M/s Intime Properties Limited, Hyderabad V. Commissioner of Income Tax-II, Hyderabad

ITA 1037/HYD/2014

• Counselvise Citation: 103722514 RSA 2014
• Duration Of Justice: 9 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-03-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 09-02-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 26-05-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D SUDHAKAR RAO
• Assessee Lawyers: ARVIND SONDE
• Keywords: Business income; Depreciation; Opportunity of being heard; Rule of consistency; Additional depreciation; Difference of opinion; Unabsorbed depreciation
• Section: 143(3); 263; 63; 12

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B, HYDERABAD BEFORE SHRI P.M. JAGTAP, ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER ITA NO. 1037/HYD/2014 ASSESSMENT YEAR: 2009-10 M/S INTIME PROPERTIES LTD. (FORMERLY KNONW AS INTIME PROPERTIES PVT. LTD.), HYDERABAD PAN AABC 15676 H VS. COMMISSIONER OF INCOME-TAX II, HYDERABAD (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI ARVIND SONDE REVENUE BY : SHRI D. SUDHAKAR RAO DATE OF HEARING 10-02-2015 DATE OF PRONOUNCEMENT 18-03-2015 O R D E R PER SAKTIJIT DEY, J.M.: THIS APPEAL OF ASSESSEE IS DIRECTED AGAINST ORDER DATED 28/03/2014 PASSED U/S 263 OF THE ACT OF LD. CIT(A)- II, HYDERABAD SETTING ASIDE THE ASSESSMENT ORDER PASSED FOR AY 20 09-10. 2. BRIEFLY THE FACTS ARE, ASSESSEE AN INDIAN COMPAN Y IS ENGAGED IN THE BUSINESS OF REAL ESTATE AND DEVELOPMENT AND LEA SING OF PROPERTIES. FOR THE AY UNDER CONSIDERATION, ASSESSE E FILED ITS RETURN OF INCOME ON 27/09/2009 DECLARING LOSS OF RS. 10,32 ,00,788. ASSESSEES RETURN OF INCOME WAS SUBJECTED TO SCRUTI NY AND AO IN COURSE OF SCRUTINY ASSESSMENT PROCEEDING, EXAMINED THE BOOKS OF ACCOUNT AND OTHER INFORMATIONS AS CALLED FOR AND AF TER VERIFYING THEM, COMPLETED THE ASSESSMENT BY ASSESSMENT ORDER DATED 27/12/2011 DETERMINING THE TOTAL LOSS AT RS. 9,95,09,291. LD. CIT IN EXERCISE OF 2 ITA NO. 1037/HYD/2014 M/S INTIME PROPERTIES LTD. POWER U/S 263 OF THE ACT, WHILE EXAMINING THE ASSES SMENT RECORD OF ASSESSEE FOR THE AY UNDER CONSIDERATION WAS OF THE VIEW THAT ASSESSMENT ORDER PASSED U/S 143(3) IS ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF REVENUE ON THE FOLLOWING ISSUES: I) THE ASSESSEE CLAIMED AN AMOUNT OF RS. 2,99,86,05 6 TOWARDS MAINTENANCE AND REPAIRS UNDER THE HEAD INCOME FROM HOUSE PROPERTY. AS THE ASSESSEE IS IN THE BUSINESS OF DEV ELOPMENT AND MAINTENANCE OF SOFTWARE TECHNOLOGY PARK THE ENT IRE RENTAL INCOME AND SERVICE INCOME DERIVED THEREON IS INCIDE NTAL TO THE BUSINESS AND AS SUCH THE SAME HAS TO BE TREATED AS BUSINESS INCOME. THEREFORE THE AMOUNTS PAID BY THE CLIENTS O F THE ASSESSEE FOR USE OF THE STP WOULD BE IN THE NATURE OF COMMERCIAL ACTIVITY ASSESSABLE UNDER THE BUSINESS. HENCE, THE EXPENDITURE CLAIMED TOWARDS MAINTENANCE AND REPAIR NEEDS TO BE DISALLOWED. II)SCHEDULE 16 OF PROFIT & LOSS ACCOUNT SHOWS THAT THE ASSESSEE HAS PAID RS. 2041.34 LAKHS TOWARDS FINANCE COST AND RS. 1572.22 LAKHS WAS CAPITALIZED. HENCE, THE EXPENDITU RE TOWARDS FINANCE COST TO BE ALLOWED TO THE EXTENT OF RS. 469 .12 LAKHS ONLY. AS THE ASSESSEE CLAIMED INTEREST TO THE EXTEN T OF RS. 1026.35 LAKHS AGAINST THE ACTUAL AMOUNT OF RS. 469. 12 LAKHS, THE EXCESS CLAIM OF FINANCE COST OF RS. 557.23 NEED S TO BE DISALLOWED. ACCORDINGLY, HE ISSUED A NOTICE TO ASSESSEE TO SHOW CAUSE AS TO WHY ASSESSMENT ORDER SHALL NOT BE REVISED. IN REPLY TO THE SAID SHOW CAUSE NOTICE, ASSESSEE SUBMITTED ITS REPLY IN WRITI NG AS WELL AS THROUGH ORAL SUBMISSIONS IN COURSE OF THE REVISION PROCEEDING. 3. AS FAR AS THE FIRST ISSUE IS CONCERNED, IT WAS S UBMITTED BY ASSESSEE THAT THE COMPANY HAS BEEN INCORPORATED WIT H THE MAIN OBJECT TO CARRY ON THE BUSINESS OF DEVELOPERS OF LA ND, BUILDING, IMMOVABLE PROPERTIES AND REAL ESTATES BY CONSTRUCTI NG, RECONSTRUCTING, ALTERING, IMPROVING, DECORATING, FU RNISHING AND MAINTAINING INDUSTRIAL PARKS, GROWTH CENTRES, OFFIC ES, FLATS, HOUSES, FACTORIES, WAREHOUSES, BUILDINGS WITH A VIEW TO EST ABLISH AND PROVIDE OFFICE SPACE, INFRASTRUCTURE AND OTHER FACILITIES F OR INFORMATION TECHNOLOGY AND INFORMATION TECHNOLOGY ENABLED ENTIT IES AND OTHER 3 ITA NO. 1037/HYD/2014 M/S INTIME PROPERTIES LTD. BUSINESS, TRADE, MANUFACTURE OR PROCESS. IT WAS SUB MITTED, TO THE EXTENT OF THE ACTIVITIES CARRIED OUT BY ASSESSEE IN PURSUANCE TO ITS OBJECTS, THEREFORE, IT DOES ANSWER THE DESCRIPTION OF BEING ENGAGED FOR THE BUSINESS OF DEVELOPING AND OPERATING AND MA INTENANCE OF INDUSTRIAL PARK. HOWEVER, FOR THE PURPOSE OF TAXATI ON OF INCOME RECEIVED BY ASSESSEE FROM ITS BUSINESS OF OPERATING AND MAINTENANCE OF INDUSTRIAL PARK, IT WOULD BE SUBJECT TO THE FRAM EWORK ESTABLISHED BY SECTION 14 OF THE ACT. IN THIS CONTEXT, IT WAS SUBM ITTED BY ASSESSEE, INCOME RECEIVED BY ASSESSEE FROM ITS TENANTS WAS S PLIT INTO TWO COMPONENTS; I) LEASE RENTAL FROM THE PREMISES AND I I) FACILITY MANAGEMENT CHARGES TOWARDS MAINTENANCE AND UP KEEP OF THE INDUSTRIAL PARK AND CHARGES FOR FIT OUTS. ASSESSEE RELYING UPON A NUMBER OF JUDICIAL PRECEDENTS SUBMITTED THAT THE IN COME RECEIVED FROM LETTING OUT/LEASING OF PROPERTY HAS TO BE TAX ED UNDER THE HEAD INCOME FROM HOUSE PROPERTY NOTWITHSTANDING WITH T HE FACT THAT ASSESSEE IS SOLELY INCORPORATED FOR RUNNING THE BUS INESS OF LETTING PROPERTY ON HIRE. THEREFORE, ASSESSEE HAS RIGHTLY O FFERED THE INCOME FROM LEASING RENTAL AS INCOME UNDER THE HEAD HOUSE PROPERTY WHEREAS INCOME RECEIVED FROM FACILITY MANAGEMENT AN D FIT OUT WERE OFFERED TO TAX AS BUSINESS INCOME. 4. AS FAR AS THE SECOND ISSUE OF EXCESS CLAIM OF FI NANCE CHARGES IS CONCERNED, IT WAS SUBMITTED BY ASSESSEE THAT INDUST RIAL PARK CONSTRUCTED BY ASSESSEE CONSISTED OF 3 BUILDINGS. WHILE CONSTRUCTION OF TWO BUILDINGS HAS BEEN COMPLETED DURING AY 2009- 10, 3 RD BUILDING WAS STILL UNDER CONSTRUCTION. DURING THE FY 2008-09 , ASSESSEE HAS INCURRED TOTAL FINANCE COST OF RS. 2041.34 LAKH, OU T OF THIS APPROXIMATELY AN AMOUNT OF RS. 136 LAKH REPRESENTED FINANCE COST IN RELATION TO THE FACILITY MANAGEMENT AND OPERATIONS OF ASSESSEE AND WERE CHARGED TO THE PROFIT & LOSS ACCOUNT. AS FAR A S BALANCE COST IS CONCERNED, IT WAS SUBMITTED THAT FROM ACCOUNTING PE RSPECTIVE THE INTEREST IS ALLOCATED TO EACH BUILDING, PORTION OF THIS ALLOCATED AMOUNT UP TO THE DATE OF THE RESPECTIVE BUILDING WAS PUT T O USE HAS BEEN 4 ITA NO. 1037/HYD/2014 M/S INTIME PROPERTIES LTD. CAPITALIZED TO THE COST OF THE SAID BUILDING. HOWE VER, FROM INCOME TAX PERSPECTIVE, IN ACCORDANCE WITH THE TERMS SPECIFIED IN SECTION 24 INTEREST ATTRIBUTABLE TO BUILDINGS, WHICH WERE PUT TO USE IS FULLY CLAIMED AS DEDUCTION FROM RENTAL INCOME. INTEREST P ERTAINING TO THE THIRD BUILDING IS CAPITALIZED TO THE SAID BUILDING. IN SUPPORT OF ITS CONTENTION, ASSESSEE ALSO FURNISHED THE FOLLOWING W ORKING: BUILDING NO. INTEREST ATTRIBUTABLE TREATMENT IN BOOKS TREATMENT FOR INCOME-TAX CAPITALIZED EXPENSED CAPITALIZED EXPENSED #1 415.28 130.63 284.65 - 415.28 #2 448.85 400.73 48.12 - 448.85 #3 1,040.85 1,040.85 - 1,040.85 - GENERAL 136.36 - 136.36 - 136.36 TOTAL 2,041.34 1,572.22 469.12 1,040.85 1,000.49 IT WAS SUBMITTED BY ASSESSEE THAT ASSESSMENT ORDER CANNOT BE CONSIDERED TO BE ERRONEOUS ON EITHER ISSUES SO AS T O ASSUME JURISDICTION U/S 263 OF THE ACT. SO FAR AS OTHER C ONDITION I.E. PREJUDICIAL TO THE INTERESTS OF REVENUE, IT WAS SUB MITTED BY ASSESSEE, EVEN THAT CONDITION IS ALSO NOT SATISFIED CONSIDERI NG THE FACT THAT WHILE ASSESSEE HAS CLAIMED 30% DEDUCTION TOWARDS REPAIRS AND MAINTENANCE FROM THE HOUSE PROPERTY INCOME, BUT, IF IT IS TO BE CONSIDERED AS BUSINESS INCOME, THEN, ASSESSEE WILL BE ENTITLED TO CLAIM DEPRECIATION @ 10% ON THE TOTAL COST OF ASSET S OF RS. 300 CRORES WHICH WILL BE MUCH MORE THAN 30% DEDUCTION C LAIMED TOWARDS REPAIR AND MAINTENANCE. MOREOVER, ANY SUCH COMPUTAT ION OF DEPRECIATION NEEDS TO BE DONE FROM A.Y. 2007-08. TH US, THERE WOULD NO PREJUDICE TO THE REVENUE, IF THE INCOME IS ASSES SED AS INCOME FROM HOUSE PROPERTY. 5. LD. CIT AFTER CONSIDERING THE SUBMISSIONS OF ASS ESSEE VIS--VIS FACTS AND MATERIALS ON RECORD, OBSERVED THAT THE MA IN OBJECT OF ASSESSEE IS TO CARRY ON THE BUSINESS OF DEVELOPERS OF LAND, BUILDING, IMMOVABLE PROPERTIES AND REAL ESTATES BY CONSTRUCTI NG, RECONSTRUCTING, ALTERING, IMPROVING, DECORATING, FU RNISHING AND 5 ITA NO. 1037/HYD/2014 M/S INTIME PROPERTIES LTD. MAINTAINING INDUSTRIAL PARKS, GROWTH CENTRES, OFFIC ES, FLATS, HOUSES, FACTORIES, WAREHOUSES, BUILDINGS WITH A VIEW TO EST ABLISH AND PROVIDE OFFICE SPACE, INFRASTRUCTURE AND OTHER FACILITIES F OR INFORMATION TECHNOLOGY AND INFORMATION TECHNOLOGY ENABLED ENTIT IES AND OTHER BUSINESS, TRADE, MANUFACTURE OR PROCESS. FROM THE AFORESAID OBJECT, LD. CIT OBSERVED, THE PROFIT MOTIVE OF ASSESSEE IS INHERENT. LD. CIT OBSERVED, IF ASSESSEE WAS SIMPLY LETTING OUT PROPER TY, INCOME WOULD PROBABLY HAVE FALLEN UNDER THE INCOME FROM HOUSE PR OPERTY. HOWEVER, RETURN OF INCOME FILED REVEALS, ASSESSEE ON ITS OWN ADMISSION HAS SHOWN THE ACTIVITIES AS BUILDERS/PROPERTY DEVELOPER S. IN THE TAX AUDIT REPORT ALSO, IT IS INDICATED THAT ASSESSEE IS IN TH E BUSINESS OF REAL ESTATE DEVELOPMENT AND LEASING OF PROPERTY. ALL THE ITEMS OF RECEIPT AND EXPENDITURE INCLUDING LEASE RENTALS ARE SUBJECT TO AUDIT UNLIKE SIMPLE LETTING OUT PROPERTY. THEREFORE, MERELY BECA USE THE ENTITIES OCCUPYING THE PREMISES, DEDUCT TDS U/S 194-I, THE C HARACTER OF THE INCOME CANNOT CHANGE. LD. CIT OBSERVED, AS PER ASSE SSEES OWN ADMISSION, IT APPROACHED THE AUTHORITIES AT DEPARTM ENT OF INDUSTRY AND OBTAINED APPROVAL FOR THE INDUSTRIAL PARK AS PART O F ITS BUSINESS ACTIVITY WITH A VIEW TO OBTAIN BETTER RETURNS FROM THE COMMERCIAL ASSETS. LD. CIT OBSERVED, AO EVEN DID NOT EXAMINE A PPROVAL DOCUMENTS BEFORE COMPLETING ASSESSMENT. IT WAS OBSE RVED BY LD. CIT, AS VERIFIED FROM THE ACCOUNTS, ASSESSEE HAS AVAILED HUGE PROJECT TERM LOAN FROM THE BANK TO CONSTRUCT THE BUILDINGS. ASSE SSEE HAS