K.BHASKARAN NAIR vs. THE COMMISISONER OF I NCOME TAX

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ITR/290/1999HC KeralaKLHC01014258199924 June 2008Author: HONOURABLE MR.JUSTICE V.K.MOHANAN,HONOURABLE MR.JUSTICE C.N.RAMACHANDRAN NAIR4 pages

AI SummaryAllowed

What did the High Court hold?

The High Court upheld the order of the Tribunal and answered the question referred in favour of the revenue and against the assessee. The Court reasoned that rental income from a building squarely falls under the head 'income from house property' as provided in the Income-tax Act. The Court found no merit in the assessee's claim to have the rental income from the building assessed under 'income from other source', especially given the statutory classification. The Court stated that if the assessee's claim were accepted, it would lead to rental income from any furnished accommodation being assessed under 'income from other source', which is contrary to the Act's intent to classify income under appropriate heads. The operative direction was to answer the reference in favour of the revenue.

What were the facts?

The assessee, K. Bhaskaran Nair, let out a lodging house, charging separate rent for the building and the furniture. For several years, the entire income was returned as income from other sources and accepted by the assessing officer. However, for the assessment year 1990-91, the assessing officer bifurcated the rent, assessing the rental income from the building under the head 'income from house property' and the rental income from the furniture under the head 'income from other source'. The assessee challenged this bifurcation. The matter reached the Income Tax Appellate Tribunal (ITAT), Cochin Bench, which upheld the assessing officer's order. The assessee has filed a Tax Reference before the High Court of Kerala.

What were the issues?

1. Whether the rental income received for the building is assessable under the head 'income from house property' or as 'income from other source'. Assessee's contention: The assessee argued that for several years, the entire income from the lodging house, including rent for the building and furniture, was returned as income from other sources and accepted by the assessing officer. Therefore, the same treatment should continue. Revenue's contention: The revenue, through the assessing officer and subsequently upheld by the Tribunal, contended that rental income from a building squarely falls under the head 'income from house property' as per the Income-tax Act. They argued that the assessee cannot insist on shifting the head of income to 'income from other source' simply because the agreement provides for collection of rent for the building along with furniture. The Income-tax Act mandates assessment under the appropriate head.

Which sections of the Income-tax Act were involved?

Income from house property, Income from other source

AI-generated summary — verify with the full judgment below

Cause title — parties, addresses and appearances

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE C.N.RAMACHANDRAN NAIR & THE HONOURABLE MR. JUSTICE V.K.MOHANAN TUESDAY, THE 24TH JUNE 2008 / 3RD ASHADHA 1930 ITR.No. 290 of 1999() --------------------- AGAINST THE ORDER IN RA.140/1996 IN ITA.328/1994 of I.T.A.TRIBUNAL,COCHIN BENCH .................... APPLICANT: ----------- K. BHASKARAN NAIR, CALICUT. BY ADV. SRI.M.RAMESH CHANDER SRI.P.RAGHUNATH RESPONDENTS: ------------- THE COMMISSIONER OF INCOME TAX, COCHIN BY ADV. SRI.P.K.R.MENON(SR.),SR.COUNSEL FOR IT SRI.GEORGE K. GEORGE, SC FOR IT THIS TAX REFERENCE HAVING BEEN FINALLY HEARD ON 24/06/2008, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: C .N. RAMACHANDRAN NAIR & V.K. MOHANAN, JJ. -------------------------------------------- I.T.R. No. 290 OF 1999 -------------------------------------------- Dated this the 24th day of June, 2008

JUDGMENT Ramachandran Nair,J. The question raised is whether the rental income received for the building is assessable under the head "income from house property" or as "income from other source". Petitioner let out lodging house charging separate rent for the building and the furniture. According to the petitioner, for several years the entire income was returned as income from other source and the was being accepted by the assessing officer. However, for the assessment year 1990-91, the assessing officer bifurcated the rent and assessed rental income from building under the head "income from house property" and rental income from furniture under the head "income from other source". Apart from the past assessments consistent with the assessee's claim, we do not think assessee has any case to ask for assessment of rental income from building under the head "income f rom other source" because rental

2 income from building squarely falls under the head "income from house property". If the petitioner's claim is accepted, then rental income received from any furnished accommodation will have to be assessed under the head "income from other source". Since the Income-tax Act provides for assessment after classifying the income under the appropriate head, petitioner cannot ask for shifting of head of income to another merely because the agreement provides for collection of rent for the building along with furniture. We therefore uphold the order of the Tribunal and answer the question referred in favour of the revenue and against the assessee. A copy of this judgment under the seal of the High Court and signature of the Registrar General shall be forwarded to the Income tax Appellate Tribunal, Cochin Bench, Cochin. (C.N.RAMACHANDRAN NAIR) Judge. (V. K. MOHANAN) Judge. kk

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