Kolte Patil I-Ven Townships Pune Ltd, Pune V. Assistant Commissioner of Income-tax, Circle - 14, Pune

ITA 1238/PUN/2018

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 2215 (ITAT-PUNE)
• Duration Of Justice: 11 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-06-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 24-06-2019
• Assessment Year: 2014-2015
• Appeal Filed On: 19-07-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business income; Set aside
• Section: 143(3)

Judgement Text

] IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE BEFORE SHRI ANIL CHATURVEDI, AM AND SHRI PARTHA SARATHI CHAUDHURY, JM . / ITA NO.1238/PUN/2018 / ASSESSMENT YEAR : 2014-15 M/S. KOLTE PATIL I - VEN TOWNSHIPS, PUNE LIMITED, S.NO.74, MARUNJI, HINJEWADI, MARUNJI KASARSAI ROAD, HINJEWADI, PUNE 411 057. PAN : AABC15807K. . / APPELLANT V/S THE ASST. C OMMISSIONER OF INCOME - TAX, CIRCLE 14, PUNE. . / RESPONDENT ASSESSEE BY : SHRI NIKHIL PATHAK. REVENUE BY : SHRI RAJESH GAWALI. / ORDER PER ANIL CHATURVEDI, AM : 1. THIS APPEAL FILED BY THE ASSESSEE IS EMANATING OUT OF THE ORDER OF COMMISSIONER OF INCOME TAX (A) 7, PUNE DATED 22.05.2018 FOR THE ASSESSMENT YEAR 2014-15. 2. THE RELEVANT FACTS AS CULLED OUT FROM THE MATERIAL ON R ECORD ARE AS UNDER :- ASSESSEE IS A COMPANY STATED TO BE ENGAGED IN THE BUS INESS OF REAL ESTATE AND DEVELOPERS. ASSESSEE ELECTRONICALLY FILED ITS RETURN OF INCOME FOR A.Y. 2014-15 ON 26.11.2014 DECLARING TOTAL INCOME OF / DATE OF HEARING : 24.06.2019 / DATE OF PRONOUNCEMENT: 26.06.2019 2 ITA NO.1238/PUN/2018 RS.107,78,02,634/-. THE CASE WAS SELECTED FOR SCRUTINY AN D THEREAFTER ASSESSMENT WAS FRAMED U/S 143(3) R.W.S 144C OF THE ACT V IDE ORDER DT.22.12.2017 AND THE TOTAL INCOME WAS DETERMINED AT RS.107,94,27,110/-. AGGRIEVED BY THE ORDER OF AO, ASSESSE E CARRIED THE MATTER BEFORE LD.CIT(A), WHO VIDE ORDER DT.22.05.2018 (IN APPEAL NO.PN/CIT(A)-7/CIR-14/10259/2017-18) GRANTED PARTIAL RE LIEF TO THE ASSESSEE. AGGRIEVED BY THE ORDER OF LD.CIT(A), ASSESSEE IS NOW IN APPEAL BEFORE US AND HAS RAISED THE FOLLOWING GROUNDS : 1. THE LEARNED CIT(A) ERRED IN CONFIRMING THE ADDITION OF RS.16,24,476/- U/S 22 R.W.S. 23(4) ON ACCOUNT OF D EEMED RENT IN RESPECT OF UNSOLD UNIT HELD BY THE ASSESSEE AS STOC K IN TRADE IN RESPECT OF THE PROJECT DEVELOPED BY IT. 2. THE LEARNED CIT(A) FAILED TO APPRECIATE THAT THE ASSESSEE COMPANY HAD HELD THE SAID UNSOLD UNITS AS ITS STOCK IN TRAD E AND HENCE, SINCE THESE UNITS WERE OCCUPIED BY THE ASSESSEE FOR ITS B USINESS PURPOSES, THERE WAS NO REASON TO TAX THE ANNUAL VALUE OF SUCH UNSOLD UNITS U/S 22 OF THE ACT AS INCOME FROM HOUSE PROPERTY. 