Sh. Ajay Kaila, New Delhi V. ACIT, New Delhi

CO 253/DEL/2014

• Counselvise Citation: [2016] 123 COUNSELVISE.COM (IT) 1886 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 3 month(s) 15 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 07-01-2016
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 06-01-2016
• Assessment Year: 2010-2011
• Appeal Filed On: 22-09-2014
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Rule of consistency; Retrospective amendment; Tax effect
• Section: 56(2); 56

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES : A : NEW DELHI BEFORE SHRI R.S. SYAL, AM & MS SUCHITRA KAMBLE, JM ITA NO.245/DEL/2014 ASSESSMENT YEAR : 2010-11 ACIT, CIRCLE-32(1), NEW DELHI . VS. AJAY KALIA, 128/B/1, VILLAGE KILOKARI, NEAR ASHRAM, NEW DELHI. PAN: AACPK5645F CO NO.254/DEL/2014 (ITA NO.245/DEL/2014) ASSESSMENT YEAR : 2010-11 AJAY KALIA, 128/B/1, VILLAGE KILOKARI, NEAR ASHRAM, NEW DELHI. PAN: AACPK5645F VS. ACIT, CIRCLE-32(1), NEW DELHI ASSESSEE BY : SHRI SURESH ANANTHA RAMAN, CA DEPTT. BY : SHRI K.K. JAISWAL, DR DATE OF HEARING : 06.01.2016 DATE OF PRONOUNCEMENT : 07.01.2016 ITA NO245/DEL/2014 CO NO.253/DEL/2014 2 ORDER PER R.S. SYAL, AM: THIS APPEAL BY THE REVENUE AND THE CROSS OBJECTION BY THE ASSESSEE ARISE OUT OF THE ORDER PASSED BY THE CIT(A ) ON 7.10.2013 IN RELATION TO THE ASSESSMENT YEAR 2010-11. 2. IN SO FAR AS THE APPEAL BY THE REVENUE IS CONCER NED, THE LD. AR SUBMITTED THAT PURSUANT TO THE MANDATE OF SECTIO N 268A, THE CBDT HAS ISSUED CIRCULAR NO. 21 OF 2015 DATED 10.12 .2015 WITH RETROSPECTIVE EFFECT, REVISING THE MONETARY LIMIT T O RS.10,00,000/- FOR NOT FILING APPEALS BEFORE THE TRIBUNAL. HE FUR THER SUBMITTED THAT AS THE TAX EFFECT INVOLVED IN THE INSTANT DEPA RTMENTAL APPEAL IS LESS THAN RS.10,00,000/-, THE EXTANT APPEAL IS N OT MAINTAINABLE. THE LD. D.R., ALTHOUGH SUPPORTED THE ORDER OF THE A SSESSING OFFICER, BUT COULD NOT CONTROVERT THE FACT THAT TAX EFFECT INVOLVED IN THIS APPEAL IS LESS THAN RS.10,00,000/-. 3. FROM PARA 10 OF THE ABOVE CIRCULAR IT IS PALPABL E THAT THE INSTRUCTION IS APPLICABLE TO THE PENDING APPEALS AL SO WITH RETROSPECTIVE EFFECT AND THERE IS A CLEAR-CUT DIREC TION TO THE ITA NO245/DEL/2014 CO NO.253/DEL/2014 3 DEPARTMENT TO WITHDRAW OR NOT PRESS SUCH APPEALS FI LED BEFORE THE ITAT WHEREIN TAX EFFECT IS LESS THAN RS.10,00,000/- . GOING BY THE PRESCRIPTION OF THE AFORENOTED CIRCULAR, WE ARE OF THE VIEW THAT THE REVENUE SHOULD HAVE EITHER NOT FILED THE INSTAN T APPEAL BEFORE THE TRIBUNAL OR WITHDRAWN THE SAME AS THE TAX EFFEC T IN THIS APPEAL IS ADMITTEDLY LESS THAN THE PRESCRIBED LIMIT FOR NO T FILING THE APPEALS. EX CONSEQEUNTI WE DISMISS THE INSTANT APPEAL WITHOUT GOING INTO MERITS OF THE CASE. 4. IN THE RESULT, THE APPEAL OF THE REVENUE STANDS DISMISSED. 