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2018 (5) TMI 1894 - AT - Income TaxCorrect head of income - hiring receipts - under the head ‘income from business or profession’ OR ‘income from house property’ - HELD THAT:- Admittedly in preceding AY as is observed from assessment order passed for AY 2007-08. A.O. in reassessment proceedings has not disputed the nature of income earned by assessee. Further for computation for year ending 31/03/11 has been placed, wherein rent received from hire of equipments have been shown as income from business. Assessee has sold the building during Financial Year 2010-11, but was continuing to receive hire charges from furniture, equipments etc. Thus it is clear that rent received from lease of building was independent of rent received from hire of furniture and fittings. On perusal of partnership deed, it is observed that one of the object was to purchase, sell and give on lease properties developed by assessee. Considering the totality of facts the intention of assessee was to continue renting furniture and fixtures to lessee, which has been admitted to be income from business in the preceding assessment year by the authorities below. Following rule of consistency, we do not find any infirmity in the observations of CIT(A) in treating the hiring receipt under the head ‘income from business’. Disallowance being bank charges, hiring charges for generator, maintenance charges, security charges and depreciation - HELD THAT:- Income received by assessee from hiring of equipments has to be treated as ‘business income’. It is an admitted fact that except for generator, rest of the equipments have been purchased by assessee and form part of block of assets - depreciation claimed by assessee on these equipments would be allowable. In respect of the other items like maintenance charges, security charges, assessee is already claiming standard deduction u/s 24 at 30% which subsumes all such misc. expenses in so far as the property building is concerned under the head ‘income from house property’. We cannot appreciate the fact that these charges could be allocated to the rental income earned by assessee against hire of furniture fittings as all the maintenance charges are borne by the lessee. In so far as bank charges are concerned, A.O. shall verify if it could be attributed to earning of rental income from hiring of furniture fittings. In the event the bank charges could be attributed to earning of rental income from furniture fittings, the same may be allowed as ‘business expenditure’. Assessee is directed to provide all details in respect of the same to the satisfaction of AO for proper verification as per law. - Ground raised by revenue stands partly allowed for statistical purposes. Interest income - claim disallowed on the premise that the rental income earned by assessee would be treated as ‘income from other sources’ - CIT (A) deleted the disallowance made by AO - HELD THAT:- In our considered opinion the interest expenditure that is attributable towards the purchase of furniture, fixtures and fittings should be an allowable expenses in the hands of assessee. Assessee is accordingly directed to provide the bifurcation of the interest expenses that is allocable towards the construction of building as well as towards purchase of furniture, fixtures, equipments and fittings. A.O. shall then consider the claim of assessee as per law. Disallowance made on account of salary and staff welfare - HELD THAT:- Rental income earned by assessee from hire of furniture, fittings has been allowed to be treated as ‘business expenditure’, which do not require to engage any employee since all the maintenance of such furniture, fixtures and fittings are being taken care by lessee as per agreements placed in the paper book. Further it is observed that assessee during the year has earned income from house property and rental income from hire of furniture, fixtures being income from business. Assessee is already claiming standard deduction u/s 24 at 30% which subsumes all such misc. expenses in so far as the property building is concerned under the head ‘income from house property’. We cannot appreciate the fact that these charges could be allocated to the rental income earned by assessee against hire of furniture fittings as all the maintenance charges are borne by the lessee. Treatment of loan as a liability of the firm - HELD THAT:- It is observed that the loan has been taken by assessee for the purposes of construction which has been admittedly obtained by providing security of family members. Admittedly the entire fund has been utilised for the purposes of construction of building as well as acquiring furniture aid fittings for the purpose of earning rental income and consistently assessee has been reflecting the said loan in the balance sheet in the preceding A.Ys which has not been disputed by revenue. Further, assessee declared in its hands the rental income received from building as ‘income from house property’ and rent received from hiring of furniture and fittings as ‘income from business’. No reason to interfere with the observations of CIT(A). Accordingly this ground raised by revenue stands dismissed. Difference in the cost of construction - DR submitted that there was a difference in the cost of construction shown by the appellant in the books of accounts and as determined by the DVO - CIT-A deleted addition - HELD THAT:- We agree with the submissions advanced by AR that AO has not found any fault in the bills and vouchers produced by assessee in support of the construction cost but has merely relied upon the DVO’s report. There has been neither any instance placed on record regarding any infirmity in the books of accounts nor there is any observations regarding the same by her. No reason to differ with the observations of CIT (A) and accordingly the same is upheld. Depreciation disallowance - HELD THAT:- The right of the assessee to relief is not restricted to the plea raised by him.” It is thus, apparent, that the AO is under an obligation to bring the correct amount of income to tax. If, the appellant has made a wrong claim, it is the duty of the Assessing Officer to allow the correct claim as per law as a deduction. The decision of the Hon’ble Supreme Court in the case of Goetze [2006 (3) TMI 75 - SUPREME COURT] is not applicable in the case of the appellant since it is not making a new claim but is revising correctly the claim it has already made in the return of income. Therefore, the AO is directed to allow the correct amount of depreciation on furniture and fixtures. No proper verification in respect of the genuineness of the transactions - HELD THAT:- We are in agreement with the submissions advanced by both the sides that this issue needs to be revisited by Assessing Officer and a thorough verification is to be conducted in this regard. Assessee is therefore directed to provide all relevant information/produce relevant personnel for purposes of examination in respect of the transactions with Ishan Constructions and Ravinder Nath Dharam, to the satisfaction of Ld. AO. Assessee shall also produce all the relevant companies from home sale and purchase of road safety equipments have been effectuated. In respect of the same assessee is directed to produce all the records/registers/bills and vouchers/Ledger accounts. AO shall then verify all the materials filed by assessee as per law and establish the genuineness and validity of the transactions in order to arrive at correct decision.
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