2016 (8) TMI 203 - AT - Income Tax

Rental income received on letting out warehouses - income from house property OR business income - Held that - Authorities below in the present case were not justified in holding the rental income received from the business assets as income from house property.

Summary

Issues:
Questioning first appellate order upholding rental income as "income from house property" instead of business income.

Analysis:
The assessee, a partnership firm, disclosed rental income as business income but the Assessing Officer treated it as "income from house property." The assessee argued that the income should be considered business income as per the partnership deed and previous assessment acceptance. The Learned AR cited relevant case laws, including the decision of the Hon'ble Delhi High Court in CIT vs. Kelvinator of India Ltd., to challenge the reopening of assessment based on change of opinion. On merit, the Learned AR relied on the decision of the Hon'ble Supreme Court in Chennai Properties & Investment Ltd. vs. CIT to support the claim that income from letting out commercial assets constitutes business income. The assessee's position was further backed by the decision of the Hon'ble jurisdictional Allahabad High Court in CIT vs. Goel Builders.

The Revenue, represented by the Learned Senior DR, supported the orders of the authorities below, arguing that the rental income should be considered as income from house property. However, the ITAT found that the Revenue failed to rebut the assessee's claim that it had no other business than letting out the warehouse. The ITAT referenced the decision of the Hon'ble jurisdictional Allahabad High Court and the Hon'ble Madras High Court, which was later reversed by the Hon'ble Supreme Court, to conclude that the rental income from letting out business assets should be treated as business income. Therefore, the ITAT directed the Assessing Officer to accept the claimed rental income from the warehouse as business income. The ITAT allowed the grounds questioning the validity of treating the income as "income from house property," and the appeal was ultimately allowed.

In conclusion, the ITAT's decision favored the assessee, establishing that the rental income from letting out business assets should be categorized as business income, not income from house property. The ITAT's ruling was based on the interpretation of relevant case laws and the specific circumstances of the case, ultimately leading to the allowance of the appeal.