| Question And Answer | |
|---|---|
| Subject: | Sec. 23(5) Deem rent in the hands of developers |
| Category: | Income-Tax |
| Querist: | prakash |
| Answered by: | Advocate Neelam Jadhav |
| Tags: | deemed rent, Developer, S. 23(5) |
| Date: | December 14, 2023 |
Assessee is developers of the real estate and is having unsold units in the projects developed by him. In respect of unsold units completion certificate from the competent authority has been received in the year 2015-16. Assessing officer has made the addition on account of deemed rent in the hands of assessee in the A.Y. 2018-19 and he has relied upon the provisions of Sec. 23(5) which are applicable for 1.04.2018.
Assessee has submitted that Sec. 23(5) is beneficial provision and applicable form 1.04.2018 and therefore two years moratorium period given in the SEc. 23(5) is applicable and therefore no addition can be made on account of deemed rental . Assessee relied upon the Mumbai ITAT decision in the case of Pegasus Properties P Ltd. 193 ITD 514
Whether AO action is legally justified. Pl guide
The amendment has been brought in the statute in section 23(5) where in respect of unsold stock of properties held as ‘stock-in-trade’ for a period of two years from the date of obtaining the completion certificate from the competent authority, the annual value of such property would be determined as ‘Nil’. In other words, there would be no addition towards deemed rental income in respect of unsold stock of properties held as ‘stock-in-trade’ for a period of two years from the date of obtaining the completion certificate from the competent authority.
On the facts of the query the Completion Certificate was received from the competent authority in the FY 2015 – 2016 which means March 2016. Therefore, the moratorium period is over as of March 2018. Hence, Assessee very well falls in the provisions of section 23(5) of the Income Tax Act i.e. two years from the date of obtaining the completion certificate from the competent authority. As in the case of Pegasus Properties (P.) Ltd. vs. Dy. CIT [2022] 193 ITD 514 (Mum)(Trib.) held that the amendment has been brought in the statute in section 23(5) from A.Y. 2018-19 providing a moratorium period of two years. Hence, no addition could be made even for A.Y. 2018-19 also.
“Assessee has submitted that Sec. 23(5) is BENEFICIAL PROVISION and APPLICABLE FROM and therefore two years moratorium period given in the SEc. 23(5) is applicable and therefore no addition can be made on account of deemed rental . Assessee relied upon the Mumbai ITAT decision in the case of Pegasus Properties P Ltd. 193 ITD 514”
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WRT the expert’s answer- too simple to make for well considered ‘opionon’! Look up the comment hurriedly posted, fot proper guidance , – @https://itatonline.org/digest/articles/taxing-of-deemed-income-and-how-far-it-is-justified/
As lastly reiteated and urged, it may have been realised that, the question of taxing ‘notional income’ should never arise !?