REAL USHA SWEETS & SNACK INCORPORATION, MUMBAI V. ITO 15(3)(1), MUMBAI

ITA 529/MUM/2009

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 7203 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 2 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-03-2010
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Next Hearing Date: 12-02-2010
• Assessment Year: 2005-2006
• Appeal Filed On: 23-01-2009
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: DURGESH SUMROTT
• Assessee Lawyers: R J ZAVERI
• Keywords: Business income; Business expenditure; Question of law; Set aside

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH D MUMBAI BEFORE SHRI A.L.GEHLOT, AM & SMT. P.MADHAVI DEVI, JM I.T.A.NO.529/MUM/2009 - A.Y 2005-06 REAL USHA SWEETS & SNACKS INCORPORATION, RASHMI ZAVERI & CO., C.AS, ARHAM, GOVINDA RAJULU NAIDU. FLOOR, PLOT 266, SION (E), MUMBAI 400 022 PAN NO.AAIFR0044B INCOME TAX OFFICER 15(3)(1), MUMBAI (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI R.J.ZAVERI. REVENUE BY : SHRI DURGESH SUMROTT. DR O R D E R PER P.MADHAVI DEVI, JM: THIS APPEAL OF THE ASSESSEE IS DIRECTED AGAINST CI T(A)S ORDER DATED 24/12/2008. 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL- GROUND I 1. UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED ASSESSING OFFICER HAS ERRED IN AS SESSING THE INCOME OF YOUR APPELLANT UNDER THE HEAD INCOME FROM OTHER SOURCES WITHOUT ALLOWING ANY DEDUCTION FOR ANY OF THE LEGITIMATE EX PENSES TO EARN THE SAID INCOME. 2. UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE AN D IN LAW, THE LEARNED CIT[A] HAS ERRED IN HOLDING THAT THE APPELLANT HAD DERIVE D INCOME FROM HOUSE PROPERTY AND SHOULD BE CHARGED UN DER THE HEAD INCOME FROM HOUSE PROPERTY. 3. YOUR APPELLANT SUBMITS THAT/OUR APPELLANT CARRIE D ON THE BUSINESS OF SUB-LETTING PREMISES AND IT WAS THE SOLE BUSINESS A CTIVITY OF YOUR APPELLANT. IT IS THEREFORE SUBMITTED THAT INCOME OF YOUR APPELLANT SHOULD BE ASSESSED UNDER THE HEAD INCOME FROM BUSI NESS OR PROFESSION AND ALL LEGITIMATE BUSINESS EXPENSES SH OULD BE ALLOWED AS DEDUCTION. 2 GROUND II : WITHOUT PREJUDICE TO GROUND I , IT IS SUBMITTED T HAT EVEN IF THE INCOME IS ASSESSED UNDER THE HEAD INCOME FROM OTHER SOURCES, ALL LEGITIMATE EXPENSES WHICH ARE DIRECTLY AND INEX TRICABLY LINKED WITH THE EARNING OF SUCH INCOME SHOULD BE ALLOWED IN FUL L. GROUND III : WITHOUT PREJUDICE TO GROUNDS I & II IT IS SUBMITT ED THAT EVEN IF THE INCOME OF THE APPELLANT IS ASSESSED UNDER TH E HEAD INCOME FROM HOUSE PROPERTY, FULL DEDUCTION OF RS.4,50,000 /- BEING ACTUAL RENT PAID BY YOUR APPELLANT SHOULD BE ALLOWED AS DEDUCTI ON. 