Home Case Index All Cases Income Tax Income Tax + AT Income Tax - 2017 (1) TMI AT This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2017 (1) TMI 1289 - AT - Income TaxRental income of the property - whether should be based on the earning of the APPL-company, which runs a business centre in the said premises and also other rentals from other tenants in it (i.e. Gandhi Mansion / Munshi Manor)? - Held that:- The rental value of the building is conceptually different from that of the building when the same is used for commercial profits. Commercial profits of the company cannot be equated with the rental value – ALV of the property alone. It has the element of profit motive of the businessman and the skilled employees of any organization. It has human element involving decisions of the management / employer and individuals. Rental value of the property is not synonymous with the business profits earned out of the property. From this point of view, the profits of the APPL minus same percentage of expenses do not constitute the ALV of the said Mansion. Therefore, based on this reasoning, we dismiss the relevant conclusions of the AO / CIT (A). Further, we find the Revenue has not taxed / re-assessed the other 50% of the said Mansion for he reasons unknown to us. This kind of half-backed attempt of AO in taxing the income of property is unsustainable in law. Also Revenue has not considered the fact of valid incorporation APPL and object of the said company. Without any sustainable reasons, the profits of the said company are taken as the basis for taxing 50% of the ALV of the said Mansion in the hands of the assessee. In the process, the profits are twice-taxed i.e. once in the hands of the assessee partly and then in the hands of the APPL. In this regard, AO has not granted any relief to the said company. Rather, same is taxed twice and he denied the tax credit too while reassessing in the hands of the assessee. Actually, assessee raised this as the ground of appeal without prejudice. Thus, the approach of the Revenue in dealing with the whole issue is deplorable and legally unsustainable. We find, the AO / CIT (A) has allowed certain percentage of business income of the APPL as expenses and allowed the same before taxing the rental income in the hands of the assessee. As such, AO / CIT (A) failed to justify the said percentage with any data or comparable cases. Whole of this exercise of the officers lack the strength of the Statute or the judicial precedents and it is a case of adhocisam. The same is unacceptable and unsustainable. - Decided in favour of assessee Apex Court in the case of M/s. Chennai Properties & Investments Ltd, Chennai vs. CIT [ 2015 (5) TMI 46 - SUPREME COURT ] held that the object of the company matters so far as the „head of income‟ is concerned. AO cannot alter the business income to property income and cannot alter the company status to AOP or otherwise, whimsically, without making out the good case with evidence. The conclusions of the AO / CIT (A), when unsupported by the evidence, become mere opinions and surmises. Such mere opinions do not constitute validity legally. - Decided in favour of assessee
|