ACIT, Kottayam V. M/s.Malankara plantations Ltd, Kottayam

ITA 687/COCH/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 73899 (ITAT-COCHIN)
• Duration Of Justice: 4 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-03-2014
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 02-04-2014
• Assessment Year: 2007-2008
• Appeal Filed On: 07-11-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: LATHA V KUMAR
• Assessee Lawyers: ABRAHAM JACOB
• Keywords: Capital asset; Business income; Depreciation; Cost of acquisition; Wholly owned subsidiary; Bad and doubtful debts; Capital expenditure

Judgement Text

ITA NO. 687/COCH/2013 & CO NO.127/COCH/2013 1 IN THE INCOME TAX APPEL L A TE T R IBUNAL COCHIN BENCH , COCHIN BEFORE S/SH RI N.R.S. GANESAN, JM & B. R. BASKARAN, AM ITA NO. 687 COCH/ 2013 (ASST YEAR 2008 - 09 ) & CROSS OBJECTION NO. 127/COCH/2013 THER ASST COMMR OF INCOME TAX KOTTAYAM VS M/S MALANKARA PLANTA TIONS LTD MALANKARA BUILDING KODIMATHA POST BOX NO.72 KOTTAYAM - 686 039 ( APPELLANT /RESPONDENT ) (RESPONDENT /CROSS OBJECTOR ) PAN NO. AABCT2019A ASSESSEE BY SRI ABRAHAM JACOB REVENUE BY SMT LATHA V KUMAR, JR DR DATE OF HEARING 29 TH JAN 2014 DAT E OF PRONOUNCEMENT 14 TH , MAR 2014 OR D ER PER B.R. BASKARAN, AM: THE APPEAL FILED BY THE REVENUE AND THE CROSS OBJECTION FILED BY THE ASSESSEE ARE DIRECTED AGAINST THE ORDER DATED 28 TH AUG 2013 PASSED BY THE LD CIT(A) IV, KOCHI AND THEY RELATE TO THE AY 2008 - 09. 2 THE REVENUE IS ASSAILING THE DECISION OF LD CIT(A) IN DELETING THE DISALLOWANCE OF RS.61.14 LAKHS RELATING TO THE CLAIM OF I NTEREST AND LEASE CHARGES WRITTEN OFF. IN THE CROSS OBJECTION, THE ASSESSEE IS SUPPORTING THE ORDER PASSED BY LD CIT(A). ITA NO. 687/COCH/2013 & CO NO.127/COCH/2013 2 3 THE FACTS RELATING TO THE ISSUE ARE STATED IN BRIEF: THE ASSESSEE COMPANY IS HAVING RUBBER AND TEA PLANTATIONS AND IS ALSO INVOLVED IN PROCESSING OF RUBBER AND TEA. DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE DECLARED ITS TOTAL INCOM E AS GIVEN BELOW: INCOME FROM BUSINESS 6,03,656 CAPITAL GAIN 24,76,965 INCOME FROM OTHER SOURCE: INTEREST 3,46,728 WEIGHTING CHARGES 79,460 SALE OF SCRAP 3,12,685 HIRE CHARGES 10,84,852 LESS: INTEREST LEASE CHARGES WRITTEN OFF 77,07,577 DEPRECIATION ON ASSETS ON LEASE 44,712 ( 66,67,437 ) TOTAL INCOME - ( 35,86,816 ) 3.1 THE AO QUESTIONED ABOUT THE DETAILS AND ELIGIBILITY OF THE ASSESSEE TO CLAIM DEDUCTION OF INTEREST AND LEASE CHARGES WRITTEN OFF REFERRED ABOVE. T HE ASSESSEE SUBMITTED THAT IT HAD OFFERED THE INTEREST