TaxTMI 
TaxTMI 
2021 (2) TMI 541
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.... The learned CIT(A) failed to appreciate that the appellant continues to run its business and grossly erred in confirming the action of the learned AO of disallowing Rs. 42,53,152/- of Retrenchment Compensation, without appreciating the fact that such compensation is paid under section 25F of Industrial Disputes Act and is a deductible expenditure. Ground No. 3: (i) The learned CIT(A) grossly erred in confirming the action of the learned AO to treat the entire lease rentals of Rs. 30,33,600/- included under the head 'Income from Business' to be 'Income from Property' of Rs. 27,00,000/- and 'Income from Other Sources' of Rs. 3,33,600/-. (ii) Without prejudice to above, the learned CIT(A) grossly erred in confirming the action of the learned AO of disallowing Rs. 17,29,197/- being depreciation on assets given on lease rental, u/s 57(ii) of the Income Tax Act, 1961. Ground No. 4: The learned CIT(A) grossly erred in confirming the action of the learned AO of making an addition of notional rental income of Rs. 19,60,888/-. 3. We have carefully heard the rival submissions and perused relevant material on record including the orders of lower authoritie....
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....95 to its associated concerns. The assessee defended its stand of offering rental / lease income as 'Business Income' by submitting that in earlier years, this position was accepted by the department at assessment level itself. However, in the background of ratios of various judicial pronouncements holding the field, Ld. AO ultimately held that rent received from building was to be assessed under 'Income from House Property' whereas rent received on Machinery and other asset was to be taxed as 'Income from Other Sources'. The alternative claim that the depreciation should be allowed u/s 57(ii) was also rejected since the assessee was not hirer of plant, machinery and furniture etc. 4.4 Proceeding further, it was noted that the assessee was receiving nominal rent of Rs. 10000/- from M/s VSS for using the premises of 1740.20 Sq. Meters at Daman. M/s VSS had met the entire cost of construction of the let out premises to the tune of Rs. 163.40 Lacs which was shown under the head sundry creditors. In the lease agreement, this amount was shown as interest free security deposit. However, Ld. AO, finding the agreed rent to be highly unimaginable, worked out additional rent of Rs. 19.60 L....
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....s continuing despite the observation that no manufacturing activity was being carried out by the assessee during the year which is also evident from the fact that except for depreciation allowance, retrenchment compensation along with minor disallowances, all other business expenditure as claimed by the assessee has been allowed by Ld. AO. 7. Proceeding further, we find that various lease agreements of buildings and Plant & Machinery, entered into by the assessee, were continuing since past many years and the assessee earned rental / lease income in similar manner since AY 1999-2000 and offered the same as 'Business income'. The assessee's stand has always been accepted by the department in most of other years. The Ld. AR has tabulated the assessment position, along with documentary evidences, for various years in the following manner:- No. AY Intimation / Assessment Order Total Income as per Return Assessed as per intimation / assessment order Accepted as Business Income Attached -ITR/ Computation / Intimation / Assessment Order 1 1999-00 Intimation u/s. 143(1) 8,41,071 8,41,071 Yes 1-3 2 2000-01 No intimation/ No order 11,97,846 Yes 4-5 3 2....
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.... be pointed out in the assessment Order. In so doing the jurisdictional High Court followed the judgment of the Supreme Court in Bharat Sanchar Nigam Ltd. v/s. Union of India reported in [2006] 282 ITR 273 where the court had drawn a distinction between the principle of res judicata and consistency. The decision of Hon'ble Apex Court in Radhasoami Satsang V/s CIT (193 ITR 321) also favor the same proposition. 8. Therefore, on the facts and circumstances, the action of Ld. AO in disturbing the rental / lease income as 'Business Income' could not be held to be justified. Once the assessee's position has been accepted in so many past as well as succeeding years, there is no reason to disturb the same only in few years, the facts being remaining the same. Therefore, we are inclined to hold that the rental / lease income from building as well as from plant & machinery was assessable as 'Business Income' only. Consequently, the assessee would be entitled for depreciation on these assets. In such a scenario, the question of determining the notional rental income would not, at all, arise. We order so. Ground Nos.3 & 4 stand allowed to that extent. 9. So far as the issue of retrenchment ....