Hind Ceramics Private Limited Vs DCIT (ITAT Kolkata)
Lease Rental Is House Property Income; 30% Deduction Allowed—Speculation Addition on Flat Rights Also Deleted
The Assessee appealed against NFAC order dated 30.01.2024 wherein two major issues were decided against it—(i) treating lease rentals from its warehousing complex as business income instead of house property income, thereby denying the 30% deduction u/s 24(a), and (ii) treating profit on assignment of flat-booking rights as speculative income u/s 43(5).
Lease Rental Issue: Income from House Property
As seen from the order, the Assessee received gross lease rentals of ₹3.16 crore from occupants of its warehousing complex at Nilganj Road, Belghoria, paid lease rent of ₹28.49 lakh, and declared net rental income of ₹2.88 crore under “House Property”, claiming 30% standard deduction of ₹83,38,635.
AO reclassified the income as “Business Income” solely on the basis that the company’s MoA permitted property development activities, resulting in denial of the 30% deduction. CIT(A)/NFAC upheld this view.
Tribunal examined assessments of preceding and succeeding assessment years, all of which consistently accepted the rental income under the head house property. As facts remained identical, the Revenue could not take a different stand for a single year. Tribunal relied on the Supreme Court ruling in Radhasoami Satsang (193 ITR 321) for consistency of approach.
Finding: Lease rental must be assessed as House Property Income, and 30% deduction u/s 24(1) must be allowed.
Speculation Addition on Assignment of Flat-Booking Rights
The second dispute related to the AO treating ₹86,24,540 as speculative income u/s 43(5) on the ground that the Assessee assigned booking rights in flats without actual delivery. The Assessee had originally advanced funds to Forum Rivera Constructions Pvt. Ltd. and later assigned its contractual rights to multiple parties, receiving ₹3.42 crore.
CIT(A) upheld AO’s view.
Tribunal held that Section 43(5) applies only to contracts in commodities, stocks & shares, not to assignment of rights in immovable property. Relying on CIT Vs Tata Services Ltd (122 ITR 594, Bom), Tribunal held that a right to obtain conveyance of property is a capital asset; assignment of such right is a transfer, giving rise to capital gains, not speculation.
Accordingly, AO’s and CIT(A)’s orders were reversed and the addition deleted.
Result
