Case Law Details
Pride Purple Properties Vs DCIT (ITAT Pune)
In a pivotal ruling, the Income Tax Appellate Tribunal (ITAT), Pune, in the case of Pride Purple Properties Vs DCIT, has overturned the retrospective determination of the annual letting value of un-sold residential units based on a prospective amendment. The judgement has significant implications for the real estate industry, particularly for builders holding unsold units.
Analysis: The ITAT, considering the provisions of section 23(4) of the Income-tax Act, 1961, highlighted that the Finance Act, 2017’s introduction of sub-section (5) to section 23 does not apply to the assessment year 2014-15. This sub-section provides that if a property held as ‘stock in trade’ isn’t let out during the year, its annual value is considered for inclusion under the ‘Income from House property’ after a period of one or two years. However, this provision came into effect from 01-04-2018, and as such, could not be applied retrospectively. Thus, the tribunal ruled that the addition of ₹2,52,000 to the total income was uncalled for and should be deleted.
Conclusion: Ruling upholds the principle that prospective amendments cannot be applied retrospectively, providing more clarity and certainty in taxation matters.
FULL TEXT OF THE ORDER OF ITAT PUNE
This appeal is directed against the order of Commissioner of Income Tax(A)-11, [‘CIT(A)’] dt. 25/01/2022 passed u/s 250 of the Income-tax Act, 1961 [‘the Act’] in relation to assessment year [‘AY’] 2014-15.
2. The only issue raised in this appeal is against the confirmation of the addition on account of determination of annual letting value in respect of unsold residential units lying with the builder assessee.
3. Briefly stated the facts of the case are that;
3.1 the assessee is a firm engaged in the business of construction & sale of residential flats, which at the closure of the financial was holding 03 residential units as its ‘stock-in-trade’ which were neither let-out nor occupied for its business and hence no income therefrom offered to tax in the return of income filed u/s 139(1) of the Act on 30/09/2014.
3.2 The Ld. Dy. CIT, Circle -1(1), Pune [‘AO’] considering the provisions of section 23(4) of the Act determined the annual letting value 03 residential unit @ ₹2,52,000/-after allowing 30% standard deduction u/s 24(a) and added the same to the total income while assessing income u/s 143(3) of the Act by an order dt. 30/11/2016.
3.3 The Ld. CIT(A) placing reliance on the decision of Hon’ble Delhi High Court in the case of ‘CIT Vs Ansal Housing Finance & Leasing Co. Ltd.’ reported in 354 ITR 213, affirmed the addition.
4. Aggrieved assessee in present case seeking reversal of impugned addition on the substantive ground of inapplicability of provisions of section 23 of the Act.
5. After hearing to rival contentions of both the parties; and subject to the provisions of rule 18 of ITAT, Rules perused the material placed on record, case laws relied upon by the appellant as well the respondent and duly considered the facts of the case in the light of settled legal position forewarned to parties present.
6. In context of impugned AY 2014-15, we note that the Finance Act, 2017 introduced sub-section (5) to section 23 providing that where a property held as ‘stock in trade’ is not let out during the year, its annual value, after a period of one year or as revised to two years, shall be considered for the purposes of inclusion under the head `Income from House property’. This amendment has been brought out w.e.f. 01-04-2018. Thus, this provision manifestly does not apply to the impugned AY 2014-15, therefore we are of the considered view that the impugned addition of ₹2,52,000/- made and as sustained in the first appeal, is not called for, thus is directed to be deleted.
7. In result the appeal of the assessee is allowed.
In terms of rule 34 of ITAT Rules, the order pronounced in the open court on this Tuesday 12th day of April, 2023.
