The Ahmedabad Bench of the Income Tax Appellate Tribunal ( ITAT ) ruled that Inox India’s lease rental income derived from leasing out unsold vacuum-insulated tanks manufactured by the company qualifies as “Business Income” rather than “Income from Other Sources.”
Inox India Limited, the assessee, is a company that manufactures vacuum-insulated tanks and related products. During the assessment years under consideration (2000-01, 2002-03, 2003-04, and 2004-05), the assessee claimed deductions under Section 80HHC ( profits from exports ) and Section 80IA ( income derived from eligible industrial undertakings ).
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The assessee included income from lease rentals derived from leasing unsold manufactured vacuum-insulated tanks as part of its business income.
The Assessing Officer ( AO ) classified lease rental income as “Income from Other Sources,” disallowing its inclusion as “Business Income.” This classification affected the company’s ability to claim deductions under sections 80HHC ( export benefits ) and 80IA ( infrastructure-related business benefits ) of the Income Tax Act, 1961.
The assessee argued that lease rental income is directly derived from its manufacturing business since the tanks leased out were manufactured by the company itself so it is part of “Business Income.”
The main issue was whether lease rental income qualifies as “business income” for deductions under section 80IA or 80HHC. The revenue counsel argued that leasing tanks does not involve manufacturing or exporting which are the assessee’s core business activities. So the income is not derived from direct sale or production, it should be categorized under “Income from Other Sources.”
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The two-member bench comprising Dr. BRR Kumar ( Vice President ) and Siddhartha Nautiyal ( Judicial Member ) observed that the leased tanks were manufactured by the company which is directly linked the income to the manufacturing activity.
Thus, the tribunal ruled that Lease rental income derived from leasing out unsold vacuum-insulated tanks was held to be “Business Income” due to its direct connection with the company’s manufacturing and business activities.
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