DIMPLE ENTERPRISES, MUMBAI V. DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE 2(2), MUMBAI

ITA 5269/MUM/2019

• Counselvise Citation: [2021] 108 COUNSELVISE.COM (IT) 4091 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 9 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-05-2021
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Assessment Year: 2015-2016
• Appeal Filed On: 09-08-2019
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: R.MISHRA
• Assessee Lawyers: GAUTAM THACKRE
• Keywords: Deemed owner of house property; Business income; Deemed to accrue or arise in india; Competent authority
• Section: 142(1); 143(2)

Judgement Text

THE INCOME TAX APPELLATE TRIBUNAL D BENCH, MUMBAI SHRI SHAMIM YAHYA (AM) & SHRI PAVANKUMAR GADALE ( JM) I.T.A. NO. 5269/MUM/2019 (ASSESSMENT YEAR 2015-16) DIMPLE ENTERPRISES 1 ST FLOOR, PLOT NO.25 GIRNARA, B WING, PALIMALA ROAD, PALI HILL, BANDR A(W), MUMBAI-400 050 VS. DCIT,CC-4(2) ROOM NO.1918, AIR INDIA BUILDING, NARIMAN POINT MUMBAI-400 021 PAN : AAAFD1153H ( APPELLANT ) ( RESPONDENT ) ASSESSEE BY SHRI GAUTAM THACKRE DEPARTMENT BY SHRI R.MISHRA DATE OF HEARING 30.03.2021 DATE OF PRONOUNCEMENT 21.05.2021 O R D E R PER SHAMIM YAHYA (AM) :- THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF LEARNED CIT(A) DATED 06.06.2019 AND PERTAINS TO ASSESSMENT YEAR 2015-16. 2. THE GROUNDS OF APPEAL READ AS UNDER : 1. THE ORDER PASSED BY THE LEARNED COMMISSIONER OF INCOME TAX(A) 52 IS BAD IN LAW. 2. THE LEARNED COMMISSIONER OF INCOME TAX(A) 52 HA S ERRED IN DISMISSING THE APPEAL AND CONFIRMING THE ADDITION OF RS . 22,25,565/=(NET) AS NOTIONAL DEEMED INCOME FROM HOUSE PROPERTY IN RESPECT OF UNSOLD UNITS LYING VACANT, HELD AS STOCK-IN-TRADE(INVENTORY). 3. THE LEARNED COMMISSIONER OF INCOME TAX(A) 52 HA S ERRED IN CONFIRMING THE ADDITION, FOLLOWING THE RATIO OF HO'BLE D ELHI HIGH COURT IN THE CASE OF ANSAL HOUSING FINANCE AND LEASING COMPANY L TD. WITHOUT APPRECIATING THE FACT THAT SLP HAS BEEN GRANTED BY THE HOB LE SUPREME COURT AGAINST THE DECISION. 4. THE LEARNED COMMISSIONER OF INCOME TAX(A) 52 HAS FAILED TO APPRECIATE THAT AMENDMENT TO INCOME TAX ACT TO SECTION 23(5) TO TAX NOTIONAL DEEMED HOUSE PROPERTY INCOME ON UNSOLD UNITS HELD AS INVEN TORY IS PROSPECTIVE AND THEREFORE CONVERSELY THERE ARE NO PROVISIONS TO TAX THE SAME IN AY 2015-16. DIMPLE ENTERPRISES 2 5. THE LEARNED COMMISSIONER OF INCOME TAX(A) 52 HAS ERRED IN NOT CONSIDERING VARIOUS CASE LAWS CITED BY THE APPELLANT . 6. THE LEARNED COMMISSIONER OF INCOME TAX(A) 52 HAS ERRED IN NOT CONSIDERING THAT NO INCOME UNDER THE HEAD HOUSE PROPER TY IS TO BE COMPUTED TAKING THE ALV AT 8.5% OF THE COST IGNORING THE VARIOUS CASE LAWS HOLDING THE MUNICIPAL RATABLE VALUE BE TAKEN AS ALV. 7. THE APPELLANT PRAYS THAT THE ADDITION OF R S. 22,25,565/- BE DELETED. 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF BUILDERS/CONSTRUCTION AND REAL ESTATE DEVELOPMENT. IT FILED ITS ORIGINAL RETURN OF INCOME N 29.09.2015 DECLARING A TOTAL INCOME OF RS.35,12,040/-. CONSEQUENTLY, NOTICES U/S. 143(2) AND 142(1) WERE D ULY ISSUED AND SERVED ON THE ASSESSEE. DURING THE COURSE OF ASSESSMENT PROCE EDINGS, ON EXAMINING HE BALANCE SHEET OF THE ASSESSEE, THE AO OB SERVED THA T UNSOLD FINISHED STOCK OF UNITS HAS BEEN SHOWN TO BE OF RS. 14,96,17,771/- 4. UPON ASSESSING OFFICERS ENQUIRY AS TO WHY THE DEEMED RENT ON FINISHED PREMISES SHOULD NOT BE