Revenue's appeal dismissed for low tax effect, assessee's Cross Objection maintained. Rental income ruled 'Income from other sources.'

The ITAT dismissed the Revenue's appeal due to low tax effect and upheld the maintainability of the assessee's Cross Objection. The ITAT ruled in favor of treating the rental income as 'Income from other sources,' in line with statutory provisions, rejecting arguments for consistency in past assessments.

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Issues:
1. Maintainability of Revenue's appeal before ITAT due to low tax effect.
2. Maintainability of Cross Objection (CO) by the assessee in response to Revenue's appeal.

Issue 1: Maintainability of Revenue's Appeal:
The Revenue appealed before ITAT challenging an order related to the assessment year 2010-11. The Revenue argued that the tax effect involved in the appeal was less than the prescribed limit of Rs. 10,00,000, as per Circular No. 21 of 2015. The ITAT noted that the Circular directed the Revenue to withdraw appeals with tax effect below the limit. Consequently, the ITAT dismissed the Revenue's appeal without delving into the case's merits, as the tax effect was below the threshold.

Issue 2: Maintainability of Cross Objection by the Assessee:
The assessee filed a Cross Objection in response to the Revenue's appeal, challenging the treatment of rental income under a different head. The ITAT analyzed the provision of section 253(4), which allows the respondent to file a CO against any part of the CIT(A)'s order, irrespective of the appealing party's issues. The ITAT clarified that a CO could address issues beyond those raised by the appealing party. The ITAT emphasized that a CO should not be dismissed solely due to the Revenue's appeal's low tax effect. The CO's maintainability was upheld, considering the assessee's right to appeal.

The CO focused on disputing the classification of rental income from a property as 'Income from other sources' instead of 'Income from house property.' The ITAT examined relevant sections of the Income Tax Act, emphasizing the distinction between income from property and inseparable letting of property with other assets. Citing a Supreme Court decision, the ITAT concluded that the combined rental income from inseparable letting should be taxed under 'Income from other sources.' The argument for consistency in previous assessments was rejected, as statutory provisions prevailed over past practices. Ultimately, the ITAT upheld the CIT(A)'s decision to treat the lease rental income as 'Income from other sources.'

In conclusion, the ITAT dismissed the Revenue's appeal due to low tax effect and upheld the maintainability of the assessee's Cross Objection. The ITAT ruled in favor of treating the rental income as 'Income from other sources,' in line with statutory provisions, rejecting arguments for consistency in past assessments.

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