Deemed Rent not applicable to Property that is ‘Stock-in-Trade’: ITAT [Read Order]

The Income Tax Appellate Tribunal (ITAT), Ahmedabad bench has held that the concept of deemed rent cannot be applicable to the properties which are treated as ‘stock-in-trade’ of a business.

The assessee,M/s. Shoppers Buildcon Private Ltd, a company which is engaged in the business of construction and development of commercial and residential projects, approached the Tribunal against the deletion by learned CIT(A) of the addition of Rs.87,40,000/- made by the Assessing Officer on account of deemed rent.

The Assessing Officer was of the view that the housing projects completed by the assessee during the year under consideration comprised of 180 units; out of which 47 units were sold and the remaining 133 unsold units were lying in the closing stock.

Overruling the orders of the lower authorities, a bench of Shri P.M. Jagtap, Vice-President and Shri Siddhartha Nautiyal, Judicial Member observed that even though learned DR has strongly relied on the order of the Assessing Officer in support of the Revenue’s case on this issue, it is observed that this issue is squarelycovered in favour of the assessee by various judicial pronouncements relied upon by the learned Counsel for the assessee.

“In one of such decisions rendered in the case of Neha Builders Pvt. Ltd., reported in [2008] 296 ITR 661 (Guj.), it was held by the Hon’ble Gujarat High Court that “if property is used as stock-in-trade, then it would become and partake character of stock and any income derived from stock would be ‘income from business’ and not ‘income from house property’”. As rightly contended by the learned Counsel for the assessee, it therefore follows that the deemed rent concept cannot be applied or invoked in case of property which is stock-in-trade of the business of the assessee and the addition made by the Assessing Officer on account of deemed rent cannot be sustained as rightly held by the learned CIT(A),” the Tribunal said.

To Read the full text of the Order CLICK HERE

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