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Income from rentals

work is worship (Service) (2728 Points)

21 June 2012

A Enterprise dealing real estateactivities enters agreement with owners of Land for development of residential building on such land. After development the developer company let out the building. The developer company have all legal ownership rights on such buildings.

Will the Income (i.e., Rent received) from let out of properties be taxable under the head of Income from House Property or Profits and Gains from Business or Profession.

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3 Replies

Prateek Agarwal (Sr. Executive - Finance & Accounts) (1732 Points)
Replied 21 June 2012

I think under Income from House Property since it is let out. But if the business of the developer is to give houses on rent instead of selling them, then under PGBP

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CA Sankalp Patwa (CA) (193 Points)
Replied 21 June 2012

CONDITIONS NECESSARY FOR TAXING INCOME

FROM HOUSE PROPERTY

These are:

• The property should consist of any building or land appurtenant thereto : - Satisfied

• The assessee should be the owner of the property : - Satisfied

• The property should not be used by the owner for the purpose of any business or profession carried on by him,

the profits of which are chargeable to tax. : - Satisfied

In case provided by you all the three conditions are satisfied and hence income from letting out of this property will be taxable under income from house property.

This can not be treated as a business income because the enterprising is engaged in real estate activities and in general parlance real estate activity does not include leasing of property

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