2014 (3) TMI 500 - AT - Income Tax

Deduction u/s 24(a) of the Act Rental income - Income from business or Income from house property Held that - There is no logic in treating the income from house property as income from business - nothing has been brought on record by the AO to show that the income from house property is actual income from business Relying upon CIT vs. Dalmia Promoters Developers (P) Ltd. 2006 (1) TMI 57 - DELHI High Court - for rejecting the view taken in earlier assessment years, there must be material change in the fact, situation or in law - there is no change in the facts, situation or in law thus, the Revenue cannot be allowed to adopt a different stand - when in earlier asstt. years the revenue accepted the order of the Tribunal in favour of the assessee, then Revenue cannot be allowed to flip flop on the issue and it ought let the matter rest rather than spend the tax payers money in pursuing litigation for the sake of it thus, there is no infirmity in the order of the CIT(A) Decided against Revenue. Partial relief u/s 57(iii) of the Act Income from other sources Expenditure not proved - Held that - On this claim CIT(A) has further disallowed 50% against which the Counsel of the assessee submitted that the assessee is not in appeal - The assessee has incurred expenditure in earning income from other sources - Assessee has himself disallowed u/s 14A and balance has been claimed by the assessee - CIT(A) has allowed 50% of the expenditure - the expenses have been found to be bogus or the concerned vouchers were lacking thus, there is no infirmity in the order of the CIT(A) in this regard Decided against revenue.

Summary

Issues:
1. Addition of income from letting out property as rental income and allowing deduction u/s. 24(a).
2. Allowing part relief u/s. 57(iii) under the head income from other sources.

Analysis:

Issue 1:
The first issue pertains to the treatment of income from letting out property as rental income and allowing deduction u/s. 24(a). The Assessing Officer (AO) raised concerns about the proportionality of the rental income to the property value, suspecting malafide intentions to categorize business income as rental income. The AO relied on a Supreme Court decision to reclassify the income. However, the Commissioner of Income Tax (Appeals) noted that the AO's conclusions lacked proper appreciation of facts. The CIT(A) emphasized that rental income should be taxed as income from house property regardless of the amount. The CIT(A) highlighted the appellant's consistent reporting of rental income as income from house property in previous assessments, indicating no tax evasion motive. The tribunal agreed with the CIT(A), citing the absence of evidence to support the AO's reclassification of rental income as business income.

Issue 2:
The second issue concerns the allowance of part relief u/s. 57(iii) under income from other sources. The AO disallowed a portion of the claimed expenses, asserting they were not wholly and exclusively for earning the income. However, the CIT(A) restricted the disallowance to 50%, considering the nature of the expenses and the lack of cogent reasons for the AO's full disallowance. The tribunal upheld the CIT(A)'s decision, noting that the expenses were genuine and incurred in earning the income, with no evidence of being bogus. Therefore, the tribunal found no fault in the CIT(A)'s order regarding the allowance of part relief u/s. 57(iii).

In conclusion, the tribunal dismissed the Revenue's appeal, upholding the CIT(A)'s orders on both issues.