2011 (7) TMI 1162 - AT - Income Tax

Summary

Issues Involved:
1. Classification of rental income from factory building.
2. Deletion of addition u/s 50.
3. Adoption of value for factory building against stamp valuation u/s 50C.

Summary:

Issue 1: Classification of Rental Income from Factory Building

The Revenue challenged the classification of rental income from a factory building under the head "Income From House Property" instead of "Income From Other Sources." The Commissioner (Appeals) directed the Assessing Officer to tax the rental income under "Income From House Property," as the lease was only for the factory building and not for plant, machinery, or furniture. The Tribunal upheld this decision, noting that the Revenue had previously accepted this classification in earlier assessment years, thus maintaining consistency.

Issue 2: Deletion of Addition u/s 50

The Revenue contested the deletion of an addition of Rs. 28,49,088 made u/s 50, arguing that the asset was depreciable and depreciation had been allowed in previous assessment years. The Commissioner (Appeals) found that the factory building was transferred to a private limited company without executing a conveyance due to pending legal formalities. The building was later sold for Rs. 23,75,000. The Tribunal upheld the Commissioner (Appeals)'s decision, finding no infirmity in the deletion of the addition.

Issue 3: Adoption of Value for Factory Building Against Stamp Valuation u/s 50C

The Revenue argued that the Assessing Officer should have adopted the stamp valuation of Rs. 33,78,500 instead of Rs. 23,75,000 for the factory building. The Commissioner (Appeals) noted that the stamp duty valuation included the value of the lease of land, which belonged to an individual, not the assessee company. The Tribunal upheld the Commissioner (Appeals)'s direction to take the consideration at Rs. 23,75,000, as the Assessing Officer failed to refer the matter to a valuation officer despite the assessee's objection to the stamp duty valuation.

Conclusion:

The Tribunal dismissed the Revenue's appeal, upholding the Commissioner (Appeals)'s findings on all issues. The rental income was correctly classified under "Income From House Property," the addition u/s 50 was rightly deleted, and the value for the factory building was appropriately adopted against the stamp valuation u/s 50C.

Order pronounced in the open Court on 29.7.2011