SPENT HUGE SUMS AS PROJECT SUPPORT FEES AND ALSO AS BUSIN ESS PROMOTION EXPENSES, WHICH CLEARLY SHOW THAT ASSESSEE IS ENGAG ED IN SYSTEMATIC ACTIVITY OF BUILDING AN INDUSTRIAL PARK AND MARKETS THE SPACE ALSO BY SPENDING HUGE AMOUNTS. THEREFORE, IT IS A CLEAR CAS E OF COMMERCIAL EXPLOITATION OF ASSETS FOR THE PURPOSE OF BUSINESS. LD. CIT OBSERVED, MERELY BECAUSE ASSESSEE IS RECORDING ENTRIES FOR LE ASE RENT AND FACILITY MANAGEMENT SEPARATELY, THE ACTIVITIES WOUL D NOT BE DISTINCT AND SEPARATE. BECAUSE IN REALITY WITHOUT FACILITY M ANAGEMENT, NONE WOULD TAKE THE PREMISES ON LEASE AS THE UNITS NEED STRONG INFRASTRUCTURAL SUPPORT WITHOUT WHICH THE CONCEPT O F INDUSTRIAL PARK 6 ITA NO. 1037/HYD/2014 M/S INTIME PROPERTIES LTD. WOULD ITSELF BE MEANINGLESS. LD. CIT OBSERVED, AP GOVT. HAD ALLOTTED LAND TO M/S K. RAHEJA IT PARK LTD. , SISTE R CONCERN OF ASSESSEE, WITH A CLEAR STIPULATION THAT CERTAIN AMO UNT OF JOBS HAVE TO BE CREATED AND IN FACT INCENTIVES WERE ALSO TO BE G RANTED FOR THE EMPLOYMENT GENERATION, HENCE, THE WHOLE ACTIVITY IS NOTHING BUT BUSINESS ACTIVITY. ACCORDING TO LD. CIT, AS AO DID NOT EXAMINE ANY OF THESE FACTS AND ACCEPTED ASSESSEES CLAIM OF HOUSE PROPERTY INCOME WITHOUT ANY ENQUIRY OR VERIFICATION, THE VIEW TAKEN BY HIM NOT BEING A JUDICIOUS VIEW CANNOT BE HELD TO BE ONE OF THE POSS IBLE VIEWS. 6. AS FAR AS ASSESSEES CONTENTION THAT THERE IS NO PREJUDICE CAUSE TO THE REVENUE EVEN IF IT IS ASSESSED AS HOUSE PROP ERTY INCOME BECAUSE ASSESSEE OTHERWISE WOULD HAVE BEEN ELIGIBLE TO CLAIM DEPRECIATION IN CASE IT IS TREATED AS BUSINESS INCO ME, LD. CIT OBSERVED THAT THE CLAIM OF ADDITIONAL DEPRECIATION WOULD NOT BE AVAILABLE TO ASSESSEE AS IT IS NOT PRODUCING ANY AR TICLE OR THING NOR ENGAGED IN GENERATION OR DISTRIBUTION OF POWER. BES IDES, THE PRIME ASSETS OF ASSESSEE ARE BUILDINGS, WHICH DO NOT FALL UNDER THE DEFINITION OF PLANT. LD. CIT, THEREFORE, HELD THAT AS AO HAS NOT EXAMINED THE ISSUE AND ALSO ASSESSEES CLAIM, ASSES SMENT ORDER IS NOT ONLY ERRONEOUS BUT PREJUDICIAL TO THE INTERESTS OF REVENUE. AS FAR AS THE SECOND ISSUE RELATING TO FINANCE COST IS CON CERNED, LD. CIT OBSERVED THAT AO HAS NOT MADE ANY VERIFICATION TO ALLOW THE CORRECT AMOUNT. ACCORDINGLY, LD. CIT SET ASIDE THE ASSESSME NT ORDER AND DIRECTED AO AS UNDER: 5. IN LIGHT OF THE ABOVE, IT IS HELD THAT THE ORDER OF THE AO PASSED U/S 143(3) IS ERRONEOUS AND PREJUDICIAL TO T HE INTERESTS OF REVENUE. IT IS ALSO HELD THAT THE INCOME FROM LE ASE RENTALS IS BUSINESS INCOME AND NOT INCOME FROM HOUSE PROPER TY. THE AO MAY COMPUTE THE INCOME ACCORDINGLY AND ALLOW THE NECESSARY DEDUCTIONS, IF THE ASSESSEE IS OTHERWISE ELIGIBLE FOR THE SAME. REGARDING THE ISSUE OF FINANCE COST, DETA ILS SUBMITTED BY THE ASSESSEE NEED TO BE VERIFIED WITH REFERENCE TO BOOKS OF ACCOUNT, HENCE, THE MATTER IS SET ASIDE TO THE FILE OF THE AO FOR PROPER VERIFICATION AND APPROPRIATE DECI SION AS PER LAW A FTER GIVING AN OPPORTUNITY OF BEING HEARD TO ASSESSEE. 7 ITA NO. 1037/HYD/2014 M/S INTIME PROPERTIES LTD. 7. BEING AGGRIEVED, ASSESSEE IS BEFORE US RAISING T HE FOLLOWING GROUNDS: GROUND 1: ERRONEOUS AND PREJUDICIAL ORDER 1.1 THE LD. CIT ERRED IN HOLDING THAT THE ASSESSMEN T ORDER DATED DECEMBER 27, 2011, PASSED BY THE AO U/S 143(3 ) OF THE ACT IS ERRONEOUS AND PREJUDICIAL TO THE INTERESTS O F REVENUE ALTHOUGH THE TWIN CONDITIONS REQUIRED TO BE FULFILL ED FOR EXERCISING THE JURISDICTION ARE NOT SATISFIED. 1.2 THE LD. CIT ERRED IN OBSERVING THAT SINCE THE A PPELLANT IS NOT ENTITLED TO A DEDUCTION U/S 32(IIA) OF THE ACT, THE ASSESSMENT ORDER IS PREJUDICIAL TO THE INTERESTS OF REVENUE AL THOUGH THE APPELLANT DID NOT MAKE ANY SUCH CLAIM IN ITS RETURN OF INCOME NOR THIS FORMED THE BASIS OF THE SHOW CAUSE NOTICE INVOKING JURISDICTION U/S 263 OF THE ACT. GROUND 2: BUSINESS INCOME VS. INCOME FROM HOUSE PRO PERTY 2.1 THE LD. CIT ERRED IN HOLDING THAT RENTAL INCOME EARNED ON LETTING OUT THE IMMOVABLE PROPERTY IS TO BE ASSESS ED AS BUSINESS INCOME AND NOT AS INCOME FROM HOUSE PROPER TY AS RETURNED BY THE APPELLANT AND ACCEPTED IN THE ASSES SMENT PROCEEDINGS. GROUND 3: DEPRECIATION ON ASSETS 3.1 WITHOUT PREJUDICE TO GROUND 2, IN CASE THE INCO ME OF THE APPELLANT IS CLASSIFIED AS BUSINESS INCOME INSTEAD OF INCOME FROM HOUSE PROPERTY, THE APPELLANT OUGHT TO HAVE BE EN ALLOWED DEPRECIATION IN RESPECT OF ITS ASSETS, INCLUDING TH E BUILDINGS AND FITTINGS AND MACHINERY THEREIN. GROUND 4: DEPRECIATION IN RESPECT OF FINANCE COST 4.1 THE LD. CIT ERRED IN COMING TO CONCLUSION THAT THE APPELLANT DID NOT FURNISH SPECIFIC DETAILS IN RESPE CT OF THE CLAIM FOR DEDUCTION OF THE INTEREST COST ALTHOUGH APPROPR IATE SUBMISSIONS WERE MADE BY THE APPELLANT IN RESPECT O F THE SAME. THE APPELLANT PRAYS, FOR THE FOLLOWING RELIEF: A) THE HONBLE TRIBUNAL BE PLEASED TO HOLD THAT THE ASSESSMENT ORDER DATED DECEMBER 27, 2011 IS NOT ERRONEOUS AND PREJUDICIAL 8 ITA NO. 1037/HYD/2014 M/S INTIME PROPERTIES LTD. TO THE INTERESTS OF REVENUE AND HENCE THE CIT WAS