Rent of plot taxed as income from other sources in absence of proof of structure on it

ITAT upheld taxing rent of plot of land as income from other sources in the absence of proof of any structure thereon

In a recent judgment, ITAT upheld taxing of rent of plot of land as income from other sources as assessee could not prove that there existed any structure thereon

ABCAUS Case Law Citation:
ABCAUS 3962 (2024) (04) ITAT

In the instant case, the assessee had challenged the order passed by the Commissioner of Income-Tax (Appeals), NFAC in confirming the addition made by the Assessing Officer (AO) by disallowing 30% deduction of lease rent claimed u/s 24(1) of the Income Tax Act, 1961 (the Act).

The appellant assessee was an individual and was inter alia engaged in the business of running a petrol/diesel pump.

For the relevant Assessment Year, the case of assessee was subjected to scrutiny-assessment. The assessee had offered income u/s 22 as “Income from House Property” and claimed standard deduction of 30% and offered net taxable income.

During the assessment-proceeding, the AO observed that the assessee had received rent for open plot of land. Therefore, the AO assessed rental income u/s 56 as “Income from Other Sources” and disallowed standard deduction claimed by assessee.

Aggrieved, the assessee carried matter in first-appeal. Before the CIT(A) the assessee contended that the land under question had also some structure on it.

The CIT(A) observed that as per the lease agreement deed, the agreement was executed for a vacant land and there was no mention of any permanent structure on it. Hence the CIT(A) upheld the action of the AO with regard to disallowance of standard deduction on vacant plot of land.

Still aggrieved, the assessee took the appeal before the ITAT.

The Tribunal observed that both of the lower-authorities had made a concurrent finding that the assessee had received rent of plot of land. In fact the CIT(A) had given a much stronger finding by saying that he had perused the lease-agreement and it was seen that the lease-agreement was executed for a vacant land.

The Tribunal further noted that the assessee had not filed rent-agreement but merely stated that the assessee had given the piece of land with some structure.

The Tribunal opined that the claim of assessee was quite vague. Further, there was no evidence from assessee’s side to substantiate that there existed any structure in the nature of “building” so that the case of assessee can fall u/s 22 justifying taxability under the head “Income from House Property”.

The Tribunal agreed with the lower-authorities’ observation that the rent was relatable to land and taxable as “Income from Other Sources”. Consequently, the standard deduction claimed by assessee @ 30% of rent u/s 24(1) was rightly disallowed by lower-authorities.

Accordingly, the Tribunal upheld the disallowance and dismissed the ground of appeal.

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