9911796707
|
Home
Issues:
1. Whether the sum of Rs. 8,000 from lease rent should be added to the assessee's income as accrued rent or under section 10(2A) of the Indian Income-tax Act, 1922? Detailed Analysis: The case involved an assessee, a partnership firm, deriving income from interest on securities and property, including an annual rent of Rs. 8,000 from a leased factory premises. The Income-tax Officer included this rent amount in the total income of the assessee, citing that it accrued to the assessee and was part of its taxable income due to following the mercantile system of accounting. The Tribunal initially upheld this inclusion based on the understanding that the assessee had been showing income from lease rent on an accrual basis. However, upon rectification, it was found that there was no evidence suggesting the assessee was following the accrual basis for this income. The court emphasized that if an assessee chooses the cash system of accounting for income assessable under sections 10 or 12 of the Act, they cannot be assessed on an accrual basis, as clarified in the case law of J. K. Bankers, Kanpur v. Commissioner of Income-tax. The court further clarified that income from the lease of a factory falls under section 12 and must be assessed based on the option exercised by the assessee. Since the assessee never offered its income to be assessed on an accrual basis, it was following the cash system of accounting for this income. Therefore, the department was not authorized to assess it on an accrual basis, regardless of past practices. Consequently, the court concluded that the sum of Rs. 8,000 was not taxable in the relevant assessment year. Additionally, the court addressed the applicability of section 10(2A) of the Act, stating that it pertains to assessing losses, expenditures, or deductions allowed in the past that are realized subsequently. The sum of Rs. 8,000 could only be assessed under section 10(2A) if it had been allowed as a deduction by way of bad debt in the past and realized in the relevant year, which was not the case in this scenario. The court highlighted that a different amount had already been taxed under section 10(2A) from a previous year, and the sum of Rs. 8,000 in question was not subject to taxation under this provision. In conclusion, the court answered the question in the negative, favoring the assessee and ruling against the department. The assessee was awarded costs amounting to Rs. 200, emphasizing that the sum of Rs. 8,000 from lease rent was not liable to be added to the income in the assessment year in question.
|
