TaxTMI 
TaxTMI 
2014 (2) TMI 739
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....aced reliance on the order of AO & CIT(A). 6. Succinctly stated facts of the case are that during the assessment proceedings the AO noted that a sum of Rs.65,11,970/-had been debited by the assessee to the profit and loss account by way of interest. The AO also noted that that out of the said amount, the assessee had disallowed a sum of Rs.36,86,605/- in the computation of income, and, therefore, effectively claimed an amount of Rs.28,25,365/- by way of interest. After giving necessary show cause notice and after examining the reply of the assessee the AO disallowed the sum of Rs.28,25,365/- on the grounds that the expense was not for the purposes of business and, hence, not allowable under Section 36(1)(iii) of the Act. 7. Assessee preferred appeal before the CIT(A), who allowed the issue partly in favour of the assessee. 8. After considering the order of the AO and CIT(A) and the order of the Tribunal in the case of assessee, it is seen that ground No.1 is covered by the order of the Tribunal for earlier year. 8.1 In respect to disallowance of Rs.12,19,177/-, which was paid to the Allahabad Bank on account of loan taken of Rs.2 Crores for windmill business. Similar di....
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....facts of the issue are that during the assessment proceeding, the AO noticed that the assessee has received one per cent (1%) of the turn over from M/s Kamat Hotels (India) Ltd (hereinafter referred to as 'KHIL') and has shown business income. The AO asked the assessee as to why this income should not be treated as income from house property as the entire hotel has been given to another hotel for its use. In reply it was submitted that the main objection of the company was to carry on the business relating to running of hotels; till 1994 the assessee company was running the hotel on its own; all the licenses were in the name of the assessee company; on conclusion of agreement with KHIL the hotel was to revert back to the assessee; there was no minimum guarantee amount in the agreement; even the interest free deposit received from KHIL is refundable. It was also submitted that from assessment year 1995-96 to 2005-06, the income under the agreement has been assessed as business income. It was also submitted that the assessee is exploiting the hotel as a business asset. However, the AO was not agreed with the contention of the assessee and placing reliance on the decision of the Hon'b....
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...., it was agreed that KHIL will reconstruct the entire hotel at its own cost, if it needs. It was also observed by the CIT(A) that though the entire hotel was given under the agreement to KHIL to run, however, if the control of the hotel was given to KHIL, therefore, right of the assessee is to be treated as income from house property and not from the business. The CIT(A) while rejecting the claim of the assessee has also examined audited accounts of the assessee and found that during the year apart from having income from the impugned management agreement, the other sources of the assessee's income are from wind power generation unit and income from financing. The last two sources of income have been assessed under the head "business income". Other than leasing out the Hotel property to its sister concern i.e. KHIL, the assessee has carried out no other business activity in the field of running a hotel or restaurant. Accordingly, the CIT(A) held that it is clear that the assessee has no intention to run the hotel and the AO was correct in following the decision in the case of Shambhu Investments Pvt. Ltd. and confirmed the order on this issue. 12. Learned counsel of the assessee....
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....e return was filed for assessment year 1995-96 showing the revenue receipt from KHIL as business income and the same was accepted. The assessment was completed under Section 143(3). Up to assessment year 2005-06, the assessment has been completed by the AO and the contention of the assessee that the revenue received from KHIL are business asset, were accepted. For assessment year 2005-06 & 2003-04 the assessment was completed under Section 143(3). The matter reached to the stage of the Tribunal, however, this issue was never disputed by the AO that the revenue receipt received from M/s KHIL under the agreement are business receipt as they were accepted. Therefore, it cannot be said that any character of the revenue receipt has been changed in the year under consideration. In our considered view, the principle of consistency in the case in hand is applicable. Accordingly, the AO should have accepted the receipt under the head business income shown by the assessee. 14.1 The AO has placed reliance on the decision of the Hon'ble Supreme Court in the case of Shambhu Investments (P.) Ltd. (supra), which has been considered by the learned CIT(A) also. However, we noted that in the case....
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....greed upon. It is also a matter of fact that the assessee was running this hotel itself and the assessee is also running various other hotels at present. 14.3 In case of Mohiddin Hotels (P.) Ltd. (supra), similar facts were involved. In this case also the hotel was given on lease to a third party. The AO treated the lease income as income from house property against shown by the assessee as business receipt. The Tribunal allowed the issue in favour of the assessee. On appeal before the High Court, the Hon'ble High Court in the aforesaid case confirmed the order of the Tribunal by holding as under :- "Held, that from the facts found by the Tribunal as well as the agreement dated February 1, 1987, it was more than clear that the agreement between the assessee and S related to the building that was ready for the purposes of commencing the hotel business. The agreement did not relate to a bare tenement but was in respect of the hotel. That the said hotel was complete with fittings and fixtures and ready for commencing the business was apparent from the agreement. The fact that all licences, permissions and no objection certificates required for running ho....