2011 (6) TMI 923 - AT - Income Tax

Summary

Issues involved: Interpretation of tax laws regarding the classification of rental income from ownership properties, and the treatment of expenses and depreciation claimed under different heads of income.

Issue 1 - Classification of rental income:
The Revenue appealed against the Commissioner of Income-tax (Appeals)-V, Mumbai's decision to tax rental receipts of ownership properties under the head business income, contrary to the decision in the case of M/s. Shambu Investment, 263 ITR 143. The Tribunal noted that similar issues had been decided in favor of the assessee in previous years. The Tribunal referred to the principle of res judicata and emphasized the importance of consistency in assessing rental income. It was held that the Assessing Officer (AO) should maintain consistency in the assessment unless there is a material change in facts or law. As there was no such change in the present case, the rental income was to be assessed under the head business income, and related expenses and depreciation were allowed.

Issue 2 - Treatment of expenses and depreciation:
The Revenue contended that allowing expenses and depreciation claimed under the head business income was erroneous since the rental income was to be assessed under the head income from house property. However, the Tribunal upheld the decision of the Commissioner of Income-tax (Appeals) based on the consistency principle and the nature of the leasing activity as a business. The Tribunal directed the AO to assess the rental income from leasing activity under the head business income, allowing related expenses such as depreciation, electricity charges, security charges, and building repairs. The Tribunal followed its previous orders for assessment years 1997-98 and 2001-02, providing relief to the assessee on the said issues.

In conclusion, the appeal of the revenue was dismissed, and the impugned order of the Commissioner of Income-tax (Appeals) was upheld, granting relief to the assessee on the classification and treatment of rental income and related expenses.