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Income Tax Appellate Tribunal, “SMC” Bench, Mumbai
Before: Shri B.R. Baskaran (AM)
The appeal filed by the assessee is directed against the order dated 5.9.2017 passed by the learned CIT(A)-51, Mumbai and it relates to A.Y. 2014- 15. The assessee is aggrieved by the decision of the learned CIT(A) in confirming the assessment of rental value in respect of unsold flat.
I heard the parties and perused the record. The assessee is engaged in the business of constructing buildings and property development. The Assessing Officer noticed that the assessee was having several unsold flats in respect of its Mirage project. During the year under consideration, total area of the unsold stock came to 1040 square feet in respect of Chembur project. The Assessing Officer took the view that the annual letting value of those flats has to be assessed as income of the assessee under the head income from house property. In this regard, the Assessing Officer took support of the decision rendered by Hon'ble Delhi High Court in the case of M/s. Ansal Housing Finance and Leasing Company Ltd. (2013) 354 ITR 180. Accordingly, the Assessing Officer competed the annual letting value of unsold flats at Rs. 2,49,600/-. After allowing deduction of 30% for repairs, the Assessing Officer
2 M/s. A.A. Estates Pvt. Ltd. assessed house property income at Rs. 1,74,720/-. The learned CIT(A) also confirmed the same and hence the assessee has filed this appeal.
The Learned AR submitted that unsold flats have been held by the assessee as Stock in trade. He submitted that the Hon'ble Gujarat High Court in the case of CIT Vs. Neha Builder Pvt. Ltd. (296 ITR 661) has held that that any income derived from stock in trade would have the character of income from business and not income from house property. However, the tax authorities have placed reliance on the decision rendered by the Hon’ble Delhi High Court in the case of Ansal Housing Finance and Leasing Company Ltd (supra), wherein an identical issue has been decided against the assessee. He submitted that in case of the conflicting decisions of different non- jurisdictional High Courts, the view in favour of the assessee should be taken. The Learned AR further submitted that the Finance Act, 2007 has introduced sub-section (5) in section 23, as per which annual letting value of property held as stock in trade, the property income shall be taken as NIL for the period up to one year from the end of the financial year in which certificate of completion of construction of the property obtained from the competent authority. He submitted that newly introduced section would support the case of the assessee. However the Ld A.R did not furnish details of period of completion of construction of the unsold flats.
The Learned DR, on the contrary, submitted that the learned CIT(A) has followed the decision rendered by him in assessee’s group case named M/s. RNA Corporation Pvt. Ltd., wherein also an identical issue was decided against the assessee. The group concern of the assessee has accepted the decision so rendered against it by the learned CIT(A) in that case.
In rejoinder, learned AR submitted that acceptance of the order passed by the learned CIT(A) by a group concern of the assessee would not bar the assessee from contesting the issue in its hand.
3 M/s. A.A. Estates Pvt. Ltd.
I noticed that the learned CIT(A) has followed the decision rendered by Hon'ble Delhi High Court in the case of Ansal Housing Finance & Leasing Co. td. (supra), wherein Hon'ble Delhi High Court has held that the annual letting value of unsold flats shall be assessed as income from house property. I noticed that Hon'ble Jurisdictional Bombay High Court has also considered an identical issue in the case of Mangla Homes Pvt. Ltd. (182 Taxman 55). In the case before Hon'ble Bombay High Court the assessee was engaged in the business of trading in flats. Rental income receivable from the flats was claimed to be business income and the said claim was turned down by Hon'ble Bombay High Court and it was held that rental income is assessable as income from house property. Since the decision rendered by Hon'ble Jurisdictional Bombay High Court is binding on us, I am of the view that the learned CIT(A) was justified in upholding the action of the Assessing Officer in assessing the rental value of unsold flats under the head income from house property. Accordingly, I uphold his order.
In the result, appeal filed by the assessee is dismissed. Order has been pronounced in the Court on 22.2.2018.