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Akola Trading Company P. Ltd Versus ITO WD 2 (1) (1) , Mumbai

Compensation received from tenanted premises - treated as income from House property OR business income - Disallowance of Expenses incurred against the other operating income - Held that:- The amount received by the assessee on account of subletting the property is only income from house property and has to be treated as such. In such circumstances there is no justification of allowing expenses against the house property income other than that provided as deduction under the scheme of computatio .....

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. The grounds of appeal read as under: 1. First Ground of Appeal relates to Treatment of the Income as from House Property a) On the facts and in the circumstances of the case and in law, the learned CIT (Appeals) -4 while passing the Appellate Order allowed the compensation received from tenanted premises to be treated as income from House property. 2. Second Ground of appeal relates to the Disallowance of Expenses incurred against the other operating income a) On the facts and in the circumsta .....

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n necessary. The Appellant craves leave to further substantiate the grounds of appeal at the time of hearing. 3. Brief facts of the case are as under: The assessee is a private limited company engaged in the business of providing table space, cabin space and other infrastructural facilities to its clients occupying the place. It furnished its return of income for A.Y.2010-11 on 05.07.2011 disclosing total income of ₹ 14,38,437/-. The assessment was made u/s.143(3) of the Act on 31.12.2012 .....

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ome under 'Income from house property; in view of the fact that the assessee was in full control in his capacity as a tenant, and had earned income by sub-letting of the property. In situations of this type, there is nothing to suggest that ownership of the premises is essential for levying tax under the head "Income from house property"- Smarts (P.) Ltd. v. CIT [2008] 166 Taxman53(Delhi). In view of forgoing paras and the introduction of section 27(iiib) of the Act by the Finance .....

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Income from House property." With regard to the Business property, the assessee's representative has argued that Sec.22 is specifically excluded from the Charging itself as the assessee is exploiting the premises for carrying on business activities and the income cannot be chargeable to tax under the head income from House Property. The assessee company holds the said premises, by virtue of lease agreement, which is sublet and earned monthly rent income from the same. Though, the assess .....

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is incorporated for the purpose of owning house property. House owning, however profitable, is neither trade nor business for the purpose of the Income Tax Act where income is derived from house property by the exercise of property rights, income falls under the head income from house property". It is the nature of operations and not capacity of the owner that must determine whether income is from property or therefrom, the true character of the income derived as income from property. The .....

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nature of letting of premises for commercial purpose and not running a commercial centre. Therefore, the claim of the assessee that it is used for commercial purpose is only a deceit for tax purpose." He further relied on the Apex Court decisions in the case of CIT vs. Poddar Cement reported in 226 ITR 625, P.B. Jodha Ma! Kuthiala vs. CIT reported in 82 ITR 570 (SC) and Smarts (P) Ltd. vs. CIT [2008] reported in 166 Taxman 53(Delhi) and held that the appellant company is the owner of the s .....

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ments made by the LAR before the undersigned. In the present case, the appellant company had disclosed the compensation received as business income and claimed the some against the operational expenses related thereto. ii) Hon'ble Supreme Court in Podar Cement's case [CIT vs. Podar Cement (P)Ltd. Etc. (1997) 226 ITR 625 (SC)] has held that the liability u/s. 22 is on a person who receives or is entitled to receive the income from the property in his own right. The requirement of registra .....

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up doubts as to the meaning of the word owner in u/s. 22. In the light of the clear exposition of the position of a declaratory/certificatory Act, it is not necessary to multiply the authorities on this point. There is, therefore, no hesitation to hold that the amendment introduced by the Finance Bill, 1988 was declaratory/clarificatory in nature so for as it relates to cls. (iii), (iiia) and (iiib) of u/s. 27. Consequently, these provisions are retrospective in operation. In the context of u/s. .....

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IT (1986) 160 ITR 308 (Del), overruled the decision of the Bombay High Court in CIT vs. Zorostrian Building Society Ltd. (1976) 102 1W 499 (Bom) and approved the decisions in Addl. CIT vs. U.P. State ,Agro Industrial Corp. (1981) 127 177? 97 (All), Smt. Kola Rani vs. CT (1981) 130 ITR 321 (P&H), Addl. CIT vs Sahay Properties & Investment Co. (P) Ltd. (1983) 144 ITR 357 (Pat), Sailfuddin vs. CIT (1985) 156 ITR 127 (Raj), Madgul Udyog vs. CIT (1990) 184 ITR 484 (Cal), Maharani Yageshwari K .....

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property' and not as 'income from other sources' once he had been put in possession of the property on payment of full consideration, though no registered document was executed. iv) Having regard to the facts and circumstances of the case and in the light of decisions of Hon ble Apex Court and Hon ble High Courts as discussed in the preceding paragraph and also discussed in the assessment order, the action of the LAO is confirmed. Corresponding grounds of appeal are dismissed. 5. Ag .....

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