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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 ..... 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. per month for all the ten (10) academic years wit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 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 should be followed & relief should be granted. 4. Appellant prays to leave, add, alter or amend any or all the gro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8 - -- 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 Officer erred in law & on facts in treating the rental income of Rs. 4,13,03,520/- received from school building as 'Income from other sources'. Appellant prays that the same should be treated as 'Income from house prop ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es & 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 against 'Income from House Property is not allowable within the meaning of section 24 as the same being capitalized to investment towards property. Accordingly, rental income is taxed under the head 'Income from Other Sources The issue involved in assessment 2009/10 is that the school building is in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 that the asset were let out and depreciation needs to be worked out from the date of leasing. In absence of such working, the claim is not considered. Without prejudice to submission made in para A) above, we state as under- It can be appreciated that the learned AO had never disputed that the loan has been utilized for t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 the school was completed in all aspects and RCC work upto 7th Floor was also complete. My Ld. predecessor had perused the number of students of the school in A.Ys 08-09 to 10-11, sample copies of admission forms, academic report of student of each standard and held that these documents were of the address of same place i.e. Chembur, that NOC issued by t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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