GEMSTAR ENTERPRISES, MUMBAI V. ASST CIT 30(1), MUMBAI

ITA 5549/MUM/2016

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 1761 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 8 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-06-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2012-2013
• Appeal Filed On: 12-09-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ABHI RAMA KARTIKEYAN SR DRS
• Assessee Lawyers: RAJESH KUMAR C GANDHI
• Keywords: Deemed owner of house property; Business income
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL G BENCH, M UMBAI BEFORE SHRI G.S.PANNU VICE PRESIDENT AND SHRI PAWAN SINGH, JUDICIAL MEMBER ITA NO.5549/MUM/2016 ASSESSMENT YEAR 2012-13 GEMSTAR ENTERPRISES, GROUND FLOOR , EESHA KRIPA, BRARMAN SHABHA, LANE, MALAD(W), MUMBAI-400 064. VS. ACIT - 30(3), C-13 5 TH FLOOR, PRATYAKSHAKAR BHAVAN, BANDRA KURLA COMPLEX, BANDRA (E), MUMBAI-400 051. PAN : AAGFG1145A ( APPELLANT ) .. ( RESPONDENT ) APPELLANT BY SHRI RAJESH KUMAR C. GANDHI RESPONDENT BY SHRI ABHI RAMA KARTIKEYAN SR DRS DATE OF HEARING 06/06/2019 DATE OF PRONOUNCEMENT 06/06/2019 O R D E R UNDER SECTION 254(1) OF INCOME TAX ACT PER PAWAN SINGH , JUDICIAL MEMBER : 1. THIS APPEAL BY ASSESSEE IS DIRECTED AGAINST THE ORD ER OF LD. COMMISSIONER OF INCOME-TAX(APPEALS)-41, MUMBAI [LD. CIT(A)] DATED 0 5/07/2016 FOR ASSESSMENT YEAR 2012-13, WHICH ARISES FROM ASSESSM ENT ORDER PASSED U/S. 143(3) DATED 30/03/2015. THE ASSESSEE HAS RAISED TH E FOLLOWING GROUNDS OF APPEAL :- 1. THE LEARNED CIT (A) ERRED BY TREATING THE APPE LLANT'S UNSOLD PREMISES WHICH ARE HELD BY THEM AS STOCK IN TRADE, THE APPELLANT BEING BUILDERS & DEVELOPERS, BY TREATING SUCH UNSOLD PREMISES AS DEEMED LET OUT AND CHARGING THE SAME TO TAX U/S 23 OF THE INCOME TAX ACT, 1961. 2. ALTERNATIVELY, WITHOUT PREJUDICE TO APPELLANT' S EARLIER GROUND AND WITHOUT ADMITTING, IN THE EVENT THE LEARNED CIT (A) HAVING MADE APPLICABLE THE PROVISIONS CONTAINED UNDER THE HEAD INCOME FROM HOUSE PROPERTY FOR THE APPELLANT'S STOCK-IN- TRADE, THE LEARNED CIT(A) ERRED BY NOT GRANTING VAC ANCY ALLOWANCE FOR SUCH VACANT STOCK-IN-TRADE UNDER THE HEAD INCOME FROM HOUSE PRO PERTY. 3. WITHOUT PREJUDICE TO APPELLANT'S EARLIER GRO UND AND WITHOUT ADMITTING, THE LEARNED CIT(A) ERRED BY NOT WORKING OUT DEEMED RENT BASED ON THE MUNICIPAL RATABLE ITA NO. 5549/MUM/2016- GEMSTAR ENTERPRISES 2 VALUE/RENT FOR THE UNSOLD FLATS AND THUS ERRED BY W ORKING OUT ADDITION ON ACCOUNT OF DEEMED RENT BY TAKING MARKET RENT OF OTHER FLATS/PR EMISES. 4. APPELLANT CRAVES LEAVE TO ADD, AMEND, ALTER , SUBSTITUTE OR DELETE ANY ONE OR MORE OF THE AFORESAID GROUNDS OF APPEAL. