2015 (11) TMI 627 - AT - Income Tax

Income of the assessee - whether assessable under the head Income from house property or other sources - Held that - As held in Chennai Properties and Investments Ltd. v. CIT 2015 (5) TMI 46 - SUPREME COURT held that holding of property and earning of income by letting out those property is the main business of the assessee, the income arising thereon is liable to be assessed under the head Income from business and cannot be treated as income from house property. Thus we restore the matter back to the file of the Assessing Officer for deciding afresh after considering the proposition of law laid down - Decided in favour of assessee for statistical purposes.

Summary

Issues:
1. Disallowance of expenses claimed by the assessee under various categories.
2. Classification of income as business income or income from house property.

Analysis:
1. The appeal involved challenges against the disallowance of expenses by the Commissioner of Income-tax (Appeals) under different heads such as business promotion, club expenses, sub-lease expenses, depreciation, repair and maintenance expenses, security service charges, and administrative expenses. The Assessing Officer treated the income as taxable under "Income from house property" and disallowed the claimed expenses. The appellant contested this decision before the Tribunal.

2. The crux of the matter was the nature of the income earned by the assessee. The appellant argued that the income should be assessed as business income due to the commercial exploitation of business assets. The Tribunal considered the Supreme Court's decision in Chennai Properties and Investments Ltd. v. CIT, emphasizing that income from holding and letting out property for business purposes should be categorized as "Income from business" rather than "Income from house property." The Tribunal directed the Assessing Officer to reassess the matter in light of this legal principle.

3. The Tribunal noted that the properties acquired by the assessee were in a dilapidated condition and required significant remodeling and refurbishment to attract sophisticated customers. The income earned by the appellant included license fees, furniture hire charges, service charges, and forfeiture amounts. The expenses claimed by the assessee were related to security charges, repairs and maintenance, business promotion, sub-lease expenses, and administrative expenses, which were initially disallowed by the Assessing Officer.

4. Relying on the precedents set by the Supreme Court in cases like Sultan Brothers (P.) Ltd. v. CIT and Karanpura Development Co. Ltd. v. CIT, the Tribunal concluded that the primary business of the assessee involved holding and letting out properties for commercial purposes. Therefore, the income derived from such activities should be treated as business income. Consequently, the Tribunal allowed the appeal in part for statistical purposes and remanded the matter back to the Assessing Officer for a fresh assessment based on the Supreme Court's legal interpretation.

5. The decision was rendered on August 14, 2015, by the Tribunal comprising D. Manmohan (Vice-President) and R. C. Sharma (Accountant Member). The legal representatives for the appellant and respondent were Firoze Andhyarujina and Love Kumar, respectively.