3. WITHOUT PREJUDICE TO THE ABOVE GROUNDS, THE ASSE SSEE SUBMITS THAT ASSUMING WITHOUT ADMITTING THAT THE INCOME OF SUCH UNSOLD UNITS WAS TAXABLE AS INCOME FROM HOUSE PROPERTY U/S 22, IT IS SUBMITTED THAT THE UNSOLD UNITS WERE VACANT FOR THE ENTIRE YEAR AND AC CORDINGLY, THE INCOME THEREON WAS TO BE CONSIDERED AT RS. NIL IN VIEW OF THE PROVISIONS OF SECTION 23(1)( C) AND HENCE, THE ENTIRE ADDITION MA DE BY THE LEARNED A.O. MAY KINDLY BE DELETED. 3. ALL THE GROUNDS BEING INTER-CONNECTED ARE CONSIDERED TOGETHER . 4. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, AO NOTIC ED THAT ASSESSEE HAD READY POSSESSION OF SIX UNSOLD FLATS/BUNGLO WS BUT HAD NOT OFFERED ANY DEEMED RENT / NOTIONAL RENT ON THOSE FLA TS/BUNGLOWS. ASSESSEE WAS ASKED TO SHOW AS TO WHY INCOME FROM THOS E UNSOLD FLATS/BUNGLOWS NOT BE CHARGED TO TAX. ASSESSEE INTER-A LIA SUBMITTED THAT THE FLATS /BUNGLOWS WERE STOCK-IN-TRADE AND NO INCO ME HAS BEEN EARNED FROM THOSE FLATS. THE SUBMISSION OF THE ASSESSEE WAS NOT FO UND 3 ITA NO.1238/PUN/2018 ACCEPTABLE TO THE AO. AO THEREAFTER ON THE BASIS OF TH E ANNUAL LETTING VALUE (ALV) WORKED OUT THE DEEMED RENT FROM THOS E SIX FLATS AT RS.16,24,476/- AND MADE ITS ADDITION. AGGRIEVED BY THE ORD ER OF AO, ASSESSEE CARRIED THE MATTER BEFORE LD.CIT(A), WHO FOLLOWING THE ORDER OF HONBLE DELHI HIGH COURT IN THE CASE OF ANSAL HOUSING F INANCE & LEASING CO., LTD., REPORTED IN 29 TAXMANN.COM 303 AND THE DECISION OF HONBLE PUNJAB AND HARYANA HIGH COURT IN THE CASE OF SU SHAM SINGLA VS. CIT REPORTED IN 244 TAXMAN 302, UPHELD THE ORDER OF AO. AGGRIEVED BY THE ORDER OF LD.CIT(A), ASSESSEE IS NOW IN AP PEAL BEFORE US. 5. BEFORE US, LD.A.R. REITERATED THE SUBMISSIONS MADE BEFORE AO AND LD.CIT(A) AND FURTHER SUBMITTED THAT IDENTICAL ISSUE AR OSE IN THE CASE OF ITS SISTER CONCERN I.E., M/S. KOLTE PATIL DEVELOPERS LIMITED IN A.Y. 2012-13, WHEREIN THE CO-ORDINATE BENCH OF THE TRIBUN AL AFTER CONSIDERING THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF ANSAL HOUSING FINANCE & LEASING CO., LTD., (SUPRA) AND OTHER DECISION CITED IN THE ORDER HAS DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE. HE PLACED ON RECORD THE COPY OF THE AFORESAID ORDER AND PO INTED TO THE RELEVANT FINDINGS. HE FURTHER SUBMITTED THAT THE FACTS IN T HE PRESENT CASE AND THAT OF THE CASE FACTS OF ITS SISTER CONCERN AR E SIMILAR AND THEREFORE FOLLOWING THE DECISION IN THE CASE OF ITS SISTER CO NCERN I.E., M/S. KOLTE PATIL DEVELOPERS LIMITED, THE ISSUE BE DECIDED ACC ORDINGLY. LD. D.R. ON THE OTHER HAND, SUPPORTED THE ORDER OF AO AND LD.CIT(A). 