Business income

The license fee received by the assessee from Nimrana Hotels (P) Ltd on revenue sharing basis for running the hotels is taxable under the head of ‘Income from business and profession’ and not under the head ‘income from house property’, as held by DelHC in CIT v Francis Wacziarg — In favour of: The assessee.

Business expenditure — Where the expenses are related to the earning of business income ,the AO was not justified in disallowing 80% of the expenses.

Depreciation — Once income is held to be taxable under the head ‘income from business or profession’, depreciation has to be allowed under the provisions of s 32 of the Act.

Deemed dividend — Amounts appearing in the account, which were in fact receipts due to the appellant in his normal course of business dealings, cannot be treated as loans and advances. Hence, the AO was not correct in treating these receipts as deemed dividends under s 2(22)(e).

Decided on: 8 November 2011.