TaxTMI 
TaxTMI 
2017 (12) TMI 1044
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.....2 On the facts and in circumstances of the case the CIT(A) was not justified in sustaining assessment of lease rent to the extent of Rs. 62,92,739/- as against Rs. 60,00,000/- received by appellant company on the basis of TDS certificate. Lease rent of Rs. 2,92,739/- was received in advance for succeeding accounting year. (iii) Ground No.3 On the facts and in circumstances of the case the CIT(A) was not justified in sustaining disallowance of following expenses:- (i) Dead Rent Rs.4,16,449/- (ii) Environment expenses Rs.2,00,640/- (ii) Salary & wages paid Rs.36,50,617/- The above disallowance of expenses are bad in law and deserves to be quashed. Without prejudice to our submission that the disallowance of expenses is bad in law, alternatively the loss incurred by appellant Co. under the above heads should have been allowed from the income assessed." 4. In the grounds No. 1 and 2 of the appeal, the issue involved is sustaining the assessment of leasing charges of machinery and also enhancing it from 60.00 lacs to 62,92,739/- as income from other sources instead of claiming the income from business. The ld. CIT(A) has dealt the issue by h....
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....Lac. The A.O. rejected the claim of the appellant that such lease income is assessable under the head 'income from business' and held that such lease income is assessable to tax under the head 'income from other sources' and against the declared lease rent of Rs. 60 Lac, the AO assessed it at 62,92,739/-. (iv) In support of its claim that lease income is to be assessed as business income, the AR relied on clause 7 of the Object clause of the Memorandum of Association of the appellant company, according to which it can lease out whole or any part of the undertaking of the company or any lands, business, property, rights or assets of any kind of the company or any share or interest therein respectively in such manner and for such consideration as the company may think fit and in particular for share, debenture, securities of any other corporation having objects altogether or in part similar to those of the company. It was the contention of the appellant that the AO has completely ignored the aforesaid clause 7 of main object clause in the Memorandum of Association. It was further submitted that such income is rightly assessable as income from business at Rs. 60 Lac as against Rs. ....
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....ements, conveniences, provisions, and things capable of being used in connection with metallurgical operations, or required by workmen and others employed by the Company. 4. To construct, carry out, maintain, improve, manage, work, control and superintend any roadways, tramways, railways, bridges, reservoirs, water-courses, aqueducts, wharves, furnaces, mills, crushing works, factories, warehouses, shops, and other works and conveniences which may seen directly or indirectly conducive to any of the objects of the Company and to contribute to subsidise, or otherwise aid or take part in any such operations. 5. To search for get, work, raise, make merchantable, sell and deal in soapstone (talc, steatite), Dolomite and other minerals and substances and to manufacture and sell fuel and other products. 6. To take on lease, hire, purchase or acquire by license or otherwise any lands, plantations, rights over or connected with lands, plantations, rights over or connected with lands, mills factories, plant, buildings, works, vessels, boats, barges, launches, lorries, carts, wagon, mills, machinery, apparatus, stock-in-trade, patents, inventions, trademarks, rights, privileges, and ....
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.... carried on. We find nothing in the cases referred, to support the proposition that certain assets are commercial assets in their very nature." Thus, by stating the leasing as an object no. 7 in MOA, it did not mean that the appellant company was engaged in the leasing business. (ix) During the appellate proceedings, the appellant was required to intimate the last financial year in which the mining activities were carried out by the appellant at its mines. Vide order sheet entry dated 20.10.2016, it was submitted by the AR that at least since FINANCIAL YEAR 2008-09, no mining activities were carried out as environment clearance were not obtained. Even, as on date, the mining activities on the mines leased to the appellant company were not started. Thus, the contention of the appellant that the mining activities were temporarily discontinued during the year under consideration is not correct as at least for the last 7-8 years, no mining activities were carried out by the appellant. During the appellate proceedings, the A.R was required to submit the details of mining leases of the appellant company in respect of which mining plans/environment clearance could not be obtained an....
