2013 (12) TMI 591 - AT - Income Tax

Assessment of Lease Rent Income: ITAT Cochin categorizes as 'Income from other sources' for AY 2006-07, pending expense deduction review.

The Appellate Tribunal ITAT Cochin assessed income from lease rent received by the assessee for the assessment year 2006-07. Initially categorized as ... Whether income from lease rent taxable under the head “Income from businesss” or “Income from other sources” – Held that:- The assessee has not brought on record any material to show that it has intention to revive its business activities - The question whether the assessee is having an intention to revive its business activity is a question of fact and the same is required to be considered every year - Though the Government licences are still continuing in the assessee's own name, it has not proved the claim of the assessee that it had an intention to revive its business activity – Decided against Revenue. Expenses u/s 57 and 58 - Held that:- The assessee did not get opportunity to contend about the deduction of eligible expenses as per the provisions of sec. 57 - The issue remitted back for fresh examination at the end of the AO for the limited purpose of deduction of expenses. Issues:Assessment of income from lease rent under 'income from other sources' or 'income from business'.Analysis:The appeal before the Appellate Tribunal ITAT Cochin involved the assessment of income from lease rent received by the assessee for the assessment year 2006-07. The Assessing Officer initially assessed the lease rental income under 'income from other sources.' However, the Ld. CIT(A) directed the assessment under 'Income from business' based on a previous Tribunal order related to the assessee's case for the assessment year 2003-04.The facts revealed that the assessee's plant was leased to M/s. Apollo Tyres Ltd. from 01-05-1995 for eight years, approved by BIFR. After the initial period, the lease agreement was renewed annually. The Assessing Officer contended that the lease rent should be considered 'income from other sources' due to the assessee ceasing its manufacturing business and continued lease agreements with Apollo Tyres Ltd.In a previous judgment related to the assessment year 2007-08, the Tribunal found that the assessee had not proven intentions to revive its business activities. Despite the claim of taking steps to restart the business, the Tribunal concluded that there was a lack of supporting evidence. Therefore, the lease rental income was assessed under 'income from other sources.'During the proceedings, the assessee requested a review of eligible expenses deduction related to computing lease rental income. The Tribunal acknowledged the assessee's historical contention that lease rental income should be assessed under 'Income from Business' but decided to confirm the assessment under 'Income from other sources.' However, the issue of deduction of expenses was remanded to the AO for fresh examination in accordance with relevant provisions.Ultimately, the appeal filed by the revenue was treated as allowed for statistical purposes, upholding the assessment of lease rental income under 'Income from other sources' but requiring a reassessment of eligible expenses deduction by the Assessing Officer.