ARIHANT DEVELOPERS,MUMBAI vs. ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE -1, KALYAN

ITA 3396/MUM/2024Status: DisposedITAT Mumbai09 September 2025AY 2014-1540 pages
AI SummaryDismissed

What did the Tribunal hold?

The Tribunal held that there was no infirmity in the conclusion drawn by the Assessing Officer (AO), which was correctly upheld by the Learned Commissioner of Income-tax (Appeals) [CIT(A)]. The Tribunal found that the assessee's main business activity comprised the construction and letting out of warehouses on rent. The AO's observation that rental income from warehouses constituted the dominant part of the credit side of the P&L account, and that expenses related to these properties were debited to the P&L account, supported the classification as business income. The Tribunal distinguished the case from CIT v Ansal Housing Finance & Leasing Co. Ltd, noting that the present case involved letting out of warehouses, not unsold flats, and there was no issue of notional rent. It also distinguished the case from the Bombay High Court's decision in Banzai Estates Bombay, where consistency in treating income as house property was a factor. Therefore, the rental receipts were correctly treated as business income, and the denial of standard deduction under Section 24(a) was justified. The grounds of appeal were dismissed.

What were the facts?

The assessee, Arihant Developers, filed appeals against the orders of the National Faceless Appeal Centre (NFAC), Delhi, for Assessment Years (AY) 2012-13, 2014-15, 2015-16, and 2017-18. These orders confirmed the Assessing Officer's (AO) action of treating rental receipts from godowns as business income, thereby denying standard deduction under Section 24(a) of the Income Tax Act, 1961. The AO reopened the assessment for AY 2012-13, initially assessing income at Rs. 1,76,58,540, and later reassessing it to Rs. 2,60,33,300. The AO noted that the assessee's Profit & Loss account showed rental income of Rs. 2,82,16,861 for AY 2012-13 and that Form 3CD listed 'construction of godowns and galas, land development and Renting of Immovable property' as the assessee's business. The AO also observed that rental income constituted the dominant part of the P&L credit and related expenses were debited to the P&L account.

What were the issues?

1. Whether the rental receipts of Rs. 2,82,16,861/- for AY 2012-13 (and similar amounts for other AYs) should be treated as business income or income from house property, and consequently, whether the standard deduction under Section 24(a) should be allowed. Assessee's contentions: - The godowns are held as stock-in-trade and given on lease, generating rental income. - The rental income should be chargeable under the head 'Income from house property' as per Section 22 of the Act. - Relied on CIT v Ansal Housing Finance & Leasing Co. Ltd (2016) 72 Taxman.com 254. - The AO erred in treating rental receipts as business receipts and denying standard deduction under Section 24(a). Revenue's contentions (as inferred from AO's actions and CIT(A)'s order): - The letting out of godowns/warehouses is the main business of the appellant. - Rental income constitutes the dominant part of income in the P&L account. - The appellant depicted rental income as income from house property to take advantage of standard deduction under Section 24(a). - Relied on Chennai Properties & Investments Ltd Vs CIT, Central -3, Tamil Nadu [2015] 56 taxmann 456 (SC).

Which sections of the Income-tax Act were involved?

Section 24(a),Section 143(3),Section 147,Section 22,Section 23,Section 27

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Before: SHRI SANDEEP GOSAIN & SHRI PRABHASH SHANKAR

For Appellant: Shri K. Gopal & Akhilesh Deshmukh, ARs
For Respondent: Shri Aditya Rai (Sr. DR)
Hearing: 25.07.2025Pronounced: 09.09.2025

Heard together (4 matters)

ITA No.3395/MUM/2024
ITA No.3396/MUM/2024
ITA No. 3397/MUM/2024
ITA No. 3398/MUM/2024

Read from the judgment's own cause title. This page is filed under one of them.

PER PRABHASH SHANKAR [Α.Μ.] :- The above captioned appeals have been filed by the assessee against the orders of even date as passed by the Learned Commissioner of Income- tax (Appeals)/National Faceless Appeal Centre, Delhi [hereinafter referred to as “CIT(A)"] pertaining to the assessment orders passed u/s 143(3) r.w.s.147 of the Income-tax Act, 1961 [hereinafter referred to as “Act”] for

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