The Delhi bench of the Income Tax Appellate Tribunal ( ITAT ) has held that income earned by the Builder from letting out of the property is assessable under the head of “Income from Business” when the objective in MOA is letting out of Property.
M/s Tupelo Builders Pvt. Ltd., the Assessee a Private Limited Company e-filed its original return of income for the assessment year under consideration on 19.09.2015 declaring a loss of Rs.7,07,00,678/- under the head “Income from Business”.
The assessment was completed on 30.12.2017 under section 143(3) of the income tax Act assessing rental income under the head “Income from other sources” as against income from the business as declared by the assessee. The Assessing Officer also denied the claim of the assessee for interest and processing charges on the home loan as allowable expenditure u/s 37(1) of the Act from “Income from Business”.
The Assessing Officer noticed that during the previous year relevant to AY 2015-16 the assessee company along with Shri Rajiv Rattan purchased property bearing House No.13A, Amrita Shergill Marg, New Delhi.
The Assessing Officer observed from the documents submitted by the assessee that the property was purchased from taking a home loan of Rs.166.87 crores from Bank of India by the assessee and Shri Rajiv Rattan as joint applicants and the assessee has borrowed a long-term loan of Rs.83.36 crores from M/s Tupelo Properties Pvt. Ltd. which is the holding company of the assessee.
The Tribunal observed that the assessee company was incorporated on 16.08.2012 with the primary objects, inter alia, to construct, acquire, hold/sell builders, buildings, tenements and such other movable and immovable builders and to rent, let on hire and manage them and to act as a real estate agent and immovable property dealers.
In the case of Pr. CIT Vs. City Centre Mall Nashik (P) Ltd. (2020) it was held that “when main objects of the assessee, over and above real estate development as main clause has renting of property therein and assessee is also providing certain other services as mentioned in Annexure B of leave and license agreement, income derived is to be taxed as Business Income and not income from house property.”
A Coram comprising of Shri G S Pannu, President and Shri Challa Nagendra Prasad, Judicial Member observed that as from the MOA, it was evident that the main objects of the assessee company are to construct, acquire hold buildings, tenements and such other movable and immovable property and to rent let on hire and managed immovable property.
Further held that the earned rental income needs to be offered to tax under the head “Income from Business”. The Tribunal dismissed the appeal of the Revenue.
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