M/s Ongole Educational Academy Pvt. Ltd., Hyderabad V. DCIT, Hyderabad

CO 8/HYD/2009

• Counselvise Citation: [2010] 122 COUNSELVISE.COM (IT) 5525 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 8 month(s) 6 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 30-12-2010
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2005-2006
• Appeal Filed On: 24-04-2009
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: RAGHAVENDRA RAO
• Assessee Lawyers: K V N CHARYA
• Keywords: Business income; Depreciation; Business expenditure; Question of law; Unabsorbed depreciation; Capital expenditure
• Section: 143(3); 56(2); 234B; 32; 37; 56

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A , HYDERABAD BEFORE SHRI G.C. GUPTA, VICE PRESIDENT AND SHRI CHANDRA POOJARI ACCOUNTANT MEMBER ITA NO.288/H/2009 ASSESSMENT YEAR 2005-06 THE DCIT, CIRCLE 16(3), HYDERABAD VS M/S ONGOLE EDUCATION ACADEMY (P) LTD., HYDERABAD. (PAN AAACO 2388 Q) (APPELLANT) (RESPONDENT) CO.8/HYD/2009 ARISING OUT OF ITA NO.288/H/2009 ASSESSMENT YEAR 2005-06 M/S ONGOLE EDUCATION ACADEMY (P) LTD., HYDERABAD. (PAN AAACO 2388 Q) VS THE DCIT, CIRCLE 16(3), HYDERABAD (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI K.V.N. CHARYA, DR RESPONDENT BY: SHRI RAGHAVENDRA RAO O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER: THE APPEAL IN ITA NO.288/H/2009 PREFERRED BY THE REVENUE AND THE CROSS OBJECTION IN CO.NO.8/HYD/2009 BY THE ASSESSEE ARE DIRECTED AGAINST THE ORDER PASSED BY THE CIT(A)-V, HYDERABAD DATED 15.2.2008 AND PERTAINS TO THE ASSESSMENT YEAR 2005- 06. 2. THE REVENUE RAISED THE FOLLOWING GROUNDS IN I TS APPEAL: 1. THE CIT(A) ERRED IN HOLDING THAT THE INCOME DER IVED FROM LEASING OUT OF THE BUILDING ALONG WITH THE FURNITURE AND OT HER ASSETS IS BUSINESS INCOME. 2. THE CIT(A) OUGHT TO HAVE APPRECIATED THAT LETTI NG OUT OF BUILDING ALONG WITH THE FURNITURE AND OTHER ASSETS ARE INSEP ARABLE AND HENCE, INCOME DERIVED FROM SUCH LEASE IS TAXABLE U/S 56(2) (III) OF THE IT ACT. ITA NO.288/H/2009 & CO.8/H/09 ONGOLE EDUCATIONAL ACADEMY (P) LTD., HYDERABAD 2 2 RELIANCE IS PLACED ON THE DECISION OF APEX COURT IN THE CASE OF SULTAN BROTHERS VS. CIT REPORTED IN 51 ITR 353 AND THE DEC ISION OF HONBLE AP HIGH COURT IN THE CASE OF KHALID MEHDI IN 57 CTR 110. 3. THE ASSESSEE RAISED THE FOLLOWING GROUNDS IN ITS CROSS OBJECTION: 1. THE CIT(A) OUGHT TO HAVE BEEN HELD THAT EVEN IF THE INCOME IS ASSESSABLE UNDER OTHER SOURCES, THE EXPENSES CLAIME D IN THE P&L ACCOUNT ARE ALLOWABLE U/S 57(III) OF THE IT ACT. 2. THE CIT(A) OUGHT TO HAVE ALSO HELD THAT THE CUR RENT DEPRECIATION, THE UNABSORBED DEPRECIATION AND THE EXPENSES ON REP AIRS AND MAINTENANCE ARE ALLOWABLE U/S 57(III) R.W.S. 30(A)( II), 30(C ) & 31 OF THE IT ACT. 4. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A PRIVATE LIMITED COMPANY. FOR THE ASSESSMENT 2005-06, IT HAS FILED RETURN OF INCOME ON 31.10.2005, SHOWING LOSS OF 26,21,314/- . AFTER PR OCESSING THE RETURN U/S 143(1) OF THE ACT, THE SAME WAS SELECTED FOR SCRUTI NY ASSESSMENT. DURING SCRUTINY, FROM THE PROFIT AND LOSS ACCOUNT FIELD WI TH THE RETURN, THE ASSESSING OFFICER NOTICED THAT DURING THE PREVIOUS YEAR THE ASSESSEE HAS DERIVED LEASE INCOME FROM RENTING OF BUILDING AND O THER INCOME OF RS.41,460/- ACCORDING TO ASSESSING OFFICER, THE AS SESSEE HAS NO BUSINESS INCOME AND ONLY INCOME FROM LEASE RENTALS. THEREFO RE, DURING THE ASSESSMENT PROCEEDINGS, VIDE LETTER DATED 3.9.2007, HE HAS ASKED THE ASSESSEE TO EXPLAIN AS TO WHY THE CLAIM OF LOSS FRO M BUSINESS SHOULD NOT BE DISALLOWED. THE ASSESSEE VIDE ITS LETTER DATED 14.9.2007, HAS SUBMITTED THAT ONGOLE EDUCATIONAL ACADEMY (P) LTD. STARTED ED UCATIONAL INSTITUTION BUSINESS IN THE YEAR 1991. THE COMPANY CARRIED OU T AND CONTINUED THE SAME BUSINESS TILL 31.3.2003. HOWEVER, IN VIEW OF THE CONTINUOUS LOSSES INCURRED BY THE COMPANY, ITS MANAGEMENT THOUGHT, IT IS NO MORE VIABLE TO RUN THE BUSINESS AND DECIDED TO LEASE OUT THE BUSIN ESS W.E.F. 1.4.2003. IT WAS STATED THAT