The High Court of Karnataka upheld the decision of the tribunal and held that income received from Forum Mall should be considered as āIncome from businessā and not āIncome from house propertyā, though an agreement between landlord and tenant contemplating the relationship of landlord and tenant and as such it would partake the character of rental income.
Assessee, M/s Prestige Estate Project Private Limited is a company carrying on the business of the real estate. Return of income for the assessment year came to be filed, declaring total income. The return was processed under Section 142(1) of the Income Tax Act, 1961 and rectified under Section 154 of the Act. During the course of assessment proceedings, the Assessing Officer noticed that assessee has adopted the āCompleted Contract Methodā of accounting for all its real estate projects. On the ground that as per the provisions of accounting standard AS ā 7, the assessee was required to mandatorily follow the āPercentage Completion Methodā and as such, a sum was added to the income. Assessing Officer has also recorded a finding that rental income received from Forum Mall and rental income received from fit-outs were āincome from businessā and āincome from other sourcesā and not as income from house property. Accordingly, the assessment order came to be passed
Aggrieved by the order, assessee preferred an appeal before Commissioner of Income Tax (Appeals) dismissed said appeal filed by the assessee. Hence, the assessee filed an appeal before Income Tax Appellate Tribunal. Tribunal, by order dated partly allowed the appeal and held that assessing officer ought to have followed āComplete Contract Methodā as claimed by the assessee and rental income received from Forum Mall should be brought to tax under the head āprofits and gains from businessā and income from fit-outs should be brought to tax under the head āincome from other sourcesā.
The division bench of Justice Aravind Kumar and Justice Suraj Govindaraj upheld the decision of the tribunal and held thatĀ āif the assessee is in the business of taking land, putting up commercial building thereon, letting out such building with all furniture as his profession or his business then notwithstanding the fact that he has constructed building and he has also provided other facilities and even if there are two separate rental deeds, it does not fall within the income from house property”.
