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

ITA 3398/MUM/2024Status: DisposedITAT Mumbai09 September 2025AY 2017-1840 pages
AI SummaryDismissed

What did the Tribunal hold?

The Tribunal dismissed the assessee's grounds of appeal. It held that there was no infirmity in the conclusion drawn by the Assessing Officer (AO) and correctly upheld by the learned Commissioner of Income-tax (Appeals) [CIT(A)]. The Tribunal found that the assessee's main business activity comprised of construction and letting out of warehouses on rent, which was its primary activity. It was not a case of stock-in-trade remaining vacant for a temporary period. The Tribunal distinguished the case from the Supreme Court's decision in Raj Dadarkar & Associates, noting that in the present case, the nature of business was specified in the Form 3CD certified by the auditor. The Tribunal also considered the decision in Banzai Estates Bombay, but found it distinguishable. Therefore, the rental receipts were correctly treated as business income, and the claim for standard deduction under Section 24(a) was denied. The appeals for AY 2014-15, 2015-16, and 2017-18 were also dismissed as they were identical.

What were the facts?

The assessee, Arihant Developers, filed appeals against the orders of the National Faceless Appeal Centre (NFAC), Delhi, which confirmed the Assessing Officer's (AO) action for Assessment Years (AY) 2012-13, 2014-15, 2015-16, and 2017-18. The core dispute concerns the classification of rental receipts from godowns. For AY 2012-13, the assessee declared Rs. 1,69,14,565/- income, but the reassessment finalized income at Rs. 2,60,33,300/-. The AO noted Rs. 2,82,16,861/- as rental income in the P&L account, which the assessee treated as income from house property, claiming standard deduction. The AO, however, treated it as business income, citing the assessee's Form 3CD stating 'renting of immovable property' as a business activity and the dominant nature of rental income in the P&L account.

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 rental income from godowns should be treated as income from house property, as the godowns are held as stock-in-trade and leased to various parties. They rely on Section 22 of the Act and the decision in CIT v. Ansal Housing & Leasing Co. Ltd. (2016) 72 Taxman.com 254. Revenue's Contention: The AO and NFAC treated the rental receipts as business income, denying the standard deduction. They relied on the assessee's Form 3CD which listed 'renting of immovable property' as a business activity, and the fact that rental income constituted the dominant part of the P&L account. The AO also relied on the Supreme Court decision in Chennai Properties & Investments Ltd. Vs CIT (2015) 56 taxmann 456 (SC), stating that if the main object is to acquire properties and earn income by letting them, it is business income.

Which sections of the Income-tax Act were involved?

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

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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)

Page 2 ITA No. 3395, 3396, 3397, 3398/Mum/2024 Α.Υ. 2012-13, 2014-15, 2015-16, 2017-18

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