The income from other sources is considered one among the five heads of income subject to taxation under the Income Tax Act, 1961. Any income which doesn’t fall under the other four heads of the income is taxed under income from other sources.
Income from other sources is basically referred to as the residuary head of income. Those incomes which are excluded from salary, house property, profits and gains from business or professions, capital gains are termed as income from other sources.
According to Section 56 of the Income Tax Act, there are three conditions for satisfying the receipt of the earning falls under the Income from other sources; you have an income, such income is not tax-exempt under the Income Tax Act 1961, such income shouldn’t be categorized as salary, profits and gains from business, income from house property or capital gains.
The Income Tax Appellate Tribunal (ITAT), Patna Bench has held that the differential amount received by way of the issue of shares for a Premium above the Fair Market Value (FMV) shall be taxable for a Closely-held Company under the head “Income from Other Sources” under Section 56(2)(viib) of the Income Tax Act, 1961 but the same is not taxable for the Investor.
The bench also directed AO to make the enquiries as directed by PCIT regarding the correctness of the valuation report of the accountant, may call for an independent report from an expert to confront the assessee and thereafter to pass a speaking order per law.
The Income Tax Appellate Tribunal (ITAT), Chandigarh Bench has invalidated the addition of rental income under the head “Income from Other Sources” wherein the assessee has already offered the same to tax under the head “Income from House Property.” The decision effectively strikes down the case of double taxation of the same income imposed on the assessee.
The two-member bench consisting of Aakash Deep Jain (Vice President) and Vikram Singh Yadav (Accountant Member) has directed to delete the addition made by CPC and confirmed by CIT(A) as it resulted in double taxation of the same income.
The Income Tax Appellate Tribunal (ITAT), Bangalore bench has held that the interest on Fixed Deposit (FD) received during the setting-up of business is not a Business Income but shall be treated as Income from Other Sources.
Ganesh R Ghale, the standing counsel for revenue, contented that the interest income received during the construction period/setting up of business process which has been received from the fixed deposits of the unutilized funds is to be taxed as income from other sources. The single-member tribunal bench of Shri Laxmi Prasad Sahu (Accountant Member) upheld the order of the CIT(Appeals) observing that the interest income received on FD during the construction period/setting up of business process is to be taxed as income from other sources.
By allowing the claim of unabsorbed brought-forward depreciation to be adjusted against the income from other sources, the Ahmedabad Bench of the Income Tax Appellate Tribunal (ITAT) granted relief to Petrofils Co-operative Limited.
Further, the bench noted the details submitted by the assessee pertained to the unabsorbed depreciation of each year. As per the details, there was no unabsorbed depreciation pertaining to A.Y. 2002-03 to 2005-06 and that does not mean that earlier year depreciation had all been absorbed.
The Income Tax Appellate Tribunal ( ITAT ) Visakhapatnam Bench, has recently, in an appeal filed before it, held that rent from sub-letting property is taxable as “income from other sources”.
“The provisions of section 22 of the Act clearly establishes that if the assessee is owner and thereby receives any income from house property, it should be taxed under the head “income from house property”. But in the case on hand, the assessee received rent only by subletting the property, therefore, we are of the view that the assessee has rightly shown the rental income under the head “income from other sources”, he added. Thus, allowing the assessee’s appeal, the Visakhapatnam ITAT held: “We, therefore, direct the AO to delete the addition made under 143(1) intimations. Hence, the grounds raised by the assessee are allowed.”
In the case of Penta soft technology, the Chennai bench of the Income Tax Appellate Tribunal (ITAT) has held that the rental income derived from the lease of plant & machinery or equipment is taxable under the head ‘income from other sources’.
It was held that if the assessee derived rental income from the lease of land & building, then definitely said income is assessable under the head ‘income from house property and consequent action needs to be followed. But, in case, rental income is derived from the lease of plant & machinery or equipment, then the same needs to be assessed under the head ‘income from other sources’ and consequent action needs to be followed. While allowing the appeal, the Tribunal set aside the issue to the file of the AO and direct the AO to re-consider the issue by law.
Maintenance charges derived from letting out services taxable under the head “income from other sources”, the Chennai Bench of the Income Tax Appellate Tribunal (ITAT) held as above.
The Tribunal held that “once, these maintenance charges are attributable to the services provided, the same derived from providing services is to be considered under the head “income from other sources” as claimed by the assessee.” The bench reversed the findings of the lower authorities and allowed the appeal of the assessee.
The Income Tax Appellate Tribunal (ITAT), Chennai held that on Receipt of property by way of inheritance, it will not be treated as income from other sources.
The Bench consisting of V Durga Rao, Judicial Member and Manoj Kumar Aggarwal, Accountant Member held that “Finally, on entirety of facts and circumstances, we would hold that the property was received by the assessee under a will / by way of inheritance and therefore, the provisions of s.56(2)(vii) would not apply to the case of the assessee.”The Income Tax Appellate Tribunal (ITAT), Chennai held that on Receipt of property by way of inheritance, it will not be treated as income from other sources.
The Ahmedabad bench of the Income Tax Appellate Tribunal (ITAT) comprising Shri P M Jagtap, vice president and Ms Suchitra Kamble, the judicial member has held that interest in FDR can be treated as income from other sources under section 56 if the claim of 80P got rejected.
