Income from Subletting the Property is ‘Income from House Property’: ITAT Mumbai [Read Order]

Recently in Akola Trading Co. P. Ltd v. ITO, the division bench of the Mumbai ITAT held that the amount received fromsubletting a leased property is“income from house property” under the provisions of the Income Tax Act.

The assessee is a private limited company engaged in the business of providing table space, cabin space and other infrastructural facilities toits clients occupying the place. The assessee was a tenant of the said space. The assessee, for the relevant assessment year, filed return wherein the consideration so received was shown as “business income”. However, the Assessing Officer, vide his order found that the by the assessee is taxable under the head “income from house property.” The above view was based on the Apex Court decision in CIT vs. Poddar Cement.

On second appeal, the bench found that the assessee has tenancy rights in the premises.  The assessee has let out the premises and is showing receipt as business income. “The authorities below have relied upon the decision of Hon’ble Delhi High Court  in the case of CIT vs D S Singh 186 CTR 387 and the Hon’ble apex court decision in the case of Poddar Cement 226 ITR 625. We find that in light of the facts of the case and the case laws relied upon by the authorities below it is clear 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.”

Read the full text of the order below.