Loading judgment…
No AI summary yet for this case.
Income Tax Appellate Tribunal, DELHI BENCH “SMC” NEW DELHI
AMIT SHUKLA, J.M.:
The aforesaid appeal has been filed by the assessee against the impugned order dated 27.10.2017 passed by Ld. CIT(A)-1, Gurgaon for the quantum of assessment passed under section 274 for the assessment year 2014-15. The assessee is mainly aggrieved by disallowance of standard deduction of Rs. 1,20,42,749/- under section 24(1) by re- characterizing the income from house property as business income.
Facts in brief are that the assessee company is earning income from rent from a building leased out to its
ITA No. 7800/Del/2017 2
holding company and sister concern is into business of Real Estate business and related activities. The assessee has shown the rental income as income from house property. The AO has treated the said income as business income after applying the ratio of the Hon’ble Supreme Court in the case of Chennai Properties and Investment Limited vs. CIT 2015 373 ITR 673 and thereafter disallowed the standard deduction claimed under section 24(1). The learned CIT(A) too has confirmed the said addition. He has held that the ancillary objects of the assessee was to lease out business centres, commercial complex, residential complex, shopping arcades etc., and therefore, the contention of the assessee is that its objects does not include giving the property on rent is factually incorrect.
Before us, the learned counsel submitted that in the earlier years, the income shown from the house property has been accepted by the AO and assessment passed under section 143(3) and therefore, as a matter of consistency different view could not have been taken. In support, he gave us the following chart:- S. Assessment Amount of Rent Status of Assessment No. Year (INR) 1. 2007-08 87,26,630 Allowed as house property income u/s 143(3) 2. 2008-09 3,49,06,518 Allowed as house property income u/s 143(3) 3. 2009-10 3,49,06,518 Allowed as house property income u/s 143(3) 4. 2010-11 3,49,06,518 Allowed as house property income u/s 143(3) 5. 2011-12 3,49,06,518 Allowed as house property income u/s 143(3)
ITA No. 7800/Del/2017 3
2012-13 3,49,06,518 Allowed as house property income u/s 143(3) 7. 2013-14 3,62,15,513 Allowed as house property income u/s 143(3) 8. 2014-15 4,01,42,496 Impugned AY, Taxed as business income 9. 2015-16 4,01,42,496 Allowed as house property income u/s 143(3)
Apart from that, he submitted that now the decision of Chennai properties (supra) and Rayla Corporation Pvt. Ltd., vs. ACIT 2016 72 taxmann.com 149 has now been explained by the Hon’ble Supreme Court in the case of Raj Dardarkar & Associates vs. ACIT reported in 394 ITR 592, wherein the Hon’ble Supreme Court on an income from lease of shops held to be rental income assessable under the head income from house property. On the other hand, learned DR strongly relied upon the order of the AO and CIT(A).
From the facts as discussed above and the material referred to before us, it is seen that the assessee all throughout has been showing rental income from a building leased out to its sister concerned as income from house property and such a income has already been assessed in all the earlier years by the AO and the scrutiny proceedings under section 143(3). No material facts or circumstances which are different from the earlier years have been brought on record either by the AO or learned CIT (A) and therefore principle of consistency has to be followed. The sole basis for treating the rental income as business income is on account of the judgment of Hon’ble Supreme Court in the case of Chennai Properties and Rayla Corporation Pvt. Ltd. These two
ITA No. 7800/Del/2017 4
judgments have now been considered by the Hon’ble Supreme Court in the case of Raj Dardarkar & Associates (supra), wherein the Hon’ble Supreme Court held that mere object clause would not be the determining factor and observed that, whether the income is to be treated as income from business and the same has to be examined on the facts of the each case and the activities carried thereto. No facts have been brought on record that the assessee was carrying out any systematic activity of exporting commercial asset for earning of income albeit it is a case of pure lease of premises for rental income.
Accordingly, I hold that rental income received by the assessee from the lease of the premises is to be assessed as income from house property and accordingly the assessee is liable for deduction of @ 30% under section 24(1). Appeal of the assessee is allowed.
In the result, appeal of the assessee is allowed.
Order pronounced in the open court on 21st December, 2018.
Sd/- [AMIT SHUKLA] JUDICIAL MEMBER DATED: 21st Dec, 2018 SH Copy forwarded to: 1. Appellant 2. Respondent 3. CIT(A) 4. CIT 5. DR
ITA No. 7800/Del/2017 5
Assistant Registrar
Date 1. Draft dictated on 21.12.2018 2. Draft placed before author 21.12.2018 3. Draft proposed & placed before the second member 4. Draft discussed/approved by Second Member. 5. Approved Draft comes to the Sr.PS/PS 6. Kept for pronouncement on 7. File comes back to PS/Sr. PS 8. Uploaded on 09.01.2019 9. File sent to the Bench Clerk 10. Date on which file goes to the AR 11. Date on which file goes to the Head Clerk. 12. Date of dispatch of Order.