2017 (2) TMI 160 - AT - Income Tax

Treatment to income from leasing of furniture, fixtures, plant , machinery and others - income from house property OR business income - Held that - Respectfully following the ratio laid down in the case of Chennai Properties & Investments Ltd (2015 (5) TMI 46 - SUPREME COURT ) which squarely cover the instant case, we are, therefore, inclined to set aside the order of the ld CIT(A) and direct the AO to treat the income from amenities and infrastructure as business income and allow the consequential claims of depreciation to the assessee.

Summary

Issues:
- Treatment of income from leasing of furniture, fixtures, plant, machinery, and others as income from house property instead of business income.
- Disallowance of depreciation on the same amount.

Analysis:
1. The appeal was filed by the assessee challenging the order treating income from leasing as income from house property instead of business income. The assessee was involved in real estate business and received income from leasing properties and amenities. The Assessing Officer (AO) treated the income as house property income, disallowing depreciation. The AO relied on a Supreme Court decision in Shambhu Investment Ltd case.

2. The CIT(A) upheld the AO's decision, stating that the income primarily came from property exploitation, not complex commercial activities, thus taxable as house property income. The CIT(A) referred to relevant case laws supporting this decision.

3. The assessee appealed to the ITAT, arguing that the income from amenities and infrastructure should be treated as business income, as in previous years. The assessee had separate agreements for leasing properties and amenities. The ITAT considered the agreements and items leased, concluding that the income should be treated as business income. The ITAT referred to the Chennai Properties & Investments Ltd case to support its decision.

4. The ITAT disagreed with the previous decisions, distinguishing the present case from the Shambhu Investment case. The ITAT directed the AO to treat the income from amenities and infrastructure as business income and allow depreciation claims to the assessee. The appeal of the assessee was allowed, overturning the lower authorities' decisions.