ADDED, THE ASSESSEE EXPLAINE D THE FACTS AS UNDER:- THE ASSESSEE FIRM ENGAGED IN THE BUSINESS OF CONSTRU CTION, DEVELOPMENT, BUILDER AND DEALING IN REAL ESTATE. IN PURSUANCE OF THIS ACTIVITY THE ASSESEE HAS CARRIED OUT CONSTRUCTION ACTIVITY OF COMMERCIAL BUILDING NAMELY K RAHEJA PRIME BEARING CTS NO.754 AT MAROL ANDHERI EA ST. THE SAID COMMERCIAL PROJECT CONSISTS OF NINE UNITS. OUT OF NINE UNITS, TWO UNITS HAVE BEEN SOLD DURING THE PREVIOUS YEAR AND REMAINING SE VEN UNITS ARE SHOWN AS STOCK IN TRADE (INVENTORY). THE UNSOLD STOCK IS SHOWN AS STOCK IN TRADE OF OUR BUSINESS. THE OCCUPATION CERTIFICATE IN RESPECT OF SA ID PROJECT K RAHEJA PRIME WAS OBTAINED ON 24 TH SEPTEMBER, 2014, SUBJECT TO THE CERTIFICATE U/S 270-A OF MMC ACT SHALL BE OBTAINED FROM H.E WITHIN 3 MONTHS. THE CERTIFICATE U/S 270A OF MMC ACT HAS BEEN OBTAINED ON 30/12/2014. THE UNSOLD FLAT, WERE NOT INTENDED OF BEING LETOUT DURING THE PREVIOUS YEAR. 5. ASSESSEE FURTHER REFERRED TO CERTAIN CASE LAW F ROM ITAT. THE ASSESSEE FURTHER SUBMITTED THAT THE DELHI HIGH COURT DECISIO N IN ANSAL HOUSING FINANCE AND LEASING COMPANY LTD (SUPRA) IS PENDING WITH HONBLE SUPREME COURT. IT WAS FURTHER SUBMITTED THAT AMENDMENT TO S ECTION 23(5) IS PROSPECTIVE. DIMPLE ENTERPRISES 3 6. HOWEVER, THE ASSESSING OFFICER WAS NOT CONVINC ED. REFERRING TO THE DELHI HIGH COURT DECISION IN THE CASE OF ANSAL HOUSING FINANCE AND LEASING COMPANY LTD (SUPRA), THE ASSESSING OFFICER CONCLUDE D AS UNDER: 4.2 AS MENTIONED ABOVE, FOR ARRIVING AT THE ANNUAL VALUE OF THESE PROPERTIES THE ASSESSEE WAS ASKED TO PROVIDE THE ANNUAL RATABLE V ALUE OF SUCH UNITS. HOWEVER, THE ASSESSEE FAILED TO PROVIDE THE SAME. IN ABSENCE OF THE ALV, THE ANNUAL VALUE IS ARRIVED AT BY ESTIMATING THE SAME @8.5 % OF THE COST OF CONSTRUCTION OF THE PROPERTY. THIS POSITION HAS ALSO B EEN UPHELD BY THE MUMBAI TRIBUNAL IN THE FOLLOWING CASES: A) M/S. OM PRAKASH & CO. (87 TTJ 183 MUM) AND B) M/S. CHEMMECH(P) LTD. (83 ITD 427 MUM) 7. UPON ASSESSEES APPEAL LD.CIT (A) REFERRED TO D ELHI HIGH COURT DECISION IN THE CASE OF ANSAL HOUSING FINANCE AND LEASI NG COMPANY LTD (SUPRA) AND FOUND THE SAME TO BE APPLICABLE ON THE FACTS OF THE CASE. HE FURTHER NOTED THAT AS SUBMITTED ASSESSEE ITSELF SECTION 23(5) AMENDMEN T IS PROSPECTIVE. LEARNED CIT(A) FURTHER OBSERVED AS UNDER :- 5.4. IT IS IMPORTANT TO NOTE HERE THAT WHILE DECIDING THE ISSUE RAISED IN THE CASE OF CHENNAI PROPERTIES & INVESTMENTS LTD., THE HON 'BLE SUPREME COURT HAS ALSO DISCUSSED ABOUT THE JUDGMENT OF THE SAME COU RT IN THE CASE OF EAST INDIA HOUSING AND LAND DEVELOPMENT TRUST LTD., AS UN DER :- 'WITH THIS BACKGROUND, WE FIRST REFER TO THE JUDGMENT OF TH IS COURT IN EAST INDIA HOUSING & LAND DEVELOPMENT TRUST LT D- 'S CASE (SUPRA) WHICH HAS BEEN RELIED UPON BY THE HIGH COURT. THAT WAS A CASE WHERE THE COMPANY WAS INCORPORATED WI TH THE OBJECT OF BUYING AND DEVELOPING LANDED PROPERTIES AN D PROMOTING AND DEVELOPING MARKETS. THUS, THE MAIN OBJ ECTIVE OF THE COMPANY WAS TO DEVELOP THE LANDED PROPERTIES INTO MARKETS. IT SO HAPPENED THAT SOME SHOPS AND STALLS, WHICH WERE DEVELOPED BY IT, HAD BEEN RENTED OUT AND INCOME WAS DERIVED FROM THE RENTING OF THE SAID SHOPS AND STALLS. IN THO SE FACTS, THE QUESTION AROSE FOR CONSIDERATION WAS WHETHER THE RENTA L INCOME THAT IS RECEIVED WAS TO BE TREATED AS INCOME FROM THE HO USE PROPERTY OR THE INCOME FROM THE BUSINESS. THIS COURT WHILE