Tribunal rules in favor of assessee on income classification and expenses, directs reexamination.

The tribunal ruled in favor of the assessee on both issues. The facility service charges were deemed assessable as "business income" rather than "income from house property," as the services provided were distinct and justified taxation as business income. Additionally, the disallowed expenses were considered necessary for maintaining the business entity, leading to a direction for reexamination of their allowability. The order was pronounced on 15/06/2016.

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Issues:
Assessability of facility service charges under "Income from House Property" or "Income from Business or Profession"
Disallowance of expenses for the year due to lack of business activity

Assessability of Facility Service Charges:
The appeal concerned the assessability of facility service charges of Rs. 9,60,000 received by the assessee. The Assessing Officer treated this amount as "Income from House Property" instead of the assessee's claim of "Income from Business or Profession." The CIT(A) upheld this decision, stating that the charges were received primarily due to letting out the property, thus falling under "income from house property." The assessee argued that the charges were for specific services like housekeeping and security, distinct from property ownership. Citing relevant case laws, the assessee contended that such charges should be taxed as "business income." The tribunal agreed, emphasizing that services provided by the assessee were not routine landlord activities but distinct services justifying taxation as business income. The order was set aside, directing the Assessing Officer to recompute the income accordingly.

Disallowance of Expenses:
The second ground of appeal related to the disallowance of expenses amounting to Rs. 18,96,428. The Assessing Officer disallowed the expenses due to the absence of business activity during the year. The CIT(A) did not address this issue. The assessee argued that the expenses were routine and necessary for maintaining the business entity, citing precedents supporting the allowance of such expenses. The tribunal noted that certain expenses were essential for corporate entity maintenance, directing the Assessing Officer to reexamine the allowability of expenses in light of this, and to recalculate the income. The assessee succeeded on this issue for statistical purposes.

In conclusion, the tribunal partly allowed the appeal, ruling in favor of the assessee on both issues. The order was pronounced on 15/06/2016.

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