FROM THE ASSESSMENT YEAR 2004-05, T HE COMPANY IS EARNING LEASE INCOME ONLY. FURNISHING THE LIST OF PROPERTIES WHICH ITA NO.288/H/2009 & CO.8/H/09 ONGOLE EDUCATIONAL ACADEMY (P) LTD., HYDERABAD 3 3 INCLUDES LAND, BUILDINGS, GENERATOR, FURNITURE AND FIXTURES, AND LAB EQUIPMENT ETC, WHICH ARE LEASED OUT BY THE COMPANY, THE ASSESSEE FURTHER STATED THAT THE INCOME SHOWN IN THE RETURN IS ONLY BUSINESS INCOME AND THEREFORE THE CARRY FORWARD LOSS WAS SET OFF AS PRO VIDED IN SECTION 72 OF THE ACT. IT WAS FURTHER SUBMITTED THAT THE PROFIT AND LOSS ACCOUNT DOES NOT SHOW ANY INCOME FROM OTHER SOURCES. IT WAS CONTENT ED TAT THE LEASE INCOME IS ASSESSABLE UNDER THE HEAD BUSINESS INCOM E ONLY AS A SPELL OF LEASING OUT OF THE ASSETS OF THE BUSINESS DOES NOT RENDER THE LEASE INCOME AS INCOME OTHER THAN FROM BUSINESS. IT WAS FURTHER STATED THAT THE BOARD OF DIRECTOR OF THE COMPANY PASSED A RESOLUTION THAT THE TIME OF LEASING OUT OF THE ASSETS OF THE BUSINESS THAT IT WOULD BE ONLY FOR A LIMITED PERIOD AND BUSINESS WOULD BE RESUMED AT APPROPRIATE TIME. THE ASSESSEE FURNISHED A COPY OF THE SAID RESOLUTION OF BOARD OF DIRECTORS. HOWEVER, THE ASSESSING OFFICER HAS NOT ACCEPTED SUCH SUBMISSIONS OF THE AS SESSEE. STATING THAT THE ASSESSEE HAS NO BUSINESS INCOME AND ONLY INCOME FROM LEASE RENTALS AND OBSERVING THAT THE COMPANYS MANAGEMENT THOUGHT THAT IT IS NO MORE VIABLE TO RUN THE BUSINESS, HE HELD THAT THE LEASE RENTALS ARE TO BE ASSESSED UNDER THE HEAD INCOME FROM OTHER SOURCES ONLY. FURTHER OBSERVING THAT THE ASSESSEE HAS NOT PROVED THAT ANY EXPENDITURE WAS INCURRED WHOLLY AND EXCLUSIVELY TO EARN THE LEASE I NCOME, HE TAXED THE ENTIRE LEASE RENTAL AMOUNT OF RS.30 LAKHS TREATING THE SAME AS INCOME FROM OTHER SOURCES. 5. THE ASSESSING OFFICER FURTHER NOTED THAT THE ASSESSEE HAD GIVEN ADVANCES OF RS.10,50,000, RS.8,52,000 AND RS.12,00, 000 TO THREE PERSONS VIZ., C. RAMANJANEYULU, N. RAMA KRISHNA, AND N. RAV I, RESPECTIVELY, DURING THE PRECEDING PREVIOUS YEAR I.E. 2003-04 AND THE SAME HAVE BEEN SQUARED UP DURING THE CURRENT. CLARIFYING ON SUCH ADVANCES, AS NOTED BY THE ASSESSING OFFICER THE ASSESSEE HAS SUBMITTED TH AT THE SAID AMOUNTS WERE GIVEN TO THOSE PERSONS FOR WORKS CONTRACT. HO WEVER, IN ABSENCE OF ITA NO.288/H/2009 & CO.8/H/09 ONGOLE EDUCATIONAL ACADEMY (P) LTD., HYDERABAD 4 4 ANY TDS MADE ON SUCH AMOUNTS GIVEN, AND IN ABSENCE OF ANY AGREEMENT MADE BY THE ASSESSEE WITH REGARD TO SUCH PAYMENTS, THE ASSESSING OFFICER HELD THAT THE SAID ADVANCES HAVE NOT BEEN GIVEN FOR ANY BUSINESS PURPOSE OF THE ASSESSEE COMPANY. UNDER THE CIRCUMSTANCES, AND SINCE THE ASSESSEE WAS PAYING INTEREST ON TERM LOANS TAKEN BY IT FROM COMMERCIAL BANKS, THE ASSESSING OFFICER DISALLOWED A SUM OF RS .3,10,200/- CALCULATED @ 10.5% ON SUCH AMOUNTS, TOWARDS PROPORTIONATE INTE REST ON THE SAID ADVANCES GIVEN, AND THUS ADDED BACK THE SAID AMOUNT TO THE INCOME OF THE ASSESSEE UNDER THE HEAD BUSINESS INCOME AND COMPL ETED THE ASSESSMENT ACCORDINGLY VIDE ORDER DATED 31.10.2007 PASSED U/S 143(3) OF THE ACT. 6. ON APPEAL, THE CIT(A) OBSERVED THAT THE LEASE OF BUILDING ALONG WITH ASSETS ARE ONLY FOR A PERIOD OF SIX YEARS AND IT IS THE CONTENTION OF THE BOARD OF DIRECTORS OF THE COMPANY TO RESUME THE BUS INESS AFTER THE LOSS ARE ABSORBED AS EVIDENCE FROM THE LEASE AS WELL AS MINUTES OF THE MEETING OF THE BOARD OF DIRECTORS, SINCE THE ASSETS HAVE BE EN LET OUT WITH THE INDICATION TO COME BACK AND RESTART THE BUSINESS. RUNNING OF EDUCATIONAL INSTITUTION, HE HELD THAT THE LEASE RENT RECEIVED I N THE CASE IS ASSESSABLE UNDER THE HEAD BUSINESS INCOME. FURTHER, REGARDI NG THE DISALLOWANCE OF EXPENDITURE ON THE REASON THAT THE ASSESSEE HAS NOT PROVED THAT THE SAME HAVE BEEN INCURRED WHOLLY AND EXCLUSIVELY ON THE LE ASE INCOME, THE CIT(A) OBSERVED THESE EXPENSES ARE SUPPORTED BY VOUCHERS AND ALLOWED THE CLAIM OF THE ASSESSEE. HOWEVER, REGARDING THE CLAIM OF F INANCIAL CHARGES, HE HAS GIVEN A DIRECTION TO DISALLOW THE PROPORTIONATE INT EREST ON THE LOAN NOT USED