2003 (5) TMI 213 - AT - Income Tax

Summary

Issues Involved:
1. Addition to income from house property.
2. Estimate of annual letting value.
3. Notional interest on interest-free security deposit.
4. Transactions of purchase and sale of GP/GC sheets.
5. Assessment of income from trading of GP/GC sheets.
6. Statutory allowance for repairs.
7. Treatment of rental income as income from business.

Summary:

1. Addition to Income from House Property:
The CIT(A) confirmed the addition of Rs. 25,97,760 made by the AO to the appellant's income from house property. The assessee argued for full deletion of this addition.

2. Estimate of Annual Letting Value:
The CIT(A) confirmed the AO's estimate of the annual letting value of house property at Rs. 26,03,232. The assessee contended that the actual rent received should be considered.

3. Notional Interest on Interest-Free Security Deposit:
The CIT(A) held that notional interest at 15% on the interest-free security deposit of Rs. 1,62,36,000 should be added to the actual rent received for determining the annual letting value. The AO had initially calculated this at 16%.

4. Transactions of Purchase and Sale of GP/GC Sheets:
The CIT(A) confirmed the AO's observations that transactions of purchase and sale of GP/GC sheets did not appear to be genuine.

5. Assessment of Income from Trading of GP/GC Sheets:
The CIT(A) confirmed the AO's action in assessing income of Rs. 33,457 from the business of trading GP/GC sheets under the head "Income from other sources". The assessee argued it should be assessed under "Profits and gains from business or profession".

6. Statutory Allowance for Repairs:
The CIT(A) did not give specific direction for the statutory allowance of 1/6th repairs despite mentioning it in the appellate order. The issue was restored to the CIT(A) for reconsideration.

7. Treatment of Rental Income as Income from Business:
The CIT(A) treated the rental income from flats as income from business, which the Revenue contested. The matter was restored to the CIT(A) for reconsideration and fresh order.

Conclusion:
- The assessee's appeal for asst. yr. 1992-93 was dismissed.
- The assessee's and Revenue's appeals for asst. yr. 1991-92 were partly allowed.
- The CIT(A) was directed to reconsider the treatment of rental income and statutory allowance for repairs.