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2018 (4) TMI 378 - AT - Income TaxRental income - nature of income - Income from business or profession OR Income from house property - Held that:- Following the ratio in the case of Rayala Corporation Pvt. Ltd. vs. ACIT ( 2016 (8) TMI 522 - SUPREME COURT), we are of the considered view that if the main activity of the assessee is of letting out properties and derive rental income without any other business activity, then such rental income should be considered under the head “Income from business or profession” but not under the head “Income from house property”. Therefore, we direct the AO to assess rental income under the head “Income from business or profession” as claimed by the assessee. Disallowance being entire amount of remuneration paid to the directors of the company - Held that:- No merits in the arguments of the AO for the reason that the allowability of expenses has to be considered in the light of the nature of business of the assessee and its relevance. Since we have already directed the AO to consider rental income under the head “Income from business”, the AO is directed to consider expenses incurred by the assessee against such income. In this case, the assessee has paid remuneration to directors and also furnished evidences for payment of remuneration for services rendered by the directors to the company. Therefore, we are of the view that the AO was incorrect in disallowing remuneration paid to directors by holding that the expenses were not wholly and exclusively incurred for business and also which is excessive and unreasonable. Hence, we direct the AO to allow expenses claimed by the assessee against business receipts. Motor car expenses and depreciation on motor car - proof of busniss use - Held that:- Merely because the car is in the name of director the usage of car for the purpose of business cannot be ruled out. However, the fact remains that when the AO has specifically asked for production of log book, the assessee failed to furnish log book to prove the use of vehicle for the purpose of business. Therefore, we are of the view that the issue needs to be examined by the AO in the light of the claim of the assessee that the motor car has been used for the business purpose. If the assessee substantiates its claim with necessary evidences and also by producing the log book to prove that car is used for business purpose, then the AO is directed to allow motor car expenses including depreciation on motor car.
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