TMI Blog2002 (7) TMI 228X X X X Extracts X X X X X X X X Extracts X X X X ..... but only 1/6th for repairs. Rs.15,37,907 (b) Claim for house tax was not to be allowed as business expenses but under the head 'income from house property' Rs. 1,00,000 (c) Legal charges Rs. 3,38,398 (d) Security expenses Rs. 58,226 (e) Court fee Rs. 1,793 ------------ Rs. 20,36,324 ------------ 3. On the facts and in the circumstances of the case, the CIT(A) has erred to confirm the disallowance under section 43B of payment of PF Rs. 10,797 and ESI Rs. 3,369." 2. The assessee declared rental income from Scindia House under the head income from business. The Assessing Officer, however, treated the said rental income as income from house property. He gave several reasons which are reproduced below: "(i) Since specific head of charge is provided fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the case of Governors of Redundal Hospital v. Ceman and other judgments in the cases of National Building Co. Ltd. (Bombay High Court), Manohar Singh (Punjab Haryana High Court), Andhra Pradesh Small Scale Industrial Development Corporation (A.P. High Court). (x) It was not the case of the appellant that it has obtained property on hire and, thereafter sub-leased it and it is also not the case of the small appellant that it has let out whole commercial complex such as hotels or factories." 3. Accordingly, the Assessing Officer concluded that the building had been let out and the assessee was not doing any business and therefore the rental income was assessable under the head 'income from house property' and not under the head 'income from business' as claimed. Consequently the Assessing Officer held that the assessee was not entitled to deduction of the following claims as business expenses:-- (a) Repairs and maintenance expenses but only 1/6th for repairs was allowable Rs. 15,37,907 (b) Claim for house tax was not to be allowed as business expenses but under the head income from house property ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was however contended that the main object of the assessee was to deal in property as trade and not to earn rental income as an owner of the (property and hence the rental income from the said property had to be assessed under the head 'income from business'. Reliance was placed on the ITAT decision in the case in earlier years. 6. The learned CIT(A) was not satisfied and convinced with the submission and contentions made before him. He observed that the ITAT went into the issue for the first time in the assessment year 1980-81 vide order dated 20-4-1992 in ITA No. 7214/Delhi/89. The rental income was held not assessable as income from house property because the assessee had not become the owner of the property during the previous year relevant to the assessment year 1980-81. The learned CIT(A) noted that the sale deed was executed on3-5-1980i.e. after the previous year relevant to assessment year 1980-81. This fact was recorded in the said order of the ITAT. In the subsequent years, the ITAT order for the assessment year 1980-81 was followed under the inadvertent mistake that there was no change of fact. As mentioned above, the correct position of the case was that there was cha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... supported by various authorities. Further whether the appellant had at all any possibility of developing property by further construction on terrace of Scindia House has not been supported as appellant has not produced relevant enactment or byelaw of NDMC to support its contention of being in a position to develop the property. Had the NDMC acted against the law, the appellant was bound to have challenged the action of the NDMC as NDMC's action struck at its very intention to do business after it made the investment. It must be stated that these aspects were not brought on the notice of the Hon'ble ITAT when the matter was before them. Had there aspects been brought to their notice, their decision may well have been different. In this view of the matter, the appellant's rental income from Scindia House is held as income from house property assessable under section 22 of the Income-tax Act and consequently the computation of income made by the Assessing Officer, reducing the claim for expenses as provided under the Act for computing the income from house property is upheld." 9. Aggrieved the assessee has come up in second appeal before this Tribunal. 10. The learned AR of the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld as stock-in-trade the rental income will be assessable under the head income from house property and not as the income derived from the business transaction of purchase and sale of the stock-in-trade which could be assessable under the head 'income from business'. She relied on the following decisions:-- 1. East India Housing Land Development Trust Ltd v. CIT [1961] 42 ITR 49 (SC). 2. CIT v. Chugandas Co. [1965] 55 ITR 17 (SC). 3. S.G. Mercantile Corpn. (P.) Ltd's case. 4. United Commercial Bank Ltd. v. CIT [1957] 32 ITR 688 (SC). 5. Punjab National Bank Ltd. v. CIT [1983] 141 ITR 886 (Delhi). 