Rent from Unsold Flat by Developer Taxable as ‘Income from House Property’: ITAT [Read Order]

The Income Tax Appellate Tribunal Pune Bench has held that the rent from unsold flats by the developer is taxable as “income from house property”.

The appellant, Mr. Atul Jaiprakash Goel, is a Builder, Promoter, and Developer. Some of the unsold units in the projects by the name “Gangadham Commercial” and “Ganga Collidium” were let out on rent, income from which was declared as ‘Income from house property’ after statutory deduction.

The Assessing Officer disallowed the deduction of Rs.7,83,692/- by treating the rental income as ‘Business income’ alleging that letting out activity was incidental to the main business activity and hence, such income from letting was also to be treated as ‘Business income’. The CIT(A) echoed the assessment order on this point and hence the appellant filed an appeal before the ITAT.

The Tribunal by relying on the decision of Bombay High Court in CIT Vs. Sane and Doshi Enterprises observed that rental income received from an unsold portion of the property constructed by the assessee, a real estate developer, is assessable as ‘Income from house property

The Coram of Mr. R. S. Syal, Vice President, and Mr. S. S. Viswanethra Ravi, Judicial Member by relying on the decision of jurisdictional High Court has held that “we hold that the rental income earned by the assessee from an unsold portion of the property should be taken as ‘Income from house property. This ground is, therefore, allowed”.

Mr. Rajiv Thakkar and Mr. M.G. Jasnani appeared for the assessee and revenue respectively.

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