2010 (3) TMI 689 - HC - Income Tax

Income received from licensing of immovable property - Income from business or as Income from other sources - assessee submitted that income treating the rental/licensing income as assessable under the head of profit and gains of business was accepted by the Revenue - assessment years 1993-94 and 2001-02 the assessments were completed under section 143(3) whereby the Assessing Officer had accepted the submission that the licence fees received by the assessee were business income - Held that - Matter remanded back to the Tribunal for reconsideration - Expenses incurred by the appellant in relation to training of an employee abroad - According to Tribunal it was not wholly and exclusively for the purpose of the business - Held that - assessee was not able to substantiate that sending employee for training abroad was for the benefit of the business of the assessee - Counsel appearing on behalf of the assessee fairly placed on record the judgment of the Division Bench in the case of Echjay Forgings Ltd. v. Asst. CIT, where this court affirmed the decision of the Tribunal for similar reasons appeal is disposed of accordingly

Summary

Issues:
1. Whether income from licensing of business premises should be classified as 'Income from other sources' or 'Profits and gains of business or profession'?
2. Whether expenses incurred for training an employee abroad are wholly and exclusively for the business?

Analysis:

Issue 1:
The appeal before the Bombay High Court pertained to the assessment year 2003-04, with the primary question being the classification of income received from licensing immovable property as either Income from business or Income from other sources. The assessee argued that previous assessments had accepted the licensing income as business income. The court noted that no distinguishing features were presented by the Revenue to warrant a different treatment for the current assessment year. Consequently, the Court decided to remand the matter back to the Tribunal for reconsideration, without expressing any opinion on the merits, and keeping all contentions open for further review.

Issue 2:
Regarding the second question on expenses incurred for training an employee abroad, the Court upheld the Tribunal's decision. The Tribunal had found that the assessee failed to substantiate that the training provided was for the benefit of the business. The Court referenced a judgment in a similar case to support this decision. Consequently, the Court affirmed the Tribunal's view on the second question but remanded the proceedings back to the Tribunal for a fresh consideration of the first question based on the observations made in the judgment. The appeal was disposed of with no order as to costs.