INCOME O F RS. 61,14,577/ - IN THE EARLIER YEARS ON ACCRUAL BASIS ON THE LOAN GIVEN TO A SUBSIDIARY COMPANY NAMED M/S MALANKARA WOODS LTD. THE ASSESSEE HAD ALSO OF FERED LEASE RENTAL INCOME OF RS.15,93,000/ - IN THE EARLIER YEARS ON ACCRUAL BASIS ON A PLANT LEASED OUT TO THE ABOVE SAID COMPANY . IT WAS SUBMITTED THAT M/S MALANKARA WOODS LTD IS A WHOLLY OWNED SUBS I DIARY OF THE ASSESSEE COMPANY. IT WAS FURTHER SUBMITTE D THAT THE ABOVE SAID SUBSIDIARY COMPANY COULD NOT PAY THE ABOVE SAID AMOUNT DUE TO HUGE ACCUMULATED LOSSES AND ACCORDINGLY MADE A REPRESENTATION TO THE ASSESSEE COMPANY TO WAIVE THE AMOUNT OF INTEREST AND LEASE RENT PAYABLE BY IT. IT WAS SUBMITTED THAT T HE BOARD OF DIRECTORS OF THE ASSESSEE COMPANY PASSED RESOLUTION TO WRITE OFF THE AMOUNTS DUE FROM THE ABOVE SAID SUBSIDIARY COMPANY. ACCORDINGLY, THE ASSESSEE COMPANY HAS WRITTEN OFF BOTH THE INTEREST RECEIVABLE AND LEASE RENT RECEIVABLE FROM THE ABOVE SA ID SUBSIDIARY COMPANY AND CLAIMED THE ITA NO. 687/COCH/2013 & CO NO.127/COCH/2013 3 SAME AS DEDUCTION . THE AO NOTICED THAT THE EXPENDITURE INCURRED WHOLLY AND EXCLUSIVELY FOR EARNING THE INCOME IS ALLOWABLE AS DEDUCTION UNDER THE PROVISIONS OF SECTION 57(III) OF THE ACT. SINCE THE AMOUNT WRITTEN O FF BY THE ASSESSEE CANNOT BE CONSIDERED AS EXPENDITURE INCURRED WHOLLY AND EXCL USIVELY FOR EARNING THE INCOME DECLARED BY THE ASSESSEE UNDER THE HEAD INCOME FROM OTHER SOURCES, THE AO DISALLOWED THE CLAIM OF RS.77,07,577/ - (RS.61,14,577/ - + RS.15,93,000/ - ) MADE BY THE ASSESSEE. 3.2 IN THE APPELLATE PROCEEDINGS BEFORE LD CIT(A) , THE ASSESSEE SUBMITTED THAT THE AMOUNT SO WRITTEN OFF BY THE ASSESSEE WAS OFFERED AS INCOME BY ITS SUBSIDIARY COMPANY M/S MALANKARA WOODS LTD. IT WAS ALSO SUBMITTED THAT THE ABOV E SAID INCOME WAS WRONGLY OFFERED AS INCOME FROM OTHER SOURCES IN THE EARLIER YEARS, INSTEAD OF OFFERING THE SAME UNDER THE HEAD INCOME FROM BUSINESS. IT WAS ALSO SUBMITTED THAT THE AO HAS GOT A DUTY TO ASSESSEE THE INCOME UNDER PROPER HEAD. THE LD CIT(A) WAS CONVINCED WITH THE EXPLANATIONS OF THE ASSESSEE THAT THE AMOUNT SO WRITTEN OFF WAS OFFERED BY THE SUBSIDIARY COMPANY AS ITS INCOME. ACCORDINGLY HE ALLOWED THE CLAIM OF THE ASSESSEE WITH THE FOLLOWING OBSERVATIONS: 5. HAVING GONE THROUGH THE DE TAILS OF THE SUBMISSIONS MADE BY THE APPELLANT AND FINDINGS OF THE AO, THE CRUX OF THE FACTS EMERGED THAT THERE IS ALWAYS TWO SIDES OF THE TRANSACTION. BOTH THE CASES, THE HOLDING AS WELL AS SUBSIDIARY COMPANY ARE BEING ASSESSED WITH THE SAME AO AND THE TR