M/S. MASTER INFRASTRUCTURE PVT. LTD.,NEW DELHI vs. ACIT, NEW DELHI

ITA 3958/DEL/2014Status: DisposedITAT Delhi03 December 2020AY 2011-126 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that rental income earned by the assessee company should be treated as business income, following the Supreme Court's decisions. The orders of the lower authorities were set aside, and the AO was directed to accept the rental income as business income.

What were the facts?

The assessee company earned income from letting out a building. The Assessing Officer and CIT(A) treated this income as 'Income from House Property' instead of 'Profit & Gains of Business & Profession'. The assessee contended that this income should be treated as business income.

What were the issues?

Whether rental income earned by a company from letting out its property should be taxed as 'Income from House Property' or 'Profits and Gains of Business or Profession'.

Which sections of the Income-tax Act were involved?

Not explicitly mentioned, but relates to classification of income under different heads.

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, DELHI BENCHES “E” : DELHI

Before: SHRI BHAVNESH SAINI & SHRI PRASHANT MAHARISHI

Hearing: 03.12.2020Pronounced: 03.12.2020

ORDER PER BHAVNESH SAINI, J.M.

This appeal by Assessee has been directed against the Order of the Ld. CIT(A)-1, New Delhi, Dated 15.04.2014, for the A.Y. 2011-2012, challenging the Order of the Ld. CIT(A) in confirming the addition to the extent of Rs.65,36,118/-.

2 ITA.No.3958/Del./2014 M/s. Master Infrastructure Pvt. Ltd., New Delhi. 2. We have heard the Learned Representative of both the parties through video conferencing and perused the material available on record.

Earlier, this appeal was dismissed for default which is restored by allowing M.A. of the assessee.

During the year assessee has income from rent earned by letting-out building constructed by it on Plot No.278, Phase-IV, Udyog Vihar, Gurgaon and some income from other sources. The A.O. considering the issue in detail directed that the entire income of the assessee is chargeable under the Head “Income from House Property” instead of “Profit & Gains of Business & Profession”. The Ld. CIT(A) confirmed the view of the A.O.

Learned Counsel for the Assessee submitted that in preceding A.Y. 2010-2011 the ITAT, Delhi E-Bench, Delhi decided the appeal of assessee in ITA.No.671/Del./2014 vide Order Dated 30.03.2017 and A.O. is directed to accept the claim of assessee of business income. The Order of the Tribunal in para 6.3 is reproduced as under :

3 ITA.No.3958/Del./2014 M/s. Master Infrastructure Pvt. Ltd., New Delhi. “6.3. Having gone through the above cited decisions, we find that in its recent decision in the case of Rayala Corporation (P) Ltd. Vs. ACIT (supra), the Honhle Supreme Court has been pleased to hold mar income earned as rent by the assessee company should be treated as business income’ and not “income from house property. In that case before the Honble Supreme Court assessee company was engaged in business of leasing its properties to earn rent. The issue raised before the Honble Supreme Court was whether so as to make rental income taxable under the head ‘'profits and gains of business or profession’, rent should be main source of income, or earning income from rent should be for purpose for which company is incorporated. It was answered in affirmative. Again in the case of Chennai Properties & Investment Ltd. Vs. CIT (supra) the Honble Supreme Court has been pleased to hold that where in terms of memorandum of 4 ITA.No.3958/Del./2014 M/s. Master Infrastructure Pvt. Ltd., New Delhi. association, main object of assessee company was to acquire properties and earn income by letting out same, said income was to be brought to tax as business income and not as income from house property. Since these decisions are later decisions than the decision in the case of Sambhur Investments (P) Ltd. Vs. CIT (supra) relied upon by the Id. CIT (Appeals), the ratio laid down in the later decisions on the issue will prevail. We thus respectfully following the ratio laid down in the above cited two later decisions of the Honble Supreme Court hold that the assessee was justified in claiming the rental income as business income. We thus, while setting aside the orders of the authorities below in this regard, direct the Assessing Officer to accept the claimed business income of the assessee and re-compute the income of the assessee accordingly. The ground is accordingly allowed in favour of the assessee.”

5 ITA.No.3958/Del./2014 M/s. Master Infrastructure Pvt. Ltd., New Delhi. 5.1. He has, therefore, submitted that the issue is covered in favour of the assessee.

The Ld. D.R. also stated that the issue is covered in favour of the assessee.

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