Is income from letting out of office premises taxable under PGBP or income from house property?

This Income Tax Appellate Tribunal case examines whether income from letting out office premises should be taxed under 'Profits and Gains of Business or Profession' (PGBP) or 'Income from House Property'. The assessee argued that letting out property was an isolated activity and not part of their core business. The Tribunal partly allowed the appeal, restoring the issue to the Assessing Officer for a fresh decision.

IN THE INCOME TAX APPELLATE TRIBUNAL “H” BENCH, MUMBAI
BEFORE SHRI AMARJIT SINGH, JM AND SHRI MANOJ KUMAR AGGARWAL, AM

I.T.A. No. 591/Mum/2020

Assessment Year: 2016-17

Hind Musafir Agency Ltd.
39th Floor, Sunshine Tower, Senapati Bapat Marg, Dadar (W), Mumbai-400013.

vs

ACIT-2(1)(2)
Aayakar Bhavan, Maharishi Karve Road, Mumbai-400020.

Assessee by: Shri Parth Achwal (AR)
Revenue by: Shri Gurbinder Singh (DR)

Date of Hearing: 14/07/2021

Date of Pronouncement: 03/09/2021

O R D E R

On the facts and in The circumstances of the case and in law, the Commissioner of Income-tax (Appeals) erred in upholding (he action of the Assessing Officer \n considering the income from letting out of office premises owned by the appellant under the head 'Profits and gains of business or profession' instead of the head 'Income from house property"

2. The brief facts of the case are that the assessee filed its return of income on 17.10.2016 declaring total income to the tune of Rs.93,74,670/- under the normal provisions of the Act and Book Profit in sum of Rs.2,05,60,222/- u/s 115JB of the Act. The case was selected for scrutiny. Notices u/s 143(2) & 142(1) of the Act were issued and served upon the assessee. The assessee has shown the rental income in sum of Rs.32,54,624/- which was other than the business and profession. The assessee offered the House Property income in sum of Rs.22,78,237/-. The assessee claimed the depreciation upon the rented out asset. After the reply of the assessee, the income of Rs.32,54,624/- was treated as income from business and profession as against the House Property income of the assessee.

3. Under this issue the assessee has challenged the treatment of rented income under the head of „Profit and Gains of Business‟ instead of income from House Property. At the very outset, Ld. Representative of the asessee has argued that the issue has duly been covered by decision of Hon‟ble ITAT in the assessee‟s own case bearing ITA. No.247/Mum/2019 for the A.Y.2015-16 dated 15.09.2020, therefore, the issue is liable to be restored before the AO to decide afresh accordingly.

4. We noted that the assessee has given the two fold submissions, (i) that the letting out of the property is not the part of business activity of the assessee and that letting out of property was an isolated activity of the assessee and (ii) as per section 38(2), if any building used for the purpose of business is not exclusively so used for the purpose of business, the deduction u/s 32 shall be restricted to a fair proportionate part, which may be determined by the AO.

5. In the result, the appeal filed by the assessee is hereby partly allowed.
Order pronounced in the open court on 03/09/2021

Please find attached the enclosed file for the full judgement