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Facts
The assessee owned a property in Mumbai, rented for ₹1,20,00,000/-, and offered this as 'Income from House Property', claiming a standard deduction of ₹36 lakhs under Section 24(a). The AO and CIT(A) reclassified this income as business income and disallowed the Section 24(a) deduction. Additionally, the assessee claimed depreciation of ₹24,69,723/- on a temporary office structure, which the authorities disallowed, treating it as enduring in nature.
Held
The Tribunal held that the rental income should be treated as 'Income from House Property' and allowed the Section 24(a) deduction, emphasizing the principle of consistency and prior Supreme Court judgments. For the second issue, the Tribunal allowed the depreciation claim on the temporary structure, finding it essential for business operations and not an asset of enduring or capital nature, as no such finding was made by the Revenue authorities.
Key Issues
1. Whether rental income from a property should be assessed as 'Income from House Property' (allowing Section 24(a) deduction) or 'Business Income'. 2. Whether depreciation claimed on a temporary office structure is allowable, or if the expenditure constitutes an asset of enduring nature.
Sections Cited
143(3), 24(a)
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ORDER PER MAHAVIR SINGH, VP
This appeal by the assessee is arising out of the order of learned CIT(A), NFAC, Delhi in appeal No.CIT(A), Delhi-16/10189/2013-14 dated 26th March, 2025. Assessment was framed by the DCIT, Circle-12(1), New Delhi for the assessment year 2010-11 under Section 143(3) of the Income-tax Act, 1961 (hereinafter referred to as 'the Act') vide his order dated 8th March, 2013.
The first issue in this appeal of the assessee is as regards the order of learned CIT(A) in confirming the action of the Assessing Officer in making disallowance of ₹36 lakhs claimed by the assessee under Section 24(a) of the Act. For this, the assessee has raised following ground No.1(a) and 1(b):-
“1(a) On the facts and circumstances of the case, the Ld.CIT(NFAC), Delhi has erred in sustaining the disallowance of ₹36,00,000/- claimed by the assessee under Section 24(a) of the Income Tax Act, as made by the A.O. on erroneous and irrelevant considerations. The order of the Ld.CIT(A) is illegal as it has ignored the material and submissions placed on record, as well as the judgments cited on the subject.
1(b) That claim deduction under Section 24(a) of the Act, having been rightly made by the assessee, showing rental income, earned by it under the head “Income from House Property", deserved to be allowed. Rental income from flat no.701/705, Dalamal House, Nariman Point, Mumbai, was always assessed under the head ‘Income from House Property' in all previous as well as subsequent years. The Ld.CIT-NFAC has failed to follow rule of consistency, leading to an erroneous conclusion.”
We have heard rival contentions and gone through the facts and circumstances of the case. Brief facts are that during the financial year 2009-10, the assessee was the owner of property located at 701/705, Dalamal House, Nariman Point, Mumbai. This property was rented for an annual rent of ₹1,20,00,000/-. The assessee filed copy of agreement entered into by the assessee with tenant dated 23rd December, 2008. The assessee offered this rental income to tax under the head 'income from house property' in the return filed and claimed standard deduction under Section 24(a) of the Act of ₹36 lakhs. The Assessing Officer treated the income from house property declared by the assessee at ₹1,20,00,000/- as business income and disallowed standard deduction claimed under Section 24(a) of the Act on the ground that assessee has incurred expenses on repairs and maintenance of the said property and claimed the same as business expenditure. Learned CIT(A) also confirmed the action of the Assessing Officer. Aggrieved, the assessee is in appeal before the Tribunal.
We noted that the assessee in its profit & loss account claimed expenses on repairs and maintenance of the above said property but these repairs and maintenance expenses were added back to the income of the assessee amounting to ₹1,40,336/- which pertained to the property located at 701/705, Dalamal House, Nariman Point, Mumbai. Learned Counsel for the assessee stated that the assessee is consistently declaring the rental income from this property under the head 'income from house property' since assessment year 1998-99 and the same has been duly accepted by the Assessing Officer and he filed the details of assessments at page 306 of the paper book and also enclosed copies of assessment order. We noted that the assessments in assessment year 2008-09, 2007-08, 1999-2000 and 1998-99 are under Section 143(3) and the Assessing Officer accepted this income declared under the head 'income from house property'. Even otherwise, the Assessing Officer or the learned CIT(A) in their orders have not given any reason how the rental income declared by the assessee is business income. We noted that, first of all, in view of the principle of consistency, the fundamental aspect permeating through the different assessment years is accepted in one way or the other, a different view in the matter is not warranted unless there being any material change in facts. This view has been taken by the Hon'ble Supreme Court in Radhasoami Satsang Vs. CIT 193 ITR 321 (SC). Even otherwise, this issue is covered by various decisions of Hon'ble Supreme Court starting from Sultan Brothers (P) Ltd. Vs. CIT – 51 ITR 353 (SC) and last decision of Hon'ble Supreme Court in Raj Dadarkar & Associations Vs. ACIT 394 ITR 592. In view of the above factual position, and also on the principle of consistency, we are of the view that once the rental receipts are declared as income from house property arising out of a property, is income from house property and assessee is eligible to claim of deduction under Section 24(a) of the Act. We direct the Assessing Officer to allow the claim of the assessee. In terms of the above, ground No.1(a) and 1(b) are allowed.
The second issue in this appeal is as regards the order of learned CIT(A) in confirming the action of the Assessing Officer in disallowing depreciation amounting to ₹24,69,723/- claimed on the temporary structure. For this, the assessee has raised the following ground No.2:-
That the Ld.(NFAC) has further gone wrong in sustaining the disallowance of the depreciation amounting to ₹24,69,723/- claimed on the temporary structure. Ld. CIT(NFAC) has failed to consider the material and evidence filed in support of the assessee's claim, all submissions and law cited in this regard have been ignored while deciding the issue. The claim of the assessee needs to be allowed.
We have heard rival contentions and gone through the facts and circumstances of the case. We noted that the assessee was carrying out its business operations from the address B-30, Maharani Bagh, New Delhi and was also exploring business avenues in the international market. Thus, it had renovated its occupied share of the property and incurred an expenditure of ₹24,69,723/- towards erection of temporary structure of the office premises. The assessee filed complete details of expenses and also construction work carried out by the assessee on the premises. The Assessing Officer disallowed the claim of temporary structure of depreciation amounting to ₹24,69,723/- by alleging that the expenses pertained to some construction work which seems to be benefit of enduring in nature and also the purchases of huge quantity of raw material indicates a permanent structure and not temporary in nature. Learned CIT(A) also confirmed the action of the Assessing Officer. We noted that the expenditure of ₹24,69,723/- was incurred by the assessee to facilitate the business more efficiently and effectively and which is supported by bills and vouchers in respect of the expenditure incurred. We noted that there is no finding of the Revenue authorities that the expenditure did bring into existence any asset of an enduring nature or had given rise to any capital asset. In the absence of the same, we are of the view that the assessee has carried out construction of temporary structure which was essential for facilitating the business of the assessee to be carried on efficiently and effectively. In terms of the above, we direct the Assessing Officer to allow the claim of the assessee.
In the result, the appeal of the assessee is allowed. Decision pronounced in the open Court on 13th March, 2026.