NILE TECH LTD.,NEW DELHI vs. ACIT, CIRCLE-18(2), NEW DELHI

PER KULDIP SINGH, JUDICIAL MEMBER :

Appellant, M/s. Nile Tech Ltd. (hereinafter referred to as the

‘assessee’) by filing the present appeal sought to set aside the

impugned order dated 17.10.2018 passed by the Commissioner of

Income-tax (Appeals)-6, New Delhi qua the assessment year

2014-15 on the grounds inter alia that :-

“1. The learned CIT(APPEALS) has erred both on facts and in law in upholding the action of the learned Assessing Officer in assessing lease rental income under the Head of Income 'Profits & gains of Business or profession’ u/s 28 instead of assessing lease rental income under the Head 'Income from House

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Property’ u/s 22 of the Act as declared by the appellant company in its return of income and which basis has been consistently followed since inception i.e. Assessment Year 2010-11 and assessed u/s 143(3) of the Act and thereby making addition of Rs.10,79,56,954 to the declared Total Income. Thus ignoring the decision of Hon'ble Supreme Court in Radha Swami Satsang 193 ITR 321(SC). 1.1 The learned CIT(A) has erred in law in not following the decision of Hon'ble Supreme Court in: 1. Raj Dadankar & Associates in 394 ITR, 592(SC). 2. East India Housing and Land Development Trust Ltd. - 42 ITR 49(SC). 3. Sultan Brothers -51 ITR, 353(SC) 2 The Learned CIT(APPEALS) has erred both on facts and in law in upholding the action of the Learned Assessing Officer in disallowing interest paid u/s 201(1A) on late deposits of TDS amounting to Rs.43179.”

controversy at hand are : Assessee has earned an income of

Rs.57,49,98,489/- as revenue from operations. Assessing Officer

noticed that the aforesaid income has been earned by the assessee

from leasing and offered income to tax as income under the head

‘house property’ instead of income under the head ‘business and

profession’. Declining the contentions raised by the assessee, AO

proceeded to conclude that the income earned by the assessee by

way of leasing the property would be taxable as business income as

the business of the company is to lease its property and earned rent

and thereby made addition of Rs.10,79,56,954/- to the total

declared income.

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ld. CIT (A) who has confirmed the addition by dismissing the

appeal. Feeling aggrieved, the assessee has come up before the Tribunal by way of filing the present appeal.

parties to the appeal, gone through the documents relied upon and

orders passed by the revenue authorities below in the light of the

facts and circumstances of the case.

GROUND NO.1

operation of its company at Rs.57,49,98,489/- from the rental

income. It is also not in dispute that the assessee company was

primarily engaged in the business of real estate. It is also not in dispute that the assessee has been leasing the property in question

and collecting rent since 2010-11 which has been assessed under

the head ‘income from house property’. It is also not in dispute

that the assessee is owner of the property in question and has

leased out the property on the basis of rental agreement. It is also

not in dispute that in the subsequent year, the rental income of the

assessee has been accepted as income from the house property.

for the assessee contended that when the assessee is admittedly

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owner of the property in question and leased out the same on the

basis of rental agreement, rental income is to be as taxed under the

head ‘income from house property’ and further contended that in the preceding years since 2011-12 and in the succeeding years, the

rental income from the property in question has been accepted as

‘income from house property’ by framing assessment under section

143 (3) of the Act and relied upon the decision rendered by Hon’ble Supreme Court in the case of Raj Dadarkar & Associates – (2017) 394 ITR 592 (SC).

contentions raised by the ld. AR for the assessee are not tenable

because when the assessee himself as claimed depreciation of the

property, the rental income is to be taxed under the head ‘income from business and profession’.

income of the assessee qua the property in question for the last 15

years as ‘income from house property’ and in the subsequent years

also, the same is treated as ‘income from house property’ and there

is no reason with the Revenue to depart from the rule of

consistency. Secondly, assessee is owner of the property in

question who has leased out the property on the basis of rental

agreement.

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letting” was included in its object clause.

So, the Hon’ble Apex Court held that wherever there is an income

from leasing out of premises and collecting rent, normally such an

income is to be treated as income from house property, if the

provision of section 22 are satisfied and merely on the basis of

entry in the object clause of the business showing a particular

object would not be a determinative factor to arrive at a conclusion that income is to be treated as income from business or profession.

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categoric enough to cover the case of the assessee who is owner of

the building in question which has been leased out by him and as such, rental income earned by him shall be chargeable to Income-

tax under the head ‘income from house property’.

material to prove that leasing of the property is the complex

commercial trading transaction, the rental income has to be

assessed under the head ‘housing property’ because the visible

intention of the assessee / owner is to exploit the property being

owner to earn the rent. When the company is not doing any

business except for leasing out the property owned by it to earn the

rent, the rental income is to be chargeable to Income-tax under the head ‘income from house property’.

Bench of the Tribunal in case cited as Select Infrastructure Pvt.

Ltd. vs. Addl. CIT & Ors. in ITA Nos.3751/Del/2013 & Ors. order dated 04.10.2017 in favour of the assessee by relying upon the

decision rendered by the Hon’ble Supreme Court in the case cited as Raj Dadarkar & Associates (supra).

assessee has claimed depreciation on the property its rental income

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is to be charged to Income-tax under the head income from

‘business & profession’ is not tenable in the face of the fact that

computation of income, available at page 44 of the paper book, shows that the assessee has never claimed depreciation on the

property leased out. Rather AO granted the depreciation after

rejecting the claim of the assessee that rental income is to be

assessed under the heads ‘income from house property’.

head ‘business & profession’, added depreciation on the property

of assessee. So, we are of the considered view that entire rental

income earned by the assessee during the year is chargeable to

Income-tax under the head ‘income from house property’ u/s 22 of

the Act and the assessee shall not be entitled for any depreciation on the property.

decision rendered by the coordinate Bench of the Tribunal and also

by following the rule of consistency laid down by Hon’ble Supreme Court in the case of Radhasoami Satsang vs. CIT 193

ITR 321 (SC) and following the decision rendered by Hon’ble Apex Court in Raj Dadarkar & Associates (supra), we are of the

considered view that rental income earned by the assessee from

leasing out the property owned by it is chargeable to Income-tax

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under the head ‘income from house property’ under section 22 of the Act. Consequently, Ground No.1 is determined in favour of the

assessee. GROUND NO.2 18. Ground No.2 is dismissed having not been pressed during

the course of arguments. 19. Resultantly, the appeal filed by the assessee is hereby partly allowed. Order pronounced in open court on this 28th day of May, 2019.

Sd/- sd/- (G.D. AGRAWAL) (KULDIP SINGH) VICE PRESIDENT JUDICIAL MEMBER Dated the 28th day of May, 2019 TS