N OT JUSTIFIED IN EXERCISING THE JURISDICTION U/S 63 OF THE ACT. B) THE HONBLE TRIBUNAL BE PLEASED TO HOLD THAT REN TAL RECEIPTS ARE ASSESSABLE AS INCOME FROM HOUSE PROPERTY AND N OT AS BUSINESS INCOME. C) THE HONBLE TRIUNAL BE PLEASED TO ALLOW THE DEDU CTION IN RESPECT OF THE FINANCE COST. 8. AT THE OUTSET, LD. AR SUBMITTED THAT AS FAR AS G ROUND NOS. 1, 2 &3 ARE CONCERNED, THEY ARE COVERED BY THE DECISION OF ITAT, HYDERABAD BENCH IN CASE OF ASSESSEES SISTER CONCER N M/S K. RAHEJA IT PARK (HYDERABAD) P. LTD. IN ITA NOS. 1038, 1039 & 1040 VIDE ORDER DATED 07/11/2014 WHEREIN THE TRIBUNAL SET ASIDE THE ORDER PASSED U/S 263 OF THE ACT ON IDENTICAL REASONING. IN THIS CONT EXT, LD. AR SPECIFICALLY REFERRED TO PARAS 16 TO 22 OF THE ORDE R OF THE TRIBUNAL. FURTHER EXPLAINING, LD. AR SUBMITTED, ASSESSMENT OR DER CANNOT BE HELD EITHER ERRONEOUS OR PREJUDICIAL TO THE INTERE STS OF REVENUE - FOR THE VERY SAME REASONS ON WHICH ITAT IN CASE OF M/S K. RAHEJA IT PARK (HYDERABAD) P. LTD. (SUPRA) UPHELD THE ASSESSM ENT ORDER. LD. AR SUBMITTED, IF AT ALL, LD. CITS VIEW THAT INCOME FROM LEASE RENTAL IS TO BE TREATED AS BUSINESS INCOME, IS TO BE ACCEPTED , THEN, ASSESSEE WOULD BE ENTITLED FOR CLAIM OF DEPRECIATION ON THE BUSINESS ASSETS I.E. BUILDING WHICH WOULD BE MUCH MORE THAN DEDUCTIONS C LAIMED TOWARDS REPAIRS AND INTEREST FROM HOUSE PROPERTY INCOME. IN THIS CONTEXT, HE REFERRED TO THE WORKING OF UNABSORBED DEPRECIATION IN CASE INCOME IS TREATED AS BUSINESS INCOME. THUS, IT WAS SUBMITTED BY LD. AR THAT BOTH IN THE MATTER OF JURISDICTION AS WELL AS ON ME RIT, ORDER PASSED U/S 263 CANNOT BE SUSTAINED. 9. AS FAR AS THE SECOND ISSUE RELATING TO DIFFERENC E IN FINANCE COST IS CONCERNED, LD. AR REFERRING TO WORKING OF FINANC E COST SUBMITTED THAT FINANCE COST CLAIMED UNDER HOUSE PROPERTY IS N OT CLAIMED UNDER BUSINESS. LD. AR SUBMITTED, IN COURSE OF REVISION P ROCEEDING, ASSESSEE HAS SUBMITTED NOT ONLY WORKING OF THE FINA NCIAL COST, BUT, ALSO DEMONSTRATED THAT ACTUALLY THERE IS NO SUCH DI FFERENCE AS POINTED 9 ITA NO. 1037/HYD/2014 M/S INTIME PROPERTIES LTD. BY LD. CIT. HOWEVER, WITHOUT EXAMINING THE WORKING SUBMITTED BY ASSESSEE, LD. CIT HAS SET ASIDE THE ASSESSMENT ORDE R AND DIRECTED AO TO VERIFY AGAIN. LD. AR SUBMITTED, LD. CIT HAS NOT GIVEN ANY SPECIFIC FINDING WITH REGARD TO ALLEGED EXCESS CLAI M MADE BY ASSESSEE, ON THE OTHER HAND, DIRECTION GIVEN BY LD. CIT IS A GENERAL DIRECTION IN THE NATURE OF ROVING AND FISHING ENQUI RY, WHICH IS NOT PERMITTED U/S 263. IN THIS CONTEXT, LD. AR RELIED O N THE DECISION OF HONBLE BOMBAY HIGH COURT IN CASE OF CIT VS. GABRIE L INDIA LTD., 203 ITR 108. LD. AR SUBMITTED, THERE IS NO CONCLUSIVE F INDING BY LD. CIT THAT AO HAS FAILED TO APPLY HIS MIND OR CONDUCT AN Y ENQUIRY. IN THESE CIRCUMSTANCES, EXERCISE OF POWER U/S 263 IS TOTALLY INVALID. 10. LD. DR, ON THE OTHER HAND, THOUGH, SUPPORTED TH E ORDER OF LD. CIT, BUT HE SUBMITTED, AS FAR AS GROUND NOS. 1, 2 & 3 ARE CONCERNED, THEY ARE MORE OR LESS COVERED BY THE DECISION OF IT AT IN CASE OF M/S K. RAHEJA IT PARK (SUPRA). AS FAR AS SECOND ISSUE IN GROUND NO. 4 IS CONCERNED, LD. DR SUBMITTED THAT LD. CIT HAS ONLY D IRECTED AO TO EXAMINE THE ISSUE WITH REFERENCE TO THE BOOKS OF AC COUNT AND NO PREJUDICE IS CAUSED TO ASSESSEE AS A RESULT OF SUCH DIRECTION. 11. WE HAVE CONSIDERED THE SUBMISSIONS OF THE PARTI ES AND PERUSED THE ORDERS OF REVENUE AUTHORITIES AS WELL AS OTHER MATERIALS ON RECORD. THE FIRST ISSUE IS EXERCISE OF JURISDICTION U/S 263 WHETHER IS VALID OR NOT. AS CAN BE SEEN, ASSESSEE IN ITS ACCOUNTS AS WE LL AS RETURN FILED FOR THE IMPUGNED AY, HAS SHOWN THE INCOME EARNED FR OM INDUSTRIAL PARK IN TWO CATEGORIES, I.E., LEASE RENTALS FROM LE TTING OUT OF THE INDUSTRIAL PARK TO ENTITIES WAS SHOWN AS INCOME FRO M HOUSE PROPERTY AND MANAGEMENT AND FACILITIES FEE HAVE BEEN SHOWN A S BUSINESS INCOME. AO WHILE COMPLETING ASSESSMENT U/S 143(3) H AS ACCEPTED SUCH CLAIM OF ASSESSEE. HOWEVER, LD. CIT HAS HELD T HE ASSESSMENT ORDER TO BE ERRONEOUS AND PREJUDICIAL TO THE INTERE STS OF REVENUE ON THE GROUND THAT LEASE RENTAL SHOULD HAVE BEEN ASSES SED AS BUSINESS INCOME AND NOT AS INCOME FROM HOUSE PROPERTY. 10 ITA NO. 1037/HYD/2014 M/S INTIME PROPERTIES LTD. 12. THE ISSUE WHETHER A PARTICULAR INCOME IS TO BE ASSESSED AS HOUSE PROPERTY INCOME OR BUSINESS INCOME WILL DEPEN D UPON THE FACT OF EACH CASE AS DIVERGENT VIEWS ARE AVAILABLE ON T HIS ISSUE. WHETHER LEASE RENTAL IS TO BE ASSESSED AS HOUSE PROPERTY IN COME OR BUSINESS INCOME IS A DEBATABLE ISSUE ON WHICH MORE THAN ONE VIEW IS POSSIBLE. THEREFORE, IF AO HAS TAKEN A VIEW IN TREATING LEASE RENTAL AS HOUSE PROPERTY INCOME, AND SUCH VIEW IS ONE OF THE POSSIB LE VIEW AND IS ALSO SUPPORTED BY JUDICIAL PRECEDENTS, THEN, THE AS SESSMENT ORDER PASSED CANNOT BE SAID TO BE ERRONEOUS, EVEN ASSUMIN G THAT THERE MAY BE SOME PREJUDICE TO REVENUE. THEREFORE, AS ONE OF THE CONDITIONS FOR INVOKING JURISDICTION U/S 263 IS NOT SATISFIED, THE IMPUGNED ORDER