Rent from Open Land taxable as “Other Income”: ITAT [Read Order]

Rent Income

The Income Tax Appellate Tribunal (ITAT), Jalandhar bench has held that the lease rent received for letting out of open land should be treated as “Income from Other Sources.”

The assessee had leased 6020 Sq. Mtrs. of “Open land” situated at Faridabad to M/s Larsen & Toubro Ltd r the purpose of setting up and operating a ‘Ready Mix Concrete’ plant (for short ‘RMC’) for making ready-mix concrete and treated the rent under the head house property income.

The Assessing Officer held that the aforesaid lease rent received by the assessee from Larsen & Toubro Ltd. was chargeable to tax under the head “Income from Other sources”, hence the assessee had claimed an excessive deduction of Rs. 4,17,145/- under Sec. 24(a) of the I.T. Act and its income to the said extent had escaped assessment.

On appeal, the CIT(A) upheld the order. Aggrieved by the order, the assessee approached the Tribunal for relief.

The Tribunal noticed the decision in Punjab & Haryana in the case of Govardhan Dass & Sons Vs. CIT wherein it was held that as the kutcha plinths on open land by no stretch of the imagination could be held as ‘house property’, hence the rental income received therefrom could not be assessed under the head “Income from House Property”. The High Court, in that case, further held that the open land also could not be taken as “appurtenant land” to the residential house.

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“It was observed by the Hon’ble High Court that what is covered by the expression “appurtenant” is the land which is necessary for the enjoyment of the building and not the land alone. We are of the considered view that as in the case of the assessee before us, there is no material which would prove that the 6020 Sq. Mtrs. of open land leased by the assessee to M/s Larsen & Toubro Ltd. was necessary for the enjoyment of any building, thus the same could by no means be held as “appurtenant land” as envisaged in Section 22 of the I.T. Act and assessed under the head “Income from House property”.”

“We are of the considered view that the Pr. CIT-2 Jalandhar rightly observing that the view was taken by the A.O that the property let out by the assessee comprised of “building” and “land appurtenant thereto” was not in conformity with the judgment of the Hon’ble High Court of Punjab & Haryana in the case of Govardhan Dass & Sons (supra), had this on the said count too rightly exercised his revisional jurisdiction under Sec. 263 of the I.T. Act,” the Tribunal said.

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