1984 (11) TMI 94 - AT - Income Tax

Summary

Issues:
1. Whether income from property should be taxed under the head 'Income from business' or 'Income from house property'.
2. Whether contributions received towards building fund should be treated as capital receipts or revenue receipts.

Analysis:

Issue 1:
The first issue revolves around the classification of income from property as either 'Income from business' or 'Income from house property'. The assessee-association purchased a flat and let it out to the Secretary General, claiming it to be business income incidental to their main business. The ITO disagreed and assessed the income under 'Income from property'. The CIT(A) relied on precedents and held that the rent received should be assessed under s. 28 of the Act. The Revenue contended that the facts were not similar to the cited cases, as the flat was not within the business premises. However, the Tribunal confirmed the CIT(A)'s view, emphasizing the objective behind purchasing the flat and the absence of contrary decisions, leading to the conclusion that the income should indeed be taxed under 'Income from business'.

Issue 2:
The second issue concerns the treatment of contributions received towards a building fund as either capital or revenue receipts. The assessee-association collected funds for purchasing a flat and an office building. The ITO taxed these contributions as income, citing a court decision. The CIT(A) reversed this decision, considering the nature of the contributions and relevant case laws. The Tribunal, after a detailed analysis, upheld the CIT(A)'s decision, emphasizing that the contributions were specifically for capital assets and, therefore, should be treated as capital receipts. The Revenue argued that the principles from previous cases were not applicable due to differences in circumstances. However, the Tribunal reiterated that the contributions were for capital assets and confirmed the CIT(A)'s decision to delete the additions.

In conclusion, the appeals were dismissed, affirming the decisions of the CIT(A) and providing detailed reasoning for the classification of income and contributions.