The Tax Publishers2020 TaxPub(DT) 2882 (Mum-Trib)

INCOME TAX ACT, 1961

Section 23(1)(a)

Where assessee-constructor was entitled to retain part of developed area, part of which was let out, considering fact that after issuance of show-cause notice for cancellation of lease on which building was developed, assessee was not entitled to let out occupied/constructed portion, AO was not justified in making addition of notional rental income on remaining unoccupied commercial property under section 23(1)(a).

Income from house property - Addition for notional rent on unoccupied commercial area developed by assessee-constructor - Assessee not entitled to let out constructed portion after cancellation of lease on which building was developed -

Assessee undertook development/construction of commercial building. Project was undertaken by assessee on 'assignment cum development' agreement with certain concern. Under agreement assessee was entitled to retain part of developed area. Assessee let out from said area to a company (Kalyan Jewellers) in same developed complex. AO alleged that remaining unoccupied commercial area was to be considered for deeming let out purposes under section 23(1)(a). Only issue was validity of addition made by AO in regard to notional rental income on commercial property under section 23(1)(a). Held: Show-cause notice for cancellation of lease was issued and ultimately lease of plot was cancelled. Therefore, after issuance of show-cause notice for cancellation of lease on which building was developed, assessee was not entitled to let out occupied/constructed portion. Since after issuance of show-cause notice assessee was not entitled to let out the property, thus, taxing notional income of unoccupied portion of building on basis of deemed annual letting value was not justified by AO.

Followed:M/s. Akshar Commercial Complex Private Limited (Now M/s. Akshar Commercial Complex LLP) v. DCIT [I.T.A. No. 666/Mum/2019, dt. 28-1-2020]

REFERRED : Sharan Hospitality (P) Ltd. v. Dy. CIT 2019 TaxPub(DT) 4832 (Bom-HC) CIT v. M/s. Ansal Housing Finance and Leasing Co. Ltd. & Ors. (2013) 354 TR 180 (Delhi) : 2013 TaxPub(DT) 0681 (Del-HC)

FAVOUR : In assessee's favour

A.Y. :

IN THE ITAT, MUMBAI BENCH

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