M/s. Servashanti Properties Pvt. Ltd., Ahmedabad V. The Income Tax Officer, Ward-4(1)(1), Ahmedabad

ITA 1278/AHD/2017

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 4336 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 9 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-03-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2013-2014
• Appeal Filed On: 26-05-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SONIA KUMAR
• Assessee Lawyers: P B PARMAR ARS
• Keywords: Business income
• Section: 201; 143(2); 192

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD B BENCH BEFORE: SHRI AMARJIT SINGH , ACCOUNTANT MEMBER AND MS. MADHUMITA ROY , JUDICIAL MEMBER M/S. SERVSHANTI PROPERTIES PVT. LTD. 1 ST FLOOR, SANIDHYA, OPP SANYAS ASHRAM, ASHRAM ROAD, AHMEDABAD PAN: AAICS1693J (APPELLANT) VS THE IT O , WARD - 4( 1 )(1) , AHMEDABAD (RESPONDENT) REVENUE BY : S H RI /MS SONIA KUMAR , SR . D . R. ASSESSEE BY: SHRI TUSHAR HEMANI AND SHRI P.B. PARMAR, ARS DATE OF HEARING : 12 - 03 - 2 019 DATE OF PRONOUNCEMENT : 19 - 03 - 2 019 / ORDER P ER : AMARJIT SINGH, ACCOUNTANT MEMBER : - THE SOLITARY GROUND OF APPEAL OF THE ASSESSEE FILED AGAINST THE ORDER OF L D. CIT(A) - 8 , AHMEDABAD IN CONFIRMING THE AC TION OF THE ASSESSING OFFICER IN MAKING AN ADDITION OF RS. 46 , 84 , 2 ,06 / - AS INCOM E FROM HOUSE PROPERTY U/S. 23 OF THE ACT. THE OTHER GROUNDS OF APPEAL OF THE ASSESSEE IS ALSO CONNECTED TO THE ABOVE REFERRED ISSUE THAT ALTERNATIVELY A LV IS TO BE I T A NO . 1278 / A HD/20 17 A SS ESSMENT YEAR 2013 - 14 I.T.A NO. 1278 /AHD/20 17 A.Y. 2013 - 14 PAGE NO M/S. SERVASHANTI PROPERTIES PVT. LTD. VS. IT O 2 COMPUTED BY TAKING 6 % AS THE AVERAGE RATE OF INVESTMENT AS AGAINST 8% OF AVERAGE RATE OF I NVESTMENT ADOPTED BY THE ASSESSING OFFICER . 2. THE FACT IN BRIEF IS THAT ASSESSEE HAS FILED RETURN OF INCOME ON 29 TH SEP, 2013. SUBSEQUENTLY, THE CASE WAS SELECTED UNDER SCRUTINY BY ISSUING OF NOTICE U/S. 143(2) OF THE ACT ON 4 TH SEP, 2014. THE NATURE OF BUSINESS OF THE ASSESSE IS BUILDER AND DEVELOPER OF PROPERTY. DURING THE COURSE OF ASSESSMENT ON VERIFICATION OF THE DETAILS FILED, THE ASSESSING OFFICER NOTICED THAT ASSESSEE HAS SHO WN IN THE BALANCE SHEET UNSOLD FINISHED PROPERTY HAVING TOTAL SQUAR E F T . OF 174109 AND VALUE OF THIS P RO PERTY WAS SHOWN AT RS. 33 ,3 4 , 51 , 476/ - . THE ASSESSING OFFICER OBSERV ED THAT ASSESSEE HAS NOT DECLARED ANY INCOME FROM THE AFORESAID PROPERTY U/S. 23 OF THE ACT. THEREFORE , ASSESSEE WAS ASKED TO FURNISH THE WORKING OF A NNUAL LETTING VALUE (ALV) OF THE AFORESAID UNSOLD PROPERTY AND ALSO TO EXPLAIN WHY THE ALV OF THE UNSOLD PROPERTY SHOULD NOT BE TAXED U/S. 23 OF THE ACT. THE ASSESSEE HAS NOT AGREED FOR CHARGEABILITY OF DEEMED ALV ON THE AFORESAID UNSOLD PROPERTIES. HOWE VER , IT HAS FURNISHED THE WORKING OF ALV TAKING INTO CONSIDERATION THE DATE OF BU PERMISSION RECEIVED AND ALV @ 6% OF UNSOLD PROPERTY WHICH WORKED TO RS . 