Income received from letting out of Property on a Commercial basis qualifies as Business Income: ITAT [Read Order]

The Ahmedabad bench of the Income Tax Appellate Tribunal (ITAT) held that the income received from letting out of the property on a commercial basis qualifies as business income.

The assessee earned income of Rs. 7,14,14,205/- from its mall operating business, and offered the same to tax as its business income. The assessee had also claimed business expenditure namely; administration, finance, other miscellaneous expenditure, etc. against such business income.

During the course of the assessment, the Assessing Officer held that the income earned by the assessee from letting out the space and house property is taxable as income from house property and cannot be taxed as business income.

The Departmental Representative submitted that the Department is in appeal before the Gujarat High Court against the order passed by the Income Tax Appellate Tribunal ITAT, on which reliance has been placed by the Commissioner of Income Tax (Appeal) [CIT(A)] while allowing the assessee’s appeal.

The counsel for the assessee submitted that various High Courts have decided this issue in favour of the assessee that income from letting out of the property on a commercial basis qualifies as business income. Further, the counsel for the assessee also produced copies of the orders passed by ITAT in the assessee’s own case.

In the case of Chennai Properties & Investments Ltd. [2015] 56 taxmann.com 456 (SC), the Supreme Court held that where in terms of the memorandum of association, the main object of the assessee-company was to acquire properties and earn income by letting out the same, said income was to be brought to tax as business income and not as income from house property.

In the case of Rayala Corporation (P.) Ltd. [2016] 72 taxmann.com 149 (SC), the Supreme Court held that where the assessee-company was engaged in the business of leasing out its house properties to earn rent, income so earned as rent should be treated as business income, and not as income from house property.

The two-bench member comprising of Annapurna Gupta (Accountant member) and Siddhartha Nautiyal (Judicial member) are in view that the Commissioner of Income Tax (Appeal) has erred in facts and in law in holding that the income qualifies as business income of the assessee.

Thus, the appeal of the Department is dismissed.

To Read the full text of the Order CLICK HERE

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