Cosmopolis Construction Vs ITO (ITAT Pune)
Income Tax Appellate Tribunal (ITAT), Pune bench, has delivered a consolidated order addressing appeals filed by Cosmopolis Construction for the assessment years 2013-14 and 2014-15. The core dispute centered on whether notional rent from unsold residential units held as stock-in-trade by a builder-developer should be assessed as “Income from House Property” or “Profits and Gains from Business or Profession” under the Income Tax Act, 1961. The Tribunal, after reviewing arguments and judicial precedents, ruled in favor of the assessee, classifying such notional income as business income.
Background of the Dispute
Cosmopolis Construction, a firm engaged in building and development activities, undertook two housing projects, Project A and Project B, at Survey No. 186, Shastri Nagar, Pune. Project A was completed by March 31, 2008, and at the relevant time, 53 units remained unsold, held by the assessee as stock-in-trade. Project B was still under construction as of March 31, 2013. For the assessment year 2013-14, Cosmopolis Construction filed its return of income declaring a loss of Rs. 7,15,951/-.
During scrutiny assessment proceedings, the Assessing Officer (AO) determined that a notional rent should be attributed to the unsold units. Consequently, the AO made an addition of Rs. 75,50,995/- to the assessee’s income for AY 2013-14, classifying it under the head “Income from House Property.” This addition was subsequently upheld by the Commissioner of Income Tax (Appeals) [CIT(A)]. The same principle was applied for AY 2014-15, leading to a similar addition of Rs. 1,21,28,928/-. Aggrieved by these confirmations, Cosmopolis Construction lodged appeals before the ITAT.
