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Facts
The assessee is engaged in the business of promotion, construction, development and sale of integrated townships and commercial properties. The Assessing Officer (AO) reclassified rental income from commercial properties as 'Income from House Property' instead of 'Income from Business', leading to disallowances of depreciation and expenses.
Held
The Tribunal held that the revenue authorities erred in changing the head of income from 'Business income' to 'Rental income'. The disallowance of expenditure and denial of depreciation were not sustainable, following previous ITAT orders for the same assessee.
Key Issues
Whether rental income from commercial properties should be treated as 'Income from Business' or 'Income from House Property' and the consequential disallowance of depreciation and expenses.
Sections Cited
143(2)
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Income Tax Appellate Tribunal, DELHI BENCH ‘A’, NEW DELHI
Before: SH. M. BALAGANESH & SH. SUDHIR KUMAR
IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH ‘A’, NEW DELHI BEFORE SH. M. BALAGANESH, ACCOUNTANT MEMBER AND SH. SUDHIR KUMAR, JUDICIAL MEMBER ITANo.5697 & 5699/Del/2024 Assessment Year: 2013-14 & 2014-15 DCIT Vs Active Securities Delhi Limited, 17 B MGF House, Asaf Ali Road, New Delhi PAN No.AAACA5733B (APPELLANT) (RESPONDENT) Appellant by Sh. Ajay Kumar Arora, Sr. DR Respondent by Sh. Puneet Agarwal, Advocate Sh. Yuvraj Singh, Advocate Sh. Chetan Shukla, Advocate Date of hearing: 29/07/2025 Date of Pronouncement: 31/07/2025 ORDER PER SUDHIR KUMAR, JM:
These appeals by revenue are preferred against the order of National Faceless Appeal Centre, Delhi [for short hereinafter referred to as the “(NFAC)”] dated 11.10.2024 arising out of the order of the AO vide dated 12.02.2016 and 14.12.2016 for Assessment Year 2013-14 and 2014-15, on the following grounds of appeal: - A.Y. 2013-14
1. Whether the Ld. CIT(A) is justified in law and in the fact & circumstances of the case in deleting the disallowances on account of depreciation on assets other than building amounting to Rs.1,77,28,541/-made by the Assessing Officer treating income from leasing as income from house property.
2. Whether the Ld. CIT(A) is justified in law and in the fact & circumstances of the case in deleting the additions/disallowances made by the Assessing Officer by treating the rental income earned by the assessee from commercial properties as Income under the head House Property instead of Income from business.
3. Whether the Ld. CIT(A) is justified in law and in the fact & circumstances of the case in deleting the disallowances on account of depreciation amounting to Rs.4,83,12,463/- made by the Assessing Officer being assets utilized in the business and the rental income should be treated as income from house property.
4. Whether the Ld. CIT(A) is justified in law and in the fact & circumstances of the case in deleting the disallowances on account of other expenses amounting to Rs.2,20,75,470/-made by the Assessing Officer treating income from leasing as income from house property.
5. The appellant craves leave to add, alter or amend any/all of the grounds of appeal
before or during the course of the hearing of the appeal. for A.Y. 2014-15
1. Whether the Ld. CIT(A) is justified in law and in the fact & circumstances of the case in deleting the additions/ disallowances made by the Assessing Officer by treating the rental income earned by the assessee from commercial properties as Income under the head House Property instead of Income from business.
2. Whether the ld. CIT(A) is justified in law and in the fact & circumstances of the case in deleting the disallowance on account of depreciation amounting to Rs.4,28,67,982/- made by the Assessing Officer being assets utilized in the business and the rental income should be treated as income from house property.
3. Whether the Ld. CIT(A) is justified in law and in fact & circumstances of the case in deleting the disallowances on account of depreciation on assets other than building amounting to Rs.1,53,42,452/- made by the Assessing Officer treating income from leasing as income from house property.
The appellant craves leave to add, alter or amend any/ all of the grounds of appeal before or during the course of the hearing of the appeal.
The brief facts of the case are that the assessee is engaged in the business of promotion, construction, development and sale of integrated townships, residential and commercial buildings, flats, IT parks, Hotels SEZs etc. The return of income was filed on 27.09.2013 declaring income of Rs.81,50,394/- for the year under consideration. On selection of case for scrutiny, notice u/s. 143 (2) of the IT Act was issued on 03.12.2015 with a detailed questionnaire to furnish relevant information. In compliance to the statutory notices, Sh. Aditya Goel, CA furnish relevant information time to time.
After going through the submissions/ information made by the Ld. AR of the assessee and also relying on some judgments, the AO computed the total income at Rs.5,55,37,459/-by making additions / disallowances.
4. Aggrieved assessee is in appeal before the Ld. CIT(A), and the Ld. CIT(A) observed that the ITAT in assessee’s case in assessment 2010-11 and 2012-13 in and 235/Del/2016 respectively vide order dated 27.05.2024 decided the issues in favour of the assessee and accordingly he allowed the appeals of the assessee. The Ld. CIT(A) has relied upon the order of the Hon’ble ITAT and in his order has observed as under :- “18. The judgment of the Hon'ble Supreme Court in the case of East India Housing and Land Development Trust Ltd. (supra) has also been considered in the case of CIT vs. Velankanni Information System (P) Ltd. (supra) by the Hon'ble Karnataka High Court and Hon'ble Court observed that in this case, the activities were restricted and consisted only of any owning property and collecting of land. There was no exploitation of the property for commercial or business purposes in this case. However, before us appellant has established that the properties were held as commercial assets and same was exploited for business purpose.
19. Thus, we are of the considered view that Ld. Tax Authorities have fallen in error in changing the head of income from 'Business income' to 'Rental income' and accordingly the disallowance of expenditure and denial of depreciation on this account is not sustainable. The grounds raised in both the appeals are allowed. Consequently, the appeals are allowed."
Aggrieved revenue is in appeals before us.
We have heard the rival contentions and perused the material available on record. We find that the issues are covered in favour of the assessee vide ITAT order dated 27.05.2024. The CIT(A) in his order has relied upon the order of the ITAT and observed as under :- "7.1 Ground Nos 1, 2 and 9 are general in nature and need no adjudication. 7.2 Ground No.3, 4 and 5 : I have carefully considered the submissions made by the appellant, the facts on record and the applicable law in this regard. It is seen that the matter has been decided in favour of the appellant in its own case, where the facts are the same, for AY 2010-11 and AY 2012-13 in and 235/Del/2016 respectively dated 27.05.2024. The Hon’ble ITAT in concluding paragraph held as under :- 18. The judgment of the Hon'ble Supreme Court in the case of East India Housing and Land Development Trust Ltd. (supra) has also been considered in the case of CIT vs. Velankanni Information System (P) Ltd. (supra) by the Hon'ble Karnataka High Court and Hon'ble Court observed that in this case, the activities were restricted and consisted only of any owning property and collecting of land. There was no exploitation of the property for commercial or business purposes in this case. However, before us appellant has established that the properties were held as commercial assets and same was exploited for business purpose.
Thus, we are of the considered view that Ld. Tax Authorities have fallen in error in changing the head of income from 'Business income' to 'Rental income' and accordingly the disallowance of expenditure and denial of depreciation on this account is not sustainable. The grounds raised in both the appeals are allowed. Consequently, the appeals are allowed."
Respectfully following the aforesaid order of ITAT, we are inclined to dismiss the grounds raised by the Revenue.
In the result, the appeals of the Revenue are dismissed.
Order announced in the court on 31.07.2025.