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2017 (2) TMI 1512 - AT - Income TaxIncome derived from ‘income from business’ or ‘income from other sources’ - allowing only 2% of the expenditure on adhoc basis - HELD THAT:- It is a fact that the assessee had not carried out any Segment I business activity i.e. incubation of new entities during the year under appeal. It had only carried out Segment II business activities during the year under appeal. The various streams of income derived from Segment II business activities were stated elsewhere hereinabove in this order. This fact was lost sight by the lower authorities and the findings given by the appellate forums in earlier years were simply copy pasted while disposing off the appeal for the year under appeal. We hold that the allowability of various expenses claimed by the assessee in its profit and loss account should have to be adjudicated based on the findings to be given with regard to the various streams of income in the form of shared services / infrastructure services etc by the lower authorities and the head of income thereon. AO would have to go through all the relevant agreements entered into by the assessee and give a finding as to whether the same would fall within the objects of the assessee trust so as to fall within the ambit of business income of the assessee. In case if the same is to be construed as income from other sources, even then the allowability of the various expenses would have to be considered in the light of the provisions of section 57(iii) of the Act. We agree with the arguments of the ld AR that the findings given in the earlier years with regard to incubation of new entities does not apply to the facts during the year under appeal. We hold that the lower authorities had not adjudicated the various streams of income in the correct perspective for the year under appeal. Accordingly, we deem it fit and appropriate, in the interest of justice and fair play, to set aside the entire assessment to the file of the ld AO for denovo adjudication, in accordance with law. Needless to mention that the assessee be given reasonable opportunity of being heard. Accordingly the grounds raised by the assessee are allowed for statistical purposes.
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