FOR THE PURPOSE OF BUSINESS. THE CIT(A) NOT A DJUDICATED CERTAIN GROUNDS WITH REGARD TO THE ALLOWABILITY OF CURRENT YEAR DEPRECIATION, UNABSORBED DEPRECIATION AND THE EXPENDITURE OF REPA IRS AND MAINTENANCE. AGAINST THIS THE ASSESSEE IS IN APPEAL BEFORE US. ITA NO.288/H/2009 & CO.8/H/09 ONGOLE EDUCATIONAL ACADEMY (P) LTD., HYDERABAD 5 5 7. THE DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT THE ASSESSEE IS NOT EXPLOITING ITS COMMERCIAL ASSETS. THE ASSES SEE IS SIMPLY LEASED OUT ITS SCHOOL BUILDING TO OTHER EDUCATIONAL INSTITUTIO N NAMELY M/S.CHAITANYA EDUCATIONAL ACADEMY ALONG WITH THE BUILDING AND OTH ER FURNITURE AND CONSOLIDATED PAYMENT WAS RECEIVED FROM M/S CHAITANY A EDUCATIONAL ACADEMY. ACCORDING TO HIM, THE PAYMENTS RECEIVED F ROM M/S CHAITANYA EDUCATIONAL ACADEMY TO BE ASSESSED U/S 56 AS INCOME FROM OTHER SOURCES. HE SUBMITTED THAT CHAITANYA BHARATHI IS A BIG EDUCA TIONAL INSTITUTION, ONCE THE ASSESSEE INSTITUTION HAS GONE INTO THEIR H ANDS; NEITHER THE ASSETS NOR THE STUDENTS WILL COME BACK TO ASSESSEES FOLD. ACCORDING TO LEARNED DEPARTMENTAL REPRESENTATIVE, THE ENTIRE ASSETS HAVE BEEN GIVEN ON LEASE. THEREAFTER, NO SERVICE HAS BEEN RENDERED BY THE ASS ESSEE AND ACCORDING TO HIM, IT IS NOT CORRECT TO SAY THAT THE ASSESSEE WAS EXPLOITING COMMERCIAL ASSETS. HE SUBMITTED THAT THE ASSESSEE IS DOING N OTHING EXCEPT LEASING OUT THE BUILDING AND RECEIVING RENTAL INCOME. SI NCE THE ASSESSEE HAS LEASED OUT THE BUILDING ALONG WITH THE ASSETS, THE INCOME CANNOT BE ASSESSED UNDER THE HEAD INCOME FROM BUSINESS, IT IS TO BE ASSESSED AS INCOME FROM OTHER SOURCES. HE SUBMITTED THAT THE A SSESSEE HAS NOT DOING ANY INCIDENTAL SERVICES TO TENANT AND ONLY RENT WAS RECEIVED AND HENCE, IT CANNOT BE SAID THAT THE ASSESSEE IS CARRYING OUT ON THE BUSINESS ACTIVITY. HE PLACED RELIANCE ON THE JUDGEMENT OF HONBLE SUPR EME COURT IN THE CASE OF CIT VS. SWADESHI KARYALAY (237 ITR 544) P&H HC) AND SUBMITTED THAT THE INTENTION OF THE ASSESSEE IS TO EARN INCOME AND IT IS NOT THE INTENTION OF CARRYING OUT ANY BUSINESS. HE DREW OUR ATTENTION T O THE VARIOUS CONDITIONS LAID DOWN BY THE SUPREME COURT IN THE CA SE OF UNIVERSAL PLAST LTD. VS. CIT (237 ITR 454 ) (SC) AND HE SUBMITTED THAT THE JUDGEMENT TO BE SEEN IN THE LIGHT OF THE FACTS OF THE CASE. ON THE OTHER HAND, THE LEARNED AR SUBMITTED THAT TH E ASSESSEE IN THIS CASE LEASED ITS ASSETS TO M/S CHAITANYA EDUCATIONAL ACADEMY, BECAUSE OF LULL IN THE BUSINESS, THE ASSESSEE HAS TEMPORARILY LEASED OUT ITS BUILDING ITA NO.288/H/2009 & CO.8/H/09 ONGOLE EDUCATIONAL ACADEMY (P) LTD., HYDERABAD 6 6 AND THE AGREEMENT IS ONLY FOR SIX YEARS AND THE ASS ESSEE IS HAVING INTENTION TO RESUME RUNNING OF SCHOOLS AFTER SIX Y EARS. HE DREW OUR ATTENTION TO THE CONDITIONS OF THE LEASE AGREEMENT AND HE ALSO RELIED ON THE ORDER OF THIS TRIBUNAL DATED 10.3.1998 IN THE CASE OF SILEMAN KHAN MAHABOOB KHAN, GUNTUR VS. ACIT IN ITA NO.1204 & 120 5/H/1993 WHICH IS PLACED ON RECORD AT PAGES 32-38 OF THE PAPER BOO K. HE ALSO RELIED ON THE JUDGEMENT IN THE CASE OF CIT VS. ALOK PAPER IND USTRIES (138 ITR 728) (MP HC). 8. HE SUBMITTED THAT THE LOSS OF RS.26,21,314/- I NCLUDES THE UNABSORBED DEPRECIATION OF THE YEAR OF RS.15,93,412 /-. THE BUSINESS LOSS EXCLUDING THE DEPRECIATION IS AT RS.6,89,766/-. TH E ASSESSEE HAD CARRIED FORWARD UNABSORBED DEPRECIATION FROM THE EARLIER YE ARS. THE ASSESSING OFFICER ASSESSED THE INCOME AT RS.33,10,200/- AS AG AINST THE LOSS DECLARED OF RS.26,21,314/- THE ASSESSED INCOME COMPRISES TH E GROSS LEASE RECEIPTS OF RS.30 LAKHS ADMITTED UNDER THE HEAD BUSINESS BUT ASSESSED UNDER THE HEAD INCOME FROM OTHER SOURCES AND THE DISALLOWED BUSINESS EXPENDITURE OF RS.3,10,200/- ASSESSED UNDER THE HEAD BUSINESS . THE ASSESSING OFFICER HAS NOT ALLOWED ANY EXPENDITURE WHATEVER EITHER UND ER THE HEAD BUSINESS HEAD AS CLAIMED OR UNDER THE HEAD INCOME FROM OTHE R SOURCES. THE ASSESSING OFFICER HAS NOT STATED ANY REASON FOR DEN YING THE EXPENDITURE CLAIMED VIDE P&L ACCOUNT. 