M/s. Tirupati Organisers Pvt. Ltd, Surat V. The ACIT,Circle-4, Surat

CO 96/AHD/2009

• Counselvise Citation: [2012] 122 COUNSELVISE.COM (IT) 7554 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 3 month(s) 26 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 21-09-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 14-09-2012
• Assessment Year: 2006-2007
• Appeal Filed On: 25-05-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: T SANKAR
• Keywords: Business income; Opportunity of being heard; Source of fund

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD D BENCH AHMEDABAD BEFORE SHRI D.K.TYAGI , JUDICIAL MEMBER AND SHRI T.R. MEENA, ACCOUNTANT MEMBER ITA NO. 2920/AHD/2008 ASSESSMENT YEAR :2005-06 A.C.I.T. CIRCLE-4, SURAT ROOM NO.223, AAYAKAR BHAVAN, MAJURA GATE, SURAT. V/S . M/S. TIRUPATI ORGANISERS P. LTD. K.G. ROAD, SURAT PAN NO. AABCT3833A (APPELLANT) .. (RESPONDENT) ITA NO. 977/AHD/2009 ASSESSMENT YEAR :2006-07 & C.O. NO. 96/AHD/2009 ASSESSMENT YEAR :2006-07 A.C.I.T. CIRCLE-4, SURAT ROOM NO.223, AAYAKAR BHAVAN, MAJURA GATE, SURAT. M/S. TIRUPATI ORGANISERS P. LTD. K.G. ROAD, SURAT V/S . V/S. M/S. TIRUPATI ORGANISERS P. LTD. K.G. ROAD, SURAT A.C.I.T. CIRCLE-4, SURAT ROOM NO.223, AAYAKAR BHAVAN, MAJURA GATE, SURAT. (APPELLANT) .. (RESPONDENT) ITA NO. 1573/AHD/2010 ASSESSMENT YEAR :2007-08 & C.O. NO. 230/AHD/2010 ASSESSMENT YEAR :2007-08 A.C.I.T. CIRCLE-4, SURAT ROOM NO.223, AAYAKAR BHAVAN, MAJURA GATE, SURAT. V/S . M/S. TIRUPATI ORGANISERS P. LTD. K.G. ROAD, SURAT ITA NOS. 2920, 977& 1573 AHD OF 08, 09 & 10 & C.O. NOS. 96 & 230 AHD OF 09 & 10 PAGE 2 M/S. TIRUPATI ORGANISERS P. LTD. K.G. ROAD, SURAT V/S. A.C.I.T. CIRCLE-4, SURAT ROOM NO.223, AAYAKAR BHAVAN, MAJURA GATE, SURAT. (APPELLANT) .. (RESPONDENT) BY REVENUE SHRI T. SANKAR, SR.D.R. /BY ASSESSEE SHRI TUSHAR P. HEMANI, A.R. /DATE OF HEARING 14.09.2012 /DATE OF PRONOUNCEMENT 21.09.2012 O R D E R PER : T.R.MEENA, ACCOUNTANT MEMBER THESE THREE APPEALS ARE FILED BY THE REVENUE IN ITA NOS.2920/AHD/2008 & 977/AHD/2009 WHICH HAVE EMANATED FROM THE ORDERS OF THE LEARNED CIT(A)- III, SURAT DATED 10-06-2008 FOR A.Y. 2005-06 & 12.0 1.2009 FOR A.Y. 2006-07 RESPECTIVELY & ITA NO.1573/AHD/2010 WHICH HAS EMANA TED FROM THE ORDER OF THE CIT(A)-IV, SURAT, DATED 29.01.2010 FOR A.Y. 200 7-08 AND BY WAY OF THIS, THE ASSESSEE FILED TWO CROSS OBJECTIONS IN C.O. NOS . 96/AHD/2010 FOR A.Y. 2006-07 & C.O. NO.230/AHD/2010 FOR A.Y. 2007-08. 