HOLDING THAT THE INCOME SHALL BE TREATED AS INCOME FR OM THE HOUSE PROPERTY, RESTED ITS DECISION IN THE CONTEXT OF T HE MAIN OBJECTIVE OF THE COMPANY AND TOOK NOTE OF THE FACT THAT L ETTING OUT OF THE PROPERTY WAS NOT THE OBJECT OF THE COMPANY AT A LL. THE COURT WAS THEREFORE, OF THE OPINION THAT THE CHARACTE R OF THAT INCOME WHICH WAS FROM THE HOUSE PROPERTY HAD NOT ALTER ED BECAUSE IT WAS RECEIVED BY THE COMPANY FORMED WITH THE OBJECT OF DEVELOPING AND SETTING UP PROPERTIES. DIMPLE ENTERPRISES 4 5.5. IN THE JUDGMENT IN THE CASE OF CHENNAI PROPER TIES & INVESTMENTS LTD., THE HON'BLE SUPREME COURT HAS ALSO DISCUSSED THE LAW LAID DOWN BY IT IN THE CASE OF KARANPURA DEVELOPMENT CO. LTD. VS. CIT, WEST BENGAL. THE RELEVANT PORTION OF THE JUDGMENT IS REPRODUCED AS UNDER :- 'BEFORE WE REFER TO THE CONSTITUTION BENCH JUDGMENT IN TH E CASE OF SULTAN BROTHERS (P.) LTD. (SUPRA), WE WOULD BE WELL AD VISED TO DISCUSS THE LAW LAID DOWN AUTHORITATIVELY AND SUCCINCTLY BY THI S COURT IN 'KARANPURA DEVELOPMENT CO. LTD. V. CIT[1962] 44 ITR 362 (SC). THAT WAS ALSO A CASE WHERE THE COMPANY, WHICH WAS THE AS SESSEE, WAS FORMED WITH THE OBJECT, INTER ALIA, OF ACQUIRING AND DISPOSING OF THE UNDERGROUND COAL MINING RIGHTS IN CERTAIN COAL FIELD S AND IT HAD RESTRICTED ITS ACTIVITIES TO ACQUIRING COAL MINING TEA SES OVER LARGE AREAS, DEVELOPING THEM AS COAL FIELDS AND THEN SUB-LEASING TH EM TO COLLIERIES AND OTHER COMPANIES. THUS, IN THE SAID CASE, THE LEA SING OUT OF THE COAL FIELDS TO THE COLLIERIES AND OTHER COMPANIES W AS THE BUSINESS OF THE ASSESSEE. THE INCOME WHICH WAS RECEIVED FROM L ETTING OUT OF THOSE MINING LEASES WAS SHOWN AS BUSINESS INCOME. DE PARTMENT TOOK THE POSITION THAT IT IS TO BE TREATED AS INCOME FROM THE HOUSE PROPERTY. IT WOULD BE THUS, CLEAR THAT IN SIMILAR CIRCUMSTANCES, I DENTICAL ISSUE AROSE BEFORE THE COURT. THIS COURT FIRST DISCUSSED THE SCHEME OF THE INCOME TAX ACT AND PARTICULARLY SIX HEADS UNDER WHICH INCOME CAN BE CATEGORIZED/CLASSIFIED. IT WAS POINTED OUT THAT BEFO RE INCOME, PROFITS OR GAINS CAN BE BROUGHT TO COMPUTATION, THEY HAVE TO B E ASSIGNED TO ONE OR THE OTHER HEAD. THESE HEADS ARE IN A SENSE EX CLUSIVE OF ONE ANOTHER AND INCOME WHICH FALLS WITHIN ONE HEAD CANNOT BE ASSIGNED TO. OR TAXED UNDER, ANOTHER HEAD. THEREAFTER, THE COURT POINTED OUT THAT THE DECIDING FACTOR IS NOT THE OWNERSHIP OF LAND OR LEASES BUT THE NATURE OF THE ACTIVITY OF THE ASSESSEE AND THE NATURE OF THE OPERATIONS IN RELATION TO THEM- IT WAS HIGHLIGHTED AND STRESSED TH AT THE OBJECTS OF THE COMPANY MUST ALSO BE KEPT IN VIEW TO INTERPRET THE A CTIVITIES. IN SUPPORT OF THE AFORESAID PROPOSITION, NUMBER OF JUDGM ENTS OF OTHER JURISDICTIONS, I.E. PRIVY COUNSEL, HOUSE OF LORDS IN ENGLAND AND US COURTS WERE TAKEN NOTE OF THE POSITION IN LAW, ULTI MATELY, IS SUMMED UP IN THE FOLLOWING WORDS: 'AS HAS BEEN ALREADY PO INTED OUT IN CONNECTION WITH THE OTHER TWO CASES WHERE THERE IS A LE TTING OUT OF PREMISES AND COLLECTION OF RENTS THE ASSESSMENT ON PRO PERTY BASIS MAY BE CORRECT BUT NOT SO, WHERE THE LETTING OR SUB-LETTING IS PART OF A TRADING OPERATION. THE DIVING LINE IS DIFFICULT TO FIN D; BUT IN THE CASE OF A COMPANY WITH ITS PROFESSED OBJECTS AND THE MANNER OF ITS ACTIVITIES AND THE NATURE OF ITS DEALINGS WITH ITS PROPERTY, IT IS POSSIBLE TO SAY ON WHICH SIDE THE OPERATIONS FALL AND TO WHAT HEAD THE I NCOME IS TO BE ASSIGNED.' 