5. INSOFAR AS THE CROSS OBJECTION OF THE ASSESSEE I S CONCERNED, THE LD. DR AT THE VERY OUTSET VIGOROUSLY ARGUED THA T THE SAME SHOULD ALSO BE CONSEQUENTIALLY DISMISSED BECAUSE TH E REVENUES APPEAL, PURSUANT TO WHICH THE CROSS OBJECTION WAS F ILED, IS LIKELY TO BE DISMISSED AS A RESULT OF LOW TAX EFFECT. HIS CONTENTION WAS THAT THE CO HAS NO INDEPENDENT EXISTENCE DISTINCT F ROM THE DEPARTMENTAL APPEAL AND HENCE THE SAME CANNOT BE AL LOWED TO SURVIVE. THIS WAS OPPOSED BY THE LD. AR WHO SUBM ITTED THAT THE ITA NO245/DEL/2014 CO NO.253/DEL/2014 4 ISSUE RAISED IN THE CO IS DIFFERENT FROM THE ONE RA ISED IN THE REVENUES APPEAL. 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD. BEFORE EMBARKING UPON THE QUESTION OF THE MAINTAINABILITY OR OTHERWISE OF THE CROSS OB JECTION FILED BY THE ASSESSEE PURSUANT TO THE REVENUES APPEAL, WHIC H INVOLVES TAX EFFECT OF LESS THAN RS.10 LAC AND HAS BEEN DISMISSE D SUPRA , WE NEED TO CONCENTRATE ON THE PRESCRIPTION OF SECTION 253(4) WHICH EMPOWERS THE RESPONDENT TO FILE CROSS OBJECTION, TH E RELEVANT PART OF WHICH READS AS UNDER:- `(4) THE ASSESSING OFFICER OR THE ASSESSEE, AS THE CASE MAY BE, ON RECEIPT OF NOTICE THAT AN APPEAL AGAINST THE ORDER OF . THE COMMISSIONER (APPEALS) HAS BEEN PREFERRED UNDER SUB -SECTION (1) OR SUB-SECTION (2) OR SUB-SECTION (2A) BY THE OTHER PA RTY, MAY, NOTWITHSTANDING THAT HE MAY NOT HAVE APPEALED AGAIN ST SUCH ORDER OR ANY PART THEREOF; WITHIN THIRTY DAYS OF THE RECEIPT OF THE NOTICE, FILE A MEMORANDUM OF CROSS-OBJECTIONS , VERIFIED IN THE PRESCRIBED MANNER, AGAINST ANY PART OF THE ORDER OF . THE COMMISSIONE R (APPEALS), AND ITA NO245/DEL/2014 CO NO.253/DEL/2014 5 SUCH MEMORANDUM SHALL BE DISPOSED OF BY THE APPELLA TE TRIBUNAL AS IF IT WERE AN APPEAL PRESENTED WITHIN THE TIME SPECIFI ED IN SUB-SECTION (3) OR SUB-SECTION (3A). 7. A BARE PERUSAL OF THE ABOVE PROVISION TRANSPIRES THAT THE AO OR THE ASSESSEE (HEREINAFTER REFERRED TO AS `THE OT HER SIDE), ON RECEIPT OF NOTICE OF AN APPEAL HAVING BEEN PREFERRE D BY THE APPEALING PARTY AGAINST THE ORDER PASSED BY THE CIT (A), NOTWITHSTANDING NOT HAVING FILED SEPARATE APPEAL, M AY FILE A CROSS OBJECTION ` AGAINST ANY PART OF THE ORDER OF THE COMMISSIONER (APPEALS). IT IS AMPLY CLEAR FROM THE LANGUAGE OF SUB-SECTI ON (4) THAT THE RIGHT TO FILE CROSS OBJECTION HAS BEEN GIV EN TO THE OTHER SIDE AGAINST ANY PART OF THE ORDER OF THE CIT(A), W HETHER OR NOT CONNECTED WITH THE ISSUES RAISED IN THE APPEAL BY T HE APPEALING PARTY. THERE CAN BE ONE POSSIBILITY WHEN THE CROSS OBJECTION IS FILED BY THE OTHER SIDE IN SUPPORT OF THE ORDER PAS SED BY THE CIT(A) AND THE OTHER POSSIBILITY CAN BE OF FILING C O AGAINST THE ISSUES DECIDED AGAINST IT IN THE IMPUGNED