Everybody wishes to own a home one day, dreams of doing so, and saves money in order to do so. Owning real estate, however, does come with obligations. One of them is yearly property tax payments on a home. According to the income tax act, there are some deductions on Income from house property.
In India, “income from house property” refers to earnings from a home, whether they come from a rental income form or from the sale of the home. According to the Income Tax Act, any property, whether a house, an office, a building, or a warehouse, is considered “house property.”
Under the heading “Income from house property,” rental income from a building or land accessory thereto that the taxpayer is the owner is subject to tax. A person other than the owner cannot claim rental income under the heading “Income from House Property” for tax purposes. Hence, a tenant’s rental income from subletting cannot be taxed under the heading “Income from House Property.” Such income is subject to taxation under the heading “Income from other sources” or, where applicable, “Profits and Gains from Business or Profession.”
According to section 22 of Income Tax Act, 1961: Income from house property: The annual value of property consisting of any buildings or lands appurtenant thereto of which the assessee is the owner, other than such portions of such property as he may occupy for the purposes of any business or profession carried on by him the profits of which are chargeable to income- tax, shall be chargeable to income- tax under the head” Income from house property”.
The Delhi Bench of Income Tax Appellate Tribunal (ITAT) has remanded the matter back to AO to compute the income from house property as per the municipal value.
The coram of Judicial Member Amit Shukla and Accountant Member, B.R.R. Kumar has held that the AO has computed 10% of the value of investments in house property whereas the CIT(A) reduced the amount to 5% of the value of investments. Both decisions are on an ad-hoc basis. The rent realised by the assessee in the subsequent years is on record with all the evidence. Hence, we deem it proper to refer the matter back to the file of the AO to compute the income from house property as per the municipal value in accordance with the provisions of Section 23(1) of the Income Tax Act, 1961.
The Delhi Bench of Income Tax Appellate Tribunal (ITAT) has deleted the disallowance made on account of expenses not allowable under the head “Income from House property”.
The coram headed by President G.S.Pannu and Judicial Member Kul Bharat has held that the issue related to rateable value adopted by NDMC was under consideration for review before the Competent Authority at NDMC. This aspect is not addressed by CIT(A) therefore, we modify the order of CIT(A) and direct the Assessing Officer to consider the decision of NDMC in respect of the rateable value revised in the subsequent year and adopt the same for this year as well.
The Income Tax Appellate Tribunal (ITAT), Delhi bench, while applying the rule of consistency, held that the income received by a Company through letting out of Steel Units and Quarters along with the land shall be treated as house property income for the purpose of the Income Tax Act, 1961.
The Tribunal concluded the case in the assessee’s favour, stating that “Ld. DR for the revenue has failed to bring on record any change in the facts and circumstances of the case to treat the income by way of rental income earned by the assessee from letting out of steel units and quarters located therein to be treated as business income.”
The Income-tax Appellate Tribunal (ITAT), held that AO correctly treated rental income from commercial properties as income under the head ‘House Property’ instead of Income from Business.
The Coram of Suchitra Kamble and O.P. Kant held that the assessee is earning rental income from commercial malls and offered the same under the head ‘Profit and Gains of Business or Profession’. The rental income has been generated from commercial units which remained unsold and were held as stock in trade in desire of an acceptable sale price. The Assessing Officer has taxed the said rental/lease income under the head “income from house property”.
The Mumbai bench of Income Tax Appellate Tribunal (ITAT) has recently held purchase of property within a specified period of one year before sale of capital asset allowable as capital gain exemption under section 54F of the Income Tax Act 1961.
The bench further observed that “in terms of Section 2(47(v) of the Act, the transfer of Capital Asset took place on 30.09.2012, which fell within the previous year relevant to the Assessment Year 2013-14. The Appellant had purchased residential property on 17.08.2012 which fell within the specified period of one year before the sale of the Capital Asset. The Appellant was, therefore, entitled to claim exemption under Section 54F of the Income Tax Act 1961.”
The Chennai bench of Income Tax Appellate Tribunal ( ITAT ) has held that no deduction of actual expenditure incurred on house property besides 30% statutory deduction on Income from House Property.
The Tribunal has held that “we set aside the impugned order and restore the matter back to the file of AO with a direction to the assessee to bifurcate the business expenditure. The expenditure incurred on Anna Nagar property would not be allowable expenditure as Business expense whereas other expenditure incurred for business purposes and to maintain corporate personality would be admissible expenditure”.
The Income Tax Appellate Tribunal Pune Bench has held that the rent from unsold flats by the developer is taxable as “income from house property”.
