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Showing 481 to 500 of 664 Records
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2006 (11) TMI 187
Expenditure incurred by the assessee, for the construction of drainage for disposal of effluents – expenditure in question enabled the assessee to use the drain for all times to come and even to transfer such a right so they are only capital expenditure – in respect of TDS, assessee was not allowed credit for the TDS for want of TDS Certificates, the assessee suffered loss during the course of carrying on the business so these loss was allowable - appeal by revenue is partly allowed
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2006 (11) TMI 186
Interest payable to bank for A.Y. 1992-93 & 1993-94 – revenue contend that liability to pay such interest not accrued during the assessment year in question – Whether the assessee is entitled to claim a deduction of that interest in the A. Y. 1992-93 & 1993-94 as business expenditure without making any provision in that regard – held, yes – assessee is following mercantile system of accounting, so, CIT & ITAT are justified in deleting the addition of the interest liability & allowing the claim
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2006 (11) TMI 185
Default in depositing TDS – offence – summoning order - held that a Managing Director was a “principal officer” of a company and that if he signs and verifies a return on behalf of the company which later turns out to be false, he would be liable – there is not need to issue separate notice to Managing Director - prosecution could continue in respect of petitioner, Managing Director and the company – but summoning order against those who are not “principal officer” is set aside
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2006 (11) TMI 184
Reassessment notice on basis of statement of third party that he was providing bogus/false transactions to assessee - Once sections 147 and 148 are resorted to, the Assessing Officer must first discharge the burden of showing that income has escaped assessment - assessees’ failure to produce person tilling the land on their behalf cannot lead to the conclusion that no agricultural income had been generated by the assessees – notice is invalid
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2006 (11) TMI 183
Assessee, is a Statutory Corporation receives grants and loans from Government of India – assessee advances grants, loans and subsidies to cooperative societies through State Governments/Apex Cooperative Banks – the same could not be claimed to be expenditure, hence disbursements made out of its interest income as loans could not be treated as revenue expenditure – therefore not deductible - questions raised is answered in favour of the Revenue and against the Assessee
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2006 (11) TMI 182
Notice under section 143(2) – service of notice - period of limitation - Assessee had failed to discharge the burden which shifted to him immediately on his assertion that he had received the notice on a particular date – therefore notice is not barred by limitation – order of tribunal that AO had not proved that the notice had been served within the time, is set aside
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2006 (11) TMI 181
Reopening of the assessment - Validity notice issued u/s 148 - change of opinion - HELD THAT:- It is quite clear that the petitioner was granted depreciation allowance on the intangible assets in the nature of know-how purchased by it. A regular assessment order was passed u/s 143(3) of the Income-tax Act. In reply to the director of audit, the Assessing Officer had opposed the reopening. In spite of the same, he has reopened the assessment. It is, therefore, difficult to say that he has formed his own opinion that the income has escaped assessment.
Secondly, it is not at all a case that the petitioner has not disclosed anything to the respondents. The petitioner has given full particulars of the intangible assets and it has maintained that it is eligible for the depreciation. We may not express our opinion on the merits of the claim of the petitioner. But the fact remains that as far as this assessment year 2003-04 is concerned, the stand taken by the petitioner was accepted by the respondents on the merits and even after disagreeing with the audit objection, as a second thought on the objections from the auditors, he has reopened the assessment. In the reasons to reopen as well as in the decision on the objections, he has nowhere stated as to how the income has escaped assessment. In our view, reopening of the assessment without any basis and merely a change of opinion is not permissible while exercising the powers u/s 147 r/w section 148 of the Income-tax Act.
Thus, we have no option but to allow this petition. The petition is allowed in terms of prayer (a), whereby the notice dated March 2, 2006, issued u/s 148 of the Income-tax Act, the notice dated June 6, 2006, issued u/s 142(1) and the decision on the objections dated October 6, 2006, shall get quashed.
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2006 (11) TMI 180
Issues involved: Determination of cost of construction based on reports of registered valuer and Departmental Valuation Officer, application of State PWD rates vs. Central PWD rates.
