2022 (11) TMI 1240 - AT - Income Tax

Treatment to rental income - income from other sources - ownership of the property - distribution of income by assessee amongst the co-owners - AO held that the claim of the assessee that property was owned by other family members was not substantiated and therefore, he assessed the income as income from house property in the hands of the assessee and allowed deduction u/s 24 of the Act and made the addition in respect of rest of the income - HELD THAT - The name of Shri Paras Mehrotra, Shri Vineet Mehrotra, Smt. Asha Mehrotra and Shri Amit Mehrotra and Ashish Mehrotra are appearing in this sale deed as owners of the property therefore, the finding of the Assessing Officer that no evidence was filed before him, substantiating the ownership of the property, is wrong. CIT(A) has also not considered all the submissions of the assessee in right perspective. Since the income received by the assessee has been distributed amongst the co-owners of the property and the co-owners had declared the income in their respective income tax returns, the non allowability of deduction to the assessee u/s 57 will amount to double taxation of the same income which is not permissible. The receipt of income in the hands of the assessee had only occurred due to the fact that the assessee had entered into an agreement with United Spirits for letting out the godown but merely letting out the property, belonging to others, by one of the family members, does not entitle the assessee to earn the rental income. The rental income received by assessee in fact belongs to these persons who are owners of that part of the property. We direct the Assessing Officer to allow the deduction to the assessee u/s 57 of the Act as the distribution of income by assessee in this case is equivalent to amount spent for earning of the income which is allowable deduction u/s 57 - Appeal of the assessee stands allowed.

Summary

Issues:
Appeal against order of CIT(A) regarding treatment of rental income as income from house property and addition of extra income under IT Act.

Analysis:
The appeal was initially dismissed for non-prosecution but later recalled for hearing on merits. The assessee claimed that rental income did not belong to him but to family members, hence deduction u/s 57 was claimed. The Assessing Officer treated the income as 'income from house property' and added extra income. The CIT(A) upheld the order. The assessee provided evidence of property ownership and distribution of income to family members. The D.R. argued that since tax was deducted on rental income, it belonged to the assessee. The Tribunal found that the rental income was jointly owned by the assessee and family members. Affidavits and tax returns of family members confirmed receipt of rental income. The Tribunal noted that the Assessing Officer wrongly rejected evidence of property ownership. The Tribunal allowed deduction u/s 57 to avoid double taxation, stating the income belonged to co-owners. The appeal was allowed, directing the Assessing Officer to grant the deduction u/s 57.

Conclusion:
The Tribunal allowed the appeal, emphasizing that the rental income belonged to co-owners, not solely to the assessee. The decision was based on evidence of property ownership, distribution of income, and avoidance of double taxation. The Tribunal directed the Assessing Officer to allow the deduction u/s 57, ensuring fair treatment of rental income.