35 , 13 ,155/ - A FTER CLAIMING STANDARD DEDUCTION AT 30%, THE ASSESSING OFFICER HAS NOT ACCEPTED THE SUB MISSION OF THE ASSESSEE AND ADOPTED 8% OF THE COST OF CONSTRUCTION AS ALV WHICH WORKED TO RS. 66 , 91 , 723/ - AFTER ALLOWING STANDARD DEDUCTION OF 30% THEREFORE AN AMOUNT OF RS. 46 , 84 , 206/ - WAS ADDED TO THE TOTAL INCOME OF THE ASSESSEE AS INCOME FROM HOUSE PROPERTY. I.T.A NO. 1278 /AHD/20 17 A.Y. 2013 - 14 PAGE NO M/S. SERVASHANTI PROPERTIES PVT. LTD. VS. IT O 3 3. AGGRIEVED ASSESSE HAS FILED APPEAL BEFORE THE LD. CIT(A). THE LD. CIT(A) HAS DISMISSED THE APPEAL OF THE ASSESSEE AFTER PLACING RELIANCE O N THE DECISION OF HON BLE HIGH C OURT OF DELHI IN THE CASE OF CIT DELHI VS. ANSAL HOUSING AND CONSTRUCTION (2016) 27 2 TAXMAN.COM 254 ( DELHI) IN TAX APPEAL NO. 442 OF 2003 ORDER DAED 26 - 07 - 2016. D URING THE COURSE OF APPELLATE PROCEEDINGS BEFORE US, THE LD. C O UNSE L HAS SUBMITTED PAPER BOOK CONTAINING DETAIL OF SUBMISSION MADE BEFORE THE ASSESSING OFFICER AND BEFORE TH E LD. CIT(A) DURING THE COURSE OF ASSESSMENT AND APPELLATE PROCEEDINGS. THE LD. COUNSEL CONTENDED THAT INCOME EARNED BY THE ASSESSE HAS BEEN DECLARED UNDER THE HEAD INCOME FROM BUSINESS OR PROFESSION AND AS PER THE M EMORANDUM OF ASSOCIATION AND ARTICLE OF A SSOCIATION , THE MAIN OBJECT OF THE ASSES S EE IS TO CARRY ON THE BUSINESS AS PROMOTER AND DEVELOPER OF VARIOUS KINDS OF PROPERTIES . THE UNSOLD PROPERTIES ARE SHOWN AS CLOSING STOCK . HE HAS VEHEMENTLY CONTENDED THAT THE AFORESAID PROPERTY WAS HELD AS STOCK IN TRADE AND ANY INCOME DERIVED FROM STOCK SHALL BE TAXABLE AS BUSINESS INCOME . THE LD. COUNSEL HAS ALSO PLACED RELIANCE ON THE FOLLOWING JUDICIAL PRONOUNCEMENTS : - (I) CHENNAI PROPERTIES AND INVESTMENT LTD. VS. CIT 373 ITR 673 (SC) (II) CIT VS. NEHA BUIL DERS 296 ITR 661 (G UJ) (III) ACIT VS. HAWARE CONSTRUCTION PVT. LTD. (2019) 101 TAXMAN.COM 168 (MUMBAI TRIB) DATED 31 ST AUGUST, 2018. ON THE OTHER HAND, THE LD. COUNSEL HAS SUPPORTED THE ORDER OF LOWER AUTHORITIES. I.T.A NO. 1278 /AHD/20 17 A.Y. 2013 - 14 PAGE NO M/S. SERVASHANTI PROPERTIES PVT. LTD. VS. IT O 4 4. WE HAVE HEARD THE RIVAL CONTENTION S AND PERUSED THE MATERIAL ON RECOR D CAREFULLY. THE LD. CIT(A) HAS SUSTAINED THE ADDITION MADE BY THE ASSESSING OFFICER AFTER PLACING RELIANC E ON THE DECISION OF ANSAL HOUSING PROPERTIES WHEREIN THE HON BLE DELHI HIGH COURT HAS DECIDED THAT THE ASSESSEE E NGAGED IN BUSINESS OF CONSTRUCTION