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2022 (10) TMI 77 - AT - Income TaxIncome from house property - warehouse hire income - income under which the rental from his house property let by the assessee to M.P. Warehousing and Logistics Ltd. for storage purposes is assessable to tax under the Act - HELD THAT - We, have little hesitation in upholding the claim of the Revenue of the warehouse hire income as assessable as income from house property in the instant case. Though the assessee has placed certain orders by the Tribunal in his paper-book, the same were not referred to during hearing, to form part of the record nor any other argument made. The matter is principally factual, i.e., given the law in the matter, and has accordingly been decided issuing findings of fact. The issue arising is rather covered by the decisions in Indian Warehousing Industries 2002 (9) TMI 90 - MADRAS HIGH COURT and Nutan Housing Society 2006 (8) TMI 286 - ITAT PUNE-A which were not distinguished before us, as indeed the decisions in Sultan Bros 1963 (12) TMI 4 - SUPREME COURT , East India Housing and Development Trust 1960 (11) TMI 7 - SUPREME COURT and Raj Dadarkar Ass 2017 (5) TMI 586 - SUPREME COURT all of which find place in the assessee s paper-book. Decided against assessee.
Issues Involved:
1. Determination of the head of income under which rental income from house property should be assessed. 2. Analysis of whether the rental income qualifies as business income or income from house property under Section 22 of the Income Tax Act, 1961. Issue-Wise Detailed Analysis: 1. Determination of the head of income under which rental income from house property should be assessed: The sole issue in this appeal is the head of income under which the rental income from house property, let by the assessee to M.P. Warehousing and Logistics Ltd. for storage purposes, should be assessed under the Income Tax Act, 1961. The assessee claims it to be business income, while the Revenue contends it is income from house property, assessable under Section 22. 2. Analysis of whether the rental income qualifies as business income or income from house property under Section 22 of the Income Tax Act, 1961: Section 22 of the Act stipulates that the annual value of property consisting of buildings or lands appurtenant thereto, of which the assessee is the owner, is chargeable to income-tax under the head "Income from house property" unless occupied for business or profession purposes. The head of income is determined by the source of income, and ownership of house property is recognized as a source of income irrespective of whether it is let or not. The Tribunal referred to various judicial precedents to clarify that letting, per se, is not considered a business under the Act. Even if the exploitation of property is one of the company's objectives, it may not be assessable as business income. The Tribunal cited cases like East India Housing & Land Development Trust Ltd. vs. CIT, Sultan Brothers (P.) Ltd. v. CIT, and Karanpura Development Co. Ltd vs. CIT to emphasize that the nature of the asset and the purpose of letting do not automatically classify the income as business income. The Tribunal further explained that if letting is carried out as a business activity, where ownership is incidental to the business, the income would be considered business income. However, this requires a set of activities beyond mere letting, indicating a systematic business operation. The Tribunal found that in the present case, the assessee's activity did not go beyond passive income from ownership of the property. The Tribunal analyzed the facts, noting that the warehouse was the only property of the assessee, completed during the relevant year, and there was no evidence of additional services or equipment that would classify it as a special-purpose building. The hire agreement and profit & loss account did not indicate any business activity beyond letting the property. The Tribunal also addressed other arguments, including the assessee's reliance on Section 35AD(8)(c) and the business codes allotted by the Revenue. However, it found these arguments unpersuasive as the element of operating a warehousing facility was absent, and the assessee's claim of business income was defeated on facts. The Tribunal considered the assessee's assessment for the following year (AY 2014-15), where the warehousing receipt was assessed as business income. However, it found this assessment to be sub silentio and per incuriam, as it lacked findings and did not consider the earlier year's assessment. Decision: The Tribunal upheld the Revenue's claim that the warehouse hire income is assessable as income from house property. The assessee's appeal was dismissed, with the Tribunal emphasizing that the decision was based on factual findings and consistent with judicial precedents. The order was pronounced in open court on September 29, 2022.
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