In a recent judgement, The Delhi High Court ruled that rental income from a factory building is classified as income from house property and is eligible for deductions under Section 24 of the Income Tax Act, 1961.
The issue to be decided was whether the Income Tax Appellate Tribunal ( ITAT ) erred in overturning the additions made by the Assessing Officer, which were upheld by the Commissioner of Income Tax (Appeals) (CIT (A)). The Assessing Officer had reclassified the income from house property, declared by the Assessee, as income from other sources. This reclassification was based on the nature of the ‘lease and license agreement’ as opposed to a traditional ‘rental agreement.’
Comprehensive Guide of Law and Procedure for Filing of Income Tax Appeals, Click Here
In the case, the Assessee offered rental income and income from fixed deposits under the category of ‘Income from other sources.’ However, the ITAT noted a direct connection between these income sources and the Assessee’s industrial undertaking, thereby qualifying them for deductions under Section 80IC of the Income Tax Act.
The ITAT highlighted that there was no dispute regarding the rental income of Rs. 47.26 lakhs earned by the Assessee from leasing the factory building to M/s Anand Engines Component Ltd. It emphasized that the existence of a ‘leave and license’ agreement, as opposed to a rental agreement, did not alter the nature of the income. Consequently, the rental income should be taxed as ‘income from house property,’ qualifying for deductions under Section 24 of the Income Tax Act. The ITAT directed the Assessing Officer to reassess the rental income accordingly, allowing the appeal.
Comprehensive Guide of Law and Procedure for Filing of Income Tax Appeals, Click Here
Thus the division bench of the Delhi High Court comprising Justice Yaswanth Varma and Justice Ravinder Dudeja, concluded that no substantial question of law was presented in this case. As a result, the appeal was dismissed.
Subscribe Taxscan Premium to view the JudgmentSupport our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates
