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2016 (4) TMI 873 - ITAT HYDERABAD

2016 (4) TMI 873 - ITAT HYDERABAD - TMI - Income from house property V/S Profits and gains of business or profession - nature of income - head of income - Held that:- The definition of rent includes any payment by whatever name called, for use of buildings including factory buildings, equipment, furniture or fittings. Even if machinery was leased, the consequent rent comes under the definition. But machinery lease can not be considered under ‘income from House property’. That indicates that just .....

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e cannot be brought to tax as ‘income from house property’ as held in the above said case of Chennai Properties & Investments Ltd., Vs. CIT [2015 (5) TMI 46 - SUPREME COURT]. Therefore, both on facts of the case and also on law, as established by the Hon'ble Supreme Court in the above said case, receipts of assessee cannot be brought to tax under the head ‘house property’. The same is to be assessed under the head ‘Profits and gains of business or profession’ only.

Allowance of expend .....

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- I.T.A. No. 874/HYD/2012 - Dated:- 22-1-2016 - SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER For The Assessee : Shri P. Murali Mohan Rao, AR For The Revenue : Shri M.H. Naik, DR PER B. RAMAKOTAIAH, A.M. : This is an assessee s appeal against the order of the Commissioner of Income Tax(Appeals), Vijayawada dt. 26-03-2012. 2. Briefly stated, assessee is a company in which public are not substantially interested. Assessee is in the business of running guest hous .....

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essee to show cause why the income should not be treated as income from house property as against profits and gains of business or profession . Assessee submitted that it is carrying the business of hospitality since inception i.e., 19-04-2002 and its main object as per Clause-I of Memorandum of Association is that of carrying on of business of hotels, resorts, boarding and lodging, houses, guest houses, holiday homes, Inns, resorts, café, bar, resorts, health clubs etc . It also submitte .....

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tering part and on enquiry, it was found out that assessee is not running a kitchen but providing food by outsourcing, on cost to cost basis and accordingly, he was of the opinion that the income received by assessee should be brought to tax as income from house property . In coming to that decision, AO also noted that TDS by various companies was made u/s. 194-I of the Act, consequently, the rentals received should be assessed as income from house property . In addition to treating the income f .....

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e property and if under the head business i.e., expenditure can be disallowed as was done by the AO on protective basis. The additional grounds are legal in nature mainly pertaining to the disallowance of expenditure. Accordingly, they are allowed. 5. After considering the rival contentions, we are of the opinion that there is dispute with reference to certain facts; i) Assessee owns the property on which it is running the hospitality business; ii) Assessee has not let out property per se but ha .....

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roperty. It is also not in dispute that in earlier years, assessee s receipts were accepted under the head business . Moreover, assessee s Memorandum of Association indicates that main object of the company is to carry on the business of hotels, resorts, boarding, lodges, guest houses etc., 6. The Hon'ble Supreme Court in the case of Chennai Properties & Investments Ltd., Vs. CIT [56 Taxmann.com 456] (SC) has held that where in terms of Memorandum of Association, main object of the asses .....

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that in the return that was filed, entire income which accrued and was assessed in the said return was from letting out of these properties. It is so recorded and accepted by the assessing officer himself in his order. In the aforesaid circumstances, it is concluded that letting of the properties is in fact is the business of the assessee. The assessee therefore, rightly disclosed the income under the head income from business. It cannot be treated as income from the house property . Accordingl .....

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lease of property. As seen from the agreements placed on record, assessee has entered into agreements with various software companies for providing accommodation only and the property as such was not leased. It was submitted that there are more than 40 companies with which assessee had entered into agreement and more than 700 employees stayed in the seven rooms during the year. Since no property was let out and as assessee received only rentals for occupation of the premises on a daily basis, AO .....

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building (including factory building); or (c) land appurtenant to a building (including factory building); or (d) machinery; or (e) plant; or (f) equipment; or (g) furniture; or (h) fittings, whether or not any or all of the above are owned by the payee; ii. . 7.1. As can be seen from the above, the definition of rent includes any payment by whatever name called, for use of buildings including factory buildings, equipment, furniture or fittings. Even if machinery was leased, the consequent rent .....

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