Top Stories Rental Income from Business Assets to be Taxed Under ‘Income from House Property’, Not as Business Income: ITAT [Read Order] The ITAT ruled that rental income from business assets should be taxed as “Income from House Property” and not business income, directing a reassessment u/s 57 of the Income Tax Act By Kavi Priya – On March 2, 2025 6:18 am – 2 mins read

The Mumbai Bench of the Income Tax Appellate Tribunal (ITAT) ruled that rental income from business assets should be treated as “Income from House Property” and not business income. Janak Texturisers Pvt. Ltd., the assessee, is a private limited company that did not file a return of income for the Assessment Year (AY) 2010-11, leading to a reassessment initiated by a notice under Section 148 on 31.03.2017. The company initially requested to drop the reassessment but it did not submit an income tax return until 11.12.2017, declaring an income of Rs. 2,54,132. The Assessing Officer (AO) observed that the assessee earned rental and interest income but had no business income for the year. The company had claimed Rs. 7,62,261 in expenses, which included director’s remuneration, depreciation, office rent, bank charges, and other business-related costs. The AO disallowed Rs. 6,78,980, reasoning that these expenses were unrelated to the business since there was no active business activity during the year.

Read More: ITAT sets aside 80G Registration Rejection Order, Cites Insufficient Time Given to Assessee [Read Order] The Commissioner of Income Tax ( Appeals ) [CIT(A)] upheld the AO’s decision, stating that the assessee failed to submit documentary evidence proving that the expenses were incurred for business purposes. On appeal before the ITAT, the assessee argued that, as a private limited company, it had to incur necessary establishment and statutory expenses. The assessee counsel argued that the business assets were rented out and related expenses should be allowed as deductions. Know Practical Aspects of Tax Planning, Click Here A single-member bench comprising Beena Pillai (Judicial Member) observed that the assessee had wrongly computed rental income as both business income and income from house property. The tribunal observed that rental income from factory premises should be taxed under “Income from House Property,” not as business income.

Read More: Gratuity Dues of Workers not Part of ‘Liquidation Estate’ of Corporate Debtor: Calcutta HC [Read Order] Considering that the rented-out factory premises were part of the company’s fixed assets, the ITAT ruled that related expenses should be examined under Section 57 of the Income Tax Act, which allows for deductions against such income. The tribunal partly allowed the appeal, directing the Assessing Officer (AO) to recompute the taxable income, ensuring that only proportionate expenses related to maintaining the rented property are allowed. The ITAT remanded the matter for fresh adjudication, directing the AO to apply Section 57 provisions and recalculate tax liability accordingly.