Moraj Finanz Corporation Vs DCIT (ITAT Mumbai)
Summary:
The Income Tax Appellate Tribunal, Mumbai Bench, in the case of Moraj Finanz Corporation, considered the taxability of notional annual letting value of unsold flats/units held by the assessee as stock-in-trade for Assessment Year 2010-11. The matter arose from a difference of opinion between the Members of the Division Bench, following which a Third Member was nominated. The Third Member concurred with the Judicial Member and held that the unsold flats/units could not be subjected to notional rent taxation under the head “Income from House Property”.
The Tribunal noted that the flats/units were held as stock-in-trade and had not been let out during the relevant year. Consequently, the assessee had derived no financial benefit from them. The Third Member considered the Bombay High Court decision in PCIT Vs Classique Associates Ltd., which dealt with income from properties held as stock-in-trade and concluded that such income could be assessed as business income rather than income from house property. The decision had not been brought to the notice of the coordinate Bench when the assessee’s matter was earlier considered.
The Third Member also considered the principles stated in CIT Vs Neha Builders (P) Ltd., where the Gujarat High Court held that where property is held as stock-in-trade, income derived from such stock is business income. The Supreme Court decision in Chennai Properties & Investments Ltd Vs CIT was also considered in the discussion concerning the character of income derived from properties.
