2017 (1) TMI 511 - AT - Income Tax

Rental income from letting out of commercial properties - nature of income - treated under the head income from house property as per revenue the assessee is involved in the activity of taking lands lease and construction of commercial buildings and let out the same on monthly rental whereas assessee has considered rental receipts under the head income from business - Held that - Respectfully following the decision of coordinate bench of this Tribunal in assessee s own case for the assessment year 2008-09 2016 (3) TMI 1016 - ITAT VISAKHAPATNAM and also following the Supreme Court decision in the case of Rayala Corporation Pvt. Ltd. Vs. ACIT (2016 (8) TMI 522 - SUPREME COURT ), we are of the view that rental receipts from letting out commercial properties is assessable under the head income from profits & gains of business or profession and not as income from house property. - Decided in favour of assessee

Summary

Issues:
Assessment of rental income from letting out commercial properties under the head "income from business or profession" or "income from house property."

Analysis:
The appeal was filed against the order of the Commissioner of Income Tax (A) pertaining to the assessment year 2010-11. The assessee, a partnership firm engaged in the tobacco trade and letting out commercial properties, filed its return admitting total income. The Assessing Officer (A.O.) assessed rental receipts under "income from house property." The CIT(A) confirmed the additions made by the A.O., stating that income from letting out furnished premises is assessable as income from house property. The assessee appealed, arguing that the rental income should be considered as business income. The issue had been considered in a previous case of the assessee, where the Tribunal held that rental income from commercial properties falls under "income from profits and gains of business or profession."

The Tribunal analyzed the partnership deed and activities of the assessee, noting the systematic activity of leasing properties for commercial purposes. Referring to judicial precedents, the Tribunal emphasized that income from such activities should be treated as business income, not income from house property. The Tribunal highlighted the intention of the assessee to engage in business activities by leasing out commercial properties. The Tribunal referred to a Supreme Court case supporting the treatment of rental income from leasing properties as business income.

The assessee relied on another Supreme Court decision, emphasizing that rental income from leasing properties for business purposes should be taxed as profits and gains of business or profession. The Tribunal, considering the facts and legal precedents, concluded that rental receipts from letting out commercial properties should be assessed under the head "income from profits & gains of business or profession," not as income from house property. Consequently, the appeal filed by the assessee was allowed, and the rental income was treated as business income.

In conclusion, the Tribunal's decision aligned with the legal principles established by previous cases and Supreme Court judgments, emphasizing the treatment of rental income from commercial properties as business income rather than income from house property.