2. THE GROUND OF REVENUES APPEALS AS WELL AS ASSE SSEES C.O. IS REVOLVING AROUND BUSINESS INCOME TREATED AS INCOME FROM HOUSE PROPERTY BY THE A.O. IN ALL THE YEARS. THE FACTUAL MATRIX OF T HE CASE IS THAT THE ASSESSEE HAD TWO SOURCES OF INCOME DURING THE YEARS UNDER CO NSIDERATION. THE FIRST INCOME (AMOUNTS ARE DIFFERENT IN DIFFERENT YEARS) F ROM OPERATIONS BASICALLY RECEIVED FROM THREE DIAMOND FIRMS FOR PROVIDING BUS INESS ACCOMMODATION IN ITA NOS. 2920, 977& 1573 AHD OF 08, 09 & 10 & C.O. NOS. 96 & 230 AHD OF 09 & 10 PAGE 3 THE PROPERTY UNDER OWNERSHIP OF COMPANY, THE SECOND INCOME (AMOUNTS ARE DIFFERENT IN DIFFERENT YEARS) IS FROM THE SALE OF C ANTEEN COUPONS. THE APPELLANT ENTERED INTO JOINT BUSINESS AGREEMENT (JBA) WITH TH REE PARTIES TO PROVIDE THE INFRASTRUCTURE INCLUDING ELECTRICAL INSTALLATION, L IFTS PLANT AND MACHINERY, SECURITY SYSTEMS CANTEEN, HOUSE KEEPING ETC ALONGWITH RESPON SIBILITY FOR ITS OPERATION AND MAINTENANCE INCLUDING PROVIDING SECURITY, HOUSE KEEPING AND CANTEEN FACILITIES AND OTHER PARTIES TO EMPLOY THEIR SKILLE D WORK FORCE AND MANUFACTURING EXPERTISE FOR PROCESSING OF DIAMONDS. DURING THE Y EARS UNDER CONSIDERATION THEY JOINTLY CARRIED BUSINESS ACTIVITY OF PROCESSIN G OF DIAMONDS ON A JOB WORK BASIS AND SHARED ITS REVENUE. THE A.O. HAD GIVEN R EASONABLE OPPORTUNITY OF BEING HEARD TO THE APPELLANT AND AFTER ANALYZING TH E SERVICE PROVIDED BY THE APPELLANT AND TERMS AND CONDITIONS OF THE AGREEMENT AMONG THEM, HE CONCLUDED MAJOR RECEIPTS AS INCOME FROM HOUSE PROPE RTY ON WHICH 30% DEDUCTION U/S.24 WAS ALLOWED BY THE A.O., HOWEVER, THE INCOME FROM THE SALE OF CANTEEN COUPONS WERE TREATED AS BUSINESS INCOME BY THE A.O. 3. BEING AGGRIEVED BY THE ORDER OF THE A.O., THE AS SESSEE CARRIED THE MATTER BEFORE THE CIT(A) WHO HAS DELETED THE ADDITI ON IN A.Y. 05-06 & 06-07 BY OBSERVING AS UNDER: I HAVE CONSIDERED THE SUBMISSIONS AS WELL AS JUDIC IAL PRONOUNCEMENTS CITED BY THE AO AND THE APPELLANT. ON CONSIDERATION OF FACTS, I FIND THAT FOLLOWING FACTS HAVE NOT BEEN CONSIDERED BY THE AO WHILE COMING TO CONCLUSION THAT SHARE OF JBA RECEIV ED BY THE APPELLANT WAS INCOME FROM HOUSE PROPERTY AND NOT INCOME FR OM BUSINESS: ITA NOS. 2920, 977& 1573 AHD OF 08, 09 & 10 & C.O. NOS. 96 & 230 AHD OF 09 & 10 PAGE 4 (I) THE AMOUNT RECEIVED UNDER JBA WAS TOWARDS NOT O NLY USE OF INFRASTRUCTURE BUT ALSO ITS OPERATION AND MAINTE NANCE AND FOR PROVIDING HOST OF UTILITIES AND SERVICES. (II) THE APPELLANT WAS CARRYING ON THE ACTIVITY IN AN ORGANIZED MANNER AND ON DAILY BASIS BY EMPLOYING A TEAM OF PERSONNEL. (III) THE APPELLANT