2015 (7) TMI 1131 - AT - Income Tax

Claim for carry forward of loss u/s 7I B - income from house property - Held that - The observation of the ld. CIT(A) that the assessee had itself stated that the income was from business and not from house property is of no consequence at all. It is for the taxing authority to decide such issues correctly and the claim of the assessee, either way, is not decided. Also, it is not of any detriment to the assessee that as observed by the ld. CIT(A), while acquiring the property, only occupation certificate was received by the assessee and electricity or water connection, inter alia, having been applied for, the property was not rendered lettable. This is also in view of the fact that in its meeting on 15-7-2007, the Board of Directors of the assessee company resolved that attempt be made to let out the property as a bare-shell, without making any renovation or furnishing. This fact has been taken note of by the ld. CIT(A) at page 4, para (d) of the impugned order. For the above discussion, the grievance of the assessee is found to be justified and is accepted as such. The order of the ld. CIT(A) in this regard is cancelled and it is held that the income of the assessee is to be computed as income from house property . The assessee s claim in this regard is, thus, allowed. Coming to the Department s grievance, once we have held that the income is to be assessed as income from house property as above, on this very basis, the order of the ld. CIT(A) on this issue is upheld, rejecting the grievance of the Department as shorn of merit.

Summary

Issues:
- Assessment of income under "Profits and Gains of Business and Profession" or "Income from House Property"
- Allowance of carry forward of losses under section 71B of the Income Tax Act

Analysis:
1. The case involved cross-appeals for the assessment year 2007-08, with the assessee contending that income should be computed under "Income from House Property," while the Revenue argued for assessment under "Profits and Gains of Business and Profession."

2. The assessee, a company formed to acquire property for letting, claimed a loss under "Income from House Property" due to the property remaining unlet during the year. The Assessing Officer (AO) treated the expenditure, including interest, as pre-operative and disallowed the carry forward of losses under section 71B of the Act.

3. The Commissioner (Appeals) upheld the AO's decision to compute income as business income but directed the allowance of carry forward of loss under "Income from House Property." This led to separate appeals from both the assessee and the Department.

4. The Tribunal referred to relevant case laws indicating that even companies formed for property acquisition should have their income assessed under "Income from House Property." The Tribunal found the assessee's claim justified, canceling the Commissioner's decision and allowing income computation under "Income from House Property."

5. Consequently, the Department's appeal was dismissed as the income was to be assessed under "Income from House Property." The Tribunal upheld the assessee's appeal and dismissed the Department's appeal, concluding the judgment in favor of the assessee.

Conclusion:
The Tribunal ruled in favor of the assessee, allowing income computation under "Income from House Property" and the carry forward of losses under section 71B of the Income Tax Act. The Department's appeal was dismissed, affirming the decision on income assessment.