2012 (9) TMI 1048 - AT - Income Tax

Summary

Issues Involved:
1. Disallowance of compounding fees.
2. Deletion of addition made on a protective basis as income from other sources.
3. Classification of rental income from Forum Mall and Eva Mall.
4. Classification of hire charges in respect of fit-outs.

Summary:

1. Disallowance of Compounding Fees:
The assessee was aggrieved by the CIT(A)'s order confirming the disallowance of compounding fees of Rs. 5,02,570/- paid to B.M.P, holding it to be prohibited by law and thus not allowable. The Tribunal noted that this issue was covered against the assessee by its own decision for the assessment years 2001-02 and 2003-04, which was also confirmed by the learned DR. The Tribunal cited the Karnataka High Court's decision in Mamta Enterprises, which held that compounding fees paid for violations of sanctioned plans are not allowable as they are considered penalties for infractions of law. Consequently, the Tribunal dismissed the assessee's appeal on this ground.

2. Deletion of Addition Made on Protective Basis as Income from Other Sources:
The Revenue challenged the CIT(A)'s deletion of the addition made on a protective basis as income from other sources. The Tribunal referred to its decision for the assessment year 2006-07, where it was held that the addition of Rs. 7.33 crores made on a protective basis was not justified as the issue had reached finality with the Tribunal's direction to accept the project completion method of accounting for the year under reference. Therefore, the CIT(A) was justified in deleting the addition, and the Tribunal dismissed the Revenue's appeal on this ground.

3. Classification of Rental Income from Forum Mall and Eva Mall:
The Revenue contended that the CIT(A) erred in directing the AO to assess the rental receipt from Forum Mall and Eva Mall as income from Profits and Gains from Business/Professions instead of income from House Property. The Tribunal referred to its decision for the assessment year 2005-06, where it was held that the income from the Mall should be assessed under the head 'income from business' based on the nature of the agreements and the services provided. Consequently, the Tribunal dismissed the Revenue's appeal on this ground.

4. Classification of Hire Charges in Respect of Fit-Outs:
The Revenue argued that the CIT(A) erred in directing the AO to assess the hire charges in respect of fit-outs let out to tenants as income from other sources. The Tribunal referred to its decision for the assessment year 2004-05, where it was held that such hire charges should be treated as income from other sources based on the principle of consistency and the nature of the transactions. Therefore, the Tribunal dismissed the Revenue's appeal on this ground.

Conclusion:
In conclusion, the Tribunal dismissed both the cross appeals filed by the Revenue and the assessee, upholding the CIT(A)'s decisions on all the issues involved. The order was pronounced in the open court on 14th Sept, 2012.