The Tribunal by relying on the decision of Bombay High Court in CIT Vs. Sane and Doshi Enterprises observed that rental income received from an unsold portion of the property constructed by the assessee, a real estate developer, is assessable as ‘Income from house property’. The Coram of Mr. R. S. Syal, Vice President, and Mr. S. S. Viswanethra Ravi, Judicial Member by relying on the decision of jurisdictional High Court has held that “we hold that the rental income earned by the assessee from an unsold portion of the property should be taken as ‘Income from house property. This ground is, therefore, allowed”.
The Bangalore Bench of the Income Tax Appellate Tribunal, held that set-off of income under ‘house property’ against loss is not allowable to a closed business.
Chandra Poojari, accountant member and Smt. Beena Pillai, judicial member observed that the assessee failed to establish by way of any documents that these expenses were incurred for business. The Coram didn’t find any infirmity in the view taken by the CIT(A) and upheld the same. The appeal filed by the assessee was dismissed.
The Kolkata Bench of the Income Tax Appellate Tribunal ( ITAT ), held that Rental income from installation of IBS is Income from house property.
Dismissing the appeal the Division Bench consisting of Manish Borad, Accountant Member and Sonjoy Sharma, Judicial Member observed that “Respectfully following the decision of this Tribunal, hold that the alleged rental income from installation of IBS tower has been rightly offered to tax as Income from house property. Thus, no interference is called for in the finding of the CIT(A).”
The Income Tax Appellate Tribunal (ITAT), Mumbai bench has held that the penalty under section 271(1)(c) of the Income Tax Act cannot be levied on the basis of the addition made in respect of notional income from house property.
Deleting the penalty order, the Tribunal held that “Thus, as could be seen from the facts on record, under a bona fide belief that interest expenditure incurred on the overdraft facility is allowable against the interest income earned by investing the funds borrowed from the overdraft account assessee has claimed the expenditure.
The Mumbai bench of Income Tax Appellate Tribunal has recently held that income from house property from abroad is not taxable.
The bench comprising Judicial Member Sandeep Gosain and Accountant Member Rajendra has observed that the assessee has excluded the income from house property which was covered by the Article 6. The DTAA contains two articles like article 6 deals with house property income and Article 7 is covered with business income in this case the AO and FAA treated both business income and house property income as one source of income for tax purposes. According to Article 6 ,income from house property in Kenya is not taxable in India.
The Delhi bench of the Income Tax Appellate Tribunal (ITAT) rental amount received from real estate business cannot be treated as ‘Income from House Property’ under the provisions of the Income Tax Act, 1961.
“We note that the assessee is in the real estate business and also in the jewellery business and as such the income of the assessee is to be assessed as business income. Moreover, if the action of the AO is confirmed the assessee will be claiming additional deduction u/s 24 @ 30% in addition to the business and administrative expenses as the assessee is in the real estate business and the income of the assessee will be assessed lower than the returned income,“ the bench said.
The ITAT, Delhi, in a recent ruling, held that license fee from lease of retail space in the shopping mall is accessable under the head “income from house property” under the provisions of the Income Tax Act, 1961.
The bench held that the receipts from the lease rent/license fee from lease of retail space in the shopping mall is to be taxed under the head “income from house property” under section 22 of the Income Tax Act. Consequently, deduction under section 24(a) and other deductions of interest of pre-construction period and interest on loan which are to be allowed while computing the income from house property were allowed to the assessee while computing the income from house property.
The division bench of Allahabad High Court held that Rental Income received from letting out shops in a mall is Income from business not coming under the head Income from House property.
The division bench comprising of Justice Pankaj Mithal and Justice Umesh Chandra Tripathi observed that, “according to Memorandums of Association and Articles of Association the Assessing Officer as well as the tribunal have categorically found that the main object of the business of the assessee is to construct Mall and to derive income from letting out the shops therein. Therefore, the income so derived by the assessee may be the income from house property but would ultimately be the business income and as such the Assessing Officer has not committed any error in determining the taxable income of the assessee under the head income from business”.
In a recent ruling, the Apex Court held that the income from sub-letting Shop Rooms and Stalls are assessable under the head “Income from House Property” under the Income Tax Act when the assessee has no proof to show that their principal business activity was to sublet the property.
The bench relied on the specific finding of the Appellate Tribunal that the assessee has not established that he was engaged in any systematic or organized activity of providing service to the occupiers of the shops/stalls so as to constitute the receipts from them as business income. In the absence of any evidence to show that its entire income was from letting out of the property which was the principal business activity of the appellant, the bench upheld the view taken by the ITAT and the High Court.
