VIJAY S. MALLYA, MUMBAI V. DCIT 20(3), MUMBAI

CO 30/MUM/2010

• Counselvise Citation: [2012] 122 COUNSELVISE.COM (IT) 7509 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 4 month(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 08-06-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: F
• Next Hearing Date: 22-05-2012
• Assessment Year: 2006-2007
• Appeal Filed On: 08-02-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: S S PHATKAR
• Keywords: Business income; Depreciation

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI F BENCH MUMBAI BENCHES, MUMBAI BEFORE SHRI R S SYAL, AM & SHRI VIJAY PAL RAO, JM ITA NO. 4518/MUM/2009 (ASSESSMENT YEAR 2006-07) & ITA NO. 4131/MUM/2010(ASSESSMENT YEAR 2007-08) THE ASST COMMR OF INCOME TAX 20(3), MUMBAI VS SH VIJAY S MALLYA B-103/202 AMEYA HOUSE RAJKUMAR CORNER J P ROAD, ANDHERI (W) MUMBAI 58 (APPELLANT ) (RESPONDENT) CROSS OBJECTION NO. 30/MUM/2010 & CROSS OBJECTION NO. 58/MUM/2011 SH VIJAY S MALLYA B-103/202 AMEYA HOUSE RAJKUMAR CORNER J P ROAD, ANDHERI (W) MUMBAI 58 VS THE ASST COMMR OF INCOME TAX 20(3), MUMBAI (CROSS OBJECTOR ) (RESPONDENT) PAN NO. ACJPM4438P ASSESSEE BY SH S S PHATKAR REVENUE BY SH M RAJAN DT.OF HEARING 24 TH MAY 2012 DT OF PRONOUNCEMENT 8 TH , JUNE 2012 ORDER PER VIJAY PAL RAO, JM THESE APPEALS BY THE REVENUE AND THE CROSS OBJECTIO NS BY THE ASSESSEE ARE DIRECTED AGAINST TWO SEPARATE ORDERS O F THE COMMISSIONER OF INCOME TAX(APPEALS) DATED 13.5.2009 AND 22.3.2010 FOR THE ASSESSMENT YEARS 2006-07 AND 2007-08 RESPECTIVELY. SH VIJAY S MALLYA 2 2 REVENUE HAS RAISED COMMON GROUNDS IN THESE APPEAL S; THEREFORE, THE GROUNDS RAISED FOR ASSESSMENT YEAR 2006-07 ARE REPR ODUCED AS UNDER: 1 THE LEARNED CIT(A) HAS ERRED ON FACTS AND IN LAW A ND IN THE CIRCUMSTANCES OF THE CASE IN DIRECTING THE AO TO TRE AT 40% OF INCOME FROM LETTING OUT BALANCE PORTION EXCLUDING THE BANQUET H AIL AMBROSIA OF THE PREMISES AS BUSINESS INCOME, INSTEAD OF INCOME FROM HOUSE PROPERTY AS ADOPTED BY THE ASSESSING OFFICER. II. THE LEARNED CIT(A) HAS ERRED ON FACTS AND IN LA W AND IN THE CIRCUMSTANCES OF THE CASE IN NOT APPRECIATING THE FA CTS THAT THIS ISSUE HAS BEEN SETTLED BY THE APEX COURT IN FAVOUR OF THE REVE NUE IN ITS LANDMARK JUDGEMENT RENDERED IN THE CASE OF M/S SHAMBHU INVEST MENT PVT. LTD. VS. CIT 263 ITR 143 AND EAST INDIA HOUSING AND LAND DEVELOPMENT TRUST LTD. 42 ITR 49. 3 IN THE CROSS OBJECTIONS, THE ASSESSEE HAS RAISED COMMON GROUNDS AS UNDER: 1 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED C.I.T.(A) ERRED IN BIFURCATING THE RECEIPTS FROM BUSINESS CENTRE FROM M/S. I-FLEX SOLUTIONS LTD., IN RESPECT OF THE PORTIO N OF BUSINESS CENTRE EXCLUDING PREMISES TAKEN FROM M/S. SANMOU MOTELS PVT. LTD., IN TWO PARTS NAMELY (A) AS 40% PERTAINING TO INCOME FROM BUSINESS ON ACCOUNT OF RECEIPT OF SERVICE CHARGES AND (B) 60% ON ACCOUNT OF LEASE OF PROPERTY, WHEN THE AGREEMENT OF BUSINESS CENTRE WITH M/S. I-FLEX SOLUTIONS LTD., DID NOT PROVIDE FOR ANY SEPARATE CHARGES FOR PROPERTY AND OTHER SERVICES PROVIDED AS A PART OF BUSINESS CENTRE BY THE RESPONDENT. II) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LEARNED C.L.T.(A) ERRED IN CONSIDERING THE 60% AS INC OME FROM HOUSE PROPERTY. III) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LEARNED C.I.T.(A) ERRED IN REDUCING THE DISALLOWANCE O F VARIOUS EXPENSES FROM RS.3,31,856/- TO RS.2 LACS ON AD-HOC BASIS INSTEAD OF DELETING THE ENTIRE ADDITION OF RS.3,31,856/-. 3 THUS, THE ONLY ISSUE ARISING FROM THE APPEALS AS WELL AS IN THE CROSS OBJECTIONS OF THE ASSESSEE IS REGARDING TREATMENT OF BUSINESS CENTRE INCOME. SINCE THE CITA) HAS TREATED 40% OF THE SAID INCOME AS BUSINESS INC OME AND 60% AS INCOME FROM HOUSE PROPERTY ; THEREFORE, BOTH THE REVENUE AS WE LL AS THE ASSESSEE ARE AGGRIEVED BY THE ORDER OF THE COMMISSIONER OF INCOME TAX(APPE ALS) ON THIS ISSUE. SH VIJAY S MALLYA 3 4 THE ASSESSING OFFICER NOTED THAT THE ASSESSEE HAS DECLARED GROSS RECEIPT OF ` 58,40,000/- AS BUSINESS CENTRE RECEIPT AGAINST WH ICH THE ASSESSEE HAS CLAIMED VARIOUS EXPENSES ON ACCOUNT OF REPAIRS AND MAINTENA NCE OF BUSINESS CENTRE, INSURANCE, CAR HIRING CHARGES AND AMORTISATION OF T EMPORARY SHED. AFTER DEBITING THE ABOVE EXPENSES, THE ASSESSEE WORKED OUT NET LOS S OF ` 12,87,799/- FROM RUNNING OF THE BUSINESS CENTRE. THE ASSESSING OFFICER WAS OF THE VIEW THAT THE BUSINESS CENTRE INCOME DECLARED BY THE ASSESSEE UNDER THE HEAD IN COME FROM BUSINESS AND PROFESSION CANNOT BE SAID TO HAVE BEEN GENERATED F ROM THE ACTIVITY IN THE NATURE OF TRADE OR BUSINESS. ACCORDINGLY, THE ASSESSING O FFICER CALLED UPON THE ASSESSEE TO EXPLAIN AS TO WHY THE INCOME FROM BUSINESS CENTRE S HOULD NOT BE TAXED AS INCOME FROM HOUSE PROPERTY AS AGAINST INCOME FROM BUSINESS CLAIMED BY THE ASSESSEE. 4.1 IN REPLY, THE ASSESSEE HAS SUBMITTED THAT THE A SSESSEE IS ENGAGED IN REAL ESTATE DEVELOPMENT BUSINESS AND THE PROPERTY HAD BE EN HELD BY THE ASSESSEE AS STOCK IN TRADE WITH THE CLEAR INTENTION TO ATTRACT CUSTOMER FOR THE ASSESSEES PROPOSED I T PROJECT AND NOT FOR EARNING RENTAL INC OME. ACCORDINGLY, THE ASSESSEE SUBMITTED THAT THE INCOME HAS TO BE TAXED AS BUSINE SS INCOME AND NOT AS INCOME FROM HOUSE PROPERTY. THE ASSESSEE HAS RELIED UPON THE DECISION OF THE HONBLE GUJARAT HIGH COURT IN THE CASE OF COMMISSIONER OF I NCOME-TAX V. NEHA BUILDERS P. LTD. REPORTED IN 296 ITR 661(GUJ). 4.2 THE ASSESSING OFFICER DID NOT AGREE WITH THE CO NTENTION OF THE ASSESSEE AND HELD THAT THE INCOME DECLARED BY THE ASSESSEE IS IN COME FROM HOUSE PROPERTY. ACCORDINGLY, THE ASSESSING OFFICER TREATED THE GROS S RECEIPTS OF ` 58,40,000/- AS INCOME FROM HOUSE PROPERTY AND ALLOWED 30% DEDUCTIO N U/S 24 OF THE I T ACT. 4.3 ON APPEAL, THE COMMISSIONER OF INCOME TAX (APPE ALS) HAS NOTED THE FACTS THAT THE ASSESSEE IS NOT FULL OWNER OF THE PROPERTY ADMEASURING 70000 SQ.FT WHICH SH VIJAY S MALLYA 4 WAS LEASED OUT TO M/S I-FLEX SOLUTIONS LTD BECAUSE THE SAME WAS TAKEN BY THE ASSESSEE ON LEASE FROM M/S SANMOU MOTELS PVT LTD., AND THE REMAINING PROPERTY ADMEASURING 25000 SQ.FT CONSTRUCTED AREA WAS OWNED BY THE ASSESSEE. THEREFORE, THE COMMISSIONER OF INCOME TAX(APPEALS) HELD THAT THE RENTAL INCOME RECEIVED FROM THE ACQUIRED PROPERTY ADMEASURING 25000 SQ.FT AND THE ASSESSEE IS THE OWNER OF THE SAME IS TO BE ASSESSED AS INCOME FROM HOUSE PROPERTY. SINCE THE ASSESSEE IS ALSO PROVIDING SERVICES AGAINST THE SERVICE CHARGES , WHICH IS IN THE NATURE OF BUSINESS INCOME; THEREFORE, THE ONLY RENTAL PORTION OF THE T OTAL RECEIPT IN RESPECT OF THE LEASED OUT PROPERTY, MEASURING 2500 SQ,.FT, IS TO BE ASSE SSED AS INCOME FROM HOUSE PROPERTY. THE COMMISSIONER OF INCOME TAX (APPEALS) HAS ACCORDINGLY HELD THAT 60% OF THE GROSS LEASE RENTAL SHALL BE TREATED AS INCOM E FROM HOUSE PROPERTY AND REST 40% TO BE ON ACCOUNT OF SERVICES CHARGES WHICH IS I N THE NATURE OF BUSINESS INCOME. 5 BEFORE US, THE LD AR OF THE ASSESSEE HAS SUBMITTE D THAT THE ASSESSEE HAS DEVELOPED THE I T PARK, WHICH WAS GIVEN TO M/S I-FL EX SOLUTIONS LTD VIDE AGREEMENT DATED 12.4.2004. HE HAS FURTHER SUBMITTED THAT THE PROPERTY IN QUESTION SITUATED AT A DISTANCE OF 12 KM FROM PUNE CITY. IN THE COURSE OF CARRYING OUT OF THE BUSINESS AS A DEVELOPER, THE ASSESSEE HAD ACQUIRED DEVELOPMENT RI GHTS OF THE PROPERTY APPROXIMATELY 12.79 ACRES OF LAND FROM M/S SANMAU M OTELS PVT LTD. IN ORDER TO ATTRACT THE CUSTOMERS TO COME TO THE SITE, IT WAS D ECIDED THAT INITIALLY THE PROPERTY SHOULD BE DEVELOPED ON A TEMPORARY BASIS AND LEASED OUT THE SAME TO SOME COMPANY HAVING LARGE SCALE BUSINESS. ACCORDINGLY, THE ASSESSEE HAS GIVEN THE PROPERTY IN QUESTION ADMEASURING 7000 SQFT TO M/S I -FLEX SOLUTIONS LTD VIDE AGREEMENT DATED 12.4.2009. SUBSEQUENTLY, THE ASSESS EE AS ALSO AGREED TO PROVIDE ADDITIONAL AREA OF 25000 SQ.FT VIDE AGREEMENT DATED 1.9.2004 FOR CONSTRUCTION OF A TEMPORARY SHED ON THE SAID PART OF THE PLOT OF THE LAND. THE LD AR HAS REFERRED THE SH VIJAY S MALLYA 5 CLAUSES OF THE AGREEMENT DATED 12.4.2004 AND 1.9.20 04 AND ADDENDUM DT 12.4.2005. 5.1 HE HAS REFERRED THE PREAMBLE CLAUSE OF AGREEMEN T DATED 12.4.2004 AND SUBMITTED THAT THE ASSESSEE ACQUIRED THE RIGHTS IN THE PROPERTY INCLUDING USE OF 35 CAR PARKING, 110 TWO WHEELERS PARKING AREA. THE ASSESSEE HAS GIVEN A BUSINESS CENTRE TOGETHER WITH FACILITIES AND SERVICES WHICH INCLUDES, CABINS/WORK STATIONS (TABLE SPACES_ AND CONFERENCE ROOMS WHICH ARE READY TO USE. THE ASSESSEE IS ALSO ENGAGED STAFF SERVICES AT ITS OWN COSTS AND EXPENSE S FOR PROVIDING UPKEEP OF BUSINESS FACULTIES AND SERVICES FOR CERTAIN HOURS P ER WORKING DAY. THE ASSESSEE HAS ALSO AGREED TO PROVIDE TRANSPORT SERVICES FOR THE E MPLOYEES/CONSULTANTS OF THE CLIENT ROUND THE CLOCK BETWEEN DESTINATIONS (TO & FRO) AS MAY BE COMMUNICATED FROM TIME TO TIME BY THE CLIENTS. 5.2 THE LD AR HAS REFERRED CLAUSE 11 OF THE AGREEME NT AND SUBMITTED THAT THE ASSESSEE HAS ALSO PROPOSED TO SET OUT A NEW COMMERC IAL PREMISES IN PUNE AND THE CLIENTS HAVE BEEN OFFERED TO CONVEY ITS ACCEPTANCE OR REJECTION OF THE PROPOSAL WITHIN 6 MONTHS FROM THE DATE OF SINGING OF THIS AG REEMENT. 5.3 THE LD AR THEN REFERRED THE AGREEMENT DATED 1.9 .2004 AND SUBMITTED THAT AS PER THE REQUIREMENT OF M/S I-FLEX SOLUTIONS, THE AS SESSEE HAS CONSTRUCTED CENTRALLY AIR- CONDITIONED SHED ADMEASURING 25000 SQ.,FT BUILT UP AREA. THIS ADDITIONAL SPACE WAS GIVEN FOR BETTER UTILISATION OF EARLIER ACCOMMODATI ON GIVEN BY THE ASSESSEE. THUS, THE LD AR HAS SUBMITTED THAT THE ASSESSEE IS RUNNING A BUSINESS CENTRE AND THEREFORE, THE RENTAL INCOME RECEIVED FROM M/S I-FLEX SOLUTIONS LT D., IS TO BE TREATED AS BUSINESS INCOME AND NOT AS INCOME FROM HOUSE PROPERTY. SINCE THE ASSESSEE IS HOLDING THE PROPERTY IN QUESTION AS STOCK IN TRADE; THEREFORE, THE INCOME DERIVED FROM THE STOCK WOULD BE BUSINESS INCOME AND NOT INCOME FROM HOUSE PROPERTY. THE INTENTION OF SH VIJAY S MALLYA 6 THE ASSESSEE WAS TO ATTRACT THE CUSTOMERS FOR THEI R