2017 (6) TMI 1254 - AT - Income Tax

Disallowance of the claim of expenditure - Held that - From the order of the Ld.AO and the Ld.CIT(A) the entire facts of the case are not clear. The assessee has also not produced before us any documents such as the agreement between the assessee and the societies the resolution passed by the society in its general meeting the nature of work executed by the society the reasons for the loss incurred by the society the reasons for the society not to repay the loan etc.. Thus the genuineness of the transaction has not been brought out vividly by the assessee before us and it is not clear from the Orders of the Ld. Revenue Authorities. Therefore in the interest of justice we remit back the matter to the file of AO for fresh consideration. Disallowance U/s. 14A r.w.r. 8D - Held that - Revenue Authorities had invoked the provisions of Section 14A r.w.r 8D of the Rules because the assessee had made investment for earning exempt income and the expenditure relating to such investment was not disallowed by the assessee. We do not find any infirmity on the order of the Ld. Revenue authorities on this issue because they have only followed the provisions of the Act. Therefore the order of the Ld.CIT(A) and the Ld.AO on this issue is hereby confirmed. Assessment of rental income under the head business income OR Income from house property - Held that - Only with respect to the rental income of 46, 76, 622/- the assessee has received rental income from its employees for providing quarters. All other rental income is with respect to third parties and the circular has no bearing on them. Therefore we hereby hold that the rental income received from the assessee s employees for providing quarters to the extent of 46, 76, 622/- shall be treated as business income and the balance amount shall be treated as income from house property as per the provisions of the Act.

Summary

Issues:
1. Delay in filing appeal by Revenue
2. Disallowance of expenditure repayment claim
3. Disallowance under Section 14A r.w.r. 8D
4. Deletion of depreciation disallowance
5. Assessment of rental income under 'business income'

Delay in filing appeal by Revenue:
The Revenue filed an appeal with a 3-day delay, citing misplacement of files. The Tribunal condoned the delay, allowing the appeal to proceed on merits.

Disallowance of expenditure repayment claim:
The assessee claimed &8377; 19.20 crores as expenditure for loan repayment under a settlement scheme. The AO rejected the claim, stating no business connection between the assessee and the cooperative society. The CIT(A) upheld the decision, finding it a capital field issue. The Tribunal remitted the matter to the AO for further examination due to insufficient evidence.

Disallowance under Section 14A r.w.r. 8D:
The Revenue invoked Section 14A r.w.r. 8D for disallowing &8377; 53,499 related to exempt income investments. The Tribunal confirmed the decision, stating compliance with the Act's provisions.

Deletion of depreciation disallowance:
The AO disallowed &8377; 60,62,124 depreciation for a beverage plant, alleging non-business use. The CIT(A) reversed this based on a Tribunal decision. The Tribunal upheld the CIT(A)'s decision following precedent.

Assessment of rental income under 'business income':
The AO assessed &8377; 46.76 lakh rental income as 'business income' instead of 'income from house property.' The CIT(A) favored the assessee, citing a Tribunal decision and a CBDT circular. The Tribunal differentiated employee and third-party rentals, treating the former as business income and the rest as income from house property.

In conclusion, the Tribunal partially allowed the assessee's appeal for statistical purposes and partially allowed the Revenue's appeal. The judgment was pronounced on June 23, 2017, in Chennai.