The Delhi Bench of Income Tax Appellate Tribunal Held that Commissioner of Income Tax (Appeals) [CIT (A)] defaulted in recharacterizing the rental income as business income and arbitrarily disallowing income tax deduction without any justifiable reasons. Thus restore the matter to the file of the Assessing Officer for redetermination of taxable income under the appropriate head.
The assessee-company Swar Maya Infotech P. Ltd. is engaged in the business of facility management service and business support service. Additionally, the assessee-company has derived rental income by leasing of commercial space. The assessee declared rental income under the head ‘income from house property’ whereas the income derived by way of facility management services were declared under the head ‘business income’ and subjected to expenses and deductions as available under law.
The assessee has shown income from house property at Rs.71,40,062/- whereas business loss of Rs.41,19,061/- was claimed for the Assessment Year 2015-16 in question.The Assessing Officer while framing the assessment under Section 143(3) of the Income Tax Act,1961 inter alia disallowed the business loss at Rs.41,19,061/-.
Aggrieved, the assessee filed an appeal before the CIT (A), which concluded that the rental income declared under the head ‘income from house property’ also should be assessed under the head ‘business income and thus recharacterized the entire income as business income and also denied deduction claimed under Section 24(a) as well as interest relating to prior period claimed under Section 24(b) of the Income Tax Act.
Further aggrieved the assessee filed an appeal before the Tribunal. The Authorized Representative (AR) of the assessee contended that the CIT(A) has committed fault not only in recharacterizing the income but also arbitrarily refused to allow several expenses claimed as per Profit & Loss Account without giving any justifiable reasons for denial of claims against business income.
Further the AR submitted that the assessee in the past has been declaring the rental income under the head ‘income from house property’ whereas facility management services income were claimed under the head ‘business or professional income’.
The Departmental Representative (DR) for the Revenue relied upon the order of the CIT (A).
The Bench comprising of Chandra Mohan Garg, Judicial Member and Pradip Kumar Kedia, Accountant Member observed that the claim of the assessee that income offered in the past in the similar circumstances has been apportioned under the head ‘income from house property’ and ‘business income’ and the taxable income has been computed after claim of deductions statutorily available and expenses incurred for the purpose of business in accordance with law.
Thus the Tribunal set aside the order of the CIT (A) and restored the matter to the file of the Assessing Officer for redetermination of taxable income under the appropriate head and after allowing the statutory and other deductions and claim towards expenses under the respective heads of income in accordance with law.
Hence the appeal of the assessee is allowed for statistical purposes.
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