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TMI Blog2024 (3) TMI 532X X X X Extracts X X X X X X X X Extracts X X X X ..... ss income of the assessee. Accordingly, from the instant facts assessee has not taken an incorrect position by offering the rental income earned by the assessee on aforesaid property income from house property . In various judicial precedents, a distinction has been drawn as to when the rental income earned by an assessee can be classified as it s business income and under what circumstances, such rental income would qualify as income from house property . The Courts have held that whether the income earned from property would qualify as business income or income from house property would primarily depend upon the objects / main business of the assessee company. If the assessee company is primarily engaged in the business of real estate / construction of which letting out properties on rent, alongwith facilities part of its regular business, then the income from letting out would qualify as business income , however, in case the assessee is engaged at other business activities and the rental income has been earned by the assessee, not on it s business assets but on other investments, then such rental income should normally qualify as income from house property. In the case of Raj D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... round No. 2 - Order passed by Assessing Officer is not erroneous and prejudicial to the interest of revenue 2.1 On facts and circumstances of the case, the learned PCIT erred in concluding that order passed by the learned AO is erroneous and prejudicial to the interests of the revenue without appreciating that: The assessing officer has applied the correct legal principles and has arrived at a reasonable and valid conclusion based on the facts of the case. The mere fact that another view is possible does not render the order passed by the assessing officer erroneous. The order passed by the assessing officer is based on a proper appreciation of the facts. The learned PCIT cannot substitute his own view for that of the assessing officer, if the view taken by the assessing officer is a reasonable view. Thus, revisionary order tantamount to change of opinion which is not permissible. Therefore, the order passed by the assessing officer is not erroneous and does not warrant revision under Section 263 of the Income Tax Act. 3. Ground No. 3 - Disallowance of Standard Deduction u/s 24 of the Act amounting to INR 3,74,74,320 3.1 On the facts and in the circumstances of the case and in law, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in under assessment of Rs. 3,74,74,320/- and consequent short levy of tax of Rs. 1,76,37,993/-. The PCIT issued notice under Section 263 of the Act dated 17.02.2023, in response to which the assessee filed reply dated 06.03.2023. After taking the submissions, of the assessee on record, the PCIT observed that the property on which rental income has been earned by the assessee has been classified as non-current investments in Schedule 11 of the Audited Annual Accounts. The PCIT was of the view that while passing the assessment order Assessing Officer has not made any inquiries as to why such rental income should not be classified as income from business and failed to make detailed inquiries on certain aspects like why the property was classified as investment, whether the assessee has claimed depreciation on such property for income tax purposes and once Assessing Officer has already held such income as income from business in earlier years, such treatment ought to have been followed. Accordingly, the Ld. PCIT set-aside the assessment order as being erroneous and prejudicial to the interest of the Revenue with the following observations:- 4. I have carefully considered facts and subm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as Income from business or profession in earlier years, such treatment ought to have been followed. While passing the assessment order, AO has failed to make proper inquires relating to claim of assessee for treating such income as income from house property which makes present assessment order to be erroneous and prejudicial to interest of revenue. 4.1 So far as claim of assessee that treatment in books of account is not relevant to determining nature of income is concerned and assessee is not in business of letting out of property, it is observed that while passing the assessment order, AO has not ascertained above referred issues which are material for treating such income as Income from house property which clearly proves that AO has not made conscious attempt on his part in assessment proceedings. 5. The assessee is in appeal before us against the aforesaid order passed by the Ld. PCIT. 6. Before us, the Counsel for the assessee submitted that the assessee is a private limited company engaged in providing Call Center Services and Business Process Outsourcing Services i.e. IT Enabled Services. Further, earning of monthly rental income is not the business income of the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 32 of the Act in relation to the aforesaid house property, which was held as investment by the assessee company. 7. Accordingly, it was submitted that there is no infirmity in the order of Ld. AO looking into the instant facts so as to call for any interference. 8. In response, Ld. D.R. relied upon the observations made by the Ld. PCIT in the 263 order. 9. We have heard the rival contentions and perused the material on record. 10. In the instant facts, we observe that the assessee is engaged in the business of providing BPO and software consultancy services i.e. it is in the line of providing IT related services. The assessee was in possession of one property in Thane, which was disclosed by the assessee under the head non- current investment in it s financial statements. Further, we also observe that the assessee was not holding the aforesaid property of it s business asset and had not claimed any depreciation thereon under Section 32 of the Income Tax Act. This, coupled with the fact that the assessee is not engaged in the business of earning rental income, but is engaged in providing IT Services, it cannot be inferred that the rental income earned by the assessee on such house ..... X X X X Extracts X X X X X X X X Extracts X X X X
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