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TMI Blog2023 (6) TMI 211X X X X Extracts X X X X X X X X Extracts X X X X ..... -14. 2. Brief facts of the case are, assessee is engaged in the business of Real Estate Development . Return of income was filed on 27.08.2013 declaring total loss at ₹.1,36,51,953/- and return was processed u/s. 143(1) of Income-tax Act, 1961 (in short Act ). Subsequently, case was selected for scrutiny and notices u/s. 143(2) and 142(1) of the Act were issued and served on the assessee. In response Authorised Representative of the assessee attended and submitted the relevant information as called for. 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 ₹.3,24,37,720/- from Babubhai Kanakia Foundation ₹. 91,66,360/- from M/s RBK Education Solution Pvt Ltd for letting out of school building along ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s been involved for earlier assessment years which is sub-judice. Accordingly, Assessing Officer adopted for this year also and the lease rental income shown at ₹.4,16,04,080/- is treated as income from other sources u/s 56(2)(ii). Accordingly, Assessing Officer proceeded to compute the income of the assessee at ₹.4,27,63,941/- by adding ₹.4,16,04,080/- as income from other sources and also added ₹.11,59,861/- (under income from business ₹.10,97,013/-, Demat Charges and Insurance charges of ₹.2,848/-, ₹.60,000/- respectively). 8. Aggrieved assessee preferred appeal before Ld.CIT(A) challenging that lease rental income received from letting out of school building along with infrastructure and other amenities should be treated as Income from House property . Ld.CIT(A) 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 source ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... - - Assessee offered rental income as income from house property. Accepted u/ 143(1) of the Act. 3. 2011-12 Income from other sources Income from house property The order passed by CIT(A) was accepted by the department. No further appeal filed before Hon'ble ITAT (Pg nos 28, 33-35 of P.B.; para nos 5 - 5.3). 4. 2012-13 Income from other sources Income from house property The order passed by CIT(A) was accepted by the department. No further appeal filed before Hon'ble ITAT (Pg nos 45, 47 - 53; para nos 5.2 - 5.3). Sr. No. A.Y. Treatment given by AO Treatment given by CIT(A) Remarks 5. 2013-14 Year under appeal 6. 2014-15 Income from house property -- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Income Tax Act, 961 against the said 'Income from other sources as also depreciation on school building should be allowed u/s 57 of the IT Act, 1961. BACKGROUND:- 1.1) Kindly refer to the statement of facts wherein at items 1 to 14, the background of the appellant and the property under consideration is given. 1.2) Appellant had taken secured and unsecured loans for construction of the school building. During year under consideration, it paid interest of Rs. 6,91,77,945/- on secured as well as unsecured loans claimed the same u/s 24 of the IT Act. ASSESSMENT ORDER AND SUBMISSION OF THE APPELLANT 1.3) The assessing officer is not convinced that the rental income should be treated under the head 'Income from House Property. He brought to tax the same under the head 'Income from other sources' by stating that lease deed to let out school building with infrastructure amenities is composite in-separable as also mentioning that the 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 shown at Rs.4,13,03,520/- is treated as In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... italized to investment towards property. Accordingly. rental income is taxed under the head Income from Other Sources'. The said issue has been adjudicated by the learned Commissioner of Income Tax. Appeal - 20 in detail in his order for AY 2009-10 and held that the rental income from school building should be treated as 'Income from House Property and interest claimed against the same is allowable within the meaning of section 24 of the IT Act, 1961. Copy enclosed at pages 30 to 44 of PB. Without prejudice to above without admitting, we state as under The main contention on the basis of which the rental income I was treated as Income from other sources' and interest being disallowed in AY 2009-10 is the presumption that school building is incomplete. It can be appreciated that during the year under consideration the fact that completed building has been let out has not been disputed by the learned AO. Thus, on consistency ground also, treatment of rental income as 'Income from other sources' is not correct as there is a change in fact from AY 2009- 10 wherein partly completed building was given on rental basis whereas during the yea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of PB wherein appellant had submitted detailed working of depreciation allowable on building, furniture / fixture, plant machinery. It can be observed that all the assets have been put to use in AY 2010-11 and depreciation is allowable for that year and thereafter for AY 2011- 12 onwards. For the year under consideration, the WDV as on 31/03/2011 has been carried forward assuming the allowance of depreciation in AY 2010-11 2011-12. The contention of the learned AO that depreciation has been worked out on gross value without taking into consideration that the assets were let out and the depreciation needs to be worked out from the date of leasing and in absence of such working. The claim is not considered is hot correct. In fact the depreciation had been worked out correctly from the date on which the assets are let out. Hence, on the basis of the above, we request your honour to allow interest paid of Rs. 6,91,77,945/- and the depreciation on school building. furniture fixture, plant machinery amounting to Rs. 4,15,73,739/- u/s 57(ii) of the IT Act. If the income is to be treated as Business. Income , corresponding interest paid of Rs. 6,91,77,945 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -10 confirmed that the trust was engaged in educational activities in Chembur and was conducting school at Chembur, that there was no basis to hold that school might have functioned from other building, that the details about the students, results, correspondence, deduction of tax at source etc. proved that the school had started functioning during the year under consideration, that the income received by the assessee was to be taxed under the head income from house property. He also held that proportionate Interest of ₹.3.26 crores u/s. 24 of the Act, claimed by the assessee was to be allowed. The Hon'ble ITAT Mumbai while deciding assessees appeal in ITA No.853/Mum/2013 for A.Y. 2009-10 vide order dt. 30-10-2015 has noted that in the assessee case the IOD is dt.10-01-2007 and CC dt.24-04-2007 which establish that the construction work had started prior to 31-03-2007 and the total expenditure incurred till 31-03-2007 was of 10,53,44,733/-. The Hon'ble ITAT also noted that further expenses were incurred in subsequent year which were shown in the books of accounts and the assessee had given details of the constructed area. The ITAT upheld the stand taken by the CIT(A) ..... X X X X Extracts X X X X X X X X Extracts X X X X
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