H&M Housing Finance and Leasing Private Limited Vs DCIT (ITAT Mumbai)
AO Can’t Reclassify Rent as Business Income- Consistency Rule Applied – ITAT Mumbai Deletes Business Head Taxing of Rent
Facts: Assessee, a leasing & finance company, owned a commercial property (Raheja Woods, Pune) let out to HSBC Software Development Pvt. Ltd. under a long-term lease (2015–2024). Rental income of ₹10.62 Cr was offered as Income from House Property with deduction u/s 24. AO taxed it as Business Income, applying SC ruling in Chennai Properties & Investments Ltd., thereby denying deduction u/s 24. CIT(A) upheld AO’s action.
Assessee’s Contentions
- Rental consistently assessed as House Property income in earlier years since AY 2005-06 & also in later years till AY 2023-24.
- Apart from rentals, assessee also earned interest & investment income; unlike Chennai Properties, letting out was not sole business.
- Relied on SC in East India Housing, Raj Dadarkar & Associates & principle of consistency laid down in Radhasoami Satsang.
- Urged that Revenue cannot take a different stand in one year without any fresh facts.
Tribunal’s Observations/Decision
- Except for AY 2017-18, Department always accepted rental as House Property income.
- No change in facts or lease terms in impugned year.
- Principle of consistency squarely applies – once a fundamental aspect is settled, it should not be disturbed unless fresh facts emerge.
- Chennai Properties distinguished – in that case, letting was sole object; here assessee had multiple sources of income.
- Relied on Bombay HC in Banzai Estates Pvt. Ltd. (2024), clarifying that rental from owned property remains House Property income even for companies engaged in leasing business.
- ITAT directed AO to assess rental income of ₹10.62 Cr under House Property u/s 22 & allow statutory deduction u/s 24.
- Appeal of Assessee allowed in full.
Rental income from owned property is taxable under House Property, not Business, unless facts show otherwise. Once consistently accepted across years, Revenue cannot alter its stand arbitrarily in one year.
