UNIQUE ESTATES DEVELOPMENT CO. LTD., MUMBAI V. DCIT, CENTRAL CIRCLE-4(1), MUMBAI

ITA 4598/MUM/2019

• Counselvise Citation: [2021] 108 COUNSELVISE.COM (IT) 8618 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 8 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-03-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: F
• Assessment Year: 2016-2017
• Appeal Filed On: 05-07-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business income; Deemed to accrue or arise in india; Revised return; Rule 8D; Set aside
• Section: 10; 143(3); 142(1); 14A; 143(1); 250; 143(2); 13; 22; 20

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL F BENCH, MUMBAI BEFORE SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER & SHRI PAVAN KUMAR GADALE, JUDICIAL MEMBER ITA NO. 4598/MUM/2019 ( ASSESSMENT YEARS: 2016-17 ) UNIQUE ESTATES DEVELOPMENT CO. LTD., CONSTRUCTION HOUSE-B, 2 ND FLOOR, 623, LINKING ROAD, KHAR (WEST), MUMBAI-400 052. / VS. DCIT, CC-4(1) ROOM NO. 1906, 19 TH FLOOR, AIR INDIA BLDG. NARIMAN POINT, MUMBAI 400 021. ./ ./ PAN/GIR NO. : AAACU0699N ( / APPELLANT ) .. ( / RESPONDENT ) / APPELLANT BY : SHRI SANJAY SHAH, AR / RESPONDENT BY : USHA GAIKWAD , CIT-DR / DATE OF HEARING 15/03/2021 !'# / DATE OF PRONOUNCEMENT 22/03/2021 / O R D E R PER SHRI PAVANKUMAR GADALE JM: THE ASSESSEE HAS FILED THE APPEAL AGAINST THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS)-52 (FOR SHORT THE CIT(A)), MUMBAI PASSE D U/SEC.143(3) AND 250 OF THE INCOME TAX ACT,1961 ITA NO 4598 MUM 2019-UNIQUE ESTATES DEVELOPMENT CO. LTD. - 2 - (FOR SHORT THE ACT). THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: 1(A). ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AS WELL AS IN LAW, LEARNED CIT(A) ERRED IN CONFIRMING THE DISALLOWANCE AMOUNTING TO RS.1,20,19,841/- CONSIDERING THE ANNUAL LETTING VALUE OF UNSOLD FLATS WHICH IS CLOSING STOCK OF .THE APPELLANT, TREATED AS 'INCOME FROM HOUSE PROPERTY'. 1(B). ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AS WELL AS IN LAW, LEARNED CIT(A) ERRED IN NOT FOLLOWING JURISDICTIONAL ITAT DECISIONS WHICH SQUARELY APPLY TO THE FACTS OF THE APPELLANT'S CASE, WHICH ARE AS UNDER:- SR. NO. DESCRIPTION (I) MAKEWAVES SEA RESORT PVT. LTD. V/S DCIT, CENTRAL CIRCLE -4(1), MUMBAI, ITA NO. 36/MUM/2018 AND 37/MUM/2018 DECIDED ON 20 TH MARCH, 2019. (II) FERANI HOTELS PVT. LTD. V/S ACIT, CENTRAL CIRCLE - 4(1) MUMBAI, ITA NO.6332/M/2016 DECIDED ON ITA NO 4598 MUM 2019-UNIQUE ESTATES DEVELOPMENT CO. LTD. - 3 - 21 ST DECEMBER, 2018. (III) ITO 2(1)(1), MUMBAI V/S ARIHANT ESTATES PVT. LTD., MUMBAI, ITA NO. 6037/MUM/2016 DECIDED ON 27TH JUNE, 2018. (IV) M/S. C.R. DEVELOPMENT PVT. LTD. V/S JCIT - 8(1)(OSD),MUMBAI (ITA NO. 4277/MUM/2012). (V) M/S. RUNWAL CONSTRUCTIONS V. ASST. CIT, CENTRAL CIRCLE - 4(1), MUMBAI, (ITA. NO. 5408- 5409/MUM/2016). (VI) PROGRESSIVE HOMES V/S ACIT, CIRCLE-4(4), MUMBAI, (ITA. NO. 5082/MUM/2016). (VII) ACIT-15(2)(1). MUMBAI V/S HAWARE CONSTRUCTION PVT. LTD. (ITA. NO.3321/MUM/2016 & NO.3172/MUM/2016). (VIII) HAWARE ENGINEERS & BUILDERS PVT. LTD. V/S DCIT, CENTRAL CIRCLE-4(2), ITA NO 4598 MUM 2019-UNIQUE ESTATES DEVELOPMENT CO. LTD. - 4 - MUMBAI. (ITA. NO.6332/M/2016). 