2012 (8) TMI 1045 - AT - Income Tax

Summary

Issues involved:
The issues involved in the judgment include the classification of income received from renting a part of hotel premises as "Income from House Property" instead of "Income from Business or Profession," application of Rule of Consistency, treatment of rental receipt as "Income from House Property," and part disallowance of deduction out of Director's Remuneration.

Issue 1: Classification of income

The appellant contested the classification of income from renting hotel premises as "Income from House Property" instead of "Income from Business or Profession." The appellant argued that the income had consistently been assessed as "Business Income" in previous assessment years, including the immediate previous year relevant to the assessment year in question u/s 143(3) of the Act.

Issue 2: Rule of Consistency

The appellant raised concerns regarding the failure to follow the Rule of Consistency, emphasizing that there had been no material change in the nature of income during the assessment year under appeal. The appellant highlighted the identical facts and circumstances compared to earlier years.

Issue 3: Treatment of rental receipt

The appellant argued that the property in question was being commercially exploited as a business asset for hotel operations since 1982, with a valid license for hotel operations renewed annually. The appellant contended that assessing the rental income as "Income from House Property" disregarded the historical assessment of the case.

Issue 4: Disallowance of Director's Remuneration

The appellant challenged the part disallowance of the deduction out of Director's Remuneration, asserting that the Commissioner erred in sustaining the findings of the Assessing Officer without considering the past assessed history on this matter.

The Tribunal considered the arguments presented by both parties. The appellant highlighted their consistent assessment of rental income as business income in preceding and subsequent years, supported by the decision in Radha Soami Satsang Vs. CIT - 193 ITR 321. The Departmental Representative relied on the lower authorities' orders.

The Tribunal referred to the decision of the Hon'ble Apex Court in Radha Soami Satsang, emphasizing that in the absence of material changes justifying a different view, the exemption of the appellant should not have been reopened. The Tribunal noted that the rental income had been consistently assessed as business income in previous and subsequent years, including the immediate preceding year.

Based on the principles outlined in the Radha Soami Satsang case, the Tribunal directed the Assessing Officer to assess the rental income as business income and allow deductions for related expenditures, including Director's Remuneration. Consequently, the appeal of the assessee was allowed.

The decision was pronounced in open court on 9th August 2012.