Business Income vs House Property Income

Hello Akshat

You have to consider rental income from shop as IFHP instead of categorizing under PGBP income. This is because your main business vertical is Textile and not rental income. Please also verify the same with Memorandum of your Company under object clause. All the best,

Show rental income under IFHP. [ Irrespective of your company status be it proprietory Firm Pvt Ltd ]

1. Since your main business is textile and renting income is incidental to the main object of the company, rent received from the shop should be shown under Income from house property. 
2. The above clarification was given in a case law Chennai Properties and Investments Vs CIT (2015) where the main object of the company as specified in the Memorandum of Association (MOA) should be considered for charging such income under PGBP or IHP. 
3. To add further if your MOA contains renting of property as one of its main objects (along with textile business) then the same should be charged under PGBP and not under IHP. 
4. Make sure to review your MOA before taking any decision. 
Please correct me if the above solution has an alternative view. 

Treatment of rent has been a common point of dispute between the income-tax department and taxpayers.

An assessee would prefer to show rent as business income, which allows her/him to deduct all the expenses incurred to maintain the properties, claim depreciation and don't need to show notional rent income when the property is not let out.

All this also means revenue loss for the Government.

The I-T department, therefore, scrutinises most of such cases in detail to dissuade taxpayers from claiming it as business income.

The disputes also occur as the I-T Act doesn't provide definite guidelines on the treatment of rent.