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESS EE- COMPANY IS ENGAGED IN THE BUSINESS OF DEVELOPMENT OF REAL ESTATE, DEVELOPMENT OF RESIDENTIAL COMPLEX AND MALLS. THE ASSESSEE HAS FILED THE RETURN OF INCOME FOR ASSESSMENT YEAR 2016-17 ON 17.10.2016 WITH TOTAL INCOME OF RS. 215,99,70,220/- AND THE ASSESSEE COMPANY ALSO FILED THE REVISED RETURN OF INCOME ON 01.12.2017 AND 11.12.2017 WITH THE TOTAL INCOME OF RS. 214,75,70,217/- THE RETURN OF INCOME WAS PROCESSED U/S. 143(1) OF THE ACT. SUBSEQUENTLY, THE CASE WAS SELECTED FOR SCRUTINY AN D NOTICE U/S. 143(2) & 142(1) OF THE ACT WERE ISSUED. IN COMPLIANCE, THE ASSESSEE-COMPANY COMPLIED WITH THE NOTICE AND SUBMITTED THE DETAILS. ON PERUSAL OF FINANCIAL STATEMENTS, THE ASSESSING OFFICER (AO) FOUND THAT THE ASSESSEE HAS RECEIVED DIVIDEND INCOME AND SHARE OF PROFIT FROM PARTNERSHIP FIRM AGGREGATING TO RS. 71,60,368/-AND WAS CLAIMED EXEMPT U/S. 10 OF THE ACT. THE A.O. IS OF THE OPINI ON THAT THE ASSESSEE HAS NOT MADE DISALLOWANCE U/S 14A R.W. RULE 8D. HENCE THE AO HAS CALCULATED THE DISALLOWANCE UNDER RULE 8D(2)(III) OF RS. 3,02,234/ -. ITA NO 4598 MUM 2019-UNIQUE ESTATES DEVELOPMENT CO. LTD. - 5 - FURTHER, THE A.O. FOUND THAT THE ASSESSEE IS A BUILDER AND DEVELOPER OF PROJECTS, BUT ON PERUSAL OF THE BALANCE-SHEET, THE ASSESSEE HAS INVENTORIES OF RS. 33,36,51,425/- WHICH INCLUDES FINISHED GOODS OF RS.32,44,35,530/-.THE AO HAS CALLED FOR THE SUBMISSIONS TO FURNISH THE BREAKUP OF INVENTORY OF FINISHED GOODS. THE AO FIND THAT THE STOCK OF FINIS HED GOODS CONSISTS OF FLATS OF VALUE OF RS. 32,44,35,53 0/- AND REQUIRED THE ASSESSEE TO EXPLAIN WHY ANNUAL LETTING VALUE (ALV) OF THE UNSOLD PROPERTIES SHOULD NOT BE COMPUTED. IN RESPONSE TO THE SAME, THE ASSESSEE HAS FILED THE DETAILS REFERRED AT PARA-5.2 OF THE ASSESSMENT ORDER. THE A.O. CONSIDERED THE SUBMISSIONS AND PROVISO TO SECTION 23 OF THE ACT AN D THE JUDICIAL DECISIONS AND FINALLY OBSERVED THAT TH E ANNUAL LETTING VALUE (ALV) OF THE FINISHED FLATS HE LD BY THE ASSESSEE AS CLOSING STOCK HAS TO BE TREATED AS INCOME FROM HOUSE PROPERTY AFTER ALLOWING THE DEDUCTIONS. THE A.O. WORKED OUT ALV @ 7% ON THE INVESTMENTS OF FLATS BEING RS. 1,71,71,201/- AND ALLOWED DEDUCTION @30% OF THE ALV AND MADE ADDITION OF ALV OF UNOCCUPIED PROPERTIES IN THREE PROJECTS TO THE EXTENT OF RS. 1,20,19,841/-. SIMILA RLY, THE AO MADE A DISALLOWANCE OF RS. 2,49,386/- BY ITA NO 4598 MUM 2019-UNIQUE ESTATES DEVELOPMENT CO. LTD. - 6 - ADOPTING RATE@12% ON INTEREST FREE FUNDS AND ASSESSED THE TOTAL INCOME OF RS. 2,16,01,41,680/- AND PASSED THE ORDER U/S 143(3) OF THE ACT DATED 18.12.2018. 