5.6 AFTER APPLYING THE AFORESAID PRINCIPLE TO THE FACTS, WHICH WERE THERE BEFORE THE COURT, IT CAME TO THE CONCLUSION THAT INCOME HAD TO BE TREATED AS INCOME FROM BUSINESS AND NOT AS INCOME FROM HOUSE PR OPERTY. WE ARE OF THE OPINION THAT THE AFORESAID JUDGMENT IN KARANPURA DEVEL OPMENT CO. LTD.'S CASE (SUPRA) SQUARELY APPLIES TO THE FACTS OF THE PRE SENT CASE.' DIMPLE ENTERPRISES 5 5.7. IT IS ALSO RELEVANT TO REFER TO THE CONCLUDING P ART OF THE JUDGEMENT OF THE HON'BLE SUPREME COURT IN THE CASE OF CHENNAI PROPERTIE S & INVESTMENTS LTD. THE RELEVANT PORTION OF THE JUDGEMENT IS REPRODUCED AS UNDER :- 'NO DOUBT IN SULTAN BROTHERS (P.) LTD. 'S CASE (SUPRA) , CONSTITUTION BENCH JUDGMENT OF THIS COURT HAS CLARIFIED THAT MERELY AN ENTRY IN THE OBJECT CLAUSE SHOWING A PARTICULAR OBJECT WOULD NOT B E THE DETERMINATIVE FACTOR TO ARRIVE AT AN CONCLUSION WHETHE R THE INCOME IS TO BE TREATED AS INCOME FROM BUSINESS AND SUCH A QUES TION WOULD DEPEND UPON THE CIRCUMSTANCES OF EACH CASE, VIZ., WHE THER A PARTICULAR BUSINESS IS LETTING OR NOT. THIS IS SO STAT ED IN THE FOLLOWING WORDS: 'WE THINK EACH CASE HAS TO BE LOOKED AT FROM A BUSINESSMAN'S POINT OF VIEW TO FIND OUT WHETHER THE LETTI NG WAS THE DOING OF A BUSINESS OR THE EXPLOITATION OF HIS PROPERT Y BY AN OWNER. WE DO NOT FURTHER THINK THAT A THING CAN BY ITS VERY NATURE BE A COMMERCIAL ASSET. A COMMERCIAL ASSET IS ONLY AN ASSE T USED IN A BUSINESS AND NOTHING ELSE, AND BUSINESS MAY BE CARRI ED ON WITH PRACTICALLY ALL THINGS. THEREFORE, IT IS NOT POSSIBL E TO SAY THAT A PARTICULAR ACTIVITY IS BUSINESS BECAUSE IT IS CONCERNE D WITH AN ASSET WITH WHICH TRADE IS COMMONLY CARRIED ON. WE FIND NOTH ING IN THE CASES REFERRED, TO SUPPORT THE PROPOSITION THAT CERTAIN ASSETS ARE COMMERCIAL ASSETS IN THEIR VERY NATURE.' 5.8. IT WOULD BE SEEN FROM THE ABOVE THAT THE HON'BLE SU PREME COURT HAS HELD THAT FOR DECIDING THE ISSUE WHETHER INCOME FROM A PROPERTY IS TO BE ASSESSED AS BUSINESS INCOME OR INCOME FROM HOUSE PR OPERTY, THE DECIDING FACTOR IS THE NATURE OF THE ACTIVITY OF THE ASSESSEE AN D THE NATURE OF THE OPERATIONS IN RELATION TO THE PROPERTY. IN THE CASE OF EAST INDIA HOUSING AND LAND DEVELOPMENT TRUST LTD , THE ASSESSEE-COMPANY WAS INCORPORATED WITH THE OBJECT OF BUYING AND DEVELOPING LANDED PROPERTIE S AND PROMOTING AND DEVELOPING MARKETS. ACCORDINGLY, THE RENTAL INCOME F ROM SOME SHOPS AND STALLS DEVELOPED AND RENTED OUT BY THE ASSESSEE WAS HE LD TO BE ASSESSABLE AS INCOME FROM HOUSE PROPERTY. WHILE HOLDING SO, THE HO N'BLE COURT TOOK NOTE OF THE FACT THAT LETTING OUT OF THE PROPERTY WAS NOT THE OBJE CT OF THE ASSESSEE. SIMILARLY IN THE CASE OF KARANPURA DEVELOPMENT CO. L TD. V. CIT, THE ASSESSEE WAS ENGAGED IN THE ACTIVITY OF ACQUIRING COAL MINING LEASES OVER LARGE AREAS, DEVELOPING THEM AS COAL FIELDS AND THEN SUB-LEASING THEM TO COLLIERIES AND OTHER COMPANIES. THEREFORE, THE HON'BLE COURT HELD THA T THE INCOME RECEIVED FROM LETTING OUT OF MINING LEASES SHOULD BE TREATED A S INCOME FROM BUSINESS. FURTHER, IN THE CASE OF CHENNAI PROPERTIES & INVESTME NTS LTD. ALSO, IT WAS HELD THAT RENTAL INCOME RECEIVED FROM LETTING OUT OF PR OPERTIES SHOULD BE TREATED AS BUSINESS INCOME, OBSERVING THAT LETTING OUT OF THE PROPERTIES WAS THE BUSINESS OF THE ASSESSEE. THUS, IT IS CLEAR FROM THE JUDGEMENTS OF THE HON'BLE SUPREME COURT DISCUSSED ABOVE THAT INCOME EAR NED FROM LETTING OUT OF PROPERTY WILL BE ASSESSED