2005 (7) TMI 304 - AT - Income Tax

Summary

Issues Involved:
1. Reopening of assessments under section 147.
2. Head of income for various receipts (rent, lease rent, maintenance charges).

Detailed Analysis:

Reopening of Assessments:

For assessment years 1996-97, 1998-99, and 1999-2000, the returns were processed under section 143(1)(a). Notices under section 148 were issued on 12-3-2003. The appellant contended that the reopening was based on a mere change of opinion, making it invalid. The Revenue argued that the Assessing Officer could not form an opinion during the processing of returns under section 143(1)(a), thus the reopening was valid as it was within six years. The Tribunal agreed with the Revenue, upholding the CIT(A)'s finding and disallowed the appellant's ground.

Head of Income:

The appellant, a private limited company, argued that income from renting and leasing should be assessed under "Profits and gains of business" as per its Memorandum of Association objectives. The Revenue contended that the appellant is the owner of the building under section 27, and income from renting should be assessed under "Income from house property". The Tribunal noted that the appellant had possession of the property for 60 years, making it the deemed owner under section 27. Thus, income from letting out property was correctly assessed as "Income from house property".

Income on Account of Rent:

The Tribunal held that since the appellant is the owner of the property and does not occupy it for business purposes, income from letting out the property is assessable under "Income from house property".

Income on Account of Lease Rent on Building Sold:

The appellant received full sale consideration and monthly lease rent from purchasers. Since the appellant is not the owner of the sold property, lease rent is assessable under "Business income". Maintenance charges reimbursed by purchasers are also assessable under "Business income".

Income Received on Account of Maintenance Charges:

Maintenance charges from purchasers, being reimbursements, are assessable under "Business income". However, fixed maintenance charges from tenants are assessable under "Income from house property".

Undisposed Grounds:

The appellant claimed that certain grounds were not disposed of by the CIT(A). The Tribunal found that these grounds related to the calculation of maintenance charges, which the CIT(A) had addressed, and thus no grievance was caused to the appellant.

Conclusion:

The appeals were allowed in part, with the Tribunal upholding the assessment of rental income under "Income from house property" and lease rent and maintenance charges under "Business income" or "Other sources" as applicable.