9. HE FURTHER SUBMITTED THAT THE INCOME WHICH INC LUDED LEASE INCOME FROM BUILDING, ELECTRICAL INSTALLATIONS, FUR NITURE AND FIXTURES, COMPUTER ETC. WAS NOT ASSESSABLE UNDER THE HEAD BUS INESS AS CLAIMED BUT WAS ASSESSABLE UNDER THE HEAD BUSINESS AS CLAIMED B UT WAS ASSESSABLE UNDER TWO HEADS NAMELY INCOME FROM OTHER SOURCES AND BUSINESS OR PROFESSION. HE THEREFORE BROUGHT THE GROSS RECEIP TS FROM LEASE OF THE BUILDINGS, GENERATORS, FURNITURE AND FIXTURES, LAB EQUIPMENT AND COMPUTERS UNDER THE HEAD INCOME FROM OTHER SOURCES. AS STATED ABOVE ITA NO.288/H/2009 & CO.8/H/09 ONGOLE EDUCATIONAL ACADEMY (P) LTD., HYDERABAD 7 7 THE BUSINESS INCOME IS THE DISALLOWED EXPENDITURE T O THE EXTENT OF RS.3,10,200/-. 10. IT IS SUBMITTED BY LEARNED AR THAT THE ASSE SSEE RAN AN EDUCATIONAL INSTITUTION FOR NEARLY 10 YEARS. AS TH E ASSESSEE HAS BEEN RUNNING INTO LOSSES, THE COMPANY DECIDED TO LEASE A LL THE ASSETS TO ANOTHER EDUCATIONAL INSTITUTION FOR A TEMPORARY PERIOD ONLY . IN THIS MANNER THE BUSINESS ASSETS OF THE ASSESSEE WERE PUT TO COMMERC IAL USE. THEREFORE INCOME IS RIGHTLY ASSESSABLE UNDER THE HEAD BUSINES S. THE ASSESSEE ADMITTED THE INCOME OF 2.50 LAKHS PER MONTH UNDER T HE HEAD BUSINESS. THE ASSESSING OFFICER BROUGHT THE SAME TO TAX UNDER THE HEAD OTHER SOURCES. THE ASSESSING OFFICER HELD THAT THE LETTI NG OUT OF THE BUILDING AND THE LETTING OUT OF THE PLANT NAMELY THE FURNITURE, FIXTURES ETC. ARE INSEPARABLE AND THEREFORE THE CORRECT HEAD OF INCOM E IS OTHER SOURCES. THE CONTENTION OF THE ASSESSEE IS THAT THE LEASE WAS ON LY FOR A LIMITED PERIOD AND THE INTENTION TO RESUME THE BUSINESS IS STILL T HERE. THE INTENTION TO LEASE THE BUILDING WITH THE PLANT IS ONLY TO REALIZ E INCOME DURING THE STOP GAP PERIOD TO BUSINESS ACTIVITY AND THERE WAS NO IN TENTION TO STOP THE BUSINESS. THE MINUTES OF THE BOARD OF DIRECTORS WA S PRESENTED TO THE ASSESSING OFFICER TO WHICH HE DID NOT GIVE ANY CONS IDERATION. 11. ACCORDING TO LEARNED AR THE INTENTION OF THE ASSESSEE TO GRANT LEASE ONLY FOR A LIMITED PERIOD AND ALSO THE MINUTES OF T HE BOARD OF DIRECTIONS TO LEASE THE PROPERTY FOR A LIMITED PERIOD CLEARLY POI NT OUT TO THE INTENTION OF THE COMPANY TO RESUME THE BUSINESS AT THE APPROPRIA TE TIME. THE LEASE PERIOD OF 6 YEARS CANNOT BE CONSIDERED TO MILITATE AGAINST THE PROFESSED INTENTION OF THE COMPANY TO DISCONTINUE THE BUSINES S ONLY FOR A LIMITED PERIOD. HE SUBMITTED THAT ONE IMPORTANT CLAUSE IN THE LEASE DEED PROVIDES THAT THE LESSEE SHALL NOT CARRY ON ANY OTHER ACTIVI TY OTHER THAN RUNNING OF EDUCATIONAL INSTITUTION IN THE PREMISES. THIS CLEA RLY POINTS TO THE ASSESSEES DESIRE TO CONTINUE THE USAGE OF PREMISES AS AN EDUCATION ITA NO.288/H/2009 & CO.8/H/09 ONGOLE EDUCATIONAL ACADEMY (P) LTD., HYDERABAD 8 8 INSTITUTION WHICH IS ITS MAIN OBJECT AND NOT SIMPLY TREAT IT AS AN ASSET TO DERIVE MERELY LEASE INCOME. AS AGAINST THESE FACTO RS, THE ASSESSING OFFICER HAS NOT STATED ANY GROUND TO HOLD THAT THE ASSESSEE S INTENTION WAS OTHERWISE. IN THESE CIRCUMSTANCE, IT IS SUBMITTED THAT THE LEASE INCOME IS ASSESSABLE UNDER THE HEAD BUSINESS ONLY. 12. THE LEARNED AR RELIED ON THE FOLLOWING JUDG EMENTS: (1) CIT VS. SRI VENKATESWARE TALKIES (155 ITR 753) (2) CIT VS. AP SMALL SCALE DEVELOPMENT CORPORATION (175 ITR 352) (3) CIT VS. AP INDUSTRIES INFRASTRUCTURE CORPORATI ON LTD. (175 ITR 361). 13. FURTHER, HE SUBMITTED THAT THE INVOCATION OF SECTION 56 OF THE ACT FOR THE ASSESSING LEASE INCOME IS MISPLACED. U /S 56(III) THE INCOME HAS TO BE BROUGHT UNDER THE HEAD OTHER SOURCES ONLY IF IT IS NOT CHARGEABLE TO THE INCOME TAX UNDER THE HEAD PROFIT AND GAINS OF A BUSINESS OR PROFESSION. IT IS SUBMITTED THE ASSESSING OFFICER AS NOT GIVEN ANY REASONS AS TO WHY THE INCOME IS NOT CHARGEABLE TO INCOME TA X UNDER THE HEAD PROFIT AND GAINS OF THE BUSINESS OR PROFESSION. IT IS ONLY AFTER THE BUSINESS HEAD IS RULED OUT, THE PROVISIONS OF SECTION 56 CAN BE I NVOKED. FOR THESE REASONS THE ASSESSING OFFICER IS NOT CORRECT IN APP LYING THE PROVISIONS OF SECTION 56 OF THE IT ACT WITHOUT PROPERTY APPRECIAT ING THE IMPORT OF THE PROVISIONS OF SEC.56(III) OF THE ACT. BY DENYING T HE CLAIM OF INCOME UNDER THE HEAD BUSINESS THE ASSESSING OFFICER DISENTITLED THE ASSESSEE TO CARRY FORWARD OF BUSINESS LOSS OF RS.6,89,766/-. 