Case Law Details
Tata Housing Development Company Ltd vs PCIT (ITAT Mumbai)
sub-section (5) to Section 23 has been inserted by the Finance Act, 2017 w.e.f. 01-4-2018, whereby notional annual value of property/part of property held has stock-in-trade has been brought to tax subject to conditions specified in the newly inserted sub-section. The amendment is substantive in nature and hence, would be effective prospectively i.e. it would no application in the impugned assessment year. Thus, no addition on account of notional rental value of the flats held as stock in trade by the assessee could have been made by the Assessing Officer in the impugned assessment year.
The Co-ordinate Bench of the Tribunal in the case of S D Corporation (P) Ltd. vs. Pr.CIT (supra) under similar situation has held that invoking of provisions of section 263 of the Act is bad in law. The relevant extract of the order of the Tribunal reads as under:-
“13. We have noted that during the assessment, the assessee vide its reply/letter dated 24.11.2015 furnished the detail of opening and closing stock consisting of flat readily available for sale in respect of Imperil project. In the details of inventory, the assessee clearly bring on record that at the time of opening of written down value of 21 flat, consisting of area of 80000 (may be sq.ft.) total value of Rs. 170,41,088,56/-out of which the assessee has sold 14 flats of total area 48830 (may be sq.ft.) of value of Rs. 104,01,45,443/-. Thereby the assessee remained in possession of total 7 unsold flats consisting area of 31170 (may be sq.ft.) value of which was shown at Rs. 66,39,63,413/-. The assessee has also furnished the complete details of name of parties, flat number and details of the cost of flats sold during the year. Moreover, the ld. CIT(A) in the notice under section 263 has referred that on verification, certain discrepancies were found in the assessment order. The ld. CIT(A) has also referred that the assessee has shown unsold flat valuing of Rs. 66,39,63,413/- in closing stock. Thereby, all the information/details were gathered by the ld. PCIT from the assessment record. We have further noted that in the notice, the ld. CIT(A) has referred the decision of Hon’ble Delhi High Court in Ansal Housing Finance & Leasing Co. Ltd.’s case (supra). The ld. AR of the assessee while making submission has vehemently submitted that issue is debatable and there is contrary decision of Hon’ble Gujarat High Court in Neha Builders (P.) Ltd.’s case (supra) wherein the Hon’ble Court has taken a view that, if property is used as a stock-in-trade, then said property would become or partake character of stock and any income derived from such stock would be “Income from Business” and not “Income from House Property”. Therefore, keeping in view the contrary decision of non-jurisdictional High Court, we are of the view that issue is debatable and two views are possible. The Hon’ble Supreme Court in Max India Ltd.’s case (supra) held that when two views are inherently possible, the provision of section 263 would not attract. We may refer here that the unsold flat was treated by assessee as stock-in-trade in its books of account. The flats sold by the assessee were assessed under the head “Income from Business”. Therefore, in our considered view that the order for not bringing the unsold flats to tax at notional letting value under the head “Income from Other Sources” is not erroneous. The assessing officer has taken one of the possible views. Even otherwise, sub-section (5) in section 23 was inserted by Finance Act, 2017 and is applicable only from 01.04.2018 and not for the Assessment Year under consideration. Therefore, the twin condition as prescribed under section 263 are not fulfilled in respect of first issue i.e. taxability of unsold flats under the head “Income from House Property”.”
Similar view has been taken by the Tribunal in the case of Archie Creation vs. PCIT(supra).
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