The Tribunal remanded back the issue for examination to the file of the Assessing Officer and partly allowed the appeal for statistical purposes. The appellant was represented by Shri Bhavin Marfatia and the respondent was represented by Shri Atul Pandey.
The Income Tax Appellate Tribunal (ITAT), New Delhi bench comprising of Shri R K Panda, AM and M S Astha Chandra, JM has held that unabsorbed depreciation can be set off against ‘income from other sources’.
It was observed by the Tribunal that the unabsorbed depreciation would be set off with business income or under any other head of income including “income from other sources” and remanded the issue to the file of the AO to verify the claim of the assessee, further allowed the set-off of unabsorbed depreciation by law after giving reasonable opportunity of being heard to the assessee. The appeal filed by the assessee was allowed for statistical purposes. Shri Atul Jain & Shri Arpan Khanna appeared on behalf of the assessee and Shri Surender Pal appeared on behalf of the revenue.
The Pune Bench of the Income Tax Appellate Tribunal (ITAT) has held that excess share of profit claimed can’t be treated as ‘Income from other sources’.
The Coram consists of R. S. Syal, vice president and S S Viswanethra Ravi, Judicial Member observed no reason to treat the difference in the share of profit of the firm as ‘Income from other sources’ and directed to delete the addition made by AO. The appeal filed by the assessee was allowed. The appellant was represented by Shri Krishna Gujarathi and the revenue was represented by Shri M.G. Jasnani.
The Pune Bench of the Income Tax Appellate Tribunal ( ITAT ) in the issue of difference in the share of profit treated as ‘Income from other sources, held that difference was due to mistake and deletes addition.
The Coram of R.S. Syal, Vice President, and S.S. Viswanethra Ravi, Judicial Member has held that “we are satisfied that there is no reason to treat the difference in the share of profit of the firm as ‘Income from other sources. The addition is directed to be deleted”. M.G. Jasnani appeared on behalf of the revenue.
The New Delhi bench of Income Tax Appellate Tribunal( ITAT ) has held that interest received on enhanced compensation not comes under ‘income from other sources’ under Section 56 and not attracts Tax Deduction at Source under Section 194A of Income Tax Act.
The ITAT bench of N.K. Billaiya, Accountant Member and Astha Chandra, Judicial Member while allowing the appeal held that “in the light of the legal provisions set out above and following the judgment of the Honorable Supreme Court in Ghanshyam (HUF) (supra), we hold that interest received by the land owners on enhanced compensation awarded to them by the court under section 28 of the Land Acquisition Act is not in the nature of income from other sources in the hands of the recipient land owners under section 56 of the Income Tax Act and therefore, the LAO was not under any legal obligation to comply with the TDS provisions of section 194A of the Income Tax Act. Accordingly, we allow the grounds raised by the assessee by way of additional grounds taken before the Tribunal. The assessee succeeds. The original grounds become infructuous”.
The Kolkata Bench of Income Tax Appellate Tribunal (ITAT) upheld the Commissioner of Income Tax (Appeal s) [CIT(A)]’s order on charging the difference of the profit on gross turnover for the year as “Income from other sources”.
The coram of Judicial Member, A.T.Varkey and Accountant Member, Manish Borad held that detailed enquiry conducted by the CIT(A), which remained uncontroverted by the ld. counsel for the assessee find no reason to interfere in the finding of CIT(A) applying the gross profit rate of 40% on the turnover disclosed by the assessee as against the gross profit rate of 57.01% disclosed by the assessee and accordingly has rightly charged the difference of the profit that is 17.01% on the gross turnover for the year as “Income from other sources”.
The High Court while dismissing the appeal filed by the revenue held that the sale made out of opening stock cannot be treated as unexplained income to be taxed as income from other sources.
“In absence of any perversity in the impugned order, we are not inclined to entertain the present appeal, which urges questions of law that are entirely resting on findings of fact. Therefore, in our view no question of law, much less substantial question of law, arises for consideration,” the court said.
The Income Tax Appellate Tribunal (ITAT), Pune Bench ruled that the deductions under section 10A and 10AA applicable on profits of the business and not on income from other sources.
The coram headed by the Vice President, R.S.Syal said that the amount of income which qualifies for deduction is the profits of the business of the undertaking and not any income earned by the assessee de hors the business of the undertaking. The ITAT held that if the relevant items of income are held to be falling under the head `Income from other sources’, the same will not qualify for deduction.
The Income Tax Appellate Tribunal ( ITAT ) has ruled that, Interests from Fixed Deposit Receipts ( FDRs ) not to be assessed under ‘Income from Other Sources’.
Accountant Member B.R.R. Kumar and Judicial member Bhavnesh Saini relied on a previous order of the same tribunal on a similar issue with the same company and ruled in favor of the company stating, “Considering the above facts in the light of the Order of the Tribunal Dated 24.07.2018 (supra) in the case of the same assessee, we find the issue is covered in favour of the assessee by the aforesaid decision of the Tribunal. We, accordingly, following the same reasons for decision, set aside the Orders of the authorities below and direct that impugned interest income is capital receipt not chargeable to tax during assessment year under appeal. Accordingly, appeal of the Assessee is allowed.”
