Income from Sub-Letting Property under Leave and License Agreement is taxable as “Other Income”: ITAT [Read Order]

Sub-Letting

Kolkata bench of Income Tax Appellate Tribunal (ITAT) recently held that income earned by the assessee from sub-letting of property under leave and license agreement for a temporary period is taxable under the head income from other sources and not under the head business income since the sub-letting was not an object of the assessees’ business.

In the present case assessee is a company engaged in the business of trading of shares, deriving income from profit on the sale of shares, brokerage etc and profit on the sale of landed properties. During the assessment year, the assessee earned a rental income of Rs. 60,000. While filing the return of income for the relevant assessment year the assessee claimed net business loss out of the aforesaid transaction and the same was adjusted with the rental income which was shown under the head income from other sources at Rs. 60,000 and disclosed its total income at Rs. 42,083.

During the course of assessment proceedings, the Assessing Officer (AO) observed that the assessee had not owned any landed property, hence the income earned from the property under the leave and license agreement cannot be treated as income from house property and it is an admirable fact that the assessee has rightly treated the same as under the head income from business.

Thereafter, the CIT (A) observed that the assessee had merely derived this rental income out of sub-letting of the property and the said property was occupied by the assessee from some other person only for a temporary period on the basis of leave and license. The authority noted that the assessee was not the real owner of the property, accordingly income earned from such property cannot be termed under the head income from house property since the assessee was not engaged in the business of subletting, therefore the department directed to treat the said income under the head income from other sources.

After considering all the findings of the lower authorities tribunal bench consists of Judicial Member N.V. Vasudevan and Accountant Member M.Balaganesh also upheld the order pronounced by the CIT(A). “We find that the rental income derived by the assessee has been correctly held by the Ld. CIT(A) as income from other sources as admittedly the assessee is not the owner of the property and had merely sublet the property to another concern thereby deriving rental income of Rs. 60,000/-. Hence, the Ld. CIT(A) had rightly treated the same as income from other sources as has been reported by the assessee in its return of income.”

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