WAS RUNNING NUMBER OF OPERATION AL DEPARTMENTS ON DAILY BASIS LIKE ANY BUSINESS HOUSE SUCH AS CANTEEN, SUPPORT, SECURITY ETC. (IV) THE APPELLANT MADE ACQUISITION OF 2 COMPANIES THROUGH AMALGAMATION AND MERGER FOR DEVELOPMENT OF THE INFRASTRUCTURE. (V) IT HAD DEVELOPED THE INFRASTRUCTURE KEEPING IN MIND THE REQUIREMENTS OF DIAMOND TRADING CO(DTC) APPLICABLE TO ITS SITE HOLDERS FACTORIES AS WELL AS ALL THE LABOUR LA W REGULATIONS. (VI) INSTEAD OF HAVING SIMPLE MANNER OF DERIVING IN COME IT ENTERED IN TO JBA TO ENSURE THAT IT CAN ALSO GET TH E REWARDS OF BUSINESS DONE JOINTLY. (VII) IT IS ALSO SEEN THAT THE USER HAD NO RIGHT OF OCCUPANCY. THEY HAD ONLY LIMITED ACCESS TO USE THE SPACE FOR T HE PURPOSE OF THE BUSINESS AND THAT TOO IN RESPECT OF CERTAIN ACTIVITIES, PREMISES WERE FULLY IN CONTROL OF THE A PPELLANT. (VIII) THE APPELLANT HAD ALSO OBTAINED REGISTRATION UNDER LABOUR LAW AND OTHER APPLICABLE FACTORY LAWS. ALL THE ABOVE FACTS SUPPORT THE INTENTION OF THE AP PELLANT OF EXPLOITING ITS INFRASTRUCTURE COMMERCIALLY WHICH DISTINGUISHES IT FROM A NORMAL OWNER OF PROPERTY WHO HAD INTENTION TO EARN RENTAL INCOME BY LETTING IT OUT. I HAVE ALSO GONE THROUGH THE JUDGMENTS RELIED UPON BY THE AO & THE APPELLANT. THE CRUCIAL TEST LAID DOWN BY ALL THE C OURTS IS THAT MERE FACT THAT THE INCOME IS ATTACHED TO IMMOVABLE PROPERTY, CANNOT BE SOLE ITA NOS. 2920, 977& 1573 AHD OF 08, 09 & 10 & C.O. NOS. 96 & 230 AHD OF 09 & 10 PAGE 5 CRITERIA FOR ASSESSMENT OF SUCH INCOME AS INCOME FR OM HOUSE PROPERTY. IT IS NECESSARY TO FIND OUT AS TO WHAT IS THE PRIMA RY OBJECT OF THE ASSESSEE WHILE EXPLOITING THE PROPERTY. IF IT IS F OUND THAT THE MAIN INTENTION IS FOR SIMPLY LETTING OUT PROPERTY OR ANY PORTION THEREOF, THE RESULTANT INCOME MUST BE ASSESSED HELD AS INCOME FR OM HOUSE PROPERTY. IF, ON THE OTHER HAND, THE MAIN INTENTIO N IS FOUND TO BE THE EXPLOITATION OF IMMOVABLE PROPERTY BY WAY OF COMMER CIAL ACTIVITIES THEN THE RESULTANT INCOME MUST BE HELD AS BUSINESS INCOM E. THE AO HAS RELIED UPON THE CASE OF SHAMBHU INVESTM ENT P LTD (SUPRA) WHEREIN HONBLE COURT AFTER LAID DOWN LAW T HAT WHAT WAS TO BE SEEN WAS THE INTENTION OF ASSESSEE. IF THE INTENTI ON WAS TO EXPLOIT PROPERTY COMMERCIALLY, THE RESULTANT INCOME MUST BE ASSESSED AS BUSINESS INCOME. THUS, EVEN APPLYING RATIO OF SHAM BHU INVESTMENT (SUPRA) THE INCOME OF THE APPELLANT IS TO BE ASSESS ED AS BUSINESS INCOME SINCE THE INTENTION OF THE APPELLANT IS TO E XPLOIT PROPERTY COMMERCIALLY. THE FACTS OF THE APPELLANT ARE QUITE