3. AGGRIEVED BY THE ORDER OF AO, THE ASSESSEE HAS FILED THE APPEAL BEFORE THE CIT(A). THE CIT(A) DEAL T ON THE DISPUTED ISSUE OF ADDITION OF ALV OF UNSOLD FLA TS, THE SUBMISSIONS OF THE ASSESSEE AND JUDICIAL DECISIONS AND OBSERVED AT PAGE 10 PARA-.5.9 OF THE ORDER AS UNDER: 5.9. IN VIEW OF THE DISCUSSION IN THE FOREGOING PARAGRAPHS, I HOLD THAT THE AO HAS RIGHTLY ASSESSED DEEMED INCOME FROM THE UNSOLD UNITS IN THE HANDS OF THE APPELLANT AS PER THE PROVISIONS OF SEC.22 AND 23 OF THE ACT BY ADOPTING A RATE OF 7% OF THE INVESTMENTS MADE, 'IN ACCORDANCE WITH THE DECISION OF RADHA DEVI DALMIA (4 TAXMAN 183)(ALL HC). ACCORDINGLY, THE ADDITION OF RS. 1,20,19,841/- MADE BY THE AO AFTER ADOPTING THE DEEMED RENTAL INCOME TO BE OF RS. 1,71,71,201/- IS UPHELD AND THE GROUND OF APPEAL TAKEN BY THE APPELLANT IS REJECTED. ACCORDINGLY, THIS GROUND OF APPEAL OF THE ASSESSEE IS DISMISSED. ITA NO 4598 MUM 2019-UNIQUE ESTATES DEVELOPMENT CO. LTD. - 7 - 4. AGGRIEVED BY THE ORDER OF CIT(A), THE ASSESSEE H AS FILED THE APPEAL BEFORE THE HONBLE TRIBUNAL. 5. AT THE TIME OF HEARING, THE LD.AR SUBMITTED THAT THE CIT(A)ERRED IN CONFIRMING THE ACTION OF AO IN DETERMINING THE ALV OF THE UNOCCUPIED FLATS AND FURTHER OVERLOOKED THE ASSESSEES OWN CASE OF HONB LE TRIBUNAL FOR THE EARLIER ASSESSMENT YEARS ON THE SAME ISSUE GRANTING THE RELIEF AND PRAYED FOR ALLOWING THE APPEAL. CONTRA, THE LD. DR SUPPORTED THE ORDER OF CIT(A). 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE LD. AR HAS BE EN EMPHASIZING THAT THE CIT(A) HAS ERRED IN CONFIRMING THE ADDITION BY THE AO, IN DETERMINING THE ALV VALU E OF THE UNSOLD FLATS. WHEREAS, IN IDENTICAL AND SIM ILAR ISSUE, THE HONBLE TRIBUNAL IN ASSESSEES OWN CASE HAS DEALT ON THE DISPUTED ISSUE RELIED ON THE JUDIC IAL DECISIONS AND GRANTED THE RELIEF IN ITA NO. 2811 & 2812/MUM/2018 AT PAGE 3 PARA-5 READ AS UNDER: 5. AFTER HEARING BOTH THE PARTIES AND PERUSAL OF M ATERIAL AVAILABLE ON RECORD, WE OBSERVE THAT THE ISSUE OF ESTIMATION OF NOTIONAL RENT IN RESPECT OF UNSOLD PLOTS HAS BEEN DECIDED IN THE CASE OF ASS ESSEES SISTER CONCERN MAKEWAVES SEA RESORT PVT. LTD (SUPRA), WHEREIN IT H AS BEEN HELD AS UNDER: ITA NO 4598 MUM 2019-UNIQUE ESTATES DEVELOPMENT CO. LTD. - 8 - 8. WE HAVE HEARD THE RIVAL SUBMISSIONS OF THE PART IES AND ALSO PERUSED THE MATERIAL ON RECORD INCLUDING THE DECISION RELIE D UPON BY THE ASSESSEE. AS POINTED OUT BY THE LD. COUNSEL THE COORDINATE BE NCH HAS DECIDED THE IDENTICAL ISSUE IN FAVOUR OF THE ASSESSEE IN THE CA SE OF FERANI HOTELS LTD. VS. ACIT (SUPRA). THE FINDINGS OF THE COORDINATE BE NCH ARE AS UNDER:- 6. UNDER THIS ISSUE THE ASSESSEE HAS CHALLENGED