SARANG PROPERTY DEVELOPERS P.LTD, MUMBAI V. ACIT CEN CIR 4(1), MUMBAI

ITA 5620/MUM/2016

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 6728 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 9 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-06-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Assessment Year: 2012-2013
• Appeal Filed On: 16-09-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VIRENDER SINGH
• Keywords: Business income
• Section: 143(3)

Judgement Text

IN THE INCOME-TAX APPELLATE TRIBUNAL D BENCH MU MBAI BEFORE SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER AND SHRI PAWAN SINGH, JUDICIAL MEMBER ITA NO.5620/MUM/2016 (ASSESSMENT YEAR 201 2-13 ) M/S SARANG PROPERTY DEVELOPERS PVT. LTD. 215, ATRIUM, 10 TH FLOOR, NEAR MARRIOT COURTYARD HOTEL, ANDHERI-KURLA ROAD, ANDHERI (E), MUMBAI-400093. PAN: AADCS6382B VS. ACIT, CENTRAL CIRCLE 4(1) AIR INDIA BUILDING, 19 TH FLOOR, NARIMAN POINT, MUMBAI. APPELLANT RESPONDEN T APPELLANT BY : SHRI ANUJ KISNADWALA (AR) RESPONDENT BY : SHRI VIRENDER SINGH (DR) DATE OF HEARING : 26.06.2018 DATE OF PRONOUNCEMENT : 26.06.2018 ORDER 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)-52, MUMBAI [LD. CIT(A)] DAT ED 01.06.2016, WHICH IN TURN ARISES FROM THE ASSESSMENT ORDER PASS ED BY ASSESSING OFFICER UNDER SECTION 143(3) OF THE ACT DATED 11.03 .2015 FOR ASSESSMENT YEAR 2012-13. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: 1. THE LEARNED COMMISSIONER OF INCOME TAX ERRED IN LAW & ON FACTS IN CONFIRMING ORDER OF THE ASSESSING OFFICER IN ADDING THE ALV OF THE UNSOLD UNITS WHICH CONSTITUTES STOCK IN TRADE OF THE APPEL LANT AS INCOME FROM HOUSE PROPERTY U/S 22 OF THE INCOME TAX ACT, 1961. 2. THE APPELLANT PRAYS THAT THE ORDER PASSED U/S. 1 43(3) ADDING SUM OF RS. 3,66,23,328/- AS ALV OF THE UNSOLD UNITS UNDER THE HEAD INCOME FROM HOUSE PROPERTY IS BAD IN LAW & SHOULD BE QUASHED. 2. BRIEF FACTS AND OF THE CASE ARE THAT THE ASSESSEE I S A PRIVATE LIMITED COMPANY ENGAGED IN THE BUSINESS OF REAL ESTATE DEVE LOPMENT, FILED ITS ITA NO. 5620 MUM 16-MS SARANG PROPERTY DEVELOPERS PVT. LTD. 2 RETURN OF INCOME FOR ASSESSMENT YEAR 2012-13 ON 26. 09.2012 DECLARING LOSS OF RS. 12,67,107/-. THE ASSESSMENT WAS COMPLET ED U/S 143(3)ON 11.03.2014. THE ASSESSING OFFICER WHILE PASSING THE ASSESSMENT ORDER WORKED OUT THE ANNUAL LETTING VALUE (ALV) OF UNSOLD UNITS AT RS. 5,23,19,040/- AND ADDED RS. 3,66,23,328/- UNDER TH E HEAD INCOME FROM HOUSE PROPERTY AND AFTER GRANTING STATUTORY DEDUC TION UNDER SECTION 24A. ON APPEAL BEFORE THE LD. CIT(A), THE ACTION OF ASSE SSING OFFICER WAS CONFIRMED. THEREFORE, FURTHER AGGRIEVED BY THE ORDE R OF LD. CIT(A), THE ASSESSEE HAS FILED THE PRESENT APPEAL BEFORE US. 3. WE HAVE HEARD THE LD. AUTHORIZED REPRESENTATIVE (AR ) OF THE ASSESSEE AND LD. DEPARTMENTAL REPRESENTATIVE (DR) FOR THE REVENU E AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE LD. AR OF THE ASS ESSEE SUBMITS THAT THE ASSESSEE OFFERED INCOME IN RESPECT OF SALE OF UNIT. THE ASSESSEE HAS SHOWN THE BALANCE UNSOLD UNIT AS STOCK-IN-TRADE. THE ASSE SSEE WAS HAVING SUCH UNSOLD UNIT OF RS. 8,94,42,150/- UNDER THE HEAD CL OSING INVENTORIES. THE ASSESSEE WAS HOLDING UNSOLD UNIT AS STOCK-IN-TRADE TO EARN BUSINESS INCOME AND NOT FOR RENTAL INCOME. THE SAID UNSOLD UNIT CAN NOT BE TAXED ON THE BASIS OF NOTIONAL ALV BECAUSE THE ASSESSEE POSSESSE D SUCH UNOCCUPIED UNIT IN THE COURSE OF HIS BUSINESS AS BUILDER AND D EVELOPER. IN SUPPORT OF HIS SUBMISSION, THE LD. AR OF THE ASSESSEE RELIED U PON THE DECISION OF HONBLE GUJARAT HIGH COURT IN CASE OF CIT VS. NEHA BUILDERS PVT. LTD. (296 ITR 661), DECISION OF MUMBAI TRIBUNAL IN M/S RUNWAL ITA NO. 5620 MUM 16-MS SARANG PROPERTY DEVELOPERS PVT. LTD. 3 CONSTRUCTIONS VS. ACIT (ITA NO. 5408/M/2016 DATED 2 2.02.2018), M/S C.R. DEVELOPMENTS PVT. LTD. VS. JCIT (ITA NO. 4277/ M/2012 DATED 13.05.2015 ACIT VS. M/S CLASSIQUE ASSOCIATES IN ITA NO. 4575/MUM/2013 DATED 29.06.2015. ON THE OTHER HAND, THE LD. DR FOR THE REVENUE SUPPORTED THE ORDER OF AUTHORITIES BELOW. T HE LD. DR FOR THE REVENUE FURTHER SUBMITS THAT THE ASSESSING OFFICER ON THE BASIS OF DECISION OF HONBLE DELHI HIGH COURT IN ANSAL HOUSI NG FINANCING & LEASING CO. LTD. (354 ITR 180) HELD THAT ASSESSEE I S LIABLE TO BE TAXED ON THE ALV OF UNSOLD FLAT OWNED BY IT UNDER THE HEAD INCOME FROM HOUSE PROPERTY. ON OUR SPECIFIC QUERY FROM BOTH THE LD. REPRESENTATIVE SUBMITS THAT THERE IS NO DECISION OF JURISDICTIONAL HIGH CO URT ON THIS ISSUE. BOTH THE REPRESENTATIVE REPLIED IN NEGATIVE. 4. WE HAVE CONSIDERED THE SUBMISSION OF PARTIES AND GO NE THROUGH THE ORDERS OF AUTHORITIES BELOW. WE HAVE NOTED THAT ASSESSING OFFICER AS WELL AS LD. CIT(A) WHILE RELYING UPON THE DECISION OF DELHI HIG H COURT I.E. IN ANSAL HOUSING FINANCING & LEASING CO. LTD. (SUPRA) WHEREI N IT WAS HELD THAT ASSESSEE IS LIABLE TO BE TAXED ON NOTIONAL ALV OF U NSOLD UNITS UNDER THE HEAD INCOME FROM HOUSE PROPERTY. THE LD. AR OF TH E ASSESSEE IS RELYING UPON THE DECISION OF HONBLE GUJARAT HIGH COURT IN CIT VS. NEHA BUILDERS P. LTD. (SUPRA) WHEREIN IT WAS HELD THAT WHEN THE A SSESSEE-COMPANY ENGAGED IN THE BUSINESS OF CONSTRUCTION OF PROPERTY AND ONE OF THE BUILDING/PROPERTY WAS INCLUDED IN THE CLOSING STOCK IN THE BALANCE-SHEET ITA NO. 5620 MUM 16-MS SARANG PROPERTY DEVELOPERS PVT. LTD. 4 DRAWN BY ASSESSEE, THE PROPERTY WOULD PARTAKE THE C HARACTER OF STOCK AND ANY INCOME DERIVED FROM STOCK WOULD NOT BE TAKE N TO BE INCOME FROM HOUSE PROPERTY. THE HONBLE HIGH COURT FURTHER HELD THAT BUSINESS OF THE ASSESSEE IS TO CONSTRUCT THE PROPERTY AND SALE IT, THEN THAT WOULD BE THE BUSINESS AND BUSINESS STOCK, WOULD BE TAKEN AS STO CK-IN-TRADE AND ANY INCOME DERIVED FROM SUCH STOCK CANNOT BE TERMED AS INCOME FROM HOUSE PROPERTY. 