DCIT, Circle-1(1), Hyderabad V. M/s Anil Prabhas (P) Limited, Hyderabad

ITA 1013/HYD/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 74548 (ITAT-HYDERABAD)
• Duration Of Justice: 7 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-02-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2004-2005
• Appeal Filed On: 25-06-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: V SHIV KUMAR
• Keywords: Business income; Business expenditure

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B, HYDERABAD BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER ITA NOS. 1013 & 1014/HYD/2013 ASSESSMENT YEARS: 2004-05 & 2005-06 DY. COMMISSIONER OF INCOME-TAX AP PELLANT CIRCLE - 1(1), HYDERABAD. VS. M/S ANIL PRABHAS (P) LTD., RESPONDEN T HYDERABAD. (PAN AABCA7293H) APPELLANT BY : SHRI SOLGY JOSE T. KOTTARAM FOR SHRI JEEVAN LAL LAVIDIA RESPONDENT BY : SHRI V. SHIV KUMAR DATE OF HEARING : 05/02/2014 DATE OF PRONOUNCEMENT : 05/02/2014 ORDER PER CHANDRA POOJARI, A.M.: THESE APPEALS PREFERRED BY THE REVENUE ARE DIRECTE D AGAINST THE SEPARATE ORDERS OF CIT(A)-V HYDERABAD DATED 04/ 03/2013 FOR THE ASSESSMENT YEARS 2004-05 AND 2005-06. SINCE COMMON ISSUES ARE INVOLVED IN BOTH THESE APPEALS, THEY WERE CLUBBED A ND HEARD TOGETHER AND, THEREFORE, A COMMON ORDER IS PASSED FOR THE SA KE OF CONVENIENCE. 2. THE GROUNDS RAISED BY REVENUE IN BOTH THESE APPE ALS ARE COMMON, WHICH ARE AS FOLLOWS: 1. THE ORDER OF THE LEARNED CIT(A) IS ERRONEOUS IN LAW AND ON FACTS OF THE CASE. 2 ITA NO. 1013 & 1014/H/13 M/S ANIL PRABHAS (P) LTD. 2. THE LEARNED CIT(A) ERRED IN DIRECTING TO TREAT T HE INCOME DERIVED ON PROVIDING AMENITIES UNDER THE HEAD HOUS E PROPERTY AS AGAINST THE INCOME FROM OTHER SOURCES;. 3. THE LEARNED CIT(A) OUGHT TO HAVE CONFIRMED THE A CTION OF THE AO IN THE LIGHT OF KARNATAKA HIGH COURTS DECISION IN THE CASE OF CIT VS. SHANTIKUMAR NARAYANA HOTELS PVT. LTD., 201 ITR 138. 3. THE ONLY ISSUE THAT IS INVOLVED FOR ADJUDICATION IN THIS CASE IS THE ISSUE OF TAXING THE CHARGES RECEIVED TOWARDS AM ENITIES BY THE APPELLANT FROM THE TENANTS IN PURSUANCE OF SEPARATE AGREEMENTS. BRIEFLY THE FACTS OF THE CASE ARE THAT THE APPELLA NT IS IN RECEIPT OF CHARGES TOWARDS AMENITIES VIDE SEPARATE AGREEMENTS, APART FROM RENT ALSO RECEIVED THROUGH SEPARATE RENTAL AGREEMEN TS, THE ASSESSING OFFICER TREATED THE MAINTENANCE CHARGES A S INCOME FROM OTHER SOURCES AND ACCORDINGLY DISALLOWED DEDUCTION CLAIMED UNDER SECTION 24 OF THE ACT. IN SUPPORT OF THE ABOVE TREA TMENT, THE ASSESSING OFFICER REFERRED TO THE SEPARATE AGREEMEN T ENTERED INTO BY THE APPELLANT WITH THE TENANTS TOWARDS RENT AND ALSO AMENITIES CHARGES AND ALSO DREW STRENGTH FROM THE CASE LAW OF KARNATAKA HIGH COURT IN THE CASE OF CIT VS SHANTHIKUMAR NARAY ANA HOTELS PVT LTD, 201 ITR 138, WHEREIN IT WAS HELD THAT EVEN IF THERE IS COMPOSITE AGREEMENT IN RESPECT OF BUILDING AND AMEN ITIES AND IF THE SERVICES PROVIDED ARE SEPARABLE THEN THE INCOME DERIVED FROM AMENITIES CAN BE TREATED AS INCOME FROM OTHER