ANSACTIONS ENTERED INTO BETWEEN THE SUBSIDIARY AND THE HOLDING COMPANY RELATING TO ACCRUED PAYMENT OR ACCRUED RECEIVABLE OF THE INTEREST AND THE LEASE INCOME, SUCH TRANSACTIONS ARE VERIFIABLE AND IT IS ONLY LOGICAL TO INFER THAT IF, IN THE HANDS OF ONE ENT ITY THE RECEIVABLES WRITTEN OFF IS CLAIMED AS LOSS THEN SIMULTANEOUSLY, ON THE OTHER HAND, THE PAYABLES WRITTEN OFF ARE TAKEN AS INCOME; NO FURTHER ELABORATION EITHER ON THE FACTS OF THE CASE OR THE INTERPRETATION OF LAW IS REQUIRED TO BE MADE. IN ANY CASE , THE INCOME IN THE PAST HAVE BEEN OFFERED TO TAX BE IT AS INCOME UNDER OTHER SOURCES OR AS BUSINESS INCOME THAT HARDLY MAKES ANY DIFFERENCE. THEN IT WOULD ONLY BE A TECHNICAL ISSUE THAT IF THE APPELLANT HAS SHOWN THEIR INCOME UNDER OTHER SOURCES CAN CLAIM THE LOSS ON ACCOUNT OF WRITING OFF OF SUCH ACCRUED INCOME WHICH WAS ALREADY OFFERED TO TAX IN THE PAST. BASED ON RATIONALITY, THE CLAIM PUT FORWARD BY THE APPELLANT SEEMS TO BE A RIGHTFUL CLAIM AND THE SAME IS ALLOWED. ACCORDINGLY, THE ADDITION MADE BY TH E AO IS DELETED AND THE APPEAL ON THIS GROUND IS ALLOWED. AGGRIEVED, THE REVENUE HAS FILED THIS APPEAL BEFORE US. ITA NO. 687/COCH/2013 & CO NO.127/COCH/2013 4 4. WE HAVE HEARD THE RIVAL CONTENTIONS. THE LD D.R SUBMITTED THAT THE ASSESSEE ITSELF HAS OFFERED THE INTEREST INCOME AND LEASE RENTAL INCOME UNDER THE HEAD OTHER SOURCES IN THE EARLIER YEARS. FURTHER THE ASSESSEE WAS NOT CARRYING ON THE BUSINESS OF FINANCING OR LEASING OF EQUIPMENTS. ACCORDINGLY THE LD D.R SUBMITTED THAT THERE IS NO MERIT IN THE CLAIM OF THE ASSESSEE THAT THE INTERE ST AND LEASE RENTAL INCOME WAS WRONGLY OFFERED UNDER THE HEAD INCOME FROM OTHER SOURCES, INSTEAD OF OFFERING THE SAME UNDER THE HEAD INCOME FROM BUSINESS. THE LD D.R FURTHER SUBMITTED THAT THE DEDUCTION OF ANY CLAIM IS TO BE ALLOWED IN TERMS OF THE PR OVISIONS OF THE ACT. ACCORDINGLY, THE LD D.R SUBMITTED THAT THE LD CIT(A) WAS WRONG IN GIVING IMPORTANCE TO THE FACT THAT THE SUBSIDIARY COMPANY HAS OFFERED THE AMOUNT SO WAIVED OFF AS ITS INCOME. THE LD D.R SUBMITTED THAT THE ALLOWABLE DEDUCTIONS ARE PR ESCRIBED IN SEC. 57 OF THE ACT. AS PER THE PROVISIONS OF SEC. 57(III) OF THE ACT, ANY EXPENDITURE INCURRED (NOT BEING IN THE NATURE OF CAPITAL EXPENDITURE) LAID OUT OR EXPENDED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF MAKING OR EARNING OF SUCH INCOME. T HE LD D.R SUBMITTED THAT SUCH INCOME USED IN SEC. 57(III) REFERS TO THE INCOME ALREADY INCLUDED IN THE COMPUTATION OF INCOME UNDER THE HEAD INCOME FROM OTHER SOURCES. THE