1979 (4) TMI 50 - AT - Income Tax

Summary

Issues:
1. Assessment of rental income from Mazdoor Line under business income.
2. Allowance of repairing expenses on Mazdoor Line as business expenditure.

Detailed Analysis:

1. Assessment of Rental Income:
The appeal by the Revenue concerns the assessment of rental income for the assessment year 1973-74. The Revenue contested the direction by the Ld. AAC to assess the rental income from Mazdoor Line under the head of business income. The Revenue sought to challenge this direction, arguing that the rental income should be considered as income from house property. The Revenue further contended that a significant portion of the total rental income did not have any connection with the business of the assessee. However, after hearing both parties and reviewing the facts, the Tribunal held that the rental income received from Mazdoor and employees directly related to the business of the assessee and should be treated as income from business. On the other hand, the rental income received from outsiders was categorized as income from house property. Therefore, the Tribunal upheld the direction of the AAC in this regard.

2. Allowance of Repairing Expenses:
The second issue pertained to the allowance of repairing expenses on Mazdoor Line as business expenditure. The Revenue challenged the decision of the AAC to allow these expenses, arguing that the expenditure was not connected to the business of the company, especially considering the relatively low rental income from Mazdoor Line. The Tribunal, however, disagreed with the Revenue's contention. It held that the repairing expenses on Mazdoor Line were indeed related to the business of the company and should be allowed as revenue expenditure. The Tribunal directed the ITO to examine the nature of these expenses further and allow them to the extent that they were referable to Mazdoor Lines and not of a capital nature. Consequently, the Tribunal set aside the order of the AAC on this issue and remanded the case to the ITO for appropriate assessment.

In conclusion, the Tribunal allowed the appeal, upholding the treatment of rental income from Mazdoor Line as business income and directing a detailed examination of the repairing expenses on Mazdoor Line to ensure proper allowance based on their nature and connection to the business activities of the assessee.