For the issue of determination of cost of construction, the assessee constructed a kalyana mandapam and the Assessing Officer referred the cost of construction to the Valuation Officer. The Valuation Officer determined the cost at Rs. 52,93,400. The Assessing Officer added a sum of Rs. 20,00,390 after allowing a 15% rebate towards self-supervision. The Commissioner of Income-tax (Appeals) reduced the addition to Rs. 3,51,000, stating that the Assessing Officer had no power to refer the cost to the Valuation Officer. The Income-tax Appellate Tribunal remanded the matter to the Assessing Officer to compare the reports of the Departmental Valuation Officer and the registered valuer, directing the application of State PWD rates instead of Central PWD rates. The High Court held that the determination of cost of construction and the choice between State and Central PWD rates are questions of fact, not legal issues. The Court cited a Rajasthan High Court decision supporting this view and dismissed the appeal, stating no substantial question of law arises.
Regarding the application of State PWD rates vs. Central PWD rates, the High Court emphasized that the comparison of reports from the registered valuer and Departmental Valuation Officer is crucial to ensure consistency in the details of construction. The Court noted that variations are expected between State and Central PWD rates, making it a factual determination rather than a legal issue. The Court cited a previous decision to support the view that the cost of construction is a question of fact, not a legal matter. Consequently, the High Court dismissed the appeal, finding no substantial question of law for consideration.
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2006 (11) TMI 179
Issues involved:
The issue involves whether the Tribunal was correct in confirming the order directing the Income-tax Officer to allow deduction of embezzled amount as trading loss for the assessment year 1985-86, despite the embezzler not being an employee of the assessee.
Summary:
The assessee claimed deduction for embezzlement by Kishore Hemani, who collected sale proceeds but did not remit them to the assessee. The Assessing Officer disallowed the claim due to lack of evidence of authorization. However, the appellate authority allowed the claim citing reasons such as a police inspector's letter, encashment through fictitious firms, and treating the embezzled amount as trading loss for 1985-86. The Tribunal upheld this view based on the Supreme Court's judgment in Associated Banking Corporation of India Limited v. CIT [1965] 56 ITR 1.
The High Court analyzed the deduction claim in light of the Income-tax Act, emphasizing that while there is no specific provision for embezzlement-related trading losses, section 37 allows for business-related expenditures with a nexus to business operations. Citing precedents like Badridas Daga v. CIT [1958] 34 ITR 10 and CIT v. Nainital Bank Limited [1965] 55 ITR 707, the Court affirmed that losses incidental to business operations should be deductible. Relying on these principles, the Court concluded that the Tribunal rightly allowed the deduction due to the direct connection between the embezzlement and the assessee's business operations.
In conclusion, the Court answered the question against the Revenue and in favor of the assessee, disposing of the reference accordingly.
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2006 (11) TMI 178
Issues involved: The judgment involves the interpretation of deduction claimed by way of adjustment u/s 143(1)(a) of the Income-tax Act, 1961 for the assessment year 1989-90.
Summary:
The assessee, a Development Officer of the Life Insurance Corporation of India, filed a return for the year 1989-90 showing total income of Rs. 18,260. The Assessing Officer disallowed conveyance allowance and incentive bonus, adjusting the income to Rs. 52,822. The assessee applied for rectification u/s 154, which partially allowed the conveyance allowance but left the incentive bonus disallowed. The matter was taken to the Deputy Commissioner of Income-tax (Appeals) and then to the Tribunal.
The Tribunal held that as the issue was debatable, powers u/s 143(1)(a) could not be exercised by the Assessing Officer. The Tribunal quashed the order passed by the Assessing Officer. The Revenue contended that only a certain percentage of deduction should be allowed, not an absolute order in favor of the assessee.
The court referred to the apex court's observation that a mistake apparent on the record must be obvious and not a debatable point of law. Since the issue of deduction was debatable, the Assessing Officer could not proceed u/s 143(1)(a) but could have used other sections like 143(2) or 143(3) of the Act.