LD D.R FURTHER SUBMITTED THAT THE AMOUNT WRITTEN OFF BY THE ASSESSEE CANNOT BE C ONSIDERED AS THE EXPENDITURE INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF EARNING OF INCOME , WHICH ARE OFFERED UNDER THE HEAD INCOME FROM OTHER SOURCES. THE LD D.R ALSO PLACED RELIANCE ON THE DECISION RENDERED BY HONBLE PUNJAB AND HARYANA HIGH CO URT IN THE CASE OF CIT VS. PUNJAB STATE WAREHOUSING CORPORATION (2009)(317 ITR 288)(P & H). ACCORDINGLY, THE LD D.R SUBMITTED THAT THE ASSESSING OFFICER WAS JUSTIFIED IN DISALLOWING THE SAID CLAIM. ITA NO. 687/COCH/2013 & CO NO.127/COCH/2013 5 5. THE LD A.R SUBMITTED THAT THE ASSESSEE HAD GIVEN THE LOAN TO ITS WHOLLY OWNED SUBSIDIARY IN THE EARLIER YEARS AND IT HAD ALSO OFFERED THE INTEREST INCOME EVERY YEAR AND PAID TAX DUE THEREON. HE SUBMITTED THAT THE WHOLLY OWNED SUBSIDIARY COMPANY HAD DEDUCTED TAX AT SOURCE ALSO IN THE EARLIER YEARS. THE A SSESSEE HAD ALSO OFFERED LEASE RENTAL INCOME FOR TAX IN THE EARLIER YEARS. THE SUBSIDIARY COMPANY INCURRED HEAVY LOSSES AND HENCE IT COULD NOT PAY THE AMOUNTS DUE TO THE ASSESSEE COMPANY. HENCE, IT REQUESTED THE ASSESSEE COMPANY TO WAIVE OFF THE AMOUNTS DUE TO THE ASSESSEE COMPANY. HE FURTHER SUBMITTED THAT THE BUSINESS OF THE ASSESSEE COMPANY IS INTIMATELY CONNECTED WITH THAT OF SUBSIDIARY COMPANY. IN THIS CONNECTION, THE LD A.R SUBMITTED THE FOLLOWING: - D. THE ASSESSEE COMPANY IS ENGAGED IN VARIOUS BUSINESS ACTIVITIES SUCH AS PLANTATION, CULTIVATION OF RUBBER AND TEA, MANUFACTURE OF RUBBER AND TEA, TRADING, INVESTMENTS LEASING AND ADVANCING LOANS TO ITS WHOLLY OWNED SUBSIDIARY COMPANY. THE WHOLLY OWNED SUBSIDIARY WAS ENGAGED IN THE BUSINESS OF RUBBE R WOOD TREATMENT/PROCESSING AND MANUFACTURE OF RUBBER WOOD FURNITURE AND ALLIED ACTIVITIES. THE ASSESSEE COMPANY ADVANCED LONG TERM LOANS TO THE SUBSIDIARY TO CARRY ON ITS BUSINESS SMOOTHLY WHICH CARRIED INTEREST . HOWEVER, THE SUBSIDIARY COULD NOT SUCCEED IN ITS BUSINESS DUE TO MANY FACTORS AND IT COULD NOT PAY THE INTEREST WHICH IS ACCUMULATED YEAR AFTER YEAR. THE ASSESSEE WAS INTIMATELY CONNECTED WITH THE SUBSIDIARY AND THE INTERESTS OF THE SUBSIDIARY WERE, THEREFORE, VITALLY CONNECTED WITH THE ASSESSEE S BUSINESS INTEREST. THE SUBSIDIARY COMPANY WAS UNABLE TO PAY THE INTEREST ACCRUED OVER THE YEARS BUT STILL THE ASSESSEE COMPANY OFFERED THE SAME FOR TAX PURPOSE AND PAID TAX. WHEN IT IS REALIZED THAT T H ERE WERE ABSOLUTELY NO CHANCE TO RECOVER THE ACCRUED INTEREST THE SAME IS WRITTEN OFF. THIS SPEAKS WELL OF THE BUSINESS PRUDENCE OF THE