The year of taxability of the capital gain in the case of development agreements came to be considered by the Hon’ble Bombay High Court in the case of Chaturbhuj Dwarkadas Kapadia v. CIT [2003] 260 ITR 491. It is pertinent to note that the High Court also noted both clauses (v) and (vi) of sec. 2(47) extracted above in its decision.
It is a well-settled that the undisclosed income under Chapter XIV-B of the Act has to be computed on the basis of search materials. It is also well settled that any income which has already been either recorded in the books of account or otherwise disclosed to the Department prior to the date of search cannot be treated as undisclosed income of an assessee.
On a careful perusal of the various decisions, it becomes clear that the facts prevailing in each case and the intention of the parties have to be considered in order to decide the question whether the lease/rental income is to be treated as house property income or business income. The nomenclature given to the said income is irrelevant.
On the contrary, the ld. representative for the assessee submitted that the definition of “manufacture” was introduced by Finance Act, 2009. The assessment years under consideration are 2006-07 and 2007-08, therefore, the definition introduced by Finance Act, 2009 is not applicable to the facts of the case. For the earlier assessment year, this Tribunal had an occasion to consider the very claim of the assessee and this Tribunal found that the activity of the assessee is manufacture and entitled for deduction u/s 80IB of the Act.
In the instant case, the assessee is a resident assessee. It is not borne out of record as to whether the ‘UK company’ is a resident assessee or non-resident assessee. Though the assessee claims that it is acting only as an agent of the ‘UK company’, yet the said claim has not been verified and accepted by the Assessing Officer. Even, if the assessee is considered as an agent of the UK company, in view of section 5, the said UK Company is also liable to pay tax on its Indian income and if it claims that it is not liable to pay tax as per the DTAA entered by the Central Government with the Government of UK, then it is the
While the gift is given by a person to another person who is personally related to him, the remission of trading liability takes place in business relationships. Normally, the remission of trading liability takes place only due to adverse business situation faced by a business concern.
In the instant case, the assessee did not account the interest income as there was uncertainty about its recovery. The apprehension or the situation foreseen by the assessee has been vindicated by the subsequent developments, which were well highlighted in the written submissions furnished before us. Hence we are of the view that the decision taken by the assessee for not accounting the accrued interest on the reason that there was uncertainty about its recovery cannot be found fault with. It may also be noted that the assessee itself has become defunct.
In this appeal, the only issue urged by the assessee is whether the AO was justified in netting the provision made for bad and doubtful debts, i.e. netting of new provision made during the year under consideration and the provision of earlier years written back during the year. As stated earlier, it will only be an academic exercise to address this issue.
M/s. Kenton Leisure Services, P. Ltd. Vs. DCIT (ITAT Cochin) – It was held that lease rental income arising from agreements for letting on lease hostel premises along with provision and maintenance of various facilities and amenities would be taxable under the head ‘Income from Business’ as against ‘Income from House Property’.The characterisation of lease rental income as ‘Income from Business’ comes as a relief to taxpayers who lease out property along with provision of facilities / amenities. However, this issue is fact specific and it would be important for taxpayers to bear the above principles in mind while determining the taxability of such revenue streams.
It is the purpose or the proximity to the purpose, which would determine the character of the asset and, thus, that of the income arising there-from and, consequently, its assessability under the Act, going on to hold that where the amount was deposited in the bank to obtain a letter of credit for purchase of a capital asset (machinery), the interest thereon would only be a capital receipt, which shall go to reduce the cost of the relevant capital asset. The said decisions, in our view, full govern the present case, and the Revenue has misapplied the decisions by the hon’ble jurisdictional high court.