PROPOSED I T PROJECT AS IT WAS FAR AWAY FROM THE CITY OF PUNE AND THEREFORE, THE ASSES SEE HAS GIVEN SOME PART OF THE PROJECT TO I-FLEX SOLUTIONS. HE HAS FURTHER SUBM ITTED THAT SUBSEQUENTLY THE BUSINESS CENTRE WAS PURCHASED BY M/S I-FLEX SOLUTIONS LTD., WHICH SHOWS THE ASSESSEES INTENTION WAS NOT TO EARN RENTAL INCOME TO LEASE OU T THE PROPERTY BUT TO PROMOTE AND DEVELOP THE I T PARK AND ATTRACT THE CLIENTS BY GIVING PART OF THE PROJECT ON RENT. 5.4 THE LD DR ON THE OTHER HAND HAS SUBMITTED THAT THE ASSESSEE IS A DEVELOPER AND NOT SERVICE PROVIDER OR IN THE BUSINESS OF LEAS ING OUT THE PREMISES. THIS IS CLEAR FROM THE FACT THAT THE ASSESSEE ULTIMATELY SOLD THE I T PARK. HE HAS RELIED UPON THE ORDER OF THE ASSESSING OFFICER AND SUBMITTED THAT T HE ASSESSING OFFICER HAS RELIED UPON THE DECISION OF THE HONBLE SUPREME COURT IN T HE CASE OF S SHAMBHU INVESTMENTS P LTD AND THEREFORE, THE RENTAL INCOME DERIVED BY LEASING OUT THE PROPERTY IS ASSESSABLE ONLY UNDER THE HEAD INCOME FROM HOUSE PROPERTY AND NOT AS BUSINESS INCOME. HE HAS FURTHER SUBMITTED THAT I T IS IMMATERIAL WHETHER THE PROPERTY LEASED OUT IS RESIDENTIAL OR COMMERCIAL PR OPERTY; BUT THE MATERIAL IS INCOME EARNED BY LETTING OUT OF THE PROPERTY AND NOT DOING ANY BUSINESS ACTIVITY. HE HAS RELIED UPON THE DECISION OF THE HONBLE PUNJAB & HA RYANA HIGH COURT IN THE CASE OF SHEETAL KHURANA FOODS (P.) LTD. V. INCOME-TAX APPEL LATE TRIBUNAL REPORTED IN 335 ITR 1. 6 WE HAVE CONSIDERED THE RIVAL CONTENTION AS WELL A S THE RELEVANT MATERIAL ON RECORD. THE ISSUE RAISED BY THE REVENUE IN THESE AP PEALS AND THE ASSESSEE IN THE CROSS OBJECTIONS IS REGARDING BIFURCATION OF RENTAL INCOME FROM THE PREMISES IN QUESTION IN THE RATIO OF 60:40 BEING INCOME FROM HO USE PROPERTY AND BUSINESS INCOME RESPECTIVELY BY THE COMMISSIONER OF INCOME T AX(APPEALS). THEREFORE, AS FAR AS THE ISSUE OF RENTAL INCOME WITH RESPECT TO THE P ROPERTY ADMEASURING 7000 SQ.FT SH VIJAY S MALLYA 7 TREATED BY THE COMMISSIONER OF INCOME TAX(APPEALS) AS BUSINESS INCOME IS CONCERNED, THE SAME IS NOT BEFORE US. THE COMMISSI ONER OF INCOME TAX (APPEALS) PROCEEDED ON THE PREMISE THAT THE ASSESSEE HAS TAKE N ON LEASE THE PROPERTY ADMEASURING 7000 SQ.FT AND AGAIN LET OUT THE SAME T O M/S I-FLEX SOLUTIONS LTD AS BUSINESS CENTRE. THEREFORE, WHEN THE ASSESSEE IS N OT THE OWNER OF THE PROPERTY, THE INCOME FROM THE SAME WAS HELD BY THE CIT(A) AS BUSI NESS INCOME; WHEREAS THE PROPERTY ADMEASURING 25000 SQ.FT BELONGING TO THE