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2017 (9) TMI 525 - AT - Income TaxRental income earned from the property held as stock in trade - income from House Property OR Business & Profession - Held that - By following the rule of consistency for the assessment year 2009-10 & 2010-11, the Ld. CIT(A) in the present assessment year i.e. 2011- 12 has rightly directed the AO to treat the income as house property and allow the deduction for payment of house tax, which does not need any interference on our part. Even otherwise, we further note that the Hon ble High Court of Delhi in the case of New Delhi Hotels Ltd. vs. ACIT 2013 (5) TMI 632 - DELHI HIGH COURT has held that rental income derived from unsold flats which are shown as stock-in-trade in the books of the assessee would be assessed under the head Income From House Property and not under the head of Profits and Gains from Business and Profession . We further note that the Hon ble High Court of Delhi had similarly held in the case of CIT vs. Discovery Estates Pvt. Ltd. (2013 (3) TMI 124 - DELHI HIGH COURT).
Issues:
1. Classification of rental income as income from 'House Property' or 'Business & Profession'. 2. Principles of consistency in income classification. 3. Validity of Ld. CIT(A)'s order and its alignment with tax laws. Issue 1: Classification of Rental Income The case involved a dispute over the classification of rental income of ?1,05,26,484 earned from a property held as stock in trade. The Revenue contended that the income should be treated as 'Business & Profession' income, while the Ld. CIT(A) classified it as 'House Property' income. The assessee had historically shown lease receipts as business income, but deviated in the year under consideration. The AO treated the income as 'House Property' income to reduce tax liability, leading to an addition of the amount to the assessable income. However, the Ld. CIT(A) deleted this addition, citing consistency in previous years' treatment and legal precedents supporting the classification of such income as 'House Property' income. Issue 2: Principles of Consistency The Ld. CIT(A) emphasized the importance of consistency in income classification, referring to earlier assessment years where similar issues were decided in favor of the assessee. The Ld. CIT(A) relied on legal provisions and judicial decisions to support the classification of rental income from properties held as stock in trade under the head of 'Income from House Property.' The assessee's change in accounting practice was deemed in accordance with the Income Tax Act, and the AO was directed to treat the income as 'House Property' income for the year under review. Issue 3: Validity of Ld. CIT(A)'s Order The Revenue appealed the Ld. CIT(A)'s order before the Tribunal, arguing for the classification of rental income as 'Business & Profession' income. However, the Tribunal upheld the Ld. CIT(A)'s decision, citing consistency in treatment, legal precedents, and the specific nature of the income derived from properties held as stock in trade. The Tribunal found the issue to be squarely covered by previous decisions and dismissed the Revenue's appeal, affirming the Ld. CIT(A)'s order. In conclusion, the Tribunal's judgment clarified the classification of rental income from properties held as stock in trade, emphasizing the importance of consistency and adherence to legal provisions in determining the appropriate head of income for tax assessment purposes.
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