TH E CONFIRMATION OF THE ADDITION OF RS.13,22,90,044/- U NDER THE HEAD OF INCOME FROM HOUSE PROPERTY ON ACCOUNT OF DEEMED INCOME FROM UNSOLD UNIT/ FLAT WHICH WAS CLOSING STOCK OF T HE APPELLANT AS PER PROVISIONS OF SECTIONS 22 AND 23 OF THE ACT. AT THE VERY OUTSET, THE LD. REPRESENTATIVE OF THE ASSESSEE HAS ARGUED THAT THE ASSESSEE IS DERIVING ITS INCOME FROM HOTEL BUSINESS AND CONSTRUCTION. THE ASSESSEE WAS ALSO DERIVING INCOME FROM DIVIDEND, SHARE OF PROFIT AND SALE OF FLATS AND DUE TO THE RECESSION, THE ASSESSEE FAILED TO SOLD OUT ALL THE FLATS, THEREFORE, SOME FLATS REMAIN VACANT WHICH WAS BEING TREATED AS STOCK IN TRADE. THE AO HAS WRONGLY ASSESSED THE NOTIONAL REN T AND ASSESSED THE RENT IN VIEW OF THE PROVISION U/S 24 O F THE ACT WRONGLY WHICH CAN ONLY BE TREATED UNDER THE HEAD OF INCOME FROM BUSINESS, THEREFORE, THE FINDING OF THE CIT(A) IS WRONG AGAINST LAW AND FACTS AND IS LIABLE TO BE SET ASIDE . IT IS ALSO ARGUED THAT THE CASE OF THE ASSESSEE IS FULLY COVER ED BY THE CASE OF RUNWAL CONSTRUCTION VS. ACIT IN ITA. NO. 5408/M/ 2016 & C.R. DEVELOPMENTS VS. JCIT IN ITA. NO. 4277/M/2012 DATED 13.05.2015. HOWEVER, ON THE OTHER HAND, THE LD. REP RESENTATIVE OF THE DEPARTMENT HAS REFUTED THE SAID CONTENTION. ON APPRAISAL OF THE FACTS OF THE CASE AND RELEVANT RECORD ON THE FILE, WE NOTICED THAT THE OBJECT OF THE ASSESSEE IS DERIVING OF INCOME FROM HOTEL BUSINESS AND CONSTRUCTION. THE ASSESSEE COMPA NY IS RUNNING A FIVE STAR HOTEL IN THE NAME AND STYLE OF THE CARLTON AT KODAIKANNAL, TAMIL NADU, HAVING ROOMS AND OTHER FAC ILITIES. THE ASSESSEE ALSO DERIVED INCOME FROM DIVIDEND, SHA RE OF PROFIT FROM PARTNERSHIP FIRM AND PROFIT FROM SALE OF FLATS . THE ASSESSEE FAILED TO SOLD THE FLAT WHICH WAS BEING TREATED BY HIM AS STOCK IN TRADE. THE AO ASSESSED THE NOTIONAL INCOME AND BROU GHT TO TAX AS INCOME AS HOUSE PROPERTY WHICH HAS NO DOUBT CONF IRMED BY CIT(A). IT IS TO BE SEEN WHETHER THE INCOME OF THE ASSESSEE IS LIABLE TO BE TREATED AS HOUSE PROPERTY OR BUSINESS INCOME. IT IS NECESSARY TO DISCUSS THE FINDING IN THE CASE OF M/S . RUNWAL CONSTRUCTIONS VS. ACIT IN ITA. NO.5409/M/2016 DATED 22.02.2018 WHICH HAS BEEN GIVEN IN PARA NO. 7 TO 10 AND ARE HEREBY REPRODUCED AS UNDER.: - ITA NO 4598 MUM 2019-UNIQUE ESTATES DEVELOPMENT CO. LTD. - 9 - 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF THE AUTHORITIES BELOW AND THE DECISIONS R ELIED UPON. IT IS AN UNDISPUTED FACT THAT THE ASSESSEES ARE IN THE BUSINESS OF BUILDERS, DEVELOPERS AND CONSTRUCTION. BOTH THE ASS ESSEES HAVE CONSTRUCTED VARIOUS PROJECTS AND THE PROJECTS WERE TREATED AS STOCK IN TRADE IN THE BOOKS OF ACCOUNT. FLATS SOLD BY THE ASSESSEES WERE ASSESSED UNDER THE HEAD INCOME FROM BUSINESS. THERE WERE CERTAIN UNSOLD FLATS IN STOCK IN TRADE W HICH THE AO TREATED AS PROPERTY ASSESSABLE UNDER THE HEAD INCO ME FROM HOUSE PROPERTY AND COMPUTED NOTIONAL ANNUAL LETTIN G VALUE ON SUCH UNSOLD FLATS PLACING RELIANCE ON THE DECISION IN THE CASE OF ANSAL HOUSING FINANCE & LEASING CO. LTD. (SUPRA). T HE ACTION OF THE AO WAS UPHELD BY THE LEARNED CIT(A). 