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE ISSUE IN THE PRESENT GROUND IS WITH RESP ECT TO TAXABILITY 4 ITA NO.1238/PUN/2018 OF DEEMED RENT IN RESPECT OF SIX UNSOLD FLATS / BUNGLOWS HELD IN STOCK- IN-TRADE BY THE ASSESSEE U/S 23 OF THE I.T. ACT. WE FIN D THAT IDENTICAL ISSUE AROSE IN THE CASE OF ASSESSEES SISTER CONCERN I.E., M/S. KOLTE PATIL DEVELOPERS LIMITED (SUPRA) IN A.Y. 2012-13, WHEREIN THE ISSU E WAS DECIDED IN FAVOUR OF THE ASSESSEE BY THE CO-ORDINATE BEN CH OF THE TRIBUNAL BY OBSERVING AS UNDER : 10. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSE D THE MATERIAL ON RECORD. THE ISSUE IN THE PRESENT CASE IS WITH RE SPECT TO ADDITION UNDER THE HEAD INCOME FROM HOUSE PROPERTY ON THE 32 UNS OLD FLATS/SHOPS BY THE ASSESSEE. IT IS AN UNDISPUTED FACT THAT ASSESS EE IS IN THE BUSINESS OF CIVIL ENGINEERS, BUILDERS AND DEVELOPERS AND HAD IN THE CLOSING STOCK OF 32 UNSOLD FLATS. IT IS ALSO AN UNDISPUTED FAC T THAT THESE 32 FLATS WERE VACANT AND NO RENTAL INCOME WAS DERIVED BY THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION. WE FIND THAT HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. NEHA BUILDERS PVT. LTD., REP ORTED IN [2007] 164 TAXMANN 342 HAS 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 WHI CH MAY INCLUDE MOVABLE AND IMMOVABLE PROPERTIES WOULD BE TAKEN TO B E STOCK-IN-TRADE AND ANY INCOME DERIVED FROM SUCH STOCKS CANNOT BE TERMED AS INCOME FROM HOUSE PROPERTY. WE FURTHER FIND THAT THE CO- ORDINATE BENCH OF THE MUMBAI TRIBUNAL IN THE CASE OF C.R. DEVELOPMENTS PV T. LTD., VS. CIT IN ITA NO.4277/2012 ORDER DT.13.05.2015, AFTER CONSIDE RING THE DECISION OF HONBLE APEX COURT IN THE CASE OF CHENNAI PROPERTIE S AND INVESTMENT VS. CIT (2015) 373 ITR 673 (SC) HAS HELD THAT ON T HE FLATS WHICH WERE UNSOLD, WHICH WERE NEITHER GIVEN ON RENT NOR THE AS SESSEE HAD INTENTION TO LET OUT THE FLATS, NO DEEMED RENTAL INCOME COULD BE CONSIDERED IN ASSESSEES HANDS. WE FURTHER FIND THAT THE CO-ORDI NATE BENCH OF PUNE TRIBUNAL IN THE CASE OF M/S. COSMOPOLIS CONSTRUCTIO N (IN ITA NOS.230 AND 231/PUN/2018 DT.12.09.2018) AFTER CONSIDERING T HE DECISION OF HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. N EHA BUILDERS (P) LTD., (SUPRA), THE DECISION OF MUMBAI TRIBUNAL IN THE CAS E OF