INCOME TAXA CT, 1961

Section 14

Head of income - Income from house property or income from other sources - Inseparable letting -

Assessee has shown rental income under the head 'income from house property' of Rs. 2,50,000 per month from M/s. Professional Management Counseltant Ltd. for leasing of 50 workstations, at the rate of Rs. 5000 per workstation in the building located at W-23, Sector 11, Noida. AO accordinlgy disallowed standard deduction claimed under section 24(a) the rate of the 30% from rental income of Rs. 22,50,000 and assessed rental income of Rs. 22,50,000 under the head 'income from other sources' as against claim of assessee under the head 'income from house property'. Held: On analyzing various terms of the lease agreement, it was evident that use of the building was incidental to the main object of leasing of workstation by assessee. Assessee had given ground and first floor of the building on rent to another party separately and income from which had been offered by assessee under the head 'income from the house property' and which had not been disturbed by AO. Thus, prime objective was exploitation of asset in form of workstations installed by assessee and not building or any part thereof. The use of easement and common areas by the second party is incidental to the lease of exploitation of workstation. The workstation in form of plant and machinery were inseparable from the building and for exploitation or use of workstation, the use of building was incidental, and as letting was inseparable, section 56(2)(iii) got attracted and rental income was to be under the head 'income from other sources'.

REFERRED :

FAVOUR : Against the assessee.

A.Y. : 2012-13

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