2015 (3) TMI 716 - HC - Income Tax

Exemption under Section 11 denied - Assessee is running separate business activity as by way of renting out its properties to Vodaphone, Reliance Communication Ltd., Jyoti Publicity etc. for advertisements and cell phone towers and also renting out the hall for marriages, party etc. as incidental to its main activity and not maintain separate books of account in contravention of Section 11(4A) as per revenue - grievance of the Revenue is that letting out of property would not amount to income from house property but is essentially in the nature of business income, and therefore, the respondent - assessee is not entitled to benefit of Section 11 of the Act - ITAT allowed exemption - Held that - The Commissioner of Income Tax (Appeals) as well as the Tribunal on examination of the record have determined that the income derived from its property by the respondent-assessee should be treated as income from house property and not as business income. This finding of the Commissioner of Income Tax (Appeals) is upheld by the impugned order. We find that as two Authorities under the Act have concurrently come to a finding of fact that the amounts received by the respondent-assessee on account of letting out of its property is income taxable under the head income from house property . Thus, no occasion to apply Section 11A (4) of the Act as canvassed by the Revenue would not arise. In view of the concurrent findings of the fact arrived at by the Authorities which is not shown to be perverse, no substantial question of law arises for our consideration. - Decided against revenue.

Summary

Issues:
Challenge to order of Income Tax Appellate Tribunal regarding exemption under Section 11 of the Income Tax Act, 1961 for a Trust involved in renting out property and conducting business activities.

Analysis:
1. The appellant, Revenue, challenged the Income Tax Appellate Tribunal's order for Assessment Year 2008-09, questioning the confirmation of the order of the CIT (Appeals) directing the Assessing Officer to allow exemption under Section 11 of the Act. The key issue was whether the respondent-assessee, a Trust involved in education and aiding physically handicapped persons, was entitled to the benefit of Section 11 despite engaging in business activities like renting out property for cell towers and events without maintaining separate books of account as per Section 11(4A).

2. The Assessing Officer contended that the respondent-assessee was commercially exploiting its property by renting it out for cell towers and events, leading to the assessment of income. However, the CIT (Appeals) held that the rental income should be taxed as 'Income from House Property' rather than 'Income from business,' allowing the assessee's appeal. The Tribunal upheld this view, emphasizing that the income from letting out property is not business income but falls under income from house property.

3. The Revenue argued that the rental income should be considered business income due to the nature of activities like installing cell towers requiring permissions and separate accounts maintenance as per Section 11(4). However, both the CIT (Appeals) and the Tribunal concluded that the income from property rental should be treated as income from house property, not business income. They found that the rental income, along with service charges, was distinct from the charitable activities' funding, training center fees, and thus dismissed the Revenue's appeal.

4. The High Court upheld the lower authorities' findings, stating that the rental income was correctly categorized as income from house property, in line with the Commissioner of Income Tax (Appeals) and Tribunal decisions. Since both authorities had concurrently determined the nature of income, the Court found no grounds to apply Section 11A (4) as argued by the Revenue. Consequently, the appeal was dismissed, with no costs awarded.