TMI Blog2012 (10) TMI 559X X X X Extracts X X X X X X X X Extracts X X X X ..... e income from business and not against Capital Gains - decided against the assessee. VRS Expenses - Held that:- As income from business centre has to assessed as business income and therefore, provisions of section 35DDA will be applicable in case of the assessee as per which any expenditure in connection with any VRS scheme has to be allowed in five equal instalments starting with the year in which the expenditure was incurred- decided in favour of the assessee. Expenditure of Rs.11,70,000/- on items such as insurance, telephone, security, travelling, motor vehicle etc and the expenditure on remuneration to the manager. already held that the income from the business centre has to be assessed as business income and therefore we hold that the expenditure will be allowed while computing the income from the business centre.in favour of the assessee. Depreciation - held that:- income from business centre has to be assessee as business income. Therefore, depreciation on all the plants and machinery installed in the business centre has to be allowed. We hold administrative expenses of Rs..34,11,991/- should be allowed as business expenditure. Sales Tax - addition of Rs.1, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) erred in confirming the action of the AO in disallowing a sum of Rs..153,951 being VRS Expenses. 7. The CIT(A) having followed the appellate orders for the assessment year 2003-2004 and 2004-2005, erred in confirming the action of the AO of allowing expenses of Rs..1,01,393 on an adhoc basis at 10% of business centre income, from income under the head Income from other sources . Without prejudice to the above, the appellants submit that the entire expenses should be allowed as a deduction in computing income from other sources. 8. The CIT(A) having followed the appellate orders for the assessment year 2003-2004 and 2004-2005, erred in confirming the action of the AO of disallowing administrative expenses of Rs..34,11,991. Without prejudice to the above, the appellants submit that the entire expenses should be allowed as a deduction in computing income from other sources. 9. The CIT(A) ought to have allowed professional fees of Rs..63,33,868 as Business Expenditure. 10. The CIT(A) ought to have allowed employee costs of Rs..13,09,310 as Business Expenditure. 11. The CIT(A) ought to have allowed depreciation on Plant and Machinery of Rs..202,811 as Business Expen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... earlier orders for the assessment years 2004-52005(AY 2003-2004). This issue has come up for consideration in the assessee s own appeal in ITA No.2653/M/2007 for the assessment year 2003-2004, wherein this issue was decided against by observing and holding as under :- 2.1.2 We have perused the records and considered the rival contentions carefully. The dispute is regarding the nature of dividend and interest income received by the assessee during the year. The dividend has been specifically defined as income from other sources in section 56(1). No case has been made out that dividend in this case was incidental to any business activity. Therefore, we confirm the order of CIT(A) holding the dividend income as income from other sources. As regards the interest income, the same had been received by the assessee from inter-corporate deposits, fixed deposits and deposits with mutual funds. The case of the assessee is that temporary surplus funds had been invested from which interest income had been received and therefore it should be assessed as business income. Reliance has been placed on the judgment of Hon ble High Court of Mumbai in case of CIT Vs. Paramount Premises Pvt. Ltd.( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s income. This view is supported by the judgment of the Hon ble Supreme Court in the case of S.G.Mercantile Corporation Pvt. Ltd. Vs. CIT (83 ITR 700). In the said case one of the object of the assessee in its memorandum of association was to take on lease or otherwise acquire and to hold, improve, lease or otherwise dispose of land, houses and other real estate and personal properties and to deal with the same commercially. The assessee had taken one property which was remodelled and repaired so as to make it fit for subletting as shop, stalls and ground space to shopkeepers etc. The issue was whether rental income should be assessed as business income or income from other sources. Hon ble Supreme Court observed that taking the property on lease and subletting portion thereof was part of business of the assessee and therefore the income had to be assessed as business income since the assessee was not owner of the property. The case of the assessee is similar. The decision of the tribunal in case of Harvinderpal Mehta (HUF) Vs. DCIT(122 TTJ 163) also supports the case of the assessee. In that case also the assessee was running a business centre in the premises with various faciliti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /-. Since the expenditure had been incurred in relation to land which was not used for the purpose of business the expenditure cannot be allowed while computing the income from business. As regards allowability of claim while computing the capital gain from sale of land the assessee has raised an additional ground on this issue and therefore this aspect will be dealt with while dealing the additional ground latter. This decision has been followed by the ITAT in the assessment year 2004-2005 vide para 18 19. Respectfully following the aforesaid decisions, this issue is decided against the assessee and ground No.5 is dismissed. 