14. HE SUBMITTED THAT HAVING ASSESSED THE INCOME OF RS.30 LAKHS U/S 56, THE ASSESSING OFFICER HAS IGNORED THE PROVI SIONS OF SECTION 57 WHICH PROVIDES FOR THE DEDUCTIONS ALLOWABLE AGAINST THE INCOME FROM OTHER SOURCES ASSESSABLE U/S 56 OF THE ACT. IN PARTICULA R SECTION 56 (II) PROVIDES FOR DEDUCTIONS U/S 30(A)(II), 30(C ), SEC.31 AND SU B SECTIONS (1) & (2) OF ITA NO.288/H/2009 & CO.8/H/09 ONGOLE EDUCATIONAL ACADEMY (P) LTD., HYDERABAD 9 9 SECTION 32. U/S 57(III) ANY OTHER EXPENDITURE NOT BEING IN THE NATURE OF CAPITAL EXPENDITURE LAID OUT OR EXPENDED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF MAKING OR EARNING SUCH INCOME IS ALSO DE DUCTIBLE. THIS IS ANALOGOUS TO THE PROVISIONS OF SECTION 37 OF THE IT ACT. IT CAN BE SEEN FROM THE P&L ACCOUNT THAT THE ASSESSEE HAS INCURRED EXPE NDITURE ON REPAIRS ALLOWABLE U/S 30(A) (II) EXPENDITURE ON MAINTENANCE COVERED BY 57(III) OF THE ACT. THUS THE EXPENDITURE SHOWN TOWARDS REPAIR S AND MAINTENANCE IN P&L ACCOUNT IS ALLOWABLE BUT NOT ALLOWED BY THE ASS ESSING OFFICER. 15. ACCORDING TO HIM, U/S 31 OF THE IT EXPENDITU RE ON INSURANCE AND THE AMOUNT PAID ON ACCOUNT OF CURRENT REPAIRS T O MACHINERY PLANT AND FURNITURE IS ALLOWABLE. THESE ITEMS ARE ALSO A PAR T OF THE P&L ACCOUNT. 16. HE SUBMITTED THAT THE DEPRECIATION IS ALLOWA BLE AS U/S 32(1) OF THE IT ACT WHICH THE ASSESSING OFFICER HAS FAILED T O ALLOW. DEPRECIATION ALLOWABLE U/S 32(1) IS RS.15,93,412/-. LIKEWISE TH E CARRIED FORWARD UNABSORBED DEPRECIATION OF EARLIER YEARS U/S 32(2) IS ALSO ALLOWABLE BUT HAS NOT BEEN ALLOWED BY THE ASSESSING OFFICER. THE CARRIED FORWARD UNABSORBED DEPRECIATION U/S 32(2) YEAR WISE IS RS.1 7,52,375 FOR 2004-05, RS.19,68,823/- FOR 2003-04. THE CALCUTTA HC HELD I N THE CASE OF CIT VS. PREMCHAND JUTE MILLS LTD (164 ITR 288) THAT THE UN ABSORBED DEPRECIATION UNDER BUSINESS HEAD OF EARLIER YEARS SHOULD BE SET OFF AGAINST INCOME FROM OTHER SOURCES OF THE FOLLOWING YEARS. 17. HE SUBMITTED THAT THE ASSESSING OFFICER OMITT ED TO ALLOW ANY OF THE ITEMS OF THE EXPENDITURE AS PROVIDED IN SECTION 57 OF THE IT ACT. THE ASSESSING OFFICER HAS NOT ALSO STATED ANY REASONS F OR OMITTING TO ALLOW THE DEDUCTIONS PROVIDED U/S 57 OF THE IT ACT. IT IS TH EREFORE SUBMITTED THAT ALL THESE EXPENSES CLAIMED BE DIRECTED TO BE ALLOWED. ITA NO.288/H/2009 & CO.8/H/09 ONGOLE EDUCATIONAL ACADEMY (P) LTD., HYDERABAD 10 10 18. FURTHER HE SUBMITTED THAT U/S 57(III) ANY OT HER EXPENDITURE INCURRED FOR THE PURPOSE OF MAKING OR EARNING THE I NCOME FROM OTHER SOURCES IS ALLOWABLE. THE INTEREST PAYABLE TO ANDH RA PRADESH STATE FINANCIAL CORPORATION AND THE CANARA BANK AS WELL A S INTEREST TO OTHERS WERE ALL INCURRED ON BORROWALS WHICH WERE MADE FOR THE PURPOSE OF CONSTRUCTING OR ACQUIRING THE ASSETS WHICH ARE THE SOURCE OF THE INCOME ASSESSED UNDER THE HEAD OTHER SOURCES. NO DOUBT, THE ASSESSING OFFICER HAS NOT DISALLOWED THIS EXPENDITURE IN ENTIRETY. H E HAS DISALLOWED ONLY AN AMOUNT OF RS.3,10,200/- AND BROUGHT THE SAME TO TAX UNDER THE HEAD BUSINESS. HOWEVER, THE BALANCE OF EXPENDITURE UN DER THE FINANCE CHARGES VIDE SCHEDULE WAS OMITTED TO BE ALLOWED UN DER EITHER OF THE HEADS. THUS HE OMITTED TO ALLOW THE DEDUCTION WHI CH WAS ALLOWABLE AS HELD BY HIM. THEREFORE THIS EXPENDITURE UNDER FINA NCE CHARGES ALSO MAY BE ALLOWED U/S 36 AND 37 OR 57(III) OF THE ACT. 19. ACCORDING TO HIM, EVEN OTHERWISE ON THE BASI S OF THE FINDING OF ASSESSING OFFICER HIMSELF THE ENTIRE EXPENDITURE DE BITED IN P&L EXCEPT TO THE EXTENT OF DEPRECIATION ADJUSTMENT AND DISALLOWA NCE OF INCOME TAX PAID IS ALLOWABLE UNDER THE HEAD BUSINESS AS THE ASSES SING OFFICER ASSESSED THE DISALLOWED INTEREST UNDER THE HEAD BUSINESS. FUR THER UNABSORBED DEPRECIATION U/S 32(2) AS ABOVE ALSO IS ALLOWABLE. 