AS INCOME FROM BUSINES S, ONLY IF THE ASSESSEE IS ENGAGED IN THE BUSINESS OF LETTING OUT OF PROPERTIES . IN THE PRESENT CASE, THE APPELLANT HAS NEVER TAKEN A STAND THAT IT IS ENGAGED IN TH E BUSINESS OF LETTING OUT OF PROPERTIES. A STATED ABOVE, IT IS CLEAR FROM THE STATEMENT OF FACTS FILED ALONG WITH FORM NO.35 AND WRITTEN SUBMISSIONS FILED BY THE APPELLANT DURING ASSESSMENT PROCEEDINGS AND APPELLATE PROCEEDINGS THAT IT IS ENGAGED IN THE BUSINESS OF CONSTRUCTION OF PROPERTIES AND SALE THERE OF. IN FACT, IN THE DIMPLE ENTERPRISES 6 SUBMISSIONS, THE APPELLANT HAS ALSO ADMITTED THAT IT WAS NEVER ITS INTENTION TO EARN INCOME BY LETTING OUT THE PREMISES THEREFORE, THE RATIO OF THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF EAST INDIA HO USING AND LAND DEVELOPMENT TRUST LTD. IS SQUARELY APPLICABLE TO THE FA CTS OF THE PRESENT CASE. FURTHER, THE FACTS IN THE PRESENT CASE ARE IDENTICAL TO TH E FACTS IN THE CASE OF ANSAL HOUSING FINANCE & 'LEASING CO. LTD. DECIDED BY THE HON'BLE DELHI HIGH COURT, AND THEREFORE, THE SAID DECISION IS ALSO SQUA RELY APPLICABLE TO THE PRESENT CASE. 5.9 IN VIEW OF THE DISCUSSION IN THE FOREGOIN G PARAGRAPHS. 1 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 2 3 OF THE ACT. THE AO HAS ALSO RIGHTLY COMPUTED THE ALV @ 8.5% OF THE INVEST MENT WHICH IS AS PER THE RATIO OF THE DECISION IN THE CASES OF M/S. OM PRAKA SH & CO. (87 TTJ 183) (ITAT, MUMBAI) AND M/S. CHEM MECH P. LTD. (83 ITD 427)(ITAT, MUMBAI). ACCORDINGLY, THE ADDITION OF RS. 22,25,565/- MADE B Y THE AO AFTER ADOPTING THE DEEMED RENTAL INCOME TO BE OF RS 31,79,378/- IS UPHELD AND THE GROUND TAKEN BY THE APPELLANT ARE REJECTE D. ACCORDINGLY, THE ONLY GROUND OF APPEAL IN THE PRESENT CASE IS DISMISSED. 8. AGAINST THE ABOVE ORDER, ASSESSEE IS IN APPEAL BEFORE US. 9. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE RECORDS. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS AND PERUSED THE RECORDS. THE ONLY ISSUE FOR OUR CONSIDERATION IS THE LEVY OF DEEMED RENT ON THE UNS OLD REAL ESTATE PROPERTY OF THE ASSESSEE WHO IS A REAL ESTATE DEVELOPER. IT IS NOT THE CASE OF THE ASSESSEE THAT ITS OBJECT INCLUDE LETTING OUT OF THE PROPERTY . IN FACT BEFORE THE ASSESSING OFFICER IT WAS SUBMITTED THAT ASSESSEE HAS NEVER CO NTEMPLATED LEASING OR RENTING THE PROPERTY. 10. ON THIS ISSUE OF DEEMED RENT ON UNSOLD STOCK OF REAL ESTATE THE ONLY HIGH COURT ORDER AVAILABLE IS THAT OF THE HONOURABLE DEL HI HIGH COURT IN THE CASE OF ANSAL PROPERTIES (SUPRA). IT HAS BEEN MISTAKENLY RE FERRED THAT HONOURABLE GUJARAT HIGH COURT DECISION IN THE CASE OF CIT VERS US NEHA BUILDERS (266 ITR 661) IS IN FAVOUR OF THE ASSESSEE. THE QUESTION DEC IDED BY HONOURABLE GUJARAT HIGH COURT IN THE ABOVE SAID CASE WAS AS UNDER :- WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE, THE RENTAL INCOME FROM ANY PROPERTY IN THE CONSTRUCTION BUSINESS CAN BE CLAIMED UNDER THE HEAD OF INCOME FROM PROPERTY EVEN THOUGH THE SA ID PROPERTY WAS INCLUDED IN THE CLOSING STOCK AND EXPENSES ON MAINTEN ANCE WERE DEBITED TO THE P&L A/C? DIMPLE ENTERPRISES 7 11. THE HONOURABLE HIGH COURT HAD ADJUDICATED THE I SSUE AS UNDER :- 8. TRUE IT IS, THAT INCOME DERIVED FROM THE PROPERTY WOULD ALWAYS BE TERMED AS 'INCOME' FROM THE PROPERTY, BUT IF THE PROPERTY IS USED AS 'STOCK-IN-TRADE', THEN THE SAID PROPERTY WOULD BECOME OR PARTAKE THE CHA RACTER OF THE STOCK, AND ANY INCOME DERIVED FROM