GIRDHARILAL KALYANDAS LULLA, ULHASNAGAR V. DCIT CIR 2, KALYAN

ITA 1604/MUM/2016

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 8546 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 7 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-11-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2011-2012
• Appeal Filed On: 21-03-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: M C OMI NINGSHEN
• Assessee Lawyers: SURESH N OTWANI
• Keywords: Business income

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL 'H' BENCH, MUMBAI BEFORE SHRI P K BANSAL, VICE PRESIDENT AND SHRI AMARJIT SINGH, JUDICIAL MEMBER ITA NO.1604/MUM/2016 (ASSESSMENT YEAR: 2011-12) SHRI GIRDHARILAL K. LULLA VS. DCIT, CIRCLE - 2 C/O SHRI SURESH N, OTWANI, ADV 109-110, 1ST FLOOR, TILSON SHOPPING CENTRE, KALYAN- AMBARNATH ROAD, ULHASNAGAR 2ND FLOOR, MOHAN PLAZA WAYALE NAGAR, KHADAKPADA KALYAN (W) PAN AAJPL7607D APPELLANT RESPONDENT APPELLANT BY: SHRI SURESH N. OTWANI RESPONDENT BY: SHRI M.C. OMI NINGSHEN DATE OF HEARING: 13.11.2017 DATE OF PRONOUNCEMENT: 17.11.2017 O R D E R PER P.K. BANSAL, VICE PRESIDENT THIS APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER OF THE CIT(A)-3, MUMBAI DATED 03.11.2014 FOR A.Y. 2011-12. 2. THE ONLY ISSUE INVOLVED IN THE GROUND TAKEN BY THE ASSESSEE RELATES TO ESTIMATION OF INCOME IN THE CASE OF THE ASSESSEE FROM THE UNSOLD VACANT UNITS AS INCOME ON NOTIONAL BASIS. 3. WE NOTED THAT THE ASSESSEE IS ENGAGED IN THE BUSIN ESS OF CONSTRUCTION OF RESIDENTIAL-CUM-COMMERCIAL COMPLEX UNDER THE PRO PRIETARY CONCERN, M/S. SHRI GANESH BUILDERS. THE ASSESSEES BUILDING PROJE CT CONSISTS OF RESIDENTIAL AS WELL AS COMMERCIAL UNITS. THE SAID PROJECT IS SI TUATED AT PLOT NO, 2, 3 & 4, SECTOR-1, KHANDA COLONY, NEW PANVEL (W), DISTRICT T HANE. THE AO NOTED THAT DURING THE COURSE OF ASSESSMENT THAT THE ASSESSEE H AD CLOSING STOCK OF 13 FLATS AND 8 SHOPS AND ONE HALL. THE AO THEREFORE TO OK THE VIEW THAT THE ASSESSEE IS THE OWNER OF TWO OR MORE HOUSE PROPERTI ES AND ACCORDINGLY APPLIED THE PROVISIONS OF SECTION 23(4) AND ESTIMAT ED THE ANNUAL LETTING VALUE ITA NO. 1604/MUM/2016 SHRI GIRDHARILAL K. LULLA 2 OF THESE FLATS AT ` 16,80,000/- AND COMPUTED THE INCOME UNDER THE HEAD INCOME FROM HOUSE PROPERTY BY REDUCING THEREFROM DEDUCTION UNDER SECTION 24 OF THE INCOME TAX ACT @30% AMOUNTING TO ` 5,04,000/-) AT ` 10,17,450/- AND ADDED THE SAME IN THE INCOME OF THE ASSESSEE UNDER THE HEAD INCOME FROM HOUSE PROPERTY. ASSESSEE WENT IN A PPEAL BEFORE THE CIT(A). THE CIT(A) CONFIRMED THE ORDER OF THE AO. 4. BEFORE US THE LEARNED A.R. RELIED ON THE ORDER OF T HE C BENCH OF THIS TRIBUNAL IN ITA NO. 4277/MUM/2012 IN THE CASE OF C.R. DEVELOPMENTS PVT. LTD. VS. JCIT IN WHICH THE TRIBUN AL VIDE ORDER DATED 13.05.2015 UNDER PARA 5 TOOK THE VIEW THAT ESTIMATI NG RENTAL INCOME OF BY THE AO FOR THE THREE FLATS SHOWN AS STOCK IN TRADE AS INCOME FROM HOUSE PROPERTY WAS NOT JUSTIFIED IN SO FAR AS THESE FLATS WERE NEITHER GIVEN ON RENT NOR ASSESSEE HAS INTENTION TO EARN RENTAL INCOME BY LETTING OUT THE FLATS. THE FLATS NOT SOLD ARE STOCK IN TRADE AND INCOME AR ISING ON ITS SALE IS LIABLE TO BE TAXED AS BUSINESS INCOME. 5. ON THE CONTRARY THE LEARNED D.R. RELIED ON THE DECI SION OF THE HON'BLE DELHI HIGH COURT IN THE CASE OF ANSAL HOUSI NG FINANCE & LEASING CO. LTD. IN ITA NO. 18 OF 1999. 