2018 (12) TMI 1262 - AT - Income Tax

Income received by way of rent & service charges offered - Business income OR Income from House Property - Held that - As decided in assessee s own case for previous AY in course of hearing before the Commissioner (Appeals) the assessee had submitted similar additional evidences for consideration of the Commissioner (Appeals) and to impress upon the fact that by virtue of these additional evidences holding the assessee as a monthly tenant, the decision of the Tribunal in earlier assessment years cannot be followed. It is apparent on record, learned Commissioner (Appeals) has totally ignored such evidences filed by the assessee. Therefore, keeping in view the decision of the Tribunal in assessee s own case for assessment year 2008 09 and 2009 10 as referred to above, we restore the issue to the file of the Assessing Officer for de novo adjudication after due opportunity of being heard to the assessee Nature of certain capital gains earned by the assessee during impugned AY and applicable tax rate thereupon - Sale of flat - STCG OR LTCG - Held that - Factual matrix that depreciation under the Income Tax Act was never claimed by the assessee against the flat and the said flat was never used as a commercial asset remained unrebutted. The revenue could not bring on record any material to controvert the same whereas LD. AR, drawing our attention to the computation of income for past several years, demonstrated that the depreciation was never claimed by the assessee under Income Tax Act against the said flat. This being the case, no fault could be found with the conclusions of first appellate authority. This ground stands dismissed.

Summary

Issues:
1. Assessment of income received as Business income or Income from House Property.
2. Treatment of interest on optionally convertible debentures.
3. Nature of capital gains earned by the assessee and applicable tax rate.

Issue 1: The first issue in this case revolves around the assessment of income received by the assessee as Business income or Income from House Property. The Tribunal agreed with the assessee's contention that the income received by way of rent and service charges should be assessed as Business income, not Income from House Property. The matter was remitted back to the Assessing Officer for re-adjudication in line with the directions given by the Tribunal in earlier assessment years. The Tribunal cited previous cases where similar disputes were resolved in favor of the department, and the issue was restored to the Assessing Officer for fresh adjudication.

Issue 2: The second issue pertains to the treatment of interest on optionally convertible debentures. The revenue's appeal challenged the addition of interest on debentures, which the assessee did not credit to the Profit & Loss account due to a waiver request from the issuer. The Tribunal upheld the deletion of the addition by the first appellate authority, citing consistency with previous orders for other assessment years. Since no distinguishing features were noted, the Tribunal dismissed this ground of appeal.

Issue 3: The final issue concerns the nature of capital gains earned by the assessee and the applicable tax rate. The assessee sold a flat and computed Long Term Capital Gain, which was treated as short term by the Assessing Officer under Section 50. The assessee argued that the gains should be treated as Long Term Capital Gains since no depreciation was claimed under the Income Tax Act, and the flat was not used for commercial purposes. The Tribunal agreed with the assessee, noting that the depreciation was never claimed against the flat under the Income Tax Act. The revenue's appeal on this ground was dismissed, and the assessee's appeal was allowed for statistical purposes.

In conclusion, the Tribunal allowed the assessee's appeal for statistical purposes and dismissed the revenue's appeal, resolving the issues related to the assessment of income, treatment of interest on debentures, and nature of capital gains and applicable tax rate.