act.

ITA 907/CHD/2024 A.Y. 2017-18 5 2.1. That the Ld. C.LT.(A), NFAC, Delhi was not justified in confirming the addition of notional income in respect of 11 flats held by the appellant as stock in trade holding that the appellant was liable to notional income on the same under the provisions of S. 22 of the Income-tax Act 1961. 2.2. That the Ld. C.I.T.(A), NFAC, Delhi has grossly erred in upholding the addition made by the Ld. AO without appreciating the fact that the amendment in finance Act 2017, in respect of provisions u/s sec 23(5) of the Act is applicable to unsold inventory of flats disclosed under stock in trade is effective from A.Y.2018-19 and not to the present A.Y.2017-18. The Ld. CIT(A) failed to appreciate that there is no provision to assess notional rent/ALV of unsold flats u/sec 22 of the Income Tax Act in the year under consideration. 2.3. That the Ld. C.I.T.(A), NFAC, Delhi has grossly erred in not adopting the Municipal rate rather an arbitrary rate for estimating notional income in respect of the 11 flats and confirming the addition. 2.4.That the Ld. C.I.T.(A), NFAC, Delhi has grossly erred in not granting (deduction) allowance (vacancy allowance) for the period during which the 11 flats were vacant in the financial year.

During the course of assessment proceeding, it was gathered by the Assessing Officer that the assessee company had in stock 11 flats in respect to stocks lying at Regency Heights in respect to which completion certificate had been received 10 years back. In view of above Provisions of section 22 and 23 of the Income Tax Act were applied in the case of assessee company relying upon the ratio laid down by the Hon'ble High Court of Delhi in the case of Commissioner of Income Tax vs. Ansal Housing and Construction reported in [20167 72taxmann.com 254. The CIT(A) confirmed the said addition by relying upon the judgement of IT AT Mumbai in CIT vs. Inorbit Malls Pvt. Ltd to hold that Income of unsold inventory of flats is taxable under head "Income from House property" In this regard, it is submitted that :- A) Income from unsold inventory of flats is taxable under the head "Business Income" u/s 28 Kind attention of your honour is invited towards the ratio laid down by Hon'ble Gujarat High Court in the case of Neha Builders (P) Ltd. in 164 taxmann 342 wherein it has held that considered the question whether the rental income received from any property in the construction business can be claimed under the head 'income from property' even though the said property was included in the closing stock. The Hon'ble Gujarat High Court held that if the business of the assessee is to construct the property and sell it or to construct and let out the same, then that would be the business and the business stocks, which may include movable and immovable, would be taken to be stock in trade and any income derived from such stocks cannot be termed as income from house property. While holding so the Hon'ble High Court observed as under: - ITA 907/CHD/2024 A.Y. 2017-18 6 "8. True it is, that income derived from the property would always be termed as 'income' from the property, but if the property is used as 'stock- in-trade', then the said property would become or partake the character of the stock, and any income derived from the stock, would be 'income' from the business, and not income from the property. If the business of the assessee is to construct the property and sell it or to construct and let out the same, then that would be the 'business' and the business stocks, which may include movable and immovable, would be taken to be 'stock-intrade', and any income derived from such stocks cannot be termed as 'income from property'. Even otherwise, it is to be seen that there was distinction between the 'income from business' and 'income from property' on one side, and 'any income from other sources'. The Tribunal, in our considered opinion, was absolutely unjustified in comparing the rental income with the dividend income on the shares or interest income on the deposits. Even otherwise, this question was not raised before the subordinate Tribunals and, all of sudden, the Tribunal started applying the analogy.

9. From the statement of the assessee, it would clearly appear that it was treating the property as 'stock-in-trade'. Not only this, it will also be clear from the records that, except for the ground floor, which has been let out by the assessee, all other portions of the property constructed have been sold out. If that be so, the property, right from the beginning was a 'stock-in- trade'. " Now the position of law laid down by Delhi High Court and Gujarat High Court is different. The Mumbai and Delhi High Court are in favour of the revenue whereas the Gujrat High Court is in favour of the assessee. There is no decision of Hon'ble Jurisdictional High Court. It has been categorically held by the Hon'ble Supreme Court in the case of CIT vs. Vegetable Products Ltd. that if more than one interpretation is possible the Court has to adopt the interpretation which favour the assessee. In the following judicial pronouncement after due consideration of the ratio laid down by Hon'ble Gujarat High Court it has been categorically held that where the unsold flats which are stock in trade and when are sold they are assessable under head "Income from Business", the Ld. A.O. is not correct in bringing to tax notional annual letting value in respect of these unsold flats under the head Income from House Property :- a) CR Developments (P) Ltd. vs. JCIT reported in b) Runwal Constructions Runwal & Omkar Esquare vs. ACIT, Central-4(1), Mumbai reported in c) Income Tax Officer vs. Arihant Estates Pvt. Ltd. reported in ITA No. 6037/Mum/2016.

ITA 907/CHD/2024 A.Y. 2017-18 7 7.1 Apart from above submissions, ld. counsel for the assessee has placed on record a large number of orders which are filed in the Paper Book from page No. 1 to 83. The ITAT Bombay in & 5409/Mum/2016 has also considered identical contention and made following observations : “10. In the case on hand before us it is an undisputed fact that both assessees have treated the unsold flats as stock in trade in the books of account and the flats sold by them were assessed under the head 'income from business'. Thus, respectfully following the above said decisions we hold that the unsold flats which are stock in trade when they were sold they are assessable under the head 'income from business' when they are sold and therefore the AO is not correct in bringing to tax notional annual letting value in respect of those unsold flats under the head 'income from house property’. Thus, we direct the AO to delete the addition made under Section 23 of the Act as income from house property.”