2011 (12) TMI 643 - AT - Income Tax

Summary

Issues Involved:
1. Condonation of delay in filing the appeal.
2. Classification of income from leasing out the terrace as "Income from House Property" vs. "Income from Other Sources."
3. Disallowance of expenses claimed by the assessee.
4. Additional ground regarding the principle of mutuality.

Detailed Analysis:

1. Condonation of Delay in Filing the Appeal:
The assessee filed an appeal with a delay of 1167 days, attributing the delay to the time taken in proceedings under section 154 of the Income Tax Act. The assessee argued that the delay was neither intentional nor willful but due to the prolonged period taken by the CIT(A) to dispose of the petition under section 154. The assessee relied on the decision of the Hon'ble Allahabad High Court in Subhash Malik vs CIT, which held that delays due to prolonged section 154 proceedings could be considered just and sufficient cause.

The Revenue opposed the condonation, arguing that the appeal should have been filed within the limitation period from the original CIT(A) order. The Tribunal considered the rival contentions and relevant material, concluding that the time taken in section 154 proceedings should be excluded for computing the limitation period. The Tribunal emphasized a lenient and justice-oriented approach in condoning delays, especially when the delay was not found to be malafide or a device to cover up ulterior purposes. Consequently, the Tribunal condoned the delay of 1167 days in filing the appeal.

2. Classification of Income from Leasing Out the Terrace:
The assessee entered into a lease and license agreement with a company for using its terrace for the installation of antenna and microwave tower, offering the income as "Income from House Property." The Assessing Officer treated this income as "Income from Other Sources" and disallowed the deduction under section 24(a) of the Act. The CIT(A) dismissed the appeal ex-parte.

The Tribunal referred to the coordinate Bench's decision in M/s Mahalaxmi Sheela Premises CHS Ltd, which had considered similar facts and held that income from letting out the terrace should be assessed under "Income from House Property." The Tribunal also noted the Hon'ble Jurisdictional High Court's confirmation of this view. Accordingly, the Tribunal directed the Assessing Officer to assess the income under "Income from House Property" and allowed the deduction under section 24(a).

3. Disallowance of Expenses:
The assessee claimed additional expenses, which were disallowed by the Assessing Officer. The Tribunal held that when a deduction under section 24(a) is allowed at 30% of the income from house property, no further deduction of expenses is permissible. Additionally, the Tribunal found no nexus between the claimed expenses and the income, as the expenses were incurred on behalf of the society's members. Therefore, the Tribunal upheld the disallowance of expenses.

4. Additional Ground Regarding Principle of Mutuality:
The assessee raised an additional ground, arguing that the income from letting out a portion of the building to outsiders for commercial purposes should not be taxable based on the principle of mutuality. The Tribunal observed that this ground was an alternative to the main grounds concerning the classification of income. Given the Tribunal's decision to classify the income as "Income from House Property," the additional ground became infructuous.

Conclusion:
The appeal was partly allowed. The Tribunal condoned the delay in filing the appeal, directed the income from leasing out the terrace to be assessed under "Income from House Property," upheld the disallowance of additional expenses, and found the additional ground regarding mutuality to be infructuous.