2013 (5) TMI 632 - HC - Income Tax

Rental income from unsold flats shown as stock-in-trade in the books - Profits and gains from business and profession v/s income from house property - Held that - Issue is no longer debatable in view of the decision of CIT v Ansal Housing Finance & Leasing Co. Ltd 2012 (11) TMI 323 - DELHI HIGH COURT subsequently, been followed in CIT v. Discovery Estates Pvt. Ltd 2013 (3) TMI 124 - DELHI HIGH COURT wherein held that the rental income should not be assessed under the head income from business but under the head income from house property .

Summary

Issues:
Classification of rental income from unsold flats as business income or income from house property.

Analysis:
The appeals were filed under Section 260A of the Income Tax Act, 1961, challenging the order of the Income Tax Appellate Tribunal regarding the classification of rental income derived from unsold flats. The Tribunal had disposed of three appeals related to different assessment years, where the issue was whether the rental income should be categorized under "profits and gains from business and profession" or "income from house property."

The Tribunal held that the rental income falls under "profits and gains from business and profession," contrary to the appellant's argument that it should be considered as "income from house property." The decision in the case of CIT v Ansal Housing Finance & Leasing Co. Ltd. was cited, which was subsequently followed in other cases, establishing a precedent. The court noted that the issue was settled based on previous decisions, and the Tribunal's classification was incorrect.

The respondent argued that the previous decision was based on deemed rent, while the current case involved actual rent received for flats. However, the court referenced other cases where the issue was related to actual rent receipts, not deemed rent, indicating that the classification should remain consistent. Therefore, the court ruled that the rental income should be assessed under the head of "income from house property" and not as "profits and gains from business and profession."

In conclusion, the court allowed the appeals, holding that the rental income from unsold flats should be treated as "income from house property" based on established legal precedents. The plea of consistency raised by the appellant was not examined as it was deemed unnecessary given the court's decision on the classification of income.