2010 (8) TMI 1035 - AT - Income Tax

Tribunal classifies terrace rent as 'income from house property', allowing deduction under IT Act

Matru Ashish Co-operative Housing Society Ltd. Versus Income-tax Officer

The Tribunal ruled in favor of the cooperative housing society, determining that the income from letting out the terrace area should be classified as ... Correct head of income - rent received for allowing the use of terrace area - 'Income from Other Sources' or 'Income from House Property' - assessee has shown an amount as rent received from Reliance Telecom and after deducting an amount being deduction u/s. 24(a) @ 30 per cent from the above amount and as shown an amount as income from house property. HELD THAT:- As relying on S. SOHAN SINGH. VERSUS INCOME TAX OFFICER. [1985 (11) TMI 90 - ITAT DELHI-C] we are of the view that the letting out of the terrace has to be assessed under the head income from house property subject to deduction u/s 24 as against income from other sources assessed by the AO. We hold and order accordingly. The ground taken by the assessee is, therefore, allowed. Issues:1. Classification of rent received for terrace area.2. Treatment of expenses under section 24(a) of the IT Act.3. Appeal against the order of the CIT(A).Issue 1: Classification of rent received for terrace areaThe appeal was against the order passed by the CIT(A) for the assessment year 2004-05. The assessee, a cooperative housing society, declared an income of Rs. 6,53,990, including rent received from Reliance Telecom. The AO treated the rent as income from other sources, disallowing a deduction under section 24(a) of the IT Act. The assessee argued that the rent was for allowing the use of the terrace area and should be taxed as income from house property. The Tribunal referred to previous decisions and held that income derived from letting out the terrace should be considered as 'income from house property' and not 'income from other sources'. The Tribunal allowed the deduction under section 24 of the Act, contrary to the AO's treatment. The appeal was allowed in favor of the assessee based on this classification.Issue 2: Treatment of expenses under section 24(a) of the IT ActThe AO disallowed a deduction of Rs. 1.65 lakhs under section 24(a) of the IT Act, which was challenged by the assessee in the appeal. The Tribunal, following previous decisions, held that the deduction should be allowed as the income from letting out the terrace area should be assessed as income from house property. The Tribunal emphasized the consistency in its decisions and allowed the deduction provided under section 24 of the Act. Consequently, the grounds taken by the assessee were allowed, leading to the allowance of the appeal.Issue 3: Appeal against the order of the CIT(A)The assessee appealed against the CIT(A)'s order confirming the classification of rent received for the terrace area as 'income from other sources' instead of 'income from house property'. The learned Departmental Representative supported the orders of the AO and CIT(A). However, the Tribunal, after considering the legal issues and previous decisions, ruled in favor of the assessee and allowed the appeal. The Tribunal's decision was based on the classification of income from letting out the terrace area as 'income from house property' and the allowance of deductions under section 24 of the IT Act. Consequently, the assessee's appeal was allowed, overturning the CIT(A)'s decision.Overall, the Tribunal held that the income derived from letting out the terrace area should be assessed as 'income from house property' and allowed the deduction under section 24 of the IT Act. The appeal was allowed in favor of the assessee, setting aside the CIT(A)'s order.