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A FIRM WHICH FILED ITS RETURN OF INCOME ON 31-10-05 DECLARING TOTAL IN COME OF RS.1,62,940/-. DURING THE ASSESSMENT PROCEEDINGS U/ S.143[3], AO OBSERVED THAT THE ASSESSEE HAS RECEIVED RENTAL INCO ME OF RS.12,15,934/- AND THE AMOUNT OF INCOME TAX DEDUCTE D THEREON WAS RS.2,52,622/-. HE OBSERVED THAT THE AMOUNT OF RENT RECEIVED WAS CREDITED IN THE PROFIT & LOSS ACCOUNT AS LEASE CHAR GES AND AFTER DEDUCTING VARIOUS EXPENSES SUCH AS- I. BANK CHARGES OF RS. 219/- II. BROKERAGE ON LEASE OF RS.1,18,327/- III. INTEREST ON LOANS RS.1,10,536/- IV. INTEREST TO PARTNERS RS.1,22,888/- V. RENT RS.4,50,000/- VI. SOCIETY MAINTENANCE CHARGES RS.2,51,022/- ASSESSEE HAS DECLARED NET PROFIT OF RS.1,62,941/- A S BUSINESS INCOME. AO OBSERVED THAT THE ASSESSEE HAS TAKEN THE PREMISE S ON LEAVE AND LICENSE FROM THE LICENSOR/OWNER OF THE PREMISES BEA RING ON 710 TO 713 ON 7 TH FLOOR AT KUSHAL TOWERS, M.G.ROAD, GHATKOPAR (E), M UMBAI WITH 5 CAR PARKING SPACES FOR A PERIOD OF 33 MONTHS ON M ONTHLY LICENSOR FEE OR COMPENSATION OF RS.45,000/- AND THAT IT HAD SUB- LET THE PROPERTY TO 3 MAX NEW YORK LIFE INSURANCE CO. FOR A MONTHLY LICEN SE FEE OR COMPENSATION OF RS.1,09,562/-. THE AO THEREFORE HEL D THAT THE INCOME FROM SUB-LETTING OF THE HOUSE PROPERTY BY A TENANT IS CHARGEABLE TO TAX AS INCOME FROM HOUSE PROPERTY AND ONLY PERMISSIBLE EXPENSES FOR MAKING OR EARNING SUCH INCOME ARE ALLOWABLE. HE, TH EREFORE, CALLED FOR ASSESSEES EXPLANATION. THE ASSESSEE VIDE LETTER DA TED 23-11-07 SUBMITTED THAT THE LEASING AND SUB-LEASING ARE PART AND PARCEL OF BUSINESS ACTIVITY OF THE ASSESSEE FIRM AND ALL THE PARTNERS HAVE CONTRIBUTED THEIR CAPITAL AND THE FIRM HAS MADE A D EPOSIT OF RS.12 LAKHS TOWARDS ACQUIRING THE LEASED PROPERTY AND THE ASSESSEE IS CONDUCTING THE SAID ACTIVITY ON REGULAR BASIS AND T HEREFORE INCOME THEREFROM IS TO BE TAXED UNDER THE HEAD PROFITS & G AINS OF BUSINESS OR PROFESSION. AO WAS, HOWEVER, NOT CONVINCED WITH THE SAID CONTENTIONS AND HELD THAT THE INCOME IS TO BE TAXED UNDER THE H EAD INCOME FROM OTHER SOURCES AND ONLY THE EXPENSES INCURRED FOR T HE PURPOSE OF MAKING OR EARNING SUCH INCOME CAN BE CLAIMED AS DED UCTION. HE THUS ALLOWED ONLY THE RENT PAID OF RS.4,50,000/- FROM TH E RENTAL INCOME. 