The court held that the Tribunal was justified in favoring the assessee as the matter was debatable. The question was answered in the affirmative, in favor of the assessee and against the Revenue. The reference was disposed of with no costs incurred.
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2006 (11) TMI 177
Issues involved: Interpretation of deduction under section 143(1)(a) of the Income-tax Act, 1961.
Summary:
The High Court of Gujarat considered whether the Assessing Officer was justified in disallowing a deduction claimed by way of adjustment under section 143(1)(a) of the Income-tax Act, 1961, in a case where the issue was debatable. The court noted that the Assessing Officer cannot make adjustments in an order under section 143(1)(a) when the issue of deduction or disallowance is debatable.
In a previous judgment, the court had observed that the Assessing Officer's powers under section 154 of the Act could be exercised to rectify any mistake apparent from the records. It was emphasized that a decision on a debatable point of law is not a mistake apparent from the record, as stated by the apex court in the case of T.S. Balaram, ITO v. Volkart Brothers [1971] 82 ITR 50.
The court held that when the issue of deduction or disallowance of deductions is debatable, the Assessing Officer cannot proceed under section 143(1)(a) of the Act. Therefore, the court found no infirmity in the Tribunal's order and answered the question referred in favor of the assessee and against the Revenue.
The reference was disposed of accordingly.
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2006 (11) TMI 176
Issues involved: Determination of whether the replacement of machinery parts constitutes revenue expenditure and whether creating a new asset or advantage amounts to revenue expenditure.
Summary:
The High Court of Madras heard an appeal by the Revenue against the Income-tax Appellate Tribunal's decision regarding the treatment of expenditure on machinery replacement by the assessee for the assessment year 1994-95. The Assessing Officer initially disallowed the expenditure as capital expenditure, but the Commissioner of Income-tax (Appeals) later allowed it as revenue expenditure. The Appellate Tribunal upheld the Commissioner's decision, leading to the Revenue's appeal.
Regarding the first issue, the court emphasized that the classification of expenditure as capital or revenue should be based on the provisions of the Income Tax Act, not the assessee's accounting practices. The Tribunal's decision to treat the replacement of machinery as revenue expenditure was upheld, citing the precedent set in CIT v. Janakiram Mills Ltd., where it was established that the replacement of machinery constitutes revenue expenditure.
In conclusion, the court found no substantial question of law to consider and dismissed the appeal, affirming the Tribunal's decision to allow the assessee's claim for the expenditure on machinery replacement as revenue expenditure.
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2006 (11) TMI 175
Rectification/ Recall of order u/s 254(2) - mistake apparent from the record - HELD THAT:- From the order of the Tribunal, we find that the Tribunal had drawn an adverse inference on the basis of the supplies made by the assessee-opposite party to some of the parties and giving one or two illustrations. It had rejected the application filed u/s 254(2) of the Act, on the ground that the goods mentioned at serial Nos. 14 and 16 of the statement of sales, were transported to Gorakhpur itself and the explanation of the assessee that the goods were sent to different places and the difference in the price was on account of difference in cost of cartage, etc., is misleading and false.
It had further held that the miscellaneous application was filed by the assessee on the misconceived notion and there was no mistake apparent on the face of the record in the order of the Tribunal. Having come to the conclusion that there was no mistake apparent in the order of the Tribunal and the application was filed on a misconceived notion, it was not open to the Tribunal to entertain the second application which has been filed on the same set of facts and recalling the order, on the alleged premise that there was an error apparent in the order.
In the case of T.S. Balaram, ITO v. Volkart Brothers [1971 (8) TMI 3 - SUPREME COURT], the apex court has held that a mistake apparent on the record must be an obvious and patent mistake and not something which can be established by a long drawn process of reasoning on points on which there may be conceivably two opinions. A decision on a debatable point of law is not a mistake apparent from the record.
Thus, we are of the considered opinion that the Tribunal was not justified in reviewing its order in the garb of rectification proceedings as there was no error apparent on the record and it could be discovered only after a process of debate. We accordingly, answer both the questions referred to us in the negative, i.e., in favour of the Revenue and against the assessee. However, there shall be no order as to costs.