6. Ground No.6 relates to disallowance of VRS expenses of Rs.1,53,507/-. This issue has been decided in favour of the assessee by the ITAT in the assessment year 2003-2004 vide para 2.4.2, wherein it has been held as under :- 2.4.2 We have perused the records and considered the matter carefully. We have already held vide para 2.4.2 of this order that income from business centre has to assessed as business income and therefore, provisions of section 35DDA will be applicable in case of the assessee as per which any expenditure in connection with any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9.3, which is reproduced hereunder :- 2.9.3 We have perused the records and considered the matter carefully. The dispute is regarding allowability of expenditure of Rs.11,70,000/- on items such as insurance, telephone, security, travelling, motor vehicle etc and the expenditure on remuneration to the manager. CIT(A) has allowed the expenditure against income from other sources. The case of the assessee is that expenditure should be allowed against business income. We have already held that the income from the business centre has to be assessed as business income and therefore we hold that the expenditure will be allowed while computing the income from the business centre. This has been followed by the ITAT in the assessment year 2004-2005 in para 13 of its order. Thus, respectfully following the aforesaid decision, ground No.10 stands allowed in favour of the assessee. 10. In Ground No.11, the assessee has challenged the disallowance of depreciation of plant and machinery of Rs.202,811/- as business expenditure. This issue has been decided by the Tribunal in para 2.8.1, which is as under :- 2.8.1 We have heard both the parties perused the records and considered the matter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has been observed and held as under :- 3.1.1 We have heard both the parties perused the records and considered the matter carefully. The dispute is regarding allowability of expenditure on account of sales tax relating to the sales in the earlier years. The AO had disallowed the claim on the ground that the business of the assessee had closed. CIT(A) has however allowed the claim on the ground that the AO had assessed income on account of sundry creditors relating to earlier year under section 41(1) and therefore the claim was allowable. In our view the claim of the assessee has to be allowed as we have already held that he income from the business centre has to be assessed as business income and thus the business has not closed. Accordingly, we confirm the order of the CIT(A) allowing the claim. This order has been followed by the ITAT in the assessment year 2004-2005 in para 45 46. Thus, respectfully following the aforesaid decisions, this ground is dismissed and is decided against the department. 14. Ground No.2 relates to VRS expenses of Rs..1,53,517/-. This issue has also been decided against the department by the Tribunal in assessment year 2003-2004 vide para 2.4 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ara 54 in assessment year 2004-2005. The relevant finding has already been reproduced while dealing with the assessee s ground No.11. Thus, respectfully following the aforesaid decision of ITAT, this ground of appeal is dismissed. 18. In ground No.6 the department has challenged the allowance of set off of long term capital loss of Rs..22,18,310/- against the capital gain for sale of development rights. The Assessing Officer has computed the income from short term capital gains in the following manner :- Income from capital gains Short term capital gain (-) Rs. 50,596 Long term capital gain (-) Rs.. 22,18,310 Income from sale of development rights (-) Rs..3,59,43,549 Rs.3,59,43,549/- Total Taxable Income Rs..3,98,60,862/- From the said computation, it was contended before the CIT(A) that the Assessing Officer failed to give set off of loss of short term capital gain and long term capital gain aggregating to Rs..22,18,310/-. The CIT(A) dully appreciated the said contention and held that figure should be adjusted against the positive figure under the head capital gains. Learned Senior Counsel before u ..... X X X X Extracts X X X X X X X X Extracts X X X X
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