Without change in facts, situation or law, Revenue can not take different stand. Rent taken as house property income not business

In case there is no change in the facts, situation or in law, the Revenue cannot be allowed to adopt a different stand. Rental income is treated as income from house property and not income from profession or profession.

Case Details:

INCOME TAX APPELLATE TRIBUNAL DELHI BENCH “A”

Asstt. Commissioner of Income Tax vs. M/s Atria Partners

I.T.A. No. 2490/DEL/2012 AY: 2008-09

Brief Facts of the Case:

The assessee was a partnership firm consisting of of two corporate members and one trust of DLF Group. During the year under consideration it had disclosed income from house property of Rs. 104,887,980/- and claimed deduction u/s. 24(1) of 30% thereof amounting to Rs. 3,14,66,394/-. The building under question was brought in the partnership firm as partner contribution by DLF group trust.

The Assessing Officer held that as per the balance sheet, the building was valued on Rs. 20.24 crores on which rent of Rs. 10.48 crores was shown as rent. AO found the rent amount highly disproportionate to the value of the property. According to AO, such high income could not be categorized as rent and the assessee’s action was malafide in showing the business income as rental income. Accordingly, he held the rental income as business income and disallowed the claim of u/s. 24(1).

However, CIT(A) observed that rental income needs to be taxed as income from house property whether such rental income is high or low. Aggrieved with CIT(A) order Revenue took the matter to ITAT

Contention of the Assessee:

The assessee contended that  the provisions of section 22 & 23 of the Income Tax Act, 1961 do not make any distinction between commercial property or other property. He further submitted that the AO’s presumption that rental income was very high was no reason to treat it as business income. He further submitted that the above position of the assessee had been accepted by the Revenue in earlier assessment years in scrutiny assessment, therefore there was no change in the facts and circumstances of the case to warrant any change in the stand.  The assessee also submitted that if the rental income was treated as income from house property and profession, then assessee would be entitled to depreciation.

Contentions of the Revenue:

The Revenue argued that there is no concept of res judicata in the Income Tax proceedings.It was also claimed that assessee itself had accepted the property as commercial, hence, the income cannot be treated as income from house property.

Important Excerpts from ITAT Judgment:

In this regard, we place reliance upon the Hon’ble Jurisdictional High Court in the case of CIT vs. Dalmia Promoters Developers (P) Ltd. 281 ITR 346, wherein it was has held that for rejecting the view taken in earlier assessment years, there must be material change in the fact, situation or in law. We find that in this case there is no change in the facts, situation or in law. Hence, the Revenue cannot be allowed to adopt a different stand. This is also reiterated by the Hon’ble Apex Court decision in CIT vs. Excel Industries Ltd. in Civil Appeal No. 125 of 2013  vide order dated08.10.2013. In this case, it was held that when in earlier asstt. years the revenue accepted the order of the Tribunal in favour of the assessee, then Revenue cannot be allowed to flip flop on the issue and it ought let the matter rest rather than spend the tax payers money in pursuing litigation for the sake of it.

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