TaxTMI 
TaxTMI 
2022 (8) TMI 1136
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....-15 on 26.09.2014 declaring NIL income and claiming refund of Rs.1,96,140/-. The return was processed under Section 143(1) of the Income Tax Act (for short 'Act') and later the case was selected for scrutiny. The Assessing Officer ('A.O.') assessed the income of the assessee under Section 143(3) of the Act at Rs.1,34,832/- after making two additions: (1) Rs.34,832/- under Section 40(a)(ia) of the Act and (2) Rs.1,00,000/- out of expenses debited to the tune of Rs.9,48,281/- in the P & L Account under the heads of Telephone and vehicle expenses by observing element of personal usage. The assessee had been engaged in the business of renting of immovable properties and the A.O. allowed income received from letting out of shops as business income. Later on, the Revenue Audit Party has raised an objection that income derived from letting out of the shops is not business income but income from house property. 4. Thereafter, the Principal Commissioner of Income Tax (in short 'Pr. CIT') exercised its revisionary powers under Section 263 of the Act and observed that the assessment order dated 16.09.2016 was not only erroneous but also prejudicial to the interest of Revenue by making foll....
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....2005-06 till date. He further pointed out that no ancillary services were rendered by the assessee to its tenants and it had let out the premises on monthly lease rent right from the beginning of the acquisition or purchase and the AO had not verified the lease deeds executed by the assessee. The Pr. CIT observed that it was categorically specified in the lease deed that the lesser (the assessee) shall at its own cost keep the demised premises in substantial repair and tenable condition, it shall carry out major, heavy and/or structure repairs and keep the demised premises both exterior and interior in good orders whereas, all minor repairs of interiors is the responsibility of the tenant or lessee and that the penalty was provided on lessee in case the lease rent was not paid on time. The statutory dues and other charges including municipal taxes, service tax, property tax, water and electricity charges etc. as per actual basis, were to be borne/paid by the lessee or tenant only and that the lease agreement was renewed after the expiry of lease period on fresh terms and conditions mutually agreed upon by both the parties. Therefore, merely because the MOA of the assessee ....
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.... the Income Tax Act, 1961 has to be read in conjunction with the expression "erroneous" order passed by the Assessing Officer. Every loss of Revenue as a consequence of an order by the Assessing Officer cannot be treated as prejudicial to interests of the Revenue. For example, when the Assessing Officer adopts one or two causes permissible in law and it has resulted in loss of Revenue or where two views are possible and the Assessing Officer has taken one view with which the Commissioner does not agree, it can not be treated as an erroneous order prejudicial to the Revenue, unless the view taken by the Assessing Officer is unsustainable in law". (iii) The ITAT further held that by considering the rental income received by the assessee as "business income" which was consistently claimed by the assessee in the preceding years also and the department had accepted the same, the assessment order passed by the A.O. was not prejudicial to the interest of the Revenue, particularly when the loss would have been more than Rs.7,70,160.40 instead of Rs.3,89,226/-, if the rental income as to be considered as "income from house property", instead of "business income" as declared by the ....
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....ited, Chennai vs. Commissioner of Income Tax Central III, Tamilnadu (2015) 14 SCC 793 held that where the assessee is a company whose main object of business is to acquire properties and to let out properties, the rental income received therefrom was taxable as "income from business" and not "income from house property". 13. This view was taken after following the ratio of the judgment of the Constitution Bench of the Hon'ble Supreme Court in Sultan Brothers (P) Ltd. vs. Commissioner of Income Tax AIR 1964 SC 1389: (1964) 5 SCR 807, wherein it was held that each case has to be looked at from businessman's point of view to find out whether the letting was doing of a business or the exploitation of the property by the owner. It shall be apposite to reproduce the relevant observations made in Chennai Properties's case (supra) which read as under:- "9. Before we refer to the Constitution Bench judgment in the case of Sultan Brothers (P) Ltd. v. CIT, AIR 1964 SC 1389, we would be well advised to discuss the law laid down authoritatively and succinctly by this Court in 'Karanpura Development Co. Ltd. v. Commissioner of Income Tax, West Bengal (1962)44 ITR 362 (SC). That w....
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.... to the facts, which were there before the Court, it came to the conclusion that income had to be treated as income from business and not as income from house property. We are of the opinion that the aforesaid judgment in Karanpura Development Co. Ltd.'s case squarely applies to the facts of the present case. 11. No doubt in Sultan Brothers (P) Ltd.'s case, Constitution Bench judgment of this Court has clarified that merely an entry in the object clause showing a particular object would not be the determinative factor to arrive at an conclusion whether the income is to be treated as income from business and such a question would depend upon the circumstances of each case, viz., whether a particular business is letting or not. This is so stated in the following words: (AIR p. 1391, para 7) "7....We think each case has to be looked at from a businessman's point of view to find out whether the letting was the doing of a business or the exploitation of his property by an owner. We do not further think that a thing can by its very nature be a commercial asset. A commercial asset is only an asset used in a business and nothing else, and business may be carried on ....
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....y covers the facts of the case involved in the appeals. The business of the company is to lease its property and to earn rent and therefore, the income so earned should be treated as its business income. 12. In view of the law laid down by this Court in the case of Chennai Properties (supra) and looking at the facts of these appeals, in our opinion, the High court was not correct while deciding that the income of the assessee should be treated as Income from House Property." 15. Similarly, in Raj Dadarkar and Associates vs. ACIT, CC-46 (2017) 14 SCC 476, the legal position was reiterated in the following manners:- "17. There may be instances where a particular income may appear to fall in more than one head. These kind of cases of overlapping have frequently arisen under the two heads with which we are concerned in the instant case as well, namely, income from the house property on the one hand and profits and gains from business on the other hand. On the facts of a particular case, income has to be either treated as income from the house property or as the business income. Tests which are to be applied for determining the real nature of income are laid down in....