Section 194LBA(3) — the law in short
What the courts have decided on section 194LBA(3), in one screen. Read this first; open an entry when you need the facts, the reasoning and the source.
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Statutory position — s.10(23FCA): a REIT's exemption for rent from real estate it owns directly, and why an InvIT cannot use it
CBDT Circulars & InstructionsCuts both waysValidity unconfirmed
My client is a registered REIT that owns some office buildings directly rather than through a project company, and lets them out. Is that rent taxed in the REIT's hands at the maximum marginal rate?
No. Clause (23FCA) of section 10 keeps out of a business trust's total income any income of a business trust, being a real estate investment trust, by way of renting or leasing or letting out any real estate asset owned directly by such business trust. The clause was inserted by section 7(III)(d) of the Finance Act, 2015 with effect from 1 April 2016, and "real estate asset" takes the meaning given to it in clause (zj) of sub-regulation (1) of regulation 2 of the SEBI (Real Estate Investment Trusts) Regulations, 2014. Two limits are on the face of it: the trust must be a real estate investment trust, so an InvIT cannot use the clause; and the asset must be owned directly by the trust, so rent earned by a special purpose vehicle and passed up as interest or dividend is on a different clause altogether.
Listed strongest first: Supreme Court, then High Court, then Tribunal, then CBDT. Nothing here has yet been read in full by a chartered accountant — open an entry to see where it came from.