20. FURTHER HE SUBMITTED THAT THE CHARGING OF IN TEREST U/S 234B IS NOT CORRECT BECAUSE THE ASSESSEE HAS NO CURRENT INC OME AS REQUIRED U/S 207 OF THE IT ACT TO BECOME LIABLE TO PAY ADVANCE T AX. ATTENTION IS INVITED TO ITAT DECISIONS IN SUMITOMO CORPORATION VS. DCIT (110 TTJ 302) (DEL.) SK PATEL FAMILY TRUST VS. ACIT (71 TTJ 121 (AHJ.) & JCIT VS. BOOZ ALLEN & HAMILTON INC. (298 ITR (AT) 87. ITA NO.288/H/2009 & CO.8/H/09 ONGOLE EDUCATIONAL ACADEMY (P) LTD., HYDERABAD 11 11 21. HE SUBMITTED THAT DEPRECIATION IS ALLOWABLE U /S 32(1) IS RS.15,93,412/- LIKEWISE THE CARRIED FORWARD UNABS ORBED DEPRECIATION OF EARLIER YEARS U/S 32 (2) IS ALSO ALLOWABLE, BUT HAS NOT BEEN ALLOWED BY THE ASSESSING OFFICER. THE CARRIED FORWARD UNABSORBED DEPRECIATION U/S 32 (2) IS RS.17,52,375/- FOR 2004-05, RS.19,68,823 FOR 200 3-04. HE SUBMITTED THAT THE CALCUTTA HC HELD IN THE CASE OF CIT VS. PR EMCHAND JUTE MILLS LIMITED (164 ITR 288) THAT THE UNABSORBED DEPRECIAT ION UNDER BUSINESS HEAD OF EARLIER YEARS SHOULD BE SET OFF AGAINST INC OME FROM OTHER SOURCES OF THE FOLLOWING YEARS. 22. WE HAVE HEARD BOTH THE PARTIES AND PERUSED TH E MATERIAL AVAILABLE ON RECORDS. THE MAIN CONTENTION OF TH E ASSESSEES COUNSEL IS THAT THE ASSETS WHICH HAVE BEEN LET OUT WITH AN INT ENTION TO TAKE IT BACK AFTER COMPLETION OF LOAN PERIOD AND THE ASSESSEE WI LL RESTART ITS EDUCATIONAL ACTIVITIES. ON THE CONTRARY, THE LEARNED DRS CONTE NTION IS THAT THE ASSESSEE HAS LET OUT ITS BUILDINGS AND OTHER ASSETS ALONG WITH THE STUDENTS TO A REPUTED INSTITUTION, AS SUCH; THERE IS NO HOPE OF RESTARTING THE EDUCATIONAL ACTIVITIES BY THE ASSESSEE. ACCORDING TO DR, THE INTENTION OF THE ASSESSEE AS GATHERED FROM THE AGREEMENT OF LEAS E AS WELL AS FROM CIRCUMSTANCES IS CLEAR THAT THE PROPERTY WAS LET OU T FOR THE PURPOSE OF EARNING RENTAL INCOME, IT CANNOT BE SAID THAT THE A SSESSEE EXPLOITED A COMMERCIAL ASSET. IN THE ABOVE BACKGROUND, WE HAVE GONE THROUGH THE FACTS OF THE CASE. AS SEEN FROM THE FACTS, THE ASSE SSEE IS NOT DOING ANYTHING EXCEPT LEASING OF ITS ASSETS FOR THE PURPOSE OF REC EIVING RENTAL INCOME. BEING SO, WHEN THE ASSESSEE LEASED OUT THE PROPERTY , THE INCOME DERIVED FROM IT CANNOT BE TREATED AS INCOME FROM BUSINESS. SINCE THE ASSESSEE, AFTER LETTING OUT THE PROPERTY HAS NOT CARRIED ON A NY FURTHER ACTIVITY WHICH COULD BE TERMED AS ADVENTURE IN THE NATURE OF BUSIN ESS, THEN WE CANNOT SAY THAT THE ASSESSEE CARRIED ON THE BUSINESS. EXP LOITATION OF THE PROPERTY BY LEASING THE SAME FOR THE PURPOSE OF THE EARNING RENT CANNOT BE ITA NO.288/H/2009 & CO.8/H/09 ONGOLE EDUCATIONAL ACADEMY (P) LTD., HYDERABAD 12 12 CONSTRUED AS CARRYING ON THE BUSINESS. THE COMMERC IAL ASSET HAS TO BE EXPLOITED BY THE ASSESSEE IN THE COURSE OF ITS BUSI NESS ACTIVITY FOR THE PURPOSE OF CLAIMING THE INCOME AS BUSINESS INCOME. IN THE PRESENT CASE, ADMITTEDLY, THE ASSESSEE HAS NOT CARRIED ON THE ACT IVITY OF RUNNING EDUCATIONAL INSTITUTIONS. THE RUNNING OF EDUCATIO NAL INSTITUTIONS WAS CARRIED ON BY M/S CHAITANYA EDUCATIONAL ACADEMY. T HEREFORE, IT CANNOT BE CORRECT TO SAY THAT THE ASSESSEE WAS EXPLOITING THE COMMERCIAL ASSET IN THE COURSE OF CARRYING OUT EDUCATIONAL ACTIVITIES. WE HAVE CAREFULLY GONE THROUGH THE JUDGEMENT IN THE CASE OF UNIVERSAL PLAS T LTD. (SUPRA) . IN THAT CASE SUPREME COURT LAID DOWN THE FOLLOWING PROPOSIT ION: (1) NO PRECISE TEST CAN BE LAID DOWN TO ASCERTAIN WHETHER INCOME (REFERRED TO BY WHATEVER NOMENCLATURE, LEASE, AMOUNT, RENTS, LICENCE FEE) RECEIVED BY AN ASSESSEE FROM LEASING OR LETTING OUT OF ASSETS W OULD FALL UNDER THE HEAD PROFITS AND GAINS OF BUSINESS OR PROFESSION. (2) IT IS MIXED QUESTION OF LAW AND FACT AND HAS TO BE DETERMINED FROM THE POINT OF VIEW OF A BUSINESSMAN IN THAT BUSINESS ON THE FACTS AND IN THE CIRCUMSTANCES OF EACH CASE, INCLUDING TRUE INTERPRE TATION OF THE AGREEMENT UNDER WHICH THE ASSETS ARE LET OUT (3) WHERE ALL THE ASSETS OF THE BUSINESS ARE LET OU T, THE PERIOD FOR WHICH THE ASSETS ARE LET OUT