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Income Tax Appellate Tribunal, PUNE BENCH “A”, PUNE – VIRTUAL COURT
Before: SHRI R.S. SYAL & SHRI S.S. VISWANETHRA RAVI
आदेश / ORDER
PER R.S.SYAL, VP : This appeal by the assessee is directed against the order passed by the CIT(A) on 07-05-2019 in relation to the assessment year 2015-16. 2. The only issue raised in this appeal is against the confirmation of addition of Rs.8,52,902/- towards deemed rent on unsold vacant flats and shops held by the assessee as stock-in- trade. 3. Succinctly, the facts of the case are that the assessee is working as Real estate Builder and Developer. During the course
2 ITA No. 980/PUN/2019 M/s. Mangal Murti Developers Ganesham
of the assessment proceedings, it was observed that the assessee
had 14 unsold units of houses/shops as stock in trade at the end of
the year. The assessee had given 7 units on rent for part of the
year, against which income from house property was declared.
The remaining units were vacant. The AO held that the vacant
flats were also liable to be considered for the purposes of charging
income under the head ‘Income from House Property”.
Considering the amount of rent received by the assessee from
other 7 properties, the AO computed monthly rental income at
Rs.3,80,700/- @ Rs.456/- per sq.ft. Total rental income for the
year anent to such 7 units was calculated at Rs.12.18 lakh. After
allowing the standard deduction towards repairs at Rs.3.65 lakh,
the AO added a sum of Rs.8,52,902/- to the assessee’s total
income under the head “Income from House Property”. The ld.
CIT(A), relying on certain Tribunal orders, held that such income
was to be taxed as “Business Income”. Aggrieved thereby, the
assessee has come up in appeal before the Tribunal.
We have heard both the sides through Virtual Court and
perused the relevant material on record. The assessment year
under consideration is 2015-16. The Finance Act, 2017
3 ITA No. 980/PUN/2019 M/s. Mangal Murti Developers Ganesham
introduced sub-section (5) to section 23 providing that where a
property held as stock in trade is not let out during the year, its
annual value, after a period of one year or as revised to two years,
shall be considered for the purposes of inclusion under the head
`Income from House property’. This amendment has been
brought out w.e.f. 01-04-2018. Thus, this provision manifestly
does not apply to the assessment year under consideration. Prior
to the amendment, the Tribunal considered this aspect in several
cases including the one taken note of by the ld. CIT(A), namely,
Cosmospolis Construction vs. ITO (ITA No.230 & 231/PUN/18)
and held that no income from house property can result in respect
of unsold flats held by a builder as stock in trade at the year-end.
While disposing off the above referred case, the Tribunal
observed that income from unsold flats could be considered only
under the head “Profits and Gains from business or profession”
and not “Income from House Property”. The ld. CIT(A)
considered these observations of the Tribunal qua the inclusion of
income, if any, under the head “Business Income” and directed to
include deemed annual value as business income in the impugned
order. He however, did not appreciate that the Tribunal nowhere
held for the inclusion of the deemed rental income under the head
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“Profits and Gains from business or profession”. It simply
directed that income, if any, from unsold flats held as stock in
trade can be considered only as “Business Income”. In the
ultimate analysis, the Tribunal eventually deleted the addition. It
is but natural that if a particular income is to be taxed under a
specific head, the computational mechanism governing that head
only can come into play. There is no provision under the head
“Profits and Gains from business or profession” which deems the
rental income from unsold flats held as stock as ‘Business
income’. Considering the above factual and legal position, we are
of the considered opinion that the addition of Rs.8,52,902/- made
by the AO and as sustained in the first appeal, is not called for.
The same is directed to be deleted.
In the result, the appeal is allowed. Order pronounced in the Open Court on 18th January, 2022.
Sd/- Sd/- (S.S.VISWANETHRA RAVI) (R.S.SYAL) JUDICIAL MEMBER VICE PRESIDENT पुणे Pune; �दनांक Dated : 18th January, 2022 Satish
5 ITA No. 980/PUN/2019 M/s. Mangal Murti Developers Ganesham
आदेश क� ��त�ल�प अ�े�षत/Copy of the Order is forwarded to: 1. अपीलाथ� / The Appellant; 2. ��यथ� / The Respondent; 3. The CIT(A)-6,Pune 4. The Pr.CIT-5,Pune िवभागीय �ितिनिध, आयकर अपीलीय अिधकरण, पुणे “A” / DR ‘A’, 5. ITAT, Pune गाड� फाईल / Guard file 6.
आदेशानुसार/ BY ORDER, // True Copy // Senior Private Secretary आयकर अपीलीय अिधकरण ,पुणे / ITAT, Pune
Date 1. Draft dictated on 17-01-2022 Sr.PS 2. Draft placed before author 17-01-2022 Sr.PS 3. Draft proposed & placed before the JM second member 4. Draft discussed/approved by Second JM Member. 5. Approved Draft comes to the Sr.PS/PS Sr.PS 6. Kept for pronouncement on Sr.PS 7. Date of uploading order Sr.PS 8. File sent to the Bench Clerk Sr.PS 9. Date on which file goes to the Head Clerk 10. Date on which file goes to the A.R. 11. Date of dispatch of Order. *