Kalpataru Developers, Pune V. Income-tax Officer,

ITA 1063/PUN/2016

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 0952 (ITAT-PUNE)
• Duration Of Justice: 4 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-09-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2010-2011
• Appeal Filed On: 20-05-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUMITRA BANERJI
• Keywords: Business income

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, PUNE . . , BEFORE SHRI R.K. PANDA, AM . / ITA NO.1063/PN/2016 / ASSESSMENT YEAR : 2010-11 KALPATARU DEVELOPERS, 710, LAXMI ROAD, NARAYAN PETH, PUNE 411 030 PAN : AAEFK7426L . / APPELLANT V/S ITO, WARD - 11 ( 4 ), PUNE . / RESPONDENT / APPELLANT BY : SHRI NIKHIL PATHAK / RESPONDENT BY : SMT. SUMITRA BANERJI / ORDER PER R.K.PANDA, AM : THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED15-03-2016 OF THE CIT(A)-V, PUNE RELATING TO ASSESS MENT YEAR 2010-11. 2. THE ASSESSEE IN THE ONLY GROUND OF APPEAL HAS CHALLE NGED THE ORDER OF THE CIT(A) IN TREATING THE INCOME FROM HOUSE PROP ERTY AS INCOME FROM BUSINESS. 3. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESSEE IS A PARTNERSHIP FIRM ENGAGED IN THE BUSINESS OF PROMOTER AND BUILDER. IT FILE D ITS RETURN OF INCOME ON 21-03-2011 DECLARING TOTAL INCOME OF RS.11,06,420/-. DURING THE COURSE OF ASSESSMENT PROCEEDIN GS THE AO OBSERVED THAT ASSESSEE HAS NOT EFFECTED ANY SALES DURIN G THE YEAR. HOWEVER, IT HAS CREDITED OFFICE RENT AT RS.27,03,280/- AND P ROPERTY / DATE OF HEARING :22.09.2016 / DATE OF PRONOUNCEMENT:23.09.2016 2 ITA NO.1063/PN/2016 TAX HAS BEEN DEBITED IN THE PROFIT AND LOSS ACCOUNT AT RS.1,64,664/-. ON BEING QUESTIONED BY THE AO REGARDING THE RENTAL INCOM E DERIVED BY THE ASSESSEE IT WAS SUBMITTED THAT RENTAL INCOME HAS BE EN DERIVED BY THE ASSESSEE BY LETTING OUT A PROPERTY SIMPLICITOR IS CH ARGEABLE TO TAX UNDER THE HEAD INCOME FROM HOUSE PROPERTY ONLY AND NOT AS BUSINESS INCOME IRRESPECTIVE OF THE FACT THAT THE ASSES SEE IS DOING BUSINESS OF ACQUIRING, DEVELOPING AND SELLING OF PROPERTIES A S THE RENTAL INCOME RECEIVED BY THE ASSESSEE IS BECAUSE OF OWN ERSHIP OF THE PROPERTY AND NOT BY EXPLOITATION OF THE PROPERTY BY WAY OF COMPLEX COMMERCIAL ACTIVITY. VARIOUS DECISIONS WERE ALSO CITED BEFORE THE AO TO THIS PROPOSITION. 