SOURC ES. THE ASSESSING OFFICER ALSO RELIED ON THE DECISION OF AP EX COURT IN THE CASE OF SULTAN BROS. PVT. VS. CIT. 4. ON APPEAL BEFORE THE CIT(A), IT WAS SUBMITTED TH AT THE APPELLANT, AS OWNER OF BUILDING 5-9-22, SECRETARIAT ROAD, SAIFABAD, LET OUT THE BUILDING TO VARIOUS PARTIES DURING SUBJECT ASSESSMENT YEAR AND EARNED RENT OF RS. 2,06,26,866/- AND CLAIMED THE SAME AS RENT IN THE PROFIT & LOSS ACCOUNT. THIS AMOUNT WAS RECEIVED VID E TWO SEPARATE AGREEMENTS WITH SOME TENANTS OF THE BUILDING, ONE A S RENT AND THE OTHER AGREEMENT TOWARDS AMENITIES. ACCORDING TO THE APPELLANT, THIS BREAK UP WAS DONE TO LESSEN THE MUNICIPAL TAXES AS MUNICIPAL TAXES 3 ITA NO. 1013 & 1014/H/13 M/S ANIL PRABHAS (P) LTD. ARE LEVIED ONLY ON RENT AND NOT ON AMENITIES CHARGE S COLLECTED. THE CHARGES RECEIVED TOWARDS AMENITIES AMOUNTED TO RS. 80,11,0901-. IT IS THE CLAIM OF THE APPELLANT THAT THE ASSESSING. O FFICER WHILE COMPLETING THE ASSESSMENT HAD BRUSHED ASIDE THEIR S UBMISSIONS AND BROUGHT THIS AMOUNT AS INCOME FROM OTHER SOURCES. A GAINST THIS TREATMENT, THE APPELLANT FURNISHED DETAILED BREAK-U P THE RENTS RECEIVED FROM 581, WHERE NO SEPARATE AMENITIES CHAR GES WERE COLLECTED AND THE OTHER TENANTS FROM WHOM THEY HAVE COLLECTED RENT APART FROM AMENITIES CHARGES AND CLAIMED THAT THE R ENT COLLECTED FROM 581 IS AROUND THE RATE PER SQ. FT. TO THE RENT AND AMENITIES CHARGES COLLECTED FROM OTHER TENANTS. IT WAS ALSO BROUGHT O UT BY THE APPELLANT THAT THEY HAVE NOT PROVIDED ANY SERVICES TO THE TEN ANTS OTHER THAN COLLECTION OF ELECTRICITY AND WATER CHARGES. IN SUP PORT OF THEIR STAND, THE APPELLANT REFERRED TO THE NEELAM CABLE MANUFACT URING COMPANY VS ACIT, 63 ITD 1 AND ALSO APEX COURT DECISION IN THE CASE OF SHAMBU INVESTMENTS PVT. LTD VS CIT, 263 ITR 143. 5. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSE E, THE CIT(A) OBSERVED THAT UNDER TWO SEPARATE AGREEMENTS THROUGH WHICH THE APPELLANT COLLECTED RENTAL INCOME AS WELL AS AMENIT IES CHARGES. FURTHER, THE CIT(A) OBSERVED THAT THE ASSESSING OFF ICER HELD THAT THE AMENITIES CHARGES ARE TAXABLE UNDER THE HEAD INCOME FROM OTHER SOURCES. REGARDING THE CLAIM OF THE APPELLANT THAT THEY HAD NOT PROVIDED ANY AMENITIES I SERVICES TO THE TENANTS APART FROM LETTING OUT THE PREMISES AND COLLECTING ELECTRICITY AND WATER C HARGES, THE ASSESSING OFFICER HAD NOT BROUGHT OUT ANY SPECIFIC SERVICES I AMENITIES PROVIDED BY THE ASSESSEE IN F THE AGREEMENT FOR AMENITIES CHARGES. ON THE OTHER HAND, THE APPELLANT ALSO EXCEPT CLAIMING THAT THEY HAVE ENTERED INTO TWO SEPARATE AGREEMENTS - ONE FOR RENT AND ANOTHER FOR AMENITIES CHARGES TO REDUCE THEIR M UNICIPAL TAX LIABILITY, HAD NOT BROUGHT OUT ANY OTHER REASON FOR ENTERING INTO TWO SEPARATE AGREEMENTS. THE REASON SO ADDUCED BY THE A PPELLANT ALSO IS NOT PRIMA-FACIE ACCEPTABLE. 