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2018 (11) TMI 127 - ITAT MUMBAIIncome derived from leave and license fee - Nature of income - to be treated as income from house property OR income from business - Held that:- Accounting entry or accounting treatment given by the assessee in its books of account is not conclusive. What is required to be examined is the intention of the assessee whether to exploit the property as owner or engage itself in an organized and systematic activity of constructing, developing and building house property and giving them on lease along with other services for earning rental income. As can be seen from the objects of the assessee as contained in the Memorandum and Articles of Association, the primary object of the assessee is not to construct, develop and lease them out for earning rental income but to engage itself as real estate developer. Therefore, as it appears from the facts on record, the business of the assessee is not letting out properties for earning rental income. As rightly observed by the learned CIT(A) in the appellate order passed for ay 2010-11, in case the Department treats the income generated from leave and licence fees as business income, the AO is duty bound to allow depreciation to the assessee on the asset generating such income. In such eventuality, the income which would ultimately be determined would be lesser than the income offered by the assessee, hence, prejudicial to the interest of Revenue. It is also relevant to observe, in assessee’s own case for A.Y. 2009-10 the AO while completing the assessment under Section 143(3) of the Act has accepted the income generated from leave and licence fees of the building as income from house property. The assessment order so passed has neither been revised nor reopened. That being the case, the Department cannot be allowed to take different stand in different assessment years with regard to head of income generated from leave and licence fees. Allowance of assessee’s claim of deduction under Section 24(b) on account of interest on borrowed capital - Loan availed by the assessee was for the purpose of construction of building - Held that:- It is a clearly established fact that vide sanction letter dated 20.04.2006 the HDFC bank did not disburse any fresh loan to the assessee but the outstanding amount out of the loan granted earlier to the assessee for construction of the building was converted into a fresh loan. That being the case, there cannot be any doubt that the loan availed by the assessee was for the purpose of construction of building, hence, interest paid on such loan is allowable under Section 24(b) of the Act. AO has observed that the fresh loan sanctioned to the assessee vide letter dated 20.04.2006 was for working capital. Such fact is not forthcoming either from the sanction letter or from the agreement between the assessee and the bank. Therefore, the conclusion reached by the AO is purely on conjecture and surmises. As regards the pre-payment charges paid to the bank, there is no doubt that such pre-payment charges are connected/ attached to the loan availed by the assessee for construction purposes. Therefore, has to be considered as part of the cost of loan. Hence it is allowable as deduction under Section 24(b) of the Act. - Decided against revenue
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