PCIT Vs Ropar District Coop. Milk Producers Union Limited (Punjab and Haryana High Court)
The Principal Commissioner of Income Tax (PCIT) appealed against the Income Tax Appellate Tribunal (ITAT) order that had set aside the PCIT’s order passed under Section 263 of the Income Tax Act, 1961. The PCIT had held that the Assessing Officer’s assessment order dated 19.02.2021 was erroneous and prejudicial to the interests of the Revenue as it allowed deduction under Section 24(a) at 30% of the annual rental value of three booths taken on lease by the assessee from the Municipal Corporation, Chandigarh, treating the rental receipts as income from house property. The Revenue argued that the ITAT wrongly relied on its earlier decisions for previous assessment years, that earlier High Court appeals had been dismissed only on account of low tax effect and therefore were not precedents, and that the Assessing Officer had not conducted any enquiry regarding the deduction claimed under Section 24(a). The High Court observed that the ITAT had independently examined the PCIT’s order and found that Section 263 could not be invoked merely on account of a change of opinion. It noted that the PCIT’s own order recorded that the Assessing Officer had carried out investigation and enquiry, though it was described as unsatisfactory, superficial and incomplete. The Court held that this itself showed that enquiry had been conducted and, therefore, the assessment order could not be treated as erroneous on the ground of lack of enquiry. On the deduction under Section 24(a), the Court held that the PCIT erred in concluding that a lessee using property for business purposes could not be treated as owner for claiming income from house property. Referring to Sections 22 to 26 of the Act, the Court held that where the assessee had obtained the three booths on lease and sub-let them for running milk booths while receiving rent, the income was received from the property and could not be treated as income from other sources. The Court agreed with the earlier ITAT view that such rental income was eligible for deduction under Section 24(a). It also noted the subsequent legislative clarification in Section 27(iii), which deems certain allottees or lessees to be owners for the purposes of Sections 22 to 26. Finding no reason to interfere with the ITAT’s order, the High Court dismissed the appeal.