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A BUILDER AND DEVELOPER, FILED ITS RETURN OF INCOME FOR RELEVANT ASSESSMENT YEAR O N 25 TH SEPTEMBER 2012. THE RETURN OF INCOME WAS SELECTED FOR SCRUTINY. THE ASSESSMENT WAS COMPLETED UNDER SECTION 143(3) ON 30.03.2015. THE A SSESSING OFFICER WHILE PASSING THE ASSESSMENT ORDER ESTIMATED THE AN NUAL LETTING VALUE OF UNSOLD STOCK OF 10048 SQ FEET FLAT AND BROUGHT TO T AX UNDER THE HEAD INCOME FROM HOUSE PROPERTY. THE ASSESSING OFFICER ESTIMA TED THE ALV @ RS. 58.22/- PER SQ FEET PER MONTH. THE ASSESSING OFFICE R WORKED OUT THE GROSS ALV AT RS. 70,19,934/- AND AFTER GRANTING DEDUCTION OF PROPERTY TAX AND DEDUCTION UNDER SECTION 24(I) @ 30% ADDED REMAINING RS. 42,73,161/- UNDER THE HEAD INCOME FROM HOUSE PROPERTY. THE AS SESSING OFFICER WHILE COMPUTING ALV OF UNSOLD STOCK REFERRED THE DECISION OF DELHI HIGH COURT IN CASE OF CIT VS. ANSAL HOUSING FINANCE AND LEASIN G CO. LTD. [354 ITR 180]. ON APPEAL BEFORE COMMISSIONER (APPEALS) THE A CTION OF ASSESSING OFFICER WAS CONFIRMED. THEREFORE, FURTHER AGGRIEVED BY THE ORDER OF COMMISSIONER (APPEALS) THE ASSESSEE HAS FILED PRESE NT APPEAL BEFORE US. 3. WE HAVE HEARD THE RIVAL SUBMISSION OF THE PARTIES A ND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE HAVE ALSO DELIBERATED ON TH E VARIOUS CASE LAWS RELIED BY LOWER AUTHORITIES. THE LEARNED AR OF THE ASSESSEE SUBMITS THAT ASSESSEE IS A PARTNERSHIP FIRM ENGAGED IN THE BUSIN ESS OF BUILDERS AND ITA NO. 5549/MUM/2016- GEMSTAR ENTERPRISES 3 DEVELOPERS. DURING THE RELEVANT PERIOD THE ASSESSEE CARRIED OUT TWO PROJECTS NAMELY GEMSTAR COMMERCIAL COMPLEX AND MILANSAR. THE PROJECT OF GEMSTAR COMMERCIAL COMPLEX WAS COMPLETED IN EARLIER YEAR AND OCCUPATION CERTIFICATE WAS ALSO RECEIVED IN THE FIN ANCIAL YEAR ENDING ON 31 ST MARCH 2008 FROM MUNICIPAL CORPORATION. IN RESPECT O F PROJECT MILANSAR BALANCE ARE, THE SAME WAS BY AND LARGE COMPLETED DU RING THE FINANCIAL YEAR ENDED ON 31 ST MARCH 2011 RELEVANT TO THE ASSESSMENT YEAR 2011-12 . IN THE PROJECT GEMSTAR COMMERCIAL COMPLEX CERTAIN OFFICES AND SHOPS REMAINED UNSOLD AND THE ASSESSEE TREATED THE UNSOLD UNIT AT THE STOCK IN TRADE AS ON 31 ST MARCH 2012. THE ASSESSING OFFICER CALLED DETAIL OF THE UNSOLD UNIT, THE ASSESSEE FURNISHED THE CHART SHOWING UNSOLD STOCK I N TRADE OF SHOPS AND THE OFFICES/VARIOUS UNITS AS ON 1 ST APRIL 2011 AND AS AT 31 ST MARCH 2012. THE ASSESSING OFFICER ISSUED SHOW CAUSE NOTICE AS TO WH Y THE STOCK IN TRADE OF REMAINING UNSOLD UNIT LYING VACANT BE NOT CHARGED T O TAX UNDER DEEMED RENTAL INCOME UNDER SECTION 23 OF THE INCOME TAX AC T. THE ASSESSEE FILED ITS REPLY DATED 24 MARCH 2015. IN THE REPLY