Rent to be charged as ‘Income from other sources’ if not chargeable to income tax as profit and gains of business or profession

Major source of income credited by the assessee company in the profit and loss account is “Other Income” of Rs. 3,00,000/- and Rent of Rs. 1,49,000/-. The assessee had not carried out any business activity in the current year nor the assessee has produced any evidences in support of its argument that it has actively pursuing its business activity. The profit and loss account reveals that the assessee credited Rs. 4,49,000/- as above and claimed expenditure of Rs. 5,24,298/- being administrative exp and depreciation.

During the year the assessee has not carried out any business activity. From the above facts also, it is clear that the assessee doe not have the where withal to run its business and has conclusively terminated its business activity. It may be mentioned that section 56 of the I.T.Act, has envisaged in sub-section 1 and 2 the kind of income to be taken under the head income from other sources. The said section in unequivocal terms makes it clear that income from rent ought to be charged under the head “Income from other sources” if such income is not chargeable to income tax under head profit and gains of business or profession. Section 57 elaborates the deduction available to the assessee. In the instant case, the assessee has credited rent income and miscellaneous charges.

The immediate sources of income of the assessee is mainly from rent receipt. It can therefore be classified as “income from other sources” and not income from “business”, since the assessee has not carried out any business during the year. Thus, the income credited to the P&L account is treated as ‘Income from other sources”.

 INCOME TAX APPELLATE TRIBUNAL, MUMBAI

ITA No. 1599/Mum/2011

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