2019 (1) TMI 685 - AT - Income Tax

Claim of rental income of the assessee - correct head of income - income from business or profession OR income from house property - Held that - All the activity speaks that the assessee was in the business activity. The assessee was maintaining the office and also the paying the salary to its employee and also incurring the other expenses such as traveling and other administrative expenses etc. The assessee temporarily letting out the premises to Broker India P. Ltd. by virtue of leave and license agreement dated 17.04.2009. The property was given on leave and licence basis till the approval of the real estate project. The memorandum and Articles of Association permits letting and leasing of property which is the business of the appellant company. CIT(A) has relied upon the case decided titled as Chennai Properties & Investment Ltd. V. CIT (2015 (5) TMI 46 - SUPREME COURT). It also came into notice that in the earlier assessment order u/s 143(3) the revenue has accepted the rent as business income. The facts are not distinguishable at this stage also. There is no other distinguishable material on record to which it can be assumed that the income of the assessee on letting out the property falls within the purview of house property. Taking into account we are of the view that the finding of the CIT(A) is quite correct and in accordance with law which is not liable to be interfere with at this appellate stage. Accordingly, these issues are being decided in favour of the assessee

Summary

Issues Involved:
Revenue's appeal against CIT(A) order treating income as business income instead of house property income for AY 2012-13.

Analysis:
1. Issue: Revenue challenges CIT(A) decision on income classification.
- The assessee initially engaged in manufacturing, later shifted to real estate development.
- AO treated rental income as house property income due to discontinued manufacturing activity.
- CIT(A) found real estate development business activities, upheld rental income as business income.
- CIT(A) cited Chennai Properties case, consistency in treating rental income as business income.
- Assessee maintained office, paid salaries, and incurred expenses, temporarily let out property.
- CIT(A) decision supported by business activities, legal precedents, and past assessments.

2. Decision: CIT(A) order upheld, appeal dismissed.
- Rental income rightly treated as business income, not house property income.
- Assessee's shift to real estate development supported by agreements, permissions, and activities.
- CIT(A) correctly applied legal principles, past assessments, and business indicators.
- Revenue's appeal lacked merit, CIT(A) decision aligned with facts and legal precedents.
- Appellate Tribunal found CIT(A) decision appropriate and in accordance with the law.

This detailed analysis highlights the key issues, arguments, and the reasoning behind the appellate tribunal's decision to dismiss the revenue's appeal and uphold the CIT(A) order regarding the classification of income for the assessment year 2012-13.