2017 (3) TMI 139 - AT - Income Tax

Compensation received from tenanted premises - treated as income from House property OR business income - Disallowance of Expenses incurred against the other operating income - Held that - The amount received by the assessee on account of subletting the property is only income from house property and has to be treated as such. In such circumstances there is no justification of allowing expenses against the house property income other than that provided as deduction under the scheme of computation of house property income. Accordingly the order s of the learned CIT-A is a reasonable one and doesn t need any interference on our part. - Decided against assessee

Summary

Issues:
1. Treatment of income as from House Property
2. Disallowance of expenses incurred against other operating income

Issue 1: Treatment of income as from House Property

The case involved an appeal by the assessee against the order of CIT-A pertaining to the assessment year 2010-11. The primary contention was the treatment of compensation received from tenanted premises as income from House property. The ITAT Mumbai analyzed the facts, including the nature of the business activities of the assessee, who provided office premises to clients and earned rental income. The ITAT referred to legal precedents, including the introduction of section 27(iiib) of the Income Tax Act, which deemed the lessee as the owner of the property for tax purposes in certain situations. The ITAT concluded that the income earned by the assessee from subletting the property was rightly categorized as income from House Property, rejecting the claim that it was for commercial purposes. The decision was supported by Supreme Court and High Court judgments, emphasizing the ownership of the property for tax assessment purposes.

Issue 2: Disallowance of expenses incurred against other operating income

The second ground of appeal related to the disallowance of expenses incurred against other operating income. The ITAT referred to the CIT-A's decision, which considered the compensation received as business income and allowed deductions against operational expenses. The ITAT highlighted the Supreme Court's ruling in the Podar Cement case, emphasizing the liability on a person entitled to receive income from the property. The ITAT upheld the CIT-A's decision, stating that the amount received by the assessee from subletting the property constituted income from House Property. Consequently, the ITAT concluded that only deductions provided under the scheme of computation of house property income were justified, dismissing the appeal and upholding the CIT-A's order.

In summary, the ITAT Mumbai ruled on the issues of treating income as from House Property and the disallowance of expenses against other operating income. The judgment emphasized legal precedents, including Supreme Court and High Court decisions, to determine the nature of income earned by the assessee and the appropriate deductions allowed. The ITAT upheld the CIT-A's decision, confirming that the compensation received from subletting the property constituted income from House Property, and only specific deductions were permissible under the scheme of computation.