4. AGGRIEVED, ASSESSEE FILED AN APPEAL BEFORE THE C IT[A]. THE CIT[A] AFTER GOING THROUGH THE ASSESSMENT ORDER AN D THE RECORDS CAME TO THE CONCLUSION THAT THE MAIN BUSINESS OF TH E ASSESSEE IS OF CATERING, PREPARING AND TRADING OF SWEETS AND SNACK S AND IN ADDITION TO THIS MAIN OBJECT, THERE IS ALSO A PROVISION IN THE OBJECT CLAUSE TO DEAL WITH THE BUSINESS OF PURCHASING, TAKING ON LEASE, S UB-LEASE AND ALSO DOING ACTIVITY OF LEAVE AND LICENSE BASIS OR OCCUPA TION BASIS OF THE 4 IMMOVABLE PROPERTIES AND THERE IS ALSO A PROVISION FOR EXCHANGE, HIRE OR OTHERWISE ACQUIRE OR DEAL WITH AND GIVE ON LEAVE AND LICENSE BASIS OR SUB-LEASING TO OTHER PERSONS. HE OBSERVED THAT DURI NG THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR, ASSESSEE HAS NOT CARRIED OUT ANY OTHER BUSINESS ACTIVITY, THAN THE BUSINESS OF TAKIN G PROPERTY ON LEAVE AND LICENSE BASIS AND THEN GIVING IT ON SUB-LEASE O N LEAVE AND LICENSE BASIS. THEREFORE, HE ISSUED A NOTICE TO THE ASSESSE E FOR ENHANCEMENT/CHANGE OF HEAD OF INCOME TO INCOME FRO M HOUSE PROPERTY. THE SAME WAS SERVED ON THE ASSESSEE ON 5 -12-2008. IN RESPONSE TO THE SAME, THE ASSESSEE FURNISHED ITS EX PLANATION STATING THAT AS PER THE DEED OF PARTNERSHIP ASSESSEES BUSI NESS OBJECT WAS TO DEAL IN THE BUSINESS OF PURCHASE, SALE OR SUB-LEASE ON LEAVE AND LICENSE BASIS ETC., AND GIVE IT ON LEAVE AND LICENSE TO ANY ONE AND THEREFORE THE INCOME EARNED SHOULD BE TAXED UNDER THE HEAD I NCOME FROM BUSINESS. THE CIT[A] , HOWEVER, WAS NOT CONVINCED WITH THE SAID EXPLANATION OF THE ASSESSEE AND HELD THAT THE ASSES SEE IS NOT HAVING SERIES OF ACTIVITIES WHICH CAN BE PRESUMED TO BE TH E ACTUAL BUSINESS OF LEASING, SUB-LEASING OF THE PROPERTIES. HE HELD THA T THE SAID INCOME IS TO BE TAXED U/S.22 OF THE ACT AS THE ASSESSEE IS TH E DEEMED OWNER UNDER SUB-CL.[IIIB] OF SEC.27 OF THE ACT. THEREAFTE R HE HELD THAT THE STANDARD DEDUCTION U/S.24[A] HAS BEEN PRESCRIBED BY THE STATUTE TO THE EXTENT OF 30% AND HENCE ONLY THIS MUCH DEDUCTION IS ALLOWABLE AND REST OF THE CLAIM OF EXPENDITURE IS NOT TO BE ALLOW ED. AGGRIEVED, ASSESSEE IS IN SECOND APPEAL BEFORE US. 5 5. THE LD. COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW AND SUBMITTED THA T THOUGH THE MAIN OBJECT OF THE ASSESSEE HAS BEEN OF CATERING, PREPAR ING AND TRADING OF SWEETS AND SNACKS, IT HAS NOT VENTURED INTO THE SAI D BUSINESS. HE SUBMITTED THAT THE ONLY BUSINESS ACTIVITY CARRIED O N BY THE ASSESSEE WAS TAKING THE PROPERTY ON LEAVE AND LICENSE BASIS AND SUB-LEASING IT TO ANOTHER PARTY. THEREFORE, ACCORDING TO HIM, SINCE T HE ASSESSEE HAS CARRIED ON THE SYSTEMATIC ACTIVITY OF TAKING THE PR OPERTY ON LEAVE AND LICENSE BASIS AND HAS SUB-LEASED IT, IT AMOUNTS TO THE BUSINESS ACTIVITY AND INCOME THEREFROM IS ASSESSABLE UNDER THE HEAD INCOME