4. HOWEVER, THE AO WAS NOT SATISFIED WITH THE EXPLANATION GIVEN BY THE ASSESSEE. HE NOTED THAT THE ASSESSEE VIDE LETTER DATED 10-12-2012 HAS ADMITTED THAT IT HAS DEBITED THE EXPENS ES TO THE PROFIT AND LOSS ACCOUNT FOR MAINTENANCE OF UNSOLD STOCK AN D PROPERTY AND THE UNSOLD PROPERTY IS SHOWN AS STOCK IN TRADE. HE , THEREFORE, HELD THAT THE PROPERTY WOULD PARTAKE THE CHARACTER OF STOCK AND ANY INCOME THERE FROM CANNOT BE TAKEN AS INCOME FROM PROPER TY. DISTINGUISHING THE VARIOUS DECISIONS CITED BY THE ASSESSEE AND RELYING ON THE DECISION OF THE HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. NEHA BUILDERS REPORTED IN 296 ITR 661 WHERE IT HAS B EEN HELD THAT RENTAL INCOME DERIVED FROM PROPERTY HELD IN STOCK WA S TREATED AS BUSINESS INCOME THE AO DETERMINED THE INCOME FROM LETTIN G OUT OF THE PROPERTY AS BUSINESS INCOME. HE ALSO RELIED ON THE DECISION IN THE CASE OF CEPT VS. SHRI LAKSHMI SILK MILLS LTD. REPORTED IN (1951) 20 ITR 451. 3 ITA NO.1063/PN/2016 5. BEFORE CIT(A) THE ASSESSEE SUBMITTED THAT THE FIRM HAD DEVELOPED A COMMERCIAL PROPERTY BY THE NAME CITY JEWEL B UILDING WHICH CONSISTED OF GROUND FLOOR AND 3 UPPER FLOORS AND 2 P ARKING FLOORS ON THE 4 TH FLOOR AND THE TERRACE AS PER THE PMC REQUIREMENT. THE ASSESSEE HAD LEASED OUT PART OF THE SAID PREMISES AND EARNED RENTAL INCOME THEREFROM BY VIRTUE OF A LEASE AGREEMENT W ITH VISHAL RETAIL LTD. ACCORDINGLY, IT HAD OFFERED RENTAL INCOME FROM HO USE PROPERTY AMOUNTING TO RS.27,03,380/-. IT WAS SUBMITTED THAT THE EXPENSES CLAIMED IN THE PROFIT AND LOSS ACCOUNT ARE TOWAR DS MAINTENANCE OF THE PROPERTY WHICH IS UNSOLD AND OFFICE RENT AS THE ASSESSEE HAD SHIFTED ITS OFFICE TO RANGANATH BUNGALOW. IT WAS FURTHER SUBMITTED THAT IT HAS PAID OFFICE RENT FOR RS.8000/- PER MO NTH WHICH WAS CLAIMED AS EXPENSES. 6. IT WAS FURTHER SUBMITTED THAT THE OFFICE ON THE UPPE R FLOOR WHICH WAS UNSOLD APPEARING AS STOCK IN TRADE WHEREAS THE SH OPS LEASED OUT TO VISHAL RETAIL LTD. ARE APPEARING UNDER THE HEAD INVEST MENT IN THE BALANCE SHEET EVERY YEAR. RELYING ON VARIOUS DECISIONS T HE ASSESSEE SUBMITTED THAT THE RENTAL INCOME SHOULD BE CONSIDERED AS INCOME FROM HOUSE PROPERTY. 7. HOWEVER, THE CIT(A) ALSO WAS NOT SATISFIED WITH THE EXPLA NATION GIVEN BY THE ASSESSEE AND UPHELD THE ACTION OF THE AO. WHILE DOING SO, SHE NOTED THAT THE ASSESSEE IS ENGAGED IN THE CONS TRUCTION BUSINESS AS A BUILDER AND DEVELOPER. THE PROPERTY IN QUE STION IS AN OFFICE PREMISES WHICH WAS HELD BY THE ASSESSEE AS STOCK I N TRADE IN THE STOCK PORTFOLIO OF BUSINESS. THE ASSESSEE HAD NEVE R TREATED THE SAID PROPERTY IN THE PORTFOLIO OF INVESTMENT AND NEVER LE T OUT THIS PROPERTY OR ANY OTHER PROPERTY OWNED BY THE ASSESSE E FOR EARNING OR CLAIMING RENTAL INCOME. SHE ALSO ANALYSED THE LEAVE AND LIC ENSE 4 ITA NO.1063/PN/2016 AGREEMENT DATED 06-02-2009 BETWEEN THE ASSESSEE AND VISHAL RETAIL LTD AND NOTED THAT CLAUSE 4.2 CLEARLY STATES THE NATUR E OF THE PROPERTY AS A COMMERCIAL BUILDING CONSTRUCTED AS ONE BY THE LICENS OR AND WAS LET OUT TO THE LICENSEE UNDER LEAVE AND LICENSE AGREEMEN