TaxTMI 
TaxTMI 
TaxTMI 
2016 (12) TMI 44
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....has been derived by the assessee by letting out a property simplicitor is chargeable to tax under the head 'income from house property' only and not as 'business income' irrespective of the fact that the assessee is doing business of acquiring, developing and selling of properties as the rental income received by the assessee is because of ownership of the property and not by exploitation of the property by way of complex commercial activity. Various decisions were also cited before the AO to this proposition. 4. However, the AO was not satisfied with the explanation given by the assessee. He noted that the assessee vide letter dated 10-12-2012 has admitted that it has debited the expenses to the profit and loss account for maintenance of unsold stock and property and the unsold property is shown as stock in trade. He, therefore, held that the property would partake the character of stock and any income there from cannot be taken as income from property. Distinguishing the various decisions cited by the assessee and relying on the decision of the Hon'ble Gujarat High Court in the case of CIT Vs. Neha Builders reported in 296 ITR 661 where it has been held that rental income derive....
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....pose of earning rental income within the provisions of section 22 to 24 of the I.T. Act. On the other hand the very nature of business activities carried out by the assessee holding of commercial property and let it out for commercial purpose explicitly establishes that such income is required to be offered by the assessee as well as taxed by the department under the head 'income from business' and in no case the same could be treated as 'income from house property'. For the above proposition she relied on the decision of Hon'ble Supreme Court in the case of Chennai Properties and Investment Ltd. reported in TS-238-SC-2015 and the decision in the case of Karanpura Development Company Ltd. Vs. CIT reported in 44 ITR 362. 8. As regards the submission of the assessee that shops leased out to Vishal Retail Ltd. are shown in accounts under the head 'investment' is concerned she noted that the very object of the assessee is not the construction of the property for holding the same as 'investment' and thereafter earning rental income by letting it out. Relying on various decisions she held that such rental income has to be assessed as 'income from business' and not as 'income from house ....
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....me form house property' shown by the assessee, the AO has completed the assessment for subsequent year u/s.143(3) and no action u/s.147/148 has been initiated. 13. Referring to the decision of Hon'ble Delhi High Court in the case of CIT Vs. Ansal Housing Finance and Leasing Company Ltd. and others reported in 354 ITR 180 he submitted that the assessee in that case was engaged in the business of Development of Mini Townships, Construction of house property, commercial and shop complex etc. In the assessment proceedings the AO assessed the annual letting value of the properties of the flats which the assessee had constructed but were lying unsold now as income from house property. The AO did not accept the contention of the assessee that the flats were its stock in trade and therefore the annual letting value of the flats could not be brought to tax under the head 'income from house property'. The CIT(A) set aside the addition made by the AO which was confirmed by the Tribunal. On appeal filed by the revenue the Hon'ble High Court held that the intention of the assessee was to hold the properties till they were sold. The capacity of being an owner was not diminished because the asse....
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....he assessee from letting out of the shops should be treated as 'income from business' and not as 'income from house property'. She accordingly submitted that the order of CIT(A) be upheld and the grounds raised by the assessee should be dismissed. 16. I have considered the rival arguments made by both the sides, perused the orders of the AO and CIT(A) and the paper book filed on behalf of the assessee. I have also considered the various decisions cited before me. The only dispute in the instant appeal is regarding the treatment of rental income. It is the contention of the assessee that such income has to be treated as 'income from house property' whereas it is the case of the revenue that it should be treated as 'income from business'. 17. From the details furnished by the assessee I find the assessee in the instant case is engaged in the business of real estate and had constructed a commercial complex in the name of "City Jewel Building" at Narayanpeth, Pune. It had sold most of the offices and shops. The ground floor of the premises had been leased out to Vishal Retail Ltd. on which the assessee has earned rental income for the year under consideration. Such shops which were l....