8. THE HON'BLE GUJARAT HIGH COURT IN THE CASE OF N EHA BUILDERS PVT. LTD. (SUPRA) CONSIDERED THE QUESTION WHETHER THE RENTAL INCOME RECEIVED FROM ANY PROPERTY IN THE CON STRUCTION BUSINESS CAN BE CLAIMED UNDER THE HEAD INCOME FROM PROPERTY EVEN THOUGH THE SAID PROPERTY WAS INCLUDED IN THE C LOSING STOCK. THE HON'BLE GUJARAT HIGH COURT HELD THAT IF THE BUS INESS OF THE ASSESSEE IS TO CONSTRUCT THE PROPERTY AND SELL IT O R TO CONSTRUCT AND LET OUT THE SAME, THEN THAT WOULD BE THE BUSINE SS AND THE BUSINESS STOCKS, WHICH MAY INCLUDE MOVABLE AND IMMO VABLE, WOULD BE TAKEN TO BE STOCK IN TRADE AND ANY INCOME DERIVED FROM SUCH STOCKS CANNOT BE TERMED AS INCOME FROM HOUSE P ROPERTY. WHILE HOLDING SO THE HON'BLE HIGH COURT OBSERVED AS UNDER: - 8. TRUE IT IS, THAT INCOME DERIVED FROM THE PROPER TY WOULD ALWAYS BE TERMED AS 'INCOME' FROM THE PROPERT Y, BUT IF THE PROPERTY IS USED AS 'STOCK-IN-TRADE', THEN THE SAID PROPERTY WOULD BECOME OR PARTAKE THE CHARACTER OF THE STOCK, AND A NY INCOME DERIVED FROM THE STOCK, WOULD BE 'INCOME' FROM THE BUSINESS, AND NOT INCOME FROM THE PROPERTY. IF THE BUSINESS OF TH E ASSESSEE IS TO CONSTRUCT THE PROPERTY AND SELL IT OR TO CONSTRUCT AND LET OUT THE SAME, THEN THAT WOULD BE THE 'BUSINESS' AND THE BUS INESS STOCKS, WHICH MAY INCLUDE MOVABLE AND IMMOVABLE, WOULD BE T AKEN TO BE 'STOCK-IN-TRADE', AND ANY INCOME DERIVED FROM SU CH STOCKS CANNOT BE TERMED AS 'INCOME FROM PROPERTY'. EVEN OT HERWISE, IT IS TO BE SEEN THAT THERE WAS DISTINCTION BETWEEN THE ' INCOME FROM BUSINESS' AND 'INCOME FROM PROPERTY' ON ONE SIDE, A ND 'ANY INCOME FROM OTHER SOURCES'. THE TRIBUNAL, IN OUR CO NSIDERED OPINION, WAS ABSOLUTELY UNJUSTIFIED IN COMPARING TH E RENTAL INCOME WITH THE DIVIDEND INCOME ON THE SHARES OR IN TEREST ITA NO 4598 MUM 2019-UNIQUE ESTATES DEVELOPMENT CO. LTD. - 10 - INCOME ON THE DEPOSITS. EVEN OTHERWISE, THIS QUESTI ON WAS NOT RAISED BEFORE THE SUBORDINATE TRIBUNALS AND, ALL OF SUDDEN, THE TRIBUNAL STARTED APPLYING THE ANALOGY. 9. FROM THE STATEMENT OF THE ASSESSEE, IT WOULD CLEARLY APPEAR THAT IT WAS T REATING THE PROPERTY AS 'STOCK-IN TRADE'. NOT ONLY THIS, IT WIL L 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 THAT BE SO, THE PROPERTY, RIGHT FROM THE BEGINNING WAS A 'STOCK-IN-TRADE'. 