OF LD. CIT CANNOT BE SUSTAINED. IN T HIS CONTEXT, IT IS RELEVANT TO REFER TO THE OBSERVATIONS MADE BY THE C OORDINATE BENCH WHILE DEALING WITH SIMILAR ISSUE ARISING OUT OF ORD ER PASSED U/S 263 IN CASE OF ASSESSEES SISTER CONCERN M/S K. RAHEJA IT PARK HYDERABAD (P) LTD. (SUPRA), WHICH IS EXTRACTED HEREUNDER FOR CONVENIENCE: 16. APART FROM THE ABOVE, EVEN ON MERITS, WE ARE OF THE OPINION THAT THE ORDER OF A.O. IS NEITHER ERRONEOUS NOR PREJUDICIAL TO THE INTERESTS OF REVENUE SO AS TO REVISE THE SAME U NDER SECTION 263. ASSESSEE HAS BEEN CONSISTENTLY OFFERING THE INCOMES UNDER THE HEAD INCOME ON HOUSE PROPERTY AS FAR AS THE RECEIPTS O F RENTS ARE CONCERNED AND UNDER THE HEAD BUSINESS AS FAR AS T HE SERVICE FEE AND MANAGEMENT FEE ON MAINTENANCE ARE CONCERNED. NO T ONLY IN THE IMPUGNED YEARS, EVEN IN EARLIER YEARS ALSO, THE INC OMES WERE ACCEPTED AS SUCH. SINCE THE LD. CIT CANNOT REVISE T HOSE ORDERS, THESE ORDERS ARE NOT SUBJECT MATTER OF PROCEEDINGS U/S 26 3 AND THEREFORE, THE ISSUES ARE CONCLUDED THEREIN ACCEPTING ASSESSEE S CONTENTION. ON THE RULE OF CONSISTENCY ALSO, IT CANNOT BE MODIFIED IN A LATER YEAR. HOWEVER, IT IS NOT ON RULE OF CONSISTENCY ALONE. A S SEEN FROM THE ORDERS PASSED BY THE AUTHORITIES AT THE TIME OF ASS ESSMENT, THEY HAVE ACCEPTED THE BIFURCATION OF RENTAL INCOME AND SERVI CES INCOME AND RENTAL INCOME WAS ACCEPTED UNDER THE HEAD HOUSE PR OPERTY. AS RIGHTLY POINTED OUT BY ASSESSEE IN THE SUBMISSIONS BEFORE THE LD. CIT THAT ASSESSING INCOMES UNDER HEAD BUSINESS WAS NOT PREJUDICIAL TO THE INTERESTS OF REVENUE CONSIDERING THAT A HIGHER CLAIM OF DEPRECIATION WAS ALLOWABLE ON THE PROPERTIES WHEN C OMPARED TO 30% ALLOWANCE FOR REPAIRS ON THE INCOMES ASSESSED, WE A GREE THAT THE ORDERS ARE NOT PREJUDICIAL TO THE INTEREST OF REVEN UE. 11 ITA NO. 1037/HYD/2014 M/S INTIME PROPERTIES LTD. 17. LD. CIT ERRED IN RELYING ONLY ON THE ITAT ORDE R IN THE CASE OF GLOBAL TECH PARK P. LTD., ACIT (SUPRA) WHER EIN THE COORDINATE BENCH RELIED ON THE JUDGMENT OF HONBLE KARNATAKA H IGH COURT IN THE CASE OF BALAJI ENTERPRISES VS. CIT 225 ITR 471. AS SEEN FROM THE JUDGMENT OF HONBLE KARNATAKA HIGH COURT THE FACTS IN THE SAID CASE WERE THAT ASSESSEE FIRM EVEN THOUGH CONSTITUTED TO CARRY ON BUSINESS OF DEALING IN REAL ESTATE AND SETTING UP, DEVELOPME NT AND EXPLOITATION OF COMMERCIAL COMPLEX IN MARKET, THEY HAVE NOT OWNE D THE PROPERTY BUT WERE DEVELOPING THE PROPERTIES OBTAINED ON LEAS E HOLD OR ON FREE HOLD BASIS AND FURTHER LEASING THE PROPERTIES AFTER DEVELOPMENT TO THE LESSEES. IN THOSE FACTS OF THE CASE, THE INCOMES AR E CORRECTLY HELD AS ASSESSABLE UNDER THE HEAD BUSINESS. FURTHER, IN T HE SAID CASE OF GLOBAL TECH PARK P. LTD., (SUPRA), THE INCOMES RECE IVED WERE COMPOSITE INCOMES FOR BOTH LEASING AS WELL AS MAINT ENANCE AND A.O. HAS NOT BIFURCATED THEM AT ALL. IN THAT CASE CONSTR UCTION AND MAINTENANCE OF INDUSTRIAL PARK WAS INDEED HELD AS BUSINESS ACTIVITY. HOWEVER, IN ORDER TO ARRIVE WHETHER A PARTICULAR INCOME IS TO BE ASSESSED UNDER HOUSE PROPERTY OR BUSINESS T HERE ARE MANY ASPECTS WHICH REQUIRE EXAMINATION. FIRST OF ALL, ON E HAS TO ENQUIRE WHETHER ASSESSEE IS OWNER OF THE PROPERTY OR NOT. T HEREAFTER, ASSESSEES NATURE OF ACTIVITIES ARE TO BE ANALYSED VIS--VIS THE ACTIVITIES/AGREEMENTS ENTERED BY ASSESSEE WITH REFE RENCE TO VARIOUS LESSEES AND TO VERIFY WHETHER RENTAL INCOME IS SEP ARATELY RECEIVED OR AS A COMPOSITE RENT BUT BIFURCATED BY ASSESSEE. THE TERMS OF AGREEMENT, THE PERIOD OF LEASE, THE CONDITIONS OF L EASE ETC., ALSO REQUIRED TO BE EXAMINED. THEREFORE, IN ORDER TO TAK E A DECISION WHETHER A PARTICULAR INCOME IS TO BE ASSESSED UNDER THE HEAD HOUSE PROPERTY OR UNDER THE HEAD BUSINESS MANY MORE FA CTS ARE REQUIRED TO BE EXAMINED. IN THIS CASE, NEITHER THE A.O. NOR THE LD. CIT EXAMINED ANY OF THESE ASPECTS, BUT DECIDED SIMPLY O N THE PRINCIPLES OF LAW. THEREFORE, WE ARE UNABLE TO GIVE ANY FINDIN G ABOUT THE CORRECTNESS OF THE ACTION OF EITHER A.O. OR LD. CIT IN COMING TO A PARTICULAR CONCLUSION WHETHER THE INCOME IS ASSESSA BLE UNDER HOUSE PROPERTY OR BUSINESS IN THE ABSENCE OF FACTS IN THESE YEARS. 18. HOWEVER, AS FAR AS THE LAW IS CONCERNED, THE HONBLE SUPREME COURT AS EARLY AS 42 ITR 49 IN THE CASE OF EAST INDIA HOUSING AND LAND DEVELOPMENT TRUST LTD., VS. CIT ON THE FOLLOWING FACTS HELD AS UNDER : THE APPELLANT COMPANY, WHICH WAS INCORPORATED WITH THE OBJECTS OF BUYING AND DEVELOPING LANDED PROPERTIES AND PROMOTI NG AND DEVELOPING MARKETS, PURCHASED 10 BIGHAS OF LAND IN THE TOWN OF CALCUTTA AND SET UP A MARKET THEREIN. THE QUESTION WAS WHETHER THE INCOME REALIZED FROM THE TENANTS OF THE SHOPS AND S TALLS WAS LIABLE TO BE TAXED AS BUSINESS INCOME UNDER SECTION 10 OF T HE INCOME TAX ACT OR AS INCOME FROM PROPERTY UNDER SECTION 9. 