2012 (4) TMI 565 - AT - Income Tax

Summary

Issues Involved:
1. Computation of profit on sale of stock-in-trade.
2. Determination of the head of income under which rent received on hiring of terrace is taxable.
3. Disallowance u/s 14A.

Summary:

1. Computation of Profit on Sale of Stock-in-Trade:

1.1 The assessee sold commercial properties at "Vaishali" for Rs. 43,73,800/-. The AO requested details of the sale agreement and justification for the consideration. The assessee provided an unstamped, unregistered, and undated agreement without the circle rate. The AO, after inquiry, worked out the value at Rs. 55,37,240/-, leading to an addition of Rs. 11,63,440/- to the income returned by the assessee.

1.2 The CIT(A) found that the AO presumed the entire floor was sold, but the possession letter showed the area sold was 2,443 sq. ft. Applying the circle rate to 2,443 sq. ft., there was no scope for addition. Thus, the addition made by the AO was deleted.

1.3 The Tribunal agreed with the CIT(A) that the AO's assumption was incorrect and dismissed ground nos. 1 to 4.

2. Determination of the Head of Income for Rent Received:

2.1 The AO taxed the rent received from terraces as business income, citing the asset as stock-in-trade and referring to the decision in Shambhu Investment (P) Ltd. vs. CIT.

2.2 The CIT(A) directed the AO to tax the income u/s 22, noting that the assessee had shown such income as property income for the last six years, and the AO had accepted this in previous assessments.

2.3 The Tribunal, referencing the case of JMD Realtors (P) Ltd. Vs. DCIT, held that income from installation of towers or antennae on terraces is not income from house property but should be assessed under "income from other sources."

2.4 The Tribunal concluded that the rental income derived from terraces is not house property income u/s 22 but is assessable under the residuary head. Thus, ground nos. 5 and 6 were allowed.

3. Disallowance u/s 14A:

3.1 The AO made a disallowance of Rs. 75,221/- u/s 14A, as the assessee earned tax-free income. The CIT(A) upheld a further disallowance of Rs. 19,324/-, noting that the AO did not record reasons for the disallowance's correctness.

3.2 The Tribunal upheld the CIT(A)'s order, noting that the AO did not record reasons for the disallowance and that the CIT(A) had worked out a reasonable amount of disallowance.

3.3 Thus, ground no. 7 was dismissed.

Conclusion:

4. The appeal is partly allowed.