9. SIMILARLY THE COORDINATE BENCH HAS CONSIDERED SIMILAR ISSUE AS TO WHETHER THE UNSOLD PROPERTY WHI CH IS HELD AS STOCK IN TRADE BY THE ASSESSEE CAN BE ASSESSED UNDE R THE HEAD INCOME FROM HOUSE PROPERTY BY NOTIONALLY COMPUTIN G THE ANNUAL LETTING VALUE FROM SUCH PROPERTY AND THE COO RDINATE BENCH CONSIDERING THE DECISION OF THE HON'BLE DELHI HIGH COURT IN THE CASE OF ANSAL HOUSING FINANCE & LEASING CO. LTD. (SUPRA) WHICH THE AO RELIED UPON AND THE DECISION O F THE HON'BLE SUPREME COURT IN THE CASE OF CHENNAI PROPER TIES & INVESTMENTS LTD. VS. CIT REPORTED IN 373 ITR 673, H ELD THAT UNSOLD FLATS WHICH ARE IN STOCK IN TRADE SHOULD BE ASSESSED UNDER THE HEAD BUSINESS INCOME AND THERE IS NO JUSTIFIC ATION IN ESTIMATING RENTAL INCOME FROM THOSE FLATS AND NOTIO NALLY COMPUTING ANNUAL LETTING VALUE UNDER SECTION 23 OF THE ACT. WHILE HOLDING SO THE COORDINATE BENCH OBSERVED AS U NDER: - 3. THE LD. AR PLACED THE ORDER OF BOMBAY TRIBUNAL IN THE CASE OF M/S PERFECT SCALE COMPANY PVT. LTD., IT A NOS.3228 TO 3234/MUM/2013, ORDER DATED 6-9-2013, WHEREIN IT WAS HELD THAT IN RESPECT OF ASSETS HELD AS BUSINESS, INCOME FROM THE SAME IS NOT ASSESSABLE U/S.23(1) OF THE IT ACT. 4. ON THE OTHER HAND, LD. DR RELIED ON THE ORDER OF HONBLE DELHI HIGH COURT IN THE CASE OF ANSAL HOUSI NG FINANCE & LEASING CO. LTD., 354 ITR 180 (DELHI) IN SUPPORT OF THE PROPOSITION THAT EVEN IN RESPECT OF UNSOLD FLATS BY THE DEVELOPER IS LIABLE TO BE TAXED AS INCOME FROM HOUSE PROPERTY . 5. WE HAVE CONSIDERED RIVAL CONTENTIONS AND PERUSED THE RECORD. THE ISSUE UNDER CONSIDERATION HAS BEEN RESTORED BY THE CIT(A) TO THE FILE OF AO TO COMPUTE THE ANNUAL VALUE. RECENTLY THE HONBL E SUPREME COURT IN THE CASE OF M/S CHENNAI PROPERTIES & INVESTMENTS LT D. VS. CIT, REPORTED IN (2015) 42 SCD 651, VIDE JUDGMENT DATED 9-4-2015 HAS HELD THAT WHERE ITA NO 4598 MUM 2019-UNIQUE ESTATES DEVELOPMENT CO. LTD. - 11 - 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 PRO PERTY IN PLACE OF INCOME FROM BUSINESS SHOWN BY THE ASSESSEE WAS HELD TO BE NOT JUSTIFIED. THE HONBLE SUPREME COURT HELD THAT SINCE THE ASSES SEE COMPANYS MAIN OBJECT, IS TO ACQUIRE AND HELD PROPERTIES AND TO LE T OUT THESE PROPERTIES, THE INCOME EARNED BY LETTING OUT THESE PROPERTIES I S MAIN OBJECTIVE OF THE COMPANY, THEREFORE, RENT RECEIVED FROM THE LETTING OUT OF THE PROPERTIES IS ASSESSABLE AS INCOME FROM BUSINESS. ON THE VERY SAM E ANALOGY IN THE INSTANT CASE, ASSESSEE IS ENGAGED IN BUSINESS OF CO NSTRUCTION AND DEVELOPMENT, WHICH IS MAIN OBJECT OF THE ASSESSEE C OMPANY. THE THREE FLATS WHICH COULD NOT BE SOLD AT THE END OF THE YEA R WAS SHOWN AS STOCK-IN- TRADE. ESTIMATING RENTAL INCOME BY THE AO FOR THESE THREE FLATS AS INCOME FROM HOUSE PROPERTY WAS NOT JUSTIFIED INSOFAR AS TH ESE FLATS WERE NEITHER GIVEN ON RENT NOR THE ASSESSEE HAS INTENTION TO EAR N RENT BY LETTING OUT THE FLATS. THE FLATS NOT SOLD WAS ITS STOCK-IN-TRADE AN D INCOME ARISING ON ITS SALE IS LIABLE TO BE TAXED AS BUSINESS INCOME. ACCO RDINGLY, WE DO NOT FIND ANY JUSTIFICATION IN THE ORDER OF AO FOR ESTIMATING RENTAL INCOME FROM THESE VACANT FLATS U/S.23 WHICH IS ASSESSEES STOCK IN TRADE 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. 