Letting out of land independently which is part of business asset of assessee can be treated as income from business
Letting out of land independently which is part of business asset of assessee can be treated as income from business
Taxation of rental income as business income or house property income is a topic of litigation and disputes in numerous cases. Here is one more case on a similar line. The citation of the case is as under:
Trimurti Films Pvt Ltd
Vs
ACIT
ITA No. 5811/Mum/2018
Short Overview of the case:
1. The assessee-company was in business of production and distribution of hindi films.
2. It showed income from house property and income from business and profession.
3.The assessee declared receipts from hiring of studio under head ‘other income’ in books of account and brought the same to tax under head ‘income from house property’.
4. The assessee had filed a return of income for relevant AY.
5. The return was processed and the case was selected for scrutiny.
6. Accordingly notices u/s 143(2) and 142(1) were issued and served on the assessee.
7. The AO by following assessment orders passed for AY 2010- 11, 2011-12 and 2012-13 treated income from studio under the head ‘business income’ as against income from house property.
8. The CIT (A) upheld order of the AO dismissed appeal of the assessee.
As a result, the appeal was preferred by the assessee before ITAT.
On appeal, Tribunal on the issue as to whether letting out of land independently which is part of business asset of assessee can be treated as income from business held it in favour of the assessee with following noteworthy observation:
1. Assessee was using the bungalow and land together for the film production as part of business assets.
2. Since the film production has stopped, it has separated the bungalow and vacant land. It uses the bungalow for storage for its own purpose and leases the vacant land not on the regular basis but based on the requirement of the other production houses.
3. It leases only the vacant land which it was earlier utilized for its own business.
4. Just because it let out only the vacant land the type of assets will not change it will remain as business assets.
5. When the assessee let out not on regular but based on the requirement of the industry, it can only be treated as income from letting out business assets.
6. Land is separable from the bungalow to let out independently, thus the land can be treated as a separate asset and thus letting out of the land independently cannot be part of the income from these properties.
7. Letting out of the land independently which is part of the business asset of the assessee can be treated as income from business only.