THE ASSESSE E STATED THAT ASSESSEE IS A BUILDER, WHEREBY THE UNITS CONSTRUCTED ARE SOLD T O THIRD PARTIES AND THE ASSESSEE IS NOT IN THE BUSINESS OF RENTING OUT THE CONSTRUCTED UNITS. THE UNSOLD SHOPS AND OFFICES ARE PART OF BUSINESS ASSET REFLECTED AT STOCK IN TRADE AND ARE NOT OFFERED FOR SALE TO RESPECTIVE CUSTOMER S. THE ASSESSEE MADE ALL EFFORTS FOR THE SALE OF UNITS INCLUDING BY MAKING A DVERTISEMENT, APPOINTING BROKERS, HOWEVER, DUE TO OVERALL FINANCIAL CRISIS, THE ASSESSEE COULD NOT SELL ITA NO. 5549/MUM/2016- GEMSTAR ENTERPRISES 4 OUT THE UNITS DURING THE YEAR UNDER CONSIDERATION. OUT OF TOTAL REST STOCK TRADE THERE WAS UNSOLD STOCK IN TRADE OF 10048 FT. AS ON 31 ST MARCH 2012. THE ASSESSING OFFICER REJECTED THE SUBMISSION OF AS SESSEE AND BROUGHT THE SAME UNDER DEEMED ANNUAL RENTING VALUE OF UNSOLD UN ITS. THE LD. AR SUBMITS THAT THE GROUNDS RAISED BY THE ASSESSEE ARE COVERED BY THE DECISION OF HON'BLE GUJARAT HIGH COURT IN THE CASE OF NEHA B UILDERS (P.) LTD. ( 296 ITR 661) DATED 18 TH AUGUST, 2006 AND THE DECISIONS OF THE MUMBAI TRIBUNAL IN ITO VS ARIHANT ESTATE PVT LTD IN ITA N O.6037/MUM/2016 FOR A.Y. 2012-13 DATED 27/06/2018, RUNAWAL CONSTRUCTION S VS ITO & RUNAWAL BUILDER P LTD VS ACIT IN ITA NO(S) 5408 & 5 409/MUM/2016 RESPECTIVELY. THE LD AR FOR THE ASSESSEE ALSO RELIE D ON THE RECENT DECISION OF PUNE TRIBUNAL IN ITO VS ARIHANT ESTATE PVT LTD I N ITA NO. 6037/MUM/2016 DATED 27.06.2018. 4. ON THE OTHER HAND THE LEARNED DR FOR THE REVENUE SU PPORTED THE ORDER OF AUTHORITIES BELOW. THE LD DR SUBMITS THAT THE ASSES SING OFFICER RIGHTLY FOLLOWED THE DECISION OF DELHI HIGH COURT IN ANSAL HOUSING FINANCE & LEASING CO LTD (SUPRA). IT WAS FURTHER SUBMITTED TH E LEGISLATURE HAS ALREADY BROUGHT THE AMENDMENT IN SECTION 23(5) OF THE ACT T O BRING THE UNSOLD UNIT AFTER A VACANCY PERIOD OF ONE YEAR. 5. THE LD. AR FOR THE ASSESSEE WAS CONFRONTED WITH THE DECISION OF HON'BLE BOMBAY HIGH COURT IN MANGLA HOMES (P) LTD V. ITO [2009] 182 TAXMAN 55/[2010] 325 ITR 281 . ITA NO. 5549/MUM/2016- GEMSTAR ENTERPRISES 5 6. THE LD. AR OF THE ASSESSEE SUBMITS THAT THE RATIO O F THE DECISION OF JURISDICTIONAL HIGH COURT IN MANGLA HOMES (P) LTD.'S CASE ( SUPRA ) IS NOT APPLICABLE ON THE FACTS OF THE PRESENT CASE. THE FA CTS OF THE SAID CASE ARE ENTIRELY DIFFERENT. THE ASSESSEE IN THE SAID CASE I S NOT THE BUILDER LIKE THE ASSESSEE IN THE CASE IN HAND. IN MANGLA HOMES (P) LTD.'S CASE ( SUPRA ) THE ASSESSEE HAS NOT SHOWN THE VACANT FLATS AS STOCK IN TRADE, RATHER THEY WERE ENGAGED IN THE BUSINESS OF LET OUT OF THE PROPERTIE S, WHICH WAS ONE THEIR OBJECT. 