2018 (11) TMI 1004 - AT - Income Tax

Amenity charges received - taxable under the head Income from other sources OR Income from house property declared by the assessee - Held that - We find that the co-ordinate bench has considered similar issue and after considering relevant facts has held that amenity charges received is assessable under the head, Income from other sources . ITAT has also considered the alternative plea of the assessee insofar as treating the amenity charges as advance and held that there is no merit in the claim of the assessee that these are advances received as the said charges have been received in pursuance to an agreement and hence, the AO was right in assessing amenity charges under the head, Income from other sources . CIT(A) was right in confirming the action of the AO in assessing amenity charges under the head Income from other sources . Disallowance of total expenses claimed under the head, Administrative & other expenses - Held that - In this year, the AO has disallowed similar expenses without there being any change in facts. The assessee ought to incur expenses even though there is no business activity to maintain corporate status of the assessee like audit fees, postage expenses, telephone charges and other day today expenses. Since the expenditure incurred by the assessee are in the nature of general administrative expenses, which are required to be incurred even though there is no business activity, we are of the considered view that there is no reason for the AO to disallow the said expenses, when he has allowed similar expenses in the past. We delete addition made by the AO towards disallowance of total expenses claimed by the assessee under the head Administrative & other expenses including depreciation, legal and professional fees and direct him to allow business loss as claimed by the assessee. Appeal filed by the assessee partly allowed.

Summary

Issues:
1. Reopening of assessment under section 147 of the Income Tax Act, 1961.
2. Treatment of income received under Amenities Agreement.
3. Disallowance of depreciation, legal and professional fees, and administrative expenses.
4. Computation of interest charged under sections 234B/234C of the Act.

Issue 1: Reopening of Assessment
The appellant challenged the reopening of assessment under section 147 of the Income Tax Act, 1961. The appellant contended that all relevant facts were disclosed in the return of income, making the reopening unjustified and bad in law. However, during the proceedings, the appellant decided not to press this ground, leading to its dismissal.

Issue 2: Treatment of Income under Amenities Agreement
The appellant disputed the treatment of income received under the Amenities Agreement as 'Income from Other Sources' instead of 'Income from House Property'. The Assessing Officer (AO) observed that the appellant had not bifurcated rental income and amenity charges, treating the entire income under 'Income from other sources'. The AO disallowed the loss claimed by the appellant under 'Income from business or profession', stating that the appellant did not carry out any business activity. The CIT(A) upheld the addition made by the AO, and the ITAT confirmed this decision based on a similar case for AY 2009-10. The ITAT dismissed the appellant's claim that amenity charges should be treated as advances, affirming the assessment under 'Income from other sources'.

Issue 3: Disallowance of Expenses
The AO disallowed total expenses claimed by the appellant under 'Administrative & other expenses', including depreciation, legal, and professional fees, citing the lack of business activity. The CIT(A) upheld this disallowance. However, the ITAT found that the expenses were routine nominal expenses to maintain the corporate status of the appellant. The ITAT noted that similar expenses were allowed in the past and concluded that there was no justification for disallowing them. Consequently, the ITAT directed the AO to allow the business loss as claimed by the appellant.

Issue 4: Computation of Interest
The appellant challenged the computation of interest charged under sections 234B/234C of the Act. However, no detailed analysis or resolution regarding this issue was provided in the judgment.

In conclusion, the ITAT partially allowed the appeal filed by the appellant, dismissing some grounds while upholding others. The judgment provided detailed reasoning for each issue, citing relevant legal provisions and precedents to support the decisions made.