ITAT allows appeal on interest income and amenities treatment, orders reevaluation of business expenditures.

The ITAT allowed the appeal for statistical purposes, directing the tax treatment of interest income under Profits and Gains of Business or Profession and income from amenities under Income from House property, while instructing a reevaluation of business expenditures under relevant provisions.

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Issues:
1. Tax treatment of interest income under Income from other sources instead of Income from Business and profession.
2. Disallowance of business expenditure.
3. Tax treatment of income received for providing amenities under Income from other sources instead of income from house property.

Analysis:

Issue 1:
The appellant contested the tax treatment of interest income, arguing it should be taxed under Profits and Gains of Business or Profession. The AO initially taxed the interest income under Income from other sources, citing lack of continuity in lending activity. However, the ITAT held that since the borrowed amount was lent to a sister concern at a higher interest rate, the appellant was engaged in money lending business ancillary to financial activities. Thus, the interest income was directed to be taxed under Profits and Gains of Business or Profession, allowing for related expenditures.

Issue 2:
The AO disallowed business expenditure claimed by the appellant, which was confirmed by the CIT(A). However, upon review, the ITAT directed the AO to consider the expenditure under Profits and Gains of Business or Profession after due verification and hearing, as per the provisions of law. Ground No. 2 was allowed for statistical purposes.

Issue 3:
Regarding the income from amenities, the AO taxed it under Income from other sources instead of Income from house property. The ITAT found that the service agreement for amenities was dependent on the rent agreement, making it an integral part of the rental income. Citing a precedent, the ITAT directed the AO to treat income from amenities under Income from House property, considering amenities as essential for tenant enjoyment and part of the building's cost.

In conclusion, the ITAT allowed the appeal for statistical purposes, directing the tax treatment of interest income under Profits and Gains of Business or Profession and income from amenities under Income from House property, while instructing a reevaluation of business expenditures under relevant provisions.

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