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TMI Blog2016 (10) TMI 1076X X X X Extracts X X X X X X X X Extracts X X X X ..... in ITA No.788/Del/2013 and the Appellant, Deputy Commissioner of Income-tax, Central Circle 19, New Delhi (hereinafter referred to as 'the revenue') in ITA No.733/Del/2013 by filing the aforesaid cross appeals sought to set aside the impugned order dated 22.11.2012 passed by the Commissioner of Income-tax (Appeals)-XXXIII, New Delhi qua the assessment year 2007-08 on the grounds, inter alia, that :- GROUNDS OF APPEAL FILED BY THE ASSESSEE (ITA NO.788/DEL/2013) "1. That the Commissioner of Income-tax (Appeals) erred on facts and in law in affirming the action of the assessing officer in assessing rental income of Rs. 20,83,413, derived from letting out of Corporate office and quarters under the head 'business income' as against t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... received by the appellant, after treating the rental income from (soap unit merged with M.D. Office) as 'income from other sources'. 3. Without prejudice, that the Commissioner of Income-tax (Appeals) erred on facts and in law in assessing rental income of Rs. 4,20,000 as 'income from other sources' and not as 'business income' of the appellant." GROUNDS OF APPEAL FILED BY THE REVENUE (ITA NO.733/DEL/2013) "5. On the facts and in the circumstances of the case, the CIT (A) has erred in directing the AO to bifurcate the income and assess the same under different heads. 6. On the facts and in the circumstances of the case, the CIT (A) has erred in not appreciating the observation of the AO and issued directions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee company filed comprehensive reply. However, AO has not accepted the plea taken by the assessee company on the ground that these quarters are for the fixed assets and incidental expenses like repair, maintenance and depreciation had been claimed and allowed on them and as such, any income arising out of quarters is to be treated as business income and it is not chargeable u/s 22 of the Act and assessed the income of the assessee as under :- " Accordingly, I hold that the rental income shown by the assessee is to be assessed as business income which is not eligible to be assessed as income from house property. Accordingly, the deduction claimed by assessee u/s 22 to the tune of Rs. 8,46,690/- is disallowed. I. Business income d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee challenged the impugned order on the ground of consistency by arguing that the property in question has been let out by the assessee company about 30 years back and has been consistently declaring rental income under the head "Income from house property" and took shelter u/s 22 of the Act. 9. For ready perusal, provisions contained u/s 22 of the Act are reproduced as under :- "22. The annual value of property consisting of any buildings or lands appurtenant thereto of which the assessee is the owner, other than such portions of such property as he may occupy for the purposes of any business or profession carried on by him the profits of which are chargeable to income-tax, shall be chargeable to income-tax under the head "Inco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is 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). 13. However, 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 Rs. 21,49,943/- is concerned, the same need to be strictly interpreted under the provisions contained u/s 22 of the Act. 14. At the same time, 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ea 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 Rs. 4,20,000/- was derived by the assessee company by letting out the land and structure thereon. 18. Now, the next question arises for determination ..... X X X X Extracts X X X X X X X X Extracts X X X X
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