12 ITA NO. 1037/HYD/2014 M/S INTIME PROPERTIES LTD. HELD THAT THE INCOME DERIVED BY THE COMPANY FROM SH OPS AND STALLS IS INCOME RECEIVED FROM PROPERTY AND FALLS UNDER THE S PECIFIC HEAD DESCRIBED IN S. 9. THE CHARACTER OF THAT INCOME IS NOT ALTERED BECAUSE IT IS RECEIVED BY A COMPANY FORMED WITHIN OBJECT OF DEVELOPING AND SETTING UP MARKETS. NOR BECAUSE OF THE FACT THAT TH E COMPANY WAS REQUIRED TO OBTAIN A LICENCE FROM THE CALCUTTA MUNI CIPALITY TO MAINTAIN SANITARY AND OTHER SERVICES AND FOR THAT PURPOSE HA D TO MAINTAIN A STAFF AND TO INCUR EXPENDITURE DID THE INCOME BECOM E PROFITS OR GAINS FROM BUSINESS WITHIN THE MEANING OF SECTION 10. NOR WAS THE CHARACTER OF THE INCOME ALTERED MERELY BECAUSE SOME STALLS WERE OCCUPIED BY THE SAME OCCUPANTS AND THE REMAINING ST ALLS WERE OCCUPIED BY A SHIFTING CLASS OF OCCUPANTS. THE PRIM ARY SOURCE OF INCOME FROM THE STALLS WAS THE OCCUPATION OF THE ST ALLS, AND IT WAS A MATTER OF LITTLE MOMENT THAT THE OCCUPATION WHICH W AS THE SOURCE OF THE INCOME WAS TEMPORARY. INCOME-TAX IS UNDOUBTEDLY LEVIED ON THE TOTAL TAXAB LE INCOME OF THE TAXPAYER AND THE TAX LEVIED IS A SINGLE TAX ON THE AGGREGATE TAXABLE RECEIPTS FROM ALL THE SOURCES; IT IS NOT A COLLECTI ON OF TAXES SEPARATELY LEVIED ON DISTINCT HEADS OF INCOME. BUT THE DISTINC T HEADS SPECIFIED IN S. 6 INDICATING THE SOURCES ARE MUTUALLY EXCLUSIVE AND INCOME DERIVED FROM DIFFERENT SOURCES FALLING UNDER SPECIFIC HEADS HAS TO BE COMPUTED FOR THE PURPOSE OF TAXATION IN THE MANNER PROVIDED BY THE APPROPRIATE SECTION. IF THE INCOME FROM A SOURCE FA LLS WITHIN A SPECIFIC HEAD SET OUT IN S. 6, THE FACT THAT IT MAY INDIRECT LY BE COVERED BY ANOTHER HEAD WILL NOT MAKE THE INCOME TAXABLE UNDER THE LATTER HEAD. 18.2. THEREAFTER, THE HONBLE SUPREME COURT HAS AN OTHER OCCASION TO RE-VISIT THE ISSUE IN THE CASE OF KARNA NI PROPERTIES LTD., VS. CIT, WEST BENGAL 82 ITR 547 WHEREIN THE HONBLE SUP REME COURT CONSIDERED THE FACTS AND HELD AS UN DER . THE ASSESSEE-COMPANY OWNED HOUSE PROPERTIES, POPU LARLY KNOWN AS KARNANI MANSION IN PARK STREET, CALCUTTA. THE SA ID KARNANI MANSION CONSISTS OF NUMEROUS RESIDENTIAL FLATS AND OVER A DOZEN SHOP PREMISES. ALL THOSE WERE LET OUT TO DIFFERENT TENANTS ON A MONTHLY RENTAL BASIS. THE TENANTS IN RESPECT OF EAC H OF THE FLATS AND SHOPS LET OUT HAD TO MAKE A MONTHLY PAYMENT WHI CH INCLUDED CHARGES FOR ELECTRIC CURRENT, FOR USE OF LIFTS, FOR THE SUPPLY OF HOT AND COLD WATER, FOR THE ARRANGEMENT FOR SCAVANGING, FOR PROVIDING WATCH AND WARD FACILITIES AS WELL AS OTHER AMENITIES. THE TRIBUNAL FURTHER FOUND THAT THE ASSESSEE-COMPANY PURCHASES FROM THE CALCUTTA ELECTRIC SUPPLY CORPORATION HIGH VOLTAGE A.C. CURRE NT IN BULK, CONVERTS THE SAME INTO LOW VOLTAGE A.C. CURRENT IN THE COMPANY'S OWN POWER HOUSE WITHIN THE PREMISES AND SUPPLIES TH E POWER TO ITS TENANTS. IT ALSO MAINTAINS A SEPARATE WATER PUM P-HOUSE AND A BOILER FOR THE SUPPLY OF HOT AND COLD WATER TO THE TENANTS. THE 13 ITA NO. 1037/HYD/2014 M/S INTIME PROPERTIES LTD. COMPANY FURTHER PROVIDED FOR THE BENEFIT OF TENANTS , ELECTRIC LIFTS WORKING DAY AND NIGHT. THE FURTHER FINDING OF THE T RIBUNAL WAS THAT FOR ALL THESE PURPOSES THE ASSESSEE-COMPANY MA INTAINS A LARGE NUMBER OF PERMANENT STAFF. THE COMPANY CLAIME D THAT THE ENTIRE RECEIPTS FROM THE TENANTS SHOULD BE TREATED AS INCOME FROM BUSINESS AS IT HAD BEEN FORMED FOR CARRYING ON THE BUSINESS OF LETTING OUT FLATS AND SHOPS. THE INCOME TAX OFFICER REJECTED ITS CLAIM BUT SPLIT THE RECEIPTS INTO TWO PARTS, ONE PA RT BEING TREATED AS RENT AND THE OTHER AS INCOME FROM OTHER SOURCES TAXABLE UNDER SECTION 12 OF THE INCOME TAX ACT, 1922 . THE APPELLATE TRIBUNAL HELD THAT THE SECOND PART WAS ASSESSABLE AS INCOME FROM BUSINESS UNDER SECTION 10 . NEITHER THE DEPARTMENT NOR THE ASSESSEE CONTENDED THAT THE PART WAS ASSESSABLE UNDER SECTION 9. ON A REFERENCE THE HIGH COURT HELD THAT THE LATTER PART OF THE RECEIPTS WAS ALSO ASSES SABLE AS INCOME FROM PROPERTY UNDER SECTION 9. ON APPEAL TO THE SUP REME COURT : HELD, REVERSING THE DECISION OF THE HIGH COURT, (I) THAT THE DEPARTMENT HAVING ALL ALONG PROCEEDED ON THE BASIS THAT THE INCOME OF THE ASSESSEE WAS FROM TWO DIFFERENT SOURC ES, IT SHOULD NOT HAVE BEEN ALLOWED BY THE HIGH COURT TO CHANGE I TS CASE ; (II) THAT, ON THE FACTS, THE SERVICES RENDERED BY T HE ASSESSEE TO ITS TENANTS WERE THE RESULT OF ITS ACTIVITIES CARRIED O N CONTINUOUSLY IN AN ORGANIZED MANNER, WITH A SET PURPOSE AND WITH A VIEW TO EARN PROFITS; THOSE ACTIVITIES WERE BUSINESS ACTIVITIES AND THE INCOME ARISING THEREFROM WAS ASSESSABLE UNDER SECTION 10. WHEN THE QUESTION TO THE HIGH COURT SPEAKS OF ON T HE FACTS AND IN THE CIRCUMSTANCES OF THE CASE:, IT MEANS ON THE FAC TS AND CIRCUMSTANCES FOUND BY THE TRIBUNAL AND NOT FACTS A ND CIRCUMSTANCES THAT MAY BE FOUND BY THE HIGH COURT O N A REAPPRAISAL OF THE EVIDENCE. IN THE ABSENCE OF A QU ESTION WHETHER THE FINDINGS WERE VITIATED FOR ANY REASON BEING BEF ORE THE HIGH COURT, THE HIGH COURT HAS NO JURISDICTION TO GO BEH IND OR QUESTION THE STATEMENT OF FACT MADE BY THE TRIBUNAL. 