IS A RELEVANT FACTOR TO FIND OUT WHETHER THE INTENTION OF THE ASSESSEE IS TO GO OUT OF BUSINESS ALTOGETHER OR TO COME BACK AND RESTART THE SAME (4) IF ONLY A FEW OF THE BUSINESS ASSETS ARE LET OU T TEMPORARILY, WHILE THE ASSESSEE IS CARRYING OUT HIS OTHER BUSINESS ACTIVIT IES, THEN IT IS A CASE OF EXPLOITING THE BUSINESS ASSETS OTHERWISE THAN EMPLO YING THEM FOR HIS OWN USE FOR MAKING PROFIT FOR THAT BUSINESS, BUT IF THE BUSINESS NEVER STARTED OR HAS STARTED BUT CEASED WITH NO INTENTION TO BE RESU MED, THE ASSETS ALSO WILL CEASE TO BE BUSINESS ASSETS AND THE TRANSACTION WIL L ONLY BY EXPLOITATION OF PROPERTY BY AN OWNER THEREOF, BUT NOT EXPLOITATION OF BUSINESS ASSETS. 23. IN THE CASE BEFORE THE APEX COURT, IT WAS A F ACT THAT THE LEASING OF THE FACTORY WAS NOT A SEQUEL TO THE ASSESSEES D ECISION TO GO OUT OF THE BUSINESS IN RESPECT OF THE SUBJECT FACTORY AND THAT IT WAS JUST A MAKE SHIFT TRANSIENT ALTERNATIVE MEANS OF COMMERCIAL EXPLOITAT ION OF THE COMMERCIAL ASSETS. FURTHER IT WAS HELD THAT THE ASSESSEE CA NNOT BE SAID THAT IT HAD ITA NO.288/H/2009 & CO.8/H/09 ONGOLE EDUCATIONAL ACADEMY (P) LTD., HYDERABAD 13 13 DISMANTLED ITS BUSINESS NEVER TO RETURN BACK TO IT AND DECIDED THAT THE INCOME RECEIVED BY THE ASSESSEE BY LEASING OUT THE FACTORY WAS BUSINESS INCOME. BUT IN THE PRESENT CASE, THE INTENTION OF THE ASSESSEE CANNOT BE SAID THAT ASSETS ARE OUT WITH AN INTENTION TO RESTA RT THE BUSINESS. THE BUILDING ALONG WITH THE OTHER FURNITURE AND ITS STU DENTS WERE LET OUT TO M/S CHAITANYA EDUCATIONAL ACADEMY FOR A CONSOLIDAT ED PAYMENT. THE INCOME FROM BUILDING AND OTHER ASSETS ARE NOT SEPAR ATELY IDENTIFIABLE. SINCE THE INCOME FROM BUILDING AND OTHER ASSETS INS EPARABLE THE PROVISIONS OF SECTION 57 IS APPLICABLE. THE ASSESS EE HAS TAKEN A STRONG PLEA THAT THE LEASE AGREEMENT AND BOARD RESOLUTION WILL INDICATE THAT THE INTENTION OF THE ASSESSEE IS TO LEASE THE BUSINESS ASSETS FOR A SHORT PERIOD WITH AN INTENTION TO RESUME THE RUNNING OF THE EDUC ATIONAL INSTITUTION AFTER SOME TIME. THESE DOCUMENTS CANNOT BE CONSIDE RED AS CONCLUSIVE EVIDENCE THESE DOCUMENTS CANNOT BE RELIED IN ITS EN TIRETY AS THEY ARE NOTHING BUT SELF SERVING DOCUMENTS. IN OUR OPINIO N, THERE IS NO POSITIVE MATERIAL ON RECORD TO SHOW THAT THE ASSESSEE HAS RE ALLY ANY INTENTION TO RESTART ITS BUSINESS. ON THE CONTRARY, THE STUDENT S OF THE ASSESSEE HAS TAKEN EXAM UNDER NEW MANAGEMENT AND IN THE CIRCUMST ANCES, IT IS IMPOSSIBLE TO PRESUME THAT THE STUDENTS WHO HAVE TA KEN EXAM UNDER THE NAME AND STYLE OF M/S CHAITANYA EDUCATIONAL ACADEMY WILL RETURN BACK TO THE ASSESSEES FOLDER AND WILL TAKE EXAM UNDER THE ASSESSEES MANAGEMENT. ACTUALLY, M/S CHAITANYA EDUCATIONAL ACADEMY IS THE LARGEST EDUCATIONAL INSTITUTION WHICH COVERS MORE THAN 50% OF THE MATRI CULATE AND INTERMEDIATE STUDENTS. IN SUCH CIRCUMSTANCES, WE CA NNOT UPHOLD THE ARGUMENT OF THE ASSESSEES COUNSEL. WHEN THE INTE NTION OF THE ASSESSEE WAS LET OUT ITS BUILDING ALONG WITH OTHER AMENITIES FOR THE PURPOSE OF EARNING RENTAL INCOME AND THE INCOME IS NOT IDENTIF IED AS INCOME FROM PROPERTY AND FROM OTHER ASSETS, SUCH INCOME HAS TO BE ASSESSED AS INCOME FROM OTHER SOURCES. ITA NO.288/H/2009 & CO.8/H/09 ONGOLE EDUCATIONAL ACADEMY (P) LTD., HYDERABAD 14 14 24. REGARDING THE CLAIM OF THE ASSESSEE TOWARDS E XPENDITURE U/S 57(III), THE ASSESSEE HAS TO PROVE TWO THINGS VIZ., (1) THAT THE EXPENSES IN QUESTION WERE INCURRED FOR THE PURPOSE OF EARNING INCOME SOUGHT TO BE TAXED (II) THAT SUCH EXPENDITURE WAS INCURRED WHOL LY AND EXCLUSIVELY FOR THE SAID PURPOSE. IT IS OBVIOUS THAT THE PURPOSE C ONTEMPLATED BY SEC.57(III) IS MORE SPECIFIC IN CHARACTER AS MUCH A S IT POINTS TO A PRECISE AND SPECIFIC OBJECT OF MAKING OR EARNING INCOME. I T, THEREFORE, FOLLOWS THAT SO LONG AS A PARTICULAR ITEM OF EXPENDITURE IS LAID OUT WITH THE SOLE OBJECT OF EARNING OR MAKING INCOME, THE DEDUCTION CONTEMPL ATED BY SECTION 57(III) TO BE ALLOWED. THE INTEREST PAID BY THE ASSESSEE O N LOANS BORROWED BY IT IS