Case Law Details
DCIT Vs Cache Properties Pvt. Ltd. (ITAT Hyderabad)
Fact that the property let out is a commercial complex is not sufficient to treat the rental income therefrom as ‘Business Income’. The tests to be applied are; 1) the tenure of the lease, 2) the objects of the company; 3) the intention of the company; and 4) the services provided or activities carried on by the assessee after letting out of the property. Though one of the objects of the company is to let out the properties on lease / rent, it is not clear whether the intention is to earn rental income only from the properties constructed / developed by it. On perusal of the returns of income for earlier assessment years, we find that the assessee had let out properties at Hyderabad, Mumbai & Delhi, but the income from said properties is not offered during the relevant assessment year. So, whether such properties were let out since they were unsold during the relevant period and whether they were sold subsequently to which, there is no rental income during the relevant assessment year is not clear from the details filed before us. As held by the Hon’ble Bombay High Court in the case of Gundecha Builders (supra), rental income from unsold flats is to be assessed on ‘income from house property’. Further, as held by the Hon’ble Courts in cases cited supra, unless the assessee is carrying on a systematic and organized activity to exploit the property commercially, it cannot be taxed as business income. We find that except for creating the infrastructure as per the requirement of the lessee, the assessee is not providing any other service during the year as is evident from the profit and loss account of the assessee for the relevant assessment year. The only expenses claimed by the assessee are interest, salaries & administrative expenses. Therefore, it is clear that the assessee’s intention is to enjoy the rental income on a long term basis by leasing out the premises and not to exploit the same commercially on short term basis.
In view of the same, we are inclined to accept the contentions of the assessee that the rental income is to be assessed as ‘income from house property’ as offered by the assessee.
FULL TEXT OF THE ORDER OF ITAT HYDERABAD
These appeal filed by the Revenue are directed against CIT(A) – 1, Hyderabad’s separate orders for AY 2011-12 & 2013-14 involving proceedings u/s 143(3) rws 147 of the Income Tax Act, 1961 ; in short “the Act”. As the facts and grounds are identical in these appeals, they were clubbed and heard together and therefore a common order is passed for the sake of convenience.
Please become a Premium member. If you are already a Premium member, login here to access the full content.
