DCIT Vs Ramesh Narayana Reddy (HUF) (ITAT Bangalore)
The Bangalore Bench of the Income Tax Appellate Tribunal (ITAT) partly allowed the Revenue’s appeal against the order of the CIT(A)/NFAC for Assessment Year 2020-21 involving Ramesh Narayana Reddy (HUF). The appeal concerned three issues: addition of deemed rental income in respect of flats received under a Joint Development Agreement (JDA), treatment of gains from sale of those flats as Short-Term Capital Gain (STCG) instead of Long-Term Capital Gain (LTCG), and taxation of rental receipts as income from plant and machinery.
The assessee had entered into a JDA with Brigade Enterprises Ltd. for development of agricultural land. During assessment, the Assessing Officer added ₹1.18 crore as deemed rental income in respect of flats allotted under the JDA, treated the capital gains declared as LTCG as STCG on the ground that the occupancy certificate was received only on 25.06.2019, and added ₹4,75,590 as income from plant and machinery on the basis of TDS deducted under Section 194-I(a). The CIT(A) deleted all three additions.
On the issue of deemed rental income, the Tribunal observed that the other two co-owners of the same property had not been subjected to similar additions. Relying on the Supreme Court decision in Union of India v. Kaumudini Narayan Dalal, the Tribunal held that the Revenue could not adopt different approaches for co-owners involved in the same transaction. On merits, it also agreed with the CIT(A) that the flats had been acquired for sale and were subsequently sold, and there was no material to show that they were intended for self-occupation. The Tribunal further held that the Revenue’s reliance on Dimple Enterprises v. DCIT was misplaced because that case related to unsold stock-in-trade, whereas the facts in the present case were different. Accordingly, the deletion of the deemed rental income addition was upheld.