ORDER. T HERE CAN BE STILL ONE MORE POSSIBILITY WHEN THE OTHER SIDE, APA RT FROM ITA NO245/DEL/2014 CO NO.253/DEL/2014 6 SUPPORTING THE IMPUGNED ORDER APPEALED AGAINST, MAY ALSO ASSAIL CERTAIN OTHER ISSUES DECIDED AGAINST IT. THIS DIVUL GES THAT THE CO CAN BE FILED BY THE OTHER SIDE, ON RECEIPT OF NOTIC E OF APPEAL HAVING BEEN FILED BY THE APPEALING PARTY, ON ANY IS SUE DE HORS THE ISSUED RAISED BY THE APPEALING PARTY. ON FILING, A CO ASSUMES THE CHARACTER OF AN APPEAL, WHICH IS APPARENT FROM SECT ION 253(4), WHICH PROVIDES THAT: ` SUCH MEMORANDUM SHALL BE DISPOSED OF BY THE APPELLATE TRIBUNAL AS IF IT WERE AN APPEAL PRES ENTED WITHIN THE TIME SPECIFIED IN SUB-SECTION (3) OR SUB-SECTIO N (3A) . RULE 22 OF THE ITAT RULES, 1963 ALSO PROVIDES THAT: A MEMORANDUM OF CROSS-OBJECTIONS FILED UNDER SUB-SECTION (4) OF SEC TION 253 SHALL BE REGISTERED AND NUMBERED AS AN APPEAL AND ALL THE RULES, SO FAR AS MAY BE, SHALL APPLY TO SUCH APPEAL. THIS SHOWS THAT A CROSS OBJECTION IS TREATED IN NO WAY DIFFERENT FROM A SEP ARATE APPEAL BY THE TRIBUNAL. 8. THE LANGUAGE OF SECTION 253(4) MAKES IT ABUNDA NTLY VIVID THAT THE SCOPE OF A CROSS OBJECTION IS NOT RESTRICTED ON LY TO THE POINTS ITA NO245/DEL/2014 CO NO.253/DEL/2014 7 DECIDED AGAINST THE APPEALING PARTY, BUT, ALSO EXTE NDS TO THE POINTS DECIDED AGAINST THE OTHER SIDE. THE MANDATE OF THE PROVISION IS QUITE VAST AND IS UNLIKE THE PRESCRIPT ION OF RULE 27 OF THE ITAT RULES, WHICH IS LIMITED IN ITS REALM EMPOW ERING THE RESPONDENT TO SUPPORT THE IMPUGNED ORDER BY PROVIDI NG THAT: `THE RESPONDENT, THOUGH HE MAY NOT HAVE APPEALED, MAY SU PPORT THE ORDER APPEALED AGAINST ON ANY OF THE GROUNDS DECIDE D AGAINST HIM. 9. THE LD. DRS CONTENTION THAT THE CROSS OBJECTION S FILED BY THE ASSESSEES SHOULD BE INVARIABLY DISMISSED IN LIMINE FOR THE REASON OF THE DISMISSAL OF THE APPEALS OF THE DEPAR TMENT BECAUSE OF LOW TAX EFFECT, IN OUR CONSIDERED OPINION, DOES NOT STAND TO ANY LOGIC IN ALL CIRCUMSTANCES. IN A SITUATION WHERE TH E CROSS OBJECTION IS IN SUPPORT OF THE IMPUGNED ORDER, THEN, OF COURS E, SUCH A CROSS OBJECTION HAS NO INDEPENDENT EXISTENCE AND IS LIABL E TO BE DISMISSED AS INFRUCTUOUS PURSUANT TO THE DISMISSAL OF THE APPEAL OF THE REVENUE. HOWEVER, IN A CASE WHERE THE CROSS OBJECTION ITA NO245/DEL/2014 CO NO.253/DEL/2014 8 FILED U/S 253(4) IS ON AN ISSUE INDEPENDENT OF THE APPEAL FILED BY THE REVENUE, THEN, SUCH A CROSS OBJECTION CANNOT BE DISMISSED SIMPLY ON THE GROUND OF DISMISSAL OF THE APPEAL BY THE REVENUE INVOLVING LOW TAX EFFECT. ACCEPTANCE OF THIS CONTE NTION OF THE LD. DR WOULD AMOUNT TO SNATCHING A VALUABLE RIGHT GIVEN BY THE STATUTE TO THE ASSESSEE TO FILE AND PURSUE AN APPEA L BEFORE THE TRIBUNAL IRRESPECTIVE OF ANY TAX EFFECT. WE, THERE FORE, NEGATE THE CONTENTION OF THE LD. DR BY HOLDING THAT THE INSTAN T CO CHALLENGING THE IMPUGNED ORDER, IS MAINTAINABLE. 