7. WE HAVE CONSIDERED THE RIVAL SUBMISSION OF THE PART IES AND HAVE GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. WE HAVE NO TED THAT THE ASSESSEE HAS RAISED THREE GROUND OF APPEAL, IN ALTERNATIVE T O EACH OTHER. GROUND NO. 1 RELATES TO TREATING THE UNSOLD FLAT WHICH IS SHOW N AS STOCK IN TRADE, BY TREATING TAXABLE UNDER SECTION 23 OF THE ACT. DURIN G THE ASSESSMENT THE ASSESSING OFFICER NOTED THAT THE ASSESSEE COMPLETED TWO PROJECTS NAMELY GEMSTAR COMMERCIAL COMPLEX AND MILANSAR THE ASSES SEE HAS SHOWN UNSOLD UNITS IN GEMSTAR AS STOCK IN TRADE. THE ASSE SSING OFFICER BY REFERRING TO THE DECISION OF THE HON'BLE DELHI HIGH COURT IN THE CASE OF ANSAL HOUSING FINANCE & LEASING CO. LTD. (SUPRA) CO MPUTED THE NOTIONAL ANNUAL LETTING VALUE (ALV) OF THE UNSOLD FLATS AND BROUGHT TO TAX UNDER SECTION 23 OF THE ACT AS INCOME FROM HOUSE PROPERTY. THE LD C IT(A) CONFIRMED THE ACTION OF ASSESSING OFFICER HOLDING T HAT THE FACT OF THE CASE ITA NO. 5549/MUM/2016- GEMSTAR ENTERPRISES 6 ARE SIMILAR TO THE FACTS OF CASE LAW RELIED BY ASSE SSING OFFICER IN ANSAL HOUSING FINANCE & LEASING CO. LTD (SUPRA). 8. THERE IS NO DISPUTE OF THE FACT THAT THE ASSESSEE I S IN THE BUSINESS OF BUILDERS, DEVELOPERS AND CONSTRUCTION. THE ASSESSEE HAS CONSTRUCTED TWO GEMSTAR COMMERCIAL COMPLEX AND MILANSAR THE ASSES SEE HAS SHOWN UNSOLD UNITS IN GEMSTAR AS STOCK IN TRADE IN THE BO OKS OF ACCOUNT. THE UNITS SOLD BY THE ASSESSEE WERE OFFERED UNDER THE HEAD 'I NCOME FROM BUSINESS'. THERE WERE CERTAIN UNSOLD FLATS IN STOCK IN TRADE W HICH THE AO TREATED AS PROPERTY ASSESSABLE UNDER THE HEAD 'INCOME FROM HOU SE PROPERTY' AND COMPUTED NOTIONAL ANNUAL LETTING VALUE ON SUCH UNSO LD FLATS PLACING RELIANCE ON THE DECISION IN THE CASE OF ANSAL HOUSI NG FINANCE & LEASING CO. LTD. (SUPRA). THE LD AR FOR THE ASSESSEE STRONG LY RELIED ON THE DECISION OF MUMBAI TRIBUNAL IN RUNAWAL CONSTRUCTIONS & RUNAW AL BUILDERS PVT LTD (SUPRA), WHEREIN THE FOLLOWING ORDER WAS PASSED ; 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF THE AUTHORITIES BELOW AND THE DECISIONS RELIED UPON. IT IS AN UNDIS PUTED FACT THAT THE ASSESSEES ARE IN THE BUSINESS OF BUILDERS, DEVELOPERS AND CON STRUCTION. BOTH THE ASSESSEES HAVE CONSTRUCTED VARIOUS PROJECTS AND THE PROJECTS WERE TREATED AS STOCK IN TRADE IN THE BOOKS OF ACCOUNT. FLATS SOLD BY THE ASSESSEE S WERE ASSESSED UNDER THE HEAD 'INCOME FROM BUSINESS'. THERE WERE CERTAIN UNS OLD FLATS IN STOCK IN TRADE WHICH THE AO TREATED AS PROPERTY ASSESSABLE UNDER T HE HEAD 'INCOME FROM HOUSE PROPERTY' AND COMPUTED NOTIONAL ANNUAL LETTING VALU E ON SUCH UNSOLD FLATS PLACING RELIANCE ON THE DECISION IN THE CASE OF ANSAL HOUSI NG FINANCE & LEASING CO. LTD. (SUPRA). THE ACTION OF THE AO WAS UPHELD BY TH E LEARNED CIT(A). 