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2015 (9) TMI 12 - AT - Income TaxDisallowance of the claim u/s 24(a) against the rental income - Held that - The total receipts are shared by 4 owners of this property as mentioned above in their respective shares indicate in the supplement agreement. It is a fact that other co-owners have also disclosed their share of income in their respective returns. The AO has not verified the other co-owners income as to remaining 50% income from said property. The case relied on by the ld. AR of the assessee support assessee s claim that the claim of the assessee in past has been accepted as income from house property. There is no reason to change head of income from house property to business income. It is a trite that rule of res judicata does not apply in income-tax proceedings but the principle of consistency has to be followed while delivering justice. Further the AO had not allowed the assessee s claim of business expenses claimed during the assessment proceedings. He simply observed that the assessee has failed to submit the details of expenditure incurred and depreciation along-with evidence but the assessee has furnished the details before the AO vide letter dated 14-12-2010 which has not been adjudicated by the AO properly. Even the ld. CIT(A) also ignored the assessee s claim at the appellate stage. Thus in view of the facts and circumstances of the case, the assessee s income is treated under the head income from house property and allow deduction u/s 24(a) of the Act. - Decided in favour of assessee.
Issues Involved:
1. Disallowance of the claim u/s 24(a) of the I.T. Act, 1961. 2. Classification of income as rental income or business income. 3. Allowance of depreciation on properties. Issue-wise Detailed Analysis: 1. Disallowance of the claim u/s 24(a) of the I.T. Act, 1961: The assessee filed the return of income declaring Rs. 33,55,080, which included rental income from two properties, Hari Mahal and Spice Court. The assessee claimed deductions u/s 24(a) amounting to Rs. 5,41,326 and Rs. 4,77,061 respectively. The AO disallowed these deductions, arguing that the income should be treated as business income rather than rental income due to the nature of the lease agreements, which were based on a percentage of the lessee's turnover rather than a fixed rent. The AO's decision was upheld by the CIT(A), who noted that the agreements indicated a share of profits rather than simple rent. 2. Classification of income as rental income or business income: The AO observed that the lease agreements for both properties included clauses allowing the assessee to inspect the lessee's turnover and financial records, indicating active involvement in the business operations. This led the AO to classify the income as business income, citing case laws such as CIT vs. G.V. Rattaiah & Co. and CIT vs. Mihidin Hotels (P) Ltd. The CIT(A) agreed, emphasizing that the income was linked to the business performance of the lessee rather than being a fixed rental amount. 3. Allowance of depreciation on properties: The AO allowed a depreciation of Rs. 1 lakh on the properties, as the assessee failed to provide detailed evidence for a higher claim. The CIT(A) confirmed this decision, noting the lack of detailed submissions from the assessee regarding the depreciation claim. Tribunal's Decision: The Tribunal noted that the facts and circumstances of the case had not changed from previous years, where the income was accepted as rental income. The principle of consistency was emphasized, and it was noted that other co-owners of the property had also treated their share of income as rental income. The Tribunal concluded that the income should be classified under the head "income from house property" and allowed the deduction u/s 24(a). The Tribunal also criticized the AO and CIT(A) for not properly adjudicating the assessee's claim for business expenses and depreciation. Conclusion: The appeal of the assessee was allowed, with the Tribunal directing that the income be treated as "income from house property" and the deduction u/s 24(a) be allowed. The Tribunal also highlighted the importance of consistency in tax treatment across different assessment years.
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