Business income or house property income

Facts:

Assessee a BPO company had large non-current investments in properties which was let out and the same was offered as income from house property and standard deduction for repairs @ 30% was claimed. Invoking revision powers the PCIT questioned the reasoning of assessee claiming standard deduction citing that they should have offered it as a business income and thus were not eligible for the standard deduction of 30% meant for house property income only. On higher appeal -

Held in favour of the assessee that letting out of the property was only incidental to their business income. As per the schedular system of taxation income meant to be offered for house property cannot be read as business income. The revision by PCIT was thus held to be incorrect.

Applied:

Raj Dadarkar & Associates (2017) 81 taxmann.com 193 (SC) : 2017 TaxPub(DT) 1173 (SC)

Meeraj Estate & Developers (2020) 113 taxmann.com 231 (Allahabad) : 2019 TaxPub(DT) 7131 (All-HC)

Dissented:

Chennai Properties & Investments Ltd. (2015) 56 taxmann.com 456 (SC) : 2015 TaxPub(DT) 2180 (SC)

Ed. Note: The epochal verdicts of -

East India Housing and Land Development Trust Limited v. CIT (1961) 42 ITR 49 (SC) : 1961 TaxPub(DT) 0132 (SC)

Sultan Brothers (P) Limited v. CIT (1964) 5 SCR (SC)

may be referred to wherein it was held that the legislature has specifically carved a special provision for letting of property thus was held as house property income.

The Apex court verdict of Chennai properties & Investments case thus appears to be one rendered per incuriam in the opinion of the editors.

Case: Effective Teleservices (P) Ltd. v. Pr. CIT 2024 TaxPub(DT) 1125 (Ahd-Trib)