The High Court while dismissing the appeal filed by the revenue held that the sale made out of opening stock cannot be treated as unexplained income to be taxed as income from other sources.
“In absence of any perversity in the impugned order, we are not inclined to entertain the present appeal, which urges questions of law that are entirely resting on findings of fact. Therefore, in our view no question of law, much less substantial question of law, arises for consideration,” the court said.
The Income Tax Appellate Tribunal (ITAT), Mumbai Bench said that the CIT(A) rightly treated the fixed deposit interest income under the “Income from Business & Profession” instead of “Income from Other Sources”.
The ITAT said that the interest income is clearly and justifiably assessed as business income. In short, the case under consideration is not a case of depositing unutilized and surplus money by the assessee to earn interest, and, therefore, the interest earned by the assessee cannot be assessed as income from other sources.
The Income Tax Appellate Tribunal (ITAT), Mumbai bench held that the assessee is not eligible to claim an exemption under section 10(10D) of the Act on the maturity value of the Keyman Insurance Policy and is taxable under income from other sources.
The tribunal, while addressing the other, said that in the facts of the present case, undisputedly, the sum received on maturity of Keyman Insurance Policy cannot be assessed either under the head salary or income from business and profession. Thus, the only other head under which it can be assessed is income from other sources as per section 56(2)(iv) of the Act and the Assessing Officer has assessed such income in accordance with the statutory provisions.
The Madras High Court held that the advance received by the respondent (which is returnable due to the failure of the development agreement) from the developer was not to be treated as income in the hands of the assessee.
On whether the advance can be treated as income from other sources, it was held that the AO had not rendered a finding that the advance does not fall under the heads ‘A’ to ‘E’ to be brought under the residuary head ‘F’. Hence, the finding of the AP was held to be perverse.
The Cochin bench of the Income Tax Appellate Tribunal (ITAT) has held that there is no prohibition under the Income Tax Act, 1961 to set off the loss against the income declared as “income from other sources” under the Income Tax Act.
“In view of the judgment of the Hon’ble High Court, we hold that there is no prohibition of set-off of loss against income declared under the head income from `other sources’ for the relevant assessment year. Hence, the assessment order dated 30.03.2017 is not erroneous and prejudicial to the interest of revenue. Accordingly, we hold that the order passed by the CIT under Section 263 of the Income Tax Act is invalid in view of the judgment of the Hon’ble Kerala High Court in the case of Vijaya Hospitality and Resorts Ltd. It is ordered accordingly,” the Tribunal said.
A single bench of Sunil Kumar Yadav (Judicial Member) recently confirmed that expenditure strictly related to earning of Income from other sources is to be allowed under Section 57(iii) of the Income Tax Act, 1961.
Finally, ITAT confirmed the order of Commissioner of Income Tax (Appeals) and declared that under section 57(iii) of the Income Tax Act, only those expenditure are to be allowed which are related to earning of income from other sources. Since the expenditure claimed by the assessee was not incurred to earn income from other sources, the same cannot be allowed.
The Income Tax Appellate Tribunal (ITAT), Hyderabad bench, in the case of DRS Warehousing (South) v. ITO, held that the interest on FDs earned during the pre-operative period is taxable as ‘Income from Other Sources’ under the provisions of Income Tax Act.
Dismissing the appeal, the bench said that “thus, there is clear line of demarcation. If the receipts are inextricably connected to the project or construction, then, the amounts are to be set-off to the capital expenditure incurred during the pre-operative stage. The interest on FDs have no connection with the project/construction activity, then the same is to be brought to tax under the head ‘Other Sources’.”
In a recent ruling, the Income Tax Appellate Tribunal Cochin bench held that the interest accrued on the Provident Fund is taxable as ‘Income from other sources’ under the provisions of the Income Tax Act.
The bench noticed that the assessee also does not have a case that its PF is established under a scheme framed under the Employees Provident Fund Act, 1952. “That being the case, admittedly, the assessees’ contributions to the Provident Fund are not recognized Provident Fund under Section 2(38) of the Income Tax Act and the contributions are not entitled to deduction under Section 80C (2)(vi) of the Income Tax Act. If the contributions are not eligible for deduction under section 80C of the Income Tax Act, there are resultant short deductions of tax under section 192 of the Income Tax Act. Consequently, the interest accrued on the Provident Fund is also liable to be taxed as ‘Income from other sources.”
In the case M/s. Emta Steel & Energy Limited v. Deputy Commissioner of Income Tax, the Kolkata bench of the ITAT held that the interest received by the assessee-company on FDRs kept with Bank before the commencement of business are taxable under the Income Tax act under the head “income from other sources.”
The bench said “after taking note of the same, it was observed by the Hon’ble Supreme Court in its judgment passed in the case of Bokaro Steel Limited (supra) that this issue, in any case, stood concluded by a decision of the Court in the case of Tuticorin Alkali Chemicals & Fertilizers Limited (supra). It is thus clear that the issue relating to the treatment to be given to the interest income earned by the assessee on FDRs kept with Bank before the commencement of business is squarely covered against the assessee by the decision of the Hon’ble Supreme Court in the case of Tuticorin Alkali Chemicals & Fertilizers Limited (supra) and respectful lyfol lowing the same, we uphold the impugned order of the ld. CIT(Appeals) confirming the action of the Assessing Officer in bringing to tax interest income in question in the hands of the assessee under the head “income from other sources”.
