Girdharilal K. Lulla Vs DCIT (ITAT Mumbai)
Income Tax Appellate Tribunal (ITAT), Mumbai bench, has allowed an appeal by assessee Girdharilal K. Lulla against an order from the Commissioner of Income Tax (Appeals) [CIT(A)] for the Assessment Year 2011-12. The dispute centered on the taxation of notional income from unsold residential and commercial units held by the assessee as stock-in-trade.
Assessment Background
Girdharilal K. Lulla operates a proprietary concern, M/s. Shri Ganesh Builders, engaged in the construction of residential-cum-commercial complexes. During the assessment proceedings, the Assessing Officer (AO) identified 13 unsold flats, 8 shops, and one hall as closing stock for the year. The AO took the view that Lulla was the owner of multiple house properties and, applying Section 23(4) of the Income Tax Act, 1961, estimated the Annual Letting Value (ALV) of these vacant units at Rs. 16,80,000. After allowing a 30% deduction under Section 24, the AO computed a notional income of Rs. 10,17,450 under the head “Income from House Property” and added it to the assessee’s total income. The CIT(A) subsequently upheld this addition.
Assessee’s Argument and Precedents
Before the ITAT, the assessee’s representative relied on a previous ruling by the ITAT ‘C’ Bench, Mumbai, in C.R. Developments Pvt. Ltd. v. JCIT (ITA No. 4277/Mum/2012), decided on May 13, 2015. This decision held that estimating rental income for flats shown as stock-in-trade was unjustified, as these properties were neither rented out nor intended for rental income. Instead, they were stock-in-trade, and any income derived from their eventual sale would be taxed as business income.