8. THE HON'BLE GUJARAT HIGH COURT IN THE CASE OF NE HA BUILDERS PVT. LTD. (SUPRA) CONSIDERED THE QUESTION WHETHER THE RENTAL INCOME R ECEIVED FROM ANY PROPERTY IN THE CONSTRUCTION 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 BUSINESS OF THE ASSESSEE IS TO CONSTRUCT THE PROPERTY AND SELL IT OR TO CONSTRUCT AND LET OUT TH E SAME, THEN THAT WOULD BE THE ITA NO. 5549/MUM/2016- GEMSTAR ENTERPRISES 7 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 HOUSE PROPERTY. WHI LE 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 PROPERTY, BUT IF THE PROPERTY IS USED AS 'STOCK-IN-TRADE', THEN THE SAID PROPERTY WOULD BECOME OR PARTAKE THE CHARACTER OF THE STOCK, AND ANY INCOME DERIVED FROM THE STOCK, WOULD BE 'IN COME' FROM THE BUSINESS, AND NOT INCOME FROM THE PROPERTY. IF THE BUSINESS O F THE 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 BUSINESS STOCK S, 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 WAS DIS TINCTION BETWEEN THE 'INCOME FROM BUSINESS' AND 'INCOME FROM PROPERTY' O N ONE SIDE, AND 'ANY INCOME FROM OTHER SOURCES'. THE TRIBUNAL, IN OUR CO NSIDERED OPINION, WAS ABSOLUTELY UNJUSTIFIED IN COMPARING THE RENTAL INCO ME WITH THE DIVIDEND INCOME ON THE SHARES OR INTEREST INCOME ON THE DEPO SITS. EVEN OTHERWISE, THIS QUESTION WAS NOT RAISED BEFORE THE SUBORDINATE TRIB UNALS AND, ALL OF SUDDEN, THE TRIBUNAL STARTED APPLYING THE ANALOGY. 9. FROM THE STATEMENT OF THE ASSESSEE, IT WOULD CLE ARLY 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, WHICH HAS BEEN LET OUT BY THE ASSESSEE, ALL OTHER PORTIONS OF THE PROPERTY CO NSTRUCTED HAVE BEEN SOLD OUT. IF THAT BE SO, THE PROPERTY, RIGHT FROM THE BE GINNING WAS A 'STOCK-IN- TRADE' .' 9. SIMILARLY THE COORDINATE BENCH HAS CONSIDERED SI MILAR ISSUE AS TO WHETHER THE UNSOLD PROPERTY WHICH IS HELD AS STOCK IN TRADE BY THE ASSESSEE CAN BE ASSESSED UNDER THE HEAD 'INCOME FROM HOUSE PROPERTY' BY NOTI ONALLY COMPUTING THE ANNUAL LETTING VALUE FROM SUCH PROPERTY AND THE COORDINATE BENCH CONSIDERING THE DECISION OF THE HON'BLE DELHI HIGH COURT IN THE CAS E OF ANSAL HOUSING FINANCE & LEASING CO. LTD. (SUPRA) WHICH THE AO RELIED UPON AND THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF CHENNAI PROPERTIES & INVESTMENTS LTD. VS. CIT REPORTED IN 373 ITR 673, HELD THAT UNSOLD FLATS WH ICH ARE IN STOCK IN TRADE SHOULD BE ASSESSED UNDER THE HEAD 'BUSINESS INCOME' AND THERE IS NO JUSTIFICATION IN ESTIMATING RENTAL INCOME FROM THOSE FLATS AND NO TIONALLY COMPUTING ANNUAL LETTING VALUE UNDER SECTION 23 OF THE ACT. WHILE HOLDING SO THE COORDINATE BENCH OBSERVED AS UNDER: - '3. THE LD. AR