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April 6, 2021

Rent received from unsold commercial property to be considered as House Property Income

Rent received from unsold commercial property to be considered as House Property Income

Fact of the case

The assessee was engaged in the business of construction of the commercial complex and also earning rental income. The return of income was filed by the assessee for the year under consideration on 13.09.2014, declaring income or Rs.2,67,02,200/-. The case was selected for scrutiny and assessment under Section 143(3) of the Income-tax Act, 1961 (in short ‘the Act’) was completed after treating the rental income under the head ‘Income from House Property’ instead of income under the head “Profit and Gains of Business or Profession’ offered by the assessee in the return of income.

Issue of the case

The issue under this case made under appeal is whether Rental from unsold Commercial Properties is House Property Income

Observation of case

In this case, the issue in dispute is regarding the head under which rental income is to be taxed. The assessee is earning rental income from commercial malls and offered the same under the head ‘Profit and Gains of Business or Profession’. The rental income has been generated from commercial units which remained unsold and were held as stock in trade in desire of acceptable sale price. The Assessing Officer has taxed the said rental/lease income under the head “income from house property”.

Identical issue was raised by the Assessing Officer in Assessment years 2006-07 and 2007-08. The issue further travelled up to the Hon’ble Delhi High Court. The Hon’ble Delhi High Court in its judgment dated 18.02.2003, reported in 356 ITR 159, in ITA No. 1089/2011 and ITA No. 1090/2011, has directed to treat the rental income earned by the assessee from commercial properties as income under the head ‘House Property’ instead of Income from business or profession.

The learned CIT(A) has extracted the decision of the Hon’ble Delhi High Court in the impugned order, which is reproduced as under:

“2. The appeals are by the Revenue. ITA Nos. 1089/2011 and 1090/2011 relate to the same assessee i.e. Discovery Estates Pvt. Ltd. and ITA N0.1097/2011 relates to another company of the same group by name Discovery Holdings Pvt. Ltd. On 13.02.2012, the following substantial questions of law were framed by this Court in all the three appeals:

”(i) Whether the Income Tax Appellate Tribunal was right in holding that the rental income should be assessed under the head “income from business” and not under the head “income from house property”?

(ii) Whether the Income Tax Appellate Tribunal was right in holding that the sale consideration disclosed by the assessee on sale of shops should be accepted?

(iii) Whether the findings recorded by the Income Tax Appellate Tribunal in respect of the question number (ii) are perverse?” 3. It is common ground that the first substantial question of law is to be answered in the negative, in favour of the Revenue and against the assessee in view of the judgment of this Court in CIT Vs. M/s Ansal Housing Finance and Leasing Co. Ltd. &Ors. decided on 31.10.02012 in ITA 18/1999.”

As the learned CIT(A) has followed the binding precedent in the case of the assessee itself, ITAT do not find any error in the order of the learned CIT(A) on the issue in dispute and accordingly maintain the same decision. Thus the grounds of the appeals are dismissed by ITAT.


The ITAT therefore held that the rent received from unsold commercial house property to be treated as Income under the head house property. Thus, the decision was made in against the assessee and the appeal of the assessee is dismissed.

Read the ITAT Order from Below Link


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