|The Tax Publishers2020 TaxPub(DT) 5489 (Mum-Trib)
INCOME TAX ACT, 1961
Sections 71 & 37(1)
Where assessee-company derived income from sub-lease of property and offered the same to be taxed under the head 'Income from House Property', then the routine and mandatory expenses incurred by assessee for maintaining its corporate entity would be eligible for regular business loss and consequently, the assessee is entitled for inter-head set-off of the same against house property income.
Loss - Set-off of business loss against house property income - Expenses incurred to maintain corporate identity resulting in loss under Business Head -
Assessee was in the business of leasing and sub-leasing of properties as a business. Arising out of sub-lease of a property they earned rental income which was offered to tax as house property income. As against this income the assessee had a business loss primarily on account of certain expenses which were incurred to maintain the corporate identity. This business loss was adjusted against the house property income which did not meet the eye of the AO who disallowed the same. FAA also upheld the views of the AO. Held: The rental income derived out of sub-leasing activity may get taxed under the head 'Income from house property' as per certain provisions of the Act and judicial precedents. But, it cannot be denied that the assessee had indeed carried on its business of sub-leasing the property. Hence, it has to mandatorily incur certain business expenditure to maintain its corporate identity, which would, in any case, be allowable as deduction. Once these expenses are debited in profit and loss account, it would only result in business loss which had to be mandatorily set off against the house property income. Therefore, assessee was entitled to set off of the business loss against house property income which arose out of the sub-leasing activity.
FAVOUR : In assessee's favour
A.Y. : 2014-15 & 2013-14
INCOME TAX ACT, 1961
Sections 71 & 32
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