2014 (9) TMI 1169 - AT - Income Tax

Income on sub lease of land and the maintenance income under the head business income - allowing of various expenses including the maintenance income claimed by the assessee as business expenses as against the findings of the AO that no business activity has been carried out by the assessee and the consequent disallowance of the expenses - CIT(A) directed the AO to assessee the income on sub lease of land (apart from rental income) and maintenance income under the head business income - Held that - Tribunal has confirmed the earlier orders of the first appellate authority for the A.Ys. 2007-08 and 2008-09 and similar grounds preferred by the Revenue have been dismissed by Tribunal on identical facts. The Tribunal for said order in turn has relied on the earlier order of the Tribunal dated 11.09.2013 for the A.Y. 2005-06 wherein it has been held that the assessee has commenced its business activity in March 2004. In view of the fact that the Ld.CIT(A) has relied on his own orders for the earlier assessment years which has been confirmed by the Tribunal and also since the Revenue is not in a position to bring any contradictory facts during the year under consideration we do not find any justifiable reason to interfere with the decision of the Ld.CIT(A) and thus the same deserves to be upheld. Addition made by the AO in respect of interest on borrowed capital utilized for construction of property - Held that - The Tribunal in the said order has held that if interest has been paid by an assessee for acquiring or construction assets that are used for earning taxable income then his claim for interest expenditure has to be allowed. The relevant finding of the Tribunal is at para 15 of the said order. Since the decision of the Ld.CIT(A) for the A.Y. 2008-09 which has been relied on by him for the impugned decision has been upheld by the Tribunal we do not find any justifiable reason to interfere with the impugned decision which deserves to be upheld. Accordingly we decide this issue against the revenue and in favour of the assessee.

Summary

Issues:
1. Disallowance of business expenses and income treatment on sub lease of land.
2. Disallowance of interest on borrowed capital utilized for property construction.

Issue 1: Disallowance of business expenses and income treatment on sub lease of land:
The Revenue challenged the Ld.CIT(A)'s decision regarding the income on sub lease of land and maintenance income under business income, along with the allowance of various expenses claimed by the assessee. The AO disallowed the business loss claimed by the assessee due to the absence of business activity and held that the expenses should be capitalized. However, the Ld.CIT(A) considered the assessee's business for the development of a Biotechnology Park as already set up and commenced. The Ld.CIT(A) directed the AO to assess the sub lease income and maintenance income under business income and allowed the claimed expenses. The Tribunal, based on previous orders, upheld the Ld.CIT(A)'s decision, stating that the assessee had commenced business activity earlier, and there were no contradictory facts presented by the Revenue for the current year. As a result, Grounds No. 1 and 2 were dismissed.

Issue 2: Disallowance of interest on borrowed capital utilized for property construction:
The Revenue contested the Ld.CIT(A)'s deletion of the addition made by the AO concerning interest on borrowed capital used for property construction. The Ld.CIT(A, following a previous order for A.Y. 2008-09, ruled in favor of the assessee. The Tribunal also confirmed this decision, stating that if interest is paid for acquiring or constructing assets used to earn taxable income, the claim for interest expenditure should be allowed. Since the Tribunal upheld the Ld.CIT(A)'s decision for A.Y. 2008-09, there was no reason to interfere with the current decision. Consequently, Ground No. 3 was dismissed. In conclusion, the appeal filed by the Revenue was dismissed by the Tribunal on September 15, 2014.