2019 (10) TMI 11 - AT - Income Tax

Characterization of income - Income from giving furniture on hire - 'Income from Other Sources - assessee has claimed income from giving furniture on hire under the head Business Income - HELD THAT - A perusal of documents on record clearly indicate that furniture has been shown as business asset of the assessee and a separate agreement has been executed for giving furniture on hire. Taking into consideration entirety of facts and principle of consistency, we find merit in the submissions of assessee. CIT (Appeals) have erred in holding income from hiring of furniture as Income from Other Sources . Furniture and fixtures are business assets of the assessee, hence, income generated from giving furniture on hire is business income of the assessee. The ground No. 2 of the appeal is allowed. Disallowance of business expenditure - authorities below have disallowed business expenditure claimed by the assessee on the premise that the assessee is not carrying any business activities hence, there can be no business expenditure - HELD THAT - While adjudicating ground No. 2 of the appeal here-in-above, we have held that income from hiring of furniture is Business Income of assessee. Thus, the observation of lower authorities that the assessee is not carrying any business activity is contrary to the facts. In principle, we hold that the expenditure claimed by the assessee in running of business is allowable. The Revenue has not raised any doubt over the quantification of expenditure while disallowing the same. We find merits in the contentions of the assessee. Accordingly, ground No. 3 of the appeal is allowed.

Summary

Issues:
1. Classification of income from furniture hiring charges
2. Disallowance of business expenditure

Classification of Income from Furniture Hiring Charges:
The appeal was filed against the order of the Commissioner of Income Tax (Appeals) regarding the classification of income earned from giving furniture on hire for the assessment year 2014-15. The Assessing Officer treated the income as 'Income from House Property,' while the Commissioner of Income Tax (Appeals) classified it as 'Income from Other Sources.' The assessee argued that the income should be considered as 'Business Income' based on past and subsequent assessments where the Department accepted the same classification. The assessee presented evidence, including a separate agreement and the presence of furniture in the balance sheet as business assets. The Tribunal agreed with the assessee, emphasizing the consistency in classification and the business nature of the assets. Consequently, the Tribunal allowed ground No. 2 of the appeal, classifying the income from furniture hiring as 'Business Income.'

Disallowance of Business Expenditure:
The assessee contested the disallowance of business expenditure amounting to ?70,45,232, which included various expenses such as depreciation, interest, office expenses, and professional fees. The lower authorities disallowed the expenditure, claiming that the assessee was not engaged in any business activities. However, the Tribunal, after analyzing the previous issue regarding the classification of income, found that the income from furniture hiring was indeed 'Business Income.' Therefore, the disallowance of business expenditure was deemed incorrect. The Tribunal held that the expenditure claimed by the assessee for running the business should be allowed. The Revenue did not challenge the quantification of the expenditure. Consequently, ground No. 3 of the appeal was allowed, and the appeal of the assessee was partly allowed.

In conclusion, the Tribunal's judgment clarified the classification of income from furniture hiring charges as 'Business Income' and allowed the claimed business expenditure, emphasizing the business nature of the activities and assets involved.