ASSESSEE. THE LD A.R FURTHER SUBMITTED THAT THE ASSESSEE HAD ADVANCED MONEY AND ALSO HAD GIVEN THE MACHINERY ON LEASE TO THE SUBSIDIARY COMPANY DUE TO INTIMATE BUSINESS C ONNECTION AND HENCE THEY SHOULD BE CONSIDERED AS ONE OF THE BUSINESS ACTIVITIES OF THE ASSESSEE COMPANY. ACCORDINGLY HE SUBMITTED THAT THE INTEREST INCOME AND LEASE RENTAL INCOME SHOULD HAVE BEEN OFFERED UNDER THE HEAD INCOME FROM BUSINESS. HOWEVER, TH E ASSESSEE HAS WRONGLY OFFERED THE SAME UNDER THE HEAD INCOME FROM OTHER SOURCES. HE SUBMITTED THAT THE ASSESSING OFFICER HAS GOT A DUTY TO ASSESS THE INCOME UNDER PROPER HEAD, EVEN THOUGH THE ASSESSEE HAD OFFERED ITA NO. 687/COCH/2013 & CO NO.127/COCH/2013 6 THE SAME UNDER A WRONG HEAD. IN THIS R EGARD, HE PLACED HIS RELIANCE ON THE DECISION RENDERED BY HONBLE SUPREME COURT IN THE CASE OF BIHAR STATE CO - OPERATIVE BANK LTD VS. CIT (1960)(39 ITR 114, 116) AND ALSO ON THE DECISION RENDERED BY HONBLE MADRAS HIGH COURT IN THE CASE OF H.C. KOTHARI VS. CIT (1951)(20 ITR 579). THE LD A.R FURTHER SUBMITTED THAT THE SUBSIDIARY COMPANY HAD OFFERED THE INTEREST AND LEASE RENT AMOUNT SO WAIVED OFF AS ITS INCOME AND IT HAS BEEN ASSESSED BY THE SAME ASSESSING OFFICER. ACCORDINGLY HE CONTENDED THAT THE ORDER PAS SED BY LD CIT(A) SHOULD BE UPHELD. 6. WE HAVE HEARD THE RIVAL CONTENTIONS AND CAREFULLY PERUSED THE RECORD. THE FIRST CONTENTION OF THE ASSESSEE IS THAT THE INTEREST INCOME AND LEASE RENTAL INCOME, THOUGH OFFERED BY IT UNDER THE HEAD INCOME FROM O THER SOURCES, SHOULD HAVE BEEN ASSESSED BY THE ASSESSING OFFICER AS THE BUSINESS INCOME OF THE ASSESSEE. IT IS PERTINENT TO NOTE THAT THE BAD DEBTS WRITTEN OFF IS ALLOWABLE AS DEDUCTION WHILE COMPUTING THE INCOME UNDER THE HEAD INCOME FROM BUSINESS, WH ILE SUCH A CLAIM IS NOT ALLOWABLE WHILE COMPUTING THE INCOME UNDER THE HEAD INCOME FROM OTHER SOURCES. AS STATED EARLIER, THE DEDUCTIONS ALLOWABLE WHILE COMPUTING THE INCOME UNDER THE HEAD OTHER SOURCES IS SPECIFIED IN SEC. 57 OF THE ACT AND AS PER CL AUSE (III) OF THAT SECTION, ONLY THE EXPENDITURE INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF EARNING OF INCOME , WHICH ARE INCLUDED IN THE COMPUTATION OF INCOME UNDER THE H EAD INCOME FROM OTHER SOURCES ARE ALLOWABLE AS DEDUCTION. HENCE, IT APPEARS THAT THE ASSESSEE IS NOW CONTENDING THA T THE INTEREST INCOME AND LEASE RENTAL INCOME OFFERED BY IT IN EARLIER YEARS SHOULD HAVE BEEN ASSESSED UNDER THE HEAD INCOME FROM BUSINESS. 