The Lucknow bench of the Income Tax Appellate Tribunal (ITAT) has recently ruled that the income received by the assessee by sub-letting a property (warehouse) for commercial purpose would be taxable as “Income from other sources” and not under the head “income from house property” under the Income Tax law.
The assessee claimed that it took a warehouse on lease to sub-let it on a higher rent. While filing the income tax returns for the relevant assessment year, the assessee declared the rental income as “income from other sources.” According to the assessing officer, neither in the above lease agreement was there any mention about subletting, nor any documentary evidence in support of the claim was submitted.
He asked the assessee to explain as to why the above income may not be treated/computed under the head “Income from House Property”, as the property was under the assessee’s possession since 30/8/2008.
The Tribunal noted that there are two pre-conditions for charging the income as income from house property under section 22 of the Act. Firstly, the assessee must be the owner of the property. Also, the property must not be occupied by the assessee for the purposes of his business or profession. In other words, the property should be a residential property.
“In the present case, neither of the above conditions of section 22 of the Act stands satisfied. The assessee, as discussed, is not the owner of the property in question. Too, the property is commercial in nature. Therefore, the provisions of section 22 of the Act are not at all applicable. Hence, the addition made as ‘income from house property’ is not sustainable. Accordingly, the order under appeal is reversed and the addition is deleted.”
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