PLACED THE ORDER OF BOMBAY TRIBUNAL IN THE CASE OF M/S PERFECT SCALE COMPANY PVT. LTD., ITA NOS.3228 TO 32 34/MUM/2013, ORDER DATED 6-9-2013, WHEREIN IT WAS HELD THAT IN RESPECT OF ASSETS RUNWAL CONSTRUCTIONS & RUNWAL BUILDERS HELD AS BUSINESS, I NCOME 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 HON'BLE DELHI HIGH COURT IN THE CASE OF ANSAL HOUSING 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 ITA NO. 5549/MUM/2016- GEMSTAR ENTERPRISES 8 COMPUTE THE ANNUAL VALUE. RECENTLY THE HON'BLE SUPR EME 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 PROP ERTIES AND THE RENTAL INCOME RECEIVED WAS SHOWN AS BUSINESS INCOME, THE A CTION OF AO TREATING THE RENTAL INCOME AS INCOME FROM HOUSE PROPERTY IN PLACE OF INCOME FROM BUSINESS SHOWN BY THE ASSESSEE WAS HELD TO BE NOT J USTIFIED. THE HON'BLE SUPREME COURT HELD THAT SINCE THE ASSESSEE COMPANY' S MAIN OBJECT, IS TO ACQUIRE AND HELD PROPERTIES AND TO LET OUT THESE PR OPERTIES, THE INCOME EARNED BY LETTING OUT THESE PROPERTIES IS MAIN OBJECTIVE O F THE COMPANY, THEREFORE, RENT RECEIVED FROM THE LETTING OUT OF THE PROPERTIE S IS ASSESSABLE AS INCOME FROM BUSINESS. ON THE VERY SAME ANALOGY IN THE INST ANT CASE, ASSESSEE IS ENGAGED IN BUSINESS OF CONSTRUCTION AND DEVELOPMENT , WHICH IS MAIN OBJECT OF THE ASSESSEE COMPANY. THE THREE FLATS WHICH COUL D 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 INSOFAR AS THESE FLATS WERE NEITHER GIVEN ON RENT NOR THE A SSESSEE HAS INTENTION TO EARN RENT BY LETTING OUT THE FLATS. THE FLATS NOT SOLD W AS 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 TH E ORDER OF AO FOR ESTIMATING RENTAL INCOME FROM THESE VACANT FLATS U/ S.23 WHICH IS ASSESSEE'S STOCK IN TRADE AS AT THE END OF THE YEAR. ACCORDING LY, THE AO IS DIRECTED TO DELETE THE ADDITION MADE BY ESTIMATING LETTING VALU E OF THE FLATS U/S.23 OF THE I.T.ACT.' 10. IN THE CASE ON HAND BEFORE US IT IS AN UNDISPUT ED FACT THAT BOTH ASSESSEES HAVE TREATED THE UNSOLD FLATS AS STOCK IN TRADE IN THE B OOKS 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 UN DER THE HEAD 'INCOME FROM BUSINESS' WHEN THEY ARE SOLD AND THEREFORE THE AO I S NOT CORRECT IN BRINGING TO TAX NOTIONAL ANNUAL LETTING VALUE IN RESPECT OF THO SE UNSOLD FLATS UNDER THE HEAD 'INCOME FROM RUNWAL CONSTRUCTIONS & RUNWAL BUILDERS HOUSE PROPERTY'. THUS, WE DIRECT THE AO TO DELETE THE ADDITION MADE UNDER SECTION 23 OF THE ACT AS INCOME FROM HOUSE PROPERTY. 9. FURTHER, BY FOLLOWING THE DECISION OF RUNAWAL CONST RUCTIONS & RUNAWAL BUILDERS (SUPRA), IDENTICAL RELIEF WAS GRANTED IN A RIHANT ESTATE PVT LTD (SUPRA). COMING TO THE FACTS OF THE PRESENT CASE, W HEN THE FATS ARE NOT AT VARIANCE AS THE ASSESSEE HAS SHOWN THE UNSOLD FLATS AS STOCK IN TRADE. 