T AS A COMMERCIAL BUILDING. THERE IS NO IOTA OF ANY INVESTMENT IN THE HOUSE PROPERTY FOR THE PURPOSE OF EARNING RENTAL INCOME WITHIN T HE PROVISIONS OF SECTION 22 TO 24 OF THE I.T. ACT. ON THE OT HER HAND THE VERY NATURE OF BUSINESS ACTIVITIES CARRIED OUT BY THE ASS ESSEE HOLDING OF COMMERCIAL PROPERTY AND LET IT OUT FOR COMMERCIAL PURPOSE EXPLICITLY ESTABLISHES THAT SUCH INCOME IS REQUIRED TO BE OFFERED BY THE ASSESSEE AS WELL AS TAXED BY THE DEPARTMENT UNDER THE HEAD INC OME FROM BUSINESS AND IN NO CASE THE SAME COULD BE TREATED AS INCOME FROM HOUSE PROPERTY. FOR THE ABOVE PROPOSITION SHE RELIED O N THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF CHENNAI PROPERTIE S AND INVESTMENT LTD. REPORTED IN TS-238-SC-2015 AND THE D ECISION IN THE CASE OF KARANPURA DEVELOPMENT COMPANY LTD. VS. CIT REPOR TED IN 44 ITR 362. 8. AS REGARDS THE SUBMISSION OF THE ASSESSEE THAT SHOPS LEASED OUT TO VISHAL RETAIL LTD. ARE SHOWN IN ACCOUNTS UNDER THE HEA D INVESTMENT IS CONCERNED SHE NOTED THAT THE VERY OBJ ECT OF THE ASSESSEE IS NOT THE CONSTRUCTION OF THE PROPERTY FOR HO LDING THE SAME AS INVESTMENT AND THEREAFTER EARNING RENTAL INCOME BY LETTING IT OUT. RELYING ON VARIOUS DECISIONS SHE HELD THAT SUCH RENTAL INC OME HAS TO BE ASSESSED AS INCOME FROM BUSINESS AND NOT AS INCOM E FROM HOUSE PROPERTY. 9. AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE ASSESSEE IS IN APPEA L BEFORE US. 5 ITA NO.1063/PN/2016 10. THE LD. COUNSEL FOR THE ASSESSEE REFERRING TO THE B ALANCE SHEET FOR THE YEAR ENDING 31-03-2008, A COPY OF WHICH IS PLACED AT PAGE 21 OF THE PAPER BOOK SUBMITTED THAT THE ASSESSEE UNDER T HE HEAD INVESTMENTS HAS SHOWN SHOPS AT RS.43,07,975/- AND CLOS ING STOCK UNDER THE HEAD CURRENT ASSETS AT RS.77,17,200/-. REFE RRING TO THE BALANCE SHEET FOR THE YEAR ENDING 31-03-2009 A COPY OF WHICH IS PLACED AT PAGE 16 OF THE PAPER BOOK HE SUBMITTED THAT SHOPS AT RS.43,07,975/- HAS BEEN DECLARED UNDER THE HEAD INVESTM ENT WHEREAS CLOSING STOCK UNDER THE HEAD CURRENT ASSETS HAS BEEN SHOWN AT RS.92,22,084/-. REFERRING TO THE COPY OF THE BALANCE S HEET FOR THE YEAR ENDING 31-03-2010, COPY OF WHICH IS PLACED AT PAGE 1 0 OF THE PAPER BOOK HE SUBMITTED THAT UNDER THE HEAD INVESTME NTS SHOPS HAVE BEEN SHOWN AT RS.43,07,975/- AND CLOSING STOCK HAS BEEN SHOWN UNDER THE HEAD CURRENT ASSETS AT RS.92,22,084/ -. HE SUBMITTED THAT THE ASSESSEE IS CONSISTENTLY SHOWING THE SHOPS UNDER THE HEAD INVESTMENT ON WHICH IT HAS RECEIVED RENTAL INCOME. 