2014 (2) TMI 174 - AT - Income Tax

Heads of income - Income from house property OR business income - Held that - The tribunal has given a definite and clear finding of the assessee providing, apart from built-up space, a range of services and facilities, which are intrinsically linked to the letting of the building, specifying the machinery deployed, so that it is a case of composite letting. Further, though the services stand provided per different agreements, they cannot be considered as de hors and separate from each other inasmuch as they form part of a single arrangement there was no reason for any change in the consistent view adopted by the tribunal Relying upon Sultan Brothers (P.) Ltd. vs. CIT 1963 (12) TMI 4 - SUPREME Court - the assessment of the gross receipt as business income is directed. Re-computation of the disallowance u/s.14A of the Act Held that - The decision in Godrej & Boyce Mfg. Co. Ltd. v. Dy. CIT 2010 (8) TMI 77 - BOMBAY HIGH COURT followed - a statutory disallowance is warrented, which had to be made toward both direct and indirect expenditure, observing the assessee to have incurred administrative expenditure and financial charges - there is no cause for any grievance to either side - The A.O. has to be satisfied with the assessee s claim u/s.14A, and compute the disallowance in a reasonable manner both qua direct as well as indirect expenditure, giving his definite findings Decided partly in favour of Assessee.

Summary

Issues:
1. Assessment of hire charges as 'income from house property' or 'business income'.
2. Non-allowance of operating expenses and depreciation claimed by the assessee.
3. Recomputation of disallowance under section 14A.

Analysis:
1. The principal issue in the assessee's appeal was the categorization of hire charges on a commercial complex as 'income from house property' or 'business income'. The Tribunal referred to previous decisions and the law regarding composite letting involving machinery and building. It found that the services provided were linked to the letting of the building, constituting a case of composite letting. The tribunal directed for the assessment of gross receipt as business income based on these findings and consistent views. Grounds 2 & 3, related to operating expenses and depreciation, were considered maintainable and required verification by the Assessing Officer (A.O.) for adjudication in accordance with the law.

2. The issue of recomputation of disallowance under section 14A was raised in both the assessee's and the Revenue's appeals. The CIT(A) directed the A.O. to re-compute the disallowance based on a reasonable basis, following a judgment by the jurisdictional high court. The A.O. was to consider both direct and indirect expenditure for the disallowance under Rule 8D of the Income Tax Rules. The Tribunal found the CIT(A)'s decision in line with the law and directed the A.O. to compute the disallowance in a reasonable manner, giving definite findings on the assessee's claim under section 14A.

3. The Tribunal partly allowed the assessee's appeal and dismissed the Revenue's appeal. The decision was pronounced on January 31, 2014, with detailed reasoning provided for each issue addressed in the judgment.