A SSESSEE AND THE ASSESSEE HAS LET-OUT THE SAME TO I-FLEX SOLUTIONS LTD., HAS PROV IDED VARIOUS SERVICES AND FACILITIES. THE COMMISSIONER OF INCOME TAX(APPEALS) BY BIFURCA TING THE RENTAL INCOME AND LEASE RENTAL HAD TREATED THE EXPENSES IN THE RATI O OF 60:40. THUS, 60% OF LEASE RENTAL WAS HELD TO BE ASSESSED UNDER THE HEAD INCOME FROM HOUSE PROPERTY AND THE BALANCE 40% OF THE LEASE RENTAL WAS HELD AS ASSESSE D AS BUSINESS INCOME AND PROPORTIONATE EXPENSES SHALL BE ALLOWED AGAINST THE BUSINESS INCOME. 7 THE ISSUE WHETHER A PARTICULAR LET OUT IS BUSINES S OR EARNING RENTAL INCOME BY THE OWNER OF THE PREMISES AS TO BE DECIDED IN THE F ACTS AND CIRCUMSTANCES OF EACH CASE. THEREFORE, SO FAR AS THE RENTAL INCOME FOR TH E LET OUT PREMISES OWNED BY THE ASSESSEE IS CONCERNED, THE ISSUE IS SETTLED BY THE HONBLE SUPREME COURT IN VARIOUS DECISIONS AND HELD THAT THE INCOME REALIZED BY SUCH OWNER BY WAY OF RENTAL INCOME FROM A BUILDING WHETHER COMMERCIAL BUILDING OR RESI DENTIAL, IS ASSESSABLE UNDER THE HEAD INCOME FROM HOUSE PROPERTY. THE ONLY EXCEPT IONAL CASE WHETHER THE LET OUT BUILDING IS INSEPARABLE FROM LEASE OUT MACHINERY, P LANT AND FURNITURE. IN OTHER WORDS, IF A BUSINESS PREMISES OR FACTORY IS LET OUT BY THE ASSESSEE FOR A TEMPORARY PERIOD, THEN LET OUT OF THE FACTORY PREMISES BECOME ESSENTI AL FOR LETTING OUT THE MACHINERY AND PLANT AND FURNITURE OF THE FACTORY. ONLY IN SU CH AN EXCEPTIONAL CASE, WHETHER THE PRIMARY PURPOSE AND INTENTION WAS TO LET OUT TH E MACHINERY, PLANT OR FURNITURE AND NOT THE BUILDING, THE RENT RECEIVED FOR THE BU ILDING IS TO BE ASSESSED AS INCOME SH VIJAY S MALLYA 8 FROM OTHER SOURCES AS HELD BY THE HONBLE SUPREME C OURT IN THE CASE OF SULTAN BROTHERS VS CIT REPORTED IN 51 ITR 353. 8 IN THE CASE IN HAND, THE ASSESSEE HAS LET OUT THE PREMISES IN QUESTION AND NOT ANY PLANT, MACHINERY OR FURNITURE. THOUGH, SOME OTH ER SERVICES, AMENITIES AND FACILITIES WERE ALSO PROVIDED BY THE ASSESSEE AS PE R THE BUSINESS REQUIREMENT OF THE TENANTS. THEREFORE, SO FAR AS THE RENTAL INCOME REP RESENTING THE LETTING OUT OF THE PREMISES IS CONCERNED, THE SAME IS ASSESSABLE AS IN COME FROM HOUSE PROPERTY AND ON THAT POINT, WE DO NOT FIND ANY REASON TO INTERFE RE WITH THE FINDINGS OF THE COMMISSIONER OF INCOME TAX(APPEALS). 