Tribunal upholds decision to delete house property income for AY 2014-15

The Tribunal upheld the Ld. CIT(A)'s decision to delete the house property income assessed by the AO for AY 2014-15. The Tribunal found that rent accrual was contingent upon approvals not obtained by the relevant year. It was clarified that compensation was due only post 'Rent Commencement period' and treated as an advance until OC procurement. As approvals were pending and no compensation was received during the relevant year, the Tribunal dismissed the Revenue's appeal, maintaining consistency with the decision for AY 2013-14.

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Issues:
Challenge to deletion of house property income assessed by AO for AY 2014-15.

Analysis:
The Revenue appealed against the decision of the Ld. CIT(A) deleting the house property income of Rs. 11.76 Crores assessed by the AO for AY 2014-15. The AO noted that the assessee, engaged in real estate business, had entered into a lease agreement and supplementary agreement for a property in Mumbai. The assessee did not offer any rental income, claiming it accrues only after approvals from MOEF and MCGM. The AO treated compensation amount of Rs. 16.80 Crores as rent receivable, assessing Rs. 11.76 Crores as income under 'income from house property'. The Ld. CIT(A) deleted a similar addition made in AY 2013-14, directing deletion for the current year too.

The Ld. DR argued that the compensation of Rs. 4.20 Crores per quarter, as per the supplementary agreement, should be assessed as 'income from house property'. The Ld. AR contended that as approvals were pending, no rent accrued, and no compensation was received during the relevant year. The Ld. AR highlighted that the compensation was an advance to be adjusted post 'Rent Commencement date'. Referring to a previous tribunal order, the Ld. AR defended the Ld. CIT(A)'s decision.

The Tribunal observed that rent accrues only post approvals, which the assessee had not obtained by the relevant financial year. The Ld. CIT(A)'s decision for AY 2013-14 was upheld by the Tribunal, indicating consistency. The AO assessed compensation as 'income from house property' based on its payment obligation till 'Rent Commencement date'. However, the supplementary agreement clarified that compensation was due only post 'Rent Commencement period' and treated as advance till OC procurement. As approvals were pending and no compensation received, the Tribunal upheld the Ld. CIT(A)'s decision, dismissing the Revenue's appeal.

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