THE STOCK, WOULD BE 'INCO ME' FROM THE BUSINESS, AND NOT INCOME FROM THE PROPERTY. IF THE BUSINESS OF T HE ASSESSEE IS TO CONSTRUCT THE PROPERTY AND SELL IT OR TO CONSTRUCT AND L ET OUT THE SAME, THEN THAT WOULD BE THE 'BUSINESS' AND THE BUSINESS STOCKS, WHICH MAY INCLUDE MOVABLE AND IMMOVABLE, WOULD BE TAKEN TO BE 'STOCK-IN -TRADE', AND ANY INCOME DERIVED FROM SUCH STOCKS CANNOT BE TERMED AS ' INCOME FROM PROPERTY'. EVEN OTHERWISE, IT IS TO BE SEEN THAT THERE W AS DISTINCTION BETWEEN THE 'INCOME FROM BUSINESS' AND 'INCOME FROM PROPERTY ' ON ONE SIDE, AND 'ANY INCOME FROM OTHER SOURCES'. THE TRIBUNAL, IN OUR CON SIDERED OPINION, WAS ABSOLUTELY UNJUSTIFIED IN COMPARING THE RENTAL INCO ME WITH THE DIVIDEND INCOME ON THE SHARES OR INTEREST INCOME ON THE DEPOSI TS. EVEN OTHERWISE, THIS QUESTION WAS NOT RAISED BEFORE THE SUBORDINATE T RIBUNALS AND, ALL OF SUDDEN, THE TRIBUNAL STARTED APPLYING THE ANALOGY. 9. FROM THE STATEMENT OF THE ASSESSEE, IT WOULD CLEARLY APPEAR THAT IT WAS TREATING THE PROPERTY AS 'STOCK-IN-TRADE'. NOT ONLY THIS , IT WILL ALSO BE CLEAR FROM THE RECORDS THAT, EXCEPT FOR THE GROUND FLOOR, WHI CH HAS BEEN LET OUT BY THE ASSESSEE, ALL OTHER PORTIONS OF THE PROPERTY CONSTR UCTED HAVE BEEN SOLD OUT. IF THAT BE SO, THE PROPERTY, RIGHT FROM THE BEGINN ING WAS A 'STOCK-IN- TRADE'. 12. THUS HONOURABLE HIGH COURT HAD NEVER EXPOUNDED ON THE ISSUE BEFORE US NOR IT WAS SEIZED WITH THE ISSUE OF DEEMED RENT ON UNSOLD STOCK OF FLATS. MOREOVER WE ALSO NOTE THAT HONOURABLE JURISDICTIONA L HIGH COURT IN THE CASE OF CIT VERSUS GUNDECHA BUILDERS BY THE ORDER DATED 31 JULY 2018 HAS HELD THAT IF THE ASSESSEE IS A BUILDER BUT IS NOT ENGAGED IN THE BUSINESS OF LETTING OF PROPERTY, THE LEASE RENT FROM UNSOLD FLATS IS ASSES SABLE TO TAX UNDER THE HEAD INCOME FROM HOUSE PROPERTY. 13. THUS ON THE TOUCHSTONE OF ABOVE SAID JURISDICTI ONAL HIGH COURT DECISION WHICH IS BINDING UPON US THE EXPOSITION THAT EMANAT ES IS THAT IF THE BUSINESS OF THE ASSESSEE IS NOT LETTING OF THE PROPERTY, THE N THE RENT FROM THE UNSOLD STOCK IS TO BE ASSESSED AS INCOME FROM HOUSE PROPER TY. THIS IS ANOTHER REASON WHY NO HELP IS DRAWN TO BE ASSESSEE BY REFERRING TH E DECISION OF NEHA BUILDERS (SUPRA). DIMPLE ENTERPRISES 8 14. WE NOTE THAT HONOURABLE DELHI HIGH COURT IN THE CASE OF ANSAL HOUSING FINANCE & LEASING CO. LTD. (SUPRA) HAD EXPOUNDED AS UNDER :- 13. IN THE PRESENT CASE, THE ASSESSEE IS ENGAGED IN BUILDING ACTIVITIES. IT ARGUES THAT FLATS ARE HELD AS PART OF ITS INVENTORY OF STOCK IN TRADE, AND ARE NOT LET OUT. THE FURTHER ARGUMENT IS THAT UNLIKE IN THE OTHER INSTANCES, WHERE SUCH BUILDERS LET OUT FLATS, HERE THERE IS NO LETTING O UT AND THAT DEEMED INCOME - WHICH IS THE BASIS FOR ASSESSMENT UNDER THE ALV METHOD, SHOULD NOT BE ATTRIBUTED. THIS COURT IS OF THE OPINION THAT THE A RGUMENT, THOUGH ATTRACTIVE, CANNOT BE ACCEPTED. AS REPEATEDLY HELD, IN EAST INDIA, SULTAN, AND KARANPURA, THE LEVY OF INCOME TAX IN THE CASE OF ONE H OLDING HOUSE PROPERTY IS PREMISED NOT ON WHETHER THE ASSESSEE CARRIES ON BUS INESS, AS LANDLORD, BUT ON THE OWNERSHIP. THE INCIDENCE OF CHARGE IS BEC AUSE OF THE FACT OF OWNERSHIP. UNDOUBTEDLY, THE DECISION IN VIKRAM COTTON INDICATES THAT IN EVERY CASE, THE COURT HAS TO DISCERN THE INTENTION OF TH E ASSESSEE; IN THIS CASE THE INTENTION OF THE ASSESSE WAS TO HOLD THE PROPE RTIES TILL THEY WERE SOLD. THE CAPACITY OF BEING AN OWNER