A.R.HOLDINGS & ELECTRONICS P. LTD.,CHENNAI vs. ITO CORPORATE WARD 1(1), CHENNAI

आदेश / O R D E R PER N.R.S. GANESAN, JUDICIAL MEMBER:

This appeal of the assessee is directed against the order of the

Commissioner of Income Tax (Appeals)-1, Chennai, dated 23.03.2018,

and pertains to the AY 2005-06.

dated 30.10.2018. The assessee filed a Miscellaneous Petition on the

ground that the rental income earned on letting out of the property was

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outside the scope of the present appeal. The Tribunal by an order dated

07.05.2019 accepted the claim of the assessee and recalled its earlier

order dated 30.10.2018. The assessed income is less than Rs.50.00 lakhs,

therefore, it is posted before the single Member for final disposal.

issue raised regarding the validity of the re-opening u/s.147 is not

pressed. The Ld.Counsel for the assessee also submitted that he will make

an endorsement to that effect on the appeal folder. However, the

Ld.Counsel has not made any endorsement on the file and also not argued

the issue regarding the re-opening. Therefore, I perused the materials

available on record. The AO re-opened the assessment by issuing a notice

u/s.148. Initially, the return was processed u/s.143(1) of the Act. There

is no doubt that the assessment was re-opened within a period of four

years from the end of the relevant assessment year. Therefore, the

Ld.CIT(A) by placing a reliance on the judgment of the Hon’ble Apex Court

in the case of CIT vs. Rajesh Jhaveri Stock Brokers Ltd., [2007] 161

Taxman 316 (SC) found that the assessment was rightly re-opened. This

Tribunal after carefully gone through the records found that the Ld.CIT(A)

has rightly confirmed the order of the AO. Accordingly, the same is

confirmed.

consideration is that the apportionment of expenditure between the rental

income and the income from amenities. According to the Ld.

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representative, the rental income has to be assessed as income from

house property and the income from amenities has to be assessed as

income from business. Referring to the order of the AO more particularly

Para No.4, Ld.representative submitted that the AO himself treated the

amenities income as business income. Therefore, there is no question of

apportionment of expenditure between the business income and the

income from house property. The entire expenditure has to be allowed

only from the business income. Therefore, the Ld.CIT(A) was not justified

in directing the AO to apportion the expenditure. Ld.Counsel has placed

reliance on the orders of the Tribunal in the assessee’s own case for the

AYs 2006-07, 2007-08 & 2008-09 in ITA Nos.1741, 1742 &

1743/Mds/2013 dated 13.11.2015 and submitted that this Tribunal found

that the amenities charges has to be classified as business income.

Representative submitted that the expenditure includes depreciation.

Referring to the order of the Ld.CIT(A) more particularly at Para Nos.11 &

12, the Ld.DR submitted that the depreciation claimed by the assessee as

expenditure includes depreciation on buildings. According to the

representative, depreciation on building relatable only to the property

which was let out and the income there from was assessed as income

from house property. Therefore, the Ld.CIT(A) has rightly found that the

expenditure relates to both rental income as well as income from amenity

charges. Hence, the AO was directed by the Ld.CIT(A) to apportion the

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total expenditure in the same ratio as rental income to the amenities

income.

perused the material available on record. The income from amenities

charges was admittedly classified as income from house property by the

AO. This Tribunal in the assessee’s own case for the AYs 2006-07, 2007-

08 & 2008-09 found that amenities income has to be classified as income

from business. Sec.37 of the Income Tax Act clearly says that the

expenditure wholly and exclusively relatable for the purpose of business

shall be allowed in computing the income under the head ‘profit & gains of

business’. Therefore, this Tribunal is of the considered opinion that there

is no question of apportionment of the expenditure between the business

income and the income from house property. In other words, the entire

expenditure relatable to business income has to be considered while

computing the business income and not while computing the income from

house property. Therefore, the orders of both the authorities below are

set-aside and the entire issues raised by the assessee are remitted back

to the file of the AO. The AO is directed to examine and find out the

expenditure claimed for earning the business income while computing the

business income of the assessee from amenities charges.

relates to the building that cannot be business expenditure. There is a

merit in the contention of the Ld.DR. The assessee is not using the

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building for its own business. The assessee simply let out the building and

the rental income is assessed as income from house property. Therefore,

what is to be allowed while computing the income from house property is

a standard deduction as provided in Sec.24 of the IT Act and not the

expenditure as claimed by the assessee. Moreover, when the property

was let out for rent the assessee is not eligible for any depreciation.

Therefore, the depreciation claimed by the assessee which is relatable to

the building cannot be treated as a business expenditure and cannot be

allowed while computing the income from house property. Accordingly,

the orders of the authorities below had modified. The AO is directed to

allow only the expenditure while computing the income from business with

respect to amenities.

assessee is partly allowed.

Order pronounced on the 16th day of July, 2019, in Chennai.

Sd/- (एन.आर.एस. गणेशन) (N.R.S. GANESAN) �या�यक सद�य/JUDICIAL MEMBER चे�नई/Chennai, 2दनांक/Dated: 16th July, 2019. TLN आदेश क+ )�त3ल4प अ5े4षत/Copy to: 4. आयकर आयु6त/CIT 1. अपीलाथ(/Appellant 5. 4वभागीय )�त�न�ध/DR 2. )*यथ(/Respondent 6. गाड$ फाईल/GF 3. आयकर आयु6त (अपील)/CIT(A)