2022 (6) TMI 570 - AT - Income Tax

Rent receipts - Correct head of income - two agreements of leave license and service charges which were entered into by the assessee - income under the head income from house property or income from other sources - HELD THAT - The facilities are incidental and ancillary to the predominate nature of transaction being letting out of the premises. In case of CIT vs National Storage Private Limited 1962 (7) TMI 44 - BOMBAY HIGH COURT has held that where house property is given on leave and licence basis for earning income therefrom, the true character of the income derived is income from house property and the said character is not changed and the income doesn t become income from trade or business where the hiring is inclusive of certain additional services such as heating, cleaning, lighting or sanitation where are relatively insignificant and only incidental to the use and occupation of tenements. We find that the dicta laid down by the Hon ble Jurisdictional High Court squarely applies in the facts of the present case and respectfully following the same, amount received as services charges have to be assessed under the head Income from house property . The matter is thus decided in favour of the assessee and the grounds of appeal are disposed off accordingly. Disallowance of interest paid to Saraswat Co opertative Bank - Addition holding that the loan taken from the bank is not used towards house property and that the same was obtained to be utilized for investment in sponge iron project and the said findings has since been confirmed by the ld.CIT(A) - HELD THAT - As perused the material available on record. In absence of any demonstrative evidence on record that the loan amount was utilized for repayment of earlier loans obtained for the purpose of housing, deduction towards interest cannot be allowed while computing the income under the head income from house property . However, given the undisputed fact that the assessee has taken the loan for the purposes of his business and has incurred the interest liability the same is directed to be allowed while computing the income under the head Profits and Gains of Business and Profession . In the result, the ground of appeal is allowed. Disallowance being 15% of the expenditure claimed on account of depreciation on car, insurance, interest on car loan and conveyance holding it to be personal expenses - HELD THAT - It is an admitted position that the vehicle has been used for personal purposes of the assessee and has thus not been used exclusively for the business purposes and therefore, the AO is well within his right to determine appropriate percentage of whole of the vehicle expenses including depreciation, insurance and interest on car loan as relatable to personal and non-business purposes and restrict the claim as relatable to business purposes. In the instant case, the AO has determined 15% as relatable to personal and non-business purposes which we found reasonable and in light of the same, we see no justifiable basis to interfere with the findings of the ld CIT(A) and the same is hereby confirmed and the ground so taken by the assessee is dismissed. Addition on the basis of TDS certificate mentioning interest income received from UCO Bank - HELD THAT - AO has returned a finding that the assessee has reported interest income as against interest in TDS certificate whereas the whole of TDS credit as shown in the TDS certificate of Rs 4440/- has been claimed by the assessee. CIT(A) has returned a finding that the contention of the assessee that he has actually received less interest income is not supported by any bank statement or any other documentary evidence. Further, during the course of hearing, nothing has been brought on record in terms of quantum of deposit, tenure and rate of interest basis which the amount of interest income can be reasonably determined. In the result, we see no justifiable basis to interfere with the findings of the ld CIT(A) and the same is hereby confirmed and the ground so taken by the assessee is dismissed. Addition received as advance against agreement of sale of land at village Chhatarpur, which was found credited in the capital account of the assessee - HELD THAT - CIT(A) has returned a finding that neither during the assessment proceedings nor during the appellate proceedings, the assessee has furnished any supporting evidence or documentation in support of his contention that the amount so received by him is on account of forfeiture of amount in relation to cancellation of transaction of property. Nothing has been brought on record during the present proceedings to controvert the said findings of the ld CIT(A). It is therefore a case where certain contentions regarding nature and source of transaction have been raised by the assessee which are however not supported by any documentation and in such a scenario, we do not see any infirmity in the action of the AO and in action of the ld CIT(A) in confirming the same. In light of the same, we do not see any justifiable basis to interfere with the findings of the ld CIT(A) and the same are hereby confirmed and the ground of appeal taken by the assessee is dismissed. Addition u/s 68 - HELD THAT - Regarding transactions with Umesh Gupta and Dilip Thakre, where the assessee has filed the necessary confirmations, a fact not disputed by the lower authorities, the addition is hereby directed to be deleted and in respect of other transactions, we find that the assessee has clearly failed to discharge the initial onus cast on him to satisfactory explain the said transactions with appropriate documentation, the additions are hereby confirmed. In the result, the additions are hereby deleted and remaining additions of Rs 1,00,000/- are sustained. In the result, the ground of appeal is partly allowed. Loan received from mother - It is an admitted fact as emerging from the records that the mother of the assessee has confirmed before the same Assessing officer in her own assessment proceedings that she has given the amount of Rs 1 lacs to the assessee and in her hands as well, the addition of the said amount has already been made on substantive basis. In such circumstances, we agree with the contention of the ld AR that the addition in the hands of the assessee does not lie and if at all, any addition has to be made, the same can be made in the hands of the mother of the assessee where the matter is currently pending before the Assessing officer in the set-aside proceedings and which the Assessing officer is free to decide as per law. In the result, the addition so made is directed to be deleted and the ground of appeal is allowed.