11. REFERRING TO THE SUBMISSION GIVEN TO THE CIT(A) DATED 27-02-2016, A COPY OF WHICH IS PLACED AT PAGES 1 TO 4 OF THE PAPER BOOK THE LD. COUNSEL FOR THE ASSESSEE DREW THE ATTENTIO N OF THE BENCH TO PARA 2.3 AT PAGE 2 OF THE SAID LETTER AND DREW THE A TTENTION OF THE BENCH TO THE FOLLOWING SUBMISSION BEFORE THE CIT(A): 2.3 THE ASSESSING OFFICER HAS FAILED TO REALIZE THAT TH E SHOPS LEASED OUT TO VISHAL RETAIL LTD. ARE APPEARING UNDER THE HEAD I NVESTMENT IN THE BALANCE SHEET EVERY YEAR AND SOME OF THE OFFICES ABOVE THE SHOPS LEASED TO VISHAL RETAIL LTD. ARE APPEARING AS STOCK IN TRADE. WE ARE ENCLOSING HEREWITH COPY OF OUR TRADING, PROFIT & LOSS ACCOUNT A ND BALANCE SHEET, WHEREIN WE HAVE DULY HIGHLIGHTED THE SHOPS APPEARING UNDER THE HEAD INVESTMENT 12. REFERRING TO THE COPY OF THE LEAVE AND LICENSE AGREEM ENT WITH VISHAL RETAIL LTD., COPY OF WHICH IS PLACED AT PAGES 22 TO 3 7 OF THE 6 ITA NO.1063/PN/2016 PAPER BOOK HE DREW THE ATTENTION OF THE BENCH TO CLAUSE 4.2 WHICH THE LD.CIT(A) HAS RELIED UPON AND SUBMITTED THAT THIS IS THE ST ANDARD CLAUSE IN ALL AGREEMENTS AND THEREFORE THIS CANNOT BE HEL D AGAINST THE ASSESSEE. HE SUBMITTED THAT EVEN AFTER COMPLETING THE ASSESSMENT FOR THIS YEAR U/S.143(3) TREATING THE RENTAL INCOME AS INCOME FROM BUSINESS AS AGAINST INCOME FORM HOUSE PROPERTY SHOWN BY THE ASSESSEE, THE AO HAS COMPLETED THE ASSESSMENT FOR SUBS EQUENT YEAR U/S.143(3) AND NO ACTION U/S.147/148 HAS BEEN INITIATED. 13. REFERRING TO THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. ANSAL HOUSING FINANCE AND LEASING COMPANY LTD. AND OTHERS REPORTED IN 354 ITR 180 HE SUBMITTED THAT THE ASSESSEE IN THAT CASE WAS ENGAGED IN THE BUSINESS OF DEVELOPMENT OF MINI TO WNSHIPS, CONSTRUCTION OF HOUSE PROPERTY, COMMERCIAL AND SHOP COMPLEX ETC. I N THE ASSESSMENT PROCEEDINGS THE AO ASSESSED THE ANNUA L LETTING VALUE OF THE PROPERTIES OF THE FLATS WHICH THE ASSESSEE HAD C ONSTRUCTED BUT WERE LYING UNSOLD NOW AS INCOME FROM HOUSE PROPERTY. TH E AO DID NOT ACCEPT THE CONTENTION OF THE ASSESSEE THAT THE FLAT S WERE ITS STOCK IN TRADE AND THEREFORE THE ANNUAL LETTING VALUE OF THE FLATS COULD NOT BE BROUGHT TO TAX UNDER THE HEAD INCOME FROM HOUSE P ROPERTY. THE CIT(A) SET ASIDE THE ADDITION MADE BY THE AO WHICH WAS CO NFIRMED BY THE TRIBUNAL. ON APPEAL FILED BY THE REVENUE THE HONBLE H IGH COURT HELD THAT THE INTENTION OF THE ASSESSEE WAS TO HOLD THE PROPERTIES TILL THEY WERE SOLD. THE CAPACITY OF BEING AN OWNER WAS NOT DIMINISHED BECAUSE THE ASSESSEE CARRIED ON THE BUSINESS OF DEVELOP ING, BUILDING AND SELLING FLATS IN HOUSING ESTATES. THE HONBLE COURT HELD THAT THE ASSESSEE WAS LIABLE TO PAY TAX ON THE ANNUAL LETTING VALU E ON THE UNSOLD FLATS OWNED BY IT UNDER THE HEAD INCOME FROM HOUSE PROPERTY . 