| The Tax Publishers2020 TaxPub(DT) 4853 (Chd-Trib) INCOME TAX ACT, 1961
Section 14 Section 263
Pr.CIT ignored explanation of assessee that there was lull in business, but business activity was not closed and assessee was having stock-in-trade. Assessee was not finding buyer to sell property kept as stock-in-trade, so it could not be said that assessee closed the business, therefore, expenses incurred for the purposes of business as well as depreciation claimed were allowable to assessee as business expenses, therefore, rental income could not be considered as 'Income from House Property', instead of 'Business income', as declared by assessee.
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Revision under section 263 - Erroneous and prejudicial order - Pr.CIT sought to treat rental income as income from house property, instead of business income - Discontinuance of real estate business due to temporary lull
Pr.CIT treated order passed by AO as erroneous and prejudicial to the interest of revenue on the ground that assessee had earned rental income which had been shown as 'Income from business and profession', rather than showing the same as 'Income from house property' and said income was further set-off against various expenses claimed, viz., directors remuneration, depreciation and other expenses. Assessee submitted that since assessee was dealing in business of real estate development and merely because due to slump in the market, stock-in-trade remained same at the beginning and at the end of the year, it could not be held that the business was discontinued and, therefore, rental income from house property of assessee was rightly assessed by AO as its 'Income from business and profession'. Held: Pr.CIT ignored explanation of assessee that there was lull in business, but business activity was not closed and assessee was having stock-in-trade. Assessee was not finding buyer to sell property kept as stock-in-trade, so it could not be said that assessee closed the business, therefore, expenses incurred for the purposes of business as well as depreciation claimed were allowable to assessee as business expenses. Rental income received by assessee was consistently claimed by assessee in the preceding years as business income and also department had accepted the same. Therefore, assessment order was not prejudicial to the interest of the revenue, particularly when loss would have been more at Rs. 7,70,160 instead of Rs. 3,89,226 if rental income was to be considered as 'Income from House Property', instead of 'business income', as declared by assessee. Therefore, impugned order passed by Pr.CIT under section 263 was quashed.
Relied:CIT v. Max India Ltd. (2007) 295 ITR 282 (SC) : 2007 TaxPub(DT) 1548 (SC), K. Sreedharan & Company v. CIT & Anr. (1999) 202 ITR 796 (Ker-HC) : 1993 TaxPub(DT) 909 (Ker-HC), Shibani S. Bhojwani v. Dy. CIT (2017) 166 ITD 488 (Mum-Trib) : 2017 TaxPub(DT) 4134 (Mum-Trib) and Rayala Corporation (P) Ltd. v. Asstt. CIT (2016) 386 ITR 500 (SC) : 2016 TaxPub(DT) 3682 (SC).
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