"THE HON’BLE SRI JUSTICE V.V.S.RAO AND THE HON’BLE SRI JUSTICE B.N.RAO NALLA R.C.No.108 OF 1997 ORDER: (Per the Hon’ble Sri Justice V.V.S.Rao) The question referred for the opinion of this Court under Section 256 (1) of the Income Tax Act, 1961 (the Act), as extracted herein below, is at the instance of the Revenue. “Whether on the facts and circumstances of the case, the ITAT is justified in holding that the annual value of the property viz., unsold flats, garages and shops of which the assessee is a legal owner cannot be assessed in the hands of the assessee under sec. 22 of the I.T.Act?” The background facts leading to the said reference in brief are as follows. The respondent (assessee) is a builder of residential/commercial flats (the flats, for brevity). The assessee takes advance amount from the intending purchasers and after completion of the construction, transfers the flats duly executing registered sale deeds in favour of the purchasers. During the assessment years 1983-84 to 1985-86, the assessee could not sell three flats, five garages and five shops in an apartment complex. The possession remained with the assessee (builder). The assessing officer, while assessing the return of income, assessed notional income from the property. In the appeal before the CIT (A), it was held that the vacant flats being stock-in-trade and business assets, cannot be assessed in the hands of the assessee. The notional income was accordingly deleted. The Revenue then appealed before the appellate Tribunal and agreed with the Appellate Commissioner observing that inclusion of notional income from the property under Section 22 of the Act is not justified. The reference was accordingly sought by the Revenue. In spite of service of notice, none appears for the respondent. The Junior Counsel for Income Tax made submissions. During the course of submissions, the counsel for the Revenue brought to the notice of this Court the decision of the Supreme Court in C.I.T. v. Podar Cement Pvt. Ltd. [1]. The Supreme Court considered the question “whether the income derived by the assessee-company therein from flats is taxable under the head of ‘Income from other sources’ under Section 56 of the Act and not income from ‘house property’ under Section 22 of the Act”. On considering the earlier decision in Jodha Mal Kuthiala (R.B.) v. C.I.T[2], in Podar Cement Pvt. Ltd., it is held that “the context of Section 22 of the Act, the owner is a person, who is entitled to receive income from the property in his own right”. Thus, if the builder is not able to sell the flats, which are already constructed, the notional income has to be assessed in the hands of the builder only. Accordingly, the question referred to this Court is answered in negative against the assessee and in favour of the Revenue and the Referred Case shall stand disposed of accordingly, without any order as to costs. _______________ (V.V.S.RAO, J) ____________________ (B.N.RAO NALLA, J) 30th December 2011 RRB [1] (1997) 226 ITR 625 : (1997) 5 SCC 482 [2] (1971) 82 ITR 570 (SC) : (1971) 3 SCC 369 "