The Income Tax Appellate Tribunal, Bangalore bench, in recently confirmed the decision of the Commissioner of Income Tax (Appeals) who allowed the assessee, a charitable trust, depreciation in respect of income from other sources. The ITAT, upheld the view of the CIT(A) that depreciation is allowable even if the assessee is not doing any business since it is following the generally accepted principles and practices of accountancy.
It was observed that “The law has prescribed specific rules for computation of income from other sources in Part ‘F’ under Chapter IV of the IT Act, 1961 running from sections 56 to 59 of the Income Tax Act. Section 57 of the Income Tax Act provides for deduction allowable in computing income under other sources. Clause (ii) of section 57 provides for depreciation under Section 32(2) of the Income Tax Act. It shows that even in computing the income from other sources, the assessee is entitled to claim depreciation under Section 32(2).” The Appellate Tribunal confirmed the above view of the CIT(A) by dismissing the appeal.
The Supreme Court of India delivered a path-breaking judgment whereby held that the Government subsidies are not “business income” and they would come under the ambit of “income from other sources.”
The contentions of the Revenue was rejected by the Supreme Court and held that the subsidies that are received by the respondent, would be income from other sources referable to Section 56 of the Income Tax Act. Any deduction that is to be made can only be made from income from other sources and not from profits and gains of business, which is a separate and distinct head as recognised by Section 14 of the Income Tax Act. The subsidies are treated as assistance given for the purpose of carrying on the business of the assessee.
The Madras High Court ruled that the Arm’s Length Price (ALP) and resultant excess profit to be treated as deemed income under ‘other sources.
“We therefore uphold that part of the CIT(A)’s order which confirms in toto the Assessing Officer’s order as regards the ALP and the resultant excess profit to be treated as deemed income under ‘other sources’. The ITAT’s order of deleting the disallowance of Rs.3.54 Crores is set aside. However, as regards the value of scrap sales, the levy of interest and the 5% of interest income taken as expenditure, we find no infirmity in the ITAT’s order,” the court said.
The Income Tax Appellate Tribunal (ITAT) Bangalore, has ruled that unexplained deposit into bank account are taxable as “other income” under section 68 of the Income Tax Act, 1961.
Judicial member George George K and accountant member Chandra Poojari, “The assessee has not furnished any evidence to establish the nexus between the earlier withdrawals and deposits into various bank accounts. In such circumstances, we are not in agreement with the assessee’s counsel that it is from the earlier withdrawals. In our opinion, these receipts are to be considered as from unknown sources to bring into taxation. Therefore, these deposits of Rs.92,54,462 to be considered as unexplained deposits from ‘income from other sources. It is ordered accordingly.”
The Amritsar bench of the Income Tax Appellate Tribunal (ITAT) has recently held that high sea sales of imported goods are not considered as speculative transactions under Section 43(5) of the Income Tax Act, 1961. Thus, the bench upheld the interest income from fixed deposits and other investments as business income.
The tribunal after considering the facts, materials and arguments of both parties observed that the entire transaction is going through by proper delivery of the goods during purchase and the assessee had provided documents for evidence of delivery of goods related to high sea sale and confirmed the interest income treated as business income. Therefore, the two-member bench of Dr. M. L. Meena, (Accountant Member) and Anikesh Banerjee, (Judicial Member) allowed the appeal filed by the assessee.
The Ahmedabad bench of Income Tax Appellate Tribunal (ITAT) has recently held that the interest expenses incurred for earning income from loans and advances should not be disallowed under Section 57 of Income Tax Act, 1961.
It was observed by the tribunal that the AO could not dictate the assessee about the loan and advances given to the other parties and the interest thereon charged by the assessee as the assessee is a partner in the partnership firm. The assessee within his business exigencies has paid higher interest on unsecured loans as the need in respect of partnership firm for its fund is required. Therefore, the single member bench of Suchitra Kamble, (Judicial Member) allowed the appeal filed by the assessee.
The Indore bench of Income Tax Appellate Tribunal (ITAT) held that no addition can be made on unexplained income which was received as gift from the family members for personal use.
The two member bench comprising of Vijay Pal Rao (Judicial Member) and B.M. Biyani (Accountant Member) held that gift received from family members, namely father and mother for personal use which do not required any special occasion like birthday, marriage, etc and the affidavit given by donors, being father and mother, themselves explained that they made gifts to assessee for “personal use”. The bench directed the assessing officer to re-adjudicate to delete the addition made under Section 69A of Income Tax Act, 1961 while allowing the appeal filed by the assessee.
The Hyderabad Bench of Income Tax Appellate Tribunal (ITAT) has upheld the estimation of Income by the Assessing Officer as income from other sources as the assessee had failed to produce the evidence as to agricultural income.
The two-member Bench of R.K. Panda, (Accountant Member) Laliet Kumar, (Judicial Member) upheld the decision of treating some income under the head of other sources.
The Income Tax Appellate Tribunal (ITAT) of Kolkata bench has held that grants from West Bengal State Government to cooperative societies are not income from other sources and directed to allow deduction under section 80P of the Income Tax Act, 1961.