FROM BUSINESS AND ALL THE EXPENSES OF THE BUSINESS SHOU LD BE ALLOWED THEREFROM. IN SUPPORT OF THIS CONTENTION, HE PLACED RELIANCE UPON THE FOLLOWING DECISIONS- A) BEDI TECHNO PROJECT PVT. LTD. 255 ITR 75 [P&H] B) CIT VS. AMORA CHEMICALS PVT. LTD. 258 ITR 519 [G UJ] HE SUBMITTED THAT EVEN IF THE INCOME IS TO BE TREAT ED AS INCOME FROM OTHER SOURCES, THEN ALL THE EXPENDITURE INCURRED BY THE ASSESSEE FOR EARNING SUCH INCOME SHOULD BE ALLOWED AS DEDUCTION AND IN SUPPORT THEREOF, HE PLACED RELIANCE UPON THE FOLLOWING DECI SIONS- I. EASTERN INVESTMENT LTD. VS. CIT 20 ITR 1 [S.C] II. DINSHAW VS. CIT 36 ITR 114 [BOM] 6 . IN THE ALTERNATIVE, HE ALSO SUBMITTED THAT EVEN IF INCOME IS TO BE ASSESSED UNDER THE HEAD INCOME FROM HOUSE PROPERTY , FULL DEDUCTION OF RS.4,50,000/- BEING THE ACTUAL RENT PAID BY THE ASSESSEE FOR TAKING 6 THE PROPERTY ON LEAVE AND LICENSE SHOULD BE ALLOWED AS DEDUCTION IN RELATION TO DEDUCTION ALLOWABLE U/S.24[III] OF THE ACT. 7. THE LD. DR, ON THE OTHER HAND, SUPPORTED THE OR DERS OF THE AUTHORITIES BELOW AND SUBMITTED THAT SINCE THE ASSE SSEE IS IN POSSESSION OF THE PROPERTY BY VIRTUE OF THE LEAVE A ND LICENSE AGREEMENT, HE IS THE DEEMED OWNER OF THE PROPERTY A ND, THEREFORE, INCOME THEREFROM IS TO BE ASSESSED UNDER THE HEAD INCOME FROM HOUSE PROPERTY. IN SUPPORT OF HIS CONTENTIONS, HE PLACED RELIANCE UPON THE DECISION OF THE HON'BLE BOMBAY HIGH COURT IN TH E CASE OF CIT VS. T.P.SIDHWA REPORTED IN 133 ITR 840 {BOM}. IN SUPPOR T OF HIS CONTENTION THAT SUB-LETTING OF THE PROPERTY ON LEAV E AND LICENSE BASIS CANNOT BE SAID TO BE BUSINESS ACTIVITY OF THE ASSES SEE, HE PLACED RELIANCE UPON THE DECISION OF THE HON'BLE BOMBAY HI GH COURT IN THE CASE OF CIT VS. ARVINDKUMAR ODHAVJI REPORTED IN 561 ITR 551. 8. HAVING HEARD BOTH THE PARTIES AND HAVING CONSIDE RED THEIR RIVAL SUBMISSIONS, THE UNDISPUTED FACTS BEFORE US ARE THA T THE ASSESSEE HAS TAKEN A COMMERCIAL PROPERTY ON LEAVE AND LICENSE BA SIS FROM THE OWNERS OF THE PROPERTY AND THEREAFTER HAD SUB-LEASE D IT TO M/S.MAX NEW YOUR LIFE INSURANCE CO. LTD. THE CIT[A]S FINDI NG THAT THE ASSESSEE IS THE DEEMED OWNER OF THE PROPERTY AND TH EREFORE INCOME THEREFROM IS TO BE TAXED UNDER THE HEAD INCOME FRO M HOUSE PROPERTY CANNOT BE UPHELD. AS PER SUB-CL.