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2016 (9) TMI 1255 - AT - Income TaxLease rental - nature of business - assessee in business of warehousing, cold storage and refrigeration - ‘income from house property’ OR ‘business income’- Held that:- The main objects of the assessee company is to carry on the business of warehousing, cold storage and refrigeration, to provide facilities and godowns for proper and safe storing of valuable agricultural and horticultural produce and to provide godowns and warehousing facilities for goods of all description of agricultural and allied products. Similarly, the other objects of the assessee company also provide to let on lease or hire the whole or any part of the real and personal property of the assessee company. We, therefore, hold that the lease income received by the assessee on account of let out of the warehouses/godowns as ‘profits and gains from business or profession’. See M/s. Rayala Corporation Pvt. Ltd. Versus Assistant Commissioner of Income Tax [2016 (8) TMI 522 - SUPREME COURT ]. Reopening of assessment - Held that:- Since all material facts were already there on record and no tangible material was available before the AO, therefore we hold that the reassessment proceedings initiated by the AO are bad in law. Disallowing the service charges made to Shri Industrial Services by invoking the provision of section 40A(2)(b) - Held that:- Since the Director of the assessee company is also the proprietor of Shri Industrial Suppliers and he is the key person for both the concerns, therefore, diversion of income of the assessee company to the proprietary concern of the Director is clearly visible and therefore the same in our opinion comes within the purview of section 40A(2)(b) of the I.T. Act. We therefore hold that the AO was justified in disallowing 50% of such payment as excess payment to the relatives as per provisions of section 40A(2)(b). However, the CIT(A) in our opinion is not justified in enhancing the same to ₹ 23,27,592/- in the instant case only on the ground that Mr. Navlakha has incurred meager expenditure of ₹ 3,40,371 out of the total receipt of ₹ 27,02,000/-. There may be so many reasons for incurring of less expenditure by the Director. Thus disallowance of 50% of the expenses as done by the AO in the instant case was the correct approach. We accordingly hold that disallowance of ₹ 13,51,000/- u/s.40A(2)(b) is justified under the facts and circumstances of the case. Ground raised by the assessee is accordingly partly allowed.
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