2003 (10) TMI 18 - HC - Income Tax

Court upholds Income-tax Appellate Tribunal's decision on income classification and deduction claims

Rani Paliwal Versus Commissioner of Income-Tax.

The High Court dismissed the appeal against the Income-tax Appellate Tribunal's order, finding no substantial questions of law raised by the appellant. ... Maintainability of appeal – tax effect - Board's Circular No. F-279/126/98-ITJ, dated March 27, 2000 - Board's circular is only an instruction issued to the income-tax authorities not to file appeals where the tax effect is less than ₹ 1,00,000. The Tribunal is not bound by any such instruction and once the Department files an appeal, the Tribunal was bound to decide the same on the merits. – Further, since the property had been leased out to the sister concern and the assessee was receiving rent there from, the assessing authority as well as the Tribunal were right in holding that the income received by way of rent, could not be treated as 'business income' particularly when leasing out of such properties was not the business of the assessee – Further, Tribunal was legally correct in holding that the claim for deduction u/s 80HHC, in respect of interest income from FDRs was not sustainable Issues:1. Appeal against Tribunal's order under Income-tax Act, 1961.2. Classification of income from leasing of asset.3. Claim for deduction under section 80HHC of the Act.Analysis:Issue 1:The appeal was filed against the Income-tax Appellate Tribunal's order, where the Revenue's appeals against the Commissioner of Income-tax (Appeals) were allowed, and the assessee's claim was rejected. The appellant raised three substantial questions of law. However, the High Court found that none of the questions raised was a question of law, let alone a substantial one. The Court dismissed the appeal, stating that the questions did not merit admission.Issue 2:Regarding the classification of income from the temporary leasing of an asset, the assessee argued that the income should be considered as 'Business income' rather than 'Property income.' The property in question was leased out to a sister concern, and the income was treated as rental income by the assessing authority. The High Court upheld the decisions of the assessing authority and the Tribunal, stating that since the property was leased out and the assessee was receiving rent, the income could not be classified as 'Business income,' especially when leasing out properties was not the assessee's primary business activity.Issue 3:The issue revolved around the deduction claimed under section 80HHC of the Act concerning interest as part of the assessee's business income. The Assessing Officer and the Tribunal differed in their treatment of the interest received and paid by the assessee for the purpose of deduction. The Commissioner of Income-tax (Appeals) allowed a deduction based on a different interpretation. The High Court agreed with the Tribunal's view that 90% of the interest deductible for the claim under section 80HHC should be from the gross interest received by the assessee, without deducting the interest paid by the assessee. The Court found that the Tribunal's decision was in line with the clear language of the relevant provision, and thus, upheld the disallowance of the assessee's claim in this regard.In conclusion, as there were no substantial questions of law involved in the case, the High Court dismissed the appeal.