Lee Martin Beach Resorts P Ltd., Coimbatore V. ITO, Coimbatore

CO 17/CHNY/2015

• Counselvise Citation: [2015] 124 COUNSELVISE.COM (IT) 7419 (ITAT-CHENNAI)
• Duration Of Justice: 10 month(s) 12 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 31-12-2015
• Appeal Filed By: Assessee
• Bench Allotted: D
• Next Hearing Date: 01-12-2015
• Assessment Year: 2011-2012
• Appeal Filed On: 17-02-2015
• Court: TRIBUNAL
• Department Lawyers: A B KOLI; P N RAJAN
• Keywords: Additional evidence

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, CHENNAI , ! ' ! # . $ , % &' BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI DUVVURU RL REDDY, JUDICIAL MEMBER ./ ITA NO. 8/MDS/2015 AND C.O.NO.17/MDS/2015 / ASSESSMENT YEAR : 2011-12 THE INCOME-TAX OFFICER, CORPORATE WARD-I, COIMBATORE. APPELLANT) V. M/S. LEE MARTIN BEACH RESORTS PVT. LTD., 54, METTUPALAYAM ROAD, G.N.MILLS (POST), COIMBATORE 641029. PAN AABCL6514G RESPONDENT) / APPELLANT BY : SHRI A.B.KOLI, JCIT / RESPONDENT BY : SHRI P.N.RAJAN, ADVOCATE ! / DATE OF HEARING : 01.12.2015 '# ! / DATE OF PRONOUNCEMENT: 31.12.2015 ( / O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER THE APPEAL BY THE REVENUE AND THE CROSS OBJECTION BY THE ASSESSEE ARE DIRECTED AGAINST THE ORDER OF THE COMMISSIONER - - ITA 8 & CO 17/15 2 OF INCOME-TAX(APPEALS) DATED 27.10.2014 FOR THE ASS ESSMENT YEAR 2011-12. 2. THE GRIEVANCE OF THE REVENUE IS WITH REGARD TO ACCEPTANCE OF ADDITIONAL EVIDENCE IN THE FORM OF UN DATED PHOTOGRAPHS DURING THE APPEAL PROCEEDINGS, WITHOUT AFFORDING ADEQUATE OPPORTUNITY TO THE ASSESSING OFFICER UNDER RULE 46A(3) OF THE I.T.RULES, 1962. IN THE CROSS OBJECTION, T HE ASSESSEE HAS RAISED THE FOLLOWING GROUND: 2. THE LEARNED CIT(A) HAS ALLOWED THE APPEAL AFTER HOLDING THAT THE BUSINESS ASSET PURCHASED BY THE ASSESSEE FOR A FUTURE BEACH RESORT AND IT IS NOT PU T TO COMMERCIAL USE BY THE COMPANY TILL DATE AS THE SAME IS NOT IN A HABITABLE CONDITION WITHOUT PROPER RENOVATION AND REPAIRS AND THUS PROVISIONS OF SEC.23(1)(A) CANNOT BE INVOKED WITH RESPECT TO THE PROPERTY. 3. THE FACTS OF THE CASE ARE THAT THE MAIN OBJECTIV E OF THE ASSESSEE IS TO ESTABLISH, RUN, ACQUIRE, DISPOSE OF BEACH RESORTS, HOTELS, MOTELS, HOLIDAY CAMPS, GUEST HOUSES, PUBS, BARS, BEERS, REFRESHMENT ROOMS, HEALTH CLUBS, LODGING OR APARTME NTS AND SO ON. DURING THE FINANCIAL YEAR RELEVANT TO THE ASSE SSMENT YEAR UNDER APPEAL, THE ASSESSEE PURCHASED A PROPERTY CON TAINING LAND, BUILDINGS AND OTHER AMENITIES POPULARLY KNOWN AS NORTH COMORIN PREMISES SITUATED IN BEACH ROAD, TUTICORIN WITH A BUILT - - ITA 8 & CO 17/15 3 UP AREA OF 39,680 SQ.FT. THE PROPERTY ALSO CONTAIN ING ANOTHER BUILDING WITH BUILT UP AREA OF 11,520 SQ.FT. POPULA RLY KNOWN AS BISON HOUSE PREMISES. THE PROPERTY WAS PURCHASED FOR ` 8,15,92,000/-. THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE HAS NOT OFFERED ANY INCOME FROM THIS PROPE RTY. THE ASSESSING OFFICER ALSO STATED IN THE ORDER THAT THE SAID PROPERTY WAS NOT USED BY THE ASSESSEE COMPANY FOR BUSINESS O F RESORTS NOR WAS IT USED FOR ANY OFFICE PREMISES. THE ASSES SING OFFICER HELD THAT THE ASSESSEE BEING A COMPANY IS A FICTIO NAL ENTITY AND NOT A HUMAN, HENCE THE DEDUCTION MADE AVAILABLE U/S .23 CANNOT B GIVEN TO THE ASSESSEE. HENCE, THE ANNUAL VALUE O F THE HOUSE CANNOT BE NIL. ACCORDINGLY, THE ASSESSING OFFICER ESTIMATED THE ANNUAL LETTING OUT VALUE AS 8% OF THE FAIR MARKET V ALUE OF THE PROPERTY AND MADE ADDITION OF ` 45,69,152/-. AGAINST THIS, THE ASSESSEE CARRIED THE MATTER BEFORE THE CIT(APPEALS) . 