2015 (1) TMI 190 - AT - Income Tax

Rejection of claim of deduction u/s 24(1) - Leasing of immovable properties business activity or not Held that - The assessee is owner of the commercial premises i.e. DLF Square and Nestle House let out throughout the year, the assessee has always treated and shown this property as a fixed capital asset and not stock-in-trade units balance sheet, accepted by the department since inception; the tenants are deducting tax at source at the rate as specified in section 194-I of the Act and there is no change in facts and circumstances of the case as in the earlier years too the income from letting out has been returned and assessed under the head income from house property identical issue has been decided in Asstt. Commissioner of Income Tax Versus M/s Atria Partners, DLF Centre 2014 (3) TMI 500 - ITAT DELHI - there is no infirmity in the First Appellate Order accepting the claimed income as income from the house property and the claimed deduction u/s 24(1) of the Act Decided against revenue. Loss incurred on future and option Losses speculative in nature or not u/s 43(5)(d) Held that - In CIT Versus Nasa Finelease P. Ltd. 2013 (9) TMI 733 - DELHI HIGH COURT it has been rightly held that the transactions in derivatives on recognized stock exchange not as deemed speculative - the transaction carried in future and options (derivatives) are outside the purview of speculation loss in terms of amendment made by the Finance Act, 2005 with effect from 1.4.2006 by inserting Clause (d) to the proviso to subsection (5) of Section 43 of the Act defining the meaning of Speculation Transaction - the dealing in derivatives was a regular business and it is not that the assessee has been incurring losses always, as in the immediately succeeding AY 2009-10, the assessee has earned a profit on trading in future and options (derivatives) - Decided against revenue. Claim of expenses u/s 57(iii) Expenses made wholly & exclusively for the purpose of earning such income or not Held that - CIT(A) was rightly of the view that the assessee has not been able to justify the claim of the entire expenses - considering the nature of expenditure being office maintenance, salary paid, conveyance, legal and professional expenses found it unjustifiable to assume that no expenses whatsoever has been incurred for earning an income of over ₹ 80,00,000/- from other sources thus, the order of the CIT(A) is upheld Decided against revenue.

Summary

Issues:
1. Whether CIT(A) was right in deleting the addition made by AO rejecting the claim of deduction u/s 24(1) of the IT Act for leasing immovable properties?
2. Whether CIT(A) was right in deleting the addition by treating the loss incurred on future and option as "speculative"?

Issue No. A:
The appeal by the revenue questioned the CIT(A) order regarding the deduction claimed under section 24(1) of the IT Act for leasing immovable properties. The assessee, engaged in share trading, declared rental income under house property and claimed a deduction. The AO treated the rental income as business income, leading to the appeal. The Ld. AR justified the claim, citing past assessments and relevant case laws. The Tribunal distinguished the case from precedents and upheld the claim, citing similar favorable decisions. The issue was decided in favor of the assessee.

Issue No. B:
The revenue challenged the CIT(A) order regarding the treatment of loss on future and option as speculative. The AO disallowed the loss, considering it speculative, but the CIT(A) allowed the claim. The Tribunal referred to a High Court decision and the Finance Act, 2005, defining speculation transactions. It was argued that derivatives transactions were not speculative under certain conditions. Relying on precedents, the Tribunal upheld the CIT(A) decision, ruling in favor of the assessee.

For the assessment year 2009-10, similar issues arose regarding rental income treatment and expenses disallowance. The CIT(A) allowed the deduction for rental income and partially disallowed expenses. The Tribunal upheld the CIT(A) decisions based on past rulings and justifications provided. The appeals were dismissed, and the orders were pronounced accordingly on 15.10.2014.