2012 (10) TMI 1144 - AT - Income Tax

Disallowance u/s. 14 r.w. Rule 8D - HELD THAT - The issue involved in this ground is squarely covered by the decision in the case of Godrej Boycee Manufacturing Co. Ltd., Vs DCIT 2010 (8) TMI 77 - BOMBAY HIGH COURT . Therefore without going into the merits of the case, we restore this issue back to the files of AO to decide afresh without applying Rule 8D as Rule 8D has been held to be applicable from A.Y. 2008-09. This ground of the assessee is allowed for statistical purposes. Rental Income - Income from house property instead of business income - In the case of Shambhu Investment P. Ltd. v. CIT 2003 (1) TMI 99 - SC ORDER , held that income derived from letting out of the property should be assessed as income from house property. The Ld. Counsel s contention that in the earlier year, the rental income has been taxed under the head Income from House property and therefore the same should be followed as per the rule of consistency cannot be accepted for the simple reason that the rule of consistency envisages that if there is only one view on the given set of facts, then the same view should be taken year after year. However, In the instant case, in the earlier year, the Revenue authorities may have taken a wrong view in-consistent with the ratio laid down in the case of Shambhu Investment P. Ltd. v. CIT, in our considerate view, the law laid down by the Hon ble Supreme Court is to be followed. Therefore, we do not find any merit in the arguments of the assessee, findings of the Ld. CIT(A) are confirmed. This ground of the assessee is dismissed. In the result, the appeals filed by the assessee are partly allowed for statistical purposes.

Summary

Issues involved:
1. Disallowance under section 14 r.w. Rule 8D of the Act
2. Application of Section 115JB on disallowances under section 14A of the Act
3. Treatment of rental income as income from house property instead of business income

Analysis:
1. The first issue pertains to the disallowance under section 14 r.w. Rule 8D of the Act. The Tribunal referred to the decision in the case of Godrej & Boycee Manufacturing Co. Ltd. and held that Rule 8D is applicable from A.Y. 2008-09. Consequently, the issue was remanded back to the Assessing Officer for fresh consideration without applying Rule 8D. The ground of the assessee was allowed for statistical purposes.

2. The second issue concerns the application of Section 115JB on disallowances made under section 14A of the Act. Since the matter related to disallowances under section 14A was remanded back to the AO, this issue was also sent back to be decided in light of the outcome of the first issue.

3. The third issue revolves around the treatment of rental income as income from house property instead of business income. The Assessing Officer treated the rental income as income from house property, disallowing the claim of depreciation on the property. The assessee contended that the property was let out in the course of business and hence should be assessed as business income. However, both the AO and CIT(A) held that the income should be assessed as income from house property. The Tribunal, relying on the Supreme Court decision in Shambhu Investment P. Ltd. v. CIT, upheld the lower authorities' decision, stating that income derived from letting out property should be assessed as income from house property. The rule of consistency was not applicable as it was based on a wrong view inconsistent with the Supreme Court's ruling. Therefore, the ground of the assessee was dismissed, confirming the CIT(A)'s findings.

In conclusion, the Tribunal partially allowed the appeals for statistical purposes, addressing the issues of disallowance under section 14, application of Section 115JB, and the treatment of rental income, providing detailed analysis and legal references for each issue.