The division bench of the Calcutta High Court quashed an order categorizing income from subletting as income from house property. The court concurred with the assessee‘s assertion that income from subletting should be classified as business income.
The petitioner, Oberoi buildings and Investment (P) Ltd through a sublicensing agreement, leased a building space from 28.09.1991 to 31.12.2022 for conducting the business of gems, jewelry, and gift articles for a fixed fee. The company reported a total contribution of Rs. 13,90,260 from letting out shops, against which it claimed expenses of Rs. 10,60,560 for license fees and other charges. The company categorized these receipts and expenses under “business income.”
The income generated from subletting had been consistently disclosed as business income in the appellant’s income tax returns since 1972, and the Income Tax Department had accepted it as such. However, in the assessment year 2005-06, the assessing officer categorized the income from subletting as income from house property instead of business income. The CIT (Appeal) had allowed the appeal in favor of the assessee, but the Income Tax Department had appealed to the Income Tax Appellate Tribunal (ITAT).
The appellant contended that, based on the nature of the transaction and the license deed, the income is rightfully categorized as business income and not income from house property.
Revenue argued that there is no res judicata in revenue matters. Referring to the assessment order, the respondent asserted that the appellant is deemed the owner of the property under Section 27(iiib) of the Income Tax Act and that the transaction constitutes a transfer under Section 269UA(f)(i) of the Act. The respondent further argued that, the categorisation of income from subletting as income from house property is warranted.
The petitioner was represented by Akhilesh Kr. Gupta and Akshara Shukla. The respondent was represented by Smarajit Roychowdhury.
The division bench comprising of Justice Surya Prakash Kesarwani and Justice Rajarshi Bharadwaj observed that:”Therefore, except for the assessment order in question, the appellant assessee’s income from sub-letting/sub-licensing the space in question, has always been accepted by the respondent Income Tax Department as, income from business. Under the circumstances when the respondent Income Tax Department has always accepted the income of the appellant assessee from sub-licensing/sub-letting of the space in question, to be income from business, then the respondent cannot take a contrary stand in the present appeal.”
The bench concurred with the assessee’s categorisation of income from subletting as business income in his income tax returns. The bench set aside the impugned order.
Subscribe Taxscan Premium to view the JudgmentSupport our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates
