2014 (2) TMI 1350 - AT - Income Tax

Lease rent income - Correct head on income - income from house property OR business income - HELD THAT - The issue is squarely covered by the decision of Hon ble Supreme Court in the case of Sambhu Investment (P) Ltd. Vs. CIT (2003 (1) TMI 99 - SUPREME COURT), wherein held that when main intention of letting out the property or any portion thereof is to earn rental income, the income is to be assessed as income from house property and where the intention is to exploit the immovable property by way of complex commercial activities, the income should be assessee as income from business. Applying this proposition to the facts of the instant case, we found that the assessee has let out the property to earn the rental income. Accordingly, no infirmity in the order of CIT(A) for treating the lease income as income from house property Deduction u/s 80IB(10) on stilt parking denied - HELD THAT - As relying on assessee s own case infirmity in the order of CIT(A) for allowing claim of deduction under Section 80IB(10) as held that if some part of the flat is used for commercial purpose, the correct character of housing project is not vitiated, Assessing Officer has not brought on record that which part of expenditure claimed to have been incurred for parking is bogus. Hence, in view of the above said arguments, case laws and submissions of the appellant alone, the Assessing Officer could be directed to allow deduction to the appellant u/s. 80IB(10) on sale proceeds of stilt parking. Addition of suppressed value of closing stock - AO has made addition in the valuation of closing stock by taking indirect expenditure as a part of cost of construction like interest expenses, depreciation, brokerage for lease etc. - CIT-A deleted the addition - HELD THAT - AO has wrongly added expenses of previous year to the value of closing stock without finding fault in assessee s method of valuation, which was consistently followed by it. The AO has wrongly included indirect cost of project which is not going to form part of value of work in progress. While computing value of closing stock the AO has not pointed out any particular expenses, which should have charged to closing stock and not added by the assessee to the closing stock. Accordingly, we do not find any reason to interfere in the findings of CIT(A) resulting into deletion of addition on account of valuation of closing stock. Addition on account of allocation of common expenditure to Poisar Project and Sakinaka D project - HELD THAT - As the facts and circumstances during the year under consideration are pari materia to the facts and circumstances as considered and decided by the Tribunal in assessee s own case, which has been elaborately referred by the CIT(A) in his impugned order Accordingly, we do not find any infirmity in the order of CIT(A) for deleting the addition made on account of allocation of common expenditure. - Decided against revenue

Summary

Issues:
1. Classification of lease rent income as income from house property or business income.
2. Allowance of deduction under Section 80IB(10) on sale proceeds of Stilt Parking.
3. Deletion of addition of suppressed value of closing stock.
4. Deletion of addition on account of allocation of common expenditure to projects.

Analysis:

Issue 1:
The appeal addressed the classification of lease rent income as income from house property or business income. The CIT(A) allowed the claim of income under the head income from house property based on the ownership of the properties and the intention to earn rental income. The Tribunal upheld this decision citing the Supreme Court's ruling that income from property rental should be assessed as income from house property. The AO's disallowance of deduction for repairs and maintenance was also overturned.

Issue 2:
Regarding the deduction under Section 80IB(10) on sale proceeds of Stilt Parking, the CIT(A) allowed the deduction, emphasizing that parking is an essential part of a housing project. The Tribunal upheld this decision, referring to previous rulings in the assessee's favor for similar years. The AO's disallowance was deemed unjustified, and the deduction was allowed in line with judicial discipline.

Issue 3:
The deletion of the addition of suppressed value of closing stock was also contested. The CIT(A) ruled in favor of the assessee, highlighting that the AO added previous year's expenses to the closing stock valuation without justification. The Tribunal concurred, noting that the AO failed to identify specific expenses that should have been charged to closing stock. The addition was deleted due to lack of evidence supporting the AO's claim.

Issue 4:
The final grievance related to the deletion of an addition on account of allocation of common expenditure to projects. The CIT(A) deleted the addition based on the Tribunal's decision in the assessee's own case for a previous assessment year. The Tribunal upheld this decision, stating that the AO's reallocation of expenses lacked evidence and justification. The deletion was supported by the consistent method followed by the assessee.

In conclusion, the Tribunal dismissed the Revenue's appeal, upholding the CIT(A)'s decisions on all issues. The judgments were based on legal precedents, factual analysis, and the consistent application of judicial principles.