|The Tax Publishers2021 TaxPub(DT) 0923 (Mum-Trib)
INCOME TAX ACT, 1961
Section 14 Section 22 & Section 28(i)
Once the assessee's position had been accepted in past so many years as well as succeeding years, there was no reason to disturb the same only in few years, the facts being remaining the same the rental/lease income from building as well as from plant and machinery was, therefore, assessable as 'Business income' only.
Head of income - Income from business or Income from House Property or Income from Other Sources - Lease rental from leasing of manufacturing activity plant and machinery -
Assessee was engaged in manufacturing of fatty acids, etc. During assessment proceedings, upon perusal of financial statements, AO formed an opinion that assessee did not carry out any manufacturing activity during the year but carried out only circular trading transactions with its associated concerns. Since the assessee did not carry out any manufacturing activity during the year, AO opined that no depreciation could be allowed on Plant & Machinery since the same were not used for the business purposes. Rather, the premises was leased out by assessee along with Plant Machinery to M/s. VVF on one side and new building was constructed by M/s. VSS on behalf of the assessee and partly let out by the assessee to M/s. VSS. AO ultimately held that rent received from building was to be assessed under the head 'Income from House Property', whereas rent received on Machinery and other assets was to be taxed as 'Income from Other Sources'. The alternative claim that the depreciation should be allowed under section 57(ii) was also rejected since assessee was not hirer of plant, machinery and furniture, etc. CIT(A) confirmed the addition made by the AO. Held: Various lease agreements of buildings and Plant & Machinery, entered into by assessee, were continuing since past many years and the assessee earned rental/lease income in similar manner since assessment year 1999-2000 and offered the same as 'Business income'. The assessee's stand has always been accepted by the department in most of other years. It could be gathered that rental/lease income so earned by the assessee had been accepted by the revenue as 'Business income' all along since assessment years. When a principle has been accepted by the revenue in earlier years as well as in subsequent years, then the revenue was bound by it unless there is a change in law or change in facts therein, which change had to be pointed out in the assessment order. Therefore, on the facts and circumstances, the action of AO in disturbing the rental/ease income as 'Business income' could not be held to be justified. Once the assessee's position has been accepted in so many past as well as succeeding years, there was no reason to disturb the same only in few years, the facts being remaining the same. Therefore, the rental/lease income from building as well as from plant and machinery was assessable as 'Business Income' only. Consequently, the assessee would be entitled for depreciation on these assets. In such a scenario, the question of determining the notional rental income would not, at all, arise.
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