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The Tax Publishers Real estate business - Notional rent on unsold stock in trade - Years prior to insertion of Section 23(5) w.e.f. 1-4-2018 - Whether business income or income from house property - Reopening under Section 263 validity *Facts:* Assessee in real estate business had certain unsold stock in trade/inventory on which no income was offered and assessments were completed thus. Subsequently PCIT invoked reversionary powers under Section 263 claiming that the order was prejudicial to the interests of the revenue as the notional rent on the unsold inventory was not offered to tax. On higher appeal - Held in favour of the assessee that the notional rent if at all could have only been business income as the below 4 conditions stood satisfied by the assessee. Nonetheless this issue was not worthy of reversionary powers under Section 263 which stood quashed. Conditions for notional rent to be taxed as business income -- i. The property or its part should be occupied by the assessee as an owner. ii. Any business or profession should be carried on by the assessee-owner. iii. Occupation of the property should be for the purpose of business or profession iv. Profits of such business or profession should be chargeable to income-tax. The ITAT has taken note of the Finance Act, 2017 inserting sub-section (5) of Section 23 w.e.f. 1-4-2018 and its cooling period extension to 24 months as well in this decision giving the amendment a prospective reading since being a taxing provision. The controversial verdicts in the prior years are also discussed therein. *Case:* Atharwa Builders & Developers v. ACIT 2023 TaxPub(DT) 1010 (Pune-Trib)

The Tax Publishers

Real estate business - Notional rent on unsold stock in trade - Years prior to insertion of Section 23(5) w.e.f. 1-4-2018 - Whether business income or income from house property - Reopening under Section 263 validity

Facts:

Assessee in real estate business had certain unsold stock in trade/inventory on which no income was offered and assessments were completed thus. Subsequently PCIT invoked reversionary powers under Section 263 claiming that the order was prejudicial to the interests of the revenue as the notional rent on the unsold inventory was not offered to tax. On higher appeal -

Held in favour of the assessee that the notional rent if at all could have only been business income as the below 4 conditions stood satisfied by the assessee. Nonetheless this issue was not worthy of reversionary powers under Section 263 which stood quashed.

Conditions for notional rent to be taxed as business income --

i. The property or its part should be occupied by the assessee as an owner.

ii. Any business or profession should be carried on by the assessee-owner.

iii. Occupation of the property should be for the purpose of business or profession

iv. Profits of such business or profession should be chargeable to income-tax.

The ITAT has taken note of the Finance Act, 2017 inserting sub-section (5) of Section 23 w.e.f. 1-4-2018 and its cooling period extension to 24 months as well in this decision giving the amendment a prospective reading since being a taxing provision. The controversial verdicts in the prior years are also discussed therein.

Case: Atharwa Builders & Developers v. ACIT 2023 TaxPub(DT) 1010 (Pune-Trib)