1 IN HIGH COURT OF JUDICATURE AT MADRAS DATED: 13.01.2015 CORAM: HONOURABLE MR.JUSTICE R.SUDHAKAR and HONOURABLE MR.JUSTICE R.KARUPPIAH Tax Case (Appeal) Nos.607 and 608 of 2007 Commissioner of Income Tax Chennai. Appellant in both T.C.(A)s versus M/s.Kalyani Constructions P. Ltd., 9, Bazullah Road T.Nagar, Chennai 17. Respondent in both T.C.(A)s PRAYER: Tax Case Appeals filed under Section 260A of Income Tax Act, 1961 as against order dated 25.8.2006 made in I..T.A..Nos.468 & 469/mds/03 on file of Income Tax Appellate Tribunal, Madras 'A' Bench for assessment years 1998-99 and 1999-2000. For appellant : Mr. M.Swaminathan Standing Counsel for Income Tax For respondent : Dr.Anita Sumanth 2 COMMON JUDGMENT (Judgment of Court was delivered by R.SUDHAKAR,J.) above Tax Case (Appeals) filed by Revenue as against order of Income Tax Appellate Tribunal, were admitted by this Court on following substantial questions of law: (i) Whether in facts and circumstances of case, Tribunal was right in holding that value of vacant area had to be assessed under head 'Income from house property' when said issue was not in appeal before Tribunal? (ii) Whether in facts and circumstances of case, Tribunal was right in holding that Annual letting value of rate of Rs.170/- cannot be adopted for vacant area of land held by assessee even though assessee had returned said value while arriving at closing stock? 2. assessment in these cases relates to assessment years 1998-99 and 1999-2000. respondent/assessee is engaged in business of civil construction. Assessing Officer, while completing assessment in respect of assessment years in question, found that certain area of land was vacant and was neither sold nor let out. Hence, Assessing Officer brought to tax said vacant land by adopting annual letting value at Rs.170/- per sq.ft. 3 Assessing Officer assessed value of vacant land under head 'income from house property' and made additions towards Annual Letting Value of vacant space. 3. Aggrieved by order of Assessing Officer, assessee filed appeals before Commissioner of Income Tax (Appeals), who while confirming decision of Assessing Officer in assessing Annual Letting Value of vacant space under head 'income from house property' deleted additions made by Assessing Officer towards Annual Letting Value, as determination of Annual Letting Value is not in conformity with guidelines given by Court. 4. As against said order of Commissioner of Income Tax (Appeals), Revenue pursued matter before Income Tax Appellate Tribunal. 5. It is case of Department that order of Assessing Officer assessing Annual Letting Value of vacant space under head 'income from house property, which was confirmed by Commissioner of Income Tax (Appeals), has not been 4 challenged by assessee before Tribunal. 6. issue that Department pursued before Tribunal as against order of Commissioner of Income Tax (Appeals) is that in respect of both assessment years viz., 1998-99 and 1999-2000, for vacant land at 24168 sq.ft. and 42,246 sq.ft. respectively, based on closing stock value of assessee's statement, rate has been fixed for determining Annual Letting Value at Rs.170/- per sq.ft. and that was added to income. It was also case of Department that Commissioner of Income Tax (Appeals) was not justified in deleting additions while upholding assessment of Annual Letting Value of vacant space under head 'income from house property' by Assessing Officer. 7. Tribunal, however, in paragraph 4 of order, took different view and upheld order of Commissioner of Income Tax (Appeals) holding that property in question was held as stock- -in-trade and therefore Annual Letting Value cannot be brought to tax under head 'house property'. For better clarity, we extract hereunder relevant portion of order of Tribunal: "4. We have heard both parties. Assessing Officer has worked out annual letting value by adopting 5 Rs.170/Sq.ft, which was arrived at by dividing closing stock at Rs.1,04,13,599/- by area of 61,355 sq.ft. assessee has leased out area of 43,011 Sq.ft in assessment year 1998-99 and 24,933 Sq.ft in assessment year 1999-2000. In case before us, part of property has been sold and another part of property has been let out. balance property is held as stock in trade. assessee is developer of properties. Assessing Officer has determined annual letting value of area lying vacant, which is held by assessee as stock in trade. Ld. CIT(A) has upheld stand taken by assessee that annual letting value of vacant area is chargeable to tax under head 'house property'. We are unable to subscribe his view for reasons that where property is held as stock in trade, annual letting value cannot be brought to tax under head 'house property' or as 'business income'. view expressed by ld CIT(A) will be applicable in cases, where properties are not held as stock in trade. Since part of property held as stock in trade cannot be brought to tax under head 'income from house property', it is held that Assessing Officer was not justified in estimating annual letting value and assessing same as 'income from house property'. Accordingly for different reasons as mentioned above, we uphold order of CIT(A), deleting addition made by Assessing Officer." 6 8. Aggrieved by order of Tribunal, Revenue is before this Court. 9. Learned Standing Counsel appearing for Revenue submitted that Tribunal while taking note of order of Commissioner of Income Tax (Appeals) holding that it is case of income from house property, there was no justification in deleting addition. He further submitted that Department's appeal before Tribunal was against order of deletion of addition made towards determination of Annual Letting Value and also on plea that assessee had already accepted this income as income from house property. Hence, addition made by Assessing Officer is in order. 10. Heard learned Standing Counsel appearing for Revenue and learned counsel appearing for assessee and perused materials placed on record. 11. It is seen from order of Tribunal that Tribunal has taken different view that assessee has held balance property 7 as stock-in-trade. Since order of Commissioner of Income Tax (Appeals), confirming assessment of Annual Letting Value of vacant space under head 'income from house property in respect of both assessment years, has not been challenged by assessee, Tribunal is not justified in coming to conclusion that property is held as stock-in-trade, thereby, upholding deletion of addition of Annual Letting Value. To that extent, order of Tribunal becomes beyond scope of appeal. Hence, we find that issue has to be re-addressed by Tribunal. 12. Accordingly order of Tribunal stands set aside and matter is remanded back to Tribunal for fresh consideration of appeal filed by Department. 13. In result, both Tax Case (Appeals) are disposed of accordingly. No costs. Index: Yes / No (R.S.,J.) (R.K.,J.) Internet: Yes / No 13.01.2015 sl R.SUDHAKAR,J. AND R.KARUPPIAH,J. 8 sl To 1. Income Tax Appellate Tribunal, Madras 'A' Bench. 2. Commissioner of Income Tax (Appeals), Central -II, Chennai. 3. Deputy Commissioner of Income Tax, Central Circle II(5), Chennai. Tax Case (Appeal) Nos.607 and 608 of 2007 13.01.2015 Commissioner of Income-tax, Chennai v. M/s. Kalyani Constructions P. Ltd