SHIVSHANKARSINGH & OTHERS, MUMBAI V. DCIT CIR. 29(3), MUMBAI

ITA 5236/MUM/2016

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 6979 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 9 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-05-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: I
• Assessment Year: 2012-2013
• Appeal Filed On: 22-08-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: N S PARWAL
• Keywords: Business income; Deemed to accrue or arise in india

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL 'I' BENCH, MUMBAI BEFORE SHRI SAKTIJIT DEY, JUDICIAL MEMBER AND SHRIN.K. PRADHAN, ACCOUNTANT MEMBER ITA NO.5236/MUM/2016 (ASSESSMENT YEAR:2012-13) M/S. SHIVSHANKAR SINGH & OTHERS C/O. M/S. PORWAL & PORWAL 625, LAXMI PLAZA, 6TH FLOOR OFF. NEW LINK ROAD ANDHERI (W), MUMBAI 400051 VS. DCIT, CIRCLE 29(3) C-10, PRATYAKSHKAR BHAVAN BANDRA-KURLA COMPLEX BANDRA (E), MUMBAI 400 051 PAN AAAAS5080P APPELLANT RESPONDENT APPELLANT BY: SHRI N.S. PARWAL RESPONDENT BY: SHRI SAURABH KUMAR RAI DATE OF HEARING: 16.05.2018 DATE OF PRONOUNCEMENT: 23.05.2018 O R D E R PER SAKTIJIT DEY, JM THIS APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-40, MUMBAI DAT ED 01.06.2016 FOR ASSESSMENT YEAR 2012-13. 2. THE ASSESSEE HAS FILED THE PRESENT APPEAL BEING AGG RIEVED BY THE ADDITION OF ` 14,63,389/- AS DEEMED INCOME FROM HOUSE PROPERTY. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE I S AN ASSOCIATION OF PERSONS (AOP) AND IS ENGAGED IN THE ACTIVITY OF DEV ELOPMENT OF BUILDINGS COMPRISING OF SHOPS AND RESIDENTIAL PREMISES. FOR T HE ASSESSMENT YEAR UNDER DISPUTE ASSESSEE FILED ITS RETURN OF INCOME O N 30.09.2012 DECLARING TOTAL INCOME OF ` 3,65,97,660/-. DURING THE ASSESSMENT PROCEEDINGS TH E ASSESSING OFFICER (AO) ON VERIFYING THE FACTS AND M ATERIAL ON RECORD FOUND THAT IN THE RELEVANT PREVIOUS YEAR ASSESSEE HAS SOL D FLATS FOR AN AMOUNT OF ` 8,72,56,000/-, WHEREAS, IT HAS SHOWN UNSOLD FLATS A S CLOSING STOCK IN RESPECT OF SHIVRAM PROJECT OF THE VALUE OF ` 2,09,05,550/-. THE AO WAS OF ITA NO. 5236/MUM/2016 M/S. SHIVSHANKAR SINGH & OTHERS 2 THE VIEW THAT IN RESPECT OF CLOSING STOCK OF UNSOLD FLAT/SHOPS THE DEEMED ANNUAL LETTING VALUE HAS TO BE DETERMINED FOR COMPU TING INCOME FROM HOUSE PROPERTY. ACCORDINGLY, HE CALLED UPON THE ASS ESSEE TO SHOW CAUSE AS TO WHY THE INCOME FROM HOUSE PROPERTY SHOULD NOT BE COMPUTED ON THE UNSOLD STOCK OF FLATS/SHOPS. THOUGH, THE ASSESSEE O BJECTED TO THE PROPOSED ADDITION, HOWEVER, THE AO REJECTED THE OBJECTIONS O F THE ASSESSEE AND DETERMINED THE NOTIONAL LETTABLE VALUE OF THE UNSOL D STOCK OF FLATS/SHOPS @10% OF THE VALUE OF SUCH UNSOLD STOCK SHOWN AT ` 2,09,05,550/-. ACCORDINGLY, THE ANNUAL LETTING VALUE OF UNSOLD FLA TS WAS DETERMINED AT ` 20,90,555/- AND AFTER ALLOWING STATUTORY DEDUCTION UNDER SECTION 24(A) OF THE INCOME TAX ACT (HEREINAFTER THE ACT) AO MA DE AN ADDITION OF ` 14,63,389/- AS INCOME FROM HOUSE PROPERTY. THOUGH T HE ASSESSEE CHALLENGED THE ADDITION IN AN APPEAL FILED BEFORE T HE LEARNED CIT(A), HOWEVER, LEARNED CIT(A) UPHELD THE ADDITION MADE BY THE AO. AGGRIEVED, ASSESSEE IS IN APPEAL BEFORE US. 4. THE LEARNED A.R. SUBMITTED, PRIOR TO 01.04.2018 THE RE WAS NO PROVISION UNDER THE ACT EMPOWERING THE AO TO COMPUT E DEEMED ANNUAL LETTING VALUE OF UNSOLD STOCK. HE SUBMITTED, ONLY A FTER INSERTION OF SUB- CLAUSE (V) TO SECTION 23 OF FINANCE ACT, 2017 W.E.F . 