THE EXPENDITURE INCURRED BY THE ASSESSEE FOR THE PU RPOSE OF EARNING ITS RENTAL INCOME, IF THE ASSESSEE BORROWED LOANS FOR THE PURPOSE OF ACQUIRING THE LEASED ASSETS AND THEN IT IS ALLOWABLE EXPENDIT URE. THERE SHOULD BE NEXUS BETWEEN THE LOAN AND ACQUISITION OF LEASED AS SETS. IF THE ASSESSEE ABLE TO PROVE THE ABOVE CRITERIA, THEN THE ASSESSEE IS ENTITLED FOR THE ABOVE DEDUCTIONS, AS SUCH THE ASSESSING OFFICER IS REQUIR ED TO EXAMINE THE SAME AND TO DECIDE THE ISSUE AFRESH IN ACCORDANCE WITH LAW. 25. REGARDING ALLOWABILITY OF DEPRECIATION, WE AR E OF THE OPINION THAT THE ASSESSEE FULFILLED THE CONDITIONS AS LAID DOWN IN THE SECTION 56(2)(III) OF THE IT ACT, AS SUCH IT IS ENTITLED FO R DEPRECIATION ON THE LEASED ASSETS. 26. REGARDING ALLOWABILITY OF SET OFF OF UNABSORB ED DEPRECIATION, THE LEARNED AR RELIED ON VARIOUS JUDGEMENTS INCLUDI NG THE JUDGEMENT OF SUPREME COURT IN THE CASE OF CIT VS. VIRAMANI INDUS TRIES (P) LTD. (216 ITR 607) (SC) FOR THE PROPOSITION THAT FOR AVAILING THE BENEFIT OF SEC.32(2), IT IS NOT NECESSARY THAT THE SAME BUSINESS SHOULD BE CARR IED ON IN THE FOLLOWING PREVIOUS YEAR, NOR IT IS NECESSARY THAT THE ASSETS WHICH EARNED THE DEPRECIATION IN THE PRECEDING YEAR SHOULD EXIST AND CONTINUED TO BE USED ITA NO.288/H/2009 & CO.8/H/09 ONGOLE EDUCATIONAL ACADEMY (P) LTD., HYDERABAD 15 15 IN THE FOLLOWING YEAR NOR THAT THE ASSESSEE SHOULD CARRY ON ANY BUSINESS OR PROFESSION IN THE FOLLOWING YEAR, AND UNABSORBED D EPRECIATION TO BE SET OFF OF AGAINST THE INCOME FOR THE ACCOUNTING PERIOD. 27. WE HAVE CAREFULLY GONE THROUGH THE JUDGEMENT IN THE CASE OF VIRAMANI INDUSTRIES (P) LTD. IN THIS CASE, THE AS SESSEE WAS ENGAGED IN THE MANUFACTURE OF SOAP AND OIL DURING THE PREVIOUS YEA R RELEVANT TO THE ASSESSMENT YEAR 1956-57. THE BUSINESS WAS STOPPED IN THAT YEAR WHEREAFTER THE FACTORY WAS LET OUT ON HIRE. TEN YE ARS LATER, I.E., IN THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR 1965- 66, THE ASSESSEE STARTED THE BUSINESS OF MANUFACTURE OF STEEL PIPES. FOR THE PURPOSE OF THIS BUSINESS, A PART OF THE OLD MACHINERY USED IN THE M ANUFACTURE OF SOAP AND OIL WAS UTILIZED. IN THE ASSESSMENT PROCEEDINGS, R ELATING TO THE ASSESSMENT YEAR 1965-66, THE ASSESSEE CLAIMED THAT THE UNABSOR BED TO THE EXTENT OF PERTAINED TO THE OLD MACHINERY UTILIZED IN THE NEW BUSINESS, SHOULD BE BROUGHT FORWARD AND SET OFF AGAINST THE PROFITS OF THE NEW BUSINESS. THIS CLAIM WAS REJECTED BY THE ITO AND BY THE APPELLATE ASST. COMMISSIONER. THE TRIBUNAL UPHELD THE ASSESSEES CLAIM AND THE HI GH COURT AFFIRMED THE DECISION OF THE TRIBUNAL. ON APPEAL TO THE SUPREME COURT DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE. THERE CANNOT BE A NY DISPUTE IN REGARD TO THE OBSERVATIONS OF THE APEX COURT IN VIEW OF THE F ACT THAT THE FACTUAL MATRIX. IN THE PRESENT CASE, THE FACTUAL POSITION WAS CLEAR THAT THERE WAS NO BUSINESS ACTIVITY OF ANY KIND DURING THE YEAR IN QUESTION AND THERE IS ONLY A SPECULATIVE SUBMISSION THAT IT IS A TEMPORAR Y SUSPENSION OF BUSINESS. IN OUR OPINION, THE FACTUAL MATRIX DO ES NOT REQUIRE US TO LOOK AROUND IN ANY DIRECTION EXCEPT THE STATUTORY LANGUA GE OF THE REQUIRED PROVISIONS OF SECTION 72 AND 32(2) OF THE INCOME TA X ACT. HENCE, UNABSORBED DEPRECIATION FROM THE BUSINESS COULD NOT BE SET OFF OF AGAINST THE INCOME ASSESSED UNDER THE HEAD INCOME FROM OT HER SOURCES IN THE CURRENT PREVIOUS YEAR. ITA NO.288/H/2009 & CO.8/H/09 ONGOLE EDUCATIONAL ACADEMY (P) LTD., HYDERABAD 16 16 28 . IN THE RESULT, THE APPEAL OF THE REVENUE IN IT A NO.288/H/2009 IS ALLOWED AND THE CROSS OBJECTION FI LED BY THE ASSESSEE IN ITS CO.8/HYD/2009 IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT 30.12.2010 SD/- SD/- G.C. GUPTA CHANDRA POOJARI VICE PRESIDENT ACCOUNTANT MEMBER DATED THE 30 TH DECEMBER, 2010 COPY FORWARDED TO: 1. M/S ONGOLE EDUCATIONAL ACADEMY (P) LTD., 11-5-76 4 RED HILLS, HYDERABAD 2. THE DCIT, CIRCLE 16(3), HYDERABAD 3. CIT(A)- V, HYDERABAD. 4. CIT, HYDERABAD 5. THE D.R., ITAT, HYDERABAD. NP