10. IN THE CASE ON HAND BEFORE US IT IS AN UNDISPUTED FACT THAT BOT H ASSESSEES HAVE TREATED THE UNSOLD FLATS AS STOCK IN TRADE IN THE BOOKS OF ACCOUNT AND THE FLATS SOLD BY THEM WERE ASSESSED UNDER THE HEAD INCOME FROM B USINESS. THUS, RESPECTFULLY FOLLOWING THE ABOVE SAID DECISIONS WE HOLD THAT THE UNSOLD FLATS WHICH ARE STOCK IN TRADE WHEN THEY WERE SOLD THEY ARE ASSESSABLE UNDER THE HEAD INCOME FROM BUSINESS WHEN THEY ARE SOLD AND THEREFORE THE AO IS NOT CORRECT IN BRINGING TO TAX NOTIONAL A NNUAL LETTING VALUE IN RESPECT OF THOSE UNSOLD FLATS UNDER THE HEAD INCOM E FROM HOUSE PROPERTY. THUS, WE DIRECT THE AO TO DELETE THE ADD ITION MADE UNDER SECTION 23 OF THE ACT AS INCOME FROM HOUSE PROPERTY . 7. IN THE CASE OF TITLED AS M/S. C.R. DEVELOPMENTS P. LTD. VS. JCIT. THE RELEVANT PARA IN 5 IS HEREBY REPRODUCED A S 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 AO TO COMPUTE THE ANNUAL VALUE. RECENTLY THE HONBLE 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 ITA NO 4598 MUM 2019-UNIQUE ESTATES DEVELOPMENT CO. LTD. - 12 - BUSINESS INCOME, THE ACTION OF AO TREATING THE RENT AL INCOME AS INCOME FROM HOUSE PROPERTY IN PLACE OF INCOME FROM BUSINESS SHOWN BY THE ASSESSEE WAS HELD TO BE NOT JUSTIFIED. THE HONBLE SUPREME COURT HELD THAT SINCE THE ASSESSEE COMPANY S MAIN OBJECT, IS TO ACQUIRE AND HELD PROPERTIES AND TO LE T OUT THESE PROPERTIES, THE INCOME EARNED BY LETTING OUT THESE PROPERTIES IS MAIN OBJECTIVE OF THE COMPANY, THEREFORE, RENT RECE IVED FROM THE LETTING OUT OF THE PROPERTIES IS ASSESSABLE AS INCO ME FROM BUSINESS. ON THE VERY SAME ANALOGY IN THE INSTANT C ASE, ASSESSEE IS ENGAGED IN BUSINESS OF CONSTRUCTION AND DEVELOPM ENT, WHICH IS MAIN OBJECT OF THE ASSESSEE COMPANY. THE THREE F LATS WHICH 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 FROM HOUSE PROPERTY WAS NOT JUSTIFIED INS OFAR AS THESE FLATS WERE NEITHER GIVEN ON RENT NOR THE ASSESSEE HAS INTENTION TO EARN RENT BY LETTING OUT THE FLATS. THE FLATS NOT S OLD WAS ITS STOCK- INTRADE AND INCOME ARISING ON ITS SALE IS LIABLE TO BE TAXED AS BUSINESS INCOME. ACCORDINGLY, WE DO NOT FIND ANY JU STIFICATION IN THE ORDER OF AO FOR ESTIMATING RENTAL INCOME FROM T HESE VACANT FLATS U/S.23 WHICH IS ASSESSEES STOCK IN TRADE 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. 8. IN THE FACTUAL POSITION OF THE PRESENT CASE IS Q UITE SIMILAR TO THE FACTS OF THE CASE MENTIONED ABOVE. IN VIEW OF T HE LAW RELIED UPON THE LAW REPRESENTATIVE OF THE ASSESSEE I.E. M/ S. RUNWAL CONSTRUCTIONS VS. ACIT AND M/S. C.R. DEVELOPMENTS P . LTD. VS. JCIT (SUPRA), WE ARE OF THE VIEW THAT THE FINDING O F THE CIT(A) ON THIS ISSUE IS WRONG AGAINST LAW AND FACTS WHEREA S THE CASE OF THE ASSESSEE HAS DULY BEEN COVERED BY THE LAW MENTI ONED ABOVE, THEREFORE, BY HONORING THE ORDERS MENTIONED ABOVE. WE DELETED THE ADDITION RAISED BY ASSESSEE ON ACCOUNT OF NOTIO NAL INCOME OF VACANT FLATS. ACCORDINGLY, THIS ISSUE IS DECIDED IN FAVOUR OF THE ASSESSEE AGAINST THE REVENUE. 