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2006 (11) TMI 174
Deductions u/s 80P(2)(e) - Co-operative society - income derived from commission/margin without letting out godown of warehouse - agent of the State Government for storing the essential commodities - whether the assessee was storing the commodities in question in his godown or warehouse for the purpose of storage, processing and facilitating marketing of such commodities or was using his godown for the purpose of its own business of trading for holding stocks as a part of its trading necessity - HELD THAT:- Once we reach this conclusion that it is a part of trading activity of the co-operative society, in respect of which supplies of the essential commodities as authorised wholesaler on payment of price reaches him, the property in goods passes on to the authorised holder as under a completed sale and thereafter subsequent transactions by the assessee in the ordinary course are his marketing activities. If that is the right conclusion, which we think so, the additional amount received by the assessee over and above price paid by him is his gross profit. He is allowed to retain the difference between the purchase price and sale price not by way of commission but as his own surplus. It is misnomer to call it commission received from the Government. He receives nothing from the Government. Whatever he receives from the retailer are his business receipts and is received on account of sale of the essential commodities and not for use of his godown or for any services rendered to facilitate marketing of that commodity.
The respondent co-operative society was storing its own trading stocks in its godowns, whether owned by him or acquired on hire for the purpose of safe custody of its stock-in-trade. No commission could be received by him for storing the essential commodities as part of its own stock-in-trade at its godown. He could not render service to himself to refer any part of receipts to letting out godown for storage or for use or lending incidental services to facilitate marketing of the commodities for someone else.
The Bombay High Court in CIT v. Bhandara Zilla Sahakari Kharedi Vikri Sangh Ltd.[1992 (1) TMI 13 - BOMBAY HIGH COURT] came to the conclusion that the entire amount received by the assessee under different heads was not to be excluded from taxable income but only what was properly referable to the letting of godown and for facilitating marketing of the commodities could be deducted and for that matter was restored to the Tribunal for determining the receipts for different and specific purpose were to be computed while reserving the exclusive trading rights. Thus, the paddy contract also did not result in passing of property in the goods to the assessee. Yet the deduction was restricted to income properly referable to section 80P(2)(e). That being the position, the Bombay High Court decision is based on its own facts and is distinguishable.
Therefore, we are of the opinion that since the assessee was storing the commodities in question in godown as a part of its own trading stock, it being trader in the essential commodities in question, the provisions of section 80P(2)(e) are not applicable, to be invoked by the assessee. He is only entitled to claim deduction of expenses incurred by him on hiring of godown, and the depreciation, as may be allowable on godowns owned by it as business assets, while computing income from its business.
Accordingly, all the appeals are allowed. The order of the Tribunal as well as of the Commissioner (Appeals) are set aside and the Assessing Officer is directed to recompute the income in the light of the aforesaid, judgment.
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2006 (11) TMI 173
Issues involved:
The judgment addresses two main issues:
1. Validity of rectification order u/s 154 by the Assessing Officer regarding the withdrawal of relief granted under section 32AB of the Income-tax Act, 1961 on share income received from partnership firms.
2. Eligibility of the respondent for deduction under section 32AB on share income received from partnership firms.
Issue 1: Validity of Rectification Order u/s 154:
The Tribunal held the rectification proceedings invalid as the issue was debatable and not an apparent mistake. However, the High Court decided to first address the issue on merits before determining the validity of the rectification order. The respondent, engaged in steel production and a partner in three firms, was granted relief under section 32AB during assessment. The relief was later partly withdrawn in rectification proceedings, excluding share income from partnership firms. The High Court found that the proviso to section 32AB expressly prohibits partners from claiming deduction on share income from firms. The court held that the original assessment allowing the deduction was a mistake apparent, as the officer overlooked the proviso. Citing precedent, the court emphasized that overlooking a mandatory provision of law, as in this case, constitutes a mistake apparent under section 154.
