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Rent from ware house -business income/house property income

CA Pramod Kulkarni (Practicing Chartered Accountant) (80 Points)

29 June 2013

Dear Friends,

The assessee is in receipt of Rent from Ware House, whether it shall be assessed as Business income or House Property Income. As per Sec 22 Building Includes Ware Houses & Godowns also, so it will be treated as House Property income as per Sec 22. But my query is that is there any Instances or Cases where the Rent from Ware House is assessed as Business Income, if so please let me know the case laws.

Thanks & Regards

Pramod

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10 Replies

Devendra (Chartered Accountant) (4775 Points)
Replied 29 June 2013

No. You will have to treat rent incom from warehouse as Income from House Property.

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Vinod Lakhera (CA in service) (85 Points)
Replied 29 June 2013

Ys income shall be taxable under house property head...

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Mihir (Wealth Manager) (5293 Points)
Replied 30 June 2013

I may be wrong, but I think it is income from business. It is a commercial activity, and it is not used for allowing someone to reside in the warehouse. Expenses will be incurred in the upkeep of the warehouseby the owner to ensure that the premises can be used for storing materials. The owner will also have to issue warehouse receipt.

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Member (Management) (325 Points)
Replied 30 June 2013

There are High Court rulings stating that such income should be treated as income from house property. Refer Tamilnadu Warehousing case of Madras HC.

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CA Pramod Kulkarni (Practicing Chartered Accountant) (80 Points)
Replied 30 June 2013

Friends Thanks for the reply to my querry,

Generally rent from warehouse facility is taxed under the head income from house property, but my doubt is that why cant we treat it as business income. Assessee bears the risk for goods stored and will be liable for the damages arising,if any in the meantime. So am searching for a case law where rent from warehouse facility is taxed under Business Income.

Thanks & Regards

Pramod

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Jithin (Learner) (1057 Points)
Replied 30 June 2013

Hi guys, it depends upon the particular case. If the assesse provides the service of just storing the goods, he is essentially letting out the warehouse which should be included under the head income from house property. But if the assessee is providing other value added services like providing adequate security measures for the safety of the goods, assembling,packaging,quality inspection,transportation,etc. of the goods, then it constitutes a distinct business activity. The assessee in such a case is no longer just letting out the storage space so the income received should be assessed as business income.

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@sh jais (live the life otherwise life leaves u.....) (1539 Points)
Replied 30 June 2013

Dear it depend how are u treating the same if u receiving only the rent from such property than it will be income from house property bcoz u have rented the property and receiving only the rent for leting out your property..

but if u are engaged in the business of werehousing getting rent for stock of goods than that rent would be tearmed as business income.. its for stocking the goods not for letting out the property..

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Deepak Gupta (CA Student) (15922 Points)
Replied 30 June 2013

If the facts show that the assessee is doing a complex commercial activity by exploiting the immovable property, then the income would fall under the head 'Profits and gains from business or profession'. If on the other hand, the assessee has simply let out the space and is earning the rental income, it would fall under the head 'Income from house property'.

ITO v.Rasiklal & Co. Pvt. Ltd, ITA No. 580/M/2006, August 28, 2008

Nutan Warehouseing Co. (P) Ltd. v. ITO (2007) 106 TTJ (Pune) 137

The assessee had let out his godown. Other activities carried on by the assessee such as the provision of electricity and security etc. were found by the Tribunal to be only incidental to the main activity of letting out. The tribunal has recorded a categorical finding that no complex commercial activity was done by the assessee. Godown income has been held to be taxable under the head "Income from house property'.

ITO v. Tejmalbhai and Co. (2006 282 ITR (AT) 224 (Rajkot)

Services provided by the assessee were a commercial activity and hence the income from storage facilities provided by the assessee to customers was eligible to be considered under the head "Business income'.

Complex commercial activity, Example: Obligation to provide adequate security for the safety of the material stored apart from the responsibility of receiving and delivering stock, maintaining record of incoming and outgoing stock in the register, loading, unloading and stock taking of material etc.

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