18.3. THUS THE ISSUE DECIDED BY THE HONBLE SUPREM E COURT IN THE ABOVE CASE WAS THAT SERVICES INCOME WAS ASSE SSABLE AS INCOME FROM BUSINESS, BUT THERE IS NO DISPUTE WITH REFERENCE TO RENT BEING ASSESSED UNDER THE HEAD INCOME FROM HOUSE PROPERTY. THE HONBLE SUPREME COURT IN THE CASE OF S.G. MERCANTILE CORPORATION PVT. LTD., VS. CIT 83 ITR 70 0 (SC) ON THE FOLLOWING FACTS HELD AS UNDER : THE ASSESSEE COMPANY WAS INCORPORATED IN JANUARY, 1955. ONE OF THE OBJECTS SPECIFIED IN ITS MEMORANDUM OF ASSOC IATION WAS TO 14 ITA NO. 1037/HYD/2014 M/S INTIME PROPERTIES LTD. TAKE ON LEASE OR OTHERWISE ACQUIRE AND TO HOLD, IMP ROVE, LEASE OR OTHERWISE DISPOSE OF LAND, HOUSES AND OTHER REAL AN D PERSONAL PROPERTY AND TO DEAL WITH THE SAME COMMERCIALLY. WI THIN LESS THAN TWO WEEKS OF ITS INCORPORATION THE COMPANY TOOK ON LEASE A MARKET PLACE FOR AN INITIAL TERM OF 50 YEARS, UNDERTAKING TO SPEND RS. 5 LAKHS FOR THE PURPOSE OF REMODELING AND REPAIRING T HE STRUCTURE ON THE SITE. IT WAS ALSO GIVEN THE RIGHT TO SUBLET THE DIFFERENT PORTIONS. THE APPELLANTS ACTIVITY DURING THE PERIOD COVERED BY THE ASSESSMENT YEARS 1956-57 TO 1958-59 CONSISTED OF DE VELOPING THE PROPERTY AND LETTING OUT PORTIONS THEREOF AS SHOPS, STALLS AND GROUND SPACES TO SHOPKEEPERS, STALLHOLDERS AND DAIL Y CASUAL MARKET VENDORS. THE QUESTION WAS WHETHER THE APPELL ANTS INCOME FROM SUBLETTING THE STALLS WAS ASSESSABLE AS BUSINE SS INCOME UNDER SECTION 10 OF THE INCOME TAX ACT, 1922, OR AS INCOME FROM OTHE SOURCES UNDER SECTION 12 : HELD : (I) THAT SINCE THE APPELLANT-COMPANY WAS NOT THE OWNER OF THE PROPERTY OR ANY PART THEREOF, NO QUESTION OF MA KING THE ASSESSMENT UNDER SECTION 9 AROSE ; (II) THAT THE DEFINITION OF BUSINESS IN SECTION 2 (4) WAS OF WIDE AMPLITUDE AND IT COULD EMBRACE WITHIN ITSELF DEALIN G IN REAL PROPERTY AS ALSO THE ACTIVITY OF TAKING A PROPERTY ON LEASE, SETTING UP A MARKET THEREON AND LETTING OUT SHOPS AND STALL S IN THE MARKET; (III) THAT, ON THE FACTS, THE TAKING OF THE PROPERT Y ON LEASE AND SUBLETTING PORTIONS THEREOF WAS PART OF THE BUSINES S AND TRADING ACTIVITY OF THE APPELLANT AND THE INCOME OF THE APP ELLANT FELL UNDER SECTION 10 OF THE ACT ; AND (IV) THAT WHERE, AS IN THIS CASE, THE INCOME COULD APPROPRIATELY FALL UNDER SECTION 10 AS BEING BUSINESS INCOME, NO RESOR T COULD BE MADE TO SECTION 12. THE LIABILITY TO TAX UNDER SECTION 9 OF THE INCOME TAX ACT, 1922, IS OF THE OWNER OF THE BUILDINGS OR LAND APPURTENANT T HERETO. IN CASE THE ASSESSEE IS THE OWNER OF THE BUILDINGS OR LANDS APPURTENANT THERETO, HE WOULD BE LIABLE TO PAY TAX UNDER SECTIO N 9 EVEN IF THE OBJECT OF THE ASSESSEE IN PURCHASING THE LANDED PRO PERTY WAS TO PROMOTE AND DEVELOP A MARKET THEREON. IT WOULD ALSO MAKE NO DIFFERENCE IF THE ASSESSEE WAS A COMPANY WHICH HAD BEEN INCORPORATED WITH THE OBJECT OF BUYING AND DEVELOPI NG LANDED PROPERTIES AND PROMOTING AND SETTING UP MARKET THER EON. THE RESIDUARY HEAD OF INCOME CAN BE RESORTED TO ONL Y IF NONE OF THE SPECIFIC HEADS IS APPLICABLE TO THE INCOME IN QUEST ION; IT COMES INTO OPERATION ONLY AFTER THE PRECEDING HEADS ARE EXCLUD ED. 15 ITA NO. 1037/HYD/2014 M/S INTIME PROPERTIES LTD. 18.4. THEREAFTER, THE HONBLE SUPREME COURT IN THE CASE OF SAMBHU INVESTMENTS PVT. LTD., VS. CIT 263 ITR 143 A LSO HELD THAT THE PRIME OBJECT OF THE ASSESSEE SHALL TO LET OUT P ORTION OF THE SAID PROPERTY TO VARIOUS OCCUPANTS BY GIVING THEM ADDITI ONAL RIGHT FOR USING FURNITURES AND FIXTURES AND OTHER COMMON FACI LITIES AND HENCE, INCOME DERIVED FROM THE SAID PROPERTY WAS AN INCOME TAXABLE UNDER THE HEAD INCOME FROM PROPERTY. THE PRINCIPLES LAID DOWN IN VARIOUS DECISIONS OF HONBLE SUPREME COURT WERE FOLLOWED IN VARIOUS OTHER DECISIONS. HONBLE MADRAS HIGH C OURT IN THE CASE OF CIT VS. CHENNAI PROPERTIES AND INVESTMENTS LTD., 274 ITR 117, HONBLE BOMBAY HIGH COURT IN THE CASE OF MANGALA HO MES P. LTD., VS. ITO 325 ITR 281 REITERATED THE SAME PRINCIPLES. EVEN THE JURISDICTIONAL HIGH COURT IN THE CASE OF PVG RAJU V S CIT 66 ITR 122 FOLLOWING THE JUDGMENT OF APEX COURT IN THE CAS E OF EAST INDIA HOUSING AND LAND DEVELOPMENT TRUST LTD., (SUPRA), H ELD THAT A MERE FACT THAT THE BUILDING OR SHOPS BUILT WITH THE SPECIFIC OBJECT OF FORMING, DEVELOPING OR SETTING-UP A MARKET DID NOT CHANGE THE CHARACTER OF INCOME DERIVED AS OWNER OF THE PROPERT Y AND BY LEASING THE SAME. IT WAS HELD THAT THE INCOME DERIV ED WAS TO BE HELD AS INCOME FROM HOUSE PROPERTY AND NOT INCOME D ERIVED FROM BUSINESS OR PROFESSION. 19. IN VIEW OF THE PREVAILING JUDICIAL PRINCIPLES/ PRECEDENTS ON THE ISSUE, A.O. MIGHT HAVE ACCEPTED THE BIFURCAT ION OF ASSESSEE RECEIPTS AND OFFERING THE INCOMES UNDER RESPECTIVE HEADS IN THE SCRUTINY ORDERS PASSED. THEREFORE, IT IS TO BE CONS IDERED THAT HE HAS FORMED AN OPINION OF ACCEPTING ASSESSEES RENTA L INCOME UNDER THE HEAD INCOME FROM HOUSE PROPERTY AND ALLOWING THE CLAIMS AS PER THAT HEAD RATHER THAN ALLOWING DEPRECIATION ON ASSETS, IF IT IS CONVERTED TO INCOME FROM BUSINESS. SINCE THE A.O. F ORMED AN OPINION NOT ONLY IN THE IMPUGNED ASSESSMENT YEARS B UT ALSO IN EARLIER YEARS, WE ARE OF THE OPINION THAT THE LD. C IT OPINION THAT THE SAME IS TO BE ASSESSED AS BUSINESS INCOME WILL FALL UNDER THE CATEGORY OF DIFFERENCE OF OPINION. IF A.O. HAS TAKE N ONE OF THE OPINION AVAILABLE OUT OF THE TWO, THE LD. CIT CANNO T INVOKE JURISDICTION UNDER SECTION 263. PROVISIONS OF SECTI ON 263 DOES NOT PERMIT SUBSTITUTING ONE OPINION BY ANOTHER OPINION. THEREFORE, THE ORDER OF LD. CIT CANNOT BE SUSTAINED ON THE PRINCIP LES OF ERRONEOUS NATURE OF A.O. ORDER, AS IT IS NOT ERRO NEOUS. 