13. She further submitted that the Hon'ble Supreme Court decision in the case of Apollo Tyres Ltd. relied upon by the learned AR of the assessee was not applicable to the present case. She added that in the said decision, the Hon'ble Supreme Court held that the dividend income earned from UTI could be included in computing the profit of the eligible business under section 32AB of the Act. Thus this finding was given by the Supreme Court for the specific purpose of relief under section 32AB of the Act. 14. We have considered the rival submissions and the materials on the f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ithout an iota of doubt or controversy:-- 'It must therefore be held that even if an item of income is earned in the course of carrying on a business, it will not necessarily fall within the head 'profits gains of business', within the meaning of section 10 read with section 6(iv). If securities constitute stock-in-trade of the business of an assessee interest received from those securities will for the purpose of determining the taxable income be shown under the head 'interest on securities' under section 8 read with section 6(ii) of the Act. Similarly dividends from shares will be shown under section 12(1A) and not under section 10. If an assessee carries on business of purchasing and selling, binding profits and gains earned by transactions in buildings will be shown under section 10, but income received from the building so long as they are owned by the assessee will be shown under section 9 read with section 6(iii). Income earned by an assessee carrying on business will in each case be broken up and taxable income under the head 'profits gains of business' will be that amount which is earned in the business and does not fall under any other specific head." Again the Ho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. The company purchased 10 bighas of land in the town ofCalcuttaand set up a market thereon. The question which arose for determination was whether the income realised from the tenants of shops and stalls was liable to be taxed as business income under section 10 of the Act or income from property under section 9. This court held that the income derived by the company from shops and stalls was income received from property and fell under the specific head described in section 9 it was observed in this connection:-- 'Income-tax is undoubtedly levied on the total taxable income of the taxpayer and the tax levied is a single tax on the aggregate taxable receipts from all the sources, it is not a collection of taxes separately levied on distinct heads of income. But the distinct heads specified in section 6 indicating the sources are mutually exclusive and income derived from different sources failing under specific heads has to be computed for the purpose of taxation in the manner provided by the appropriate section. If the income from a source falls within a specific head set out in section 6, the fact that it may indirectly be covered by another head will not make the income taxa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and ESI Rs. 3369." 19. We have heard both the sides and considered the materials on the file in respect of the above ground. It is noted that the learned CIT(A) dismissed the assessee's ground in respect of the above claims because the assessee did not press the same before him. The learned CIT(A) in paras 28 and 29 at page 11 noted the facts and gave his finding as under:-- "The appellant has agitated the disallowance of Rs. 10,797 on account of Provident Fund and tax Rs. 3,389 on account of ESI under section 43B of the Income-tax Act. According to the Assessing Officer the payment was made on27-4-1992which was after the due date prescribed under the respective Acts and, therefore was beyond the due date which was 15th April in respect of Provident Fund and 21st April, in respect of ESI and this claim was not allowable. Before me the AR fairly stated that the appellant had not made the payments within the due time allowed as per the relevant acts and, therefore, this ground was not being pressed. This ground does not survive for consideration and is therefore dismissed." We hold that in view of the aforesaid categorical observations and findings of the learned CIT(A), the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... no justification for disallowance of the rent paid unless the same is proved to be excessive. Insofar as the suspicion of the Assessing Officer regarding avoiding of tax is concerned, the same also appears to be unfounded as the instance of taxation in both the cases remain the same. A mere suspicion cannot be made the ground for disallowance of expenditure. In the circumstances the disallowance is deleted. This issue is therefore clearly covered by the order of my predecessor and I find no reason to differ with the same. The contention of the appellant is therefore upheld and the disallowance made by the Assessing Officer is deleted." 22. The final position in the matter i.e. whether the order of the learned CIT(A) in assessment year 1990-91 which was followed by the learned CIT(A) in the assessment year 1992-93 covered under the present appeal had been challenged in second appeal before the ITAT and with that result was not thereon. We, therefore, set aside the matter and restore the same to the Assessing Officer with the direction that if the matter stood concluded in the assessment years 1990-91 and 1991-92 in favour of the assessee and if there was no change of fact in the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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