2016 (5) TMI 372 - HC - Income Tax

Depreciation in respect of electrical installations, elevators, DG sets installed in the building, which have been let-out by the assessee, which is receiving rental income from the said building - Held that:- The lessee is required to pay not only the rentals on the building but also charges for the facilities provided by the assessee. The facilities and services provided by the assessee are at Annexure–2 to the said agreement. On a conjoint reading, it becomes clear that the rental income is income from house property. But the charges received towards provision and maintenance of facilities and services as per Annexure-2 cannot be construed to be income from house property. The said income, in our view, has to be considered as income from business and therefore, the claim for depreciation has to be allowed, which has been rightly done so by the Tribunal. - Decided in favour of assessee

Payment of interest on borrowed capital - whether an allowable business expenditure? - Held that:- It is noted that in the financial year 2003-04, assessee had constructed a project known as M/s.IBC Knowledge Park Pvt. Ltd., on Bannerghatta Road, Bengaluru. However, there were disputes between the assessee and Bangalore Housing Development and Investments, a partnership firm, with whom the assessee had entered into a joint development agreement. As a result, assessee could not sell the constructed properties. Sale of constructed properties is not a sine qua non for commencement of business. Assessee's business commenced when it had purchased land, obtained plan sanction and put up construction. Thus, when the business of the assessee had commenced during the financial year 2003-04, interest paid by the assessee on borrowed capital cannot be added back to the work in progress. The Tribunal in this regard has relied upon a decision in the case of K.Raheja Development [2005 (5) TMI 552 - ITAT MUMBAI], which has been held to be correct by this court. We hold that the Tribunal was right in giving relief to the assessee and the findings of the Tribunal would not call for any interference.- Decided in favour of assessee

Disallowance of interest - Held that:- The Tribunal has found that the assessee had filed a letter dated 30/9/2006 before the Assessing Officer. In paragraph No. 21 of the said letter, detailed workout of interest on borrowings for 'Tower A' is furnished. 'Tower A' had been let-out and the interest amount was paid during the previous year. Interest in respect of 'Tower B' had not been claimed as deduction.- Decided in favour of assessee

Correctness of allowing the claim of deduction on construction management fee to an extent of 25% - Held that:- It is noted that M/s. Accenture Services Pvt. Ltd., had engaged the services of the assessee herein as construction management services. The income earned is business income and cannot be considered as income from other sources. Also, if the assessee had received income of ₹ 78.25 lakh towards construction management services, it would have incurred expenditure in various forms. But the details of expenditure was not putforth by the assessee. In the circumstances, the Tribunal assessed the expenditure to be allowed as expenses at 25% of the gross fee. We think that the Tribunal was right in construing the said income as business income and not as income from other sources. We do not find any perversity in the said assessment of 25% being the expenditure incurred from the gross fee. - Decided in favour of assessee

Assessment u/s 153C - Held that:- Where incriminating material leading to undisclosed income of another assessee was detected in a search operation, in those cases, reopening of the concluded assessment have taken place. There has been no single decision cited by the learned counsel for the Revenue where the assumption of jurisdiction of the Assessing Officer is in the absence of any incriminating material or undisclosed income having been detected during the course of search leading to reopening of a concluded assessment. In the instant case, though documents belonging to the assessee were seized at the time of search operation, there was no incriminating material found leading to undisclosed income. Therefore, assessment of income of the assessee was unwarranted. Consequently, no satisfaction was recorded in the case of the assessee.- Decided in favour of assessee

Assessment u/s 153C / 158BD - Held that:- In the instant case, one of the conditions precedent for invoking a block assessment pursuant to a search in respect of a third party under Section 158BD of the Act, i.e., recording satisfaction that undisclosed income belongs to the third party, which was detected pursuant to a search under Section 133 of the Act, has not been complied with in the instant case. Therefore, the reassessment as such made under Section 158BD in respect of the assessee is not in accordance with law.- Decided in favour of assessee