[IIIB] OF SEC.27 OF THE ACT, A PERSON IS A OWNER OF A HOUSE PROPERTY IF HE ACQUIRES ANY RIGHTS (EXCLUDING ANY RIGHTS BY WAY OF A LEASE FROM MONTH TO MONTH OR FOR A PERIOD NOT 7 EXCEEDING ONE YEAR) IN OR WITH RESPECT TO ANY BUILD ING OR PART THEREOF, BY VIRTUE OF ANY SUCH TRANSACTION AS IS REFERRED TO IN CLAUSE ( F ) OF SEC.269UA OF THE ACT. SUB-CLAUSE (F) OF SEC.269UA D EFINES TRANSFER IN RELATION TO IMMOVABLE PROPERTY TO MEAN TRANSFER OF SUCH PROPERTY BY WAY OF SALE OR EXCHANGE OR LEASE FOR A TERM OF NOT LESS THAN TWELVE YEARS, AND INCLUDES ALLOWING THE POSSESSION OF SUCH PROPERTY TO BE TAKEN OR RETAINED IN PART PERFORMANCE OF A CONTRACT OF THE NATURE REFERRED TO IN SECTION 53A OF THE TRANSFER OF PROPE RTY ACT, 1882. EXPLANATION THERTO PROVIDES THAT A LEASE WHICH PROV IDES FOR THE EXTENSION OF THE TERM THEREOF BY A FURTHER TERM OR TERMS SHALL BE DEEMED TO BE A LEASE FOR A TERM OF NOT LESS THAN TW ELVE YEARS, IF THE AGGREGATE OF THE TERM FOR WHICH SUCH LEASE IS TO BE GRANTED AND THE FURTHER TERM OR TERMS FOR WHICH IT CAN BE SO EXTEND ED IS NOT LESS THAN TWELVE YEARS. THUS, IT CAN BE SEEN THAT FOR DEEMING A PERSON TO BE THE OWNER OF AN IMMOVABLE PROPERTY, IT HAS TO BE TRANSF ERRED BY SALE, EXCHANGE OR BY LEASE. THERE IS NO SALE OR EXCHANGE IN THE CASE BEFORE US. IF IT IS TO BE A TRANSFER BY VIRTUE OF A LEASE, THE LEASE PERIOD SHOULD NOT BE LESS THAN 12 YEARS EVEN IF THE AGGREGATE OF THE PERIOD IS TAKEN INTO CONSIDERATION. IN THE CASE BEFORE US IT IS NOT THE CASE OF LEASE BUT IT IS A CASE OF LEAVE AND LICENSE AND THAT TOO FOR A PERIOD OF 33 MONTHS ONLY. THEREFORE, IT CANNOT BE DEEMED TO BE A TRANSF ER AND THE ASSESSEE CANNOT BE DEEMED TO BE THE OWNER OR THE BENEFICIAL OWNER OF THE PROPERTY. THEREFORE, WE SET ASIDE THE FINDINGS OF T HE CIT[A] TO THIS EFFECT. 8 9. NOW COMING TO THE QUESTION AS TO WHETHER THE INC OME FROM SUB-LETTING THE PROPERTY IS INCOME FROM BUSINESS OR INCOME FROM OTHER SOURCES, WE ARE UNABLE TO AGREE WITH THE CON TENTION OF THE LD. COUNSEL FOR THE ASSESSEE THAT THIS INCOME IS TO BE ASSESSED AS BUSINESS INCOME. 10. THE ASSESSEE HAS TAKEN THE PROPERTY ON LEAVE AN D LICENSE BASIS AND HAS SUB-LET IT OUT. THE SUB-LETTING OF THE PROP ERTY CANNOT BE SAID TO BE EXPLOITATION OF THE PROPERTY AS A COMMERCIAL ASS ET. IN THE CASE OF AMORA CHEMICALS [CITED SUPRA] RELIED UPON BY THE AS SESSEE, THE HON'BLE HIGH COURT WAS DEALING WITH THE CASE OF AN ASSESSEE WHO HAD TAKEN THE PROPERTY ON LEASE AND THE ASSESSEE HAD AD VANCED MONIES FOR THE CONSTRUCTION OF THE PROPERTY AND THE ASSESSEE H AD ALSO ADVANCED INTEREST BEARING FUNDS IN EXCESS OF THE AGREEMENT A ND HAD LET OUT THE PROPERTY TO BANK OF BARODA. THE HON'BLE HIGH COURT OBSERVED THAT THE ASSESSEE HAD MAINTAINED ITS OBJECT CLAUSE IN ORDER TO LEASE OUT THE PROPERTY AS ONE OF ITS BUSINESS ACTIVITY AND HAD BO RROWED FUNDS FOR THE CONSTRUCTION OF THE BUILDING