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2019 (3) TMI 1877 - ITAT HYDERABADAllowability of interest on loan as business expenditure - assessee is having commercial property which is rented and in order to provide the equipment and furniture, assessee has taken loan from bank and the relevant interest was charged to P&L A/c as business expenditure - AO has rejected the claim of the assessee and treated the consolidated receipt of rent and hire charges as income from house property - HELD THAT:- We have to see the intention of the assessee whether the letting was the doing of a business or to exploitation of his property by an owner. The assessee when exploited the property to derive rental income it has to be held that the income realized by him by way of rental income from a building if the property with other asset attached to the building to be assessed as 'income from house property' only. The only exceptions are cases where the letting of the building is inseparable from letting of the machinery, plant and furniture. In such cases, it has to be held that the rental would not have been realized but for the letting out of the machinery, plant or furniture along with such building and therefore, rental received for the building is to be assessed under the head 'income from other sources'. In the present case, on the facts of the case, it is clear that the assessee as the owner of the building was only exploiting the property as owner by letting out the same and realizing income by way of rent. Such rental income was liable to be assessed under the head 'income from house property.' The various assets let out to the tenants are incidental to letting out the building being integral part of the letting. Accordingly, we reverse the order of the CIT(A) and restore that of the assessing officer. This ground of the revenue is allowed. Assessee has availed loan to arrange the relevant fixed assets in the building and incurred interest expenditure - Since, the assessee was claiming them as business expenditure as the income was declared as business income. As the authorities have treated the business income as income from house property, the interest expenditure is connected to the earning of income and head of income was changed due to the facts of the case, the relevant expenditure is accordingly claimable u/s 24(b) of the Act. Merely accepting the income and excluding the related expenditure is not proper. Therefore, we direct the AO to allow the relevant expenditure, which assessee has incurred to earn the rental income. Accordingly, additional ground raised by the assessee is allowed.
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