2002 (7) TMI 228 - AT - Income Tax

Summary

Issues Involved:
1. Classification of rental income from Scindia House.
2. Deductibility of various business expenses.
3. Disallowance under Section 43B for payment of PF and ESI.
4. Deletion of addition on account of lease rent paid to a sister concern.

Issue-wise Detailed Analysis:

1. Classification of Rental Income from Scindia House:
The primary issue was whether the rental income from Scindia House should be assessed under the head 'Income from Property' or 'Income from Business'. The Assessing Officer treated the income as 'Income from House Property', citing various reasons including the Supreme Court's decision in East India Housing & Land Development Trust Ltd. The CIT(A) upheld this view, noting that the property had become the assessee's ownership post the assessment year 1980-81, fulfilling the legal requirements for assessment under 'Income from House Property'. The Tribunal agreed, emphasizing that the property was not stock-in-trade and the rental income was correctly taxable under 'Income from House Property'.

2. Deductibility of Various Business Expenses:
The assessee claimed deductions for repairs and maintenance, house tax, legal charges, security expenses, and court fees as business expenses. The Assessing Officer disallowed these claims, allowing only 1/6th of the repairs. The CIT(A) and the Tribunal upheld this disallowance, stating that these expenses were not related to business activities but were deductible under sections 23 and 24 of the Income-tax Act for computing 'Income from House Property'.

3. Disallowance under Section 43B for Payment of PF and ESI:
The assessee contested the disallowance of PF and ESI payments under Section 43B. The CIT(A) dismissed this ground as the assessee admitted to not making the payments within the prescribed due dates. The Tribunal upheld this finding, confirming the disallowance of Rs. 10,797 for PF and Rs. 3,369 for ESI.

4. Deletion of Addition on Account of Lease Rent Paid to a Sister Concern:
The revenue appealed against the CIT(A)'s deletion of Rs. 9,68,148 on account of lease rent paid to a sister concern. The CIT(A) had relied on his predecessor's order for the assessment year 1990-91, which found no justification for disallowance if the transaction was genuine and the car was used by the assessee company. The Tribunal set aside this matter, directing the Assessing Officer to verify if the earlier orders for 1990-91 and 1991-92 were in favor of the assessee and if there was no change in facts for 1992-93, then the CIT(A)'s findings should be accepted, and the addition should be deleted.

Conclusion:
The Tribunal upheld the classification of rental income from Scindia House as 'Income from House Property' and the disallowance of various business expenses, confirming the CIT(A)'s findings. The disallowance under Section 43B for PF and ESI payments was also upheld. However, the matter concerning the lease rent paid to a sister concern was remanded to the Assessing Officer for verification based on earlier years' findings.