2016 (11) TMI 204 - AT - Income Tax

Rectification of mistake - Rental income earned from sublease of the property - income from house property or business income - Held that - Tribunal after appreciation of facts has held that the sub leasing of the property was not part of the business activity of the assessee. The Tribunal, as the facts were available before it, has given a categorical factual finding upon which the relevant case laws have been relied upon. With due respect to the all case laws relied upon by the Ld. Counsel for the assessee, we find no mistake apparent on record in this case as the said case laws are not applicable because the factual finding given by the Tribunal is contrary to the facts of the cases before the Hon ble Supreme Court as relied upon by the Ld. Counsel for the assessee. So far the reliance of the Ld. Counsel on the subsequent decision of the Tribunal is concerned, in our view, any finding arrived by a co-ordinate Bench of the Tribunal in subsequent decision can not be held to be a reason enough to hold that there was any mistake in the earlier order of different Bench of the Tribunal. Moreover, we deem it fit to mention further here that this Tribunal has no power to review etc. If the assessee has any grievance against the impugned order, proper course to agitate the same is by filing an appeal before the next appellate authority i.e. the Hon ble Bombay High Court, but, not with the present application under section 254(2) of the Act. The Tribunal, vide impugned order, has not only considered the submissions of the assessee but has given a categorical finding on all of the issues which were raised before the Tribunal by the Ld. Counsel for the assessee

Summary

Issues Involved:
1. Classification of rental income from sublease as "income from house property" or "business income."
2. Applicability of the Supreme Court's decision in "Chennai Properties & Investments Ltd." to the case.
3. Rectification of the Tribunal's order under section 254(2) of the Income Tax Act based on subsequent interpretations of law.

Issue-wise Detailed Analysis:

1. Classification of Rental Income:
The primary issue was whether the rental income earned by the assessee from subleasing the property should be assessed under the head "income from house property" or as "business income." The Tribunal, in its order dated 14.08.2013, held that the rental income should be assessed as "income from house property." It was noted that the assessee simply subleased the property to enjoy rental income without engaging in any organized activity of commercial exploitation or leasing out properties as a business.

2. Applicability of Supreme Court's Decision in "Chennai Properties & Investments Ltd.":
The assessee contended that the Supreme Court's decision in "Chennai Properties & Investments Ltd." (Civil Appeal No.4494 of 2004) mandated that the rental income should be classified as "business income." The Tribunal examined the facts and circumstances of the "Chennai Properties" case, where the company's main objective was to acquire and let out properties as a business activity, which was distinguishable from the assessee's case. The Tribunal found that the assessee's main objects did not include leasing or subleasing properties as a business activity.

3. Rectification under Section 254(2):
The assessee argued that the Tribunal's order dated 14.08.2013 contained an apparent error based on the subsequent Supreme Court decision and should be rectified under section 254(2) of the Income Tax Act. The Tribunal reviewed the relevant case laws, including "Karanpura Development Company Ltd. vs. CIT" and "East India Housing Land Development Trust Ltd. vs. CIT," and found that the facts of the assessee's case were different. The Tribunal emphasized that rectification under section 254(2) is permissible only for obvious and patent mistakes apparent from the record, not for issues requiring detailed arguments or where there can be two opinions. The Tribunal concluded that there was no mistake apparent on record in its previous order, and the proper course for the assessee, if aggrieved, was to file an appeal before the higher appellate authority, not seek rectification under section 254(2).

Conclusion:
The Tribunal dismissed the miscellaneous applications filed by the assessee, holding that the rental income should be assessed as "income from house property" and not "business income." The Tribunal found no apparent mistake in its previous order that warranted rectification under section 254(2) based on subsequent interpretations of law. The Tribunal reiterated that the power of rectification is limited to correcting obvious and patent mistakes and does not extend to re-evaluating decisions based on new arguments or interpretations.