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2018 (4) TMI 263 - AT - Income TaxTreating to rental Income - Income from House property or Business Income - Held that - The issue is covered in favour of assessee and the Tribunal s order for AY 2005-06 had attend the finality because the assessee has not preferred an appeal before the Hon ble High Court. As the issue is covered, we confirm the orders of the lower authorities treating the rental receipts as income from house property. Accordingly, this common issue of assessee s appeals is dismissed. Disallowance of depreciation on the above issue, which has been decided against the assessee by treating the rental receipts as income from house property, this being a consequential issue, the same is dismissed. Disallowance of maintenance expenses - AO has disallowed the expenses because the assessee s income is assessed as income from house property - Held that - We find that this issue has not been adjudicated by CIT(A) despite specific ground raised before him. However, this issue needs to go back to AO for the simple reason that it is to be verified whether these expenses are claimed by assessee net of the rental receipts or these are inclusive in the gross receipts. In case these are inclusive of gross receipts, the AO has to take ALV of the property excluding these expenses. For re-deciding this issue, the matter is set aside to the file of the AO Addition of difference amount of closing stock valuation considering inclusive method of Modvat under section 145A - Held that - The amount of Modvat credit was irreversible credit offered to manufacturers upon purchase of duty paid raw materials and that would not amount to income. See CIT vs Diamond Dye Chem Ltd. 2017 (7) TMI 616 - BOMBAY HIGH COURT
Issues involved:
1. Treatment of rental income as income from house property instead of business income. 2. Disallowance of depreciation, maintenance expenses, salary, wages, bonus, traveling, and office expenses. 3. Addition of difference amount of closing stock valuation under section 145A of the Act. 4. Addition of unexplained credit entry under section 68 of the Act. 5. Disallowance of expenses relatable to dividend amount under section 14A of the Act. Issue 1: Treatment of Rental Income: The appeals by the assessee challenged the order confirming the rental income as income from house property instead of business income. The CIT(A) disallowed depreciation, maintenance expenses, salary, wages, bonus, traveling, and office expenses. The Tribunal upheld the lower authorities' decision based on the exploitation of property, treating the rental receipts as income from house property. The issue was considered identical across the years, and the Tribunal dismissed the appeals. Issue 2: Disallowance of Depreciation and Expenses: The disallowance of depreciation and expenses was a consequential issue due to treating rental receipts as income from house property. The Tribunal dismissed this issue based on the decision regarding the treatment of rental income. Issue 3: Closing Stock Valuation: The addition of the difference amount of closing stock valuation under section 145A of the Act was contested by the assessee. The AO added Modvat credit to the closing stock, but the Tribunal directed the AO to delete the addition based on relevant legal precedents. Issue 4: Unexplained Credit Entry: The addition of an unexplained credit entry under section 68 of the Act was challenged by the assessee. Discrepancies in ledger balances led to the addition, which the CIT(A) upheld. The Tribunal remitted the issue back to the AO for reconsideration based on new reconciliation details provided by the assessee. Issue 5: Disallowance of Dividend-Related Expenses: The disallowance of expenses related to dividend amount under section 14A of the Act was contested by the assessee. Due to the smallness of the amount and the assessee's decision not to press the issue, the Tribunal dismissed it as not pressed. In conclusion, the Tribunal partly allowed the appeals by the assessee, dismissing some issues while remitting others back to the AO for further consideration. The judgment provided detailed analyses of each issue, considering legal precedents and factual circumstances to reach decisions.
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