7 ITA NO.1063/PN/2016 14. SO FAR AS THE DECISION OF HONBLE SUPREME COURT IN TH E CASE OF CHENNAI PROPERTIES LTD. (SUPRA) IS CONCERNED, HE SUBMITTED THAT THE MAIN OBJECTS OF THE ASSESSEE COMPANY AS STATED IN THE MEMORANDUM OF ASSOCIATION WAS TO ACQUIRE THE PROPERTIES IN THE CITY O F MADRAS AND TO LET OUT THOSE PROPERTIES. THE ASSESSEE HAD RENTED OUT SUCH PROPERTIES AND THE RENTAL INCOME RECEIVED THEREFROM WAS SHOWN AS INCOME FROM BUSINESS IN THE RETURN FILED BY THE ASSESS EE. THE AO REFUSED TO TAX THE SAME AS BUSINESS INCOME ON THE GR OUND THAT SINCE THE INCOME WAS RECEIVED FROM LET OUT OF THE PROPERTIES, IT WAS THE NATURE OF RENTAL INCOME. HE ACCORDINGLY TREATED THE SAM E AS INCOME FROM HOUSE PROPERTY. THE CIT(A) ALLOWED THE APPEAL FILED B Y THE ASSESSEE HOLDING THE SAME TO BE BUSINESS INCOME. THE TRIBUNAL DISMISSED THE APPEAL FILED BY THE REVENUE. THE HONBLE HIGH COURT ALLOWED THE APPEAL FILED BY THE REVENUE VIDE ORDER DATED 0 5-09-2002 HOLDING THAT THE INCOME DERIVED BY LETTING OUT OF THE PRO PERTIES WOULD NOT BE INCOME FROM BUSINESS BUT COULD BE ASSESSED ONL Y AS INCOME FROM HOUSE PROPERTY. ON FURTHER APPEAL BY THE ASSESS EE, THE HONBLE SUPREME COURT SET ASIDE THE ORDER OF THE HIGH COURT A ND RESTORED THE ORDER OF THE TRIBUNAL CONCLUDING THAT THE INCOME HAD TO B E TREATED AS INCOME FROM BUSINESS AND NOT AS INCOME FROM HOUSE PRO PERTY. HE ACCORDINGLY SUBMITTED THAT SINCE THE MAIN OBJECTION AS P ER THE MEMORANDUM OF ASSOCIATION OF THE COMPANY WAS TO ACQUIRE THE PROPERTIES AND TO LET OUT THOSE PROPERTIES, THEREFORE, IT CONSTITUTED BUSINESS INCOME. HOWEVER, THE FACTS OF THE PRESENT CASE A RE DISTINGUISHABLE AND NOT APPLICATION TO THE FACTS OF M/S. CHEN NAI PROPERTIES (SUPRA). VARIOUS OTHER DECISIONS RELIED ON BY T HE CIT(A) ARE ALSO NOT APPLICABLE TO THE FACTS OF THE PRESENT CASE AN D ARE DISTINGUISHABLE. HE ACCORDINGLY SUBMITTED THAT THE ORDER O F THE CIT(A) BE SET ASIDE AND THE GROUND RAISED BY THE ASSESSEE SHOULD BE ALLOWE D. 8 ITA NO.1063/PN/2016 15. THE LD. DEPARTMENTAL REPRESENTATIVE ON THE OTHER H AND HEAVILY RELIED ON THE ORDER OF THE CIT(A). SHE SUBMITTED THAT THE LD.CIT(A) HAS GIVEN FINDING AS TO WHY AND HOW THE RENTAL INCOME REC EIVED BY THE ASSESSEE FROM LETTING OUT OF THE SHOPS SHOULD BE TREATE D AS INCOME FROM BUSINESS AND NOT AS INCOME FROM HOUSE PROPERTY. SHE ACCORDINGLY SUBMITTED THAT THE ORDER OF CIT(A) BE UPHELD AND THE GROUNDS RAISED BY THE ASSESSEE SHOULD BE DISMISSED. 16. I HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BOTH THE SIDES, PERUSED THE ORDERS OF THE AO AND CIT(A) AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. I HAVE ALSO CONSIDERED THE VARIOU S DECISIONS CITED BEFORE ME. THE ONLY DISPUTE IN THE INSTANT APPEAL IS REGARDING THE TREATMENT OF RENTAL INCOME. IT IS THE CONTENTION OF T HE ASSESSEE THAT SUCH INCOME HAS TO BE TREATED AS INCOME FROM HOU SE PROPERTY WHEREAS IT IS THE CASE OF THE REVENUE THAT IT SHOULD BE TREATED AS INCOME FROM BUSINESS. 