10. IN CIT VS ANSAL HOUSING FINANCE LTD (SUPRA) THE HO NBLE DELHI HIGH COURT HAS TAKEN A VIEW THAT ALV OF UNSOLD FLAT BUIL T BY THE BUILDER IS ASSESSABLE AS INCOME FROM THE HOUSE PROPERTY. HOWEV ER, THERE IS CONTRARY ITA NO. 5549/MUM/2016- GEMSTAR ENTERPRISES 9 VIEW OF HONBLE GUJARAT HIGH COURT IN NEHA BUILDERS (SUPRA) 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 SAID PROPERTY WOULD BECOME OR PARTAKE THE CHARACTER OF THE STOCK, AND INCOME DERIVED FROM THE STOCK, WOULD BE INCOME FROM THE BUSINESS , AND NOT FROM THE PROPERTY. IF THE BUSINESS OF THE ASSESSEE IS TO CON STRUCT THE PROPERTY AND TO SELL IT OR TO CONSTRUCT AND LET OUT THE SAME, THEN WOULD BE THE BUSINESS AND THE BUSINESS STOCKS, MAY INCLUDED MOVEABLE OR IMMOV EABLE, WOULD BE TAKEN TO BE STOCK IN TRADE AND ANY INCOME FROM SU CH STOCK CANNOT BE TERMED AS INCOME FROM PROPERTY. THERE IS NO DIRE CT DECISION ON THIS ISSUE BY JURISDICTIONAL HIGH COURT; THEREFORE, THE VIEW I N FAVOUR OF THE ASSESSEE HAS TO BE ADOPTED IN VIEW OF DECISION OF HONBLE AP EX COURT IN CIT VS VEGETABLE PRODUCT LTD. (88 ITR 192 SC). SUB-SECTIO N (5) IN SECTION 23 WAS INSERTED BY FINANCE ACT 2017 W.E.F. 01.04.2018; THE REFORE, THE SAME IS NOT APPLICABLE FOR THE ASSESSMENT YEAR UNDER CONSIDERAT ION. 11. THEREFORE, RESPECTFULLY FOLLOWING THE DECISIONS OF COORDINATE BENCH THE AND THE DECISIONS OF GUJARAT HIGH COURT IN NEHA BUILDER S (SUPRA) WE ARE OF THE VIEW THAT THE ASSESSING OFFICER WAS NOT JUSTIFIED I N BRINGING THE UNSOLD FLAT TO BRING IT UNDER INCOME FROM HOUSE PROPERTY. 12. THE SUBMISSION OF THE LD DR THAT THE LEGISLATURE H AS ALREADY BROUGHT THE AMENDMENT IN SECTION 23(5) OF THE ACT TO BRING THE UNSOLD UNIT AFTER A VACANCY PERIOD OF ONE YEAR IS NOT ACCEPTABLE TO US AS THE SAID AMENDMENT ITA NO. 5549/MUM/2016- GEMSTAR ENTERPRISES 10 WAS BROUGHT BY FINANCE ACT, 2017 AND IS APPLICABLE FROM 01.04.2018, THUS, THE SAID AMENDMENT IS NOT APPLICABLE FOR THE YEAR U NDER CONSIDERATION. 13. IN THE RESULT THE GROUND NO.1 OF THE APPEAL IS ALL OWED. 14. CONSIDERING OUR FINDING ON GROUND NO.1, WHICH WE HA VE ALLOWED, THEREFORE, THE ALTERNATIVE GROUNDS OF APPEAL RAISED BY THE ASSESSEE HAS BECOME ACADEMIC. 15. IN THE RESULT THE APPEAL OF THE ASSESSEE IS ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT ON 06.06.2019. SD/- SD/ - G.S. PANNU PAWAN SINGH VICE-PRESIDENT JUDICIAL MEMBER MUMBAI, DATE: 06.06.2019 SK COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE 2. RESPONDENT 3. THE CONCERNED CIT(A) 4. THE CONCERNED CIT 5. DR G BENCH, ITAT, MUMBAI 6. GUARD FILE BY ORDER, DY./ASST. REGISTRAR ITAT, MUMBAI