TaxTMI 
TaxTMI 
2010 (12) TMI 695
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.... The AO noted that the assessee had made investments in mutual funds and the capital gain bonds which were long term investments. The assessee had also made investments in bank deposits. The AO therefore treated the interest and dividend income as income from other sources under section 56 of the I.T. Act. The AO placed reliance on the judgment of Hon'ble High Court of Madras in case of South India Shipping Corporation Ltd. (240 ITR 24) in which it was held that in classifying the income under a particular head, relevant point in deciding the issue was the manner in which the income was derived and not the fact that the assessee was engaged in some business. In appeal the assessee submitted that temporary surplus fund had been invested in inter corporate deposits, fixed deposits and mutual funds. It was urged that the income should be assessed as business income. Reliance was placed on the judgment of Hon'ble High Court of Mumbai in case of CIT vs Paramount Premises Pvt. Ltd. (190 ITR 259) and some other judgments. CIT(A) however did not accept the contentions and observed that the judgments cited by the assessee were distinguishable. The assessee was not able to show as to how the....
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.... declared the rental income of Rs.62,77,218/- from the business centre as business income. The assessee explained that main activity of the assessee was the running of business centre by offering the business centre facilities to corporate clients. It was also submitted that the property had been rented by the assessee on monthly tenancy basis which was used for running the business centre. As the premises had been taken on monthly tenancy basis, the assessee could not be deemed owner under section 27(iiib). The assessee had let out the premises to various parties. AO however observed that the assessee had let out the premises on rent and the confirmation filed by the tenants did not state any services provided by the assessee. The AO accordingly treated the rental income as income from other sources. 2.2.1 In appeal the assessee submitted before CIT(A), that it had sublet the premises with various facilities such as furniture, fixtures, telephone direct lines, EPABX, telephone board line, water, electricity, security arrangement, computer with internet facilities, cleaning facilities, board room maintenance facilities, arrangement to dispatch and receive post etc. It was....
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....income from subletting of the premises taken on lease had been held to be assessable as business income. Further reliance was placed on the decision of the tribunal in case of Harvinderpal Mehta (HUF) vs DCIT (122 TTJ 163) in which case also the income from activity of providing the service of business centre along with various facilities had been held assessable as income from business and not as income from other sources. 2.2.3 The Learned DR on the other hand supported the orders of authorities below. It was argued that the assessee had only filed confirmations from the clients and not the agreement regarding the property taken on lease. It was also submitted that the service centre had been given on lease on long term basis and therefore the decision of tribunal in case of (122 TTJ 163) was distinguishable as in that case the space had been let out on weekly or monthly basis. The Learned DR placed reliance on the judgment of Hon'ble High Court of Gujarat in case of Harikrishna Family Trust vs CIT (306 ITR 303) in which case also the assessee who was not owner of the property had derived rental income from subletting and the same had been held assessable as income from....
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....he facilities such as furniture, fixtures, telephone direct lines, EPABX, telephone board line, water, electricity, security, cleaning facilities, board room maintenance facilities and facilities for receiving and dispatch of posts etc. 2.2.6 The assessee had taken the premises on lease on month to month basis and after developing the same as business centre had sublet the same to different corporate entities along with facilities. The issue is whether income from subletting of the premises with various facilities could be considered as income from business or income from other sources. CIT(A) has held that the assessee was deemed owner of the property under section 27(iiib). But since the assessee had sublet the properties with various facilities he has held that income had to be assessed as income from other sources and not as income from house property. The department has not challenged the decision of CIT(A) not to assess the income as income from house property. The premises have been taken by the assessee on month to month lease which is specifically excluded under the provisions of section 27(iiib) and the assessee therefore cannot be deemed to be the owner of the ....
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....e property. The case of the assessee is similar. The decision of the tribunal in case of Harvinderpal Mehta (HUF) vs DCIT (122 TTJ 163) also supports the case of the assessee. In that case also the assessee was running a business centre in the premises with various facilities such as receptionist, telephone operator, common waiting/guest room, centralized air conditioning with other services like sweeper, telephone, furniture, fax machines etc. The tribunal observed that the object of the assessee was to run the business centre by exploiting the property and not mere letting out the same on rent. It was accordingly held that the income had to be assessed as income from business. The Learned DR has placed reliance on the judgment of Hon'ble High Court of Gujarat in case of Harikrishna Family Trust vs CIT (306 ITR 303) in support of the case of the department. The said case in our view is distinguishable. The assessee in that case had taken the property on lease which was incomplete and after completing the construction the assessee let out the premises to Posts and Telegraph department. The property had not been developed to provide for any other services. It was a case of simple le....
