Rental Income from Building cannot be treated as Business Income since Assessee is not Involved in Business of Leasing: ITAT [Read Order]

The Income Tax Appellate Tribunal (ITAT), Vishakhapatnam bench has held that the rental income received from the building cannot be treated as business income of the assessee who is not involved in the day to day operations and management of the business. 

The assessee, Gowtham Residential Junior College had leased out its property consisting of building and lands appurtenant thereto for a period of 10 years for an annual rent of Rs.2.50 crores and claimed the rent received as “business income” under the income tax return. The Assessing Officer rejected the return and assessed the income under the head of “income from house property” by holding that the assessee is not involved in any business of letting out buildings on lease or hire.

Upholding the assessment order, a bench of Shri Duvvuru Rl Reddy, Judicial Member & Shri S Balakrishnan, Accountant Member has observed that “it is an admitted fact that the building was let out for rent and the assessee had received the income from buildings. The main contention of the revenue is that the assessee has no role to play in running the educational institution after it has leased out its assets except major repairs. Even the maintenance of the building is to be done by the lessee. Hence, day to day operation or management of business is the only duty of the lessee. The assessee did not place any evidence to establish that it incurred the expenditure. Therefore, we do not find any infirmity in the orders passed by the AO as well as the CIT(A) and uphold the same.”

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