TMI Blog2020 (7) TMI 339X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee, that the legislature directs him to follow the method that may be prescribed. Sub-s. (3) of s. 14A provides for the application of sub-s. (2) also to a situation where the assessee claims that no expenditure has been incurred by him in relation to income which does not form part of the total income under the Act. See GODREJ AND BOYCE MFG. CO. LTD [ 2010 (8) TMI 77 - BOMBAY HIGH COURT] - Decided in favour of assessee. Income derived from letting out of property to the tenants - Property in an industrial park/SEZ including the amenities - income from other sources or business income or income from house property - HELD THAT:- We need not labour much on this issue, on account of the circular No.16 of 2017 issued by the CBDT dated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h, Chennai in ITA Nos.1700 1701/Chny/2017 dated 04.04.2018 for the Assessment Years 2011-12 and 2012-13. 2. The appeals were admitted on 04.03.2020 on the following Substantial Questions of Law. 1. Whether on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal was right in holding that the income derived from letting out of property to the tenants as income from business in the hands of the owner of the property? 2. Whether on the facts and in the circumstances of the case and in law, the Tribunal was right in holding that disallowance u/s.14A read with Rule 8D should be restricted to the extent of exempted income especially when neither Section 14A nor Rule 8D provide for any such restriction? ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... form part of the total income of the assessee; (b) sec. 14A(1) is enacted to ensure that only expenses incurred in respect of earning taxable income are allowed; (c) the principle of apportionment of expenses is widened by s. 14A to include even the apportionment of expenditure between taxable and non-taxable income of an indivisible business; (d) the basic principle of taxation is to tax net income. This principle applies even for the purposes of s. 14A and expenses towards non-taxable income must be excluded; (e) once a proximate cause for disallowance is established -which is the relationship of the expenditure with income which does not form part of the total income-a disallowance has to be effected. All expenditure incurred in relatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... whether the claim of the assessee in that regard is correct and the determination must be made having regard to the accounts of the assessee. The satisfaction of the AO must be arrived at on an objective basis. It is only when the AO is not satisfied with the claim of the assessee, that the legislature directs him to follow the method that may be prescribed. Sub-s. (3) of s. 14A provides for the application of sub-s. (2) also to a situation where the assessee claims that no expenditure has been incurred by him in relation to income which does not form part of the total income under the Act. 7. The above legal position has been rightly followed by the tribunal while deciding the assessee's case and therefore, rightly dismissed the ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) . In the said decision, at paragraph No.11, the Division Bench, has held as follows: 11. In considering whether the income arising on the leasing of the property was business of the assessee, one has to get into the nature of the business of the assessee, to find out the receipts are assessable under the head of income from house property or as business income and if receipts does not fall in any of those classified heads, would fall consideration under the residuary head of income as income from other sources. 11. After referring to the decision in the case of CIT Vs. Chennai Properties and Investments Limited, reported in (2005) 274 ITR 117 , it was pointed out that income derived from letting out of the property with all a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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