Dated: 31st July, 2018
(Bombay High Court)].
[ACIT-24(3) vs. Gundecha Builders; dated
19/02/2014 ; ITA. No 4475/Mum/2011, Bench G,
Mumbai. ITAT ]
Section 22: Income from house property vis a vis
Income from business – Real estate developer – main object not acquiring and holding properties – Rental
income is held to be assessable as Income from house property. [Section 28(i)]
Section 80IB(10) : Housing projects – stilt
parking is part & parcel of the housing project – Eligible to deduction
The assessee is engaged in
the business of developing real estate projects. During the previous year the
assessee has claimed lease income of Rs.30.18 lakh under the head income from
house property. The same was not accepted
by the
A.O who held
it to be
business income. Consequently,
the deduction available on the account of repair and maintenance could not be
availed of by the assessee.
Being aggrieved, the
assessee filed an appeal to the CIT(A). The CIT(A) held that the rental income
received by the assessee has to be classified as income from house property.
Thus, 30% deduction on account of repairs and maintenance be allowed.
Being aggrieved with the
CIT(A) order, the Revenue filed an appeal to the Tribunal. The Tribunal holds
that the dispute stands squarely covered by the decision of the Supreme Court
in Sambhu Investment (P)Ltd. vs. CIT (2003) 263 ITR 143(SC), wherein the
Hon’ble Apex Court has held that when main intention of letting out the
property or any portion thereof is to earn rental income, the income is to be
assessed as income from house property and where the intention is to exploit
the immovable property by way of complex commercial activities, the income
should be assessee as income from business. Applying this proposition to the
facts of the instant case, it was held
that the assessee has let out the property to earn the rental income.
Accordingly, the lease income was taxable as income from house property.
Before High Court the
Revenue points out that after the above decision the issue now stands concluded
in favour of the revenue by the decision of the Supreme Court in Chennai
Properties and Investments Limited, Chennai vs. CIT (2015) 14 SCC 793 and Rayala
Corporation Private Limited vs. ACIT (2016)15 SCC 201.
The Court observed that the assessee is in the business of
development of real estate projects and letting of property is not the business
of the assessee. In both the decisions relied upon by Revenue Chennai Properties
(supra) and Rayala Corporation (supra), the Supreme Court on facts
found that the appellant was in the business of letting out its property on
lease and earning rent there from. Clearly it is not so in this case. Further,
the decision of this Court in CIT vs. Sane & Doshi Enterprises (2015) 377
ITR 165 wherein on identical facts this Court has taken a view that rental
income received from unsold portion of the property constructed by real estate
developer is assessable to tax as income from house property. Accordingly,
Revenue Appeal is dismissed.
As regard second issue is
concerned, the AO has disallowed assessee’s claim of deduction u/s. 80IB(10) in
regards to parking space. The CIT(A) allowed the assessee’s claim after find
that parking is part & parcel of the housing project that is the first and
foremost requirement of the residents of the residential units. Therefore, it
cannot be said that sale proceeds of stilt parking is outside the purview of
section 80IB(10) of the Act. The parking’s are in built and approved in the
residential structure of the residential building and no such separate
approvals are taken. The principle decided by the Hon’ble Spl. Bench of ITAT
(Pune) in the case of Brahma Associates vs. JCIT also supports the case
of the appellant that if some part of the flat is used for commercial purpose,
the correct character of housing project is not vitiated, AO has not brought on
record that which part of expenditure claimed to have been incurred for parking
is bogus. Hence, the A.O was directed to allow deduction to the appellant u/s.
80IB(10) on sale proceeds of stilt parking .The Tribunal upheld the finding of
the CIT(A)
Being aggrieved with the
ITAT order, the Revenue filed an appeal to the High Court. The court held that
this issue stands concluded against the Revenue and in favour of the assessee
by virtue of the orders of this Court in respect of AYs 2006-07 and 2007-08 decided in CIT vs.
Gundecha Builders (ITXA Nos.2253 of 2011 and 1513 of 2012 order dated 7th
March, 2013). Accordingly, Revenue Appeal was dismissed.
