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2017 (10) TMI 1419 - AT - Income TaxCorrect head of income - rental income from Operating Family Entertainment Center cum Mall and Maintenance Charges - Income from House Property OR Profit and Gains from Business or Profession - Following the stand of the assessing authorities in the past years of A.Y.2008-09 to 2011-12, AO assessed the said income under the head Income from House Property as against assessee s claim for treating the same as business income Held that - In the assessment order, the AO was made aware of the decision of the Tribunal in the assessee s own case wherein such receipts have been held to be taxable as business income. The Assessing Officer noticed that the decision of the Tribunal has not been accepted by the Department and its appeal filed before the Hon ble Bombay High Court u/s.260A of the Act was pending. For the said reasons, he has not followed the decision of the Tribunal for earlier years. On the contrary, the CIT(A) followed the decision of the Tribunal and allowed the claim of the assessee for treating such incomes as business income. The Hon ble Bombay High Court in its order 2017 (7) TMI 779 - BOMBAY HIGH COURT has upheld the stand of the assessee that such incomes are liable to be assessed as business income. Disallowance of interest paid on loan availed by the assessee from HDFC in respect to a property located at Chandigarh - Held that - CIT(A) allowed claim of the assessee by noting that the income from lease / rentals was assessed as business income and therefore, the interest expenditure on loans availed from HDFC was an allowable expenditure. On this aspect also, we found no merit in the appeal of the Revenue in as much as it is consequential to the upholding of assessee s stand of the income from lease / rentals being liable to be assessed as business income. - Appeal of the Revenue is dismissed.
Issues:
1. Assessment of rental income as "Income from House Property" or "Profit and Gains from Business or Profession" 2. Applicability of the decision of the Hon'ble Supreme Court in Shambhu Investment case 3. Treatment of interest expenditure on loans availed by the assessee Analysis: *Issue 1: Assessment of rental income* The Revenue appealed against the order of the CIT(A) regarding the treatment of rental income from an Entertainment Center cum Mall and Maintenance Charges as "Income from House Property" instead of "Profit and Gains from Business or Profession." The Assessing Officer assessed the income under the head "Income from House Property," contrary to the assessee's claim. The CIT(A) upheld the assessee's claim based on previous Tribunal decisions. The Hon'ble Bombay High Court affirmed that such income should be assessed as business income, leading to the rejection of Revenue's appeal. *Issue 2: Applicability of Shambhu Investment case* The Revenue contended that the CIT(A) erred in not considering the decision of the Hon'ble Supreme Court in the Shambhu Investment case, which held that income from letting out furnished premises is assessable as income from property, not business income. However, the Tribunal and the Hon'ble Bombay High Court rulings favored the assessee's position, leading to the dismissal of the Revenue's appeal on this ground. *Issue 3: Treatment of interest expenditure* The third issue pertained to the interest expenditure on loans availed by the assessee from HDFC in relation to a property in Chandigarh. The Assessing Officer disallowed the interest expenditure based on previous decisions. The CIT(A) allowed the claim, considering the income from lease/rentals as business income. The Revenue's appeal was dismissed as it was consequential to the treatment of rental income as business income, as upheld by the Hon'ble Bombay High Court. In conclusion, the Revenue's appeal was dismissed based on the consistent rulings of the Tribunal and the Hon'ble Bombay High Court, affirming the treatment of rental income as business income and allowing the interest expenditure on loans. The decision was pronounced in the open court on 30th October 2017.
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