SHARE

| Nov-24-2021

Rental income from sub-lease shall be considered as Business Income since same was business of assessee

In Shri Shanthilal Movji Bhai Thakker v. The Income Tax Officer [ITA No. 2267-2270/Chny/2019 decided on November 3, 2021] Income Tax Appellate Tribunal, Chennai (“ITAT”) held that rental income from sub-lease shall be considered as business income as the assesee was engaged in business of real estate development and the property in question was sub-leased in furtherance of their business.

Shri Shanthilal Movji Bhai Thakker (“the Appellant”) aggrieved by the order (“Impugned Order”) passed by Assessing Officer (“AO”) treating lease rental income earned by the Appellant as income from House Property as against Business Income offered by the Appellant, has preferred this appeal.

The Hon’ble ITAT observed that the Appellant has acquired the property in question by virtue of lease of 27 years i.e. for a long term basis and is sub-leased to various tenants.

Further observed that, the Appellant and his associated entities were in business of real estate development and the property in question was sub-leased in furtherance of their business i.e., to earn the rental income from the tenants, thus such income cannot be treated as income from house property.

ITAT relied upon the judgement passed by the Hon’ble Supreme Court in case of Raj Dadarkar & Associates v. ACIT [81 Taxmann.com 193] to hold that in cases where a particular income may appear to fall under more than one head, income has to be either treated as income from the house property or as the business income.

Further held, by applying the ratio of case, Sultan Bros.(P) Ltd. v. CIT [1964, 51 ITR 353 (SC)], held that the type of income depends upon the fact that whether the sub-letting was done as exploitation of the property by owner or was done by the owner in furtherance of business and applying the same criteria held that in present case income received by the Appellant was to be treated as income from the business.

(Author can be reached at info@a2ztaxcorp.com)

DISCLAIMER: The views expressed are strictly of the author and A2Z Taxcorp LLP. The contents of this article are solely for informational purpose and for the reader’s personal non-commercial use. It does not constitute professional advice or recommendation of firm. Neither the author nor firm and its affiliates accepts any liabilities for any loss or damage of any kind arising out of any information in this article nor for any actions taken in reliance thereon. Further, no portion of our article or newsletter should be used for any purpose(s) unless authorized in writing and we reserve a legal right for any infringement on usage of our article or newsletter without prior permission.

Similar reads

Income Tax deduction allowed by Karnataka High Court on loss suffered by assessee on Foreign Rate Fluctuation

The Hon’ble Karnataka High Court in P.R Commissioner of Income Tax v. M/s United Spirits Ltd. [I.T.A. No. 548/2015 c/w I.T.A No. 37/2010 decided on September 2, 2021] answered in favor

Nov-24-2021

Read More

Wrong deduction claimed which resulted in reduction of Tax liability can’t amount to concealment of income

In Pr. Commissioner of Income Tax v. Sonu Realtors Private Limited [INCOME TAX APPEAL NO.956 OF 2017 dated October 11, 2021], Pr. Commissioner of Income Tax (“the Appellant”) filed the appeal being

Nov-24-2021

Read More

Initiation of Assessment Proceedings can’t be done if no incriminating material seized at time search

The Hon’ble Orissa High Court (“Orissa HC”) in the matter of Smt. Smrutisudha Nayak v. Union of India and Others [W.P. (C) Nos. 10587 OF 2009 dated October 27, 2021], held that assessment proceedings

Nov-24-2021

Read More

Guarantee commission not ‘Levy’ for the purposes of disallowance under Section 40(a)(iib) of the IT Act

In M/s. Krishna Bhagya Jala Nigam Ltd. v. Assistant Commissioner of Income Tax, Bangalore [ITA 3064 /BANG/2018, decided on November 10, 2021], Hon’ble Income Tax Appellate Tribunal, Bangalore (“ITAT”)

Nov-24-2021

Read More

Share Transfer with no consideration chargeable to Income Tax

In Shri Rajeev Ratanlal Tulshyan v. Income Tax Officer [I.T.A. No.5748/Mum/2017 & Cross Objection No. No.118/Mum/2018 AY 2014-2015 dated October 01, 2021], the Income Tax Appellate Tribunal (“ITAT”),

Nov-24-2021

Read More