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....the purpose of business and should be allowed. In our view the case of the assessee cannot be accepted that the payment had been made in connection with publicity of the business centre because the AO has given a clear finding that the business centre was fully occupied and had been sublet to companies on long term basis. This finding has not been controverted before us by producing any material. Therefore once the business centre is fully occupied on long term basis there is no question of making any payment for publicity. Obviously the assessee had made the payment as a donation to RPG Academy of Art and Music which could not be held as expenditure incurred wholly and exclusively for the purpose of business. We see no infirmity in the orders of authorities below disallowing the claim. The order of CIT(A) is accordingly upheld. 2.4 The fifth dispute is regarding disallowance of VRS expenses of Rs.1,53,517/-. The assessee had claimed the VRS expenditure under section 35DDA. AO however observed that the assessee had sold its premises and discontinued the business and therefore the VRS expenditure was not allowable as deduction. In appeal the assessee submitted that the VRS....
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....Hyd 75669 -do- Others 603710 No break-up/confirmation filed by the assessee Total 8094091 2.5.1 In appeal the assessee submitted that the AO had treated the sundry creditors as income under section 41(1) only on the ground that the amount remained unpaid as on 31.3.2003. It was argued that the provisions of section 41(1) were attracted only when there was remission or cessation of liability during the year. The assessee pointed out that in several cases the amounts were paid subsequently. The details of such cases are in para 11.2 of CIT(A) order. The assessee referred to judgment of Hon'ble Supreme Court in case of CIT vs Kesaria Tea Co. Ltd. (254 ITR 434) to point out that even when there was unilateral write back of liability it could not be said that the liability had ceased to exist. In this case the assessee had not even written off the liability. CIT(A) however observed that the assessee has not denied the closure of business and did not file any evidence of payment after 31.3.2003. Therefore he agreed with the AO that the provisions of section 41(1) were attracted and accordingly upheld the addition aggrieved by which the assessee is in app....
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....No. F.Y.01-02 F.Y.02-03 1 TMC Bill 99 432703 2 ROC fees 177193 500 3 ROC fees 192985 500 4 Property tax (TMC) SM2031156 67454 5 ROC fees 199726 1000 6 Water charges (NICL) 16 2410 7 Electricity charges(NICL) 105 1653 8 Electricity charges(NICL) 122 193 9 ROC fees 207913 1000 10 TMC bill 275 576851 11 Water charges (NICL) 151 2926 12 Water and electricity charges (NICL) 164 4047 Total 433703 657534 Grand Total (F.Y.01-02 and 02-03) 1091237 Less: Reversal of the expenses booked twice i.e. both in March 02 and April 02. 400 Total of Rates and Taxes 1090837 2.6.1 The AO observed that Thane land was not used for the business of the assessee and the same had also been sold during the year from which the assessee had shown long term capital gain of Rs.1,04,23,716/-. The AO disallowed th....
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....ansfer Registrar 7. Parikh and Associates 107057 Consultant for Secretarial matters 8. P.Pawan Kumar 101000 Accounts/Sales Tax matter Hyd. 9. M.P. Baxi 83500 Consultant for Central Excise Matters 10. D.G.Mahadik 75000 Retainer for Accounts/Admin work 11. S.V. khot 66000 Retainer for Central Excise/Customs/Drawback 12 Y.N.V.T.Babu 63000 Consultant Sales Tax Hyderabad 13 Karim S.Vakil 60000 Advocate Fees Daisylea Flat 14 A.B. Pantankar and Co. 60000 Retainer for Refineries/DGFT/Imports documentation to Banks 15 Rajani D. Patil 57600 Retainer for Admin/Secretarial work 16 RPG Enterprise 225523 Recovery of expenses on deputation 17 N.M. Raiji and Co. 32500 Consultant for Indirect Taxes 18 P.N. Anaokar 30100 Labour matter Thane Employee 19 Jitin Parikh and Associates 29070 Consultant for Secretarial Matters 20 RSM and Co 20250 Consultant for Income Tax matters 21 N.C. Mehta and Co. 18000 Consultant for Sales Tax matters 22 Dhir and Co. 14500 Consultant for Sales Tax matters, New Delhi 23 Jaga....
