License Fee collected by Tenant while Sub-Letting Property is not Assessable as House Property Income: ITAT [Read Order]

License Fee - Taxscan

Income Tax Appellate Tribunal (ITAT), Kolkata bench recently held that the License Fee collected by the tenant while sub-letting the property should be assessed under the head business income and cannot be assessed as income from house property.

Assessee in the present case is a company deriving income from sub-letting of properties as well as from letting out properties owned by the assesse.

Insofar the assessee was collected license fee from the tenants not only for use of the premises but has also provided other services like installation of a transformer, providing lighting in common area, deployment of security personnel and other facilities and the assessee treated the same also under the head business income by holding that it was carrying out regular activity. The claim for considering the income as business income was rejected by the Assessing Officer during the course of assessment proceedings.

On appeal the CIT (A) also supported assessee’s concept of treating the income as business income and passed an order in favor of the assessee. Aggrieved by the order pronounced by the CIT (A) revenue was on appeal before the tribunal.

After considering the rival submissions of both the parties the tribunal bench comprising of Judicial Member N.V.Vasudevan and Accountant Member M.Balaganesh upheld the order of the CIT (A) and observed that the assessee in the present case is only a tenant of the property and does not have any ownership on the said properties, hence income earned from such property cannot be treated as income from house property.

The bench further said that assessee is a registered limited company deriving its income from license fees from different sub-tenants and accordingly the assessee collected license fees and other charges from sub-tenants, and its all part of the business of the assessee and it has rightly treated the same under the head income from business.

While dismissing the appeal filed by the revenue the division bench declared that license fee collected by the tenant while subletting the property should also be treat as business income and cannot be treat under the head income from house property by holding the fact that the assessee in the present case was not the real owner of the property.

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