The assessee was merely a developer and not the owner. Accordingly notional annual value of unsold flats, held as stock in trade by the assessee, could not be assessed under section 23


The Assessee is a joint sector company promoted by West Bengal Housing Board alongwith M/s DC Properties Ltd for undertaking large scale construction of housing complexes within the State of West Bengal to solve the basic housing problems.

The assessee allotted flats to various persons. The assessee treated unsold constructed flats as its stock in trade.  

The AO observed that the allotment is ‘provisional allotment’.  With respect to flats for which no formal deeds were executed and registered, the AO held that assessee to be the owner of flats.  The AO computed and charged to tax the notional annual value of unsold finished apartments held by the assessee.  CIT(A) upheld the order of the AO.


The Tribunal observed that the apartments were allotted prior to the balance sheet date and in respect of such allotment a substantial part of the consideration was received and reflected by way of liability in the books of the assessee. Consequent to the allotment and receipt of consideration, the right of specific performance and right to obtain conveyance accrued in favour of the petitioner. The ITAT held that the appellant was never the owner of the apartments, but was just a developer, who held the apartments as a trustee.

The Tribunal also observed that the apartments did not have occupancy certificate and therefore could not be said to be in a position to be let or occupied.  The ITAT also referred of newly inserted section 23(5) and observed that by virtue of latter enactment it is now abundantly clear that until the completion certificate is not issued by the competent authority and two years thereafter; annual value of the unsold units shall be NIL.

The ITAT relied on the decision of Bombay High Court in the case of Shree Nirmal Commercial Ltd Vs CIT (193 ITR 694), and held that there cannot be a charge u/s 22 if the property is not capable to be let out.

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