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....ffender, if in custody shall be released forthwith." (xi) Thus, since the appellant was not having the statutory approval to do the mining activities for the last 7-8 years, it cannot be said that it temporarily discontinued the mining activities. It may be mentioned that in the case of Royal Beverages Pvt. Ltd. vs. DCIT [2016] 70 taxmann.com 86 (Chandigarh Trib.)(Third Member), it has been held by the Hon'ble ITAT that: * A temporary discontinuance of business may lead to the interference that there is some lean economic period of recession and that the business can be revived when proper circumstances exist but then it is not a conscious or deliberate act on the part of the assessee which would lead to the abandonment of business. It is the peculiar facts of the case which would determine as to whether the assessee has ceased to carry on its business or it was a temporary discontinuance. * In CIT v. Integrated Technologies Ltd., the High Court of Delhi in ITA 530/2011 doted 16-12-2011, holds that the only condition to claim depreciation etc., as expenditure is that it is not necessary that plant & machinery owned by the assessee should be actually put to use in the relev....
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....bited by the operation of law to do mining activities as statutory clearances have not been received and it had given its pulverizers on lease to M/s UMDSPL since 01.04.2008. (xiv) Therefore, in view of the above discussion and the recent decision of Hon'ble HAT, Third Member, it is held that the AO was justified in treating the lease rent income as income from other sources. (xv) The appellant has shown the lease rent at Rs. 60 Lac whereas as per Form 26AS and the TDS certificate, the lease rent was shown at Rs. 62,92,739/- and during assessment proceedings, it was submitted before the AO that amount of Rs. 2,92,000/- was paid as advance lease rent by UMDSPL and TDS was deducted thereof and in support of its claim, it filed copy of account of UMDSPL as appearing in its books of accounts. Since, no satisfactory explanation was furnished before the AO, the AO treated the amount of Rs. 62,92,739/- as lease rent against Rs. 60 Lac declared by the appellant company. (xvi) During the appellate proceedings, nothing has been stated by the appellant on this issue. It is noted from the assessment record that though the appellant has filed a copy of account of UMDSPL as appearing in....
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.... been received for these plans till the date of hearing of this appeal. All these facts suggest that the letting out of the machinery was not on account of temporary lull in the business of assessee. The facts on record suggest that the assessee's mining business is almost permanently closed. In view of these factual matrix, we hold that the income from leasing out of the machinery to the sister concerns shall be assessed as income from other source. In view of this, we uphold the order of the ld. CIT(A) on this issue. However, the assessee had made an alternate submissions that the loss incurred by the assessee company under the various heads of expenses should be allowed from the income assessed under other heads of income. From the records we observe that the genuineness of these expenses debited in P&L account have not been verified by the authorities below. Prior to considering the allowability of these expenses. The genuineness and business requirement of the assessee needs verification. Therefore, for the verification of the genuineness of the expenses and also the justification of the expenses for business requirement of the assessee, the issue is restored back to the file ....
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....der consideration and the lease rental income was held to be rightly treated by the AO as income from other sources' and since these expenses are not related with the earning of lease rental income, it is therefore, held that the AO was justified in disallowing the 'environment expenses' and 'dead rent' and thus the addition of Rs, 2,00,640/- and 4,16,449/- made by the AO is hereby sustained. 3.3.2 Determination: (i) The appellant has debited a sum of Rs. 44,00,617/- on account of salary payments and it was observed by the AO that these expenses have no nexus with the earning of the rental income. However, by considering that the appellant may have incurred some salary expenses for essential administrative staff for day to day office affairs, the AO has allowed a sum of Rs. 7,50,000/- thereof and consequently, has made an addition of Rs. 36,50,617/- to the income of the appellant. (ii) During the appellate proceedings, it was submitted by the appellant that the said expenditure has been incurred wholly for the purposes of the business and it is neither personal expenditure nor capital expenditure. It was further submitted that it is not open to the De....