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

ITA 3397/MUM/2024Status: DisposedITAT Mumbai09 September 2025AY 2015-1640 pages
AI SummaryDismissed

What did the Tribunal hold?

The Tribunal held that the rental receipts from godowns should be treated as business income and not income from house property. The reasoning was based on the assessee's own declaration in Form 3CD, which explicitly stated 'construction of godowns and galas, land development and Renting of Immovable property' as its business. The Tribunal found that the rental income constituted the dominant part of the assessee's income, and expenses related to these properties were debited in the Profit & Loss account in a business-like manner. The Tribunal distinguished the case of CIT v Ansal Housing Finance & Leasing Co. Ltd. by noting that it dealt with notional rental income of unsold flats, whereas the present case involves actual letting out of warehouses. The Tribunal also found the facts distinguishable from Raj Dadarkar & Associates. Consequently, the AO's action of treating rental receipts as business income and denying standard deduction under Section 24(a) was upheld. 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, which upheld the Assessing Officer's (AO) action. The appeals pertain to Assessment Years (AY) 2012-13, 2014-15, 2015-16, and 2017-18. The core issue revolves around the classification of rental receipts from godowns. For AY 2012-13, the AO reopened the assessment and treated rental receipts of Rs. 2,82,16,861/- as business income, denying standard deduction under Section 24(a). The assessee's returned income was Rs. 1,69,14,565/-, and the reassessed income was Rs. 2,60,33,300/-. The AO noted that the assessee's Form 3CD declared 'construction of godowns and galas, land development and Renting of Immovable property' as its business. The NFAC confirmed the AO's findings.

What were the issues?

1. Whether the rental receipts of Rs. 2,82,16,861/- (for AY 2012-13) should be treated as business income or income from house property, and consequently, whether the standard deduction under Section 24(a) of the Income-tax Act, 1961, is allowable. Assessee's Contention: The assessee argued that the godowns are held as stock-in-trade and leased out, thus the rental income should be taxed under the head 'Income from house property' as per Section 22 of the Act, entitling them to the standard deduction under Section 24(a). They relied on CIT v Ansal Housing Finance & Leasing Co. Ltd. Revenue's Contention: The revenue, through the AO and confirmed by the NFAC, contended that the rental income from warehouses constitutes the dominant part of the assessee's income, and the nature of business declared in Form 3CD indicates that letting out immovable property is the assessee's primary business. They relied on the Supreme Court decision in Chennai Properties & Investments Ltd. Vs CIT, Central -3, Tamil Nadu, arguing that where the main object is to acquire properties and earn income by letting them, it should be taxed as business income. The revenue also distinguished the case of Raj Dadarkar & Associates Vs CIT, stating the facts were different.

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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