2013 (12) TMI 782 - AT - Income Tax

Nature of rental income - business income or income from house property or other sources - a warehouse/godown was let out by the assessee for preservation of goods belonging to M/s. Hindustan Lever Ltd., for commercial purposes and the letting out of the building for warehouse is business of the assessee. - Held that - the income derived is to be treated as income from business only. - Decided against the revenue. TDS on rent paid - assessee contended that when the assessee itself did not claim the payments by debiting to profit and loss account, the question of disallowance of those amounts by invoking the provisions of section 40a(ia) does not arise. - Held that - In the case of M/s. Narne Constructions (P) Ltd 2013 (3) TMI 412 - ITAT HYDERABAD , it was observed that; unless the assessee claims this item as expenditure / payment, the A.O. cannot allow or disallow the same - Decided in favor of assessee.

Issues involved:
1. Treatment of lease rentals under different heads of income.
2. Disallowance of lease rentals for non-deduction of TDS.
3. Classification of rental income from property as business income or income from house property.
4. Treatment of income from letting out furniture and fixtures as business income.

Issue 1: Treatment of lease rentals under different heads of income:
The cross-appeals filed by the Revenue and Assessee were against the Order of the CIT(A)-III for the assessment year 2007-2008. The Assessing Officer held that the lease rentals for Racking Systems should be taxed under 'Income from House Property' as the income was credited to the profit and loss account. The A.O. also mentioned the possibility of disallowance under section 40(a)(ia) for non-deduction of TDS. The CIT(A) confirmed this decision, but the Tribunal allowed the assessee's appeal based on the precedent set in similar cases where the absence of a claim in the profit and loss account led to the disallowance being set aside.

Issue 2: Disallowance of lease rentals for non-deduction of TDS:
The Assessing Officer disallowed the lease rentals paid to M/s. Rack India Pvt. Ltd. for non-deduction of TDS under section 40(a)(ia). The CIT(A) upheld this disallowance, but the Tribunal ruled in favor of the assessee based on the absence of a claim in the profit and loss account, following previous decisions where such disallowances were set aside.

Issue 3: Classification of rental income from property as business income or income from house property:
The Revenue raised grounds challenging the treatment of rental income from a warehouse/godown as 'income from business' instead of 'income from house property'. The Tribunal referred to a previous case where a similar situation was considered, and it was held that income derived from letting out a warehouse/godown for commercial purposes should be treated as 'income from business'. The Tribunal dismissed the Revenue's appeal based on this precedent.

Issue 4: Treatment of income from letting out furniture and fixtures as business income:
The Revenue appealed against the treatment of income from letting out furniture & fixtures and generator as business income instead of income from other sources. The Tribunal held that since the assessee was engaged in the business of letting out warehouse/godown for commercial purposes, the income from furniture & fixtures and generator should also be treated as business income. The Tribunal dismissed the Revenue's appeal based on this reasoning.

In conclusion, the Tribunal allowed the assessee's appeal regarding the treatment of lease rentals and dismissed the Revenue's appeal concerning the classification of rental income and income from letting out furniture and fixtures. The judgments were based on the specific circumstances of each issue and previous legal precedents.

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