Court reclassifies rental income from unsold flats as "income from house property" over "profits and gains from business."

The court allowed the appeals, ruling that rental income from unsold flats should be classified as "income from house property" based on established legal precedents. The Tribunal's classification under "profits and gains from business and profession" was deemed incorrect, as previous decisions and the nature of actual rent receipts supported consistent treatment. The court emphasized adherence to precedent and upheld the appellant's position, setting aside the Tribunal's order.

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Issues:
Classification of rental income from unsold flats as business income or income from house property.

Analysis:
The appeals were filed under Section 260A of the Income Tax Act, 1961, challenging the order of the Income Tax Appellate Tribunal regarding the classification of rental income derived from unsold flats. The Tribunal had disposed of three appeals related to different assessment years, where the issue was whether the rental income should be categorized under "profits and gains from business and profession" or "income from house property."

The Tribunal held that the rental income falls under "profits and gains from business and profession," contrary to the appellant's argument that it should be considered as "income from house property." The decision in the case of CIT v Ansal Housing Finance & Leasing Co. Ltd. was cited, which was subsequently followed in other cases, establishing a precedent. The court noted that the issue was settled based on previous decisions, and the Tribunal's classification was incorrect.

The respondent argued that the previous decision was based on deemed rent, while the current case involved actual rent received for flats. However, the court referenced other cases where the issue was related to actual rent receipts, not deemed rent, indicating that the classification should remain consistent. Therefore, the court ruled that the rental income should be assessed under the head of "income from house property" and not as "profits and gains from business and profession."

In conclusion, the court allowed the appeals, holding that the rental income from unsold flats should be treated as "income from house property" based on established legal precedents. The plea of consistency raised by the appellant was not examined as it was deemed unnecessary given the court's decision on the classification of income.

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