A two-member bench comprising Shri Rajpal Yadav, (Vice-President) & Dr Manish Borad (Accountant Member) observed that since the alleged sum of Rs.9,92,664/- is the income earned by the Society for its objects, the same is eligible for deduction under section 80P of the Income Tax Act. The tribunal allowed the appeal in result.
The Income Tax Appellate Tribunal (ITAT), Chennai Bench, has recently, in an appeal filed before it, held that interest on fixed deposits is assessable under the head ‘income from other source’.
The ITAT finally held: “Therefore, we are of the considered view that interest on fixed deposits is rightly assessed under the head income from other source and thus, we reject the argument of the assessee.”
The Ahmedabad bench of the Income Tax Appellate Tribunal (ITAT) has held that interest/ salary received by a partner from a firm is not assessable as “other income”.
The Tribunal viewed that the claim of the assessee for deduction under Section 57(iii) is not justifiable and has rightly been disallowed by the Assessing Officer and the CIT(A). The appeal of the assessee got dismissed.
In a recent ruling, the Bangalore Bench of the Income Tax Appellate Tribunal (ITAT), which is chaired by Judicial Member George George K. and Accountant Member Laxmi Prasad Sahu, instructed the Assessing Officer to re-adjudicated the case in which the Interest from Investment earned by the Co-operative Society from the Co-operative Bank is at issue.
The tribunal then instructed the AO to determine if the assessee had incurred any expenses for generating interest income, which are assessed under the head “income from other sources,” and if so, the same shall be allowed as deduction under Section 57 of the Income Tax Act. Also, directed to examine the direction of the PCIT in the impugned order passed under the Section 263 of the Income Tax Act.
The Mumbai bench of the Income Tax Appellate Tribunal (ITAT) has held that the interest received from fixed deposit receipt (FDR) is taxable not as income from the business but as other income in Income Tax Act 1961.
Dismissing the appeal the bench of comprising of, Shri Amarjit Sing (Accountant Member), and Shri Sandeep Sing Karhail (Judicial member) observing that the interest received from FDR was taxable as other income referring to a case where the assessee himself was a party. The tribunal also dismissed the appeal filed by the revenue.
A division bench of the Delhi High Court has held that the dividend received by the assessee from OMIFCO, Oman is chargeable to tax in India under the head “Income from other sources” and forms part of the total income and therefore, the disallowance under section 14A of the Income Tax Act, 1961 cannot be made.
Upholding the ITAT order, the Court held that “As per Section 2(45) of the Act, “total income” means the total amount of income referred to in Section 5, computed in the manner laid down in the Act. Therefore, Section 14A pertains to disallowance of deduction in respect of income which does not form part of the total income. Since the dividend received by the assessee from OMIFCO, Oman is chargeable to tax in India under the head “Income from other sources” and forms part of the total income, the same is included in taxable income in the computation of income filed by the assessee. However, rebate of tax has been allowed to the assessee from the total taxes in terms of Section 90(2) of the Income Tax Act read with Article 25 of the Indo Oman, DTAA and thus, the dividend earned can be said to be in the nature of excluded income and, therefore, the provisions of Section 14A would not be attracted in this case.”
The Chennai bench of the Income Tax Appellate Tribunal (ITAT) has ruled that, Securities Premium can’t be Taxed as “Other Income” under Section 56(2) (viib) of the Income Tax Act.
The bench consisting of V Durga Rao, Judicial Member and G Manjunatha Accountant Member held that “Therefore, we are of the considered view that the Assessing Officer cannot invoke provisions of section 56(2)(viib) of the Income Tax Act, because receipt of balance consideration towards allotment of shares cannot be equated with allotment of equity shares. Hence, we are of the considered view that the Assessing Officer has erred in invoking the provisions of section 56(2) (viib) of the Income Tax Act and taxed securities premium under the head ‘income from other sources’ for the assessment year in question”.
The Mumbai bench of the Income Tax Appellate Tribunal (ITAT) comprising Shri Vikas Awasthy, Judicial Member & Shri Gagan Goyal, Accountant Member has held that the dividend income received by the assessee, a builder, which is not subject to Dividend Distribution Tax (DDT) shall be assessable as “Income from Other Sources” under the provisions of the Income Tax Act, 1961.
“Since, the said dividend income was not subject to Dividend Distribution Tax the assessee has offered dividend income to tax as Business Income. The Assessing Officer has held the same as ‘Income from Other Sources’. Taking into consideration the nature of activities carried out by the assessee, dividend income received cannot be held to be business income of the assessee. Therefore, in our considered view the authorities below have rightly assessed dividend income as ‘Income from Other Sources’. The Ground No.3 of appeal lacks merit, hence, dismissed,” the Tribunal said.
The Jaipur Bench of Income Tax Appellate Tribunal has held that receipt of excess share from close relative is not chargeable to tax under other sources.
The Coram of Dr. S. Seethalakshmi, and Sri Rathod Kamlesh Jayantbhai, by giving reliance to the decision in the case of ACIT vs. Venkanna Choudhary has held that “we allow the appeal of the assessee and set aside the order of CIT(A) and addition confirmed by the CIT(A) is deleted”.
The Bangalore bench of the Income Tax Appellate Tribunal (ITAT) has ruled that, Income received in Excess of Face Value of Shares under Section 56 of the Income Tax Act is Taxable.