WAS NOT DIMINIS HED ONE WHIT, BECAUSE THE ASSESSEE CARRIED ON BUSINESS OF DEVELOPING, BUIL DING AND SELLING FLATS IN HOUSING ESTATES. THE ARGUMENT THAT INCOME TAX IS LEVIE D NOT ON THE ACTUAL RECEIPT (WHICH NEVER AROSE IN THIS CASE) BUT ON A NOTIO NAL BASIS, I.E. ALV AND THAT IT IS THEREFORE NOT SANCTIONED BY LAW, IN THE OPINIO N OF THE COURT IS MERITLESS. ALV IS A METHOD TO ARRIVE AT A FIGURE ON THE BASIS OF WHICH THE IMPOST IS TO BE EFFECTUATED. THE EXISTENCE OF AN ARTIFIC IAL METHOD ITSELF WOULD NOT MEAN THAT LEVY IS IMPERMISSIBLE. PARLIAMENT HAS RE SORTED TO SEVERAL OTHER PRESUMPTIVE METHODS, FOR THE PURPOSE OF CALCULATION OF INCOME AND COLLECTION OF TAX. FURTHERMORE, APPLICATION OF ALV TO DETERMINE THE TAX IS REGARDLESS OF WHETHER ACTUAL INCOME IS RECEIVED; IT IS PREMISED ON WHAT CONSTITUTES A REASONABLE LETTING VALUE, IF THE PROPERTY WERE TO BE L EASED OUT IN THE MARKETPLACE. IF THE ASSESSEE'S CONTENTION WERE TO BE ACCEPTED, THE LEVY OF INCOME TAX ON UNOCCUPIED HOUSES AND FLATS WOULD BE IM PERMISSIBLE - WHICH IS CLEARLY NOT THE CASE. 14. AS FAR AS THE ALTERNATIVE ARGUMENT THAT THE ASSES SEE ITSELF IS OCCUPIER, BECAUSE IT HOLDS THE PROPERTY TILL IT IS SOLD, IS CON CERNED, THE COURT DOES NOT FIND ANY MERIT IN THIS SUBMISSION. WHILE THERE CAN B E NO QUARREL WITH THE PROPOSITION THAT 'OCCUPATION' CAN BE SYNONYMOUS WITH PH YSICAL POSSESSION, IN LAW, WHEN PARLIAMENT INTENDED A PROPERTY OCCUPIED BY ONE WHO IS CARRYING ON BUSINESS, TO BE EXEMPTED FROM THE LEVY OF INCOME TAX WAS THAT SUCH PROPERTY SHOULD BE USED FOR THE PURPOSE OF BUSINESS. THE INTENTION OF THE LAWMAKERS, IN OTHER WORDS, WAS THAT OCCUPATION OF ONE' S OWN PROPERTY, IN THE COURSE OF BUSINESS, AND FOR THE PURPOSE OF BUSINESS, I.E. AN ACTIVE USE OF THE PROPERTY, (INSTEAD OF MERE PASSIVE POSSESSION) QUAL IFIES AS 'OWN' OCCUPATION FOR BUSINESS PURPOSE. THIS CONTENTION IS, THEREFORE RE JECTED. THUS, THIS QUESTION IS ANSWERED IN FAVOUR OF THE REVENUE, AND A GAINST THE ASSESSEE. 15. FROM THE ABOVE IT IS AMPLY CLEAR THAT DEEMED RE NT ON THE UNSOLD STOCK IS EXIGIBLE TO TAX UNDER THE HEAD INCOME FROM HOUSE PR OPERTY. THE ASSESSEE HAS CONTENDED THAT THE PROVISIONS OF SECTION 23(5) ARE PROSPECTIVE AND HENCE NOT DIMPLE ENTERPRISES 9 APPLICABLE IN THE PRESENT ASSESSMENT YEAR. WE MAY G AINFULLY REFERRED TO THE PROVISION OF SECTION 23(5) :- 23(5) WHERE THE PROPERTY CONSISTING OF ANY BUILDING OR LAND APPURTENANT THERETO IS HELD AS STOCK-IN-TRADE AND THE PROPERTY OR A NY PART OF THE PROPERTY IS NOT LET DURING THE WHOLE OR ANY PART OF THE PREVIOUS YEAR, THE ANNUAL VALUE OF SUCH PROPERTY OR PART OF THE PROPERTY, FOR THE PER IOD UP TO [ONE YEAR] FROM THE END OF THE FINANCIAL YEAR IN WHICH THE CERTIFICA TE OF COMPLETION OF CONSTRUCTION OF THE PROPERTY IS OBTAINED FROM THE COMPE TENT AUTHORITY, SHALL BE TAKEN TO BE NIL. 16. THE FINANCE BILL INCLUDED THE FOLLOWING EXPLANA TORY NOTE IN THIS REGARD :- NO NOTIONAL INCOME FOR HOUSE PROPERTY HELD AS STOCK-I N-TRADE SECTION 23 OF THE ACT PROVIDES FOR THE MANNER OF DET ERMINATION OF ANNUAL VALUE OF HOUSE PROPERTY. CONSIDERING THE BUSINESS EXIGENCIES IN CASE OF REAL ESTATE DEVELOPERS, IT IS PROPOSED TO AMEND THE SAID SECTION SO AS TO PROVIDE THA T WHERE THE HOUSE PROPERTY CONSISTING OF ANY BUILDING AND LAND APPURTE NANT THERETO IS HELD AS STOCK-IN-TRADE AND THE PROPERTY OR ANY PART OF THE PROP ERTY IS NOT LET DURING THE WHOLE OR ANY PART OF THE PREVIOUS YEAR, THE ANNUAL VALUE OF SUCH PROPERTY OR PART OF THE PROPERTY, FOR THE PERIOD UPTO ONE YEAR FROM THE END OF THE FINANCIAL YEAR IN WHICH THE CERTIFICATE OF COMPLETIO N OF CONSTRUCTION OF THE PROPERTY IS OBTAINED FROM THE COMPETENT AUTHORITY, SHAL L BE TAKEN TO BE NIL THIS AMENDMENT WILL TAKE EFFECT FROM 1 ST APRIL, 2018 AND WILL, ACCORDINGLY APPLY IN RELATION TO ASSESSMENT YEAR 2018-19 AND SUB SEQUENT YEARS. 