10. THE ONLY ISSUE RAISED BY THE ASSESSEE IN HIS CO IS AGAINST THE TREATMENT OF RENTAL INCOME FROM PROPERTY LOCATED AT F-62, OKHLA, NEW DELHI, AS CHARGEABLE TO TAX UNDER THE HEAD INC OME FROM OTHER SOURCES AS AGAINST `INCOME FROM HOUSE PROPER TY DECLARED BY THE ASSESSEE. 11. BRIEFLY STATED, THE FACTS APROPOS THIS ISSUE AR E THAT THE ASSESSEE LET OUT ITS BUILDING ALONG WITH FURNITURE & FIXTURES AND ELECTRICAL INSTALLATIONS AND OFFERED THE RENTAL INC OME SO RECEIVED ITA NO245/DEL/2014 CO NO.253/DEL/2014 9 UNDER THE HEAD INCOME FROM HOUSE PROPERTY. THE AO HELD SUCH INCOME TO BE CHARGEABLE TO TAX UNDER THE HEAD INCO ME FROM OTHER SOURCES, WHICH VIEW CAME TO BE ECHOED IN THE FIRST APPEAL. THE ASSESSEE IS AGGRIEVED AGAINST THE TREATMENT GIVEN T O SUCH RENTAL INCOME AS FALLING UNDER THE HEAD INCOME FROM OTHER SOURCES. 12. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD. THERE IS NO DISPUTE O N THE FACT THAT THE LEASE RENT RECEIVED BY THE ASSESSEE WAS A COMPO SITE RENT OF BUILDING, FURNITURE & FIXTURES AND ELECTRICAL INSTA LLATIONS. IT IS NOT THE CASE OF THE ASSESSEE THAT THE LETTING OUT THIS PROPERTY IS HIS BUSINESS ACTIVITY. THUS, THE DISPUTE IS NARROWED D OWN TO CONSIDERING SUCH RENTAL INCOME EITHER UNDER THE HEA D INCOME FROM HOUSE PROPERTY OR INCOME FROM OTHER SOURCES. 13. SECTION 22 OF THE ACT PROVIDES THAT THE ANNUA L VALUE OF THE PROPERTY CONSISTING OF ANY BUILDING OR LAND APPURTE NANT THERETO OF WHICH THE ASSESSEE IS THE OWNER, OTHER THAN SUCH PO RTIONS OF SUCH PROPERTY AS HE MAY OCCUPY FOR THE PURPOSES OF ANY B USINESS OR ITA NO245/DEL/2014 CO NO.253/DEL/2014 10 PROFESSION CARRIED ON BY HIM, SHALL BE CHARGEABLE T O INCOME-TAX UNDER THE HEAD INCOME FROM HOUSE PROPERTY. THE E SSENCE OF SECTION 22 IS THAT THE ANNUAL VALUE OF PROPERTY CON SISTING OF ANY BUILDING OR LAND APPURTENANT THERETO IS CHARGEABLE TO TAX UNDER THE HEAD INCOME FROM OTHER SOURCES. SECTION 56(1) PROVIDES THAT INCOME OF EVERY KIND, WHICH IS NOT TO BE EXCLUDED F ROM THE TOTAL INCOME, SHALL BE CHARGEABLE TO INCOME-TAX UNDER THE HEAD INCOME FROM OTHER SOURCES, IF IT IS NOT CHARGEABLE TO INC OME-TAX UNDER ANY OF THE HEADS SPECIFIED IN SECTION 14, ITEMS A T O E. SUB- SECTION (2) TO SECTION 56 CONTAINS AN INCLUSIVE LIS T OF THE INCOMES WHICH ARE CHARGEABLE TO TAX UNDER THE HEAD INCOME FROM OTHER SOURCES. CLAUSE (III) OF SUB-SECTION (2) OF SECTIO N 56, WHICH IS RELEVANT FOR OUR PURPOSE, READS AS UNDER : - `WHERE AN ASSESSEE LETS ON HIRE MACHINERY, PLANT OR FURNITURE BELONGING TO HIM AND ALSO BUILDINGS, AND THE LETTIN G OF THE BUILDINGS IS INSEPARABLE FROM THE LETTING OF THE SAID MACHINE RY, PLANT OR