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TMI Blog2016 (10) TMI 1076X X X X Extracts X X X X X X X X Extracts X X X X ..... mes statutory tenant of the assessee company and the word “temporary basis” cannot be imported to interpret the lease agreement (supra). So far as observations returned by ld. CIT (A) that depreciation has been claimed by the assessee company on business assets as far as rental income of ₹ 21,49,943/- is concerned, the same need to be strictly interpreted under the provisions contained u/s 22 of the Act. We are of the considered view that the rental income derived by the assessee company by way of letting out the quarters to the employees of its company, who undisputedly works for conducting the business of the company, has to be treated as business income and cannot be treated as income from house property by any stretch of imagination u/s 22 of the Act. Rental income derived by the assessee company by way of letting out of MD Office (soap unit merged with MD Office) - “income from other sources” OR “income from house property” or “business income” ?” - Held that:- Perusal of the lease agreement dated 07.06.2007, minutely perused by the ld. CIT (A), is enough to describe the property in question as total land area of 1584 sq. mtr. Having industrial shed of covered a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Income-tax (Appeals) erred on facts and in law in affirming the action of the assessing officer in assessing rental income of ₹ 20,83,413, derived from letting out of Corporate office and quarters under the head 'business income' as against the same being declared under the head 'income from house property'. 1.1 That the Commissioner of Income-tax (Appeals) erred on facts and in law in holding that the Corporate office and quarters were let out to the sister concerns of the appellant on a temporary basis and, therefore the rental income so derived was assessable to tax under the head 'business income'. 1.2 That the Commissioner of Income-tax (Appeals) erred on facts and in law in disallowing statutory deduction @ 30% of the annual value under section 24 of the Act, against the rental income received by the appellant, after treating the rental income from office and quarters as 'business income'. 2. That the Commissioner of Income-tax (Appeals) erred on facts and in law in confirming the action of the assessing officer in treating the rental income of ₹ 4,20,000 received from letting out of M.D. Office (soap unit merged with M.D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rm house property at ₹ 1,81,00,528/- after claiming 30% deduction u/s 22 of the Act shown from the quarters owned by the company forming part of the fixed assets and all incidental expenses like repair, maintenance and depreciation has been claimed and allowed. Assessing Officer called upon the assessee to explain as to why any income out of the quarters is to be treated as business income and is not chargeable u/s 22 to which the assessee company filed comprehensive reply. However, AO has not accepted the plea taken by the assessee company on the ground that these quarters are for the fixed assets and incidental expenses like repair, maintenance and depreciation had been claimed and allowed on them and as such, any income arising out of quarters is to be treated as business income and it is not chargeable u/s 22 of the Act and assessed the income of the assessee as under :- Accordingly, I hold that the rental income shown by the assessee is to be assessed as business income which is not eligible to be assessed as income from house property. Accordingly, the deduction claimed by assessee u/s 22 to the tune of ₹ 8,46,690/- is disallowed. I. Busin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tax, shall be chargeable to income-tax under the head Income from house property . 10. A bare perusal of the provisions contained u/s 22 of the Act apparently goes to prove that rental income from unused portion of any business premises owned by the assessee is to be treated as income from house property. In the case at hand, undisputedly, when the property in question consisting of buildings and land appurtenant thereto i.e. in the shape of corporate office and quarters is owned by the assessee company and is on rent pursuant to the lease agreement dated 07.06.2007, the same has to be treated as income from house property. It does not matter if the property in question is rented out to the third party or its sister concern because sister concern is otherwise treated as a separate entity for all intents and purposes. 11. Even otherwise, the assessee company has come up with the lease agreement dated 07.06.2007 which describes the entire land and structure thereon having been rented out by the assessee company to the third party or its sister concern and the issue of renting out the land and structure thereon owned by the assessee company is duly covered u/s 22 of the Act. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not income from house property. 17. Perusal of the lease agreement dated 07.06.2007, minutely perused by the ld. CIT (A), is enough to describe the property in question as total land area of 1584 sq. mtr. Having industrial shed of covered area of 733 sq. mtr. It is also subject matter of the lease agreement that the lessee has requested the lessor to renovate and reconstruct the existing constructed building as the said structure is quite old and is not suitable for lease for use of manufacture warehouse, storage of goods and offices etc. When the lease agreement is categoric enough to lease out the land and structure thereon, the same cannot be disbelieved without getting the same verified by the ld. CIT (A) and no such verification/remand report is there on the file. So, we are of the considered view that the rental income of ₹ 4,20,000/- was derived by the assessee company by letting out the land and structure thereon. 18. Now, the next question arises for determination in this case is :- as to whether rental income of ₹ 4,20,000/- is to be treated as income from house property or income from other sources or business income ? 19. When it is not i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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