01.04.2018 THE ANNUAL VALUE OF UNSOLD STOCK IN TRADE OF PROPERTY CAN BE D ETERMINED. HOWEVER, HE SUBMITTED, THE SAID PROVISION WILL APPLY PROSPECTIV ELY. IN SUPPORT OF SUCH SUBMISSION THE LEARNED A.R. RELIED UPON THE FOLLOWI NG DECISIONS: - (I) M/S. C.R. DEVELOPERS P. LTD. VS. JCIT ITA NO. 4277/ MUM/2012 DATED 13.04.2015 (II) RUNWAL CONSTRUCTIONS VS. ACIT ITA NO. 5408/MUM/2016 DATED 22.02.2018 5. THE LEARNED DEPARTMENTAL REPRESENTATIVE RELIED UPON THE OBSERVATIONS OF THE DEPARTMENTAL AUTHORITIES. 6. WE HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSED TH E MATERIAL ON RECORD. IT IS ACCEPTED BY THE DEPARTMENT THAT ASSES SEE IS A BUILDER AND CONSTRUCTS BUILDINGS COMPRISING OF SHOPS AND RESIDE NTIAL PREMISES. IT IS EVIDENT, IN COURSE OF SUCH BUSINESS ACTIVITIES SOME FLATS AND SHOPS REMAIN ITA NO. 5236/MUM/2016 M/S. SHIVSHANKAR SINGH & OTHERS 3 UNSOLD AND ARE SHOWN AS STOCK IN TRADE. THERE IS NO DISPUTE THAT THE PROFIT DERIVED BY THE ASSESSEE FROM SALE OF FLATS/SHOPS IN THE BUILDING PROJECT HAS BEEN ASSESSED AS BUSINESS INCOME. HOWEVER, THE AO H AS PROCEEDED TO DETERMINE NOTIONAL HOUSE PROPERTY INCOME ON THE UNS OLD STOCK OF FLATS AND SHOPS BY DETERMINING THE ANNUAL LETTING VALUE. AS C OULD BE SEEN, PRIOR TO 01.04.2018 THERE WAS NO PROVISION UNDER SECTION 23 OF THE ACT TO DETERMINE THE ANNUAL VALUE OF UNSOLD FLAT/SHOP HELD AS STOCK IN TRADE. IN THE FINANCE ACT, 2017 AN AMENDMENT WAS MADE TO SECT ION 23 OF THE ACT BY INSERTING SUB-CLAUSE (V), WHICH PROVIDES FOR DETERM INATION OF ANNUAL VALUE OF ANY BUILDING OR LAND APPURTENANT THERETO HELD AS STOCK IN TRADE AND WHICH HAS NOT BEEN LET OUT. HOWEVER, THE AFORESAID PROVISION HAS BEEN MADE EFFECTIVE FROM 01.04.2018. THE COORDINATE BENC H IN THE CASE OF M/S. RUNWAL CONSTRUCTIONS (SUPRA), FOLLOWING THE DECISIO N OF THE HON'BLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. NEHA BUIL DERS PVT. LTD. 296 ITR 661 AND THE DECISION OF THE ITAT MUMBAI BENCHES IN THE CASE OF C.R. DEVELOPERS P. LTD (SUPRA) HAS HELD THAT UNSOLD FLAT S HELD AS STOCK IN TRADE IN THE BOOKS OF ACCOUNT WHEN SOLD, THE PROFIT DERIV ED THEREFROM WILL BE ASSESSABLE UNDER THE HEAD INCOME FROM BUSINESS. T HAT BEING THE CASE, NOTIONAL HOUSE PROPERTY INCOME ON SUCH UNSOLD STOCK IN TRADE CANNOT BE BROUGHT TO TAX. IN VIEW OF THE AFORESAID DECISION O F THE COORDINATE BENCH WE HOLD THAT THE DEPARTMENTAL AUTHORITIES WERE NOT JUSTIFIED IN DETERMINING THE DEEMED ANNUAL LETTING VALUE OF THE UNSOLD STOCK AND BRINGING IT TO TAX AS NOTIONAL HOUSE PROPERTY INCOME. ACCORDINGLY, WE DELETE THE ADDITION MADE BY THE AO AND SUSTAINED BY THE CIT(A). 7. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 23 RD MAY, 2018. SD/ - SD/ - (N.K. PRADHAN) (SAKTIJIT DEY) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED: 23 RD MAY, 2018 ITA NO. 5236/MUM/2016 M/S. SHIVSHANKAR SINGH & OTHERS 4 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) -40, MUMBAI 4. THE PR. CIT- 29, MUMBAI 5. THE DR, I BENCH, ITAT, MUMBAI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI N.P.