17. FROM THE ABOVE IT IS AMPLY CLEAR THAT THE SAID SECTION WAS INSERTED TO PROVIDE RELIEF TO THE BUILDERS AND DEVELOPERS FROM THE AMBIT OF DEEMED RENT ON UNSOLD STOCK ALREADY PRESENT IN THE SANGUINE PROVIS IONS OF SECTION 23, FOR A PERIOD OF ONE YEAR WITH EFFECT FROM 1.4.2018. HENCE THE ASSESSEE IS MISTAKEN IN ITS PLEA THAT DEEMED RENT HAS BEEN LEVIED UNDER THE PROVISIONS OF SECTION 23(5) WHICH AS PER THE CLAIM OF THE ASSESSEE IS PROSPECTI VE. AS WE HAVE NOTED THAT IT IS NOBODY'S CASE THAT DEEMED RENT IS TO BE LEVIED U NDER THE PROVISIONS OF SECTION 23(5). HENCE THIS PLEA OF THE ASSESSEE THAT DEEMED RENT WAS NOT LEVIABLE AS SECTION 23(5) WAS NOT IN EXISTENCE IN T HE STATUTE BOOKS FOR THE IMPUGNED ASSESSMENT YEAR IS TOTALLY UNSUSTAINABLE 18. THUS FROM THE DECISION AND PRECEDENCE FROM HON' BLE DELHI HIGH COURT IN THE CASE OF ANSAL HOUSING FINANCE & LEASING CO. LTD .(SUPRA) READ ALONGWITH DIMPLE ENTERPRISES 10 HON'BLE JURISDICTIONAL HIGH COURT DECISION IN CIT VS. GUNDECHA BUILDERS (SUPRA), IT IS AMPLY CLEAR THAT DEEMED RENT FROM TH E UNSOLD STOCK IS DULY LEVIABLE ON THE ASSESSEE ON THE FACTS OF PRESENT CA SE. HENCE PRINCIPALLY WE DO NOT FIND ANY INFIRMITY IN THE PROPOSITION THAT DEEM ED RENT IS LEVIABLE UPON THE ASSESSEE. 19. NOW THE QUESTION IS OF THE RENTAL VALUE. THE AS SESSING OFFICER HAS NOT LEVIED THE DEEMED RENT ON MUNICIPAL RATABLE VALUE O R ANY NEARLY SIMILAR INSTANCE. THE RELIABILITY OF MUNICIPAL RATABLE VALU E HAS BEEN DULY UPHELD IN SEVERAL DECISIONS. THE ASSESSING OFFICER CANNOT MAK E ANY ADHOC COMPUTATION OF DEEMED RENT. HOUNOURABLE BOMBAY HIGH COURT DECIS ION IN THE CASE OF CIT VS. TIP TOP TYPOGRAPHY (368 ITR 330) DULY SUPPORTS THIS PROPOSITION. THUS ASSESSING OFFICER HAS MADE AN AD HOC ESTIMATE OF 8. 5% OF INVESTMENT ON THE PLEA THAT ASSESSEE HAS NOT BEEN ABLE TO PROVIDE THE MUNICIPAL RATABLE VALUE. THIS IS NOT SUSTAINABLE ON THE TOUCHSTONE OF HON'BL E BOMBAY HIGH COURT DECISION IN THE CASE OF TIP TOP TYPOGRAPHY (SUPRA). IN OUR CONSIDERED OPINION NOTHING STOPS THE ASSESSING OFFICER FROM OBTAINING THE MUNICIPAL RATABLE VALUE FROM DEPARTMENTAL OR GOVERNMENT MACHINERY. HENCE WE DIRECT THE ASSESSING OFFICER TO COMPUTE THE VALUATION OF DEEMED RENT IN ACCORDANCE WITH OUR OBSERVATION AS ABOVE AND TAKE INTO ACCOUNT THE HON' BLE JURISDICTIONAL HIGH COURT DECISION AS ABOVE. SINCE WE HAVE DECIDED THE ISSUE BY DULY TAKING NOTE OF HON'BLE JURISDICTIONAL HIGH COURT DECISION AND H AVE ALSO APPLIED HON'BLE DELHI HIGH COURT DECISION, THE REFERENCE TO OTHER D ECISION IN THIS CASE IS NOT CONSIDERED RELEVANT TO ADJUDICATION IN THIS CASE. 20. IN THE RESULT THIS APPEAL BY THE ASSESSEE STAND S PARTLY ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON 21.5.2021. SD/- SD/- (PAVANKUMAR GADALE) (SHAMIM YA HYA) JUDICIAL MEMBER ACCOUNTAN T MEMBER MUMBAI; DATED : 21/05/2021 DIMPLE ENTERPRISES 11 COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. BY ORDER, //TRUE COPY// ( ASSISTANT REGISTRAR) PS ITAT, MUMBAI