Rental income from subletting will be treated as business income since it was the appraiser’s business: ITAT


The Chennai Bench of the Income Tax Appeal Tribunal (ITAT) ruled that rental income received through the subletting of the property should be treated as business income of the appraised, because the same is true of the appraised company.

Previously, the appraisal agent treated rental rental income earned by the appraiser as “home ownership income” versus “business income” offered by the appraiser.

The tribunal panel, made up of ITAT vice-president Mahavir Singh and accountant member Manoj Kumar Agarwal, concluded that the property under consideration was obtained by appraised on the basis of a long-term lease and that it had been sublet to various tenants.

“The income thus earned was offered as ‘business income’. The main purpose of the subletting was to operate the property for commercial purposes and to derive rental income from it. It is also evident that the appraised and its associated entities had a commercial interest in the real estate development. As the Honorable Supreme Court held in Raj Dadarkar & Associates V / s ACIT (81 193), there may be instances where a particular income may appear to fall into more than one count. Depending on the facts of a particular case, the income should be treated either as home ownership income or as business income, ”the judiciary said.

Ruling in favor of the appraised, the Tribunal ruled that “in this case, the appellant is considered to be the“ deemed owner ”of the property in question under section 27 (iiib) of the Act. On the other hand, in certain circumstances, where the income can be derived from the rental of the premises, it can still be treated as business income if the rental of the premises itself is the business of the appraised. As decided in Sultan Bros. (P) Ltd. vs. CIT [1964] 51 ITR 353 (CS), each case must be considered from an entrepreneur’s perspective as to whether the rental was the operation of a business or the operation of his property by an owner. The question is whether the activity in question was of a commercial nature, which makes it possible to say that the income received by the appellant should be treated as business income.

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