5. IN THE CASE IN HAND, THERE IS NO DISPUTE THAT ASSES SEE TREATED THE UNSOLD UNIT IS TREATED AS STOCK-IN-TRADE IN ITS BOOKS OF ACCO UNT. FURTHER, THE UNIT SOLD BY THE ASSESSEE HAS BEEN OFFERED UNDER THE HEAD IN COME FROM BUSINESS. THUS, THE UNSOLD FLAT WHICH ARE STOCK-IN-TRADE, WHE N ARE SOLD, THEY ARE ASSESSABLE UNDER THE HEAD INCOME FROM BUSINESS AN D THEREFORE, THE ASSESSING OFFICER IS NOT CORRECT IN BRINGING THOSE UNITS TO TAX ON THE BASIS OF NOTIONAL ALV UNDER THE HEAD INCOME FROM HOUSE P ROPERTY. 6. WE ARE CONSCIOUS OF THE FACT THAT THE DECISION OF H ONBLE DELHI HIGH COURT IN ANSAL HOUSING FINANCING & LEASING CO. LTD. (SUPR A) IS AGAINST THE ASSESSEE. THE HONBLE SUPREME COURT IN CASE OF CIT VS. VEGETABLE PRODUCTS LTD. (88 ITR 92) HELD THAT WHEREIN TWO REA SONABLE CONSTRUCTION TO TAX PROVISION ARE POSSIBLE THAT CONSTRUCTION WHI CH FAVOURS ASSESSEE MUST BE ADOPTED. THEREFORE, WITH UTMOST REGARD TO THE DE CISION OF DELHI HIGH COURT IN CASE IN ANSAL HOUSING FINANCING & LEASING CO. LTD. (SUPRA), WE ITA NO. 5620 MUM 16-MS SARANG PROPERTY DEVELOPERS PVT. LTD. 5 ARE ACCEPTING THE VIEW TAKEN BY GUJARAT HIGH COURT IN CIT VS. NEHA BUILDERS (SUPRA). 7. THE HONBLE SUPREME COURT IN CASE OF CHENNAI PROPER TY (373 ITR 673) HELD THAT WHEN THE COMPANY IS PRIMARILY ENGAGED IN BUSINESS OF CONSTRUCTION AND DEVELOPMENT, WHICH IS THE MAIN OBJ ECT OF THE ASSESSEE, THE INCOME DERIVED BY ASSESSEE WOULD BE INCOME FRO M BUSINESS. ON THE SAME ANALOGY IN THE CASE IN HAND, THE ASSESSEE IS E NGAGED IN THE BUSINESS OF CONSTRUCTION AND DEVELOPMENT, WHICH IS THE MAIN BUSINESS OF THE ASSESSEE, THE UNITS WHICH COULD NOT BE SOLD AT THE END OF THE YEAR AND WERE SHOWN AS STOCK-IN-TRADE, ESTIMATING RENTAL INCOME ON NOTIONAL ALV WAS NOT JUSTIFIED. PARTICULARLY WHEN, THERE IS NO EVIDE NCE ON RECORD THAT THESE UNITS WERE EITHER GIVEN ON RENT OR THAT THE ASSESSE E HAS INTENTION TO LET OUT THOSE UNITS. THE UNITS WHICH ARE NOT SOLD ARE STOCK -IN-TRADE AND THE INCOME ARISING OF ITS SALE IS LIABLE TO BE TAXED AS BUSINE SS INCOME, THEREFORE, WE DO NOT FIND ANY JUSTIFICATION IN CALCULATING NOTIONAL ALV OF THE VACANT UNITS. THEREFORE, WE DIRECT THE ASSESSING OFFICER TO DELET E THE ADDITION MADE ON ESTIMATE BASIS. IN THE RESULT, GROUND OF APPEAL RAI SED BY ASSESSEE IS ALLOWED. 8. IN THE RESULT, APPEAL FILED BY ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 26.06.2018. SD/- SD/- SHAMIM YAHYA PAWAN SINGH ACCOUNTANT MEMBER JUDIC IAL MEMBER ITA NO. 5620 MUM 16-MS SARANG PROPERTY DEVELOPERS PVT. LTD. 6 MUMBAI, DATE: 26.06.2018 SK COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE 2. RESPONDENT 3. THE CONCERNED CIT(A) 4. THE CONCERNED CIT 5. DR D BENCH, ITAT, MUMBAI 6. GUARD FILE BY ORDER, DY./ASST. REGISTRAR ITAT, MUMBAI