ITO, CHENNAI vs. KODAI HOUSING PRIVATE LIMITED, CHENNAI

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ITA 231/CHNY/2017Status: DisposedITAT Chennai20 June 2017AY 2012-134 pages
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What did the Tribunal hold?

The Tribunal agreed that the income should be treated as business income, following the Supreme Court's precedent. However, it noted that the Assessing Officer had not examined the allowability of expenses claimed under business income.

What were the facts?

The assessee company earned rent from letting out its property and claimed expenses under 'Business income'. The Assessing Officer treated this income as 'Income from house property'. The CIT(A) reversed this, treating it as business income, citing a Supreme Court judgment.

What were the issues?

Whether rental income from property letting is to be assessed as business income or income from house property, and the subsequent examination of related expenses.

Which sections of the Income-tax Act were involved?

Section 30,Section 38,Section 40

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Income Tax Appellate Tribunal, C/“SMC” BENCH, CHENNAI

Before: SHRI CHANDRA POOJARI

Hearing: 20.06.2017

आदेश / O R D E R

PER CHANDRA POOJARI, ACCOUNTANT MEMBER:

1.

This appeal is filed by the Revenue , aggrieved by the order of the Learned Commissioner of Income Tax(A)-8, Chennai dated 21.11.2016 pertaining to assessment year 2012-13.

2.

The ground raised in its appeal is that Ld.CIT(A) erred in deleting the addition of `42 lakhs by holding that income from letting out of property be assessed as income from business.

3.

The facts of the case are that the assessee is letting out the property owned by the company at Kodaikanal to M/s.Sujana Metal Products Ltd., for a rent of `5 lakhs per month totaling to `60 lakhs

per annum and the assessee claimed various expenses under the head ‘Business income”. The ld. Assessing Officer had treated the income earned from renting or premises as “income from house property” instead of “business income” and accordingly, the AO computed income of assessee. Aggrieved with the action of ld. Assessing Officer, the assessee carried the appeal before the Ld.CIT(A). On appeal, Ld.CIT(A) treated it as business income only on the reason that the assessee company has been rendering additional services to their tenant following the judgement of Apex Court in the case of Chennai Properties and Investments Ltd. Vs. CIT (373 ITR 673)(SC). Against the order of Ld.CIT(A), the Revenue is in appeal before us.

4.

I have heard both the parties and perused the material on record. In my opinion, in principle, I agree with the findings of the Ld.CIT(A) as there was a binding decision of Supreme Court in the case of Chennai Properties and Investments Ltd. Vs. CIT(supra) wherein held that:

“10. No doubt in Sultan Brothers (P.) Ltd.'s case, a Constitution Bench judgment of this court has clarified that merely an entry in the objects clause showing a particular object would not be the determinative factor to arrive at an conclusion whether the income is to be treated as income from business and such a question would depend upon the circumstances of each case, viz., whether a particular business is letting or not. This is so stated in the following words :

"We think each case has to be looked at from a businessman's point of view to find out whether the letting was the doing of a busi ness or the exploitation of his property by an owner. We do not fur ther think that a thing can by its very nature be a commercial asset. A commercial asset is only an asset used in a business and nothing else, and business may be carried on with practically all things. Therefore, it is not possible to say that a particular activity is business because it is concerned with an asset with which trade is commonly carried on. We find nothing in the cases referred to support the proposition that certain assets are commercial assets in their very nature." 11. … in this case, letting of the properties is in fact is the business of the assessee. The assessee, therefore, rightly disclosed the income under the head "Income from business". It cannot be treated as "Income from the house property"

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