1977 (10) TMI 48 - AT - Income Tax

Assessee's Income Taxed Individually, Property Income Exempted, Expenses Disallowed

The Tribunal held that the salary income received by the assessee should be taxed in his individual capacity, not as HUF income, due to personal exertion. ... - Issues:1. Taxation of salary income in the hands of the assessee as an individual and as a member of HUF.2. Exemption claim for income from property used for commercial purposes.3. Disallowance of expenses in the wine account.4. Addition of low household expenses.5. Disallowance of professional tax.6. Charging of interest under section 139.7. Allowance of interest claimed by the assessee.Detailed Analysis:1. The first issue revolves around the taxation of salary income of Rs. 2,975 received by the assessee from Bharat Cinema (Lessee) in two capacities - as an individual and as a member of HUF. The assessee argued that since the salary income was already taxed in the hands of the HUF, it should not be taxed again in his individual capacity. However, the Tribunal held that the salary income was rightly treated as the income of the assessee as an individual, emphasizing that the investment of the HUF in the firm was minimal compared to the individual's investment. The Tribunal rejected the contention that the salary income should be considered as HUF income, stating that it was paid for personal exertion and correctly included in the individual's income.2. The second issue concerns the exemption claim for income from property used for commercial purposes. The assessee constructed a building claimed to be a residential unit but let it out for commercial purposes. The Tribunal analyzed the provisions of the law and held that the building being constructed as a residential unit was sufficient to claim the exemption, irrespective of its actual usage. The Tribunal distinguished a previous judgment and allowed the exemption, stating that the building being a residential unit was the key requirement for the exemption.3. The third issue involves the disallowance of expenses in the wine account, where the assessee claimed various expenses including entertainment expenses without providing bills. The Tribunal upheld the disallowance of Rs. 1,000 as entertainment expenses, citing relevant case law and emphasizing the lack of evidence to support the nature of the expenses claimed.4. The fourth issue relates to the addition of Rs. 3,000 based on low household expenses withdrawn by the assessee. The Tribunal considered the family composition and withdrawals made by the HUF, concluding that the withdrawals from the HUF account were substantial, and hence, no addition was warranted for low household expenses. The addition of Rs. 3,000 was deleted.5. The fifth issue pertains to the disallowance of professional tax, which was contingent on the treatment of the salary income. Since the Tribunal held that the salary income belonged to the assessee, and professional tax was already allowed from that income, no further relief was granted on this ground.6. The sixth issue addresses the charging of interest under section 139. The Tribunal noted that there was no right of appeal against the charging of interest, rendering this ground untenable for consideration.7. The final issue involves the allowance of interest claimed by the assessee, which was initially disallowed by the AAC. The Tribunal reviewed the interest payments and previous allowances, ultimately allowing the interest claimed by the assessee. The appeal was partly allowed on this ground.In conclusion, the Tribunal addressed various taxation and expense-related issues, providing detailed reasoning and legal analysis to determine the appropriate treatment of income, expenses, and exemptions in the case.