Rental Income received from letting out property is taxable under head “Income from House Property": ITAT allows deduction u/s 24(a) of Income Tax Act [Read Order]

The Income Tax Appellate Tribunal (ITAT), Delhi bench held that rental income received from letting out property is taxable under the head "Income from house property." Therefore, the bench allowed a deduction under Section 24(a) of the Income Tax Act, 1961.

The assessee, U & I Business Services Pvt. Ltd., is a resident corporate entity engaged in the business of leasing property. During the assessment proceedings, the Assessing Officer (AO) noted that rental income of Rs. 4,58,97,039 from letting out a property to Reliance Retail Ltd. had been offered for taxation under the head "Income from house property."

Accordingly, the Assessing Officer issued a show cause notice to the assessee and directed the submission of its Memorandum of Association. After reviewing the Memorandum of Association, the Assessing Officer observed that, as per the objects, the rental income received by the assessee should be treated as business income. Consequently, he assessed the income under the head "Business and Profession."

Displeased with the order, the assessee filed an appeal before the Commissioner of Income Tax (Appeal) CIT(A), who allowed the appeal. Subsequently, the revenue filed an appeal before the tribunal.

The tribunal noted that the assessee had two different properties. One property was let out to Greynium Information Technologies Pvt. Ltd. as a business center with various additional services. The lease rent for this property was offered as income from business.

Another property was let out to M/s. Reliance Retail Ltd. without any additional/associated services. Hence, the rental income received from this property was offered as income from house property. The tribunal also observed that the rental income from Reliance Retail Ltd. had been assessed and offered for tax as income from house property in past assessment years.

After reviewing the facts and records, the two-member bench of Dr. B.R.R. Kumar (Accountant Member) and Saktijit Dey (Vice-President) held that rental income received from letting out property is taxable under the head "Income from house property." Therefore, the bench allowed a deduction under Section 24(a) of the Income Tax Act. Consequently, the bench dismissed the appeal filed by the revenue.

Sapna Bhatia, counsel, appeared for the revenue, and NL Anand, counsel, appeared for the assessee.

To Read the full text of the Order CLICK HERE

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