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Shri Mahendra Singh Versus The DCIT, Circle- 2, Jaipur

2015 (9) TMI 12 - ITAT JAIPUR

Disallowance of the claim u/s 24(a) against the rental income - Held that:- The total receipts are shared by 4 owners of this property as mentioned above in their respective shares indicate in the supplement agreement. It is a fact that other co-owners have also disclosed their share of income in their respective returns. The AO has not verified the other co-owners income as to remaining 50% income from said property. The case relied on by the ld. AR of the assessee support assessee’s claim that .....

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ed to submit the details of expenditure incurred and depreciation along-with evidence but the assessee has furnished the details before the AO vide letter dated 14-12-2010 which has not been adjudicated by the AO properly. Even the ld. CIT(A) also ignored the assessee’s claim at the appellate stage. Thus in view of the facts and circumstances of the case, the assessee’s income is treated under the head ‘income from house property’ and allow deduction u/s 24(a) of the Act. - Decided in favour of .....

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7; 4,77,061/- against the rental income shown from Hari Mahal and Spice Court. 2.1 Brief facts of the case are that the assessee filed the return of income on 29-07-2008 declaring income of ₹ 33,55,080. The case of the assessee was scrutinized u/s 143(3) of the Act. In this case, the AO observed that the assessee had shown rental income as under:- 1. Hari Mahal ₹ 18,04,420/- 2. Spice Court ₹ 15,90,204/- The assessee had claimed deduction u/s 24(a) of the Act at ₹ 5,41,326 .....

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rease to 25% when the number of rooms is increased to more than 7 rooms. 20. the licensee shall pay the license fees every month by preparing a statement of turnover which can be checked by licensor at any time. He may post/ send a person to check the turnover statement and the sales of the hotel at all the times. The statement shall be audited by the auditor appointed by the licensor. Further the title lease deed of Hari Bhawan says Hotel operating license agreement. The AO held that this clear .....

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eed to take active part in looking after the work of hotel on behalf of the licensor. The AO observed that the assessee even appointed one supervisor or an agent to look after the work of hotel. Hence, it was certainly not merely letting out of a building but building was let out with clause of supervision of the assessee (lesser). Further as per the lease agreement regarding Spice Court, it is mentioned as under- 3. That in view of taking the demised premises on license the party on the second .....

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rtain percentage of gross receipt of the lessee which implies that assessee share of receipt fluctuates with changes or fluctuation of gross receipt of the lessee. Therefore, the AO held that such income cannot be categorized as rental income, rather it should be treated as business income and hence deduction u/s 24(a) of I.T. Act would not be allowed. Moreover, the assessee is not merely letting out the property but has reserved his rights to inspect and examine the books of the licensee. There .....

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tivated by desire to derive income from the asset as a mere owner thereof. In the case given assessee entered into assessee lease agreement with the lessee but merely did not earn from house property as an asset. Rather assessee was having percentage share in the gross receipt of income. In this case, the assessee leased the hotel to other party would have made it as a brand wherein assessee was having its rights reserved to receive certain percentage of gross receipt. Moreover, as per clauses o .....

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perty, it was to be seen that whether the asset was being exploited commercially by letting out or whether it was being let out for the purpose of enjoying the rent. The distinction between the two is a narrow one and has to depend on certain facts peculiar to each case. So long as the assets are used as business assets, it is irrelevant whether business assets are exploited and used by the assessee himself or someone else and where instead of carrying on the business itself, the assessee permit .....

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4(a) of the Act on both the properties at ₹ 10,18,387/- which is not allowable. However, the AO allowed depreciation on properties at ₹ 1.00 lac and net addition of ₹ 9,18,387/- was made in the income of the assessee. 2.3 Being aggrieved by the order of the AO, the assessee carried the matter before the ld. CIT(A) who has confirmed the addition by observing as under:- 4.5 I have carefully perused the order of the AO and the submissions of the A. R. Given the facts of the case, .....

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of the restaurant, it was mentioned that the licensee had to pay 10% of the total turnover of the month of restaurant. In this clause of the agreement, it was further mentioned that the licensor is free to check the cash memo, bills, expenses and vouchers and books of account of the licensee pertaining to the restaurant business. The licensee was required to provide day today sale figures of the licensor. Thus as per the clause of the agreement between the licensor and the licensee, it is clear .....

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d to file any details regarding its claim of depreciation. Similarly, during the course of appellate proceedings, no details were furnished regarding the depreciation allowable to the appellant. Therefore, the depreciation of ₹ 1 lac allowed by the AO appears to be reasonable and is confirmed. Thus the grounds of appeal no. 3,4, & 5 are decided in favour of the Department. 2.4 Now the assessee is before us. The ld. AR of the assessee reiterated the arguments as made before the ld. CIT( .....

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culating the lease money only. The petitioner rightly claimed the income from lease rent as property income. In the earlier years, the same income was shown as rental income and was accepted by the AO. In the case of Spice Court who is running restaurant, the petitioner had no interference in the day today business activities of the restaurant. The assessee vide letter dated 01-12-2010 replied the query of the AO. He further drew our attention to the definition of business. As per Section 2(3) o .....

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owed in computing business income He further relied on decision of Hon ble Patna High Court in the case of CIT and Anr vs. Saran Holdings (P) Ltd. (2011) 58 DTR 82 wherein it was held that where the let out property is not in the possession of the a nor any business was done there and assessee has let out the same to others for rent, income has to be taxed under the head Income from house property. The ld. AR of the assessee further relied on the case of ITAT Lucknow Bench in the case of ACIT vs .....

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the property from Income from house property to income from house on the ground that premises under consideration is a warehouse , which is basically a commercial asset of the assessee - Not justified - There was no reason to depart from the stand taken in the earlier years particularly when there was no material change in the facts and circumstances of the present case as compared to earlier years. Even though, principle of res judicata does not apply to income-tax proceedings, but at the same .....

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ties alongwith furniture, fixtures, light, air-conditioners etc. for being used as table space . The assessee was also providing services like watch and ward staff, electricity, water and other common amenities to the occupiers. These services are not separately charged. Entire cost of property already recovered by way of interest free advance by the assessee. Only intention was to let out the portion of premises to respective occupants. Income derived from letting is assessable as income from p .....

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ed this income under the head income from house property. However, during the year under consideration, the AO assessed the income under the head Business and Profession. As per copy of the license agreement dated 5-09-2003, this property was owned by Shri Mahendra Singh S/o Shri Hari Singh, Drr. Sunita Shishodia, Shri Shashank Nath Singh and Shri Tirathraj Nath Singh (Licensor) and M/s. Shree Hari Mahal through Mrs. Madhu Singh W/o Shri Rajendra Singh (Licensee) vide supplement hotel operating .....

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