2014 (11) TMI 1200 - AT - Income Tax

Treatment of income from manufacturing services as income from other sources - Addition on the ground that there was no involvement of the Appellant in the manufacturing activity - Treatment of lease rental as income from other sources - allowability of the claim of expenditure against the said receipts - HELD THAT - On perusal of the said orders of the Tribunal 2013 (7) TMI 1130 - ITAT MUMBAI and 2014 (7) TMI 1300 - ITAT MUMBAI we find the ITAT adjudicated the identical issues and remanded the grounds to the file of the AO for a fresh adjudication. Respectfully following the orders of the Tribunal (supra) as well as following the principle of consistency, we remand the grounds raised in the present appeal also with identical directions given by the Tribunal in the AYs 2006-2007 and 2007-2008 to the file of the AO for adjudicating them afresh. Accordingly ground raised by the assessee are allowed for statistical purposes.

Summary

Issues involved:
1. Treatment of income from manufacturing services as income from other sources
2. Treatment of lease rental as income from other sources
3. Treatment of other income as income from other sources
4. Disallowance of expenditure pertaining to the business activity
5. Deduction u/s 35(1)(i) in respect of expenditure incurred for R&D activity
6. Disallowance of deduction u/s 35(1)(iv)
7. Incorrect working of book profit u/s 115JB

1. Treatment of income from manufacturing services as income from other sources:
The appellant contested the CIT (A)'s decision to assess the income from manufacturing services under 'Income from Other Sources' due to alleged lack of involvement in the manufacturing activity. The Tribunal noted similar issues in prior years and remanded the matter to the AO for fresh adjudication, following the principle of consistency.

2. Treatment of lease rental as income from other sources:
The CIT (A) upheld the AO's decision to treat lease rental income under 'Income from Other Sources,' disregarding the appellant's argument about the composite nature of the arrangement. The Tribunal referred to past cases and directed a fresh adjudication by the AO, aligning with previous decisions for consistency.

3. Treatment of other income as income from other sources:
The CIT (A) upheld the AO's classification of other income as income from other sources, contrary to the appellant's contentions. The Tribunal, following the pattern of previous judgments, remanded the issue to the AO for reconsideration in line with consistency principles.

4. Disallowance of expenditure pertaining to the business activity:
The CIT (A) supported the disallowance of the appellant's claimed expenditure against business income due to alleged inactivity in manufacturing and business operations. Additionally, the denial of deduction under sections 57 and 35(1)(i) was contested. The Tribunal remanded the matter to the AO for fresh assessment, emphasizing the need for consistency with prior decisions.

5. Deduction u/s 35(1)(i) in respect of expenditure incurred for R&D activity:
The CIT (A) disallowed the deduction under section 35(1)(i) for R&D expenditure, which the appellant challenged. The Tribunal directed a reevaluation by the AO, in line with past judgments, to ensure consistency in decision-making.

6. Disallowance of deduction u/s 35(1)(iv):
The CIT (A) upheld the disallowance of the deduction under section 35(1)(iv) for capital expenditure on the in-house research center, citing the absence of business activity. The Tribunal directed a fresh assessment by the AO, emphasizing the need for uniformity in decisions.

7. Incorrect working of book profit u/s 115JB:
The CIT (A) was criticized for incorrect computation of book profit under section 115JB. The Tribunal allowed the appeal for statistical purposes, following precedents and maintaining consistency in decision-making.

In conclusion, the Tribunal remanded various issues to the AO for fresh adjudication, guided by the principles of consistency and alignment with past judgments to ensure fair and uniform treatment in the assessment process.