AND AFTER OBTAINING TH E PROPERTY ON LEASE, CERTAIN ALTERATIONS AND DECORATIONS WERE CARRIED OU T IN THE PREMISES; A DIRECTOR WAS SPECIFICALLY ENTRUSTED TO LOOK AFTER T HE UPKEEP OF THE BUILDING ETC. THEREFORE, THE HIGH COURT AFFIRMED TH E VIEW OF THE TRIBUNAL THAT THE ACTIVITY OF THE ASSESSEE COMPANY CONSTITUTED BUSINESS AND THE INCOME BY WAY OF RENT HAS TO BE ASSESSED AS INCOME FROM BUSINESS. HOWEVER, THIS DECISION IS DISTINGUISHABL E ON FACTS OF THE CASE BEFORE US. IN THE CASE BEFORE US, THE ASSESSEE HAS SIMPLY TAKEN THE 9 PROPERTY ON LEAVE AND LICENSE BASIS AND HAS SUBLEAS ED IT. THEREFORE, THE DECISION OF THE HON'BLE HIGH COURT IS NOT APPLI CABLE TO THE FACTS OF THE CASE BEFORE US. 11. AS REGARDS THE OTHER DECISION RELIED UPON BY TH E LD. COUNSEL FOR THE ASSESSEE, WE FIND THAT THE SAME IS ALSO DISTING UISHABLE ON FACTS AS IN THE SAID CASE, THE PUNJAB & HARAYANA HIGH COURT HAS DISMISSED THE APPEAL OF THE REVENUE ON THE GROUND THAT NO SUBSTAN TIAL QUESTION OF LAW ARISES. 12. THE OTHER DECISIONS RELIED UPON BY THE LD. COUN SEL FOR THE ASSESSEE AS GIVEN IN THE WRITTEN SUBMISSIONS ARE A) PFH MALL & RETAIL MANAGEMENT LTD. VS. ITO 16 SOT 83 [KOL] B) DECISION OF ITAT BANGALORE A BENCH DATED 30-6- 2008 IN THE CASE OF M/S GLOBAL TECH PARK PVT. LTD. VS. ACIT, I.T.A.NO.1021/BAN/07 FOR A.Y 2003-04 IN THE CASE OF PFH MALL & RETAIL MANAGEMENT LTD., W E FIND THAT THE FACTS OF THE CASE RELATES TO THE EXPLOITATION OF TH E IMMOVABLE PROPERTY AS A SHOPPING MALL/BUSINESS CENTRE AND THE ASSESSEE HAD CONTRACTUAL OBLIGATION FOR PROVIDING SERVICES TO CUSTOMERS LIKE ELECTRICITY, TELEPHONE, WATCH AND WARD ETC. AND THE USERS HAD NO RIGHT OF O CCUPANCY AND HAD THE RIGHT OF LIMITED ACCESS TO USE THE SPACE FOR PU RPOSE OF THEIR BUSINESS DURING SPECIFIC HOURS OF THE DAY ONLY AS T HE KEYS OF THE PREMISES WERE KEPT BY THE ASSESSEE. EVEN IN THE CAS E OF M/S GLOBAL TECH PARK PVT. LTD., THE PROPERTY WAS LET OUT AS A COMPOSITE ONE WITH HOST OF SERVICES AND AMENITIES. THE CASE BEFORE US IS DISTINGUISHABLE ON FACTS FROM THE ABOVE CASES. THE ASSESSEE HAS SUBLEA SED THE PROPERTY 10 SIMPLICITOR WITH NO OTHER SERVICES ATTACHED THERETO . THEREFORE, INCOME FROM LETTING OUT OF THE PROPERTY CANNOT BE TREATED AS BUSINESS INCOME OF THE ASSESSEE. 