The Income Tax Appellate Tribunal (ITAT), Pune bench has held that the developer cannot be liable to pay income tax on the deemed rent from the unsold flats/ bungalows since the same is treated as stock-in-trade.
During the course of assessment proceedings, AO noticed that assessee had ready possession of six unsold flats/bungalows but had not offered any deemed rent / notional rent on those flats/bungalows. The AO was of the opinion that the income from those unsold flats/bungalows must be charged to tax under the head “income from house property” on the basis of notional basis. Assessee inter-alia submitted that the flats /bungalows were stock-in-trade and no income has been earned from those flats. The submission of the assessee was not found
The Tribunal noticed that identical issue arose in the case of assessee’s sister concern i.e., M/s. Kolte Patil Developers Limited in A.Y. 2012-13, wherein the issue was decided in favour of the assessee by the Co-ordinate Bench of the Tribunal. In that case, it was held that since the unsold flats were treated as stock-in-trade, no such assessment can be made.
“Further Revenue has also not placed any material to demonstrate that the order of Tribunal in the assessee’s sister concern for A.Y. 2012-13 has been set aside / stayed or overruled by Higher Judicial Forum. In view of the aforesaid facts, we following the order of the Co-ordinate Bench of the Tribunal in the case of assessee’s sister concern i.e., M/s. Kolte Patil Developers Limited for A.Y. 2012-13 and for similar reasons hold that in the present case, no addition on account of deemed rent of 6 unsold flats/bungalows can be made in the hands of assessee,” the Tribunal said.
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