Case Note & Summary
The appellant, Indian Express Newspapers (Bombay) Ltd., owned a building known as Express Towers at Nariman Point, Mumbai. For the Assessment Year 1987-1988, the appellant claimed a deduction of Rs.76,97,918 under Section 32AB of the Income Tax Act, 1961. The Assessing Officer allowed deduction of only Rs.2,85,024, excluding rental income of Rs.1,27,11,742 from the computation of 'profits of eligible business or profession' on the ground that such income was assessed under the head 'Income from house property' and not business income. The Commissioner of Income Tax (Appeals) upheld this view, and the Income Tax Appellate Tribunal (ITAT) confirmed the same by order dated 29th May 2002. The appellant appealed to the High Court. The court framed the substantial question of law: whether the rental income earned by the appellant and assessed under the head 'Income from house property' qualifies for deduction under Section 32AB. The court noted that Section 32AB(2)(i) defines 'eligible business or profession' as any business or profession except those specifically excluded. The court held that the rental income from letting of space in Express Towers was part of the appellant's business activity and therefore constituted profits of eligible business or profession. The court allowed the appeal, setting aside the ITAT's order and directing the Assessing Officer to recompute the deduction under Section 32AB including the rental income.
Headnote
A) Income Tax - Deduction under Section 32AB - Eligible Business or Profession - Rental income assessed as 'Income from house property' - The issue was whether such rental income forms part of 'profits of eligible business or profession' for deduction under Section 32AB of the Income Tax Act, 1961 - The court held that the rental income from letting of space in Express Towers, being part of the assessee's business activity, qualifies as profits of eligible business or profession and is eligible for deduction under Section 32AB - The Tribunal's order was set aside and the appeal allowed (Paras 1-12).
Issue of Consideration
Whether rental income earned by the appellant and assessed under the head 'Income from house property' qualifies for deduction under Section 32AB of the Income Tax Act, 1961.
Final Decision
The appeal is allowed. The impugned order of the ITAT dated 29th May 2002 is set aside. The Assessing Officer is directed to recompute the deduction under Section 32AB of the Income Tax Act, 1961 for the Assessment Year 1987-1988 by including the rental income from Express Towers as part of 'profits of eligible business or profession'.
Law Points
- Section 32AB deduction
- eligible business or profession
- rental income
- house property income
- profits of eligible business or profession
- Income Tax Act 1961
Case Details
2024 LawText (BOM) (03) 73
Income Tax Appeal No.90 of 2003
K. R. Shriram, Dr. Neela Gokhale
Mr. Sukhsagar Syal a/w. Mr. Amol Joshi and Ms. Tejasvi Ghag i/b. Ms. Poorvi Kamani for appellant, Mr. P.C. Chhotaray for respondent
Indian Express Newspapers (Bombay) Ltd.
The Commissioner of Income Tax, City I, Mumbai
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Nature of Litigation
Income Tax Appeal against order of ITAT denying deduction under Section 32AB on rental income assessed as house property income.
Remedy Sought
Appellant sought deduction under Section 32AB of the Income Tax Act, 1961 on rental income from Express Towers.
Filing Reason
The Assessing Officer and appellate authorities excluded rental income from 'profits of eligible business or profession' for deduction under Section 32AB.
Previous Decisions
Assessing Officer allowed deduction of Rs.2,85,024 only; CIT(A) upheld; ITAT confirmed by order dated 29th May 2002.
Issues
Whether rental income assessed under 'Income from house property' qualifies as 'profits of eligible business or profession' for deduction under Section 32AB of the Income Tax Act, 1961.
Submissions/Arguments
Mr. Syal for appellant submitted that eligible business or profession under Section 32AB(2)(i) includes all activities resulting in profits except those specifically excluded, and rental income from business premises should qualify.
Respondent argued that since rental income was assessed as house property income, it does not form part of business profits for Section 32AB deduction.
Ratio Decidendi
Rental income from letting of business premises, even if assessed under the head 'Income from house property', constitutes profits of eligible business or profession under Section 32AB of the Income Tax Act, 1961, as the definition of 'eligible business or profession' under Section 32AB(2)(i) includes all business activities except those specifically excluded, and the rental income is derived from the assessee's business activity.
Judgment Excerpts
Whether the facts and circumstances of the case, the Tribunal was right in law in holding that the rental income earned by the Appellant and assessed under the head ‘Income from house property’ will not qualify for deduction u/s. 32AB of the Income Tax Act, 1961?
The ITAT, by the impugned order dated 29th May 2002, held that since the rental income has been assessed in appellant’s case as “income from house property” and has not been considered as business income, it will not qualify for deduction under Section 32AB of the Act.
Procedural History
Assessment Year 1987-1988: Assessing Officer allowed deduction under Section 32AB of Rs.2,85,024 only, excluding rental income of Rs.1,27,11,742. Assessee appealed to CIT(A) who upheld the order on 22nd March 1991. Assessee appealed to ITAT which confirmed the order on 29th May 2002. Assessee filed appeal to High Court which was admitted on 21st September 2004. High Court delivered judgment on 15th March 2024.
Acts & Sections
- Income Tax Act, 1961: 32AB, 32AB(2)(i), 32AB(3)
