A division bench of the Delhi High Court in Jay Metal Industries Pvt. Ltd v. CIT held that the income received by the assesse from letting of the building along with the furniture and machineries constitute “composite rent” which is taxable under the head “income from other sources” not under “income from house property” for the purpose of Income Tax Act.
Appellant-assessee, in the instant case, let out their building along with all its furniture and machineries. AO held that the same is taxable under the head “income from other sources” against the claim of the Assessee that it is taxable as “income from house property.”
On appeal, the first appellate authority allowed the claim of the assesse. However, the ITAT reversed the order by stating that the rental income should be treated as ‘income from other sources’
After perusing the rental agreement, the bench found that letting is not merely of the building but a composite letting of both, the building as well as the equipment, furniture etc. and therefore, Section 56 (2) (iii) of the Act was attracted.
“Applying the test laid down in Sultan Bros. (supra) the income from the letting in the hands of the Assessee was “a new kind of income” which could be considered to be income from house property since the income not from the ownership of the building alone “but an income which though arising from a building would not have arisen if the plant, machinery and furniture had not also been let along with it,” the bench said.
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