TaxTMI 
TaxTMI 
2023 (6) TMI 211
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.... 3. The assessee is engaged in the business of construction and development of properties. During the year under consideration, Assessing Officer noticed that no real estate development activity was carried out by the assessee and assessee has shown rental income from letting out of school building, capital gain on redemption of preference shares, interest on fixed deposits and interest from partnership firm and dividend on shares. 4. During the year under consideration, the assessee has shown rental income of Rs..3,24,37,720/- from Babubhai Kanakia Foundation & Rs.. 91,66,360/- from M/s RBK Education Solution Pvt Ltd for letting out of school building along with complete infrastructure and amenities which has been constructed by it after acquiring the development rights from M/s. Natvar Parikh & Co, on 11.08.2006. During the construction period, a lease deed was entered into with Babubhai Kanakia Foundation at a monthly lease rent as provided in the lease deed plus taxes, electricity charges and outgoings. The said lease deed was not registered. The school building was constructed with the above referred infrastructure and amenities and the lease rent was Rs..30/- per sq. ft.....
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....) dismissed the appeal of the assessee by sustaining the action of the Assessing Officer. 9. Aggrieved, assessee is in appeal before us raising following grounds in its appeal: - "1. The Commissioner of Income tax (Appeal) erred in law & on facts in treating the rental income of Rs. 4,16,04,080/- received from school building under the head 'Income from other sources. Appellant prays that the same should be treated as 'Income from House Property' since the primary object is to lease school building only. Accordingly, deduction on account of interest paid should be allowed u/s 24(b). 2. The learned Commissioner of Income Tax (Appeal) erred in law & on facts not allowing deduction on account of interest on loan borrowed for the purpose of school building and also depreciation on school building and other infrastructure facilities like plant & machinery, furniture. The same should be allowed as deduction against rental income u/s. 57 of the Income Tax Act, 1961. 3. The learned Commissioner of Income Tax (Appeal) erred in law & on facts in not following orders passed by the appellate authorities on similar issue in earlier years. The same shoul....
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....se property. Accepted u/ 143(1) of the Act 8. 2016-17 - -- Assessee offered rental income as income from house property. Accepted u/ 143(1) of the Act 9. 2017-18 - -- Assessee offered rental income as income from house property. Accepted u/ 143(1) of the Act Note: In all the above years, the assessee has offered rental income under the head 'Income from House Property'. 11. On the other hand, Ld. DR relied on the order of the lower authorities. 12. Considered the rival submissions and material placed on record, the issue involved in this appeal is, the assessee declared the income earned from letting of school building with amenities under the Head "income from House Properties" from A.Y. 2009-10. This issue was decided by the Ld.CIT(A) and ITAT in favour of the assessee till A.Y.2012-13. The decision of the Ld.CIT(A) in A.Y. 2012-13 is reproduced below: - "5.2 During the course of appellate proceedings, the A/R has submitted as under: - "GOA 1 to 4 - Whether income from "House Property" income from Other Sources" or "Business Income" The grounds read as under- 1) The learned Assessing Of....
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....ed to show cause as to why the composite rent income received under the head house property should not be brought to tax under the head income from other sources in view of section 56(ii)(2) of the Act. The assessee furnished reply wherein it has been stated that if lease rental is taxable under the head other sources & not house property, depreciation is allowable as deduction. The same was verified from the details filed wherein it was found that depreciation was worked out on gross value without taking into consideration that the assets were let out and depreciation needs to be worked out from the date of leasing. In the absence of any such working, the claim is not considered. It is also a fact worth mentioning here that similar issue has been involved for earlier assessment years which is sub judice. Hence, a same line is adopted for this year also and the lease rental income. The issue involved in assessment 2009/10 is that the school building is incomplete as on 31.03.2009. Correct date of possession of the property seems to be after 31-03- 09. Hence, rent received for the incomplete building cannot be regarded as rent for the purpose of section 22 and interest claimed....
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....d before FAA about admission of students and their report cards for 3 academic years clearly prove that school had commenced its activities in the year under consideration. We do not find any legal infirmity with the order of the FAA who had held that income could not be taxed as income from other sources and that interest paid. amounting to Rs. 3,26,25,374/ had to be allowed u/s 24 of the Act. Therefore, confirming his order, we decide Gr. No. 1 and 2 against the AO" Copy of order of Hon'ble Tribunal enclosed at pages 45 to 49 of PB B) The assessee furnished a reply wherein it has been stated that if lease rental is treated as 'Income from Other Sources' then deduction of interest amounting to Rs. 6,91,77,945/- utilized for the purpose of construction of school building and depreciation on school building, furniture / fixture & plant / Machinery amounting to Rs. 4,15,73,739/- since the same is also incurred wholly & exclusively for the purpose of earning rental needs to be allowed u/s 57(iii). The same was verified from the details filed wherein it was found that depreciation was worked out on gross value without taking into consideration t....
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....nces by noting that the assessee was unable to establish that any construction activity was carried out by the assessee during the year. Accordingly all expenses claimed to have been incurred for the building construction were rejected. The assessee has vehemently opposed the disallowance and submitted that A.O. had not correctly appreciated the facts of the case and made additions which may be deleted. In this regard it is noted that the issue of commencement of construction has already been decided in assessee's own case by this office order dt.07- 11-2012 for A.Y. 2009-10. It has been held in this order by my Ld. predecessor that it is evident that appellant started construction of school building during A.Y. 2007-08 and expenses were debited in the books of accounts from that year and were shown as Work-in-progress. The total expenditure incurred including plot of land increase as on 31.03.2008 showed further expenses and the file number of approvals such as IOD, CC remained the same throughout, that the contention of the AO with regard to invalidity of IOD and CC was not correct, that the certificate of architecture proved that as on 12.4.2008 work up to the 2nd floor of t....