Recently in Akola Trading Co. P. Ltd v. ITO, the division bench of the Mumbai ITAT held that the amount received from subletting a leased property is“income from house property” under the provisions of the Income Tax Act.
The bench ruled that the amount received by the assessee on account of subletting the property is only income from house property and has to be treated as such. In such circumstances there is no justification of allowing expenses against the house property income other than that provided as deduction under the scheme of computation of house property income.”
The Supreme Court of India has declared that, Income which arises from Rent out business should be taxed under the Head “Profits and gains of business or profession’ not ‘Income from House property.
While setting aside the Madras High Court Judgment, the division bench of Supreme Court observed that, “the rent should be the main source of income or the purpose for which the company is incorporated should be to earn income from rent, so as to make the rental income to be the income taxable under the head “Profits and Gains of Business or Profession”.
The Income Tax Appellate Tribunal, Hyderabad in a recent ruling held that the assessee can claim deduction u/s 80IA(4) for his income falls under the head “Income from House Property.”
The ITAT, while allowing the appeal, found that the assessee has got the approval from the Government of India to set-up and maintain the industrial park. For claiming the deduction under section 80IA, sub-section (4) enumerates the enterprises which are eligible for such deduction. Clause-(iii) of sub section(4) of section 80IA prescribes the ‘eligible undertaking’ to be an undertaking which develops and operates or maintains and operates an industrial park (or Special Economic Zone) notified by the Central Government in accordance with the scheme framed and notified by that Government for the period beginning 1st day of April, 1997 and ending of 31st March, 2006.
The Karnataka High Court recently ruled that the assessee’s income from renting out the industrial sheds is eligible to be taxed as income from real estate. The Revenue petitioned the Court to rule on an appeal, arguing that because the aforementioned revenue is of the character of company income, it must be considered as “Profits and Gains from Business.”
Rejecting the contention of the Appellant-revenue, the High Court held that the said income should be treated as “income from house property.”The Court, in connection with this, found that the Department has admitted the income in respect of the same property as “Income from house property” in the subsequent years.
Common Area Maintenance Charges that are not included in Real Rent are not taxable as “House Property Income,” according to the Delhi Bench of the Income Tax Appellate Tribunal (ITAT).
The coram consists of O.P. Kant and Suchitra Kamable, while allowing the appeal noted that the common area maintenance charges were not forming the part of the actual rent paid to the owner by the assessee company.
The Bengaluru bench of the Income Tax Appellate Tribunal ( ITAT ), in a recent ruling held that the amount of amortization of cost of construction of building on leased land cannot be deducted from the head “Income from House property” since the same is not permissible under section 24 of the Income Tax Act, 1961.
“Because the matter has also been determined against the assessee by the co-ordinate Bench on the ground that amortisation of expenses on cost of construction of building on leasehold property is not a legitimate deduction under sec. 24 of the IT Act under the facts of the case,” the Tribunal stated. Issue No. 2 of the Assessee’s Appeal is Disallowed in Parity.
The Income Tax Appellate Tribunal (ITAT), Pune bench has held that the amount of compensation received under an option agreement cannot be brought to tax under the head “Income from House Property” under the provisions of Income Tax Act, 1961. The Tribunal further noted that the same is taxable as income from other sources.
The Tribunal stated that any income that is assessable under the heading “income from house property” must come from rental income or be presumed to come from rental income during the relevant period. The property in this instance is neither rented out nor unoccupied.
The Income Tax Appellate Tribunal (ITAT) Mumbai bench has ruled that the assessee is not qualified to claim depreciation on office space provided under a lease as business expense if it has already been assessed as income from residential property against which statutory deduction under section 24 is already permitted.
In response to an appeal, the Tribunal ruled that the assessee had derived rental revenue from a few office buildings that are a component of the block of assets.
The Income Tax Appellate Tribunal (ITAT) bench has held that the rental income received by the builder cannot be treated as business income and the same must be taxable under the heading “Income from House Property” under the Income Tax Act, 1961.
“We are of the view that the rental income earned by the assessee was rightly treated as income under the head “House Property” by Ld. CIT(A),” the Tribunal stated, “while relying upon the judgement of the jurisdictional High Court in the case of CIT Vrs. Gundecha Builders in ITA no. 347 of 2016 dated 31.07.18 (Bom).” The assessee is in the business of developing real estate projects.
The Bombay branch of the Income Tax Appellate Tribunal (ITAT) has ruled that the rent earned from renting out the terrace will be taxed under the Income Tax Act’s “Income from Home Property” heading.