4 ITA NO. 1013 & 1014/H/13 M/S ANIL PRABHAS (P) LTD. 5.1 THE CIT(A) FURTHER OBSERVED THAT HOWEVER, CONSI DERING THE TOTALITY OF THE FACTS AND THE OTHER CASES LAWS RELIED UPON BY THE BOTH PARTIES, IT IS SEEN THAT NO CLINCHING EVIDENCE WAS BROUGHT OUT BY THE BOTH PARTIES IN SUP PORT OF THEIR RESPECTIVE ARGUMENTS. LEAVING THESE SHORT COMINGS, GOING BY THE FACT THAT THE RENT COLLECTED FROM SBI AND THE RENT PLUS AMENITIES COLLECTED FROM OTHERS IS CLOSE AS BROUGHT OUT BY TH E APPELLANT IN A STATEMENT ENCLOSED TO THE WRITTEN SUBMISSIONS, IT C AN BE MADE OUT THAT THERE IS SOME STRENGTH IN THE ARGUMENT OF THE APPELLANT THOUGH PRIMA-FACIE THE REASON ADDUCED FOR SEPARATE AGREEME NTS LEAVES SOME DOUBT. IN THE ABSENCE OF ANY FACTS BROUGHT OUT BY THE ASSESSING OFFICER OF THE NATURE OF AMENITIES PROVID ED BY THE APPELLANT AND ALSO GOING BY THE CONSPICUOUS ABSENCE OF ANY SEPARATE CLAIM TOWARDS MAINTENANCE CHARGES BY THE A PPELLANT, I AM INCLINED TO ACCEPT THE VERSION OF THE APPELLANT TO TREAT THE ENTIRE RECEIPTS AS INCOME FROM HOUSE PROPERTY. ONE MORE ASPECT THAT CONVINCES ME TO SEE SOME REASON IN THE VERSION OF THE APPELLANT IS THAT ONCE A RECEIPT IS TREATED AS INCO ME FROM OTHER SOURCES UNDER SECTION 56, THEN THERE WILL BE A CORR ESPONDING BURDEN TO THIS RECEIPT UNDER SECTION 57. WITHOUT AN Y MENTION OF THE CORRESPONDING LIABILITY ATTACHED TO THIS RECEIPT, T HE RECEIPT ALONE CANNOT BE CONSIDERED AS INCOME OF THE APPELLANT. 5.2 IN VIEW OF THE ABOVE OBSERVATIONS, THE CIT(A) D IRECTED THE AO TO TREAT THE ENTIRE RECEIPTS AS INCOME FROM HOUSE P ROPERTY AND ALLOW THE DEDUCTIONS AS APPLICABLE THERETO. 6. AGGRIEVED BY THE ORDER OF THE CIT(A), THE REVENU E IS IN APPEAL BEFORE US. 7. WE HAVE HEARD THE ARGUMENTS OF BOTH THE PARTIES AND PERUSED THE RECORD AS WELL AS GONE THROUGH THE ORDERS OF TH E AUTHORITIES BELOW. THE GRIEVANCE OF THE DEPARTMENT IS THAT APAR T FROM LETTING OUT THE PREMISES AND COLLECTING ELECTRICITY AND WATER C HARGES, THE 5 ITA NO. 1013 & 1014/H/13 M/S ANIL PRABHAS (P) LTD. ASSESSEE PROVIDED SPECIFIC SERVICES/AMENITIES AND, THEREFORE, THE INCOME DERIVED BY THE ASSESSEE CAN BE TREATED AS I NCOME FROM OTHER SOURCES AND NOT AS INCOME FROM HOUSE PROPERTY. IN THIS CONNECTION, THE CIT(A) GAVE A CATEGORICAL FINDING THAT IN THE ABSENCE OF ANY FACTS BROUGHT OUT BY THE AO OF THE NATURE OF AMENITIES PR OVIDED BY THE ASSESSEE AND ALSO GOING BY THE CONSPICUOUS ABSENCE OF ANY SEPARATE CLAIM TOWARDS MAINTENANCE CHARGES BY THE ASSESSEE, I AM INCLINED TO ACCEPT THE VERSION OF THE ASSESSEE TO TREAT THE ENT IRE RECEIPTS AS INCOME FROM HOUSE PROPERTY. IN THIS CONNECTION, WE REFER TO THE JUDGMENT OF THE HONBLE HIGH COURT OF MADRAS IN THE CASE OF CIT VS. CHENNAI PROPERTIES & INVESTMENTS LTD., 266 ITR 685 (MAD.) WHEREIN THE HONBLE COURT HELD AS FOLLOWS: SEC. 22 DOES NOT REFER TO 'HOUSE PROPERTY' DESPITE ITS CAPTION. THE LANGUAGE EMPLOYED IN THE SECTION SHOWS THAT THE INCOME REFERRED TO THEREIN IS NOT NECESSARILY INCOME FROM HOUSES. IT IS INCOME FROM PROPERTY 'CONSISTING OF ANY BUILDING OR LANDS APPURTENANT THERETO OF WHICH THE ASSESSEE IS THE OW NER'. THE WORD 'BUILDING' IS NOT CONFINED IN ITS SCOPE ONLY T O DWELLING HOUSES. 