The coram of Sri N V Vasudevan, Vice President, and Sri B R Baskaran Accountant Member held that the assessee did not file any valuation report to substantiate the fair market value of shares issued in terms of Section 56(2)(viib) (a)(i) of the Income Tax Act and Rule 11UA of the Income Tax Rules. In such circumstances, ITAT of the view that the AO could not have accepted the intrinsic value without calling for a value in terms of Rule 11UA of the Rules to find out whether class (i) or class (ii) of explanation (a) to Sec.56(2)(viib) of the Act would be applicable, and the order of the AO without considering it was erroneous. And find that there was no merit on part of the assesse and hence appeal dismissed.
The Income Tax Appellate Tribunal (ITAT), Delhi bench has held that the income from mutual fund and interest received from the income tax refund shall be taxable as “income from other sources” for the purpose of Income Tax Act, 1961.
“That being the case, it has to be set off against the revenue expenses. However, this is only to the extent of interest income earned on fixed deposits. As far as income earned from mutual fund and interest from income tax refund, they have to be taxed under the head income from other sources. Thus, I allow assessee’s claim of assessment of interest income under the head business to the extent of Rs. 11,74,070/-. Whereas, the balance amount of Rs. 20,325/- is to be taxed under the head income from other sources. In so far as the issue of set off of income from other sources against the revenue expenses in terms of section 71 of the Income Tax Act, I admit the additional grounds as they do not require fresh investigation into facts,” the Tribunal said.
The Mumbai bench of the Income Tax Appellate Tribunal (ITAT) has held that the award is taxable as “income from other sources” under the provisions of the Income Tax Act, 1961.
“The issue is squarely covered insofar as the present appeal is concerned and nothing survives to be decided. Therefore, respectfully following the decision of the co-ordinate bench (supra), we uphold the decision of learned Commissioner (Appeals) by dismissing the ground raised,” the Tribunal said.
The Income Tax Appellate Tribunal (ITAT), Bangalore Bench held that the usage of fund cannot be the reason to impose tax liability.
The tribunal held that there is also no negotiation for the transfer of capital assets by the assessee with these two parties. Thus, the assessee’s case is not hit by the provisions of section 56(2)(ix) of the Income Tax Act. Accordingly, the addition sustained by the CIT(A) is deleted.
The Delhi bench of the Income Tax Appellate Tribunal (ITAT) has held that the lease rental income should be taxed under the head “Income from House Property” or “Income from Other Sources” even if such renting is incidental to the main business activity and the same is separable.
“We find that Ld. CIT(A) has also relied on the decision of the jurisdictional High Court in the case of Garg Dyeing and Processing Industries versus ACIT (supra). In the said decision also the Hon’ble High Court has held that where the letting was inseparable, section 56(2)(iii) was rightly invoked. In the case of Shambhu Investment (supra) the issue of taxability of the rental income under the head “income from house property” vis-à-vis income under the head “profit and gains of business and profession”, whereas in the present case dispute between the parties regarding the lease rental income should be taxed under the head “income from house property” or under the head “income from other sources”,” the Tribunal said.
The Kolkata bench of the Income Tax Appellate Tribunal (ITAT) has recently held that the income received by the assessee, a Co-operative credit society, from holiday homes owned by it is not taxable under the head “income from house property” as the same is taxable under the head “income from other sources” for the purpose of levying an income tax.
The head of assessee’s income derived from its holiday homes i.e. whether it is income from house property as per the PCIT, business income going by the Assessing Officer in assessment and the CIT(A) and the residuary head of “other” sources in its computation; respectively, is purely a debatable issue. It thus could not be held that that the Assessing Officer’s action sought to be revised as erroneous and causing prejudice to the interest of the Revenue,” the Tribunal said.
The Delhi bench of the Income Tax Appellate Tribunal (ITAT) has recently held that the income from maintenance services received along with rental income cannot be included under the head “income from house property” and the same is taxable as “Other Income” for the purpose of imposing an income tax.
Referring to the Karnataka High Court judgment in CIT vs. Shantikumar Narayana Hotel Pvt. Ltd, “it is our considered opinion that only the rental income should be charged to tax under income from house property after allowing deductions in respect of the Municipal taxes paid and of the 30% standard statutory deduction u/s 24(a) of the Act. On the other hand, the income from maintenance services should be brought to tax under income from other sources after allowing the benefit of deduction towards expenditure incurred on maintenance charges. Accordingly, we set aside the order of the Ld. CIT (A) and direct the Assessing Officer to charge only the rental income under income from house property and allow the statutory permissible deductions therefrom. The expenditure on maintenance services is not to be deducted from income from house property and neither the income from maintenance charges recovered is to be treated as income from house property,” the Tribunal said.
The Income Tax Appellate Tribunal (ITAT) held that income from interest is chargeable to tax as ‘income from other sources’ under Section 56 of the Income Tax Act.
The tribunal comprising of an Accountant Member Chandra Poojari held, “there is nothing to show that the expenses claimed as deduction were incurred for earning interest income. Equally, the claim of the appellant that the expenditure incurred by the assessee was allowable under Sections 30 to 37 of the Act is inadmissible for the reason that the business of the assessee was lying closed and income from interest was chargeable to tax as ‘income from other sources’ under Section 56 of the Act. Once that was so, the Tribunal had rightly adjudicated the matter in favor of the revenue.”
