If renting out is the business of the assessee, it could be regarded as a business income: ITAT 

Shri Shanthilal Movji Bhai Thakker v. The Income Tax Officer [ITA No. 2267-2270/Chny/2019]

Short Overview of the Case:

1. Appellant has acquired the property in question by virtue of lease of 27 years i.e. for a long term basis and is sub-leased to various tenants.

2. Appellant and his associated entities were in business of real estate development and the property in question was sub-leased in furtherance of their business i.e., to earn the rental income from the tenants.

3. The AO had passed the order treating lease rental income earned by the Appellant as income from House Property as against Business Income offered by the Appellant

ITAT held as below:

The rental income from sub-lease shall be considered as business income as the assesee was engaged in business of real estate development and the property in question was sub-leased in furtherance of their business.

ITAT relied upon the following judgements:

1. Hon’ble Supreme Court in case of Raj Dadarkar & Associates v. ACIT [81 Taxmann. com 193] held that in cases where a particular income may appear to fall under more than one head, income has to be either treated as income from the house property or as the business income.

2. Further Hon’ble SC held in the case of Sultan Bros.(P) Ltd. v. CIT [1964, 51 ITR 353 (SC)], that the type of income depends upon the fact whether the sub-letting was done as exploitation of the property by owner or was done by the owner in furtherance of business.

3. In M/s Chennai Properties & Investment Pvt. Ltd. V/s CIT (373 ITR 673), the entire income of the assessee was through letting out of the properties it owned and there was no other income of the assessee except the income from letting out of the said properties, which was the business of the assessee. Accordingly, the claim of the assessee as business income was accepted by Hon’ble Apex Court in Chennai Properties & Investments Ltd. (supra).