Delhi ITAT affirms tax on deemed rental income from unsold flats held as stock-in-trade

The Delhi Bench of the Income Tax Appellate Tribunal (ITAT) in the case of Ansal Housing Limited Vs ACIT has reiterated that notional annual letting value (ALV) can be brought to tax under the head “Income from House Property” in respect of unsold flats and commercial units held as stock-in-trade by a real estate developer. Relying squarely on the binding decision of the Delhi High Court in CIT vs Ansal Housing Finance of Leasing Company Limited (2013) 213 com 143(Del), the Tribunal rejected the assessee’s challenge and dismissed both appeals.

The ITAT also recorded that a separate addition made under Section 43CA had already been rectified by the appellate authority under Section 154 read with Section 250, granting relief to the assessee. Since the Revenue did not dispute this factual position, the ground challenging the Section 43CA addition was treated as not pressed.

Background of the appeals

Parties and assessment years

  • Assessee: Ansal Housing Limited
  • Respondent: ACIT
  • Forum: ITAT Delhi
  • Appeals: ITA No. 888/Del/2026 and ITA No. 889/Del/2026
  • Relevant assessment year discussed in detail: A.Y. 2015-16 (lead appeal)
  • Originating orders: Orders passed by the Commissioner of Income Tax (Appeals) / National Faceless Appeal Centre, Delhi (CIT(A)/NFAC), under Section 250 arising out of assessments framed under Section 143(3) of the Income Tax Act 1961

Both appeals concerned similar disputes and were disposed of by a common order of the Tribunal, with the decision in the lead appeal applied mutatis mutandis to the connected matter.

Principal issues before the Tribunal

The assessee had raised multiple grounds in the lead appeal, which, in substance, involved two primary controversies:

  1. Taxability of notional ALV of unsold flats and commercial spaces held as stock-in-trade, under the head “Income from House Property”.
  2. Addition under Section 43CA on account of alleged understatement of consideration for sale of real estate properties, vis-à-vis the stamp duty valuation/DVO valuation.

Other grounds were of a general nature, challenging the order as being contrary to facts, law, and principles of natural justice.

Dispute on notional rent from unsold stock-in-trade

Assessee’s broad objections before CIT(A)

In its appeal before the first appellate authority, Ansal Housing Limited had challenged the Assessing Officer’s action of computing and taxing a notional ALV of Rs. 63,44,502/- in respect of:

  • Unsold residential flats, and
  • Unsold commercial space

which formed part of the assessee’s closing stock in its real estate business. These units were treated as stock-in-trade in the books of account, not as investment property.

The assessee was aggrieved that:

  • The same unsold units were being taxed twice in the same year:

    • Once, through notional ALV under the head “Income from House Property”; and
    • Again, through valuation of closing stock under the head “Profits and Gains of Business or Profession”.

  • This, according to the assessee, resulted in multiplicity of taxation without any real income actually accruing or arising by way of rent.

  • Further, the assessee pointed out that many of the unsold units were allegedly not yet fit for habitation, and that purchasers, after taking possession, had to incur additional expenditure to make them livable.