M/s. Kumar Company, Pune V. Deputy Commissioner of Income-tax, Circle - 7, Pune

ITA 568/PUN/2018

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 6968 (ITAT-PUNE)
• Duration Of Justice: 3 year(s) 5 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-09-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 06-09-2021
• Assessment Year: 2013-2014
• Appeal Filed On: 28-03-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S P WALIMBE
• Keywords: Set aside
• Section: 201; 13; 22

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, PUNE (THROUGH VIRTUAL COURT) BEFORE SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER AND SHRI S.S. VISWANETHRA RAVI, J UDICIAL MEMBER . / ITA NO. 568 /PUN/201 8 / ASSESSMENT YEAR : 201 3 - 14 KUMAR CONSTRUCTION AND PROPERTIES PRIVATE LIMITED, (PREVIOUSLY KNOWN AS M/S. KUMAR COMPANY), 2413, 1 ST FLOOR, KUMAR CAPITAL, EAST STREET, CAMP, PUNE - 411001 PAN : AAICK0938Q ....... / APPELLANT / V/S. DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE 7, PUNE / RESPONDENT ASSESSEE BY : SHRI RAJENDRA AGIWAL REVENUE BY : SHRI S.P. WALIMBE / DATE OF HEARING : 06 - 09 - 2021 / DATE OF PRONOUNCEMENT : 07 - 0 9 - 202 1 / ORDER PER S.S. VISWANETHRA RAVI, JM : THIS APPEAL BY THE ASSESSEE AGAINST THE ORDER DATED 24 - 11 - 2017 PASSED BY THE COMMISSIONER OF INCOME TAX (APPEALS) - 5 , PUNE [CIT(A)] FOR ASSESSMENT YEAR 201 3 - 14. 2 ITA NO .568/PUN/2018, A.Y. 2013 - 14 2 . THE ASSESSEE RAISED 8 GROUNDS OF APPEAL AMONGST WHICH THE O NLY ISSUE EMANATES FOR CONSIDERATION IS AS TO WHETHER THE CIT(A) JUSTIFIED IN CONFIRMING THE ADDITION MADE BY THE AO ON ACCOUNT OF DEEMED RENTAL INCOME O N UNSOLD FLATS IN THE FACTS AND CIRCUMSTANCES OF THE CASE. 3. BRIEF FACTS RELATING TO THE ISSUE ON HAND ARE THAT THE ASSESSEE IS A PRIVATE LIMITED COMPANY ENGAGED IN THE BUSINESS OF CONSTRUCTION ACTIVITY OF VARIOUS RESIDENTIAL AND COMMERCIAL PROJECTS. THE ASSESSEE FILED ITS RETURN OF INCOME DECLARING A LOSS OF RS.36,50,78,966/ - . THE AO ON ACCOUNT OF D EEMED RENT U/S. 23(4) OF THE ACT ON UNSOLD FLAT ADDED AN AMOUNT OF RS.2,49,200/ - TO THE TOTAL INCOME OF THE ASSESSEE. THE CIT(A) CONFIRMED THE SAME. 4. HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. DURING THE COURSE OF ASSESSMEN T PROCEEDINGS, WE NOTE THAT THE ASSESSEE IS HOLDING STOCK OF 6 FLATS WHICH ARE COMPLETED AND THE DETAILS OF WHICH ARE REFLECTED IN PARA NO. 5 OF THE ASSESSMENT ORDER. THE AO ASKED THE ASSESSEE TO EXPLAIN AS TO WHY DEEMED RENT IN RESPECT OF SAID 6 FLATS SH OULD NOT BE CHARGED TO TAX UNDER THE PROVISIONS OF SECTION 22 OF THE ACT. THE ASSESSEE EXPLAINED VIDE ITS SUBMISSIONS DATED 09 - 03 - 2016 , WE NOTE THAT THE MAIN CONTENTION OF LD. AR IS THAT THE UNSOLD FLATS FORMS PART OF STOCK IN TRADE AND THERE IS NO INTENT ION FOR THE ASSESSEE TO LET OUT THE SAID UNSOLD FLATS BUT ONLY TO SELL IN THE MARKET . THE AO REJECTED THE CONTENTION RAISED BY THE ASSESSEE AND CALCULATED THE DEEMED RENTAL INCOME REGARDING THE ABOVE SAID UNSOLD FLATS