17. FROM THE DETAILS FURNISHED BY THE ASSESSEE I FIND THE ASSESSEE IN THE INSTANT CASE IS ENGAGED IN THE BUSINESS OF REAL ES TATE AND HAD CONSTRUCTED A COMMERCIAL COMPLEX IN THE NAME OF CITY JEWE L BUILDING AT NARAYANPETH, PUNE. IT HAD SOLD MOST OF THE OFFICES AND SHOPS. THE GROUND FLOOR OF THE PREMISES HAD BEEN LEASED OUT TO VISHAL RETAIL LTD. ON WHICH THE ASSESSEE HAS EARNED RENTA L INCOME FOR THE YEAR UNDER CONSIDERATION. SUCH SHOPS WHICH WERE LET OUT TO VISHAL RETAIL LTD. HAS BEEN SHOWN UNDER THE HEAD INVESTM ENT IN THE BALANCE SHEET FOR THE YEAR ENDING 31-03-2008, 31-03-200 9 AND 31- 03-2010. THE UNSOLD PORTION OF THE COMMERCIAL BUILDING HAS BEEN SHOWN UNDER THE HEAD CLOSING STOCK YEAR AFTER YEAR. UNDER THIS SCENARIO, ONE HAS TO SEE AS TO THE TREATMENT OF SUCH R ENTAL INCOME AS 9 ITA NO.1063/PN/2016 INCOME FROM HOUSE PROPERTY OR BUSINESS INCOME. I FIND THE LD.CIT(A) WHILE DECIDING THE ISSUE AGAINST THE ASSESSEE AND UPHOLDING THE DECISION OF THE AO IN TREATING SUCH INCOME AS BUSINESS INCOME HAS RELIED ON THE DECISION OF HONBLE SUPREME COU RT IN THE CASE OF M/S. CHENNAI PROPERTIES (SUPRA). HOWEVER, ACCORD ING TO THE LD. COUNSEL FOR THE ASSESSEE, THE SAID DECISION IS NOT APPLICABLE TO THE FACTS OF THE PRESENT CASE AND IS DISTINGUISHABLE. 18. I FIND SOME FORCE IN THE ARGUMENT OF THE ASSESSEE. I FIND IN THAT CASE THE MAIN OBJECT OF THAT COMPANY AS STATED IN THE MEMORANDUM OF ASSOCIATION IS TO ACQUIRE THE PROPERTIES IN THE CITY OF MADRAS AND T O LET OUT THOSE PROPERTIES FOR WHICH THE ASSESSEE TREATED SUCH RENTAL INCOME AS BUSINESS INCOME. THE AO REFUSED TO ACCEPT T HE SAME AS BUSINESS INCOME AND TREATED THE NATURE OF RECEIPT FROM LET OUT OF THE PROPERTIES AS IN THE NATURE OF INCOME FROM HOUSE PROPER TY. THE CIT(A) ACCEPTED THE PLEA OF THE ASSESSEE TO TREAT THE S AME AS BUSINESS INCOME WHICH WAS UPHELD BY THE TRIBUNAL. ON FUR THER APPEAL BY THE REVENUE THE HONBLE MADRAS HIGH COURT RE VERSED THE DECISION OF THE TRIBUNAL AND UPHELD THE ACTION OF THE AO IN TREATING THE SAME AS INCOME FROM HOUSE PROPERTY. ON FURTHER A PPEAL BY THE ASSESSEE THE HONBLE APEX COURT HELD THAT THE OBJECTS OF THE ASSESSEE COMPANY ARE TO ACQUIRE AND HOLD THE PROPERTIES KNOWN A S CHENNAI HOUSE AND FIRAVIN ESTATE BOTH IN CHENNAI AND TO LET OUT THESE PROPERTIES AS WELL AS MAKE ADVANCES UPON THE SECURITY O F LANDS AND BUILDINGS OR OTHER PROPERTIES OR ANY INTEREST THEREIN. AC CORDINGLY, IT WAS HELD THAT SUCH INCOME HAS TO BE TREATED AS INCOME FROM BUSINESS. 