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2015 (7) TMI 471 - AT - Income TaxChange of head of income from ncome from business and profession to ncome from House property - Held that - In the present case, the assessee was neither absolute owner nor had surplus own capital. It was providing complex services. Accordingly, in the facts and circumstances of the present case and the decisions as relied upon by the ld. Counsel for the asessee we are of the view that the assessee being partnership firm was having warehousing business and local trade license authorities have accepted the assessee firm s business to carry out warehousing business. To do so the assessee took a land on lease, which proves the intention of commercial expediency by the assessee. Accordingly, we hold that income of the assessee should be assessed under the head business or profession . - Decided in favour of assessee. Addition on account of unsecured loan - CIT(A) deleted the addition - Held that - the source of the money received has been fully explained by the assessee by way of confirmations given by said 4 persons. Under such circumstances, the loan of ₹ 20 lakhs appearing in the balance sheet cannot be treated as unexplained. The ld.CIT(A) has rightly deleted the addition so made by the AO. We find no infirmity in the impugned order of the ld.CIT(A). We uphold the same. - Decided in favour of assessee.
Issues Involved:
1. Classification of income as "Income from House Property" vs. "Profits and Gains from Business or Profession." 2. Validity of assessment orders and limitation period. 3. Treatment of unsecured loan as unexplained income. Detailed Analysis: 1. Classification of Income: The primary issue revolved around whether the income earned by the assessee from letting out godown space should be classified as "Income from House Property" or "Profits and Gains from Business or Profession." - Assessee's Argument: The assessee argued that the income should be classified as business income because the godowns were given on rent as part of their business operations. The assessee provided various services such as security, electricity, and truck parking, which supported the classification as business income. - Assessing Officer's (AO) Stand: The AO treated the rental income as "Income from House Property," arguing that the assessee was simply letting out property and not carrying out any business activities. - CIT(A)'s Initial Decision: Initially, the CIT(A) agreed with the assessee, treating the income as business income, citing various case laws. However, this decision was set aside by the ITAT for re-examination on the limitation issue. - CIT(A)'s Final Decision: Upon re-examination, the CIT(A) concluded that the rental income should be classified as "Income from House Property," emphasizing that the godowns were let out before the commencement of any business activities and that the agreements were long-term without any special services provided. - ITAT's Final Decision: The ITAT disagreed with the CIT(A)'s final decision, noting that the assessee's primary intention was commercial exploitation of the property. The ITAT highlighted that the assessee had taken the land on lease and constructed the godowns with the intent of sub-letting them as part of its business operations, providing various services to the tenants. Therefore, the income was classified as "Profits and Gains from Business or Profession." 2. Validity of Assessment Orders and Limitation Period: The ITAT remanded the matter to the CIT(A) to decide on the validity of the assessment orders concerning the limitation period. - Assessee's Argument: The assessee contended that the assessment orders were barred by limitation and thus invalid. - ITAT's Direction: The ITAT directed the CIT(A) to ascertain whether the assessment orders were passed within the statutory limitation period and to provide an opportunity for both the assessee and the AO to present their cases. - CIT(A)'s Conclusion: The CIT(A) concluded that the assessment orders were passed within the statutory limit. 3. Treatment of Unsecured Loan: The revenue challenged the deletion of an addition made by the AO on account of an unsecured loan of Rs. 20 lakhs, arguing that the CIT(A) erred in deleting the addition without giving the AO an opportunity to verify the facts. - AO's Stand: The AO treated the loan as unexplained income because the confirmations from the lenders indicated that the loans were given to M/s. Dutta Tea Blenders, not the assessee firm. - Assessee's Explanation: The assessee argued that the loans were initially given to M/s. Dutta Tea Blenders, a group concern, which then transferred the amount to the assessee firm through banking channels. The transfer was duly reflected in the books of both entities. - CIT(A)'s Decision: The CIT(A) accepted the assessee's explanation and deleted the addition, stating that the source of the loan was adequately explained. - ITAT's Conclusion: The ITAT upheld the CIT(A)'s decision, finding no infirmity in the deletion of the addition since the source of the funds was fully explained. Conclusion: The ITAT ruled in favor of the assessee, classifying the rental income as "Profits and Gains from Business or Profession" and upheld the deletion of the addition regarding the unsecured loan. The appeal by the revenue was dismissed, and the appeals by the assessee were partly allowed.
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