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ITAT confirmed allowance of rental income u/s 22 (of Income Tax Act, 1961) and interest u/s 24 (of Income Tax Act, 1961)
ITAT confirmed allowance of rental income u/s 22 (of Income Tax Act, 1961) and interest u/s 24 (of Income Tax…
AO taxed Kanakiya Gruhnirman Pvt Ltd’s rental income under ‘income from house property’ as against ‘income from other sources’ and disallowed interest expenditure. AO found it had capitalised cost of a school building project, on installation of furniture and fixture in its books of account. AO disallowed proportionate interest. CIT(A) allowed rental income u/s 22 (of Income Tax Act, 1961) and interest u/s 24 (of Income Tax Act, 1961). ITAT confirmed CIT(A)’s order.-500633
1. Kanakiya Gruhnirman Pvt Ltd was in the business of construction/development of properties.
2. It filed its return of income declaring total income at Rs.Nil.
3. AO completed assessment u/s 143 (of Income Tax Act, 1961) determining the income of the assessee at Rs 4.24 crores.
4. AO taxed the rental income under the head income from house property as against income from other sources as well as disallowed interest expenditure of Rs.3.26 crores.
5. AO found that assessee had added Rs.1.88 crores to the cost of a school building project, on installation of furniture and fixture.
6. AO held that assessee had claimed it in its books and had capitalised the same, that both the additions amounting to Rs.1.92 crores (1.88cr+3.97 lacs) had been capitalised in the AY.09-10.
7. AO fixed revised capital investment at Rs.40.17 crores.
8. He disallowed proportionate interest of Rs.19,72,594.
9. FAA allowed the assessee’s appeal.
On appeal, the ITAT held as under:
10. The evidences produced before the FAA about admission of students and their report cards for 3 academic years clearly prove that the school had commenced its activities in the year under consideration.
11. We do not find any legal infirmity with the order of the FAA who had held that income could not be taxed as income from other sources and that interest paid, amounting to Rs.3,26,25,374/- had to be allowed u/s.24 (of Income Tax Act, 1961).
12. We find that the assessee had installed various items as per the mutual agreement entered into with the lessee, that the amount was capitalised.
13. We have,in the earlier part of the order,held that rental income was to be assessed u/s.22 (of Income Tax Act, 1961).
14. Therefore, we agree with the observation of the FAA that capitalisation will not make any difference.
Case Reference - ITO vs M/s. Kanakiya Gruhnirman Pvt Ltd.
The Income-tax Appellate Tribunal -"A"Bench Mumbai
Before Sh.Rajendra,Accountant Member and Smt.Beena Pillai,Judicial Member
ITA No.853/Mum/2013,
(Assessment Year 2009-10)
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