C.R. DEVELOPMENTS PVT. LTD., (SUPRA) AFTER ALSO CONSIDER ING THE DECISION IN THE CASE OF CIT VS. ANSAL HOUSING AND CONSTRUCTION REPO RTED IN [2013] 29 TAXMANN.COM 303 HAS HELD THAT NO NOTIONAL ANNUAL RE NTAL VALUE ON UNSOLD FLATS HELD IN STOCK-IN-TRADE CAN BE MADE IN ASSESSEES HANDS. THE RELEVANT FINDINGS OF THE CO-ORDINATE BENCH OF T HE TRIBUNAL IS AS UNDER : 7. THE ISSUE BEFORE US FOR ADJUDICATION IS WHETHER THE NOTIONAL ANNUAL RENTAL VALUE ON UNSOLD FLATS HELD AS STOCK-I N-TRADE BY THE ASSESSEE IS TO BE ASSESSED UNDER THE HEAD BUSINESS INCOME OR UNDER THE HEAD INCOME FROM HOUSE PROPERTY . THE HON BLE GUJARAT HIGH COURT IN THE CASE OF COMMISSIONER OF I NCOME TAX VS. NEHA BUILDERS (P.) LTD. (SUPRA) HAS HELD THAT WHERE THE PROPERTY IS HELD AS STOCK-IN-TRADE ANY INCOME DERIVED ROM STOCK WOULD BE INCOME FROM BUSINESS AND NOT INCOME FROM HOUSE PROPERTY . THE RELEVANT EXTRACT OF THE FINDINGS OF HON BLE HIGH COURT ARE AS UNDER : 5 ITA NO.1238/PUN/2018 7. FROM THE ORDER PASSED BY THE LEARNED CIT(A), IT WOULD CLEARLY APPEAR THAT THE CASE OF THE ASSESSEE WAS TH AT THE COMPANY WAS INCORPORATED WITH THE MAIN OBJECT OF PURCHASE, TAKE ON LEASE, OR ACQUIRE BY SALE, OR LET OUT THE BUILDINGS CONSTRUCTED BY THE ASSESSEE. DEVELOPMENT OF LAND OR PROPERTY WOULD ALSO BE ONE OF THE BUSINESSE S FOR WHICH THE COMPANY WAS INCORPORATED. 8. TRUE IT IS, THAT INCOME DERIVED FROM THE PROPERT Y WOULD ALWAYS BE TERMED AS 'INCOME FROM THE PROPERTY, BUT IF THE PROPERTY IS USED AS 'STOCK-IN-TRADE, THEN THE SAID PROPERTY WO ULD BECOME OR PARTAKE THE CHARACTER OF THE STOCK, AND ANY INCOME DERIVED FROM THE STOCK, WOULD BE 'INCOME FROM THE BUSINESS, AND NOT INCOME FROM THE PROPERTY. IF THE BUSINESS OF THE ASSESSEE IS TO CONSTRUCT THE PROPERTY AND SELL IT OR TO CONSTRUCT AND LET OU T THE SAME, THEN THAT WOULD BE THE 'BUSINESS AND THE BUSINESS STOCK S, WHICH MAY INCLUDE MOVABLE AND IMMOVABLE, WOULD BE TAKEN TO BE 'STOCK-IN- TRADE, AND ANY INCOME DERIVED FROM SUCH STOCKS CAN NOT BE TERMED AS 'INCOME FROM PROPERTY. EVEN OTHERWISE, I T IS TO BE SEEN THAT THERE WAS DISTINCTION BETWEEN THE 'INCOME FROM BUSINESS AND 'INCOME FROM PROPERTY ON ONE SIDE, AND 'ANY IN COME FROM OTHER SOURCES. THE TRIBUNAL, IN OUR CONSIDERED OPI NION, WAS ABSOLUTELY UNJUSTIFIED IN COMPARING THE RENTAL INCO ME WITH THE DIVIDEND INCOME ON THE SHARES OR INTEREST INCOME ON THE DEPOSITS. EVEN OTHERWISE, THIS QUESTION WAS NOT RAISED BEFORE THE SUBORDINATE TRIBUNALS AND, ALL OF SUDDEN, THE TRIBU NAL STARTED APPLYING THE ANALOGY. 9. FROM THE STATEMENT OF THE ASSESSEE, IT WOULD CLE ARLY APPEAR THAT IT WAS TREATING THE PROPERTY AS 'STOCK-IN-TRAD E. NOT ONLY THIS, IT WILL ALSO BE CLEAR FROM THE RECORDS THAT, EXCEPT FOR THE GROUND FLOOR, WHICH HAS BEEN LET OUT BY THE ASSESSEE, ALL OTHER PORTIONS OF THE PROPERTY CONSTRUCTED HAVE BEEN SOLD OUT. IF THA T BE SO, THE PROPERTY, RIGHT FROM THE BEGINNING WAS A 'STOCK-IN TRADE. 8. IN THE CASE OF COMMISSIONER OF INCOME TAX VS. AN SAL HOUSING FINANCE AND LEASING CO. LTD. (SUPRA) THE HONBLE DE LHI HIGH COURT TAKING A CONTRARY VIEW HAS HELD THAT ANNUAL R ENTAL VALUE ON UNSOLD FLATS BUILT BY ASSESSEE ENGAGED IN CONSTRUCT ION BUSINESS IS ASSESSABLE AS INCOME FROM HOUSE PROPERTY. IT IS A WELL SETTLED LAW THAT WHEN TWO DIVERGENT VIEWS OF NON-JURISDICTI ONAL HIGH COURTS ARE AVAILABLE AND THERE IS NO DECISION ON TH E ISSUE FROM THE JURISDICTIONAL HIGH COURT, THE VIEW IN FAVOUR O F THE ASSESSEE HAS TO BE ADOPTED [COMMISSIONER OF INCOME TAX VS. V EGETABLE PRODUCTS LTD.(SUPRA)]. 9. IN SO FAR AS THE DECISION OF HON BLE BOMBAY HIGH COURT IN THE CASE OF COMMISSIONER OF INCOME TAX VS. SANE & DOSHI ENTERPRISES (SUPRA) IS CONCERNED WE FIND THAT THE F ACTS IN THE SAID CASE ARE AT VARIANCE. IN THE SAID CASE THE ASSESSEE WAS ENGAGED IN CONSTRUCTION BUSINESS. THE ASSESSEE RENTED OUT U NSOLD FLATS AND SUO-MOTU OFFERED RENTAL INCOME FROM THE FLATS U NDER THE HEAD INCOME FROM HOUSE PROPERTY . ON THE CONTRARY THE REVENUE WANTED TO TAX RENTAL INCOME UNDER THE HEAD BUSINES S INCOME . THE MATTER TRAVELLED TO THE TRIBUNAL. THE TRIBUNAL HELD THAT THE INCOME EARNED BY THE ASSESSEE FROM RENTING OF FLATS IS TO BE ASSESSED UNDER THE HEAD INCOME FROM HOUSE PROPERTY . THE DEPARTMENT CARRIED THE MATTER IN APPEAL BEFORE THE HONBLE HIGH 6 ITA NO.1238/PUN/2018 COURT. THE HONBLE HIGH COURT CONFIRMED THE FINDING S OF TRIBUNAL AND HELD THAT RENTAL INCOME RECEIVED FROM UNSOLD PO RTION OF PROPERTY CONSTRUCTED BY THE ASSESSEE, IS ASSESSABLE AS INCOME FROM HOUSE PROPERTY. THE CORE DIFFERENCE BETWEEN TH E CASE OF THE ASSESSEE AND IN THE CASE OF COMMISSIONER OF INCOME TAX VS. SANE & DOSHI ENTERPRISES (SUPRA) IS THAT IN THE CAS E OF ASSESSEE, IT IS NOTIONAL ANNUAL RENTAL INCOME ON FLATS HELD A S STOCK WHICH IS SOUGHT TO BE TAXED, WHEREAS IN THE CASE OF COMMISSI ONER OF INCOME TAX VS. SANE & DOSHI ENTERPRISES (SUPRA) IT WAS THE CASE OF ACTUAL RENTAL INCOME EARNED BY THE ASSESSEE FROM RENTING OF FLATS CONSTRUCTED BY IT. HENCE, THE DECISION RENDER ED IN THE CASE