Case Law Details
Haware Engineers & Builders Private Ltd. Vs DCIT (ITAT Mumbai)
If a immovable property in the shape of flats / shops is held as stock-in-trade, then it becomes part of trading operations for the assessee and as a natural corollary, any income derived there-from would be Business Income and not Income from House Property.
FULL TEXT OF THE ITAT JUDGMENT
1. Aforesaid appeal by assessee for Assessment Year [AY] 2012-13 contest the order of Ld. Commissioner of Income-Tax (Appeals)-52 [CIT(A)], Mumbai, Appeal No.CIT(A)-52/DCIT-CC-4(2)/44/2015-16 dated 02/09/2016 by raising following ground of appeal:-
On the facts and in the circumstances of the case and in law, the Commissioner of Income Tax (Appeals) has grossly erred in law as well as on facts in confirming the action of the Assessing Officer (AO) in charging notional income as income from house properties in respect of unsold units (both residential / commercial), which were held by the appellant as its stock in trade.
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Correction: Last but one line from bottom- to be read , – ‘notional’ !
OFFHAND
4.3 Keeping in view the consistent stand of this Tribunal and respectfully following the same, we hold that if a immoveable property in the shape of flats / shops is held as stock-in-trade, then it becomes part of trading operations for the assessee and as a natural corollary, ANY INCOME DERIVED there-from WOULD BE Business Income and not Income from House Property. Resultantly, the impugned additions as confirmed by first appellate authority stand deleted. (FONT supplied)
Of course ;;as quite rightly said, if and when income is derived, that is on sale of the unsold stock, it would be assessable. and assessed as
business income,in the year of sale-Not until then !
courtesy
PS:: Until such sale, the developer- builder , in one’s conviction, in view of the governing law for Flats, might have to continue to hold the unsold Flats as st-in-trade. For that matter, he cannot even convert it into , and sell as, ‘capital asset’..
In any event, the question of taxing any national income cannot arise – Any thoughts to the contrary ?