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2016 (10) TMI 1076 - AT - Income TaxRental income derived by way of letting out of corporate office - “business income” or “income from house property” - Held that:- In the case at hand, undisputedly, when the property in question consisting of buildings and land appurtenant thereto i.e. in the shape of corporate office and quarters is owned by the assessee company and is on rent pursuant to the lease agreement dated 07.06.2007, the same has to be treated as income from house property. It does not matter if the property in question is rented out to the third party or its sister concern because sister concern is otherwise treated as a separate entity for all intents and purposes. CIT (A) has proceeded on the basis of whims and fancies by holding that the portion of the property in question has been rented out by the assessee company to its sister concern is on temporary basis and could be taken back at any point of time by the assessee company for its business purposes. When the property in question has been rented out on the basis of lease agreement dated 07.06.2007, the sister concern becomes statutory tenant of the assessee company and the word “temporary basis” cannot be imported to interpret the lease agreement (supra). So far as observations returned by ld. CIT (A) that depreciation has been claimed by the assessee company on business assets as far as rental income of ₹ 21,49,943/- is concerned, the same need to be strictly interpreted under the provisions contained u/s 22 of the Act. We are of the considered view that the rental income derived by the assessee company by way of letting out the quarters to the employees of its company, who undisputedly works for conducting the business of the company, has to be treated as business income and cannot be treated as income from house property by any stretch of imagination u/s 22 of the Act. Rental income derived by the assessee company by way of letting out of MD Office (soap unit merged with MD Office) - “income from other sources” OR “income from house property” or “business income” ?” - Held that:- Perusal of the lease agreement dated 07.06.2007, minutely perused by the ld. CIT (A), is enough to describe the property in question as total land area of 1584 sq. mtr. Having industrial shed of covered area of 733 sq. mtr. It is also subject matter of the lease agreement that the lessee has requested the lessor to renovate and reconstruct the existing constructed building as the said structure is quite old and is not suitable for lease for use of manufacture warehouse, storage of goods and offices etc. When the lease agreement is categoric enough to lease out the land and structure thereon, the same cannot be disbelieved without getting the same verified by the ld. CIT (A) and no such verification/remand report is there on the file. So, we are of the considered view that the rental income of ₹ 4,20,000/- was derived by the assessee company by letting out the land and structure thereon. When it is not in dispute that the regular rental income of ₹ 4,20,000/- is being derived by the assessee company from the land and structure thereon from M/s. Weld Excel India Limited on the basis of lease agreement dated 07.06.2007 @ ₹ 35,000/- per month on permanent basis, it has become regular business income of the assessee company. So, we are of the considered view that AO as well as ld. CIT (A) have erred in treating the rental income of ₹ 4,20,000/- as income from other sources. So, the same is ordered to be treated as business income of the assessee company.
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