ITO 15(3)(1), MUMBAI V. THIRD EYE ESTATES P.LTD, MUMBAI

ITA 1005/MUM/2015

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 8647 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 9 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-11-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Assessment Year: 2010-2011
• Appeal Filed On: 13-02-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: V JUSTIN
• Keywords: Business income; Depreciation

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES E, MUMBAI BEFORE SHRI P K BANSAL, VICE PRESIDENT & SHRI PAWAN SINGH, JUDICIAL MEMBER ITA NO.1005/MUM/2015 ASSESSMENT YEAR : 2010-11 ITO 15(3)(1) MUMBAI VS. THIRD EYE ESTATES PVT LTD, B/3301-3302 OBEROI SPRING, OFF LINK ROAD, ANDHERI (W), MUMBAI PAN AACCT1261H (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI V JUSTIN RESPONDENT BY : SHRI HIRO RAI DATE OF HEARING : 31.1 0 .2017 DATE OF PRONOUNCEMENT : . 11 .2017 O R D E R PER P K BANSAL, VICE-PRESIDENT: THIS APPEAL HAS BEEN FILED BY THE REVENUE AGAINST T HE ORDER OF THE CIT(A)-24, MUMBAI, DATED 27.11.2014, FOR A.Y. 2010- 11 THE EFFECTIVE GROUNDS TAKEN BY THE REVENUE READ AS UNDER: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD. CIT (A) ERRED IN ALLOWING RELIEF TO THE ASS ESSEE COMPANY WITHOUT APPRECIATING THE FACT THAT THE RENT WAS REC EIVED BY THE ASSESSEE FROM OWNED PROPERTY AND, THEREFORE, IT WAS RIGHTLY ASSESSED AS INCOME FROM HOUSE PROPERTY.' 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE DISALLOWANCE MADE OF RS.44,33,656/-WITHOUT APPRECIATING THE FACT THAT TH E RENT RECEIVED WAS INCOME FROM HOUSE PROPERTY.' ITA NO.1005/MUM/2015 THIRD EYE ESTATES PVT LTD. 2 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSI NG OFFICER NOTED THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF PURCHASE AND SALE OF REAL ESTATE. DURING THE YEAR THE ASSESSEE HAD NO BUSINESS RECEIP TS EXCEPT THE RENTAL INCOME OF ` 9 LACS AND PROFIT ON SALE OF FIXED ASSET AMOUNTING TO ` 39,95,528/- HOWEVER, IT HAS CLAIMED EXPENSES AMOUNT ING TO ` 44,33,656/-. THE ASSESSEE HAS SHOWN RENTAL INCOME AS INCOME FRO M BUSINESS BUT THE ASSESSING OFFICER WAS SATISFIED AND HE ASSESSED THE RENTAL INCOME UNDER THE HEAD INCOME FROM HOUSE PROPERTY AND AFTER ALLOWIN G DEDUCTION U/S. 24(1) AMOUNTING TO ` 2,70,000/- CONSIDERED THE INCOME FROM HOUSE PROPE RTY AT ` 6,30,000/- AND DISALLOWED A TOTAL SUM OF ` 44,33,656/- AS, IN HIS OPINION, THE ASSESSEE HAS NOT CARRIED OUT ANY BUSINESS ACTIVITY DURING THE IMPUGNED ASSESSMENT YEAR. THEREFORE, THE BUSINESS INCOME HA S BEEN ASSESSED AT NIL. ON APPEAL, THE CIT(A) ALLOWED THE APPEAL OF THE ASS ESSEE IN BOTH THE ISSUES AS WELL AS OTHER ISSUES BY HOLDING AS UNDER: 2.3 I HAVE CAREFULLY CONSIDERED-THE SUBMISSIONS AN D THE FINDING OF THE AO IN THE IMPUGNED ORDER. IN SUPPORT OF ITS CON TENTION THAT THE INCOME SHOULD BE ASSESSED UNDER THE HEAD BUSINESS, THE APPELLANT HAD FURNISHED COPY OF THE AUDITED BALANCE SHEET ALO NG WITH THE SCHEDULE OF FIXED ASSETS TO SHOW THAT THE PREMISES FROM WHICH RENT WAS-RECEIVED WAS HELD AS A BUSINESS ASSET. THE A.O HIMSELF IN THE ASSESSMENT ORDER HAS BROUGHT OUT THE MAIN OBJECTS O F THE APPELLANT COMPANY. THE MEMORANDUM INDICATES THAT APART FROM A CQUISITION AND SALE OF FLATS, PROVISION OF CONVENIENCE COMMONL Y PROVIDED IN THE FLATS, SHOPS AND RESIDENTIAL AND COMMERCIAL PRE MISES WAS ALSO FOUND TO BE ONE OF THE OBJECT. THUS THE MAIN OBJECT ALLOWS THE APPELLANT TO CARRY ON .THE HOUSE KEEPING ACTIVITY A S A BUSINESS ACTIVITY APART FROM OTHER ACTIVITIES. IN FACT IN PA RA 1.2 OF THE ITA NO.1005/MUM/2015 THIRD EYE ESTATES PVT LTD. 3 SUBMISSION MADE THE APPELLANT HAD CLAIMED THAT THE FACILITIES SUCH AS HOUSE KEEPING, SECURITY, TELEPHONE, ELECTRICITY, MAINTENANCE ETC. AND RENDERING SUCH FACILITIES ARE EMBEDDED IN THE R ENT RECEIPTS..