Notional Rent on Shared Office Premises Cannot Be Taxed Without Actual Receipt Despite “Other Sources” Classification: ITAT [Read Order]
ITAT held hypothetical rental income from shared group office premises cannot be taxed without evidence of actual accrual or receipt.
![Notional Rent on Shared Office Premises Cannot Be Taxed Without Actual Receipt Despite “Other Sources” Classification: ITAT [Read Order]](https://images.taxscan.in/h-upload/2026/05/13/2136732-notional-rent-on-shared-office-premises-cannot-be-taxed-without-actual-receipt-despite-other-sources-classification-site-imagejpg.webp "Notional Rent on Shared Office Premises Cannot Be Taxed Without Actual Receipt Despite “Other Sources” Classification: ITAT [Read Order]")
The Income Tax Appellate Tribunal (ITAT)Mumbai Bench has held that notional rent on office premises shared with group companies cannot be brought to tax in the absence of actual receipt or accrual of income, even where such receipts are assessable under the head “Income from Other Sources.” The dispute arose after the Assessing Officer treated office space shared by the...
The Income Tax Appellate Tribunal (ITAT)Mumbai Bench has held that notional rent on office premises shared with group companies cannot be brought to tax in the absence of actual receipt or accrual of income, even where such receipts are assessable under the head “Income from Other Sources.”
The dispute arose after the Assessing Officer treated office space shared by the assessee with its sister concerns namely Procter & Gamble Hygiene and Health Care Ltd and Gillette India Limited as a leasing arrangement and sought to tax notional rental income based on a rate of ₹90 per square foot mentioned in an earlier agreement.
However, the Revenue assessed the alleged rent under the head Income from House Property and made additions of ₹5.01 crore and ₹4.55 crore for the relevant assessment years.
The assessee Procter & Gamble Home Products Private Limited contended that the arrangement was merely a cost-sharing mechanism for common facilities and not a tenancy arrangement. It argued that the usage charges mentioned in the agreement were never implemented and that only reimbursement of common expenses was under taken among group entities. The assessee further submitted that no actual rent was either received or receivable.
The Tribunal noted that the characterisation of such receipts under the head Income from Other Sources had already attained finality. The Tribunal observed that once income is assessable under Other Sources, hypothetical or notional income cannot be taxed unless there is material to establish actual receipt.
The two-member bench comprising Pawan Singh and Arun Khodpia held that consequential disallowances relating to repairs, maintenance, service charges and depreciation on the shared premises were unsustainable. Accordingly, the additions towards notional rent and related disallowances were deleted.
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