LATE ANILKUMAR R. AGGARWAL (LEGAL HEIR SMT.SARANGA AGGARWAL),MUMBAI vs. DEPUTY COMMISSIONER OF INCOME TAX CENTRAL CIRCLE-3(4), MUMBAI

DCIT Cen Cir-3(4), Late Anilkumar R. 19th floor, Air India Aggarwal (Legal Heir Smt Building, Nariman Point Saranga Aggarwal), बिधम/ 6th floor, RNA Corporate Mumbai-400 021 Vs. Park, Near Collector Office, Kalanagar, Bandra East, Mumbai-400051 स्थायीलेखासं./जीआइआरसं./ PAN No. AABPA3657N (अपीलाथी/Appellant) (प्रत्यथी / Respondent) : अपीलाथीकीओरसे/ Appellant by : Shri J. P. Bairagra, AR प्रत्यथीकीओरसे/Respondentby : Shri Nishant Samaiya, DR सुनवाईकीतारीख/ : 20.03.2019 Date of Hearing घोषणाकीतारीख / : 20.05.2019 Date of Pronouncement आदेश / O R D E R

Per Sandeep Gosain, Judicial Member:

(AY 2012-13) 3. First of all we take up assessee’s appeal in (AY 2012-13) on the grounds mentioned herein below:-

1. The learned Commissioner of Income Tax (Appeals) erred in confirming the action of the Assessing Officer computing deemed income under the head Income from House Property in respect of unsold flats in the projects.

2. The learned Commissioner of Income Tax (Appeals) erred in holding that deemed income from House Property is to be computed u/s 22 even when these are unsold flats lying as stock-in-trade of completed projects.

3 & 6906/Mum/2017 Late Anilkumar R. Aggarwal (Legal Heir Smt Saranga Aggarwal) 3. The learned Commissioner of Income Tax (Appeals) erred in confirming the Gross Annual Value of Rs. 14,49,360/- in respect of unsold flats of total area 4026 sq. feet in the project RNA Regency at Kandivali, Mumbai at the rate of Rs. 30 per sq. feet per month and of Rs. 50,21,040/- in respect of unsold fiats of total area 20921 sq. feet in the project RNA Courtyard at Mira Road at the rate of Rs. 20 per sq. feet per month.

4. The learned Commissioner of Income Tax (Appeals) erred in not allowing deduction u/s 24 of the Income Tax Act, 1961 of 30% of the Gross Annual Value computed.

4 & 6906/Mum/2017 Late Anilkumar R. Aggarwal (Legal Heir Smt Saranga Aggarwal) 5. As per the facts of the present case, during the year under consideration, AO observed from the books of the assessee, that the assessee has an inventory of several unsold flats in RNA Regency Having area of Total Area of 4026 sq.ft at Kandivali West, Mumbai and RNA Courtyard having area of Total Area of 20921 Sq.ft. at Mira road Thane. Whereas assessee submitted before the AO that it is in the business of real estate development activity and has never contemplated into leasing or renting the flats. Further assessee stated that he continues to occupy the said flats for the purpose of business and thus are outside the preview of section 22 of the IT Act 1961. These flats are part of its inventory of stock-in-trade and income derived from such stocks could not be assessed as income from house property. According to the assessee, no deemed income on the basis of annual letting value in respect of the unsold flats should be assessed in its hands. However, AO observed that Sec.22 of the Act lays down that annual value of property has to be assessed in the hand of the owner of the property and it does not matter as to how the property is held by the owner in his books of accounts. Therefore, while relying upon the judgment of Hon'ble Delhi 5 I.T.A. No. 4421 & 6906/Mum/2017 Late Anilkumar R. Aggarwal (Legal Heir Smt Saranga Aggarwal) High Court in the case of Ansal Housing Finance & Leasing co. Ltd.(2013) 354 ITR18O(De1), held that annual letting value of the unsold units is assessable in the hands of the assessee. Thereafter, AO made the additions to the total income of the by holding that annual letting value of the unsold units is assessable in the hands of the assessee. On appeal, the order of AO was confirmed by Ld. CIT(A) by dismissing the appeal of the assessee.

6 & 6906/Mum/2017 Late Anilkumar R. Aggarwal (Legal Heir Smt Saranga Aggarwal) 8. At the outset, Ld. AR appearing on behalf of the assessee submitted before us that these ground are squarely covered by the order of Coordinate Bench of Hon’ble ITAT in ITA No. 3321 & 3172/Mum/16 for AY 2009-10 & 2011-12 in the case of ACIT vrs. M/s Haware Construction Pvt. Ltd, wherein the identical grounds raised in the present appeal have already been decided on merits.

7 & 6906/Mum/2017 Late Anilkumar R. Aggarwal (Legal Heir Smt Saranga Aggarwal) 4.5. 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 position of law, we shall 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 8 & 6906/Mum/2017 Late Anilkumar R. Aggarwal (Legal Heir Smt Saranga Aggarwal) 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-intrade 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 2009-10. In view of the insertion of sub-section (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 2nd ground of appeal filed by the revenue.

9 & 6906/Mum/2017 Late Anilkumar R. Aggarwal (Legal Heir Smt Saranga Aggarwal) 11. After having gone through the facts of the present case as well as considering the orders passed by revenue authorities and ITAT as mentioned above, we find that assessee is a builder and developer and the issue involved in the present case is with regard to taxability of unsold flats. In such a circumstances, we rely upon the relevant provisions of the Act and in this respect, sub-section (5) has been inserted after sub-section (4) of section 23 by the Finance Act, 2017, w.e.f. 01.04.2018, which reads as under:-

(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.

10 & 6906/Mum/2017 Late Anilkumar R. Aggarwal (Legal Heir Smt Saranga Aggarwal) 12. 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.