6. WE HAVE GONE THROUGH THE DECISION AS RELIED ON BY THE LEARNED D.R. WE NOTED THAT IN THE DECISION THE HON'BLE DELHI HIG H COURT, ALONG WITH OTHER QUESTIONS, CONSIDERED THE FOLLOWING QUESTION NO. 4; WHETHER THE ASSESSEE WAS LIABLE TO PAY INCOME TAX ON THE ANNUAL LETTING VALUE OF THE UNSOLD FLAT OWNED BY IT UNDER THE HEAD INCOME FROM HOUSE PROPERTY. THE HON'BLE DELHI HIGH COURT DEALING WITH SAME ISSUE DE CIDED THE QUESTION IN FAVOUR OF REVENUE. WE NOTED THAT THE DECISION OF TH E HON'BLE HIGH COURT HAS BEEN CONSIDERED BY THE C BENCH OF THIS TRIBUN AL IN ITA NO. 4277/ MUM/2012 IN THE CASE OF M/S. C.R. DEVELOPMENTS PVT. LTD. (SUPRA) AND ULTIMATELY DECIDED THE ISSUE IN FAVOUR OF THE ASSES SEE ON THE BASIS OF THE DECISION GIVEN BY THE HON'BLE SUPREME COURT IN THE CASE OF M/S. CHENNAI PROPERTIES & INVESTMENTS LTD. VS. CIT 42 SCD 651 BY HOLDING AS UNDER: - 5. WE HAVE CONSIDERED RIVAL CONTENTIONS AND PERUSE D THE RECORD. THE ISSUE UNDER CONSIDERATION HAS BEEN RESTORED BY THE CIT(A) TO THE FILE OF ITA NO. 1604/MUM/2016 SHRI GIRDHARILAL K. LULLA 3 AO TO COMPUTE THE ANNUAL VALUE. RECENTLY THE HONBL E SUPREME COURT IN THE CASE OF M/S CHENNAI PROPERTIES & INVESTMENTS LTD. VS. CIT, REPORTED IN (2015) 42 SCD 651, VIDE JUDGMENT DATED 9-4-2015 HAS HELD THAT WHERE ASSESSEE COMPANY ENGAGED IN THE ACTIVITY OF LETTING OUT PROPERTIES AND THE RENTAL INCOME RECEIVED WAS SHOWN AS BUSINESS INCOME, THE ACTION OF AO TREATING THE RENTAL INCOME AS INCOME FROM HOUSE PROPERTY IN PLACE OF INCOME FROM BUSINESS SHO WN BY THE ASSESSEE WAS HELD TO BE NOT JUSTIFIED. THE HONBLE SUPREME COURT HELD THAT SINCE THE ASSESSEE COMPANYS MAIN OBJECT, IS T O ACQUIRE AND HELD PROPERTIES AND TO LET OUT THESE PROPERTIES, THE INC OME EARNED BY LETTING OUT THESE PROPERTIES IS MAIN OBJECTIVE OF THE COMPA NY, THEREFORE, RENT RECEIVED FROM THE LETTING OUT OF THE PROPERTIES IS ASSESSABLE AS INCOME FROM BUSINESS. ON THE VERY SAME ANALOGY IN THE INST ANT CASE, ASSESSEE IS ENGAGED IN BUSINESS OF CONSTRUCTION AND DEVELOPM ENT, WHICH IS MAIN OBJECT OF THE ASSESSEE COMPANY. THE THREE FLATS WHI CH COULD NOT BE SOLD AT THE END OF THE YEAR WAS SHOWN AS STOCK-IN-TRADE. ESTIMATING RENTAL INCOME BY THE AO FOR THESE THREE FLATS AS INCOME FR OM HOUSE PROPERTY WAS NOT JUSTIFIED INSOFAR AS THESE FLATS WERE NEITH ER GIVEN ON RENT NOR THE ASSESSEE HAS INTENTION TO EARN RENT BY LETTING OUT THE FLATS. THE FLATS NOT SOLD WAS ITS STOCK-IN-TRADE AND INCOME ARISING ON ITS SALE IS LIABLE TO BE TAXED AS BUSINESS INCOME. ACCORDINGLY, WE DO NOT FIND ANY JUSTIFICATION IN THE ORDER OF AO FOR ESTIMATING REN TAL INCOME FROM THESE VACANT FLATS U/S.23 WHICH IS ASSESSEES STOCK IN TR ADE AS AT THE END OF THE YEAR. ACCORDINGLY, THE AO IS DIRECTED TO DELETE THE ADDITION MADE BY ESTIMATING LETTING VALUE OF THE FLATS U/S.23 OF THE I.T. ACT. SINCE THE TRIBUNAL HAS TAKEN A VIEW IN FAVOUR OF TH E ASSESSEE ON THE BASIS OF THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF CHENNAI PROPERTIES & INVESTMENTS LTD. (SUPRA) THEREFORE THE DECISION OF THE HON'BLE DELHI HIGH COURT, IN OUR VIEW, WILL NOT HELP THE RE VENUE. WE ACCORDINGLY SET ASIDE THE ORDER OF THE CIT(A) AND RESPECTFULLY FOLLOWING THE DECISION OF THE C BENCH IN ITA NO. 4277/MUM/2012 IN THE CASE OF C.R. DEVELOPMENTS PVT. LTD. SET ASIDE THE ORDER OF THE C IT(A) AND DELETE THE ADDITION MADE BY ESTIMATING THE LETTING OUT VALUE O F THE FLATS SHOWN BY THE ASSESSEE AS STOCK IN TRADE. 7. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 17 TH NOVEMBER, 2017. SD/ - SD/ - (AMARJIT SINGH) (P.K. BANSAL) JUDICIAL MEMBER VICE PRESIDENT MUMBAI, DATED: 17 TH NOVEMBER, 2017 ITA NO. 1604/MUM/2016 SHRI GIRDHARILAL K. LULLA 4 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) -3, THANE 4. THE CIT - III, THANE 5. THE DR, H BENCH, ITAT, MUMBAI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI N.P.