Rental Income to be taxed as PGBP when one of the main objects as per MOA is letting out of properties: ITAT

Income Tax Appellate Tribunal (ITAT) in the matter of ACIT vs M/s Tupelo Builders Pvt. Ltd. has reiterated that income earned by the assessee from letting out of the property is assessable under the head “Income from Business” when one of the main objects of the assessee company is to carry on the business of letting out of properties.

Relevant Text:

42. As could be seen from MOA one of the main objects of the assessee company is to construct, acquire hold buildings, tenements and such other movable and immovable property and to rent let on hire and managed immovable property. Therefore, we noticed that undoubtedly the main objects of the assessee company provides to carrying on the business of letting out of properties and the assessee has let out its property during the year and earned rental income of Rs.4,50,00,000/- which was offered to tax under the head “Income from Business”. Applying the ratio of the decisions of the Hon’ble Supreme Court in the case of Rayale Corporation Ltd. (supra) and Chennai Properties Ltd. (supra) and also the other decisions referred to above, we hold that the income earned by the assessee from letting out of property is assessable under the head “Income from Business”. The decision of Sultan Brother relied upon by the Ld. AO has already been distinguished by the Apex Court in Chennai Properties (373 ITR 673). As noted above, the property was let out by the assessee as per defined business objectives and lease rent earned by the assessee is rightly disclosed as business income. As we have held that the income from letting out of property is assessable under the head “Income from Business” the expenses incurred by the assessee towards interest and processing charges are allowable as deduction u/s 37(1) of the Act. We sustain the order of the Ld. CIT(A) and reject the grounds raised by the Revenue.