TaxTMI 
TaxTMI 
TaxTMI 
2014 (5) TMI 822
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....the appeal of the Department confirming the order of the CIT(A), Kanpur directing the Assessing Officer to assess the rental income of Rs. 3 lakhs from letting out of City Centre, the Mall, Kanpur as 'income from business' instead of income from 'House Property' without properly appreciating the facts of the case? iii.)Whether the Income Tax Appellate Tribunal was justified in law in dismissing the appeal of the Department confirming the order of the CIT(A), Kanpur deleting the addition of Rs. 5,26,213/- on account of disallowance of interest on borrowed capital without properly appreciating the facts of the case?" The brief facts of the case giving rise to this appeal are; the assessee owns the properties namely, 12/483, Mac Robertganj, Kanpur and City Centre, the Mall, Kanpur. The assessee was receiving yearly rent of Rs. 3 lakhs from the above properties. The above receiving was claimed as business income against which the depreciation was also claimed. The return was filed by the assessee for the assessment year 1996-97 showing rental income of Rs. 3 lakhs from the aforesaid two properties. In the return of the assessee, the above amount was reflected as '....
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....Society Motors has been for acquiring interest and not for the purpose of earning income. Interest on such investment is on capital account and, therefore, not allowable deduction. Sri S.D. Singh, learned Senior Advocate appearing for the assessee refuting the submission of learned counsel for the revenue submitted that findings of fact has been recorded by the Tribunal that City Centre premises, given on rent to M/s Society Motors Ltd. has been taken back by the assessee and the business has started from that premises which clearly indicate that property was given on rent for a temporary period with a view to exploit a commercial asset on account of financial crises. The assessee had no intention to let out the premises permanently. He submits that the income derived from letting out of the aforesaid commercial asset has rightly been treated as business income. In so far as the deduction claimed by the assessee on the interest is concerned, it is submitted that interest fee advances with the assessee were far in excess to the investment made in purchasing the shares. He submits that assessee has rightly been held entitled for deduction and the order of Tribunal is correct. We ha....
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....ly certain portion of two properties in question were let down by the assessee due to certain financial crisis. The properties were business assets and used by the appellant for his own business. Finding has also been recorded by the Appellate Authority that appellant/assessee had taken back the City Centre Showroom from M/s Society Motors Ltd. As laid with the Apex Court, the intention of the parties in letting out the premises is important factor and it depends upon case to case, as to for what purpose the properties had been let out. The Tribunal after considering all the relevant factors has recorded findings and came to the conclusion that letting out of the commercial asset was business income. It is useful to get paragraph 4 of the judgment which is to the following effect:- "We have considered the rival submissions. The Hon'ble Supreme Court in the case of Universal Plast Ltd, 103 Taxman 493, has held that no precise test can be laid down to ascertain whether income by way of lease amount, rent, licence fee etc received by an assssee from leasing or letting out of the assets would fall under the head 'profits and gains of business or profession'. It is a mixed ....
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....be whether the transaction is a normal part of the business of the assessee. If the business of the assessee has nothing to do with the renting of property and renting is an isolated transaction to earn property income, the mere fact that such income will result in reduction of business loss is not enough to hold that it will fall under the head of business income. If this was to be the sole test, every rental income of a businessman has to be held to be business income which is not the statutory scheme as held by the hon'ble Supreme Court particularly in East India Housing and Land Development Trust Ltd. vs. CIT [1961] 42 (SC)." Another judgment relied by Sri Upadhyay is Commissioner of Income Tax vs. Chennai Properties and Investments Ltd. 266 ITR 685. The Madras High Court also laid down proposition to the similar effect. It is useful to quote following laws which is as follows: "Although it was held by the Constitution Bench in the case of Sultan Brothers [1964] 51 ITR 353 (SC) that whether a particular letting is business has to be decided in the circumstances of each case and that each case has to be looked at from a businessman's point of view to find out whether t....
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....ares is not the business of assessee. It is an investment for him. Thus, it is clear that the assessee has diverted interest bearing loans taken for business purposes to the interest free investments being non business purposes, in the shape of purchase of shares." The appeal filed by the assessee against the order of Assessing Officer was allowed. The appellate Authority has noted that opening balance of advance from the customer was Rs. 36.92 lakhs as on 1.4.1996, such amount was interest free advance form the customers. Appellate Authority noted that much less amount was utilized for purchase of share of M/s Society Motors Pvt. Ltd. The appellate Authority accepted the plea of the assessee that he had more interest free funds available with him than what he utilized in purchase of share of M/s Society Motors Pvt. Ltd. during the relevant accounting year, therefore, rest of the money was utilized only for the business purpose. The appellate Authority has rightly relied on the judgment of the Apex Court in Commissioner of Income Tax vs. Rajendra Prasad Moody 115 ITR 519. The Apex Court in the above case held that even utilization of money for purchase of share which has not yield....