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Income Tax Appellate Tribunal, PUNE BENCH “B”, PUNE – VIRTUAL COURT
Before: SHRI INTURI RAMA RAO & SHRI S. S. VISWANETHRA RAVI
ORDER PER INTURI RAMA RAO, AM: These are the appeals filed by the different assessees directed against the respective orders of ld. Commissioner of Income Tax 2 ITA No.30 & 50/PUN/2019 (Appeals)- 3/4, Pune (‘CIT(A)’ for short) for the assessment years 2014-15 and 2015-16.
Since the identical facts and issues are involved in all above three appeals, we proceed to dispose of the same by this common order.
For the sake of convenience and clarity, the facts relevant to the appeal in ITA No.1075/PUN/2018 for the assessment year 2014-15 in the case of Pranjal Constructions Pvt. Ltd. are stated herein. ITA No.1075/PUN/2018, A.Y. 2014-15 : 4. The assessee raised the following grounds of appeal :- “The following grounds are taken without prejudice to each other - On facts and in law, 1] The learned CIT(A) erred in confirming the addition of Rs.6,14,149/- u/s 22 r.w.s. 23(4) on account of deemed rent in respect of unsold units held as stock in trade by the appellant company. 2] The learned CIT(A) failed to appreciate that the appellant company had held these unsold units as stock in trade and hence, as these units were occupied by the assessee for its business purpose, there was no reason to tax the annual value of such unsold units u/s 22 of the Act. 3] Without prejudice to the above grounds, the assessee submits that assuming without admitting that the income of such unsold units was taxable as income from house property u/s 22, it is submitted that the unsold units were vacant for the entire year and accordingly, the income thereon was to be considered at Rs. NIL in view of the provisions of Section 23(1) (c) and hence, the entire addition made by the learned CIT(A) may kindly be deleted. 4] Without prejudice to the above grounds, the assessee submits that the net annual rate able value adopted by the A.O. is on an 3 ITA No.30 & 50/PUN/2019 adhoc basis and the same should be substituted by the municipal rateable value determined for the various units by the local authorities. 5] The appellant craves leave to add, alter, amend or delete any of the above grounds of appeal
.”
5. Briefly, the facts of the case are as under : The appellant is a private limited company engaged in the business of construction of residential properties. The return of income for the assessment year 2014-15 was filed on 26.11.2014 declaring total income of Rs.91,23,090/-. Against the said return of income, the assessment was completed by the Assistant Commissioner of Income Tax, Circle-4, Pune (‘the Assessing Officer’) vide order dated 30.08.2016 passed u/s 143(3) of the Income Tax Act, 1961 (‘the Act’) at total income of Rs.97,37,239/-. While doing so, the Assessing Officer made addition of Rs.6,14,149/- under the head ‘income from house property’ being the annual value of unsold flats and brought to tax by placing reliance on the decision of the Hon’ble Delhi High Court in the case of CIT vs. Ansal Housing Finance & Leasing Co. Ltd., 354 ITR 180 (Delhi).
6. Being aggrieved by the above decision of the Assessing Officer, an appeal was filed before the ld. CIT(A), who vide impugned order confirmed the action of the Assessing Officer 4 ITA No.1075/PUN/2018 ITA No.30 & 50/PUN/2019 placing reliance on the decision of the Hon’ble Delhi High Court in the case of Ansal Housing Finance & Leasing Co. Ltd. (supra) and the decision of the Hon’ble Supreme Court in the case of Raj Dadarkar and Associates, 394 ITR 592 (SC).
7. Being aggrieved, the appellant is before us in the present appeal.
8. When the appeal was called on, none appeared on behalf of the assessee despite due service of notice of hearing, therefore, after hearing the ld. Sr. DR, we proceed to dispose of this appeal.
