June 04, 2019

Rent From Sub-Letting Warehouse For Commercial Purposes Is ‘Other Income’, Rules Income Tax Appellate Tribunal

[ By Bobby Anthony ]


All income received by any individual or company by sub-letting a warehouse for any commercial purpose is liable to be taxed as “income from other sources” and not under the head of “income from house property”, according to a recent ruling by the Lucknow bench of the Income Tax Appellate Tribunal (ITAT).

The ITAT ruling was issued in a recent case where an income tax assessee claimed that it had taken a warehouse on lease in order to sub-let it for a higher rent.

However, during the course of filing income tax returns, the assessee declared rental income accrued from sub-letting the warehouse for commercial purposes under “income received from other sources”.

Neither in the lease agreement nor in any documents submitted by the assessee to the income tax assessing officer was there any mention of any kind of subletting.

The assessee was asked to explain why the rental income should not be treated or computed under “income from house property”, since the property was in the assessee’s possession for a few years.

There are pre-conditions to charge the income as income from house property under Section 22 of the Income Tax Act, the ITAT stated.

The pre-condition is that the assessee must be the owner of the property. Besides, the property must not be occupied by the assessee for purposes of his business or profession. It should also be a residential property.

The ITAT noted that none of these conditions of Section 22 of the Income Tax Act were satisfied in the above mentioned cases, since the assessee is not the owner of the property in question.

Since the property is commercial in nature, provisions of Section 22 are not at all applicable, the ITAT stated.

Consequently, the addition made under “income from house property” is not sustainable and accordingly, the order under appeal was reversed and the addition has been deleted, the ITAT ruled.

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