2015 (6) TMI 704 - AT - Income Tax

Tribunal Decision: Deduction for Business Activities Upheld, Rental Income Treatment Confirmed

M/s Ansysco and M/s Ansysco Sunrise Complex Versus The Addl. CIT, Chandigarh

M/s Ansysco and M/s Ansysco Sunrise Complex Versus The Addl. CIT, Chandigarh - TMI Issues Involved:1. Denial of deduction under section 80IC on various incomes.2. Treatment of income from job work under section 80IC.3. Classification of certain expenses as capital or revenue expenditure.4. Treatment of rental income and related deductions.5. Deduction under section 80IC on interest income and miscellaneous income.Issue-wise Detailed Analysis:1. Denial of Deduction under Section 80IC on Various Incomes:The assessee contested the denial of deduction under section 80IC for 'Other Income' consisting of interest on refund from HIMUDA, government award, interest on IT refunds, and foreign exchange fluctuation gain. The CIT(A) and AO held that these incomes were not derived from the business of the eligible undertaking. The Tribunal upheld this view, referencing previous years' decisions, and concluded that such income was not directly linked to the business activities. However, the Tribunal allowed deduction on foreign exchange fluctuation gain, considering it directly linked to business activities.2. Treatment of Income from Job Work under Section 80IC:The revenue challenged the allowance of deduction under section 80IC on income from job work. The Tribunal referred to its earlier decisions from assessment years 2005-06 to 2008-09, where it was established that job work related to the manufacturing process and thus eligible for deduction. The Tribunal found no merit in the AO's stand and upheld the CIT(A)'s decision to allow the deduction.3. Classification of Certain Expenses as Capital or Revenue Expenditure:The assessee disputed the classification of expenditure on repairs and maintenance as capital expenditure. The Tribunal reviewed the nature of the expenses, specifically PU coating on the floor, which had a short life span and did not enhance the building's life. It concluded that such expenses should be treated as revenue expenditure and allowed the deduction.4. Treatment of Rental Income and Related Deductions:The revenue appealed against the treatment of receipts from leasing part of the factory building as rental income, arguing it was a business arrangement. The Tribunal noted that rental income had been consistently declared since assessment year 2003-04 and sharing of common expenses did not alter the nature of the income. It upheld the CIT(A)'s decision to treat the receipts as rental income and allowed the statutory deduction under section 24(a).5. Deduction under Section 80IC on Interest Income and Miscellaneous Income:The revenue and the assessee both raised issues regarding the deduction under section 80IC on various other incomes such as interest from Housing Board, IT refunds, and miscellaneous income. The Tribunal, following previous decisions, allowed the deduction on income from sale of scrap, insurance claims, and credit balances written off, but denied it for interest income and other miscellaneous incomes not directly linked to business activities.Conclusion:The Tribunal dismissed the revenue's appeals and partly allowed the assessee's appeals, maintaining consistency with previous years' decisions and legal principles regarding the deduction under section 80IC and classification of expenses. The Tribunal's detailed analysis ensured that deductions were allowed only for incomes and expenses directly linked to the business activities of the eligible undertaking.