10 ITA NO.1063/PN/2016 19. HOWEVER, IN THE INSTANT CASE, THE MAIN OBJECT OF THE A SSESSEE COMPANY IS NOT TO ACQUIRE PROPERTY AND TO LET OUT THOS E PROPERTIES. THE ASSESSEE IS A BUILDER AND DEVELOPER. IT HAD CONSIDER ED A PART OF ITS UNSOLD STOCK AS INVESTMENT AND THE RENTAL INCOME D ERIVED FROM SUCH INVESTMENT HAS BEEN DECLARED UNDER THE HEAD INCO ME FROM HOUSE PROPERTY. 20. I FIND IDENTICAL ISSUE HAD COME UP BEFORE THE HONBLE DE LHI HIGH COURT IN THE CASE OF ANSAL HOUSING FINANCE AND LEAS ING COMPANY LTD. IN THAT CASE, THE ASSESSEE COMPANY WAS ENGAGED IN THE BUSINESS OF DEVELOPMENT OF MINI TOWNSHIPS, CONSTRUCTION OF HOUSE PROPERTY, COMMERCIAL AND SHOP COMPLEXES ETC. THE AO ASSESSED THE ANNUAL LETTING VALUE OF THE FLATS WHICH THE ASSESSEE HAD CONSTRUCTED BUT WERE LYING UNSOLD UNDER THE HEAD INCO ME FROM HOUSE PROPERTY. THE ASSESSEE HOWEVER CONTENDED THA T THE SAID FLATS WERE ITS STOCK IN TRADE AND THEREFORE THE ANNUAL LETTING VALUE OF THE FLATS COULD NOT BE BROUGHT TO TAX UNDER THE HEAD INCOM E FROM HOUSE PROPERTY. HOWEVER, THE AO DID NOT ACCEPT THE STAND O F THE ASSESSEE AND ADDED THE ANNUAL LETTING VALUE OF UNSOLD FLATS TO THE T OTAL INCOME OF THE ASSESSEE. THE CIT(A) SET ASIDE THE ORDER OF THE AO. APPEAL FILED BY THE REVENUE WAS ALSO DISMISSED BY THE TRIBUNAL. ON FUR THER APPEAL FILED BY THE REVENUE THE HONBLE HIGH COURT RELYING ON VARIOUS DECISIONS INCLUDING THE DECISION IN THE CASE OF KARANPURA DEVELOPMENT COMPANY LTD. (SUPRA), SULTAN BROTHERS PVT. LTD. (SUPRA) HELD THAT SUCH INCOME HAS TO BE TREATED AS INCOME FROM HOUSE PROPERTY. THE HONBLE HIGH COURT IN THE SAID DECISION H AS HELD THAT ASSESSEE WAS LIABLE TO PAY TAX ON THE ANNUAL LETTING VALUE OF THE UNSOLD FLATS OWNED BY IT UNDER THE HEAD INCOME FROM HOUS E PROPERTY. 11 ITA NO.1063/PN/2016 21. SINCE IN THE INSTANT CASE THE ASSESSEE HAS SHOWN TH E SHOPS UNDER THE HEAD INVESTMENT AND HAS RECEIVED RENTAL INC OME FROM SUCH SHOPS WHICH WERE LET OUT, THEREFORE, SUCH INCOME IN M Y OPINION SHOULD BE HELD AS INCOME FROM HOUSE PROPERTY AND NOT AS BUSINESS INCOME. THE VARIOUS DECISIONS RELIED ON BY THE CIT(A) ARE DISTINGUISHABLE AND NOT APPLICABLE TO THE FACTS OF THE PRESE NT CASE. ACCORDINGLY, THE ORDER OF THE CIT(A) IS SET ASIDE AND THE GROUND RAISED BY THE ASSESSEE IS ALLOWED. 22. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 23-09-2016. SD/- ( R.K. PANDA ) ACCOUNTANT MEMBER PUNE ; DATED : 23 RD SEPTEMBER, 2016. '# $# / COPY OF THE ORDER FORWARDED TO : / BY ORDER , // $ % / TRUE COPY // // TRUE COPY // &' % * / SR. PRIVATE SECRETARY *, / ITAT, PUNE 1. / THE APPELLANT 2. / THE RESPONDENT 3. THE CIT (A) - I, KOLHAPUR 4. THE CIT- I, KOLHAPUR 5. $ %%* , * , SMC BENCH / DR, ITAT, SMC BENCH PUNE; 6. 2 / GUARD FILE.