Rental Income From Co-operative Society's Administrative Building Taxable As 'Income From House Property': Mumbai ITAT

A Bench comprising Vice President Saktijit Dey and Accountant Member Jagadish was hearing cross appeals filed by Western Industrial Co-operative Estate Limited for Assessment Year 2017-18.

The assessee, a registered co-operative society located in MIDC, Andheri, had been consistently declaring income from leasing its administrative building under the head “Income from House Property.” However, during the relevant assessment year, the Assessing Officer departed from the earlier approach and taxed the rental receipts as “Income from Other Sources,” while also disallowing standard deduction, sub-letting charges paid to MIDC, interest on borrowed capital, and certain other expenses.

Upholding the assessee's contention, the Tribunal noted that there was no change in facts or in the nature of activity compared to earlier years, when similar rental income had been accepted as income from house property. The Bench emphasized that the Assessing Officer could not arbitrarily change the head of income without any material change in circumstances.

The Tribunal observed that when the department has consistently accepted a particular treatment in earlier years, it cannot take a contrary view in a subsequent year without justification. Accordingly, the Tribunal directed the Assessing Officer to assess the rental income under the head “Income from House Property.”

The Tribunal also allowed consequential relief, directing that the 30% standard deduction under Section 24(a) and interest on borrowed capital under Section 24(b) be granted. The disallowance of sub-letting charges paid to MIDC was also deleted, following an earlier Tribunal decision in the assessee's own case.

On other issues, the Tribunal remanded the question of allowability of certain expenses claimed against testing and miscellaneous income, as well as the deduction claimed under Section 80P on storage charges, back to the Assessing Officer for fresh examination in accordance with law.

In view of the above, the appeal filed by the assessee on the main issues was allowed, while the connected rectification appeal was dismissed as infructuous.

Case Title: Western Industrial Co-operative Estate Limited Vs. DCIT Circle 32(1)

Case No.: ITA No. 6514/Mum/2024 A.Y. 2017-2018

Appearance for Appellant: Shri Satyaprakash Singh

Appearance for Respondent: Shri Arun Kanti Datta, CIT D.R.