Judicial Analysis of Income Tax on unsold flats owned by the Builder

Abstract

A company engaged in business of construction and sale of flats and if some of the flats remain unsold, the question may raised whether builder would be liable to pay tax on notional rent in respect of unsold flats, owned by the assessee . In view of the above Delhi High Court case of CIT v. Ansal Housing and Construction Ltd.(2013) 40 taxmann.com 305 (Del), the Finance Act, 2017 has inserted section 23(5) in the Income Tax Act, 1961, which provided that unsold flats held as stock-in-trade up to one year from the end of the financial year in which the certificate of completion of construction of the property is obtained from the competent authority, shall be taken as nil, afterwards they are liable to pay tax on notional rent in respect of unsold flats owned by the assessee.