9. The issue in the present appeal relates to the assessability of notional income from the unsold flats held as ‘stock in trade’ in the case of the assessee whose business is construction and sale of residential properties. The undisputed fact of the case is that the assessee has unsold flats which are held as ‘stock in trade’. Then the question that arises for consideration whether the annual value of such unsold flats can be assessed u/s 23 of the Act. There is no doubt that the Hon’ble Delhi High Court in the case of Ansal Housing Finance & Leasing Co. Ltd. (supra) held that the annual value of unsold flats is chargeable to tax as ‘income from house property’. Contrary position was taken by the Hon’ble Gujarat High Court in the case of CIT vs. Neha Builders (P.) Ltd., 296 ITR 5 ITA No.30 & 50/PUN/2019 661 (Gujarat). The Legislature also enacted sub-section (5) of section 23 of the Act inserted by the Finance Act, 2017 w.e.f. 01.04.2018 to provide that the property as held ‘stock in trade’ which is not let out during the whole or any part of the previous year, its value for the period of two years from the end of the financial year in which the completion certificates of construction were issued by the competent authority, shall be taken as Nil. The Memorandum explaining the provisions of Finance Bill has clearly clarified that this amendment will take effect from 01.04.2018 and, will accordingly apply in relation to the assessment year 2018-19 and subsequent year.
10. In the backdrop of the above, we are now required to adjudicate the issue on hand. The identical issue has been dealt by the Co-ordinate Bench of this Tribunal in the case of Kumar Properties and Real Estate (P.) Ltd. vs. DCIT, 190 ITD 212 (Pune- Trib.) to which one of us Hon’ble Judicial Member is party. The Co-ordinate Bench of this Tribunal noticed cleavage of the opinion between the decisions of the Hon’ble Delhi High Court in the case of Ansal Housing Finance & Leasing Co. Ltd. (supra) and the Hon’ble Gujarat High Court in the case of Neha Builders (P.) Ltd. (supra) and in the absence of any decision from the Jurisdictional 6 ITA No.30 & 50/PUN/2019 High Court, a view in favour of the assessee has taken by holding as under :- “11. The authorities below have canvassed a view that the annual letting value of flats/bungalows is income chargeable to tax as 'Income from house property' by relying on Ansal Housing Finance and Leasing Company Ltd. (supra). There is no doubt that the Hon'ble Delhi High Court in the said case has held that Annual letting value of unsold flats at the year end is chargeable to tax under the head 'Income from house property'. At the same time, we find that the Hon'ble Gujarat High Court in CIT v. Neha Builders (P.) Ltd . [2007] 164 Taxman 342/[2008] 296 ITR 661 has held that income from the properties held as stock in trade can be treated as Income from business and not as 'Income from house property'. Our attention has been drawn towards certain Tribunal decisions including Cosmopolis Construction v. ITO [IT Appeal No. 230 & 231 (PUN) of 2018, dated 12-9-2018], wherein, after taking note of both the above judgments and finding none of them from the jurisdictional High Court, a view has been canvassed in favour of the assessee by holding that no income from house property can result in respect of unsold flats held by a builder at the year end. Similar view has been reiterated by the Pune Bench of the Tribunal in Mahanagar Construction v. ITO [IT Appeal No. 623 (PUN) of 2018, dated 5-9-2019].
At this juncture, it is relevant to mention that the Finance Act, 2017 has inserted sub-section (5) of section 23 w.e.f. 1-4-2018 reading as under:— 'Where the property consisting of 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 be nil.' 13. A close scrutiny of the provision inducted by the Finance Act, 2017, transpires that where a property is held as stock-in-trade which is not let out during the year, its annual value for a period of one year, which was later enhanced by the Finance Act, 2019 to two years, from the end of the financial year in which the completion certificate is received, shall be taken as Nil.”
The reliance placed by the ld. CIT(A) on the decision of the Hon’ble Supreme Court in the case of Raj Dadarkar and Associates 7 ITA No.30 & 50/PUN/2019 (supra) is misplaced, inasmuch as, the issue involved in that case is the assessability of income under “house property” or “business income”.
12. No change in facts and law subsequent to the decision of the Co-ordinate Bench of this Tribunal in Kumar Properties and Real Estate (P.) Ltd. (supra) was brought to our notice. Hence, we have no reason to take a different view from the view taken by the Co- ordinate Bench of this Tribunal in the case of Kumar Properties and Real Estate (P.) Ltd. (supra). Therefore, we are of considered opinion that the Assessing Officer was not justified to assess the annual value of unsold flats for the year under consideration. Accordingly, we direct the Assessing Officer to delete the addition of Rs.6,14,149/- as made by him in the assessment order. Thus, the issue raised in the grounds of appeal
stands allowed.
13. In the result, the appeal filed by the assessee in ITA No.1075/PUN/2018 for the assessment year 2014-15 stands allowed. ITA No.30/PUN/2019, A.Y. 2015-16 :