2018 (1) TMI 1336 - AT - Income Tax

Income received by the assessee from sub-letting - nature of income - income from house property or busniss income - Held that - Under section 22 of the Act the charge to tax of income from house property is based on the ownership of such property. The admitted position in the present case is that the assessee is only a tenant and not the owner of the property. It is also not the case of the revenue that the tenancy is for a period of more than 12 years which could be construed as ownership rights u/s 27(iiib) of the Act. Therefore the income in question cannot be assessed as income from house property. See M/s Konark Furniture Pvt. Ltd case 2014 (12) TMI 1321 - ITAT KOLKATA

Summary

Issues:
1. Assessment of income received from sub-letting properties under the head "Income from business."
2. Application of legal precedent in determining the nature of income for taxation purposes.

Analysis:
1. The primary issue in this case revolves around the assessment of income derived from sub-letting properties by the assessee. The Revenue contested the deletion of the addition by the CIT(A) based on the judgment in the case of M/s. Chennai Properties and Investments Ltd. The assessee argued that the income from sub-letting should be considered under the head "Income from business" due to additional services provided to tenants. The Tribunal noted that the assessee collected license fees and offered various services to tenants, leading to the conclusion that the income should indeed be categorized as business income.

2. The second issue pertains to the application of legal precedent in determining the nature of income for taxation purposes. The CIT(A) relied on a previous decision by the Tribunal regarding a sister concern of the assessee, M/s. Konark Furniture Pvt. Ltd., where income from similar activities was assessed under the head "Income from business." Furthermore, the CIT(A) referenced the Supreme Court judgment in the case of Chennai Properties to support the decision. The Revenue challenged the applicability of these precedents to the present case, emphasizing the need for a thorough discussion on the relevance of the legal principles to the facts at hand. However, the Tribunal upheld the CIT(A)'s order, citing consistency in the treatment of income from sub-letting across previous assessment years and emphasizing the principle of finality in legal proceedings.

In conclusion, the Tribunal dismissed the Revenue's appeal and confirmed the order of the CIT(A), directing the Assessing Officer to treat the income from sub-letting as income from business, in line with previous assessments and legal precedents. The decision underscores the importance of consistency in tax assessments and the application of established legal principles to ensure fairness and finality in judicial proceedings.