The Income Tax Appellate Tribunal (ITAT), Pune bench has held that since the unsold flats amount to stock-in-trade in the hands of the builder, no deemed rent can be derived from the same under the head “income from house property.”
The assessee is in the business of Civil Engineers, Builders and Developers. The assessee, during the relevant year, had 32 unsold flats/shops and no rental income was derived by the assessee from such properties.
The income tax department was of the view that since assessee was owner of two or more house properties, provision of Sec.23(4) of the Act would be attracted and as per which assessee should have offered deemed rental income from the aforesaid properties and asked the assessee to pay tax on the deemed rent.
The Tribunal noticed the decision of the Gujarat High Court in the case of CIT Vs. Neha Builders Pvt. Ltd wherein it was held that when the business of the assessee is to construct the property and sell it or to construct or let out then that would be the “business” and the business stocks which may include movable and immovable properties would be taken to be “stock-intrade” and any income derived from such stocks cannot be termed as “income from house property”.
Relying on a catena of judicial decisions, the Tribunal concluded the matter in favour of the assessee by holding that no notional annual rental value on unsold flats held in stock-in-trade can be made in assessee’s hands.
“Before us, no distinguishing feature in the facts of the present case and the case decided by Pune ITAT noted hereinabove has been pointed out by Revenue. In view of the aforesaid facts, we following the decision of Co-ordinate Bench of the Pune Tribunal in the case of M/s. Cosmopolis Construction Vs. ITO (supra) holds that in the present case, no addition on account of deemed rent of 32 unsold flats can be made in hands of the assessee,” the Tribunal said.
Subscribe Taxscan Premium to view the Judgment
