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TMI Blog2018 (4) TMI 378X X X X Extracts X X X X X X X X Extracts X X X X ..... irected to consider expenses incurred by the assessee against such income. In this case, the assessee has paid remuneration to directors and also furnished evidences for payment of remuneration for services rendered by the directors to the company. Therefore, we are of the view that the AO was incorrect in disallowing remuneration paid to directors by holding that the expenses were not wholly and exclusively incurred for business and also which is excessive and unreasonable. Hence, we direct the AO to allow expenses claimed by the assessee against business receipts. Motor car expenses and depreciation on motor car - proof of busniss use - Held that:- Merely because the car is in the name of director the usage of car for the purpose of business cannot be ruled out. However, the fact remains that when the AO has specifically asked for production of log book, the assessee failed to furnish log book to prove the use of vehicle for the purpose of business. Therefore, we are of the view that the issue needs to be examined by the AO in the light of the claim of the assessee that the motor car has been used for the business purpose. If the assessee substantiates its claim with necessary ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... incurred in relation to the motor car ₹ 15,83,596/- may please be allowed as business expenses as the same was incurred for the purpose of such business. 4. The Ld. A.R. for the assessee submitted that the additional grounds raised by the assessee taking a legal plea of assessing the compensation/rental income under the head Income from house property as against declared and claimed under the head Income from business emanates from the orders of the lower authorities and no new facts or evidences brought in support of additional grounds. Therefore, the additional grounds raised may be admitted and decide on merits. 5. On the other hand, the Ld. D.R. opposed admission of additional grounds. 6. Having heard both the sides and considered material available on record, we find that the additional grounds raised by the assessee challenging the action of the AO in assessing the compensation/rental income under the head Income from house property as against declared and claimed under the head Income from business emanates from the order of the lower authorities and no new facts or evidences brought on record to support the same. Therefore, we are of the considered ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he decision of Hon ble Supreme Court in the case of Shambhu Investment P. Ltd. vs. CIT (SC) 263 ITR 143, observed that rental income received from letting out of properties is assessable under the head Income from house property , but not under the head Income from business or profession and accordingly considered rental income under the head Income from house property and recomputed income from house property, after allowing deductions towards property tax and standard deduction under section 24(a) of the Income Tax Act and determined net income of house property at ₹ 1,31,29,691/-. The AO also treated interest received of ₹ 6,44,553/- under the head Income from other sources . Further, the AO has disallowed expenses being remuneration paid to directors for ₹ 72 lakhs, on the ground that once rental income has been treated as income from house property consequent deductions towards expenses under section 24(a) have been given. Therefore, no further deductions can be given towards remuneration to directors under the head Income from house property . The AO further observed that the expenses incurred by the assessee has not been incurred wholly and exclusive ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... depreciation with necessary evidences, when the AO specifically asked to produce log book etc. the assessee failed to file any evidences. Therefore, the AO was right in disallowing motor car expenses including depreciation. With these observations, the Ld. CIT(A) dismissed the appeal filed by the assessee. Aggrieved by the order of the Ld. CIT(A), the assessee is in appeal before us. 10. The Ld. A.R. for the assessee referring to the additional grounds of appeal raised, submitted that the AO was erred in assessing the compensation/rental income under the head Income from house property as against declared and claimed under the head Income from business or profession even though the assessee has discontinued its manufacturing activity and continued the activity of letting out of properties which is also in accordance with its main objects. The assessee further submitted that it was in the business of renting its properties after discontinuation of its manufacturing activity and received rent form properties which has been taxed under the head profit and gains of business or profession. The AO without appreciating the fact has assessed rental income under the head Income from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Profit and gains of the business or profession . This legal proposition is further supported by the decision of ITAT Mumbai SMC Bench, in the case of Distinct Developers Pvt. Ltd. (supra) wherein under similar circumstances the co-ordinate Bench by following the decision of Hon ble Supreme Court in the case of Rayala Corporation Pvt. Ltd. vs. ACIT (supra) has held that rental income received from letting out of properties should be considered under the head Income from business . 13. Considering the facts and circumstances of this case and also following the ratio of Hon ble Supreme Court in the case of Rayala Corporation Pvt. Ltd. vs. ACIT (supra), we are of the considered view that if the main activity of the assessee is of letting out properties and derive rental income without any other business activity, then such rental income should be considered under the head Income from business or profession but not under the head Income from house property . Therefore, we direct the AO to assess rental income under the head Income from business or profession as claimed by the assessee. 14. Coming to disallowance of expenses being directors remuneration and motor car expens ..... X X X X Extracts X X X X X X X X Extracts X X X X
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