The Income Tax Appellate Tribunal (ITAT), Bangalore has held that the income received from the sale of cocoons is not agricultural income and therefore, the same is taxable as “Income from Other Sources” under the income tax law.
“In the case on hand, the AO has considered income from sericulture at Rs.1,92,240/- and 50% thereof viz., Rs.96,120/- as income derived from the cultivation of mulberry plants. It has already been held in this order that the AO was not correct in estimating, both the agricultural income as well as the expenditure thereon, when the facts on record establish that the assessee HUF had carried on agricultural operations; including the growing of Mulberry plants and sericulture; during the year under consideration. In the facts and circumstances of the case, as discussed above, on this issue, the income from sericulture as declared by the assessee amounting to Rs.15,42,199/- is to be accepted and 50% thereof, amounting to Rs.7,71,100/- is held to be attributable to the sale of cocoons, which is chargeable to tax,” the Tribunal said.
The Lucknow bench of the Income Tax Appellate Tribunal (ITAT) has recently ruled that the income received by the assessee by sub-letting a property (warehouse) for commercial purpose would be taxable as “Income from other sources” and not under the head “income from house property” under the Income Tax law.
“In the present case, neither of the above conditions of section 22 of the Act stands satisfied. The assessee, as discussed, is not the owner of the property in question. Too, the property is commercial in nature. Therefore, the provisions of section 22 of the Act are not at all applicable. Hence, the addition made as ‘income from house property’ is not sustainable. Accordingly, the order under appeal is reversed and the addition is deleted.”
The Delhi bench of the Income Tax Appellate Tribunal (ITAT) has held that the forfeiture of earnest money received during the negotiation of capital assets not taxable as other income before the amendment in the year 2015.
“A co-ordinate bench of Tribunal in case cited as Randhir Singh Kadan vs. Department of Income Tax decided the identical issue by treating the earnest money received and forfeited by the assessee in respect of any negotiation for transfer of capital assets to be deducted from the cost of assets. Since in A.Y. 10-11 there was no provision under the Act for treating the forfeiture of earnest money received during the negotiation of a capital assets as income from other sources, the Ld. CIT(A) has rightly deleted the addition. The issue in controversy is also covered by decision rendered by Co-ordinate bench of Tribunal in case of Vijay Singh,” the Tribunal said.
The Income Tax Appellate Tribunal (ITAT), Jalandhar bench has held that the lease rent received for letting out of open land should be treated as “Income from Other Sources.”
“We are of the considered view that the Pr. CIT-2 Jalandhar rightly observing that the view was taken by the A.O that the property let out by the assessee comprised of “building” and “land appurtenant thereto” was not in conformity with the judgment of the Hon’ble High Court of Punjab & Haryana in the case of Govardhan Dass & Sons (supra), had this on the said count too rightly exercised his revisional jurisdiction under Sec. 263 of the I.T. Act,” the Tribunal said.
The Mumbai bench of the Income Tax Appellate Tribunal (ITAT) has held that the payment of municipal taxes cannot be deducted under section 57(iii) of the Income Tax Act since the same is directly related to the letting out of the property.
“We thus find ourselves as being in agreement with the view taken by the Tribunal in the assesses own case for the aforementioned years viz. A.Y. 2009-10 and A.Y. 2010-11, respectfully follow the same. The Grounds of appeal No. 1 and 2 raised by the revenue are allowed in terms of our aforesaid observations,” the Tribunal said.
In M.J. Aravind vs. The Joint Commissioner of Income Tax, the Bangalore Bench of the Income Tax Appellate Tribunal (ITAT) has held that for availing deduction under Section 57(iii) of the Income Tax Act, 1961 the assessee has to establish that the expenditure has been exclusively laid out or expended wholly and exclusively for the purpose of making or earning such income taxable under the head ‘income from other sources’
The bench comprising of Judicial Member N.V. Vasudevan and Accountant Member Arun Kumar Garodia observed “In this regard, we observe that section 14A comes into picture in respect of those expenses which are otherwise allowable and therefore, the assessee has to first establish this that the expenses claimed by the assessee is allowable under any provisions of the law. For that, the assessee has to show that the claim of the assessee is allowable u/s. 57 of IT Act because the expenses are incurred in earning of income from other sources. Regarding the allowability of deduction under clause (iii) of section 57, it has to be established by the assessee that expenditure has been exclusively laid out or expended wholly and exclusively for the purpose of making or earning such income taxable under the head ‘income from other sources ‘and a categorical finding has been given by CIT (A) in para no. 6.2 of his order as reproduced above that no such detail was furnished by the assessee. Before us also, the assessee has made general arguments and has submitted general details but no specific details were furnished before us also. Hence, we hold that no deduction is allowable u/s 57 (iii) of the Income Tax Act, 1961.”
While partly allowing the appeal filed by Jhabua Power Limited, Kolkata bench of Income Tax Appellate Tribunal (ITAT) recently ruled that interest on security deposit made for sales tax registration for construction of power plant is taxable under the head other income.
