2016 (8) TMI 1421 - AT - Income Tax

Correct head of income - assessee have constructed commercial complex and rented out the unsold shops / offices on lease - Business income or income from house property - HELD THAT - Assessee have constructed commercial complex and rented out the unsold shops / offices on lease. In case of Commissioner of Income Tax 12 Vs. M/s. Sane & Doshi Enterprises 2015 (4) TMI 882 - BOMBAY HIGH COURT the income of the assessee was treated as income from house property. Finding identical facts and circumstances of the present case, we are of the view that in the present case the law is quite applicable and the income of the assessee is liable to be treated as income from the house property and accordingly he would be entitled exemption u/s.22 of the Act. Set aside the finding of the CIT(A) in question and direct the Assessing Officer to re-assess the income of the assessee in view of the observation made above. - Decided in favour of assessee for statistical purpose.

Summary

Issues:
Identification of immovable property and ancillary assets, interpretation of Sections 14 and 22 of the Income Tax Act, treatment of rental income as income from house property or business.

Analysis:
The appellant contested the order of the Commissioner of Income Tax (Appeals) regarding the treatment of rental income for the A.Y. 2010-11. The main dispute was whether the rental income should be classified as income from house property or business. The appellant, engaged in construction and development, argued that the rental income from the property should be treated as house rent income. The Assessing Officer, however, viewed the property as being used for business purposes, thus categorizing the income as business income. The CIT(A) upheld this decision, prompting the appellant to appeal. The appellant cited a Bombay High Court case to support their position. The appellant had developed a shopping-cum-office complex in Mumbai, leasing out office space and earning income from various related activities. The Tribunal analyzed the facts and compared them to the cited case where a similar scenario resulted in income being treated as house property income. Finding the circumstances analogous, the Tribunal ruled in favor of the appellant, directing the Assessing Officer to reassess the income as income from house property, granting exemption under Section 22 of the Act.

The Tribunal's decision hinged on the interpretation of the law and the specific facts of the case. By aligning the facts with a precedent where income was treated as house property income, the Tribunal concluded that the rental income in this case should also be categorized as income from house property. This ruling highlights the importance of considering the nature of the property and the activities conducted on it in determining the appropriate classification of income for tax purposes. The Tribunal's decision provides clarity on the treatment of rental income derived from properties developed for commercial purposes, emphasizing the need for a thorough examination of the facts and legal precedents to arrive at a just outcome.