The Tribunal held that “Since in the present case, the facts in dispute are identical and no difference in facts could be pointed out by the Ld. DR of the Revenue, respectfully following this order of the Tribunal, I decide the issue in favour of the assessee.”
The rental income earned following the purchase of a warehouse that was previously rented out is taxable as income from dwelling property, according to the Delhi branch of the Income Tax Appellate Tribunal (ITAT). The Tribunal made it clear that even if the assessee is involved in the warehousing sector, the aforementioned income cannot be considered business income.
The Tribunal upheld the assessment judgement, concluding that “In the case of the assessee, it has become the sole owner of the property after purchasing the warehouse from the former owner.
The Delhi bench of the Income Tax Appellate Tribunal (ITAT) has held that the property which is not capable of letting out cannot be taxable under the head House Property Income for the purpose of income tax.
Even the dilapidated property as its ALV and thus, the contentions of the Ld. AR does not sustain as the property always has the value. Therefore, Ground No. 6 to 6.1 are dismissed,” the Tribunal said.
The Mumbai bench of the Income Tax Appellate Tribunal (ITAT) has held that the income from mobile companies for letting out the terrace space for fixing and operating antennas needed for cellular operation is taxable under income from house property.
Accordingly, the bench allowed the appeal of Assessee and declared that the income received by Assessee from the cellular company for letting out of terrace or roof space for fixing antennas has to be treated as income from house property and also eligible for deduction under section 24(a) of the Act.
The Income Tax Appellate Tribunal (ITAT) bench in Kolkata decided that the service fees obtained from the tenant that are incidental to rental revenue would qualify as “housing property income” for tax purposes.
The service and maintenance fees collected by the assessee were only incidental to rental income, and because the aforementioned activity was ancillary to the primary activity of renting out the properties, the service and maintenance fees were subject to tax as income from house property, as the Assessing Officer correctly claimed, the Tribunal stated.
The Mumbai bench of the Income Tax Appellate Tribunal (ITAT), while allowing the assessee, a builder to credit the rental income from tenants towards the work-in-progress, held that such income cannot be taxed under the head “Income from House Property”.
So, in our opinion, it is fair for the assessee to credit the rent paid for work-in-progress rather than treating it as income from a residential property. The Bombay High Court’s decision in the case of Lokholdings, in particular, is of particular emphasis, the bench stated. “For this proposition, the case laws relied upon by the ld. Counsel of the assessee referred in the submissions hereinabove are pertinent and support the case of the assessee,” the bench said.
The Kolkata bench of Income Tax Appellate Tribunal (ITAT) held that the License Fee received from the tenants is subject to Income Tax under the head “Profit and Gains from Business or Profession” and not under the head “Income from House Property.”
The bench noticed the decision of the Coordinate Bench of the Tribunal wherein the Coordinate Bench placed reliance in the case of M/s. Konark Furniture Pvt. Ltd. which is sister concern of assessee, on identical facts held that the income in question is to be treated as income from business.
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.
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.
The Cochin bench of Income Tax Appellate Tribunal in the case of The Asst.Commissioner of Income-tax versus M/s.Janapriya Builders where the bench ruled that diesel expenses can’t be deducted from House Property Income.
Tribunal while hearing both the recitals observed that “The assessee, on our directions, have now produced the confirmation of the tenant stating therein they have paid the rent minus the diesel expenses incurred by it”.
Notional Value in the case, Income Tax Officer vs. M/s National Engineering, Calcutta High Court recently held that Notional Value of building under construction cannot be taken for determining house property income.
The division bench comprising of Justice Anirudha Bose and Justice Amitabha Chatterjee observed that notional value of building under construction cannot be taken for computing the total income of the Assessee under the head income from house property for the purpose of computation of tax liability and also upheld the order passed by the authorities below.
The Income Tax Appellate Tribunal, Mumbai bench declared that amenities received along with rental income under the lease agreement is assessable as House Property Income under the provisions of the Income Tax Act, 1961 if the same is part and parcel of the same transaction.
The court observed that amenities charges being part and parcel of the same transaction were assessable as Income from House Property against which the assessee was entitled for statutory deduction of 30%.
In a significant ruling, the Ahmedabad bench of the ITAT held that the rent received by a Co-operative housing society by letting out space for hoardings are taxable under the head ‘Income from House Property’ under the Income Tax Act, 1961.
The single Member, therefore, held that the income earned by the assessee, in consideration of having given rights to have play hoardings etc. are taxable as income from house property. Accordingly the Tribunal granted deduction under section 24(a) of the Income Tax Act to the assessee.
