August 2019

Section 22 r.w.s. 23 –Under section 22 annual value is chargeable to tax in the hands of the owner – The assessee, SPV, promoted by the State Housing Board, was merely a developer and not the owner. Accordingly, notional annual value of unsold flats, held as stock-in-trade by the assessee, could not be assessed u/s 23

JAGDISH T. PUNJABI | DEVENDRA JAIN | TEJASWINI GHAG
Chartered Accountants

25.  [2019] 106 taxmann.com 346 (Kol.)

Bengal DCL Housing Development Co. Ltd. vs. DCIT

ITA Nos.: 210/Kol/2017 & 429/Kol/2018

A.Y.s: 2011-12 & 2012-13

Date of order: 24th May, 2019

 

Section 22 r.w.s. 23 –Under section 22 annual value is chargeable to tax in the hands of the owner – The assessee, SPV, promoted by the State Housing Board, was merely a developer and not the owner. Accordingly, notional annual value of unsold flats, held as stock-in-trade by the assessee, could not be assessed u/s 23

 

FACTS

The assessee was a joint-sector company promoted by the State Housing Board with DCPL for undertaking large-scale construction of housing complexes within the state to solve basic housing problems subject to the supervision and overall control by the State Government. Pursuant to a development agreement, the assessee undertook construction of a housing complex known as ‘U’. The assessee treated unsold constructed flats as its stock-in-trade.

 

These flats, in respect of which annual value was sought to be computed by the AO, were allotted by the assessee to various persons. The AO noted that the expression ‘allotment’ in the terms and conditions of allotment was defined to mean ‘provisional allotment’; the definition also stated that allotment will remain provisional till a formal deed of transfer is executed and registered in favour of the allottee for his apartment. In respect of the flats for which no formal deeds were executed and registered, the AO held the assessee to be the owner. The AO computed and charged to tax the notional annual value of unsold finished apartments held by the assessee.

 

Aggrieved, the assessee preferred an appeal before the Commissioner of Income-tax (Appeals) [CIT(A)] who confirmed the action of the AO. Still aggrieved, the assessee preferred an appeal to the Tribunal.

 

HELD

The Tribunal observed that in order to attract charge of tax under the head ‘house property’, the AO must prove that the assessee is the owner of the same. The term ‘owner’ for the purposes of Chapter IVC is defined in section 27. The Tribunal observed that though the v

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