Case Law Details
ITO Vs M/s. United White Metal Ltd. (ITAT Mumbai)
We noticed that the rental income of the assessee was to the tune of Rs.2,16,00,000/- which has been shown as income from business. However, the AO declined the claim of the assessee on the basis of this fact that the no activity of business was going on, therefore, the said rental income was treated as income from house property and accordingly, the deduction u/s 24(a) and 23(1) of the Act was allowed and the remaining income in sum of Rs.1,19,73,405/- was treated as income from house property and accordingly taxed. Initially the business of the assessee was of the manufacturing of engineering goods/components/spares which was discontinued since many years ago. Thereafter, the assessee changed its business for development of real estate. The assessee converted its land into stock in trade w.e.f 07.08.2008. Schedule 8 on the balance-sheet shows Rs.109,94,65,193/- as inventory of property.
The assessee entered into the development agreement with Rajesh Real Estate Development P. Ltd. on 12.07.2010 for the development of the land. Earlier the assessee also agreed to alienate the larger portion of the land to Rajesh Estate and Nirman Limited by virtue of letter dated 20.12.2007. The assessee has also converted its land from industrial zone to residential use and necessary permission was also talen. All the activity speaks that the assessee was in the business activity. The assessee was maintaining the office and also the paying the salary to its employee and also incurring the other expenses such as travelling and other administrative expenses etc.
The assessee temporarily letting out the premises to Broker India P. Ltd. by virtue of leave and license agreement dated 17.04.2009. The property was given on leave and licence basis till the approval of the real estate project. The memorandum and Articles of Association permits letting and leasing of property which is the business of the appellant company. The CIT(A) has relied upon the case decided by Hon’ble Apex Court titled as Chennai Properties & Investment Ltd. V. CIT (2015) 277 CTR 0185 (SC).
It also came into notice that in the earlier assessment order u/s 143(3) of the Act, the revenue has accepted the rent as business income. The facts are not distinguishable at this stage also. There is no other distinguishable material on record to which it can be assumed that the income of the assessee on letting out the property falls within the purview of house property. Taking into account, all the facts and circumstances, we are of the view that the finding of the CIT(A) is quite correct and in accordance with law which is not liable to be interfere with at this appellate stage. Accordingly, these issues are being decided in favour of the assessee against the revenue.
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