4. ON APPEAL, THE CIT(APPEALS) AFTER GOING THROUGH THE PHOTOS PRODUCED BY THE ASSESSEE OBSERVED THAT THESE ARE PHOTOS OF OLD BUILDING CONSTRUCTED VERY LONG BACK A ND THE BUILDING WAS IN VERY BAD CONDITION, NOT FIT FOR OCC UPANCY. THE ELECTRICITY CONNECTION WIRES WERE HANGING ALONG WIT H BROKEN - - ITA 8 & CO 17/15 4 WOODEN STAIRCASE AND PEELING AWAY OF CEILING. THE CIT(APPEALS) FURTHER OBSERVED THAT THERE IS NO PROPER FLOORING A ND ALSO THE TOP CEILING OF THIS PROPERTY IS IN A VERY BAD CONDITION AND IT IS SEEN FROM THE PHOTOGRAPHS THAT THE BUILDING IS NOT IN A HABITABLE CONDITION. THE ASSESSEE BEING INVOLVED IN REAL ESTA TE BUSINESS HAS PROCURED THIS PROPERTY FOR FUTURE AS BEACH RESO RT. THE CIT(APPEALS) ALSO OBSERVED THAT THIS PROPERTY APPEA RS TO HAVE BEEN BUILT DURING THE BRITISH TIME AND IS NOT PUT T O COMMERCIAL USE BY THE COMPANY TILL DATE AND THE ASSESSEE IS TR YING TO RENOVATE THE PROPERTY AFTER OBTAINING NECESSARY APP ROVAL FROM THE STATE GOVERNMENT OF TAMIL NADU. HENCE, ACCORDI NG TO THE CIT(APPEALS), THE PROVISIONS OF SEC.23(1)(A) OF THE ACT CANNOT BE INVOKED IN RESPECT OF THIS PROPERTY. THE CIT(APPEA LS) FURTHER OBSERVED THAT IT IS A FACT THAT THE PROPERTY FORMS PART OF BUSINESS ASSET AND SINCE THE PROPERTY IS IN A STATE WHERE HU MAN HABITATION IS NOT POSSIBLE, IT CANNOT BE SAID THAT THE PROPERTY WILL HAVE ANY VALUE WITHOUT PROPER RENOVATION. ACCORDIN GLY, HE DELETED THE ADDITION MADE BY THE AO. AGGRIEVED, T HE REVENUE IS IN APPEAL BEFORE US. - - ITA 8 & CO 17/15 5 5. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE M ATERIAL ON RECORD. IN OUR OPINION, THE CONTENTION OF THE A SSESSEE IS TO BE UPHELD ON THE REASON THAT THE ASSESSEE HAS NOT COMM ENCED ANY COMMERCIAL ACTIVITY IN THE ASSESSMENT YEAR UNDER CO NSIDERATION. FURTHER, IT IS BROUGHT TO OUR NOTICE THAT IN SUBSEQ UENT ASSESSMENT YEAR 2012-13, THE AO REFERRED THE MATTER TO THE INS PECTOR TO ENQUIRE ABOUT THE PROPERTY AND IT IS SEEN THAT THE PROPERTY IS IN A DILAPIDATED CONDITION. THERE IS NO ELECTRICITY AND ELECTRICITY CONNECTION WIRES WERE HANGING ALONG WITH BROKEN WOO DEN STAIRCASE AND PEELING AWAY OF CEILING AND NOT IN US E. THE BUILDING IS IN A BAD CONDITION. SINCE THE PROPERT Y IS IN A BAD CONDITION, ANNUAL LETTING VALUE OF THE BUILDING CAN NOT BE TAKEN AT NIL. FURTHER, AS OBSERVED BY THE SUPREME COURT IN THE CASE OF CHENNAI PROPERTIES & INVESTMENTS LTD. V. CIT (56 TA XMANN.COM 456), ONE HAS TO SEE THE INTENTION OF THE ASSESSEE AND LETTING OUT OF THE PROPERTY BEING BUSINESS ACTIVITY OF THE ASSE SSEE. IT IS NOT APPROPRIATE TO INVOKE THE PROVISIONS OF SEC.23(1)(A ) OF THE ACT. IN OUR OPINION, THOUGH THE CIT(APPEALS) CONSIDERED THE UNDATED PHOTOGRAPHS BUT THE FACT REMAINS THAT THE BUILDING IS IN A DILAPIDATED CONDITION AND THERE IS NO ELECTRICITY C ONNECTION. AS - - ITA 8 & CO 17/15 6 SUCH, WE DO NOT FEEL IT APPROPRIATE TO REMIT THE IS SUE BACK TO THE FILE OF THE AO FOR CONSIDERATION AND WE CONFIRM THE FINDING OF THE CIT(APPEALS) ON THIS ISSUE. 6. SINCE, WE HAVE DISMISSED THE GROUND OF APPEAL TA KEN BY THE REVENUE, THE CROSS-OBJECTION FILED BY THE ASSES SEE HAS BECOME INFRUCTUOUS. 7. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED AND THE CROSS-OBJECTION OF THE ASSESSEE IS DISMISSED AS INFRUCTUOUS. ORDER PRONOUNCED ON THURSDAY, THE 31 ST OF DEC , 2015 AT CHENNAI. SD/- SD/- ( $ % . & '( ) ( ) * + , ) DUVVURU RL REDDY - ./012304556037- 8 9: /JUDICIAL MEMBER ! 9:;<<5=1>01>?@AB@3 )8 /CHENNAI, C9 /DATED, THE 31 ST DEC., 2015. MPO* 9D EFGF /COPY TO: 1. /APPELLANT 2. /RESPONDENT 3. H- /CIT(A) 4. H /CIT 5. FIJ K /DR 6. J(L /GF.