However, the said deposits were linked with the construction of Power Plant of the assessee and interest earned by the assessee on the said deposits was liable to be adjusted against the Project construction expenditure and the same could not be assessed as income from other sources. The CIT(A) has confirmed the addition made by the Assessing Officer to the total income of the assessee by treating the said interest income as chargeable to tax in the hands of the assessee-company under the head “income from other sources” by mistake. The bench directed the AO to delete the addition made by him while concluding the issue.
In the Case, Assistant Commissioner of Income Tax vs. M/s Posco India Private Limited, Cuttack bench of Income Tax Appellate Tribunal (ITAT) recently held that interest on fixed deposits on money received in respect of share capital cannot be assessed as other income.
The AO further observed that the inextricable link with the process of setting up the project with deposits in banks has not been explained by the assessee and accordingly he taxed the interest income under section 56 of the Income Tax Act 1961 under the head income from other sources.
While concluding the issue the bench further held that interest on fixed deposits are not taxable under income from other sources and, accordingly, uphold the findings of the CIT (A) and dismissed the appeal filed by the Revenue.
The Kolkata bench of the ITAT recently held that the interest from surplus fund invested in Short-Term Deposits and Securities is taxable as “Income from Other Sources” under the Income Tax Act, 1961.
Finally, the bench directed to remand the issue to the file of the AO, to verify the expenses that may have been incurred in earning the impugned amount and also to find whether such investment made out from the surplus fund or out of the amount payable to its members.
In the case of Sonega Trades & Investments Private Limited vs. Income Tax Officer, Mumbai bench of Income Tax Appellate Tribunal (ITAT) recently held that interest income earned from capital gains bonds would be taxable under the head other income and the same cannot be taxed as business income.
“The assessee could not claim any expenditure from Income from House Property outside the ambit of Section 24. The expenditure as claimed by the assessee was not covered by the statutory provisions and hence not allowable. The interest income was earned from Capital Gains Bonds which was rightly assessed as Income from Other Sources,” the bench said.
Kolkata bench of Income Tax Appellate Tribunal (ITAT) recently held that income earned by the assessee from sub-letting of property under leave and license agreement for a temporary period is taxable under the head income from other sources and not under the head business income since the sub-letting was not an object of the assessees’ business.
After considering all the findings of the lower authorities tribunal bench consists of Judicial Member N.V. Vasudevan and Accountant Member M. Balaganesh also upheld the order pronounced by the CIT(A). “We find that the rental income derived by the assessee has been correctly held by the Ld. CIT(A) as income from other sources as admittedly the assessee is not the owner of the property and had merely sublet the property to another concern thereby deriving rental income of Rs. 60,000/-. Hence, the Ld. CIT(A) had rightly treated the same as income from other sources as has been reported by the assessee in its return of income.”
A division bench of the Delhi High Court in Jay Metal Industries Pvt. Ltd v. CIT held that the income received by the assesse from letting of the building along with the furniture and machineries constitute “composite rent” which is taxable under the head “income from other sources” not under “income from house property” for the purpose of Income Tax Act.
“Applying the test laid down in Sultan Bros. (supra) the income from the letting in the hands of the Assessee was “a new kind of income” which could be considered to be income from house property since the income not from the ownership of the building alone “but an income which though arising from a building would not have arisen if the plant, machinery and furniture had not also been let along with it,” the bench said.
In a recent ruling, the Rajasthan High Court held that the interest earned on Fixed Deposit receipts used by the assessee as borrowing margin money for funds for setting up the industry is revenue income.
Reversing the ITAT order, the division bench comprising of Justice Govind Mathur and Justice Vinit Kumar Mathur observed that, the assessee had income of interest through FDRs and while setting off that the Assessing Officer as well as the ITAT did not examine the aspect as to under which provision the assessee claimed deduction or set off of his income from other sources against interest payable on the borrowed fund. “The reason given is that the amount pertaining to FDR was not surplus amount but part of amount that was kept to obtain letter of credit for purchase of machinery. While accepting the fact that the FDR was for obtaining letter of credit to purchase machinery but so far as interest earned thereon is concerned, that is nothing but income through other sources, as such, the Commissioner of Income Tax rightly treated the same as income taxable.”
In Ms. Ramairen Properties Pvt Ltd v. ITO, the division bench of the Delhi ITAT ruled that non-recording of Construction expenses in books of account is not a ground for assessing rental income under the head “income from other sources”
Construction expenses not recorded in books of account, cannot be a ground for assessing the rental income under the head “income from other sources” when the conditions of Section 22 of the Act for assessing the annual value of the property have been fulfilled by the assessee. By not recording construction expenses in books of account, the rights of ownership of the assessee over the property cannot be taken away and it remains the owner of the property.”
The Mumbai bench of the Income Tax Appellate Tribunal (ITAT) has recently held that a shareholder cannot be taxed under Section 56(2)(vii) of the Income-tax Act, 1961 when the shares are allotted to him on a proportionate basis, even if such shares are allotted at lower than the fair market value under Section 56(2)(vii) of Income Tax Act.
The Tribunal also held that in the current facts (and as in the facts of Sudhir Menon HUF case) the Taxpayer’s shareholding was in fact reduced after the issue of additional shares (from 34.57% to 33.30%) as he only partially accepted the offer given to him, section 56(2)(vii) of the Income Tax Act should not be invoked.
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