AND HOUSE PROPERTY WOULD BE LIABLE TO PAY OF ALV OF FLATS LAYING UNSOLD DURING THE YEAR AS INCOME FROM HOUSE PROPERTY. WE HAVE ALSO NOTICED THAT AN AMENDMENT HAS BEEN MADE BY THE FINANCE ACT IN SUB - SECTION ( 5 ) OF SECTION 23 OF THE ACT W.E.F. 01 - 04 - 2018. HOWEVER, THIS AMENDMENT IS NOT APPLICABLE FOR THE YEAR UNDER CONSIDERATION. W I TH THE ASSISTANCE OF LD. REPRESENTATIVES, WE HAVE GONE THROUGH THE DECISION OF HON BLE JURISDICTIONAL HIGH COURT IN THE CASE CIT VS. NEHA BUI LDER PVT. LTD. (2007) 164 TAXMAN 342 (GUJ) WHEREIN IT IS HELD THAT IF PROPERTY IS U S ED AS STOCK IN TRADE, THEN , SUCH PROPERTY WOULD BECOME OR PARTAKE CHARACTER OF STOCK AND ANY INCOME DERIVED FROM STOCK WOULD BE INCOME FROM BUSINESS AND NOT INCOME F R O M PRO PERTY. WE HAV E ALSO GONE THROUGH THE JUDGMENT OF ITAT MUMBAI IN THE CASE OF ACIT VS. HAWARE CONSTRUCTION PVT. LTD. (SUPRA) ON IDENTICAL ISSUE WHEREIN AS PER PARA 4.5 OF THE ORDER, IT IS HELD AS UNDER: - 4.5 HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED TH E RELEVANT MATERIALS ON RECORD. ON THE ABOVE ISSUE, WE COME ACROSS ONE DECISION FOR THE ASSESSEE AND ANOTHER DECISION FOR THE REVENUE. THE DECISION IN NEHA BUILDERS (P.) LTD. 'S CASE (SUPRA) IS FOR THE ASSESSEE, WHEREAS THE DECISION IN ANSAL HOUSING FINANC E & LEASING CO. LTD. 'S CASE (SUPRA) IS FOR THE REVENUE. THE HON'BLE SUPREME COURT IN THE CASE OF CIT V. VEGETABLE PRODUCTS LTD. [1973] 88 ITR 192 HAS HELD THAT 'IF TWO REASONABLE CONSTRUCTIONS OF A TAXING PROVISIONS ARE POSSIBLE, THAT CONSTRUCTION WHICH F AVOURS THE TAX PAYER MUST BE ADOPTED.' IN VIEW OF THE ABOVE POSITION OF LAW, WE SHALL FOLLOW THE DECISION IN NEHA BUILDERS (P.) LTD. 'S CASE (SUPRA). IN THE LIGHT OF THE ABOVE FACT S AND JUDICIAL FINDINGS OF THE HON BLE J URISDIC TIONAL HIGH C OURT IN THE CA SE OF NEHA BUILDER PVT. LTD. ( SU P R A) AND AFTER CONSIDERING THE DECISION OF ITAT MUMBAI BENCH AS CITED ABOVE, WE SET I.T.A NO. 1278 /AHD/20 17 A.Y. 2013 - 14 PAGE NO M/S. SERVASHANTI PROPERTIES PVT. LTD. VS. IT O 5 AS IDE THE ORDER OF THE LD. CIT(A) AND CONSIDER THAT IN THE CASE OF THE ASSESSEE ANY INCOME DERIVED WAS STOCK WOULD BE INCOME FROM BUSINESS A ND NOT INCOME FROM PROPERTY, THEREFORE, ALLOW THE APPEAL OF THE ASSESSEE. ACCORDINGLY THE APPEAL OF THE ASSESSEE IS ALLOWED. 5. IN THE RESULT, THE A PPEAL OF THE ASSESSE IS ALLOWED . ORDER PR ONOUNCED IN THE OPEN C OURT ON 19 - 03 - 201 9 SD/ - SD/ - ( MADHUMITA ROY ) ( AMARJIT SINGH ) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD : DATED 19 /03 /2019 / COPY OF ORDER FORWARDED TO: - 1. ASSESSEE 2. REVENUE 3. CONCERNED CIT 4. CIT (A) 5. DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER/ , / ,