Home Case Index All Cases Income Tax Income Tax + AT Income Tax - 2014 (11) TMI AT This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2014 (11) TMI 684 - AT - Income TaxAssessability of rental income - “Income from House Property” or “Income from business” – Held that:- The shares of the assessee company was acquired by M/s Seto Teknolog P Ltd on 5th September, 2006, due to which the assessee company became its Subsidiary Company - the assessee was engaged in the business of dealing in computers and peripherals - the business activity of the holding company appear to be more complex and technical in nature, whereas the activity of the assessee company consisted of merely dealing in computers and peripherals - in order to carry out the job work given by the holding company, the assessee company should have possessed skilled workers, who were having required technical knowledge - it is unbelievable that the assessee could have performed the job work with the help of its existing workers, who were merely engaged in the job of selling computer - the assessee has failed to show the nature of services performed by it to its holding company. Since the assessee has claimed to have received the labour charges from its holding company by carrying out certain technical activity and since it forms the foundation to determine whether the assessee was continuing to carry on the business, the onus to prove its claim is fully placed upon the assessee - the assessee has failed to discharge the onus - CIT(A) was not justified in accepting the claim of the assessee that it has continued to carry on its business - the nature of business activity of the assessee company and its holding company was different and hence the possibility of workers of the assessee company rendering technical services was remote - the so called “job work” or “receipt of labour charges” can only be categorized as colourable device to create an impression that the assessee has continued to carry on the business - the AO was justified in disallowing the claim of administrative expenses and further he was also justified in assessing the receipt of labour charges as income from other sources – Decided in favour of revenue. Whether the expenses are assessable as business income or house property income – Held that:- The rent received on letting out of factory premises on temporary basis due to lull in the business is normally assessed as “Business income”, since the object of the assessee in such type of cases was not mere earning of rental income, but effective exploitation of business assets - the telephone company or the company providing services to the telephone company, could not have accepted installation of the same for a shorter period - the assessee has let out the terrace, which means, it has let out the space which was not required for it - the claim of letting out on a temporary basis does not apply to the facts surrounding the rental receipt from M/s Reliane Infratel Ltd. - the intention of the assessee in letting out the terrace to a telephone company for enabling it to erect a tower could only be with the intention to earn rental income – the AO was justified in assessing the rental income received from M/s Reliance Infratel Limited under the head “Income from House Property”. Assessment of rental income received from the holding company of the assessee – Held that:- The assessee company has become subsidiary of M/s Seto Teknolog Pvt. Ltd and the premises have been let out, meaning thereby, there is a possibility that the assessee company has let out the factory premises in pursuance of a business policy decision - the letting out of factory business should be due to the fact of temporary lull in the business and the intention of the assessee could be ascertained from the efforts taken to revive the business activities - though the assessee claims that the letting out of factory premises was for a temporary period, yet no material was brought on record to substantiate the claim - the relationship between the assessee and its holding company also weakens the claim - The assessee has also failed to show that it was taking efforts to revive its business activities - All these factors cumulatively show that the intention of the assessee in letting out the factory premises could not be due to temporary lull in the business - the AO was justified in assessing the rental income under the head Income from House Property – Decided in favour of revenue. Determination of Annual Letting Value (ALV) of the factory premises let out to the holding company – Held that:- The Annual letting value is determined as per the provisions of sec. 23 of the Act, according to which the fair market value or the actual rent received whichever is higher is taken as ALV - the municipal ratable value may be adopted as fair rental value - the ALV may be taken as the municipal ratable value - the order of CIT(A) is modified – Decided partly in favour of assessee.
|