The Delhi bench of the Income Tax Appellate Tribunal (ITAT) has held that the rental income received after the purchase of an already let out warehouse is taxable as income from house property. The Tribunal clarified that the said income cannot be treated as business income even though the assessee is engaged in business of warehousing.
The assessee had purchased warehouse which was already let out. In its returns, they declared the rental income of around Rs 1.36 Cr against the said property. However, while computing the income, assessee treated the same as business income and claimed expenses under the heads finance costs, depreciation and other expenses aggregating to around Rs. 1.65 Cr.
However, the Assessing Officer rejected the return and held that the dominant intention of letting out the said warehouse was receiving rental income in view of the lease executed between both the parties and the same must be treated as House property income.
Upholding the assessment order, the Tribunal held that “In the case of the assesseee, after purchasing the warehouse from earlier owner, it has become the sole owner of the property. Though the ownership has been changed on record but the nature of usage of the warehouse remains the same. Before purchasing the warehouse by assessee, the earlier owner was receiving the income from warehouse as rental income and after change of ownership, the nature of payments made by occupier (Tupperware) remains the same. Thus, the nature of transactions or income generated through this warehouse did not change. The basis taken by assessee regarding the clauses of memorandum of association also holds no force now after the aforesaid decision of Hon’ble Supreme Court. In view of this, Ld. CIT(A) has rightly held that income from warehouse has to be assessed under the head income from house property not under the head income from business and profession.”
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