2017 (3) TMI 1813 - AT - Income Tax

Deduction claimed u/s 24(a) disallowed - Rent income should be treated as income from house property OR Business income - HELD THAT - No details were furnished by assessee till 17/07/2014. Some statements regarding the queries raised by ld CIT(A) were filed by assessee on 28/08/2014 from which the facts were not verifiable as to which are the asset used for Marine training. CIT(A) concluded that assessee company executed two agreements one in respect of buildings and other in respect of furniture and fixture. The assessee company derived the benefits claiming depreciation all the years and now has changed the head the income only to claim standard deduction u/s 24(a) which is higher than the depreciation comparative to repairs and maintenance. Assessee has not filed copy of Memorandum of Association of Assessee Company for the reasons best known to them. The Audit report filed by the assessee reveals that nature of business or profession is Boat pleasure Cruising renting of properties para 8(a) and there is no change in the nature of business or profession. The ratio of the various decisions is not applicable as the facts of the present case are at variance. We have seen that the order of ld CIT (A) is reasoned one and does not require any interference at our end. Appeal of the assessee is dismissed.

Summary

Issues:
1. Determination of rental income as income from business or income from house property.
2. Disallowance of deduction claimed under section 24(a) of the Income Tax Act.

Analysis:
1. The appeal was filed against the order of the Commissioner of Income-tax (Appeals) for Assessment Year 2010-11, where the Assessing Officer treated the rental income as "Business Income." The assessee argued that the rental income should be considered as "Income from House Property" and claimed a deduction under section 24(a) of the Act. The main contention was that the property was merely let out without any systematic business activity related to it. The assessee cited various legal precedents to support their argument that the letting out of property is not a business activity but falls under the category of house property income.

2. The Revenue supported the order of the authorities below, stating that the assessee consistently showed business income from letting out the property. It was argued that the nature of activities and the presentation of rental income remained the same as in preceding years, and the change in the head of income was an attempt to reduce tax liability. The Assessing Officer found no justification for the change in the head of income and concluded that the rental income should be treated as business income based on consistency and lack of material change in facts.

3. The Tribunal considered the arguments of both parties and reviewed the orders of the lower authorities. It was noted that the assessee consistently offered rental income under the head of business income, and there was no substantial change in the nature of income or activities. The Tribunal observed that the assessee changed the head of income to claim a higher standard deduction under section 24(a) compared to depreciation expenses. The Tribunal agreed with the Commissioner of Income-tax (Appeals) that the facts of the case did not align with the legal precedents cited by the assessee, and upheld the decision to treat the rental income as business income. The appeal of the assessee was dismissed, with no order as to costs.

In conclusion, the Tribunal upheld the decision to treat the rental income as business income based on consistency and lack of material change in facts, rejecting the assessee's argument to categorize it as income from house property. The appeal was dismissed, and the order was pronounced on March 8, 2017.