FURNITURE, THE INCOME FROM SUCH LETTING, IF IT IS N OT CHARGEABLE TO ITA NO245/DEL/2014 CO NO.253/DEL/2014 11 INCOME-TAX UNDER THE HEAD 'PROFITS AND GAINS OF BUS INESS OR PROFESSION'; 14. WHEN WE READ SECTION 22 IN JUXTAPOSITION TO SEC TION 56(2) OF THE ACT, IT IS MANIFESTED THAT WHEREAS THE FORMER S ECTION COVERS INCOME ONLY FROM LAND OR BUILDING APPURTENANT THERETO , THE LATTER COVERS WITHIN ITS AMBIT INCOME FROM INSEPARABLE LET TING OF BUILDING, MACHINERY, PLANT OR FURNITURE, ETC. AS, ADMITTEDLY, THE ASSESSEE EARNED RENTAL INCOME FROM LETTING OUT OF B UILDING, FURNITURE & FIXTURES AND ELECTRICAL INSTALLATIONS I N A COMPOSITE MANNER WHICH ARE INSEPARABLE FROM EACH OTHER, SUCH INCOME SPECIFICALLY FALLS UNDER THE HEAD INCOME FROM OTHE R SOURCES AND IS LIABLE TO BE TAXED ACCORDINGLY. THE HONBLE SUPR EME COURT IN A CELEBRATED DECISION IN SULTAN BROTHERS (P) LTD. VS. CIT (1964) 51 ITR 353 (SC), HAS HELD THAT WHERE THE BUILDING AND FIXTURES WERE INTENDED TO BE USED TOGETHER, THEN, COMBINED RENTAL INCOME FROM SUCH INSEPARABLE LETTING OUT SHOULD BE CHARGED TO T AX UNDER THE HEAD INCOME FROM OTHER SOURCES. THUS IT IS CLEAR THAT THE LD. ITA NO245/DEL/2014 CO NO.253/DEL/2014 12 CIT(A) HAS RIGHTLY TREATED LEASE RENTALS AS FALLING UNDER THE HEAD INCOME FROM OTHER SOURCES. 15. AS REGARDS THE CONTENTION OF THE LD. AR FOR FOL LOWING THE RULE OF CONSISTENCY INASMUCH AS IN EARLIER YEARS SU CH INCOME WAS ASSESSED UNDER THE HEAD INCOME FROM HOUSE PROPERTY , WE FIND NO FORCE IN THE SAME AS ADMITTEDLY THERE CAN BE NO EST OPPEL AGAINST THE STATUTE. WHEN SECTION 56(2)(III) SPECIFICALLY P ROVIDES FOR TREATING SUCH INCOME AS FALLING UNDER THE HEAD INC OME FROM OTHER SOURCES, THERE IS NO RATIONALE IN TREATING IT AS ` INCOME FROM HOUSE PROPERTY SIMPLY ON THE GROUND THAT IN THE EARLIER YEARS SUCH INCOME HAS BEEN WRONGLY TAXED UNDER SECTION 22 OF T HE ACT. THERE IS NO RES JUDICATA IN SO FAR AS THE TAXATION PROVISIONS ARE CONCERNED, MORE SPECIFICALLY, WHEN THE EARLIER ACCE PTED POSITION IS CONTRARY TO THE SPECIFIC PROVISIONS OF THE ACT. WE, THEREFORE, REFUSE TO COUNTENANCE THIS ARGUMENT. 16. IN THE ULTIMATE ANALYSIS, WE APPROVE THE VIEW T AKEN BY THE LD. CIT(A) IN TREATING LEASE RENTAL AS FALLING UNDE R THE HEAD ITA NO245/DEL/2014 CO NO.253/DEL/2014 13 INCOME FROM OTHER SOURCES IN CONTRAST TO THE ASSE SSEES STAND OF SUCH INCOME BEING CHARGEABLE UNDER THE HEAD INCOME FROM HOUSE PROPERTY. 17. IN THE RESULT, THE CROSS OBJECTION OF THE ASSES SEE IS ALSO DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 07.01.2016. SD/- SD/- [SUCHITRA KAMBLE] [R.S. SYAL] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED, 07 TH JANUARY, 2016. DK COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR, ITAT AR, ITAT, NEW DELHI.