'HOUSE' IS DEFINED IN THE OXFORD DICTIONARY OF ENGLISH, 10TH EDITION AS : A BUILDING FOR HUMAN HABITATION E SPECIALLY ONE THAT IS LIVED IN BY A FAMILY OR BY A SMALL GROUP OF PEOPLE CONSISTING OF GROUND FLOOR AND ONE OR MORE NUMBER O F STORES. THE WORD HOUSE IN ASSOCIATION WITH OTHER WORDS AL SO HAS MANY OTHER MEANINGS. BUT, A COMMERCIAL BUILDING IS NOT R EGARDED AS A HOUSE. THAT, HOWEVER, WOULD NOT TAKE THE INCOME FRO M SUCH BUILDINGS OUT OF THE AMBIT OF S. 22. THOUGH IT IS N OT CLEAR FROM THE CONTEXT AS TO WHY THE ACT DESCRIBES INCOME FROM PROPERTY AS INCOME FROM HOUSE PROPERTY, THE SUBSTANTIVE PROVISI ON OF LAW WHICH CREATES THE CHARGE AND OBLIGATES THE PERSON W HO RECEIVES SUCH INCOME TO HAVE IT ASSESSED UNDER THAT HEAD DOE S NOT CONFINE ITS APPLICATION ONLY TO HOUSE PROPERTY, BUT EXTENDS TO ALL BUILDINGS WHETHER SUCH BUILDING IS USED AS DWELLING HOUSE OR FOR OTHER PURPOSES. ON THE FACTS OF THIS CASE, IT IS CL EAR THAT THE ASSESSEE, AS OWNER OF THE BUILDING, WAS ONLY EXPLOI TING THE PROPERTY AS OWNER BY LEASING OUT THE SAME AND REALI SING INCOME BY WAY OF RENT. SUCH RENTAL INCOME IS LIABLE TO BE ASSESSED UNDER THE HEAD INCOME FROM HOUSE PROPERTY. THE TR IBUNAL WAS IN ERROR IN HOLDING OTHERWISE. ACCORDINGLY, THE EXP ENSES INCURRED FOR THE PURPOSE OF LETTING OUT OF THE PROP ERTIES COULD NOT BE ALLOWED AS BUSINESS EXPENDITURE. 6 ITA NO. 1013 & 1014/H/13 M/S ANIL PRABHAS (P) LTD. 7.1 MOREOVER, IN THE CASE OF SHAMBU INVESTMENTS PVT . LTD. VS. CIT, 263 ITR 143(SC), ON WHICH RELIANCE PLACED BY THE AS SESSEE, THE HONBLE SUPREME COURT HELD THAT INCOME DERIVED BY ASSESSEE BY LETTING OUT FURNISHED PREMISES ON MONTHLY RENT BASI S TO VARIOUS PARTIES ALONG WITH FURNITURE, FIXTURES, LIGHT, AIR-CONDITIO NERS, ETC., FOR BEING USED AS 'TABLE SPACE' AND ALSO PROVIDING THEM COMMO N SERVICES LIKE WATCH AND WARD STAFF, ELECTRICITY, WATER AND OTHER AMENITIES WITHOUT ANY SEPARATE CHARGES WAS ASSESSABLE AS INCOME FROM PROPERTY AND NOT BUSINESS INCOME. 7.2 IN VIEW OF THE RATIOS LAID DOWN BY THE HONBLE SUPREME COURT IN THE SAID CASES, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE CIT(A) IN DIRECTING THE AO TO TREAT THE ENTIRE RECEIPTS AS INCOME FROM HOUSE PROPERTY AND ALLOW THE DEDUCTIONS AS APPLICABLE TH ERETO AND ACCORDINGLY, WE UPHOLD THE ORDER OF THE CIT(A) ON T HIS ISSUE DISMISSING THE GROUNDS RAISED BY THE REVENUE IN BOT H THE YEARS UNDER CONSIDERATION. 8. IN THE RESULT, BOTH THE APPEALS OF THE REVENUE I N ITA NOS. 1013 AND 1014/HYD/2013 FOR AY 2004-05 AND 2005-06 ARE DI SMISSED. PRONOUNCED IN THE OPEN COURT ON 05/02/2014 UPON CONCLUSION OF HEARING. SD/- SD/- (SAKTIJIT DEY) (CHANDRA POOJARI) JUDICIAL MEMBER ACCO UNTANT MEMBER HYDERABAD, DATED: 05/02/2014. KV 7 ITA NO. 1013 & 1014/H/13 M/S ANIL PRABHAS (P) LTD. COPY TO:- 1) DCIT, CIRCLE 1(1), 4 TH FLOOR, AAYAKAR BHAVAN, BASHEERBAGH, HYDERABAD. 2) M/S ANIL PRABHAS (P) LTD., 5-9-22, SECRETARIAT R OAD, HYDERABAD. 3) CIT(A)-V, HYDERABAD 4) CIT-I, HYDERABAD 5) THE DEPARTMENTAL REPRESENTATIVE, I.T. A.T., HYDERABAD.