2013 (12) TMI 1537 - AT - Income Tax

Tribunal clarifies rental income classification, upholds CIT(A)'s TDS disallowance exception.

The Asstt. Commissioner of Income-tax Circle XV Chennai Versus M/s. Eskay Designs

The Tribunal directed the Assessing Officer to assess rental income on a property taken on lease and sub-letting it as 'income from house property' rather ... Sub-letting - ‘income from house property’ OR ‘business income’ - Held that:- So far as the findings under challenge of the CIT(A) in principle are concerned, in the absence of any distinction on facts pointed out by the Revenue vis-à-vis facts of assessment year 2007-08 , we see no reason to adopt a different approach in the impugned assessment year. At the same time, we find force in the consequential argument of the Revenue that since present is an issue of head of income i.e the Assessing Officer had treated the receipts in question as ‘business income’ and the CIT(A) under the head ‘income from house property’, the Assessing Officer has to examine the case afresh for the purpose of appropriate computation. In our view, this consequential argument deserves to be accepted since at the time of computing the income under the head ‘house property’ the case of the assessee has to be considered for the purpose of deductions u/s 24 of the Act Disallowance u/s 40(a)(ia) for non-deduction of TDS - Held that:- CIT(A) has rightly directed the Assessing Officer to examine the assessee’s claim on the basis of ‘paid’ and ‘payable’ issue as stated hereinabove. So, the relevant grounds of the Revenue are decided in favour of the assessee. Issues:1. Assessment of rental income on property taken on lease by the assessee and sub-letting it on a commercial basis under different heads of income.2. Disallowance for non-deduction of TDS under section 40(a)(ia) of the Income Tax Act.Analysis:Issue 1: Assessment of rental income on property taken on lease and sub-letting:The Revenue appealed against the CIT(A)'s order directing the Assessing Officer to assess the rental income on property taken on lease by the assessee and sub-letting it on a commercial basis under the head 'income from house property' instead of 'business income.' The Assessing Officer treated a portion of the income as business income due to the nature of the activities. The CIT(A) relied on a tribunal order from a previous year with similar facts and ruled in favor of the assessee. The Tribunal found no distinction in facts between the current and previous assessment years and directed the Assessing Officer to re-examine the case for appropriate computation of income under the head 'house property.' The Tribunal restored this ground to the Assessing Officer for further assessment.Issue 2: Disallowance for non-deduction of TDS under section 40(a)(ia):The Assessing Officer disallowed a sum for non-deduction of TDS by the assessee. The CIT(A) referred to a case law and held that the disallowance should apply only to amounts payable by a specific date, not those already paid. The Revenue contended that this distinction was no longer valid based on recent High Court decisions. The Tribunal examined conflicting judgments from different High Courts and applied the rule of Judicial Precedence to uphold the view favorable to the assessee. Consequently, the Tribunal upheld the CIT(A)'s decision and dismissed the Revenue's appeal regarding the disallowance under section 40(a)(ia).In conclusion, the Tribunal partly allowed the Revenue's appeal for statistical purposes, emphasizing the importance of following judicial precedence in resolving conflicting interpretations of tax laws.