2024 (8) TMI 365 - HC - Income Tax

Correct head of income - income received by assessee from the property owned by it be accepted as income from house property or business income - HELD THAT - Revenue s reading of Section 22 differently to those who are in the business of letting out properties as in the present case namely in combination of a property of assessee s ownership and also to have income from properties which are not of assessee s ownership from which rental income is derived, would amount to reading something into Section 22, than what the provision actually ordains. The legislature does not carve out any such categorization/exception. Thus, we do not find that the Revenue is correct in its contention that, in the circumstances in hand, a straight jacket formula is required to be applied, namely, that Section 22 is unavailable to an assessee, who is in the business of letting out properties. In the prior Assessment Years, the AO had accepted the assessee s treatment of such income as an income from house property, which is one of the factors which has weighed with the Tribunal to allow the Appeals filed by the assessee, on the principle of consistency. We are of the opinion that such principles are appropriately applied by the Tribunal. The Supreme Court has held it to be a settled principle of law that although strictly speaking res judicata does not apply to income tax proceedings, and as such, what is decided in one year may not apply in the following year. Thus, when a fundamental aspect permeating through different assessment years has been treated in one way or the other and that has been allowed to continue such position ought not be changed without any new fact requiring such a direction. (See - M/s. Radhasoami Satsang, Saomi Bagh, Agra 1991 (11) TMI 2 - SUPREME COURT - No substantial question of law.

Summary

Issues Involved:
1. Classification of income from self-owned property as "income from house property" or "business income".
2. Treatment of rental income from properties taken on lease and sub-let by the assessee.
3. Consistency in income classification by the Revenue across different assessment years.

Detailed Analysis:

Issue 1: Classification of Income from Self-Owned Property
The primary issue in these appeals under Section 260A of the Income Tax Act, 1961, is whether the income received by the assessee from its self-owned property, MBC Tower, should be classified as "income from house property" or "business income". The Tribunal had allowed the assessee's appeal, treating the income as "income from house property". The Revenue contended that since the assessee was in the business of letting out properties, the income should be classified as "business income". However, the Tribunal referred to the Supreme Court's decisions in Raj Dadarkar & Associates v. Assistant Commissioner of Income-tax and Commissioner of Income-tax v. Shambhu Investment (P.) Ltd., concluding that Section 22 of the Act was applicable as the property was owned by the assessee. The High Court upheld the Tribunal's view, noting that the basic requirements of Section 22 were satisfied and that the income from the property owned by the assessee should be considered as "income from house property".

Issue 2: Rental Income from Properties Taken on Lease and Sub-Let by the Assessee
The Revenue also questioned the treatment of rental income derived from properties taken on lease and sub-let by the assessee. The Tribunal had treated this income as "income from house property". The High Court found that the Revenue's interpretation of Section 22 was incorrect. The Court emphasized that the legislature did not carve out any exceptions in Section 22 for businesses involved in letting out properties. Therefore, the assessee could categorize the rental income from properties it owned as "income from house property" and the income from sub-letting other properties as "business income".

Issue 3: Consistency in Income Classification by the Revenue
The High Court also addressed the principle of consistency, noting that the Revenue had accepted the assessee's classification of income from the MBC Tower property as "income from house property" in previous assessment years (2005-06, 2006-07, and 2007-08). The Court referred to the Supreme Court's ruling in M/s. Radhasoami Satsang v. Commissioner of Income Tax, which established that a consistent position should not be changed without any new material fact. The High Court also cited its own decision in Principal Commissioner of Income-tax v. Quest Investment Advisors (P.) Ltd, reinforcing the rule of consistency.

Conclusion:
The High Court concluded that the appeals did not raise any substantial question of law. It dismissed the appeals, affirming the Tribunal's decision to treat the income from the MBC Tower property as "income from house property" and maintaining the consistency in the assessee's income classification across different assessment years. The Court also clarified that the decision in Chennai Properties & Investment Ltd. v. Commissioner of Income-tax was not applicable in this case, as the facts were different.