Issue 2: Eligibility for Deduction under Section 32AB:
The respondent, a limited company, claimed deduction under section 32AB on its own eligible profit along with share income from partnership firms. The proviso to the section explicitly states that deduction for eligible business profits of a firm can only be claimed by the firm and not individual partners. The High Court ruled that the respondent was ineligible for deduction on share income from partnership firms, as the proviso prohibits partners from claiming such deductions. The court emphasized that the express prohibition in the proviso cannot be circumvented by combining ineligible share income with eligible business profits. Consequently, the court held in favor of the Revenue on the issue of eligibility for deduction under section 32AB.
Separate Judgment:
The High Court, comprising Judges C. N. Ramachandran Nair and K. M. Joseph, delivered the judgment. The court allowed the appeal by canceling the Tribunal's order and reinstating the rectification order issued by the Assessing Officer under section 154 of the Act.
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2006 (11) TMI 172
Method of accounting - business of execution of works contract - Whether the Tribunal was right in not accepting the valuation of closing work-in-progress in accordance with accounting standard (AS-7) as laid down by the ICAI and to work out the profit on the basis of the accounts maintained? - HELD THAT:- The assessee-firm/appellant being a private Ltd. company was maintaining its accounts following the said system and the accounts were duly audited by a qualified chartered accountant, maintenance of the accounts as well as the valuation of work-in-progress will not prejudice either side. Admittedly, the particular work contract was not completed and it comes under the category of work-in-progress. There is also no dispute that the ultimate liability of the assessee as regards tax will be dependant upon the total (fixed) amount received by the assessee against the particular work contract.
We, therefore, hold that the income-tax authority has no option/jurisdiction to meddle in the matter either by directing the assessee to maintain its accounts in a particular manner or adopt a different method for valuing the work-in-progress. We reiterate the decision in Doom Dooma India Ltd.[1992 (12) TMI 41 - GAUHATI HIGH COURT] and hold that an assessee has as the option/liberty to adopt any recognized method of accounting for his business and the income shall be computed in accordance with such regularly maintained accounting system.
In the result, the substantial question of law is answered in favour of the appellant and against the Revenue. The impugned order passed by the Tribunal is set aside and that of the CIT(A) is restored.
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2006 (11) TMI 171
Issues involved:
Interpretation of the Income-tax Act, 1961 regarding the inclusion of expenditure-tax, luxury tax, and sales tax in total business receipts for computation of deduction under section 80HHD.
Analysis:
The judgment of the High Court of MADRAS was delivered by Judge P. D. DINAKARAN. The case involved an appeal against the order of the Income-tax Appellate Tribunal for the assessment year 1993-94, questioning the inclusion of expenditure-tax, luxury tax, and sales tax in the business receipts for the purpose of computing deduction under section 80HHD of the Income-tax Act, 1961. The Assessing Officer had included these taxes in the business receipts, but the Appellate Tribunal ruled against it.
The main issue raised was whether the Tribunal was correct in excluding expenditure-tax, luxury tax, and sales tax from the total business receipts of the assessee for the purpose of computing the deduction under section 80HHD. The court referred to a previous unreported decision in the assessee's own case, which was later reported in CIT v. Adyar Gate Hotel Ltd., where a similar issue was decided in favor of the assessee based on the interpretation of section 80HHC of the Act.
The court also considered previous judgments in CIT v. Wheels India Ltd. and CIT v. Sudarshan Chemicals Industries Ltd., where it was held that sales tax and excise duty should not be included in the total turnover while computing deductions under section 80HHC of the Act. Applying the same reasoning, the court concluded that expenditure-tax, luxury tax, and sales tax should not be included in the total business receipts for the purpose of computation of deduction under section 80HHD of the Act.
Based on the precedent set in the assessee's own case and the interpretation of relevant provisions of the Income-tax Act, the High Court upheld the decision of the Appellate Tribunal. Consequently, the court dismissed the tax case appeal, stating that no question of law, much less a substantial question of law, arose from the Tribunal's order, and no costs were awarded.
