2019 (3) TMI 1004 - HC - Income Tax

Receipts from rent, derived from surplus space being let-out - Classification of income - Business Income OR Income from House Property - HELD THAT - From the perusal of the record, it also reveals that the assessee has claimed depreciation on the building, which was let out and on the other hand, wants to claim deduction under section 24 of the Income Tax Act as house property. From the perusal of the record of the case in hand, it is crystal clear that the assessee, in its Memorandum of Association, had an object to earn income from renting out its property. The assessee has filed its returns showing income earned only from renting out of the property and there is no other income of the assessee in the disputed year. The assessee, in the disputed year, has also claimed deduction on the same property, rented out, which is not permissible under the Act. The authorities below were justified in rejecting the second claim made by the appellant assessee under section 24 of the Income Tax Act, as only one deduction is permissible under the Income Tax Act. - Decided against the Assessee.

Summary

Issues:
Classification of income as "Business Income" or "Income from House Property"

Detailed Analysis:

The case involves an appeal against the order of the Income Tax Appellate Tribunal regarding the classification of income derived from rent as either "Business Income" or "Income from House Property." The appellant initially declared a total income of ?10,79,200/- for the Assessment Year 2012-13, which was later revised to correct the depreciation claim. The Assessing Authority disallowed double deductions claimed by the appellant, leading to an addition to the total income. The Commissioner of Income Tax (Appeals) dismissed the appeal, and the Tribunal partly allowed it but confirmed the disallowance under section 24 of the Income Tax Act.

The appellant argued for the deduction under section 24, emphasizing the Memorandum of Association's main object not being income from renting property. The Revenue's counsel supported the lower authorities' decisions, stating that two depreciation claims cannot be permitted. The Court examined the Memorandum of Association, revealing the Company's objective of earning business income from letting out property. Referring to the case of Raj Dadarkar & Associates, the Court highlighted that income solely from renting premises cannot claim deduction under section 24.

The Court found that the appellant's income was solely from renting out property, with no other income in the disputed year. As the appellant claimed deductions on the same rented property, only one deduction is permissible under the Income Tax Act. Therefore, the authorities were justified in rejecting the appellant's second claim under section 24. Consequently, the appeal was dismissed, with the questions of law answered in favor of the Revenue and against the Assessee.