Sumrit Impex Pvt. Ltd. Vs Assessment Unit (ITAT Delhi)
In Sumrit Impex Pvt. Ltd. vs Assessment Unit, the Income Tax Appellate Tribunal, Delhi Bench, adjudicated an appeal for Assessment Year 2022–23 against an order passed by the Commissioner of Income Tax (Appeals)/National Faceless Appeal Centre under Section 143(3) of the Income-tax Act, 1961.
The assessee initially raised a legal ground contending that the case, selected for limited scrutiny, had been incorrectly treated as a complete scrutiny by the lower authorities. The Tribunal rejected this contention after considering the Revenue’s report confirming that the case was indeed subject to complete scrutiny.
The primary issue concerned the classification of rental income amounting to ₹1,11,24,910. The assessee had declared this income under the head “Income from House Property” and claimed a 30% standard deduction. However, both the Assessing Officer and the CIT(A) treated the income as “business income,” thereby denying the deduction.
The Tribunal examined past assessments and noted that in Assessment Year 2012–13, similar rental income had been accepted as income from house property without any business income addition. The Revenue relied on judicial precedents to support classification as business income, arguing that the assessee’s activity was limited to leasing.
The Tribunal, however, found these arguments unpersuasive. It observed that in the cited case law, the assessees were engaged solely in leasing activities, whereas in the present case, the assessee had multiple business objects, including trading and export of fabrics and garments. Considering these facts, the Tribunal held that the rental income could not be treated as business income.