DIFFERENT FROM THAT OF THE CASE OF SHAMBHU INVESTMENT AND HENCE THE FINDIN GS TO THAT EXTENT ARE NOT APPLICABLE TO CASE OF APPELLANT. FURTHER, THE CASE OF THE APPELLANT IS ALSO COVERED BY JUDGMENT OF JURISDICTI ONAL HONBLE GUJARAT HIGH COURT GIVEN IN THE CASE OF SAPTARASHI SERVICES (SUPRA) WHEREIN THE ASSESSEE HAD CONSTRUCTED A BUSINESS CENTRE AND LET OUT ITS DIFFERENT PORTIONS TO DIFFERENT PARTIES ALONG WITH SERVICES L IKE LIFT, RECEPTIONIST, SECRETARY, DATA PROCESSING, SECURITY ETC. THE HON BLE TRIBUNAL HELD THAT THE COMPENSATION RECEIVED BY ASSESSEE FROM THE OCCU PANTS WAS TO BE TAXED AS INCOME FROM BUSINESS. IN VIEW OF THE ABOVE, I AM OF THE CONSIDERED OPINI ON THAT THE INCOME OF THE APPELLANT IS TO BE ASSESSED AS INCOME UNDER THE HEAD BUSINESS AND NOT INCOME FROM HOUSE PROPERTY. THE SIMILAR ADDITION HAD BEEN DELETED BY THE CIT(A) FOR A.Y. 07-08. THE LD. CIT(A) HAS FOLLOWED HIS PREDECESSORS ORDERS FOR A. YS. 05-06 & 06-07 AND ALLOWED THE APPEAL IN FAVOUR OF THE ASSESSEE. ITA NOS. 2920, 977& 1573 AHD OF 08, 09 & 10 & C.O. NOS. 96 & 230 AHD OF 09 & 10 PAGE 6 4. NOW, THE REVENUE IS BEFORE US. IT WAS CONTENDED BY THE LD. SR. D.R. THAT THE A.O. HAD GIVEN DETAILED REASONING BEFORE A SSESSING THE INCOME AS INCOME FROM HOUSE PROPERTY. THEREFORE, IT SHOULD B E CONFIRMED. 5. FROM THE OTHER SIDE, SHRI TUSHAR P. HEMANI, LD. A.R. CONTENDED THAT THIS IS COVERED CASE OF HONBLE A BENCH, AHMADABAD, IN CASE OF ACIT VS. M/S. VARDHMAN INFRASTRUCTURE P. LTD . IN ITA NO. 976/AHD/2009 FOR A.Y. 2005-06 , WHERE THE FACTS ARE IDENTICAL AS TREATED BY THE HON BLE ITAT A BENCH AS INCOME FROM THE BUSINESS AND THEREFORE, HE REQUESTE D TO CONFIRM THE ORDER OF THE CIT(A). 5. WE HAVE GONE THROUGH THE FACTS AND CASE LAW CITE D BY THE APPELLANT. IN CASE OF M/S. VARDHMAN INFRASTRUCTURE P. LTD. (SUPRA ), THE OPERATIVE PORTION OF THE ORDER IS AS UNDER: 4. WE HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSE D THE ORDERS OF THE AO AND THE CIT(A). WE HAVE ALSO PERUSED THE CO PY OF THE JOINT BUSINESS AGREEMENT BETWEEN THE ASSESSEE AND THE POO NAM DIAMOND, ENGLISH TRANSACTION WHEREOF HAS BEEN FILED IN THE C OMPILATION BY THE ASSESSEE. WE FIND THAT THE ASSESSEE HAS AGREED TO PROVIDE SPACE FOR DIAMOND BUSINESS AND ALSO PROVIDED INFRASTRUCTURE F ACILITIES LIKE ELECTRICAL INSTALLATION, CANTEENS, HOUSE KEEPING, S ECURITY ETC. CLAUSE-3 OF THE AGREEMENT PROVIDES CERTAIN AMOUNT PAYABLE TO THE ASSESSEE COMPANY AS SECURED AMOUNT OR RE.1/- PER INWARD CARA T, WHICHEVER IS HIGHER. THUS, THE AMOUNT PAYABLE