TMI Blog2017 (6) TMI 1254X X X X Extracts X X X X X X X X Extracts X X X X ..... e. We do not find any infirmity on the order of the Ld. Revenue authorities on this issue because they have only followed the provisions of the Act. Therefore the order of the Ld.CIT(A) and the Ld.AO on this issue is hereby confirmed. Assessment of rental income under the head ‘business income’ OR 'Income from house property' - Held that:- Only with respect to the rental income of ₹ 46,76,622/-, the assessee has received rental income from its employees for providing quarters. All other rental income is with respect to third parties and the circular has no bearing on them. Therefore, we hereby hold that the rental income received from the assessee’s employees for providing quarters to the extent of ₹ 46,76,622/- shall be treated as business income and the balance amount shall be treated as ‘income from house property’ as per the provisions of the Act. - IT.A.Nos. 866/Mds/2016, IT.A.Nos. 1107/Mds/2016 - - - Dated:- 23-6-2017 - SHRI A.MOHAN ALANKAMONY, ACCOUNTANT MEMBER AND SHRI DUVVURU RL REDDY, JUDICIAL MEMBER Assessee by : Shri R.Vijayaraghavan, Advocate Revenue by : Smt. Jayanthi Krishnan, CIT Shri A.V. Sreekanth, JCIT O R D E R Per A. Moh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ken up for scrutiny under CASS and finally the assessment was completed U/s.143(3) of the Act on 30.03.2013, wherein the Ld.AO had made several additions. 6. Assessee s Appeal, Ground No. 3(i) : Disallowance of the claim of expenditure of ₹ 19.20 crores :- During the course of assessment proceedings, it was noticed by the Ld.AO that the assessee had claimed ₹ 19,20,16,000/- as expenditure in Profit Loss account for the relevant assessment year. On query, it was explained by the Ld.AR before the Ld.AO as follows:- The assessee-company for the purpose of securing adequate irrigation facilities to its cane areas has created water users societies, viz., Sakthi Rural Development Water Users Society,Cuttack and Samthi Sugars Cane Growers Rural Development Water Users Society, Dhanakanal. Those societies have created irrigation facilities, viz., liftinf of water from Mahanathi River and pumping the water into sugar cane fields by setting up of infrastructures for the purpose. To construct the infrastructure facilities such as setting up of motor pumps at the river points, sourcing the water, laying of pipie line for distributing the water to cane fields etc., th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ld.CIT(A) agreeing with the view of Ld.AO that there is no business connection in the legal sense between the assessee company and the co-operative society except in similarity of name, confirmed the order of the Ld.AO. The Ld.CIT(A) further held that since the loan amount of ₹ 19.2 crores was obtained by the co-operative society against the guarantee provided by the assessee which was to be deployed for creating capital assets, the same cannot be treated as revenue expenditure in the hands of the assessee because it falls in the capital field. 6.3 Before us, the Ld.AR reiterated the arguments made before the Ld. Revenue authorities. The main argument of the assessee was that the assessee had provided guarantee to the societies in order to help the farmers in the near vicinity to increase their agricultural produce because it is from them the assessee is dependent for procuring raw materials. It was therefore submitted that the main intention for providing such bank guarantee was to improve the business of the assessee and therefore, there is a direct business nexus on the transaction. Hence, it was pleaded that the loss suffered by the assessee may be allowed as deduction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Since, the Ld.CIT(A) has only followed the order of the Chennai Bench of the Tribunal on this issue, we do not find it necessary to interfere with his order. Accordingly this ground raised by the Revenue is decided against it. 9. Revenue s Appeal, Ground No. 4(ii) : Assessment of rental income of ₹ 46.76 lakh under the head business income :- It was observed by the Ld.AO that the assessee had a rental income of ₹ 73,80,239/- which was disclosed by the assessee under the head business income . Since, as per the provisions of the Act, the rental income has to be taxed under the head income from house property , the Ld.AO completed the assessment accordingly. 9.1 On appeal, the Ld.CIT(A) following the decision of the Tribunal on the same issue for the earlier year held the matter in favour of the assessee. 9.2 On perusing the order of the Tribunal, we find that the Tribunal has arrived at such decision due to the Board circular issued by the CBDT which states as follows:- DEPRECIATION DEVELOPMENT REBATE SECTION 32 SECTION 33 Attention is invited to the Board's Letter No. F. 10/97/63-IT(AI), dt. the 29th Feb., 1964, addressed to the CIT, in which i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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