NISARG REALTORS PVT LTD.,THANE vs. ACIT 15 (2)(1), MUMBAI

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ITA 7719/MUM/2019Status: DisposedITAT Mumbai28 April 2022AY 2013-148 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the income earned from the property is chargeable to tax as business income, not income from house property, based on the assessee's Memorandum of Association and relevant Supreme Court and High Court decisions.

What were the facts?

The assessee, a real estate developer, earned income from a Leave and License Agreement. The Assessing Officer treated this income as 'income from house property' instead of business income, disallowing business expenses.

What were the issues?

Whether rental income earned by a real estate development company, as per its Memorandum of Association, should be taxed as business income or income from house property.

Which sections of the Income-tax Act were involved?

Section 194(I)

AI-generated summary — verify with the full judgment below

Cases cited in this judgment(4)Show list

Detected automatically from the text. Citations are also linked where they appear in the judgment. The count shows how many other judgments on BharatTax rely on the same authority.

Income Tax Appellate Tribunal, “B” BENCH, MUMBAI

Before: SHRI PRASHANT MAHARISHI, AM & SHRI AMARJIT SINGH, JM

For Appellant: Ms. Nishita Mandalaywala, CA
For Respondent: Shri C.T. Mathews, DR
Hearing: 21.04.2022Pronounced: 28.04.2022
1.

This appeal is filed by Nisarg Realtors Pvt. Ltd. (the appellant/ assessee) against order passed by learned Commissioner of Income–tax (Appeals)–24, Mumbai (the learned CIT(A)] for A.Y. 2013–14 dated 25th February, 2019 raising the following grounds of appeal:–

“1. On the facts and circumstances of the case and law on the subject the learned Assessing Officer erred in treating the business income of Rs.3,38,46,924/- as Income from House property and disallowing Business expenses of Rs.4,64,59,034/- and the

3.

During the course of assessment proceedings the learned Assessing Officer found that was executed a Leave and License Agreement on 9th September, 2011 between M/s Sankalpan Infrastructure Pvt. Ltd. (Licensor) and M/s Lanxess India Pvt. Ltd. for Lanxess house situated at Thane. As per that deed, Sankalpan Infrastructure Pvt. Ltd. (Licensor) granted license to Lanxess India Pvt. Ltd. (Licensee) from 1st January 2012, to 31st December 2016 at license fee of ₹8,08,312 per month for a total built up area of 18,088 sq. ft. Further, rectification deed was entered into where total built up area was enhanced to 48,417 sq. ft. and license fee was revised to ₹20,12,265 PM. Accordingly, the total license fee per year was determined at ₹3,38,46,924.

6.

The learned Authorized Representative vehemently submitted that the assessee is engaged in the business of real estate development. It has purchased one property which was at the time of purchase was earning rental income. Assessee’s memorandum of association clearly shows that the assessee is a developer and builder and according to clause no. A(1) and B(5) assessee can also engage into renting out of the property. The learned Authorized Representative further submitted that the case is squarely covered by the decision of Hon'ble Supreme Court of India in Chennai Properties and Investment Ltd. Vs. CIT 373 ITR 673. Reference was made to paragraph no. 5 of that decision and submitted that assessee has also similar objects in the memorandum of association. Reference was also made to paragraph no. 7, where in the decision of Hon'ble Supreme Court in case of East India Housing and Rent Development Trust Ltd. vs. CIT 42 ITR 49 was also discussed. It was stated that this is the decision relied upon by the CIT (A) to confirm the addition. She further relied upon the decision of Hon'ble Supreme Court in Rayala Corporation Pvt. Ltd. vs. ACIT 386 ITR 500. She, in this case, submitted that similar arguments are used by the Revenue to treat the rental income as income from house property. She referred to paragraph no. 5. Accordingly, she submitted that both these decisions of the Hon'ble Supreme Court cover the issue in

7.

The learned Departmental Representative vehemently supported the order of the lower authorities. It was submitted that:–

i. TDS was deducted on above sum under section 194I of the Act. ii. Assessee is engaged in business of real estate development and renting may be one of the objects but it is not the only object. iii. Decisions relied upon by assessee do not apply to facts of the case. iv. Intention of assessee is to earn rental income only.

8.

We have carefully considered the rival contentions and perused the order of the lower authorities. The fact clearly shows that assessee is a company engaged in the business of real estate development. According to Memorandum Of Association, main object of the assessee

9.

In the result, the appeal of the assessee is allowed.

Order pronounced in the open court on 28 .04.2022.

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