13. THE LD. DR HAS PLACED RELIANCE UPON THE DECISIO N OF THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF T.P.SIDHWA [CITED SUPRA], WHEREIN FACTS OF THE CASE WERE THAT THE ASSESSEE THEREIN HA D ENTERED INTO A CONTRACT TO PURCHASE 1/4 TH SHARE IN A HOUSE PROPERTY IN THE YEAR 1959 AND IN 1963 A REGULAR CONVEYANCE DEED IN FAVOUR OF THE ASSESSEE WAS EXECUTED AND SHE BECAME THE FULL OWNER OF THE 1/4 TH SHARE. SHE RECEIVED 1/4 TH SHARE OF INCOME FROM THE SAID PROPERTY FROM APRIL 1, 1959 AND SINCE SHE WAS NOT THE LEGAL OWNER IT WAS H ELD THAT INCOME WAS CHARGEABLE TO TAX UNDER THE HEAD INCOME FROM O THER SOURCES. THE HON'BLE HIGH COURT HELD THAT THE ASSESSEES RENTAL INCOME FOR A.YS. 1960-61 AND 1961-1962 COULD NOT FORM PART OF HER AS SESSABLE INCOME UNDER THE RESIDUARY HEAD I.E. U/S.12 OF THE INCOME TAX ACT, 1922 AND THE RENTAL INCOME WAS NOT CHARGEABLE U/S.22 OF THE I.T.ACT 1961 FOR THE A.YS. 1962-63 AND 1963-64. THE FACTS OF THE CAS E ARE ALSO DISTINGUISHABLE AND NOT APPLICABLE TO THE FACTS OF THE CASE BEFORE US. 14. IN VIEW OF THE ABOVE DECISIONS, WE HOLD THAT IN COME FROM LEASING OF THE PROPERTY IS ASSESSABLE AS INCOME FR OM OTHER SOURCES AND NOT AS INCOME FROM BUSINESS OR PROFESSION. HA VING HELD SO, WE HAVE TO HOLD THAT ALL THE EXPENDITURE INCURRED BY T HE ASSESSEE FOR EARNING SUCH INCOME IS TO BE ALLOWED AS A DEDUCTION FROM THE SAID INCOME. THE ASSESSEE HAS CLAIMED THE BANK CHARGES, BROKERAGE ON 11 LEASE, INTEREST ON LOANS, INTEREST TO PARTNERS, REN T PAID AND SOCIETY MAINTENANCE CHARGES AS EXPENDITURE INCURRED FOR EAR NING OF THE ABOVE INCOME. IN OUR OPINION, RENT PAID TO THE OWNERS OF THE PROPERTY AND BANK CHARGES ARE ALLOWABLE AS DEDUCTION AS IT IS NO T POSSIBLE TO EARN THE LEASE INCOME WITHOUT PAYING THE SAME. AS REGARD S THE BROKERAGE ON LEASE, IT IS ALLOWABLE ONLY IN THE FIRST YEAR OF SUB-LEASING OF THE PROPERTY. AS REGARDS INTEREST ON LOANS AND INTEREST TO PARTNERS, THEY ARE ALLOWABLE ONLY IF THEY ARE INCURRED FOR THE PUR POSE OF OBTAINING OR LETTING OUT THE PROPERTY ON RENT AND NOT OTHERWISE. AS REGARDS THE SOCIETY MAINTENANCE CHARGES, IT IS ALLOWABLE ONLY I F IT IS PAID BY THE ASSESSEE HEREIN AND NOT THE ORIGINAL OWNER OR THE L ESSEE OF THE ASSESSEE. NEITHER THE AO NOR THE CIT[A] HAVE EXAMI NED THE NATURE OF THESE EXPENDITURES, NOR THE VERACITY OF THE CLAIM; THEREFORE, WE DEEM IT FIT AND PROPER TO DIRECT THE AO TO ASSESS THE IN COME AS INCOME FROM OTHER SOURCES AND ALLOW THE DEDUCTION OF THE EXPEND ITURE INCURRED FOR EARNING THE ABOVE INCOME SUBJECT TO OUR OBSERVATION S ABOVE. ACCORDINGLY, GROUNDS OF APPEAL NOS.1 AND 3 ARE REJE CTED AND GROUND OF APPEAL NO.2 IS ALLOWED. 15. IN THE RESULT, ASSESSEES APPEAL IS PARTLY ALLO WED. ORDER PRONOUNCED ON THIS 30TH DAY OF MARCH, 2010. SD/- SD/- (A.L.GEHLOT) (P.MADHAVI DEVI) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI: 30 TH MARCH, 2010.