ITAT: Sub-Lease Property Rental Income Will Be Treated as Assessee Biz Income

The Chennai bench of the Income Tax Appellate Tribunal (ITAT) ruled that the rental income obtained via sub-leasing of the property comes under the income of business of the taxpayer as this comes under the business of the taxpayer’s organization.

Prior to that, the assessing officer treated the lease rental income earned through the taxpayer as the income from house property towards the business income provided through the taxpayer.

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The bench includes Vice-President Mahavir Singh and Accountant Member Manoj Kumar Agarwal who seems that the property beneath the recognition was availed through the taxpayer upon the long-term grounds and this was subleased to several tenants.

Bench mentioned that “The income thus earned was offered as ‘business income’. The main object of sub-leasing was to exploit the property in a business-like manner and earn the rental income therefrom. It is also evident that the assessee and his associated entities had a business interest in real estate development. As held by the Hon’ble Supreme Court in the case of Raj Dadarkar & Associates V/s ACIT, there may be instances where a particular income may appear to fall in more than one head. On the facts of a particular case, income has to be either treated as income from the house property or as the business income,”

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Favoring to the taxpayer the bench specified that “in the present case, the appellant is held to be “deemed owner” of the property in question by virtue of Section 27(iiib) of the Act. On the other hand, under certain circumstances, where the income may have been derived from letting out of the premises, it can still be treated as business income if letting out of the premises itself is the business of the assessee. As held in Sultan Bros.(P) Ltd. v. CIT [1964] 51 ITR 353 (SC), 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. It is to be seen as to whether the activity in question was in the nature of business by which it could be said that income received by the appellant was to be treated as income from the business.”