BY DEPUTING THE INSPECTOR FOR FIELD E NQUIRY ASCERTAINING THE MONTHLY FAIR MARKET RENT. THE CIT(A) IN THE IMPUGNED 3 ITA NO .568/PUN/2018, A.Y. 2013 - 14 ORDER AGREED WITH THE VIEW TAKEN BY THE AO. A SIMILAR ISSUE CAME UP BEFORE THIS TRIBUNAL IN ASSESSEES SISTER CONCERN IN THE CASE OF KUMAR PROPERTIES AND REAL ESTATE PRIVATE LIM ITED IN ITA NO. 2977/PUN/2017 FOR A.Y. 2013 - 14. THE CO - ORDINATE BENCH OF TRIBUNAL VIDE ORDER DATED 28 - 04 - 2021 DISCUSSED THE ISSUE IN DETAIL FROM PARA NOS. 3 TO 13 OF THE SAID ORDER AND HELD THAT AN EXCEPTION HAS BEEN CARRIED OUT IN SECTION 22 OF THE ACT T HAT ANY SUCH PROPERTY OR ITS PART, WHICH IS OCCUPIED BY THE ASSESSEE FOR THE PURPOSES OF ANY BUSINESS OR PROFESSION CARRIED , THE PROFITS OF WHICH ARE CHARGEABLE TO INCOME - TAX, SHALL BE EXCLUDED ON SATISFYING THE CONDITIONS THEREIN. THE CO - ORDINATE BENCH , FURTHER DISCUSSED THE SAID 4 CONDITIONS IN PARA NOS. 6, 7, 8 AND 9. THE FIRST CONDITION BEING THAT THE PROPERTY OR ITS PART SHOULD BE OCCUPIED BY THE ASSESSEE AS AN OWNER. THE RE IS NO MATERIAL EVIDEN CE TO SHOW BEFORE US THAT THE ASSESSEE IS NOT OCCUPIED T HE SAID UNSOLD 6 FLATS. THE SECOND CONDITION IS THAT ANY BUSINESS OR PROFESSION SHOULD BE CARRIED ON BY THE ASSESSEE . WE NOTE THAT THE ASSESSEE FILED RETURN SHOWING INCOME FROM SUCH BUSINESS AND ALSO E NGAGED IN THE BUSINESS OF PROPERTY DEVELOPMENT . THE THIRD CONDITION IS THAT THE OCCUPATION OF THE PROPERTY SHOULD BE FOR THE PURPOSE OF BUSINESS OR PROFESSION WHEREIN THE ASSESSEE BEFORE US SHOWN THE SAID 6 UNSOLD FLATS AS STOCK IN TRADE . THE LAST CONDITION IS THAT PROFITS OF SUCH BUSINESS OR PROFES SION SHOULD BE CHARGEABLE TO INCOME - TAX. IN THE PRESENT CASE THAT THERE IS NO DISPUTE THAT THE PROFITS OF THE BUSINESS OF CONSTRUCTION BY THE ASSESSEE ARE CHARGEABLE TO INCOME - TAX. THEREFORE, IN OUR VIEW THAT THE UNSOLD 6 FLATS ARE OCCUPIED BY THE ASSESS EE ARE AS OWNER; BUSINESS OF CONSTRUCTION IS CARRIED ON BY THE ASSESSEE; THE OCCUPATION OF THE FLATS IS FOR THE PURPOSE OF BUSINESS; AND PROFITS OF SUCH BUSINESS ARE CHARGEABLE TO 4 ITA NO .568/PUN/2018, A.Y. 2013 - 14 I NCOME - TAX. THUS, IN OUR OPINION, ALL THE FOUR CONDITIONS PROVIDED IN EXCLU SION CLAUSE IN SECTION 22 OF THE ACT ARE TO BE EXCLUDED, THEREFORE, WE HOLD THAT NO ADDITION ON ACCOUNT OF DEEMED RENT ON UNSOLD 6 FLATS CAN BE MADE IN THE HANDS OF THE ASSESSEE. THUS, THE ORDER OF CIT(A) IS NOT JUSTIFIED AND IT IS SET ASIDE. THUS, THE G ROUNDS RAISED BY THE ASSESSEE ARE ALLOWED. 5. IN THE RESULT, THE APPEAL OF ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 07 TH SEPTEMBER, 2021 . SD/ - SD/ - ( INTURI RAMA RAO ) ( S.S. VISWANETHRA RAVI ) ACCOUNTANT MEMBER JUDICIAL MEMBER / PUNE; / DATED : 07 TH SEPTEMBER, 202 1 . RK / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT. 2. / THE RESPONDENT. 3. THE CIT(A) - 5 , PUNE 4. THE PR. CIT - 4 , PUNE 5. , , , / DR, ITAT, A BENCH, PUNE. 6. / GUARD FILE. // // TRUE COPY// / BY ORDER, / PRIVATE SECRETARY, , / ITAT, PUNE