|
II. Direct Taxes Case Laws:
1. Raj
Dadarkar & Associates Vs. ACIT, Civil Appeal No. 6455-6460 of 2017,
Date of Judgement: 09.05.2017, Supreme Court of India
Issue:
Whether simply showing a particular object in the object clause of
the business can be considered as determinative factor to conclude that
the rental income is to be treated as income from business and not
income from house property?
Held: No
Brief Facts:
The assessee is a partnership firm. In 1993, it acquired the right to
conduct the market on a plot on a monthly license basis from Municipal
Corporation Greater Bombay (“MCGB”). The appellant constructed 95 shops
and 30 stalls of different carpet areas on the plot under the market
name “Saibaba Shopping Centre”. It had further sub-licensed the area and
collected Compensation from sub-licensees, leave & license fees,
Service Charges for providing various services, including security
charges, utilities, etc. from the sub-licensees. The appellant filed the
returns of income from the year 1999 till 2004 and it had been offering
the income from the aforesaid shops and stalls sub-licensed by it under
the head “PGBP” of the Act.
The
income was also assessed accordingly. However, the case of FY 1999-2000
was reopened by the ld. AO by issuing notice u/s 148 of the Act. In
Reassessment order, ld. AO computed the income from the shops, and the
stalls under head “Income from House Property” of the Act by contending
that the appellant was “deemed owner” of the premises u/s 27(iib) of the
Act as it had acquired leasehold right in the land for more than 12
years. Being aggrieved by that Reassessment order, the assessee filed an
appeal before the CIT (A). CIT (A) allowed the appeal of the assessee
and reversed the action of the Ld. AO. However, on appeal before ITAT,
the ITAT reversed the order of the CIT (A) and confirmed the action of
the Ld. AO. Being aggrieved by the order of the ITAT, the appellant
preferred an appeal before the Hon’ble High Court. The Hon’ble High
Court, by its order dated 19.09.2014, dismissed the appeal filed by the
assessee. Accordingly, against the judgment of the Hon’ble High Court,
the assessee preferred further appeal before the Hon’ble Supreme Court.
Held:
In this case, the Hon’ble Supreme Court said that merely because
there is an entry in the object clause of the business showing a
particular object, would not be the determinative factor to arrive at a
conclusion that the income is to be treated as income from business.
Such a question would depend upon the circumstances of each case.
Wherever there is an income from leasing out of premises and collecting
rent, normally such an income is to be treated as income from house
property, in case provisions of Section 22 of the Act are satisfied with
primary ingredient that the assessee is the owner of the said building
or lands appurtenant thereto. Section 22 of the Act makes ‘annual value’
of such a property as income chargeable to tax under this head.
How
annual value is to be determined is provided in Section 23 of the Act.
‘Owner of the house property’ is defined in Section 27 of the Act which
includes certain situations where a person not actually the owner shall
be treated as deemed owner of a building or part thereof. In the present
case, the appellant is held to be “deemed owner” of the property in
question by virtue of Section 27(iiib) of the Act. On the other hand,
under certain circumstances, where the income may have been derived from
letting out of the premises, it can still be treated as business income
if letting out of the premises itself is the business of the assessee.
Therefore, the appeal of the assessee was dismissed.
(Please click here for judgment)
2. CIT
Vs. M/S Pashupati Nath Agro Food Products Pvt. Ltd., Income Tax Appeal
No. 165 of 2010, Date of Judgement: 04.05.2017, High Court of Allahabad
Issue:
Whether the AO can make any addition on account of income earned
out of undisclosed sources, where the books of account have not been
rejected?
Held: No
Brief Facts:
An order of assessment was passed against the respondent assessee by
making the addition of Rs.30,73,542/- on account of sale of rice out of
books of Rs.28,76,125/- for investment in stock out of undisclosed
sources and the additions of Rs.27,84,611/- towards investment in stock
of wheat purchased out of books. However, in appeal before the Hon’ble
ITAT, the tribunal deleted the addition vide order dated 27/10/2009 and
ordered that the assessee has maintained the books of accounts in
accordance with the prescribed standard as per Section 145 of the Income
Tax Act, 1961 as the account books have not been rejected by the
assessing officer. Therefore, an appeal was filed by revenue before the
Hon’ble High Court against the order of the Tribunal.
Held:
The Hon’ble High Court confirmed the order of the Hon’ble ITAT while
affirming that where Books of account are not rejected by AO, then the
account books are expected to be maintained in the prescribed accounting
standard as per Section 145 of the Act. Thereafter, the AO could not
have made any additions towards the sale of rice treating it to be
outside the books of accounts or towards investing in stock of rice and
wheat outside the books of accounts.
Therefore, the appeal of the revenue was dismissed.
(Please click here for judgment)
|
New User? 
Subscribe Now