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2018 (1) TMI 933 - AT - Income TaxTreatment given to the rental income - Authorities below have treated these receipts as ‘income from other sources’ only on the premise that the assessee was not the owner of the premises and the case relating to its ownership stood lost at the lower judicial level - Held that:- This reason assigned by the ld. Authorities below to treat the rental income as income from other sources, in our considered opinion, is not tenable in view of the decision of Hon’ble Supreme Court in the case of Chennai Properties & Investments Ltd. vs. CIT (2015 (5) TMI 46 - SUPREME COURT) stating deciding factor is not the ownership of land or leases but the nature of the activity of the assessee and the nature of the operations in relation to them. The objects of the company must also be kept in view to interpret the activities.” Thus no hesitation to treat the rental income received by the assessee in the instant case as business income. Bogus transactions - Held that:- As on perusal of assessee’s account in the books of Vendor (PB-88), we find that no payments have been made by the assessee upto 31.03.2001 and the assessee was not able to establish any subsequent payment to the said party before the authorities below. We, therefore, endorse the view of the authorities below regarding no activities of purchase and sales during the year and transactions of purchase and sale shown, as sham. This however, would not affect the business of assessee regarding receipt of rentals as noted above. Administrative expenses disallowance - AO has allowed such expenditure only to the extent of 10% to earn the income from other sources - Held that:- Disallowance made by the ld. Authorities below to the extent of 90% of the expenditure claimed by the assessee is somewhat excessive. It is worthwhile to note that in order to keep the company alive, the assessee is required to make certain necessary overhead expenses also apart from earning the income, as there is nothing on record to establish that the assessee company was closed once for all. We feel it appropriate to allow 50% of the total administrative expenditure of ₹ 4,38,636/- claimed by the assessee. Disallowance of interest on account of loans taken from PNB - addition u/s 36 - Held that:- The interest shown to have been paid by assessee on this loan, which was advanced by the assessee to third party, in our opinion, has rightly been held as not allowable to the assessee for the reason that the purpose of advancing loan to third party after raising it from the bank, does not stand established from the account of the assessee, as no interest received on such loan from the third party, has been credited by the assessee in his books from F.Y. 1997-98 to 31.03.2001. The purpose of earning interest income, therefore, stood defeated and therefore, the interest paid by the assessee to the PNB claimed as deduction, is not admissible u/s. 36(1)(iii) of the IT Act. We, therefore, sustain the addition Allowance of 1/10th of deferred Revenue expenditure claimed by the assessee in the profit and loss account towards vacation of property - Held that:- We find that there is no provision in the IT Act to allow such deferred Revenue Expenditure u/s. 35D(1) & (2) of the IT Act. It is neither the revenue expenditure nor an expenditure incurred wholly and exclusively for the purpose of business during the year. This issue is, therefore, decided against the assessee and in favour of the Revenue. Accordingly, this ground of assessee is dismissed.
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