6.1 IT IS A SETTLED PROPOSITION THAT, IN ORDER TO DETERMINE THE HEAD OF INCOME UNDER WHICH THE INCOME GENERATED OUT OF A PARTICULAR ACTIVITY IS ASSESSABLE, ONE HAS TO LOOK INTO THE INTENTION OF AN ASSESSEE AT THE TIME WHEN HE STARTED THAT ACTIVITY. IF THE INTENTION IS TO CARRY ON THAT ITA NO. 687/COCH/2013 & CO NO.127/COCH/2013 7 ACTIVITY AS A SUSTAINED BUSINESS ACTI VITY, THEN THE INCOME ARISING THERE FROM IS ASSESSABLE UNDER THE HEAD INCOME FROM BUSINESS. ON THE OTHER HAND, IF THE INTENTION WAS TO MAKE INVESTMENTS, THEN THE INCOME ARISING THERE FROM IS ASSESSABLE UNDER THE HEAD INCOME FROM OTHER SOURCES . FURTHE R THE BUSINESS ACTIVITY MEANS A CONTINUOUS ACTIVITY IN CARRYING ON A PARTICULAR TRADE OR VOCATION, WHICH IS CAPABLE OF PRODUCING A PROFIT WHICH CAN BE TAXED. 6. 2 IN THE INSTANT CASE, THE FACTS REMAIN THAT THE ASSESSEE HAS BEEN DECLARING THE INTEREST I NCOME AND LEASE RENTAL INCOME UNDER THE HEAD OTHER SOURCES ONLY IN THE EARLIER YEARS . EVEN THE AMOUNT WRITTEN OFF BY THE ASSESSEE HAS ALSO BEEN SET OFF AGAINST THE INCOME DECLARED UNDER THE HEAD OTHER SOURCES DURING THE YEAR UNDER CONSIDERATION ALSO . FURTHER WE NOTICE THAT THE ASSESSEE HAS NOT ADVANCED FUNDS OR LEASED OUT MACHINERIES TO ANY OTHER CONCERNS OR PARTIES. THUS IT IS A SOLITARY INSTANCE OF ADVANCING MONEY OR LEASING OUT THE MACHINERY TO ITS WHOLLY OWNED SUBSIDIARY. THESE FACTS SHOW THAT T HERE WAS NO INTENTION W ITH THE ASSESSEE TO CARRY ON BUSINESS OF EITHER GIVING LOANS ON INTEREST OR IN LEASING OUT ITS MACHINERY. FURTHER, WE NOTICE THAT THE ASSESSEE HAS CHANGED ITS STAND ONLY DURING THE YEAR UNDER CONSIDERATION AND FURTHER IT DID NOT B R ING ANY MATERIAL ON RECORD TO SHOW THAT THE ASSESSEE INTENDED TO CARRY ON THE ACTIVITY OF ADVANCING MONEY OR LEASING OUT PLANT AS A SUSTAINED BUSINESS ACTIVITY. AS STATED EARLIER, THE INTENTION OF THE ASSESSEE AT THE INCEPTION OF THE ACTIVITY WOULD NORMA LLY DECIDE ABOUT THE HEAD OF INCOME UNDER WHICH THE INCOME ARISING OUT OF THE ACTIVITY IS ASSESSABLE. AS STATED EARLIER, I T APPEARS THAT THE ASSESSEE IS MAKING THIS CLAIM ONLY AFTER IT WAS FOUND THAT THE AMOUNT SO WRITTEN OFF CANNOT BE CLAIMED AS DEDUCTIO N UNDER SEC. 57 OF THE ACT. IN THE INSTANT CASE, THE VERY FACT THAT THE ASSESSEE HAS DECLARED BOTH THE INTEREST INCOME AND LEASE RENTAL INCOME UNDER THE HEAD OTHER SOURCES WOULD SHOW THAT THE INTENTION OF THE ASSESSEE WAS ONLY TO CARRY THOSE ACTIVITIES AS AN INVESTMENT ACTIVITY ONLY. ITA NO. 687/COCH/2013 & CO NO.127/COCH/2013 8 6.3 WE NOTICE THAT THE LD CIT(A) WAS CARRIED AWAY BY THE SUBMISSION THAT THE AMOUNTS OF INTEREST AND LEASE RENT