Ambience Developers & Infrastructure Pvt. Ltd Vs PCIT ( ITAT Delhi)
ITAT Delhi Quashes 263 Orders – Rental Income Reclassified as House Property, Not Business
Background Assessments:
Assessee engaged in real estate development.
AY 2018-19: Return filed showing loss of ₹19.52 Cr (normal) & MAT income of ₹17.09 Cr, processed u/s 143(3).
AY 2020-21: Similar scrutiny completed.
PCIT (Central)-2, Delhi:
- Exercised revisionary jurisdiction u/s 263 (orders dated 29.02.2024).
- Held AO’s orders erroneous & prejudicial to Revenue, citing:
Wrong classification of rental receipts as “Income from House Property” instead of “Business Income”.
Wrong allowance of interest expenses as business expenditure (should have been capitalized).
Wrong standard deduction u/s 24(a).
Assessee’s plea:
- Consistency principle—similar treatment accepted in earlier & later years.
- Change would reduce revenue, not enhance it (due to depreciation entitlement).
- AO made inquiries & applied mind, hence 263 cannot be invoked.
- Relied on SC in Malabar Industrial Co. Ltd. & Calvinator of India Ltd., and Delhi HC in Brahma Centre Development.
Tribunal’s Findings
1. Classification of Rental Income
- Assessee owned shops; rent consistently assessed under “House Property”.
- PCIT’s claim of no ownership factually incorrect- sale deeds produced proved ownership.
- If reclassified as business income, depreciation of ₹60.39 Cr would be allowable, leading to higher loss carry forward, prejudicial to Revenue itself.
- Thus, PCIT’s finding unsustainable
2. Interest Expenses
- Finance cost of ₹87.78 Cr claimed as business expense u/s 36(1)(iii).
- AO examined during scrutiny; assessee explained investment nature.
- PCIT alleged it should be capitalized, but ITAT held:
AO conducted inquiry & adopted a permissible view.
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