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2015 (6) TMI 1229 - AT - Income TaxCorrect head of income - income from business and profession or income from house property - assessee received licence fee from leased out flats - HELD THAT:- Assessee is a partnership firm engaged in the business of development activities since its inception. All the units, leased outs, were developed by the assessee itself and only small portion of the total units were leased out on lease and licence basis, which were held as stock in trade. Let out the premises on lease and licence basis is the ancillary business of development and the rent constitute a small percentage of total revenue/income earned by the assessee. These units were subsequently sold out and in between (when remained to be unsold) were commercially exploited/utilized. Subsequent to sale of such units, the assessee offered the income as business income. In the present appeal, the units were leased out for temporary period for commercial utilization of the unsold units. Clause-14 of the lease and licence agreement clearly demonstrate the commercial intention of the assessee because the clause provides that the assessee shall have the right to sale the leased premises without any objection for the lessee except that lease and licence agreement shall continue for the balance period. Holding that mere entry of the object clause showing a particular object would not be the determinative factor to arrive at a conclusion whether the income is to be treated as income from business and such question would depend upon the circumstances of each case i.e. whether a particular business is letting or not. Income derived from property would be termed as ‘income from property’ but if the property is held as stock in trade, then the said property would become or part take the character of stock and thus any income derived therefrom would be income from business and not income from property. If business of the assessee is to construct the property and sale it or to construct and let out the same then that would be the business income. Disallowances of expenses which were arrived at pro rata basis - AO observed that income from leasing of properties is assessed under the head income from house property and thus part of expenses incurred in creating/building, the stock cannot be allowed as business expenditure - HELD THAT:- The assessee duly submitted the details of expenses along with names and addresses of the vendors. The ld. Commissioner of Income Tax (Appeals) found that the assessee transferred some amounts to profit and loss account and balance in WIP account. The assessee also filed statement showing the total area developed was divided into sold area and leased area and stock in hand. It was found by the CIT(Appeals) almost 94% of the income was derived from sale of flats and the remaining through rentals. Even the assessee bifurcated total expenses so incurred by it into revenue expenses and that leased to be capitalized. CIT(Appeals) and the Revenue has not brought any contrary material in their support, we find no infirmity in the conclusion drawn by the ld. CIT(Appeals). Even otherwise, while disposing of the aforesaid ground whether business income or income from house property, since we have affirmed the decision of the ld. CIT (Appeals), following the latest decision from Hon’ble Apex Court, we affirm the stand of the ld. CIT (Appeals). Thus, this ground of the Revenues is also dismissed.
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