2020 (10) TMI 1308 - HC - Income Tax

Correct head of income - business income or house property - whether ITAT erred in holding that the Revenue had assessed income from letting out unsold shops in Coramandel Plaza as business income and therefore not adjudication the grounds of appeal of the Revenue whereas the Revenue had assessed the said income as house property income ? - Revenue contended that this was illegal and factually incorrect as the Assessing Officer did not assess the income from Coromandel Plaza as business income - HELD THAT - Tribunal, after hearing both the Revenue as well as the assessee, by order dated 08.10.2018, allowed the said miscellaneous petition and recalled that portion of the order passed by it. Thus, the basis for filing these appeals and raising the second substantial question of law, as of now, does not survive because the finding has already been recalled by the Tribunal and the Tribunal will hear the matter afresh. Therefore, we hold that there is no necessity to answer the second substantial question of law. Whether the Tribunal was justified in holding that the only course available to the Revenue is the revision of its order under Section 263 ? - We find that the observation made by the Tribunal regarding exercise of power by the Commissioner under Section 263 of the Act is a power to be advisorial and no substantial question of law arises from such observation. Hence, this substantial question of law is rejected. Rental receipts of the assessee with regard to letting out of the property - whether it needs to be treated as business income? - As today we set aside the common order of the Tribunal and remanded the matter to the Tribunal for a fresh consideration. Accordingly, the first substantial question of law framed is left open and both the assessee as well as the Revenue can raise all the issues before the Tribunal.

Summary

Issues:
1. Interpretation of rental receipts as business income for taxation.
2. Justification of the Tribunal's decision regarding the Revenue's course of action under Section 263 of the Income Tax Act.

Interpretation of Rental Receipts as Business Income:
The appeals filed by the Revenue challenged the order of the Income Tax Appellate Tribunal (ITAT) regarding the treatment of rental receipts from property as business income for the assessment year 2012-13. The High Court considered the second substantial question of law, which revolved around the Revenue's assessment of income from letting out unsold shops in Coramandel Plaza as business income. However, the High Court noted that subsequent developments led to the Tribunal recalling its earlier order on this matter. As a result, the High Court found no necessity to address this question further, as the Tribunal would reconsider the issue. The High Court also highlighted that both the assessee and the Revenue could raise all related issues before the Tribunal in the future.

Tribunal's Decision on Revenue's Course of Action:
Another substantial question of law raised was whether the Tribunal was correct in stating that the only recourse for the Revenue was to revise its order under Section 263 of the Income Tax Act. The High Court observed that the Tribunal's mention of the Commissioner's power under Section 263 was advisory and did not give rise to a substantial question of law. Consequently, this question was rejected by the High Court. In conclusion, the High Court disposed of the appeals, indicating that the issues regarding the interpretation of rental receipts as business income and the Tribunal's advisory remarks on the Revenue's course of action under Section 263 would be revisited by the Tribunal in light of the developments.