Facts of the Case

The Revenue filed multiple appeals against the assessee, Select Infrastructure Pvt. Ltd., concerning the classification of income. The core issue arose from the Income Tax Appellate Tribunal’s decision to bifurcate the assessee’s income into two categories—income from business and income from house property.

The assessee had also claimed depreciation on plant and equipment installed in common areas, from which it earned maintenance charges. Importantly, the assessee clarified that no depreciation was claimed on the building itself.

Further, procedural aspects such as delays in filing appeals were condoned by the Court. The appeals primarily pertained to Assessment Year 2008–09, with a noted omission regarding Assessment Year 2009–10.

 

Issues Involved

  1. Whether the Income Tax Appellate Tribunal was correct in bifurcating income into “business income” and “income from house property”?
  2. Whether payments relating to debentures should be treated as amount paid by the holding company for acquisition of share capital?

 

Petitioner’s Arguments (Revenue)

  • The Revenue challenged the Tribunal’s approach of splitting income into two heads.
  • It sought to contest the correctness of classification, implying that such bifurcation may not align with statutory provisions.
  • The Revenue also attempted to raise an issue regarding treatment of debenture-related payments as share capital acquisition.

 

Respondent’s Arguments (Assessee)

  • The assessee defended the Tribunal’s classification of income under separate heads.
  • It clarified that:
    • No depreciation was claimed on the building, thereby supporting classification under “income from house property.”
    • Depreciation was claimed only on plant and equipment in common areas, which generated maintenance income and justified treatment as business income.

 

Court’s Findings

  • The Delhi High Court framed a substantial question of law on whether bifurcation of income into two heads was justified.
  • The Court accepted the respondent’s clarification regarding depreciation claims.
  • The Court declined to frame any substantial question of law regarding the issue of debenture payments being treated as share capital.
  • Procedural directions were issued allowing parties to file relevant documents from earlier proceedings.
  • Certain appeals were disposed of without prejudice, subject to the outcome of the main appeal. 

Court Order / Final Outcome

  • Substantial question of law framed only on classification of income.
  • No question of law framed on debenture issue.
  • Appeals partly admitted and others disposed of without prejudice.
  • Matter directed to be listed in regular course.

Important Clarifications

  • Dual classification of income is permissible depending on the nature of receipts.
  • Depreciation claim plays a crucial role in determining the head of income.
  • Maintenance charges arising from use of plant and machinery can be treated as business income, even if rental income is taxed under house property.
  • The Court limited its scope strictly to substantial questions of law, rejecting peripheral issues.

Link to download the order -https://delhihighcourt.nic.in/app/case_number_pdf/2018:DHC:8330-DB/SKN05122018ITA8722018_162553.pdf

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