Summary

Issues Involved:
1. Legality of the order of the Asstt. Commissioner of Income Tax.
2. Classification of Rs. 18,98,100/- as income from rent or other sources.
3. Determination of whether Rs. 18,98,100/- is for services provided.
4. Classification of service charges and common maintenance charges.
5. Disallowance of interest paid to Saraswat Cooperative Bank.
6. Disallowance of interest to the extent of Rs. 25,441/-.
7. Determination of income from other sources.
8. Disallowance of 15% of car-related expenses as personal expenses.
9. Addition of Rs. 15,476/- as interest earned.
10. Treatment of Rs. 90,000/- as cash credit under section 68.
11. Treatment of Rs. 1,35,000/- as cash credit under section 68.
12. Treatment of Rs. 1,00,000/- received from Smt. Shyamadevi Gupta as income.
13. Charging of interest under sections 234A and 234B of the Income Tax Act.

Detailed Analysis:

1. Legality of the Order:
- Ground No.1 is general in nature and does not require separate adjudication.

2. Classification of Rs. 18,98,100/-:
- The assessee argued that the income should be classified under "income from house property" rather than "income from other sources." The Tribunal noted that the agreements for leave and license and service charges were primarily for letting out the property with incidental services. Following precedents, the Tribunal ruled that the amount should be assessed under "income from house property."

3. Determination of Rs. 18,98,100/- for Services:
- The Tribunal found that the services were incidental to the letting of the property and not independent. The income was thus classified under "income from house property."

4. Classification of Service Charges:
- The Tribunal held that the service charges were an integral part of the rent and should be considered under "income from house property."

5. Disallowance of Interest to Saraswat Cooperative Bank:
- The Tribunal found no evidence that the loan was used for housing purposes. However, it allowed the interest as a business expense under "Profits and Gains of Business and Profession."

6. Disallowance of Interest of Rs. 25,441/-:
- This ground was dismissed as not pressed by the assessee.

7. Determination of Income from Other Sources:
- The Tribunal ruled that the income should be assessed under "income from house property" based on the nature of the agreements.

8. Disallowance of Car-Related Expenses:
- The Tribunal upheld the disallowance of 15% of car-related expenses for personal use, finding it reasonable.

9. Addition of Rs. 15,476/- as Interest Earned:
- The Tribunal upheld the addition, noting that the assessee failed to provide documentary evidence to support a lower interest income.

10. Treatment of Rs. 90,000/- as Cash Credit:
- The Tribunal upheld the addition due to the lack of supporting evidence for the assessee's claim that the amount was a forfeited advance.

11. Treatment of Rs. 1,35,000/- as Cash Credit:
- The Tribunal deleted the addition for transactions with Umesh Gupta and Dilip Thakre, where confirmations were provided. However, it upheld the addition for other transactions due to insufficient documentation.

12. Treatment of Rs. 1,00,000/- from Smt. Shyamadevi Gupta:
- The Tribunal deleted the addition, noting that the mother of the assessee had confirmed the loan transaction in her own assessment proceedings.

13. Charging of Interest under Sections 234A and 234B:
- This ground was noted as consequential and did not require separate adjudication.

Conclusion:
- The appeal was partly allowed, with specific grounds being upheld or dismissed based on the evidence and legal precedents. The Tribunal provided a detailed analysis for each issue, ensuring that the legal terminology and significant phrases were preserved.