2016 (6) TMI 1289 - AT - Income Tax

Tribunal directs income reclassification to prevent double taxation, considers shared expenses

Procter & Gamble Home Products Limited (Erstwhile Procter & & Gamble Distribution Company Limited), Versus DCIT, Circle-8 (2), Mumbai

The Tribunal partially allowed the appeal, directing the Assessing Officer to treat the income received as 'income from other sources' instead of 'Income ... Treatment to receipt as rental income - 'Income from Business or Profession' as or 'Income from House Property' or 'income from other sources' - Held that:- As similar view has been taken by Tribunal in assessee’s own case. As the facts and circumstances during the year under consideration are same, respectfully following the orders of Tribunal in assessee’s own case, we direct the AO to treat the income so received as income other sources and to allow the claim of deduction in respect of expenditure incurred for earning the same. The AO is to recompute the income by treating the income so received as “income from other sources”. We direct accordingly. Issues Involved:1. Taxability of rental income received by the assessee under the head 'Income from House Property.'2. Classification of income earned from a sister concern under the head 'Income from Business or Profession.'3. Disallowance of expenses related to repairs, maintenance, and depreciation on the building.4. Charging of interest under section 234 of the Income Tax Act.Issue 1: Taxability of Rental Income:The appeal was filed against the order of the CIT(A) confirming the AO's decision to tax an amount received as rent for premises usage charges. The assessee argued that the agreement with the sister concern was for sharing common facilities, not renting premises. The Tribunal found that the parties shared common expenses based on net sales, not fixed rent. The AO's treatment of the amount as house property income was challenged, citing double taxation concerns.Issue 2: Classification of Income:The CIT(A) confirmed the AO's decision to assess income earned from a sister concern under 'Income from House Property.' The assessee contended that the income should be classified as 'Income from Business or Profession.' The Tribunal referred to past decisions in the assessee's favor, directing the AO to treat the income as 'income from other sources' and allow deductions for related expenditures.Issue 3: Disallowance of Expenses:The CIT(A) upheld the AO's disallowance of expenses on repairs, maintenance, and depreciation on the building, based on the let-out portion. The assessee argued that the expenses were business-related and not solely for the let-out portion. The Tribunal directed the AO to reconsider the disallowance, emphasizing the nature of the expenses and the method of apportionment.Issue 4: Charging of Interest:The CIT(A) confirmed the AO's decision to charge interest under section 234 of the Income Tax Act. The assessee appealed for the deletion or reduction of the interest. The Tribunal did not provide specific details on the resolution of this issue in the summarized text.In conclusion, the Tribunal partially allowed the appeal, directing the AO to treat the income received as 'income from other sources' and recompute the income accordingly. The decision was based on past tribunal rulings in the assessee's favor and considerations of the nature of expenses and income classification.