The Income Tax Appellate Tribunal (ITAT) Chennai Bench, has recently, in an appeal filed before it, held that rental income shall not to be assessed as ‘business income’, and that adjustment made u/s 143(3) in this regard is unsustainable.
The aforesaid observation was made by the Tribunal when an appeal was filed before it by the assessee, M/s. Deutschland Transformers P. Ltd, for the Assessment Year (AY) 2018-19, against the order of the learned Commissioner of Income Tax (Appeals)-1, Chennai, dated 04.09.2020, in the matter of an intimation issued by the Centralized Processing Center, Bangalore, u/s 143(1) of the Act, on 02.10.2019.
The intimation enhancing the ‘business income’ by Rs.15.53 Lacs, attention was drawn by the AR towards the computation of income, explaining the assessee to have earned income from House Property for Rs.77 Lacs, which was credited in the Profit & Loss Account.
The assessee having paid the lease premium of Rs.15.53 Lacs for the property which was debited to the Profit & Loss Account, both these items were removed from the ‘Business Income’ and the net of the two i.e., Rs.61.47 Lacs, were offered as Income from House Property.
However, the CPC having computed the variance of Rs.15.53 Lacs and enhanced the business income to that extent, the AR submitted that the case for the year was picked up for scrutiny wherein the rental income has been assessed by AO as ‘business income’, while the DR submitted that this fact may be verified by lower authorities.
Hearing the opposing contentions of either sides and perusing the materials on record, Manoj Kumar Agarwal, the Accountant Member of the Tribunal observed:
“I find strength in the argument of the Ld. AR. It could be seen that the assessee has removed the component of income as well as expenditure from ‘business income’ and offered the net of the two under Income from House Property. Therefore, there is no variance as alleged. This being so, the impugned adjustment as made by CPC is not sustainable on merits.”
Thus, allowing the Assessee’s appeal, the Tribunal concluded:
“So far as the adjustment u/s 143(1) is concerned, the same is not sustainable in law. The CPC is directed to delete the demand raised against the assessee u/s 143(1) on this count.”
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