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2017 (1) TMI 511 - ITAT VISAKHAPATNAM

2017 (1) TMI 511 - ITAT VISAKHAPATNAM - TMI - Rental income from letting out of commercial properties - nature of income - treated under the head “income from house property” as per revenue the assessee is involved in the activity of taking lands lease and construction of commercial buildings and let out the same on monthly rental whereas assessee has considered rental receipts under the head “income from business” - Held that:- Respectfully following the decision of coordinate bench of this Tri .....

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ated:- 6-1-2017 - SHRI V. DURGA RAO, JUDICIAL MEMBER AND SHRI G. MANJUNATHA, ACCOUNTANT MEMBER For The Appellant : Shri G.V.N. Hari, AR For The Respndent : Shri Rajagopal, DR and Shri M. Narayana Rao, DR ORDER PER G. MANJUNATHA, Accountant Member: This appeal filed by the assessee is directed against order of Commissioner of Income Tax (A), Guntur dated 28.3.2014 and it pertains to the assessment year 2010-11. 2. The brief facts of the case are that the assessee is a partnership firm engaged in .....

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uring the course of assessment proceedings, the A.O. noticed that the assessee has considered income from rental receipts under the head income from business . After considering the details furnished by the assessee and analyzing the provisions, held that income from lease rentals received by the assessee is assessable under the head income from house property, but not under the head income from profits and gains of business or profession. Aggrieved by the assessment order, the assessee preferre .....

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als, Guntur in Appeal No. 130/CIT(A)/GNT/12-13, is against the appellant in so far as contrary to the law, facts and circumstances of the case. 2. The learned CIT(Appeals),Guntur, Ought not to have sustained the addition made by the assessing officer treating the income received by appellant firm as "income from house property" instead of business as claimed by the appellant. 3. The learned CIT(A), ought to have accepted the contention of the appellant since the letting out of properti .....

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pellant's ground that its main intention of floating the firm by its partners is to lease out commercial properties strictly in a commercial sense as a prudent businessman yielding good amount of profits In several occasions the courts have also felt that where company or a firm acquire property which it sells or leases it out with a view to be dealt with in the same manner, the company or a firm is not treating them as property to be enjoyed in the shape of rent which they yield but as a ki .....

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etting out commercial properties is assessable under the head income from business or profession or under the head income from house property has been considered by this Tribunal, in assessee s own case in ITA No.275/Vizag/2012 dated 19.2.2016 for the assessment year 2008-09, wherein the coordinate bench held that rental income received by the assessee from letting out commercial properties is assessable under the head income from profits and gains of business or profession . On the other hand, .....

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e assessee has considered rental receipts under the head income from business . The A.O. assessed rental receipts under the head income from house property. The Ld. A.R. for the assessee at the time of hearing submitted that the issue has been covered by the assessee s own case for the assessment year 2008-09 in ITA No.275/Vizag/2012 dated 19.2.2016. We find that the coordinate bench of this Tribunal, under similar circumstances held that rental income from letting out commercial properties is a .....

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usiness is to construct godowns or residential or commercial buildings or flats or commercial shops, etc. on lands owned by the firm or by taking land on long lease basis from others, as mutually agreed upon from time to time, and lease out the same to others . It is also mutually agreed that any other business also may be carried with the mutual consent of all the partners if deemed lucrative. From the above, it is clear that the intention of the assessee is to acquire the land by its own or by .....

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ee is as per the partnership deed to construct the godowns or residential or commercial buildings or flats or commercial shops on land owned by the firm by taking land on lease basis from others, leased out or sale to others, besides conducting the tobacco business , came to a conclusion that the income received by the assessee is an income from house property and not a business income by following certain judicial precedents. 11. We find that the assessee firm has undertaken a systematic activi .....

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d on record mentions main objects as well as incidental or ancilliary objects in clause III(A) and (B) respectively. The main object of the appellant company is to acquire and hold the properties known as Chennai House and Firhavin Estate both in Chennai and to let out those properties as well as make advances upon the security of lands and buildings or other properties or any interest therein. What we emphasise is that holding the aforesaid properties and earning income by letting out those pro .....

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d. (supra) has held that letting out of the properties is in fact the business of the assessee, assessee therefore rightly disclosed the income under head Income from business it cannot be treated as an Income from house property and appeal filed by the assessee is allowed. 12. In the present case, the assessee has acquired the land on lease basis in various places i.e. Mumbai, Kolkata, Bangalore, Chennai and constructed commercial complexes and leased out the same to the commercial entrepreneur .....

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e Supreme Court squarely applies to the facts of the case and we hold that the income earned by the assessee is Income from business and not Income from house property . 13. So far as the order of the ITAT in the assessee s own case (supra) is concerned, the Tribunal has observed that assessee has constructed its properties at various places and let out to different tenants for a longer period, it cannot be inferred that the activity of the assessee is a business activity. So far as the above ob .....

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