9 IT IS AN UNDISPUTED FACT THAT THE ASSESSEE HAS RE CEIVED CHARGES FOR PROVIDING SERVICES AND FACILITIES AND AMENITIES INCLUDING TRA NSPORT FACILITIES ETC., TO THE TENANTS, THEN, THE SAID PROPORTION OF THE AMOUNT RECEIVED BY THE ASSESSEE WOULD NOT CONSTITUTE THE INCOME FROM HOUSE PROPERTY. AS PER SEC. 23 OF THE I T ACT, THE ANNUAL LETTING VALUE OF THE PREMISES IS THE SUM FOR WHICH THE PROPERTY MIGHT REASONABLY BE EXPECTED TO LET FROM YEAR TO YEAR OR THE PROPERTY I S LET AND THE ACTUAL RENT RECEIVED OR RECEIVABLE BY LETTING OUT OF THE PREMISES, WHICH EVER IS MORE. THEREFORE, FOR COMPUTATION OF ANNUAL VALUE, ONLY THE RENTAL INCOME AND NOT THE SERVICE CHARGES FOR PROVIDING THE EXTRA FACILITIES AND SERVICES IS RELEVANT. 10 IN THE CASE IN HAND, THE FACILITIES PROVIDED BY THE ASSESSEE ARE NOT IN THE NATURE OF INSEPARABLE FROM THE PREMISES IN QUESTION AND THEREFORE, WHEN THE SERVICES ARE PROVIDED INDEPENDENTLY AND SEPARATELY, THEN THE RECEIPT FROM THE SERVICE CHARGES ARE LIABLE TO BE ASSESSED AS INCOME FROM OT HER SOURCES OR BUSINESS AND NOT INCOME FROM HOUSE PROPERTY. SH VIJAY S MALLYA 9 10.1 EVEN OTHERWISE, FOR COMPUTATION OF ANNUAL LETT ING VALUE AS PER THE PROVISIONS OF SEC. 23 OF THE I T ACT, THE ACTUAL RENT RECEIVED OR RECEIVABLE BY THE OWNER HAS TO BE TAKEN INTO CONSIDERATION AND THERE IS NO SCOPE F OR ADDING ANY OTHER AMOUNT RECEIVED BY THE OWNER FOR PROVIDING ANY OTHER SERVI CE OR FACILITIES TO THE TENANT WHICH WAS NOT DIRECTLY CONNECTED WITH THE LETTING O F THE PROPERTY. IT HAS NOT BEEN DISPUTED THAT THE ASSESSEE WAS NOT PROVIDING THESE SERVICES. 10.2 NONE OF THE PARTIES HAVE DISPUTED THE CORRECTN ESS OF THE RATIO OF 60:40 FOR BIFURCATING THE RECEIPTS FOR RENTAL AND SERVICE CHA RGES BY THE COMMISSIONER OF INCOME TAX (APPEALS). THEREFORE, WE ARE OF THE VIEW THAT THE COMMISSIONER OF INCOME TAX (APPEALS) HAS TAKEN A JUST AND PROPER VI EW ON THIS ISSUE. 11 IN VIEW OF THE ABOVE FACTS AND CIRCUMSTANCES OF THE CASE, WE DO NOT FIND ANY ERROR OR ILLEGALITY IN THE ORDER OF THE COMMISSIONE R OF INCOME TAX(APPEALS), QUA THIS ISSUE AND THE SAME IS UPHELD. 12 THE ASSESSEE HAS ALSO RAISED ADDITIONAL GROUND O F CROSS OBJECTION WHICH IS AS UNDER: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, WITHOUT PREJUDICE TO THE AFORESAID GROUND (NO.1), THE ASSESS ING OFFICER FAILED TO CONSIDER THE ALTERNATE SUBMISSION MADE BY THE APPELLA NT VIDE LETTER DATED NIL FILED ON 19.12.2008 TO TREAT THE COST OF TEMPORARY S HED AS COST OF THE PROJECT CARRIED ON BY THE APPELLANT. 