The Kolkata bench of the Income Tax Appellate Tribunal in a recent decision ruled that the rental income earned by a licencee is chargeable under the head ‘business income’.
It was concluded that the Assessee is only a licencee, then it can safely be said that the provisions of Sec.22 read with Sec.27(iiib) of the Act are not attracted and hence the income in question cannot be assessed under the head ‘Income from House Property”.
The Delhi bench of the Income Tax Appellate Tribunal (ITAT) has held that the lease rental income should be taxed under the head “Income from House Property” or “Income from Other Sources” even if such renting is incidental to the main business activity and the same is separable.
“Thus, in the instant lease under reference, the prime objective is the exploitation of assets in the form of workstations installed by the assessee and not the building or any part thereof. The use of easement and common areas by the second party is incidental to the lease of exploitation of the workstation. The workstation in the form of plant and machinery is inseparable from the building and for exploitation or use of the workstation, the use of the building is incidental,” the Tribunal observed.
The Income Tax Appellate Tribunal (ITAT), Mumbai bench recently rejected Bollywood singer Sonu Nigam’s plea by holding that the self-occupied property cannot enter into the block of a depreciable asset.
While dismissing the petition the bench comprising of Judicial Member, K.N Chary and Accountant Member, Prashant Maharshi states that assessee trust is not eligible for standard deduction at the rate of 30% u/s 24 (a) of the act, out of the rental income chargeable to tax in the hands of the assessee.
The Jodhpur bench of the Income Tax Appellate Tribunal ( ITAT ) has held that the house which is not having any actual rental income but self-occupied by the assessee, then deemed rent should be determined as per the municipal rateable value.
“Further, the house at 6-A-42, C.S. Azad Nagar was occupied for the business of R.K. Textiles for grading and finishing jobs. The house which is not having any actual rental income but self occupied by assessee should be determined as per the municipal rateable value. Accordingly, the matter is restored to the file of the Assessing Officer to find out the municipal rateable value of the house for computing income under Section 22 of the Income Tax Act,” the Tribunal said.
While hearing the case of M/s Altitus Managment Advisors Pvt. Ltd, the Mumbai bench of the Income Tax Appellate Tribunal (ITAT) recently held that receipt of sinking fund from tenant for maintenance and repairs of property not taxable as rental income under the head “Income from House Property”
The division bench further observed while concluding the issue that “where the tenant had agreed to pay the maintenance charges or accepted to bear the cost of repairs the same should not be a ground for holding that the stipulated rent does not represent annual letting value, especially when there was no evidence or finding to show that the rent received was low compared to the prevailing rent for similar premises in the same locality”.
Hyderabad bench of Income Tax Appellate Tribunal (ITAT) has held that rent received during eviction of tenants on a property purchased for setting up of project is not taxable as ”income from house property” under the provisions of the Income Tax Act, 1961 as the same constitute “capital receipt”.
The Tribunal bench of Accountant Member B. Ramakotaiah has observed that while getting vacant possession for completing the project the assessee had taken steps to evict tenants and also paid compensation to them. And the rental receipts received by the assessee during the period have to be set off to the cost of the project. So the receipts are to be considered as capital receipts only. Hence it cannot be treated under the head ‘income from other sources’ and the assessee has rightly treated them as ‘capital receipts’ and also set off to work-in-progress.
Mumbai ITAT held that the income tax authorities cannot determine the annual rent value on notional basis by ignoring the actual rent received by the assessee which is lesser than the fair value.
In the instant case, the Assessing Officer made an addition of Rs. 46,46,371/- under the head ‘income from house property’ on the basis of fair rent by finding that assessee shown lesser rental income compared to that shown by owners in respect of flats located in the same building.
In Ms. Ramairen Properties Pvt Ltd v. ITO, the division bench of the Delhi ITAT ruled that non-recording of Construction expenses in books of account is not a ground for assessing rental income under the head “income from other sources”
The assessee filed a return of income declaring rental income under the head “income from house property.”
The bench noted that the income of the assessee would be taxable under the head “income from house property” if two conditions are satisfied. Firstly, there must a property consisting of any building or land appurtenant thereto and secondly, the assessee must be the owner of that property.
In a recent decision, the Mumbai bench of the ITAT observed that change in the heads of income reported by the assessee would not automatically result in attracting penalty under section 271(1)(c) of the Income Tax Act.
In the instant case, the assessee M/s Jai Hind Oil Mills Co. is engaged in the business of warehousing. Initially, the assessee returned the income from the above business by showing it as “income from house property”. Subsequently, the assessee filed a revised return and conceded the income under the head “business income”.
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