OF COMMISSIONER OF INCOME TAX VS. SANE & DOSHI ENTERPRI SES (SUPRA) WOULD NOT APPLY IN THE FACTS OF THE PRESENT CASE. 10. WE FURTHER FIND THAT MUMBAI BENCH OF THE TRIBUN AL IN M/S. C.R. DEVELOPMENTS PVT. LTD. VS. JCIT (SUPRA), M/S. RUNWAL CONSTRUCTIONS VS. ACIT (SUPRA) AND SHRI GIRDHARILAL K. LULLA VS. DCIT (SUPRA) UNDER SIMILAR SET OF FACTS HAVE TAKEN A CONSISTENT VIEW IN HOLDING NOTIONAL ANNUAL RENTAL VALUE ON UNS OLD FLATS HELD AS STOCK-IN-TRADE BY THE ASSESSEE ENGAGED IN CONSTR UCTION AND DEVELOPMENT ACTIVITIES AS BUSINESS INCOME . 11. BEFORE US, NO DISTINGUISHING FEATURE IN THE FAC TS OF THE PRESENT CASE AND THE CASE DECIDED BY PUNE ITAT NOTED HEREIN ABOVE HAS BEEN POINTED OUT BY REVENUE. IN VIEW OF THE AFORESAID F ACTS, WE FOLLOWING THE DECISION OF CO-ORDINATE BENCH OF THE PUNE TRIBUNAL IN THE CASE OF M/S. COSMOPOLIS CONSTRUCTION VS. ITO (SUPRA) HOLD THAT I N THE PRESENT CASE, NO ADDITION ON ACCOUNT OF DEEMED RENT OF 32 UNSOLD FLATS CAN BE MADE IN HANDS OF THE ASSESSEE. WE THEREFORE SET ASIDE THE ADDITION MADE BY AO. THUS, THE GROUND OF THE ASSESSEE IS ALLOWED. 7. BEFORE US, NO DISTINGUISHING FEATURE IN THE FACTS OF THE P RESENT CASE AND THAT OF ASSESSEES SISTER CONCERN I.E., M/S. KO LTE PATIL DEVELOPERS LIMITED (SUPRA) FOR A.Y. 2012-13 HAS BEEN POINTE D OUT BY REVENUE. FURTHER REVENUE HAS ALSO NOT PLACED ANY MATER IAL TO DEMONSTRATE THAT THE ORDER OF TRIBUNAL IN THE ASSESSEE S SISTER CONCERN FOR A.Y. 2012-13 HAS BEEN SET ASIDE / STAYED OR OVERRU LED BY HIGHER JUDICIAL FORUM. IN VIEW OF THE AFORESAID FACTS, WE FOLLOWING THE ORDER OF THE CO-ORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF ASS ESSEES SISTER CONCERN I.E., M/S. KOLTE PATIL DEVELOPERS LIMITED FOR A.Y. 2012-1 3 AND FOR SIMILAR REASONS HOLD THAT IN THE PRESENT CASE, NO ADD ITION ON ACCOUNT OF DEEMED RENT OF 6 UNSOLD FLATS/BUNGLOWS CAN BE MADE IN THE 7 ITA NO.1238/PUN/2018 HANDS OF ASSESSEE. WE THEREFORE SET ASIDE THE ADDITION M ADE BY THE AO. THUS, THE GROUNDS OF ASSESSEE ARE ALLOWED. 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWE D. ORDER PRONOUNCED ON THE 26 TH DAY OF JUNE, 2019. SD/- SD/- ( PARTHA SARATHI CHAUDHURY ) ( ANIL CHATURVEDI ) ! / JUDICIAL MEMBER '! / ACCOUNTANT MEMBER PUNE; DATED : 26 TH JUNE, 2019. YAMINI #$%&'('% / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. 4. 5 6. CIT(A)-7, PUNE. PR. CIT-6, PUNE. '#$ %%&',) &', / DR, ITAT, A PUNE; $,-./ GUARD FILE. / BY ORDER // TRUE COPY // /01%2&3 / SR. PRIVATE SECRETARY ) &' , / ITAT, PUNE.