Rental income received from letting out of building along with furniture, fixtures, etc., would be taxable under the head ‘Income from other sources’
Delhi Tribunal in the case of Active Securities Ltd v. ITO (ITA . 4199/Del/2014 & 2335/Del/2016, Assessment Years: 2010-11 & 2012-13) has held that rental income received from letting out of building along with furniture, fixtures, etc., would be taxable under the head ‘Income from other sources’ and accordingly, depreciation would be allowable as expense in terms of provisions of section 57(iii) of the Act.
While arriving at above decision, the Hon’ble bench relied on the following decisions:
~ Jay Metal Industries (P) Ltd. vs. CIT: 396 ITR 194
~ Garg Dyeing & Processing Industries vs. ACIT: ITA 319/2012 (Del)
~ Oriental Building & Furnishing Co. Ltd. vs. DCIT: 53 ITD 198 (Del Trib.)
~ Serendipity Apparels (P.) Ltd. vs. ITO: 78 Taxmann.Com 154 (Ahmedabad – Trib.)
~ M.M. Creations v ACIT: 165 ITD 534 (Delhi – Trib.)
It is further held that where primary object of letting out of property with other amenities is exploitation of a commercial asset, lease rental received is not taxable under the head of income from house property. For this, the court relied on the following decisions:
~ Karanpura Development Co. Ltd. vs. CIT: 44 ITR 362
~ CIT vs. Velankani Information Systems (P.) Ltd.: 265 CTR 250 (Kar)
~ CIT vs. Mohiddin Hotels P. Ltd. & Ors.: 284 ITR 229 (Bom)
~ CIT vs. Goel Brothers: 331 ITR 344 (All)
~ PCIT vs. M/s Krome Planet Interiors Pvt. Ltd.: ITA No. 282 of 2017 (Bom)
~ CIT vs. M/s Oberon Edifices & Estates (P) Ltd.: ITA No. 166 of 2016 (Ker)
~ Pr. CIT vs. M/s Krome Planet Interiors Pvt. Ltd.: ITA No. 282/2017 (Bom)
~ CIT vs. M/s Oberon Edifices & Estates (P) Ltd.: ITA No. 166/2016 (Ker)
~ M.M. Creations vs. ACIT: 165 ITD 534 (Del Trib)
~ M.S. Luvish Projects (P.) Ltd. vs. DCIT: 175 TTJ 153 (Mum Trib)
~ DCIT vs. Magarpatta Township Development & Construction Co.: 150 TTJ 590 (Pun)
~ ENN ZEN Enterprises (P.) Ltd. vs. ACIT: 45 ITRT) 382 (Chandigarh ITAT)
Relying on following decision, the court held that the intention of the lessor is of significance to determine the nature of rental income earned thereupon from such lease. Rental income earned from letting out of a property due to difficult market conditions and with no intention to close down the normal business operations, would be taxable as ‘business income’.
~ CIT v. Vikram Cotton Mills Ltd. (169 ITR 597) (SC)
~ Universal Plast Ltd. vs. CIT (237 ITR 454) (SC)
~ ITO vs. Skipper Properties (P.) Ltd. (118 TTJ 111)
~ CEPT v. Shri Lakshi Silk Mills Ltd 20 ITR 451 (SC)
~ Maltex Malsters Ltd. CIT 243 Taxman 581 (P&H)
~ Sri Hanuman Sugar & Industries Ltd. vs. CIT: 266 ITR 106 (Cal)
The copy of the order is as under:
