No addition can made u/s 23(4) of Act on Deemed Rent on Unsold Flats declared as Stock In Trade: ITAT [Read Order]

In a significant case the Pune bench of the Income Tax Appellate Tribunal (ITAT) held that no addition could be made under Section 23(4) of Income Tax Act, 1961 on deemed rent on unsold flats declared as stock in trade .

Section 23(4) of Income Tax Act deals with determination of annual value in case of the deemed to be let out property. 

Suhas P. Bora appeared for the assessee. Ramnath P. Murkunde appeared for revenue.

The above appeal was filed by the assessee Dugad Properties  who is a firm engaged in the business of builder and promoter against the order of the CIT(A).

Before the tribunal, assessee  challenged  the action of CIT(A) in confirming the order of AO by invoking deemed rent  under Section 23(4) of the  Income Tax Act on unsold flats under stock-in trade.

Counsel for the assessee submitted that no addition has  maintainable on deemed rent on unsold flats which are shown as stock-in-trade.

Counsel for the revenue submitted that assessee  completed construction of the flats and possession also given to the flat owners, but did not offer deemed rent on completed and unsold 9 flats.

The tribunal after considering the submissions and relied  upon the decision in the case of M/s Cosmopolis Constructions observed that,  no addition is maintainable on account of deemed rent on unsold flats which are treated at stock-in-trade.

Therefore, the two member bench of  S.S. Viswanethra Ravi, (Judicial Member)  and G.D. Padmahshali, (Accountant Member) held that   no addition is justified under deemed rent under Section 23(4) of the Income Tax Act.Thus the bench allowed the appeal filed by the assessee.

To Read the full text of the Order CLICK HERE

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