This detailed analysis of the judgment provides a comprehensive understanding of the legal issues involved and the reasoning behind the court's decision regarding the interpretation of the Income-tax Act, 1961 in relation to the computation of deductions under section 80HHD.
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2006 (11) TMI 170
Issues:
1. Appeal against the order of the Income-tax Appellate Tribunal regarding additions made by the Commissioner of Income-tax (Appeals) for the assessment year 1992-93.
2. Dismissal of the appeal by the Income-tax Appellate Tribunal based on the monetary limit set by the Central Board of Direct Taxes for filing appeals.
Analysis:
Issue 1:
The appeals were filed by the Revenue challenging the order of the Income-tax Appellate Tribunal concerning additions made by the Commissioner of Income-tax (Appeals) for the assessment year 1992-93. The assessees were linked to Vazhaga Vaiyagam Enterprises, where deposits were made without a clear explanation for the source of the funds. The assessments in question pertained to interest accrued on these deposits, which were treated as unexplained investments in earlier years. The Commissioner of Income-tax (Appeals) deleted these additions, prompting the Revenue to appeal to the Income-tax Appellate Tribunal. The Tribunal, citing a Circular by the Central Board of Direct Taxes, dismissed the appeals due to the tax effect being less than the prescribed limit of Rs. 1,00,000. The Revenue contested this decision, leading to the present appeals.
Issue 2:
The second issue revolved around the dismissal of the Revenue's appeal by the Income-tax Appellate Tribunal based on the monetary limit set by the Central Board of Direct Taxes for filing appeals. The Revenue argued that the Tribunal erred in not considering the case on its merits and solely relying on the monetary limit. Reference was made to a decision by the court in CIT v. Kodananad Tea Estates Co., where it was held that the Circular setting the monetary limit came into effect after the assessment years in question. The court emphasized that appeals should not be dismissed solely based on monetary limits if the issue pertains to the application of the Circular itself. Following this precedent, the High Court set aside the Tribunal's orders and remanded the matters back to the Tribunal for a fresh consideration on merits, allowing the assessees to present all relevant points. Consequently, the questions of law were resolved in favor of the Revenue, and the appeals were disposed of without costs.
This comprehensive analysis highlights the key issues raised in the legal judgment and provides a detailed overview of the court's decision-making process and reasoning behind the final judgment.
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2006 (11) TMI 169
The High Court of Gujarat ruled in favor of the assessee, stating that no addition can be made based on the valuation report of unexplained income invested in construction. The court emphasized that adding unexplained income to the investment would result in a "zero" balance. The decision was influenced by a previous case stating that a Valuation Officer cannot be consulted to determine the cost of construction.
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2006 (11) TMI 168
Issues involved:
The issue involved in this case is whether the income from letting out of a building should be assessed as business income or as income from house property.
Summary:
The assessee-company offered the rental income of the building as business income, claiming that the income from letting out should be treated as business income due to the nature of its business activities. The Assessing Officer, however, considered the entire income from the property as assessable under the head "Income from house property" u/s 22 of the Act. The Commissioner of Income-tax (Appeals) upheld this decision. On further appeals, the Tribunal held that the income from letting out of the building is business income, not income from house property, based on the intention to enjoy the building along with amenities, following relevant Supreme Court decisions.
The High Court initially remitted the matter to the Tribunal to reconsider the issue, citing the need for materials to show that the property was treated as commercial assets. Upon reconsideration, the Tribunal found in favor of the assessee, emphasizing that the property was used exclusively for commercial purposes and leased out to commercial tenants. The Revenue challenged this decision, arguing that the income should be assessed as income from house property u/s 22 of the Act.
The High Court set aside the Tribunal's order, emphasizing that the Revenue must establish ownership of the property and whether there was exploitation of the property by giving it away for rent before assessing rental income as income from house property. The matter was remitted to the Assessing Officer for further consideration, with both parties allowed to present relevant judgments before the Tribunal.
In conclusion, the High Court allowed the appeals, setting aside the Tribunal's order and remitting the matter for fresh consideration by the Assessing Officer to determine the nature of the income derived from letting out the property.
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