2014 (11) TMI 976 - AT - Income Tax

Nature of income - interest on deposit interest on staff loan interest on Government Securities service charges for handling UNDP programme miscellaneous income profit on sale of fixed assets difference in exchange commitment fee application fee MNES service charges - business income OR Income from other sources - Held that - The correct nature of the above items of income as to whether falling under the head Income from other sources or Profit and gains of business or profession cannot be determined at our end in the light of the non-speaking order passed by the authorities below on the exact nature of such income. The Tribunal can adjudicate when some finding is returned either way by the authorities below in respect of such items of income. In the absence of any such finding we are handicapped to adjudicate their nature. In our considered opinion the ends of justice would meet adequately if the matter is sent back to the Assessing Officer for elaborating considering and then deciding the true nature of income of the above discussed items in the light of the judgment of the hon ble jurisdictional High Court by means of a speaking order. - Decided in favour of assesse for statistical purposes. Non-granting of exemption under section 10(23G) of the Act in respect of the abovereferred items of income - Held that - Only when the correct nature of income is determined as to whether it is income from other sources or business income that the position regarding the allowability or otherwise of exemption under section 10(23G) can be ascertained. We therefore direct the Assessing Officer to decide the question of exemption under section 10(23G) in respect of the above items of income after first ascertaining the correct nature of income as discussed above. Disallowance of depreciation - CIT(A) allowed the claim - Held that - It has not been denied by the Assessing Officer that the assessee exercised dominion over such property having right to occupy and use the same. In such circumstances the assessee shall be treated as the owner of such properties entitled to claim of depreciation. In so far as the second objection of the Assessing Officer about the claiming of depreciation on the cost of land is concerned we agree in principle that there can be no question of allowing depreciation on the cost of land. The learned authorised representative contended that the value of the asset under this block does not include the cost of land. In our considered opinion it would be in the fitness of things if the impugned order on this issue is set aside and the matter is sent back to the Assessing Officer for identifying the cost of land if any included in the amount on which depreciation has been claimed. We order accordingly and direct the Assessing Officer to refuse depreciation on the cost of land if any included in such gross value on which depreciation was claimed by the assesse - Decided partly in favour of revenue.

Summary

Issues Involved:
1. Nature of Income: Business Income vs. Income from Other Sources.
2. Exemption under Section 10(23G) of the Income-tax Act.
3. Calculation of Disallowance of Expenses Relating to Exempt Income.
4. Deduction under Section 36(1)(viii) and Section 36(1)(viia)(c).
5. Allowance of Depreciation on Office and Residential Buildings.

Detailed Analysis:

Assessment Years 1998-99 to 2002-03:
The primary issue was the classification of various types of income such as interest on deposits, staff loans, government securities, service charges, and other miscellaneous incomes. The Tribunal previously categorized these as business income, granting exemptions under Section 10(23G). However, the High Court found the Tribunal's decision lacked detailed analysis of the income's nature and remitted the case back for a fresh determination. The Tribunal, acknowledging the lack of detailed findings by the Assessing Officer (AO) and Commissioner of Income-tax (Appeals), remitted the matter back to the AO to decide the nature of income with a detailed speaking order. The exemption under Section 10(23G) was deemed consequential to the determination of the income's nature.

Assessment Year 2003-04:
The cross-appeals by the assessee and Revenue revolved around similar issues. The AO was directed to re-examine the nature of income and, based on that, decide on the exemption under Section 10(23G). The issue of disallowance of expenses related to exempt income was also deemed consequential and remitted back to the AO for fresh consideration.

Assessment Year 2004-05:
The issues included the treatment of various incomes, exemption under Section 10(23G), and deductions under Sections 36(1)(viii) and 36(1)(viia)(c). The Tribunal directed the AO to re-assess the nature of income and subsequently decide on the exemptions and deductions. The issue of the revised return was not pressed by the assessee.

Assessment Year 2005-06:
The appeal by the Revenue involved the classification of income, exemption under Section 10(23G), and deduction under Section 36(1)(viii). The Tribunal remitted these issues back to the AO for a detailed examination. Additionally, the AO was directed to re-evaluate the claim for depreciation on office and residential buildings, ensuring that the cost of land was excluded from the depreciation claim, following the principles laid out in the Supreme Court's judgment in Mysore Minerals Ltd. v. CIT.

Assessment Year 2006-07:
Cross-appeals addressed the nature of income, exemption under Section 10(23G), and deductions under Sections 36(1)(viii) and 36(1)(viia)(c). The Tribunal remitted these issues back to the AO for detailed examination. The Tribunal also directed the AO to reassess the depreciation claim on similar grounds as the previous year.

Assessment Year 2007-08:
The Revenue's appeal focused on the classification of income, deduction under Section 36(1)(viii), and depreciation. The Tribunal remitted these issues back to the AO for fresh consideration, consistent with the approach taken in earlier years.

Assessment Year 2008-09:
Cross-appeals involved similar issues as previous years. The Tribunal directed the AO to re-evaluate the nature of income, exemptions, and deductions, following the same approach as in earlier years.

Assessment Year 2009-10:
The Revenue's appeal addressed the classification of income, deduction under Section 36(1)(viii), and depreciation. The Tribunal remitted these issues back to the AO for fresh examination, consistent with the directions given for earlier years.

Conclusion:
The Tribunal consistently remitted the issues back to the AO across all assessment years for a detailed examination of the nature of income, exemptions under Section 10(23G), and relevant deductions. The AO was directed to issue speaking orders and ensure a thorough analysis of each income item, allowing reasonable opportunities for the assessee to be heard.