9. THE FACTS AND THE ISSUE INVOLVED IN THE PRESENT CASE ARE SIMILAR TO THE FACTS OF THE CASE AND THE ISSUE INVOLVED IN THE CAS E OF FERANI HOTELS PVT. LTD. (SUPRA). IN THE SAID CASE, THE COORDINATE BENC H HAS DELETED THE ADDITION CONFIRMED BY THE CIT (A) ON ACCOUNT OF NOT IONAL RENT DETERMINED BY THE AO BY HOLDING THAT THE ALV OF THE UNSOLD UNI T OF ASSESSEE PROJECT IS ASSESSABLE UNDER THE HEAD INCOME FROM HOUSE PROPER TY. SINCE, THE FINDINGS OF THE LD.CIT (A) IS NOT IN ACCORDANCE WIT H THE DECISION OF THE COORDINATE BENCH RENDERED IN THE CASE OF FERANI HOT ELS PVT. LTD. (SUPRA), ITA NO 4598 MUM 2019-UNIQUE ESTATES DEVELOPMENT CO. LTD. - 13 - WE RESPECTFULLY FOLLOWING THE DECISION OF THE COORD INATE BENCH SET ASIDE THE ORDER OF THE LD. CIT (A) AND ALLOW THE APPEAL O F THE ASSESSEE AND DIRECT THE AO TO DELETE THE ADDITION MADE UNDER THE HEAD INCOME FROM HOUSE PROPERTY. ON PERUSAL OF THE SAID ORDER, WE FIND THAT THE ISSU E IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE AND, HENCE, THE ORDER OF THE CIT(A) UP HOLDING THE ADDITION MADE BY AO ESTIMATING THE ALV IN RESPECT OF UNSOLD FLATS CA NNOT BE SUSTAINED. THE DECISION RELIED UPON BY THE LEARNED DR IN THE CASE OF CIT VS. GUNDECHA BUILDERS (SUPRA), IS DISTINGUISHABLE ON FACTS AS IN THAT CAS E THE UNSOLD PORTION OF THE PROPERTY CONSTRUCTED BY THE BUILDER WAS GIVEN ON RENT AND RE NTAL INCOME WAS TREATED AS BUSINESS INCOME. WHEREAS, IN THE PRESENT CASE, THE ASSESSEE HAS NOT LET OUT ANY FLATS AND ALL WERE LYING UNSOLD AS STOCK IN TRADE. ACCORDINGLY, WE ARE INCLINED TO SET ASIDE THE ORDER OF THE CIT(A) AND DIRECT THE AO TO DELETE THE ADDITION ON ACCOUNT OF ESTIMATION OF ALV IN RESPECT OF UNSOLD F LATS FOR A.Y. 2013-14. THE APPEAL OF THE ASSESSEE IS ALLOWED. 8. WE FALLOW THE JUDICIAL PRECEDENCE AND APPLY THE RATIO OF THE DECISION TO THE FACTS OF THE PRESENT C ASE. ACCORDINGLY WE SET-ASIDE THE ORDER OF CIT(A) AND DIRECT THE AO TO DELETE THE ADDITION AND ALLOW THE GROUNDS OF APPEAL OF THE ASSESSEE. 9. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. THE ORDER PRONOUNCED ON 22.03.2021, IN THE OPEN COURT. SD/- SD/- SD/- SD/- ( SHAMIM YAHYA ) ( PAVAN KUMAR GADALE ) ACCOUNTANT MEMBER JUDICIAL MEMB ER MUMBAI, DATED 22/03/2021 ITA NO 4598 MUM 2019-UNIQUE ESTATES DEVELOPMENT CO. LTD. - 14 - SK, PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. & '( ) / THE CIT(A) 4. ) ( ) / CONCERNED CIT 5. ,-. //'( , '(# , & / DR, ITAT, MUMBAI 6. .34 5 / GUARD FILE. / BY ORDER, , / //TRUE COPY// 1. / ( ASST. REGISTRAR) !' #, / ITAT, MUMBAI