2016 (7) TMI 133 - AT - Income Tax

Tribunal Disallows Expenses for Property & Business: Summary of Key Decisions

The Tribunal upheld the disallowance of expenses like brokerage, legal expenses, and insurance charges concerning the annual value of a property let out ... (I) While computing annual value of property which has been let out - disallowance made on account of brokerage charges, legal expenses, maintenance charges and insurance expenses being not as per section 24. (II) Expenses, which were not incurred wholly and exclusively for the purposes of earning the income from other sources, cannot be allowed deduction u/s 57 Held that:- The claim of the assessee in respect of brokerage charges and legal expenses, of the property are not as per the provisions of section 24 of the Act which deals with allowable deductions while computing the income of the house property. We therefore, do not find any merit in the case of the assessee and the arguments as advanced by the ld.AR and dismiss this ground of assessee by upholding the order of ld. CIT(A) on this issue. - Decided against assessee Allowability of expenditure u/s 57 - nature of income - assessee had claimed the expenses against the receipt of interest of FDRs, commission, speculative profit and loss from shares - AO was of the opinion that only receipt in the nature of business arising out of speculation in shares and the remaining receipts were in the nature of income of other sources and accordingly held that the expenses were not allowable u/s 57 - Held that:- the activity of the assessee of investing money in the FDRs in the banks in no way can be treated as receipt from the business and we agree with the view taken by the lower authorities that the same has to be taxed under the head income from other sources and was rightly assessed so. So far as admissibility of various expenses aggregating to ₹ 21,06,469/- is concerned, we are of the view that having regard to the nature of expenses, these were not incurred wholly and exclusively for the purposes of earning the income from other sources in order to be qualified for deduction u/s 57 of the Act which deals with the deduction of expenditure from the income and other sources. After considering facts and circumstances, we are of the opinion that the order passed by the ld. CIT(A) is correct and accordingly, we uphold he order of the ld. CIT(A) by dismissing the appeal of the assessee on this issue.- Decided against assessee Issues involved:1. Disallowance of brokerage, legal expenses, and insurance charges while computing annual value of property.2. Disallowance of expenses claimed for business purposes against interest income.Detailed analysis:1. The appeal addressed the disallowance of expenses like brokerage, legal expenses, and insurance charges concerning the annual value of a property let out by the assessee. The Assessing Officer disallowed these expenses totaling &8377; 7,65,658, stating that the provisions of sections 23 and 24 of the Income Tax Act did not allow such deductions. The CIT(A) partly allowed the appeal, directing verification of maintenance charges paid to the housing society. However, the Tribunal upheld the disallowance, ruling that these expenses were not in line with section 24 provisions for deductions in house property income computation.2. The second issue revolved around disallowance of expenses claimed for business purposes against interest income. The AO considered the interest income from fixed deposits as income from other sources due to the speculative nature of share trading activity. The expenses claimed by the assessee were not considered related to earning interest and were held not covered under section 57 of the Act. The CIT(A) upheld the AO's decision, emphasizing that interest earned on fixed deposits did not constitute business income and hence, the claimed expenses were not deductible under section 57. The Tribunal concurred with these findings, dismissing the appeal as the expenses were not deemed to be incurred solely and exclusively for earning income from other sources.In both issues, the Tribunal upheld the lower authorities' decisions, emphasizing the adherence to relevant sections of the Income Tax Act and the lack of justification for the claimed expenses. The appeal of the assessee was ultimately dismissed by the Tribunal on both grounds.