TO THE ASSESSEE C OMPANY WAS ALSO DEPENDED ON QUANTITY OF INWARD CARAT OF DIAMONDS. THE ASSESSEE HAS CONVERTED ITS PREMISES IN SUCH A WAY AS TO PROVIDE BASIC INFRASTRUCTURE FACILITY FOR THE BUSINESS AND HAS PROVIDED THESE SE RVICES IN AN ORGANIZED AND CONTINUOUS BUSINESS. IT IS NOT A CASE WHERE TH E ASSESSEE HAS LET OUT ITS PREMISES AND HAS EARNED RENTAL INCOME SIMPL ICITOR WITHOUT ITA NOS. 2920, 977& 1573 AHD OF 08, 09 & 10 & C.O. NOS. 96 & 230 AHD OF 09 & 10 PAGE 7 PROVIDING ANY INFRASTRUCTURE FACILITIES ON COMMERCI AL BASIS. THE INTENTION OF THE ASSESSEE OF EXPLOITING ITS INFRASTRUCTURE FA CILITIES PROVIDED BY IT IN A COMMERCIAL MANNER CAN BE BORNE OUT IN THE FACTS O F THE CASE OF THE ASSESSEE. IN THESE FACTS AND CIRCUMSTANCES OF THE CASE, WE HOLD THAT THERE IS NO MISTAKE IN THE ORDER OF THE LEARNED CIT (A) IN HOLDING THAT EVEN APPLYING RATIO OF SHAMBHU INVESTMENT (SUPRA) T HE INCOME OF THE APPELLANT IS TO BE ASSESSED AS BUSINESS INCOME SINC E THE INTENTION OF THE APPELLANT IS TO EXPLOIT PROPERTY COMMERCIALLY. ACCORDINGLY, THE ORDER OF THE CIT(A) ON THIS ISSUE IS CONFIRMED AND THE GR OUNDS OF THE REVENUE ARE DISMISSED. BOTH THE PARTIES ARE AGREED AND ACCEPTED THAT THE F ACTS ARE IDENTICAL AND THE CASE LAW CITED ABOVE IS SQUARELY APPLICABLE. THERE FORE, WE FOLLOW THE CO- ORDINATE A BENCH DECISION IN CASE OF M/S. VARDHMA N INFRASTRUCTURE P. LTD. (SUPRA) AND DISMISS THE REVENUES APPEAL AND UPHOLD THE ORDER OF THE CIT(A). 6. IN THE COMBINED RESULT, THE REVENUES APPEALS AR E DISMISSED AND THE ASSESSEES C.OS. ARE ALLOWED. THIS ORDER PRONOUNCED IN OPEN COURT ON 21.09.2012 SD/- SD/- ( D.K.TYAGI ) (T.R. MEENA) JUDICIAL MEMBER ACCOUNTANT MEMBER TRUE COPY S.K.SINHA / COPY OF ORDER FORWARDED TO:- 1. '#$ / APPELLANT 2. &'#$ / RESPONDENT 3. )*)+ ' ', / CONCERNED CIT 4. ' ',- ' / CIT (A) 5. 01'' +, ' ''' +, 34 * / DR, ITAT, AHMEDABAD 6. 167 89 / GUARD FILE. BY ORDER/ , ITA NOS. 2920, 977& 1573 AHD OF 08, 09 & 10 & C.O. NOS. 96 & 230 AHD OF 09 & 10 PAGE 8 :/3' )' ' ''' +, 34 * < STRENGTHEN PREPARATION & DELIVERY OF ORDERS IN THE ITAT 1) DATE OF TAKING DICTATION 17.09.2012 2) DIRECT DICTATION BY MEMBER STRAIGHT ON COMPUTER/LAPTOP/DRAGON DICTATE XXX 3) DATE OF TYPING & DRAFT ORDER PLACE BEFORE MEMBER 18.09.2012 4) DATE OF CORRECTION ,, ,, 5) DATE OF FURTHER CORRECTION XXX 6) DATE OF INITIAL SIGN BY MEMBERS 21.09.2012 7) ORDER UPLOADED ON 21.09.2012 8) ORIGINAL DICTATION PAD HAS BEEN ENCLOSED IN THIS FILE YES 9) FINAL ORDER AND 2 ND COPY SEND TO BENCH CLERK ON 21.09.2012