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II. Direct Taxes Case Laws:
1. M/s.
Rayala Corporation (P.) Ltd. Vs. ACIT, Civil Appeal Nos. 6437 to 6441
of 2016, Date of Judgment: 11.08.2016, Supreme Court of India
Issue:
Whether
rent received from business of renting of house property should be
treated as 'Business income', and not as 'income from house property'?
Held: Yes
Brief Facts
The appellant-assessee, a private limited company, is having house
property, which has been rented and the assessee is receiving income
from the said property by way of rent. The assessee company is in
business of renting its properties and is receiving rent as its business
income, the said income should be taxed under the Head “Profits and
gains of business or profession” whereas the case of the Revenue is that
as the income is arising from House Property, it must be taxed under
the head “Income from House Property”. The ld. counsel submitted that as
per its MOA its business is to deal into real estate and earn income by
way of rent by leasing or renting the properties. The ld. counsel for
the assessee submitted that the issue involved in these appeals is no
more res integra as this Court has decided in the case of Chennai
Properties and Investments Ltd. v. Commissioner of Income Tax [2015] 373
ITR 673 (SC).
Held:
The hon’ble supreme court held that, upon hearing the ld. counsel and
going through the judgments cited by the learned counsel, the law laid
down by this Court in the case of Chennai Properties and Investments
Ltd., shows the correct position of law and looking at the facts of the
case in question, the case on hand is squarely covered by the said
judgment. In the judgment (supra), it was held that if an assessee is
having his house property and receiving rent by way of renting it and
claiming such rent as his business income. The said rental income, even
if in the nature of rent, should be treated as “Business Income” because
the assessee is having a business of renting his property and the rent
which he receives is in the nature of his business income. Appeal is
allowed.
(Please click here for judgment)
2. M/S Rishi Hi-Tech Builders Pvt. Ltd. Vs. ITO, I.T.A. No. 6447/Del/2012, Date of Order: 08.08.2016, ITAT - Delhi
Issue:
Whether
where no exempt income is received or receivable by the assessee during
the relevant assessment year, no disallowance can be made by invoking
provisions of Section 14A of the Income Tax Act,1961?
Held_Yes
Brief Facts:
The assessee company is engaged in the business of construction of
building. From the audited balance sheet, it is noticed by the AO that
assessee has shown investment of Rs.3,04,00,000/- and interest paid was
Rs. 20,14,787/-. Thus, the AO issued show cause notice to assessee as
to why disallowance u/s 14A of the Act, read with Rule 8D of the
Income-tax Rules, 1962 be not made? Assessee contended that the has not
recorded his satisfaction and also it has neither received any exempted
income nor claimed any exempted income in return of income and hence
provisions of Section 14A read with Rule 8D are not applicable. However,
the AO invoked the provisions contained u/s 14A read with Rule 8D and
calculated the expenditure for earning dividend income and made addition
of Rs. 17,36,661/-. On the appeal to CIT(A) by the assessee, the order
of the AO was confirmed. Aggrieved by which, the assessee is in appeal
before the Tribunal.
Held:
Before invoking provisions contained under Rule 8D(2)(iii), the AO
has not recorded his dis-satisfaction of the correctness of the claim of
expenditure made by the assessee nor AO came to the Conclusions that,
“the claim of the assessee that no expenditure has been incurred” is
incorrect. Assessee has come up with categorical plea that no exempt
income has been earned during the year under assessment nor the assessee
has incurred any expenses for managing the investments. From the books
of account, AO has not identified any expenditure incurred by the
assessee for earning any dividend income but proceeded to invoke the
provisions contained under Rule 8D(2)(iii) merely on the basis of
guesswork that too without recording his dis-satisfaction as to how the
claim of the assessee that no expenditure has been incurred. Hon’ble
jurisdictional High Court in judgment cited as Cheminvest Ltd. while
examining the identical issue held that section 14A will not apply where
there is no exempt income received or receivable during the year under
assessment. Consequently, appeal stands allowed.
(Please click here for judgment)
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