Rental Income is Business Income If Letting Out was Business of Assessee: ITAT [Read Order]

TDS on Rent - Taxscan

The Income Tax Appellate Tribunal (ITAT), Delhi bench has held that the Rental Income received from letting out the property can be treated as “business income” if letting out of property is the business of the assessee-Company.

In the instant case, the Commissioner of Income Tax invoked his revisional power to held that the rental income was allowed by the Assessing Officer as income from business and profession without proper examination/verification. He was of the view that the said income is taxable as Income from House Property.

The Assessee relied on the decision of the Apex Court in Chennai properties and Investments Ltd. vs. CIT and requested to drop the revisional proceedings.

However, the Commissioner was of the opinion that the main object of the assessee company is construction and development of any type of properties, which is not same as in the case Chennai Properties & Investments Ltd. vs CIT.

The Tribunal bench noted that apart from the rental income, the assessee-company does not have other activity.

The Tribunal held that where assessee-company claimed that it was engaged in real estate business, whether rental income was to be taxed under the Head “Business Income” or “Income from House Property” was to be decided as per objects of the assessee-company.

“The assessee-company filed copy of the Memorandum of Association and Learned Counsel for the Assessee referred to main objects to be pursued by the assessee-company on its incorporation which provides that assessee-company would be carrying on business for construction of any type of property and to let-out or sell the same to the public, therefore, renting-out the properties is also one of the main objects of the assessee-company. Therefore, letting-out/renting-out the property was in fact business of the assessee-company. Therefore, same was correctly claimed by assessee-company as income from business and profession, the Tribunal said.

Quashing the revisional proceedings, the Tribunal further added that “It is well-settled Law that every loss of Revenue as a consequence of an Order of the A.O. cannot be treated as prejudicial to the interests of the Revenue, For example, when A.O. adopted one of the courses permissible under Law and it has resulted in loss of Revenue or where two views are possible and A.O. has taken one view with which the Ld. CIT does not agree, it cannot be treated as an erroneous Order prejudicial to the interests of the Revenue unless the view taken by the A.O. is unsustainable in Law.”

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