12.1 THE LD AR HAS SUBMITTED THAT THE ASSESSEE RAIS ED THE GROUND, BEING GROUND NO.2 BEFORE THE COMMISSIONER OF INCOME TAX(APPEALS) WHICH HAS NOT BEEN SPECIFICALLY ADJUDICATED BY THE COMMISSIONER OF INC OME TAX(APPEALS) WHILE DECIDING THE GROUND NO.1, THE COMMISSIONER OF INCOM E TAX(APPEALS) STATED IN PARA 4.16 OF THE IMPUGNED ORDER THAT GROUNDS NO.1 & 2 ARE DISPOSED OFF; WHEREAS SH VIJAY S MALLYA 10 GROUND NO.2 RAISED BY THE ASSESSEE WAS AN ALTERNATE GROUND AND REGARDING COST OF TEMPORARY SHED TO BE TREATED AS COST OF PROJECT CAR RIED OUT BY THE ASSESSEE. 12.2 THE LD DR HAS OPPOSED THE ADDITIONAL GROUND RA ISED BY THE ASSESSEE AND SUBMITTED THAT THE ASSESSEE HAS NOT RAISED THIS ROU ND IN THE ORIGINAL GROUND OF CROSS OBJECTION. 13 WE HAVE CONSIDERED THE RIVAL CONTENTION AS WELL AS THE RELEVANT MATERIAL ON RECORD. WE FIND THAT THE ASSESSEE HAS RAISED GROUND NO2 BEFORE THE COMMISSIONER OF INCOME TAX(APPEALS) WHICH IS BEING RAISED BEFORE U S AS AN ADDITIONAL GROUND. THE COMMISSIONER OF INCOME TAX(APPEALS), WHILE DECIDING THE GROUNDS NOS 1 & 2 IN PARA 4 OF THE IMPUGNED ORDER HAS NOT ADJUDICATED THE ALT ERNATE GROUND OF THE ASSESSEE. THUS, THE ADDITIONAL GROUND RAISED BEFORE US IS NO T A FRESH GROUND RAISED FOR THE FIRST TIME ; BUT THE SAME WAS RAISED BEFORE THE COMMISSIO NER OF INCOME TAX(APPEALS) AND WAS NOT ADJUDICATED> THEREFORE, IN THE INTEREST OF JUSTICE, WE ADMIT THE ADDITIONAL GROUND RAISED BY THE ASSESSEE FOR ADJUDI CATION ON MERITS. 13.1 SINCE THE INCOME HAS BEEN BIFURCATED UNDER TWO HEADS AS INCOME FROM HOUSE PROPERTY AND INCOME FROM BUSINESS AND PROFESS ION AND ACCORDINGLY ONLY 40% OF THE EXPENSES CLAIMED BY THE ASSESSEE WERE ALLOWE D AGAINST THE INCOME FROM BUSINESS. AS SUCH, EXPENDITURE ON TEMPORARY SHED WA S NOT ALLOWABLE AS PER THE ORDER OF THE COMMISSIONER OF INCOME TAX(APPEALS). 13.2 IN THE ADDITIONAL GROUND, THE ASSESSEE IS CLAI MING THAT THE TOTAL COST OF TEMPORARY SHED SHOULD BE TREATED AS COST OF THE PRO JECT CARRIED ON BY THE ASSESSEE FOR FUTURE PURPOSES. WE FIND MERITS IN THE ADDITION AL GROUNDS OF THE ASSESSEE AND THEREFORE, THE ASSESSEE IS ENTITLED FOR COST OF TEM PORARY SHED TO BE TREATED AS COST OF THE PROJECT CARRIED BY THE ASSESSEE. SH VIJAY S MALLYA 11 14 IN THE RESULT, THE APPEALS FILED BY THE REVENUE ARE DISMISSED WHEREAS THE CROSS OBJECTIONS OF THE ASSESSEE ARE PARTLY ALLOWED. ORDER PRONOUNCED ON THIS 8 TH , DAY OF JUNE 2012 SD/ SD/- ( R S SYAL ) ACCOUNTANT MEMBER ( VIJAY PAL RAO ) JUDICIAL MEMBER PLACE: MUMBAI : DATED: 8 TH , JUNE 2012 RAJ* COPY FORWARDED TO: 1 APPELLANT 2 RESPONDENT 3 CIT 4 CIT(A) 5 DR /TRUE COPY/ BY ORDER DY /AR, ITAT, MUMBAI