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आदेश/Order
Per Sanjay Garg, Judicial Member:
The present appeal has been preferred by the assessee against the order dated 27.3.2017 of the Commissioner of Income Tax (Appeals)-2, Gurgaon [hereinafter referred to as CIT(A)].
In this appeal, the assessee has agitated the action of the lower authorities in estimating the annual letting out of the value of the property at Rs. 5,46,000/- for the purpose of taxing the rental income of the assessee.
We have heard the rival submissions. The Ld. Counsel for the assessee has submitted that the assessee is engaged in the business of sale,
ITA No. 724/Chd/2017- M/s AHM Promoters & Developers P Ltd., Chandigarh 2
purchase and construction of properties. That the houses in question were
purchased by the assessee for resale purpose, which was as per the
business activity of the assessee. However, during the period, the said
houses were lying vacant with the assessee. As the customers were not
available, the assessee has rented those out at nominal rent to its
employees. The rental income so earned has also been returned by the
assessee in the return of income. The Ld. Assessing officer estimated the
annual letting out of the properties as per the market rate. The Ld. CIT(A)
confirmed the addition so made by the Assessing officer.
The Ld. counsel for the assessee, before us, has submitted that
there was no intention of the assessee to keep these properties as
investment and thereby to earn rental income. However, the fact on the
file is that the assessee has not treated the said properties as stock in trade
but capital assets. Under the circumstances, it cannot be said that the
aforesaid properties were business assets or stock in trade of the assessee.
However, the fact on the file is also that the assessee is indulged in the
activity of investment in property and earning capital gains thereon.
During the short period, during which the properties remained with the
assessee, since assessee was not interested in keeping properties for a long
time and to earn interest / rental there upon, the assessee taking into
consideration his activity and interest, rented it out to his own employees,
though, at a nominal rent. Whatever rent has been earned by the assessee
that has been returned in the income. A perusal of the assessment order
also reveals that the Assessing officer got carried out certain investigations
though field staff. During the second investigation, it was found that the
ITA No. 724/Chd/2017- M/s AHM Promoters & Developers P Ltd., Chandigarh 3
assessee had already sold the house to one retired Colonel Sh. S.P.S.Toor and other to Sardar Ravinder Singh. 4. In view of this, we direct the Assessing officer to assess the actual rent received by the assessee on the aforesaid two houses and not notional
rent as per the annual market rental value estimated in the absence of any evidence that properties were lying vacant or the assessee actually had earned any rental income more than that has been disclosed. This appeal of the assessee is accordingly treated as allowed. In the result, the appeal of the assessee stands allowed.
Order pronounced in the Open Court on 05.11.2018
Sd/- Sd/- (अ�नपूणा� गु�ता / ANNAPURNA GUPTA) (संजय गग� / SANJAY GARG) लेखा सद�य/ Accountant Member �या�यक सद�य/ Judicial Member Dated : 5.11.2018 “आर.के.”
आदेश क� ��त�ल�प अ�े�षत/ Copy of the order forwarded to : 1. अपीलाथ�/ The Appellant 2. ��यथ�/ The Respondent 3. आयकर आयु�त/ CIT 4. आयकर आयु�त (अपील)/ The CIT(A) 5. �वभागीय ��त�न�ध, आयकर अपील�य आ�धकरण, च�डीगढ़/ DR, ITAT, CHANDIGARH 6. गाड� फाईल/ Guard File
आदेशानुसार/ By order, सहायक पंजीकार/ Assistant Registrar