Property Rental Income of assessee engaged in building construction taxable as income from property

Brief of the case:

Hon’ble HC have decided following questions of law in these bunch of appeals:

• Whether ITAT was justified in directing the AO to tax the rental income of Rs.45,57 lakhs as ‘income from house property’ and to allow deduction u/s 24 ignoring the fact that the income was received from the business asset of unsold flats shown as closing stock?
• Whether ITAT was justified in directing the AO to allow the claim of expenses of Rs.45 lakhs on account of provision for incomplete work ignoring the fact that there was no incomplete work in the project as is evident from the fact that assessee has received rental income out of closing stock shown by him?
• Whether ITAT was justified in treating the rental income as income from house property when the assessee had not maintained any separate account in respect of the income from the house property?

The Hon’ble Court have dismissed all the appeals and confirmed the order of ITAT.

Facts of the case: Hon’ble Court have mentioned facts of ITA No. 5313 of 2010 only which are produced hereunder:

• The respondent-assessee before us is common to all appeals and it is engaged in the real estate business and constructed a commercial complex.
• It filed its return of income for the assessment year 2000-01 declaring total income at Rs.5,51,81,680/- including rental income of Rs.45,57,272/- and claimed deduction under section 24(a) of Rs.11,39,318/-.
• This claim of the assessee was not accepted and he treated the rental income as business income.

Contention of the revenue: