2012 (2) TMI 681 - AT - Income Tax

Summary

Issues involved:
The judgment involves issues related to the treatment of rental income, bank interest income, set off of unabsorbed depreciation and brought forward losses, rental income from a specific property, disallowance of rent and taxes paid, and disallowance of repair and maintenance expenses.

Treatment of Rental Income:
The Assessee's rental income was assessed as 'income from house property' instead of 'business income.' The AO computed the rental income after allowing deductions u/s 24(a) of the Act. The CIT(A) confirmed this action, which was upheld by the Tribunal citing the decision of the Hon'ble Supreme Court in Shambhu Investment P. Ltd. Vs. CIT. The Tribunal dismissed the appeal, affirming the rental income as 'income from house property.'

Treatment of Bank Interest Income:
The AO treated the interest income earned by the Assessee on bank deposits as 'income from other sources' rather than 'business income.' The CIT(A) upheld this decision, and the Tribunal found no material evidence to support the Assessee's claim that the interest was business income. Citing a Delhi High Court decision, the Tribunal upheld the CIT(A)'s order, dismissing the Assessee's appeal.

Set Off of Unabsorbed Depreciation and Brought Forward Losses:
This issue was consequential to the treatment of rental and interest income. Since both were classified as 'income from other sources,' the Tribunal dismissed the Assessee's appeal related to the set off of unabsorbed depreciation and brought forward losses.

Rental Income from Specific Property:
The Assessee received rental income from a property, which was claimed to be on behalf of another individual. The AO taxed this rental income in the Assessee's hands, considering the leave & license agreement and sale agreement provided. The CIT(A) held that the Assessee was the real owner of the property, and the Tribunal upheld this decision, dismissing the Assessee's appeal.

Disallowance of Rent and Taxes Paid:
The issue of disallowance of rent and taxes paid was not adjudicated by the CIT(A). The Tribunal restored this issue to the AO for further consideration.

Disallowance of Repair and Maintenance Expenses:
The AO disallowed a portion of expenses related to repairs and maintenance, considering it as a contribution to a repair fund. The CIT(A) confirmed this disallowance, but the Tribunal disagreed, stating that the amount was meant for future repairs. The disallowance was deleted, and the Assessee's appeal on this ground was allowed partially.

In conclusion, the Tribunal partly allowed the Assessee's appeal, making specific decisions on each issue raised.