Western Industrial Co-operative Estate Limited Vs DCIT (ITAT Mumbai)
Rental from Administrative Building Is House Property Income; Rule of Consistency Applies: ITAT Mumbai Grants Major Relief to Co-operative Estate
Mumbai ITAT allowed substantial relief to the Assessee-society by reversing multiple additions and restoring certain issues for fresh examination.
The Assessee, a co-operative society allotted land by MIDC, earned substantial rental income from sub-letting its administrative building on leave & licence basis. Though such income had consistently been assessed as “Income from House Property” in earlier years, the AO, for the year under appeal, assessed it as “Income from Other Sources”, thereby denying standard deduction u/s 24(a), disallowing sub-letting charges paid to MIDC and interest on borrowed capital.
The Tribunal held that there was no change in facts or nature of activity, and applying the rule of consistency (as recognised by the Supreme Court), directed that rental income be assessed under Income from House Property. Consequently, the Assessee became entitled to 30% standard deduction u/s 24(a), deduction of sub-letting charges paid to MIDC, and interest on borrowed capital u/s 24(b), subject to verification.
On the issue of testing charges / miscellaneous income, where expenses of ₹31.78 lakh were disallowed without proper examination, the ITAT restored the matter to the AO for fresh verification after granting due opportunity.
With respect to deduction u/s 80P, the Tribunal noted that neither the AO nor the CIT(A) properly examined the nature of storage charges and the identity of members from whom such charges were received. Accordingly, the issue was remanded to the AO to re-examine eligibility under section 80P in accordance with law.
The rectification appeal u/s 154 relating to standard deduction was held to be infructuous, as the main appeal itself was decided in favour of the Assessee.
Overall, the ITAT reaffirmed that head of income cannot be arbitrarily changed, consistency must be maintained, and mechanical disallowances without factual verification cannot survive appellate scrutiny.
FULL TEXT OF THE ORDER OF ITAT MUMBAI
