Rental Income from Letting Out Properties by Builder is House Property Income: ITAT [Read Order]

Rent Income

The Income Tax Appellate Tribunal (ITAT) bench has held that the rental income received by the builder cannot be treated as business income and the same must be taxable under the head “Income from House Property” under the Income Tax Act, 1961.

The assessee, a firm engaged in the business of builders & developers, received income from renting of immovable properties as income from business. The assessee firm had shown rental income of Rs 34,13,95,6117/- and shown the income under the head ‘Income from house property’ by claiming 30% deduction under section 23 against such rental income.

However, the AO denied the claim by finding that income is attached to immovable property cannot be the sole criterion for taking it as income and treated the same as business income. The officer further allowed the deduction of only the property tax paid.

The Tribunal noted that the assessee is in the business and developers and during the year under consideration, the assessee earned income from units leased out to certain parties and such leasing is done for long tenures. It was further noted that the units provided on tenancy had been made for a tenure ranging between 3 to 9 years, which shows that the intention of the assessee was to earn lease rental income and not to exploit the immovable property.

Allowing the contentions of the assessee, the Tribunal held that “assessee is in the business of development of real estate projects and letting of property is not the exclusive business of the assessee, therefore while relying upon the judgment of jurisdictional High Court in the case of CIT Vrs. Gundecha Builders in ITA no. 347 of 2016 dated 31.07.18 (Bom), we are of the view that the rental income earned by the assessee was rightly treated as income under the head ‘House Property’ by Ld. CIT(A).”

To Read the full text of the Order CLICK HERE