SO WAIVED OFF WAS OFFERED AS INCOME IN THE HANDS OF THE SUBSIDIARY COMPANY. IN OUR VIEW, THE TREATMENT G IVEN BY THE SUBSIDIARY COMPANY CANNOT DECIDE ABOUT THE TAXABILITY IN THE HANDS OF THE ASSESSEE HEREIN. TO QUOTE AN EXAMPLE, CARS ARE TRADING ASSETS IN THE HANDS OF A VEHICLE DEALER AND HENCE SALE OF CAR WOULD BE TAKEN AS REVENUE RECEIPT IN HIS HANDS. ON THE CONTRARY, THE CAR MAY BE A CAPITAL ASSET IN THE HANDS OF A PURCHASER AND HENCE THE PURCHASE COST CANNOT BE CLAIMED AS DEDUCTION, MERELY BECAUSE IT WAS TAXED AS REVENUE RECEIPT IN THE HANDS OF THE VEHICLE DEALER. HENCE, WE ARE UNABLE TO AGREE WITH THE OBSERVATIONS MADE BY LD CIT(A). 6.4 THE ASSESSEE ALSO HAS TAKEN A STAND THAT THE BUSINESS PROXIMITY OF THE ASSE SSEE WITH ITS SUBSIDIARY AND THE VESTED INTEREST IN THE WELFARE OF THE SUBSIDIARY ARE THE FACTORS THAT WILL GO TO DECIDE THE NATURE OF INTE REST AND LEASE RENTAL INCOME. WE ARE UNABLE TO AGREE WITH IT. AS STATED EARLIER, THE INTENTION OF THE ASSESSEE AT THE INCEPTION OF THE ACTIVITY WOULD DECIDE THE NATURE OF THE ACTIVITY AND NOT THE CLOSE BUSINESS CONNECTION OR THE WELFARE OF THE RECIPIENT. 6.5 IN VIEW OF THE FOREGOING DISCUSSIONS, WE ARE UNABLE TO ACCEPT THE CLAIM OF THE ASSESSEE THAT THE INTEREST INCOME AND LEASE RENTAL INCOME SHOULD HAVE BEEN ASSESSED UNDER THE HEAD INCOME FROM BUSINESS . HENCE, WE ARE OF THE VIEW THAT THE ASSESS ING OFFICER WAS JUSTIFIED IN ASSESSING BOTH THE INCOME UNDER THE HEAD INCOME FROM OTHER SOURCES, AS DECLARED BY THE ASSESSEE. WE ALSO AGREE WITH THE VIEW OF THE ASSESSING OFFICER THAT THE AMOUNT WRITTEN OFF BY THE ASSESSEE CANNOT BE CONSIDERED AS EXPEND ITURE INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF EARNING OF INCOME, WHICH IS INCLUDED IN THE COMPUTATION OF INCOME UNDER THE HEAD ITA NO. 687/COCH/2013 & CO NO.127/COCH/2013 9 INCOME FROM OTHER SOURCES. ACCORDINGLY, WE SET ASIDE THE ORDER OF LD CIT(A) ON THIS ISSUE AND RESTORE THE DISALLOWA NCE MADE BY THE ASSESSING OFFICER. 7. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS ALLOWED AND THE CROSS OBJECTION FILED BY THE ASSESSEE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 14 TH , DAY OF MAR 2014. SD/ - SD/ - (N.R.S. GANESAN) (B.R. BASKARAN) JUDICIAL MEMBER ACCOUNTANT MEMBER COCHIN: DATED 14 TH MAR 2014 RAJ* COPY TO: 1. APPELLANT THE ASST COMMR OF INCOME TAX, KOTTAYAM 2 THE RESPONDENT M/S MALANKARA PLANTATIONS LTD, MALANKARA BUILDING, KODIMATH, PO BOX 72 KOTTAYAN - 039 3 CIT(A) 4 CIT , KOTTAYAM 5 DR 6 GUARD FILE BY ORDER ASSISTANT REGISTRAR ITAT, COCHIN