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2018 (9) TMI 780 - AT - Income TaxRental Income received from letting out of factory Premises situated in government notified industrial area - Income from house property or busniss income - Held that:- Assessee's memorandum and Articles of Association clearly indicates that assessee is allowed to carry on business of renting, lease, sublease being of residential and commercial or industrial premises on behalf of assessee itself or on behalf of Central or state government or any local authority in India. Assessee has let out on rental basis the portion which is not occupied by assessee for its business purposes. It is also very clear that assessee had received land from State Government of Haryana for commercial use, which has not been disputed by authorities below. Though we agree with Ld.DR that principle of res judicata do not apply, but consistency should be maintained and taxing authorities should not deviate from its earlier decision, unless there is justifiable material on record calling for such deviation. Thus in our considered view assessee had granted a portion of the building on lease to M/s.ALP Plastics Pvt. Ltd., and M/s.Standard Gold Electricals Pvt. Ltd to commercially exploit the asset, which has to be assessed as business income. - Decided in favour of assessee. Addition u/s 68 as received from undisclosed sources - AO disallowed amount received by assessee towards job work, since the Principal failed to deduct TDS from payments made to assessee, in view of provisions of section 194C - CIT (A) restricting allowability of business expenses to the extent of 50% - Held that:- Admittedly for the year under consideration, amount credited in books of accounts are income in hands of assessee, which has been declared by assessee under the head, “Income from Business”. In fact, view formed by authorities below is based on presumption that assessee is the owner of the said amount credited in cash. Further authorities below rejected submissions of assessee, without making any enquiries in relation to nature of income received on the basis of preceding assessment years. We therefore are of considered opinion that the addition made by Ld.AO which is sustained by Ld. CIT (A) needs proper verification by Ld.AO. Merely on surmises and conjunctures no addition can be made u/s 68 of the Act, when assessee himself is declaring the monies received in cash as its Business Income. It is observed from Ld.AO’s order that assessing officer has not rejected books of accounts, but has disallowed expenses since vouchers did not appear to be authentic. No further enquiries were conducted by Ld.A.O. in this regard for rejecting entire expenses claimed by assessee. Ld.CIT (A) did not dispute business activity but restricted disallowance to 50% without any basis. There are certain expenses like administrative expenses, directors sitting fees, audit fees, depreciation, office repairs and maintenance expenses, legal expenses, factory running expenses, telephone expenses and miscellaneous expenses which cannot be disallowed as these are necessary to be incurred for the purposes of business. As we have in the preceding paragraph already held the rent received from factory premises to be “Income from Business”, factory running expenses and office repairs and maintenance expenses are eligible expenditure in the hands of assessee. We accordingly direct Ld.AO to compute the disallowance of expenses in respect of the other items. Addition on account of interest paid on loans - Held that:- For purposes of allowability of an expenditure under section 37(1) burden lies upon assessee to establish that loans have been expended wholly and exclusively for purposes of business or profession only. In the facts of present case, assessee has not demonstrated in any manner whatsoever, regarding alleged purchase of land out of loans taken from related parties, on which interest of ₹ 3,43,693/- has been paid. Merely by submitting that amount has been utilised for purposes of business, do not support claim of assessee. We therefore do not find any infirmity in decision of Ld. CIT (A) in disallowing interest expenditure. - decided against assessee
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