Case Law Details
Kanakia Gruhnirman Pvt Ltd Vs DCIT (ITAT Mumbai)
ITAT Mumbai held that composite rental income received by letting out school building with infrastructure and amenities is taxable under the head ‘Income from House Property’ and not under ‘Income from income from other sources’ in view of section 56(2)(ii) of the Income Tax Act.
Facts- 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 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.
AO observed that as lease deed to let out the school building with infrastructure and amenities was entered into for composite in-separable rent in respect of letting out of school building with infrastructure. The assessee was asked 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 other sources in view of section 56(2)(ii) of the Act.
AO adopted lease rental income shown at ₹.4,16,04,080/- to be treated as income from other sources u/s 56(2)(ii). Accordingly, AO 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).
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