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....tal asset of the company and therefore he disallowed the claim. CIT(A) has directed the AO to examine the nature of expenses and capitalize such expenses which related to the capital asset of the company and to allow the professional expenses of revenue in nature under income from 'other sources'. We find no infirmity in the order of CIT(A) directing the AO to examine the nature of expenses and capitalize all expenditure related to capital asset of the company. As regards the direction of CIT(A) to allow professional expenses of revenue in nature against income from other sources, we modify the direction and hold that these expenses will be allowed against the business income since we have already held that income from business centre has to be assessed as business income. We dispose off the ground accordingly. 2.8 The disputes raised in ground No.9 is regarding disallowance of depreciation of Rs.3,49,915/- on plant and machinery. The AO disallowed the claim of depreciation on the ground that there was no business done by the assessee during the year. In appeal CIT(A) confirmed the order of AO aggrieved by which the assessee is in appeal before the tribunal. 2.8....
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....s business in nature and not under the head 'other sources'. The Learned DR placed reliance on the orders of authorities below. 2.9.3 We have perused the records and considered the matter carefully. The dispute is regarding allowability of expenditure of Rs.11,70,000/- on items such as insurance, telephone, security, traveling, motor vehicle etc and the expenditure on remuneration to the manager. CIT(A) has allowed the expenditure against income from other sources. The case of the assessee is that expenditure should be allowed against business income. We have already held that the income from the business centre has to be assessed as business income and therefore we hold that the expenditure will be allowed while computing the income from the business centre. 2.10 The ground No.12 is regarding the decision of the AO in not allowing the brought forward business loss to be set off/carried forward. The AO had assessed the business income at Rs.85,41,939/- and income from other sources at Rs.97,06,126/- and the long term capital gain at Rs.1,04,23,716/-. The AO had set off the brought forward business loss only to the extent of business income of Rs.85,41,939/- and ....
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....719) in which it has been held that the provisions of section 234D will be apply only from assessment year 2004-05. The assessment year involved in the present appeal is assessment year 2003-04 and therefore no interest can be charged under section 234D in view of the decision of the Special Bench (supra). We therefore set aside the order of CIT(A) and delete the interest levied. 2.12 The assessee has also raised two additional grounds. One of the additional grounds which related to set off of brought forward business loss and depreciation has already been dealt with while dealing with the ground No.12 earlier. The second additional ground is regarding allowability of expenditure of Rs.10,90,837/- on account of rates and taxes against the capital gain arising from sale of land. The case of the assessee is that in case these expenses are not allowed as business expenditure, the same should be allowed as deduction while computing the capital gain from sale of land as expenses were incurred in relation to the land. 2.12.1 The Learned AR for the assessee argued that the expenditure has to be allowed while computing capital gain whereas the Learned DR placed reliance....
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....y. The dispute is regarding allowability of expenditure on account of sales tax relating to the sales in the earlier years. The AO had disallowed the claim on the ground that the business of the assessee had closed. CIT(A) has however allowed the claim on the ground that the AO had assessed income on account of sundry creditors relating to earlier year under section 41(1) and therefore the claim was allowable. In our view the claim of the assessee has to be allowed as we have already held that the income from the business centre has to be assessed as business income and thus the business has not closed. Accordingly we confirm the order of CIT(A) allowing the claim. 3.2 The second dispute is regarding the decision of CIT(A) allowing the professional expenses as revenue expenditure under section 57(iii) of the I.T. Act. The AO had disallowed the professional expenses fully on the ground that the business had discontinued. CIT(A) however allowed the professional expenses which did not relate to capital assets and were revenue in nature under section 57(iii) of the I.T. Act against the income from other sources. Aggrieved by the said decision the revenue is in appeal before t....