Rental Income from Leasing Trailers and Exhibition Space is Business Income, Not House Property: ITAT Deletes Addition [Read Order]

The Bangalore Bench of the Income Tax Appellate Tribunal (ITAT) deleted an addition made by the Assessing Officer (AO) that treated rental receipts from trailers and trade exhibitions as income from house property and held that such income is correctly offered under the head "Profits and Gains of Business or Profession".

Scania Commercial Vehicles India Private Limited (assessee) engaged in the business of dealing in heavy-duty trucks, buses, and coaches, filed a return showing a total loss. The AO selected the case for scrutiny after noticing a discrepancy between the rental receipts reported in Form No. 26AS and the income from house property reported in the tax return.

The assessee had received a total of ₹48,51,630, which included ₹28,41,650 from M/s. Kailash Carriers Limited and ₹5,09,980 from M/s. All Cargo Logistics Limited for the renting of trailers. Additionally, ₹15,00,000 was received from M/s. Volkswagen Finance Limited for subletting exhibition space at a trade show.

The AO rejected the assessee's explanation and taxed the entire amount under the head "Income from House Property".

The counsel for the assessee argued that the income was derived from the business of renting trailers and amenities at exhibitions, not from house property. The counsel contended that the AO wrongly classified the income simply because tax was deducted at source (TDS) under Section 194I of the Income Tax Act.

The counsel noted that the exhibition income had already been offered to tax in a previous year (AY 2016-17) by netting it off against sales promotion expenses.

The counsel for the revenue contended that the assessee failed to provide requisite details regarding the renting of trailers. The counsel argued that in the absence of such information, the income was rightly chargeable under the head "Income from House Property".

The two member bench comprising Prashant Maharishi (Vice President) and Keshav Dubey (Judicial Member) examined the nature of the receipts.

The tribunal noted that Section 194I did not apply exclusively to the renting of buildings and it also covers the renting of machinery, plant, or equipment. The tribunal further noted the fact that TDS was deducted under this section did not automatically make the income "House Property" income.

The tribunal observed that the renting of trailers was part of the assessee's business operations. Similarly, subletting exhibition space was related to business promotion. The tribunal found that the assessee had already shown this income as business income. The tribunal held that treating it as house property income resulted in an unsustainable double addition.

The tribunal directed the Assessing Officer to delete the addition as income from house property, confirming that the income had been correctly offered by the assessee under the head business income. The Tribunal allowed this ground of appeal.

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