-- SINCE THE SOURCE OF INCOME EMANATES FROM THE BUSINE SS ASSET THE RENT RECEIVED NEED TO BE HELD AS BUSINESS RECEIPT. IN VIEW OF THIS, THE CONCLUSION DRAWN BY THE : AO THAT THE RENTAL INCOME NEEDS TO BE ASSESSED UNDER THE HEAD 'INCOME FROM HOUSE PROPERTY ' CANNOT BE UPHELD: THE GROUND RAISED IS ALLOWED. . 3.3 I HAVE CAREFULLY CONSIDERED THE SUBMISSION AND THE FINDING OF THE AO IN THE IMPUGNED ORDER. IT IS THE CONTENTION OF T HE APPELLANT THAT IT IS ENGAGED IN THE BUSINESS OF RENDERING VARIOUS FAC ILITIES SUCH AS HOUSE KEEPING, SECURITY, TELEPHONE, ELECTRICITY, MA INTENANCE ETC. AND RENDERING SUCH FACILITIES ARE EMBEDDED IN THE R ENT RECEIPTS. SINCE THE SERVICES RENDERED ARE IN THE NATURE OF BU SINESS ACTIVITY AND TO MAINTAIN THE BUSINESS ASSETS, APPELLANT NEED TO INCUR VARIOUS ROUTINE EXPENDITURE, SUCH AS. SALARY & BONUS TO EMP LOYEES, GENERAL, ADMINISTRATIVE EXPENSES, DEPRECIATION, INTEREST ETC . WHILE ADJUDICATING THE GROUND OF APPEAL NO: 1, I HAVE HEL D THAT THE RENT RECEIVED IS IN THE NATURE OF BUSINESS RECEIPTS, THE REFORE SUCH EXPENDITURE WAS INCURRED DURING THE NORMAL COURSE O F BUSINESS ACTIVITY, HENCE IT NEEDS TO BE ALLOWED. THEREFORE, THE AO IS NOT JUSTIFIED IN DISALLOWING THE CLAIM OF EXPENSES AMOU NTING TO RS.44,33,6567-. THIS GROUND OF APPEAL IS ALLOWED. 3. WE HAVE HEARD THE RIVAL SUBMISSIONS AND HAVE CAR EFULLY CONSIDERED THE SAME ALONG WITH THE ORDERS OF THE AUTHORITIES BELOW . IT IS NOT DENIED THAT THE MAIN OBJECTS OF THE ASSESSEE NOT ONLY INCLUDES ACQU ISITION AND SALE OF FLATS, PROVISION OF CONVENIENCE COMMONLY PROVIDED IN THE F LATS, SHOPS AND RESIDENTIAL AND COMMERCIAL PREMISES BUT THE ASSESSE E CAN ALSO LET OUT THE PROPERTY. THEREFORE, IN VIEW OF THE DECISION OF TH E HONBLE SUPREME COURT IN THE CASE OF CHENNAI PROPERTIES AND INVESTMENT LTD. VS. CIT [2015] 373 ITR ITA NO.1005/MUM/2015 THIRD EYE ESTATES PVT LTD. 4 673, WE ARE OF THE VIEW THAT THIS ISSUE IS NO MORE RES INTEGRA. WE, THEREFORE, CONFIRM THE ORDER OF THE CIT(A) TREATING THE INCOME AS INCOME FROM BUSINESS IN RESPECT OF THE RENT RECEIVED. 4. WE ALSO DO NOT FIND ANY ILLEGALITY OR INFIRMITY IN THE ORDER OF THE CIT(A) DELETING THE DISALLOWANCE OF CLAIM OF EXPENSES AMOU NTING TO ` 44,33,565/- WHICH HAS BEEN INCURRED BY THE ASSESSEE FOR MAINTAI NING THE BUSINESS ASSETS AS THE ASSESSEE IS ENGAGED IN THE BUSINESS OF RENTI NG VARIOUS BUSINESS ACTIVITIES SUCH AS HOUSE-KEEPING, SECURITY, TELEPHO NE, ELECTRICITY, MAINTENANCE ETC. NO COGENT MATERIAL OR EVIDENCE WAS BROUGHT TO OUR NOTICE BY THE LEARNED DR SO THAT THE FINDING GIVEN BY THE LEARNED CIT(A) COULD BE REVERSED. WE, THEREFORE, CONFIRM THE ORDER OF THE CIT(A) ON THIS ACCOUNT. 5. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 13 TH DAY OF NOVEMBER, 2017. SD/- SD/- (PAWAN SINGH) (P K BANSAL) JUDICIAL MEMBER VICE-PRESIDENT MUMBAI; DATED: 13 TH NOVEMBER, 2017 SA ITA NO.1005/MUM/2015 THIRD EYE ESTATES PVT LTD. 5 COPY OF THE ORDER FORWARDED TO : 1. THE APP ELL ANT. 2. THE RESPONDENT. 3. T HE CIT(A), MUMBAI 4. THE CIT 5. DR, E BENCH, ITAT, MUMBAI BY ORDER, #TRUE COPY # ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL, MUMBAI