Tribunal Upholds Rental Income Assessment for Property Without Services

The Tribunal upheld the assessment of rental income under "Income from House Property" for premises without additional services or infrastructure provided. Additionally, the Tribunal adjusted the notional value for the upper floors of the property based on various considerations, resulting in a revised assessment for the income derived from those floors.

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Issues:
1. Assessment of rental value under "Income from House Property" instead of "Business Income"
2. Determination of notional value for upper floors of the property let out to a partner

Issue 1: Assessment of rental value under "Income from House Property" instead of "Business Income"

The appellant contested the CIT(A)'s decision to tax the rental income from letting out parts of the property under the head "Income from House Property" instead of "Business Income." The appellant argued that the rental income should be considered as "Business Income" as it was earned from letting out premises along with furniture and fixtures. The lease agreement with the lessee mentioned a rent inclusive of certain facilities provided by the lessor. However, the department contended that no evidence was presented to prove the provision of additional services or assets beyond the premises. The Tribunal upheld the department's decision, stating that in the absence of evidence of business infrastructure or services provided, the rental income was rightly taxed under "Income from House Property."

Issue 2: Determination of notional value for upper floors of the property let out to a partner

The second issue involved the determination of the notional value for the upper floors of the property let out to a partner, which was assessed as "Income from House Property." The appellant argued that the second to fifth floors were not suitable for commercial use due to their condition and size, and the rent charged was significantly lower compared to the lower floors. The AO estimated the notional rent based on a percentage deduction from the lower floors. The Tribunal found discrepancies in the rent charged to related and unrelated parties for different parts of the property. After considering various factors, including the condition of the floors and the deposit made by the partner without interest, the Tribunal determined a lower rental value for the upper floors, resulting in a revised assessment. The Tribunal partially allowed the appeal on this issue.

In conclusion, the Tribunal upheld the assessment of rental income under "Income from House Property" for the premises without additional services or infrastructure provided. Additionally, the Tribunal adjusted the notional value for the upper floors of the property based on various considerations, resulting in a revised assessment for the income derived from those floors.

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