2018 (2) TMI 349 - AT - Income Tax

Treating the compensation received from terrace antenna and hall booking - Income from Other Sources OR Business Income - Held that - It is undisputed that assessee company s only source of income is from letting out of properties. This is duly supported by the profit and loss account submitted by the assessee. Even the Assessing Officer has accepted that the entire receipt of the assessee consists of rentals for letting out of property. In these circumstances, find that Hon ble Apex court decision in the case Rayala Corporation (P) Ltd. vs. ACIT (2016 (8) TMI 522 - SUPREME COURT) duly covers the issue in favour of the assessee. Thus assessee s receipts should be considered as business income - Decided in favour of assessee.

Summary

Issues:
1. Classification of compensation received from terrace antenna and hall booking as "Income from Other Sources" instead of "Business Income."
2. Disallowance of business expenditure.
3. Allowance of expenditure under section 57(iii) of the Act against "Income from Other Sources."

Issue 1: Classification of Compensation:
The appellant contested the CIT(A)'s decision to classify the compensation received from terrace antenna and hall booking as "Income from Other Sources" instead of "Business Income." The Assessing Officer noted the rental income but disallowed the expenses claimed by the appellant. The CIT(A) upheld this decision, stating that the compensation was incidental to letting out properties and did not involve organized business activity. The CIT(A) dismissed the grounds raised on this issue. However, the ITAT disagreed, citing the appellant's sole income source from letting properties. Referring to the Rayala Corporation case, the ITAT ruled in favor of the appellant, setting aside the lower authorities' orders.

Issue 2: Disallowance of Business Expenditure:
The appellant challenged the disallowance of business expenditure by the CIT(A). The CIT(A) upheld the disallowance, stating that the expenses were not incurred exclusively for earning the incidental income. The ITAT concurred with this decision, highlighting that the standard deduction had already been allowed against the Income from House Property. Consequently, the ITAT dismissed the ground raised on this issue.

Issue 3: Allowance of Expenditure under Section 57(iii):
The appellant also raised the issue of allowing the expenditure under section 57(iii) of the Act against "Income from Other Sources." The CIT(A) rejected this claim, stating that the expenditure was not wholly and exclusively incurred for earning the income. The ITAT upheld this decision, emphasizing that the expenses were not directly related to the incidental income. Therefore, the ITAT dismissed the ground raised on this issue.

In conclusion, the ITAT ruled in favor of the appellant, overturning the decisions of the lower authorities and classifying the appellant's receipts as business income. The judgment highlighted the appellant's primary income source from letting properties and referenced the Rayala Corporation case to support its decision. The ITAT allowed the appeal, setting aside the orders of the authorities below and directing that the appellant's receipts be considered as business income.