Chamber Construction Pvt. Ltd Vs DCIT (ITAT Mumbai)
Mumbai, [Current Date]: The Income Tax Appellate Tribunal (ITAT), Mumbai Bench, has delivered a significant ruling favoring real estate developers, holding that the notional annual letting value (ALV) of unsold flats held as stock-in-trade cannot be taxed as “Income from House Property.” This decision, pronounced on November 30, 2018, overturns an order by the Commissioner of Income Tax (Appeals) [CIT(A)] that had upheld the Assessing Officer’s (AO) action of computing deemed income on unsold inventory for Chamber Construction Pvt. Ltd.
Background of the Dispute:
The case pertains to Assessment Year 2012-13. Chamber Construction Pvt. Ltd., a company engaged in the business of builder and property developer, had e-filed its return of income declaring a loss. During scrutiny assessment, the AO observed that the assessee held an inventory of several unsold flats, covering an area of 75,215 sq. ft. in its RNA Mirage project at Worli, Mumbai.
The AO, believing that the deemed ALV of these completed unsold flats was taxable under the head “Income from House Property” as per Section 22 of the Income Tax Act, 1961, sought an explanation from the assessee. The AO proposed to determine the ALV at Rs. 50 per sq. ft. per month, which amounted to Rs. 4,51,29,000/-.
