Case Law Details
Kolkatta High court held Shyam Burlap Company Ltd Vs CIT that as the assesse’s main business is purchasing, developing and letting out of property. The same was mentioned in the object clause of memorandum of the company. It not to be considered that the in the previous years the assesse used to file its ROI under head income from House Property. The assesse had paid compensation to the tenants for releasing that property so that it can earn higher rent. So that expenditure should be treated as a business expenditure.
Moreover even if the assesse used to consistently file its ROI under head income from House property of previous years then also if any expense incurred related with its main business objective as mentioned in the company’s memorandum then the same would be considered under head Business Income.
Facts of the case:
Assessee was in the business of acquiring and developing properties and to deal with the same by way of sale, lease, letting out, etc. The same was given on rent by the assesse to tenants who were giving less rent to the assesse so assesse decided to give them compensation so that it could earn higher rent So assesse paid Rs 53,50,000/- as compensatory amount to the tenants and treated that amount to be business expenditure. But the AO disallowed the same and treated the rental income under head income from property and disallowed the expenditure because under head income from property only deduction u/s 24 was allowed . No other expense was allowed.
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