The Commissioner of Income Tax (Appeals) erred in reclassifying the rental income as business income and unilaterally disallowing income tax deduction without any justification, according to the Delhi Bench of the Income Tax Appellate Tribunal.
Hence restore the case to the file of the Assessing Officer for redetermination of taxable income under the proper head.
Swar Maya Infotech Pvt. Ltd., the taxpayer firm, engages in the provision of business support services and facilities management services. The assessee company has also gotten rental money from renting out commercial premises. The assessee listed rental revenue under the heading “income from house property,” whereas facility management income was listed under the heading “business income” and was subject to legal expenditures and deductions.
The taxpayer has established the income via house property at Rs.71,40,062/- in which the loss of business would be Rs.41,19,061/- was claimed for the AY 2015-16 in question. The Assessing Officer explaining the assessment under Section 143(3) of the Income Tax Act,1961 inter alia disallowed the business loss at Rs.41,19,061/-.
The taxpayer dissatisfied filed a petition to CIT(A) that reached that the rental income shown under the head income via the house property would indeed get assessed under the head business income and therefore reestablish the whole income as the business income and refused the whole deduction claimed under Section 24(a) including the interest concerned with the prior period claimed under Section 24(b) of the Income Tax Act.
The assessee, who was further resentful, appealed to the Tribunal. The Authorised Representative (AR) of the Assessee argued that the CIT(A) was at fault for recharacterizing the income as well as for arbitrarily rejecting several expenses that were claimed in accordance with the Profit & Loss Account without providing any justification for the decision.
Additionally, the AR alleged that the assessee had previously claimed facility management services revenue under the heading “business or professional income” while submitting rental income under the heading “income from house property.”
On the order of the CIT (A), the Departmental Representative (DR) for the Revenue would have been laid.
The bench, which was made up of Chandra Mohan Garg, Judicial Member, and Pradip Kumar Kedia, Accountant Member sees that the taxpayers claim that income offered in the past under similar circumstances had been divided between income from house property and “business income,” and that the taxable income had been calculated after taking advantage of legal deductions and business-related expenses had been incurred in accordance with the law.
As a result, the Tribunal overturned the CIT(A)’s decision and returned the case to the Assessing Officer’s file for a new determination of taxable income under the proper head and after allowing the legal deductions and claims for expenses under the various heads of income.
Therefore for the statistical objective, the taxpayer’s appeal is been permitted.
| Case Title | Swar Maya Infotech P. Ltd. Vs ITO |
| Citation | I.T.A. No.2480/DEL/2018 |
| Date | 25.07.2023 |
| For Assessee | Shri Ved Jain, Adv. Ms. Supriya Mehta, CA |
| For Revenue | Shri Vivek Kumar Upadhyay, Sr.DR |
| Delhi ITAT | Read Order |