13. AS FAR AS THE SECOND ISSUE RELATING TO EXCESS C LAIM OF INTEREST IS CONCERNED, AS CAN BE SEEN FROM THE FACTS AND MATERI ALS ON RECORD, IN COURSE OF REVISION PROCEEDING, ASSESSEE HAS SUBMITT ED DETAILED WORKING RELATING TO APPORTIONMENT OF INTEREST TO HO USE PROPERTY 16 ITA NO. 1037/HYD/2014 M/S INTIME PROPERTIES LTD. INCOME AS WELL AS BUSINESS INCOME. AS IT APPEARS, L D. CIT HAS NOT AT ALL APPLIED HIS MIND TO THE WORKING SUBMITTED BY AS SESSEE. HOWEVER, ON PERUSAL OF THE WORKING SUBMITTED BY ASSESSEE IN COURSE OF REVISION PROCEEDING, CLEARLY DEMONSTRATE THAT ACTUALLY THER E IS NO SUCH EXCESS CLAIM AS ALLEGED BY LD. CIT IN THE SHOW CAUSE NOTIC E. LD. CIT WHILE ISSUING THE SHOW CAUSE NOTICE U/S 263 HAS SPECIFIC ALLY ALLEGED OF EXCESS CLAIM OF INTEREST TO THE TUNE OF RS. 557.23 LAKHS, BUT, ULTIMATELY HE HAS NOT AT ALL GIVEN ANY SPECIFIC FIN DING WITH REGARD TO SUCH ALLEGATION AND HAS MERELY REMITTED THE ISSUE B ACK TO THE FILE OF AO FOR VERIFICATION. IT IS TO BE NOTED THE DIRECTI ON OF LD. CIT IN THIS REGARD IS NOTHING BUT A GENERAL DIRECTION AND IN TH E NATURE OF ROVING AND FISHING INQUIRY AS LD. CIT HAS NOT BROUGHT ANY MATERIAL ON RECORD TO SUBSTANTIATE HIS ALLEGATION THAT ASSESSEE HAS CL AIMED FINANCIAL CHARGES IN EXCESS. THE HONBLE BOMBAY HIGH COURT IN CASE OF CIT VS. GABRIEL INDIA LTD. (SUPRA) HELD AS UNDER: 9. FROM A READING OF SUB-S. (1) OF S. 263 IT IS CLEAR THAT THE POWER OF SUO MOTU REVISION CAN BE EXERCISED BY THE COMMISSIONER ONLY IF, ON EXAMINATION OF THE RECORDS OF ANY PROCEEDINGS UNDER THIS ACT, HE CONSIDERS THAT ANY ORDER PASSED THEREIN BY THE ITO IS 'ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTEREST OF THE REV ENUE'. IT IS NOT AN ARBITRARY OR UNCHARTERED POWER. IT CAN BE EXERCISED ONLY ON F ULFILMENT OF THE REQUIREMENT LAID DOWN IN SUB-S. (1). THE CONSIDERAT ION OF THE COMMISSIONER AS TO WHETHER AN ORDER IS ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTERESTS OF THE REVENUE, MUST B E BASED ON MATERIALS ON RECORD OF THE PROCEEDINGS CALLED FOR BY HIM. IF THERE ARE NO MATERIALS ON RECORD ON THE BASIS OF WHICH IT CAN BE SAID THAT THE COMMISSIONER ACTING IN A REASONABLE MANNER COULD HAVE COME TO SU CH A CONCLUSION, THE VERY INITIATION OF PROCEEDINGS BY HIM WILL BE I LLEGAL AND WITHOUT JURISDICTION. THE COMMISSIONER CANNOT INITIATE PROC EEDINGS WITH A VIEW TO STARTING FISHING AND ROVING ENQUIRIES IN MATTERS OR ORDERS WHICH ARE ALREADY CONCLUDED. SUCH ACTION WILL BE AGAINST THE WELL-ACCEPTED POLICY OF LAW THAT THERE MUST BE A POINT OF FINALITY IN AL L LEGAL PROCEEDINGS, THAT STALE ISSUES SHOULD NOT BE REACTIVATED BEYOND A PAR TICULAR STAGE AND THAT LAPSE OF TIME MUST INDUCE REPOSE IN AND SET AT REST JUDICIAL AND QUASI- JUDICIAL CONTROVERSIES AS IT MUST IN OTHER SPHERES OF ACTIVITY. [SEE PARASHURAM POTTERY WORKS CO. LTD. VS. ITO 1977 CTR (SC) 32 : (1977) 106 ITR 1 (SC)]. 10. AS OBSERVED IN SIRPUR PAPER MILLS LTD. VS. ITO 197 7 CTR (AP) 138 : (1978) 114 ITR 404 (AP) BY RAGHUVEER, J. (AS HIS LO RDSHIP THEN WAS), 17 ITA NO. 1037/HYD/2014 M/S INTIME PROPERTIES LTD. THE DEPARTMENT CANNOT BE PERMITTED TO BEGIN FRESH L ITIGATIONS BECAUSE OF NEW VIEWS THEY ENTERTAIN ON FACTS OR NEW VERSIONS W HICH THEY PRESENT AS TO WHAT SHOULD BE THE INFERENCE OR PROPER INFERENCE AS OF THE FACTS DISCLOSED OR THE WEIGHT OF THE CIRCUMSTANCES. IF TH AT IS PERMITTED, LITIGATION WOULD HAVE NO END, 'EXCEPT WHEN LEGAL IN GENUITY IS EXHAUSTED'. TO DO SO, IS 'TO DIVIDE ONE ARGUMENT INTO TWO AND T O MULTIPLY THE LITIGATION'. THE OBSERVATIONS OF THE HONBLE BOMBAY HIGH COURT S QUARELY APPLY TO THE FACTS OF THE PRESENT CASE. IN THE AFORESAID VI EW OF THE MATTER, AS THE CONDITIONS OF SECTION 263 ARE NOT SATISFIED, WE ARE OF THE VIEW THAT EXERCISE OF POWER U/S 263 IN THE PRESENT CASE IS IN VALID. ACCORDINGLY, WE SET ASIDE THE IMPUGNED ORDER OF LD. CIT AND REST ORE THE ORDER PASSED BY AO. 14. IN THE RESULT, APPEAL OF ASSESSEE IS ALLOWED. PRONOUNCED IN THE OPEN COURT ON 18 TH MARCH, 2015. SD/- SD/- (P.M. JAGTAP) (SAKTIJIT DEY) ACCOUNTANT MEMBER JUDICIAL MEMBER HYDERABAD, DATED: 18 TH MARCH, 2015 KV COPY TO:- 1) M/S INTIME PROPERTIES LTD., 1, MINDSPACE, CYBERA BAD, S NO 64 (PART), APIIC SOFTWARE LAYOUT, 1 ST FLOOR, TITUS TOWERS, BUILDING NO. 10, MADHAPUR, HYDERABAD 2) CIT-II, HYDERABAD 3) ADDL. CIT(A), RANGE 2, HYDERABAD 4) THE DEPARTMENTAL REPRESENTATIVE, I.T.A.T., HYDE RABAD. 18 ITA NO. 1037/HYD/2014 M/S INTIME PROPERTIES LTD. DESCRIPTION DATE INTLS 1. DRAFT DICTATED ON SR.P.S. 2. DRAFT PLACED BEFORE AUTHOR SR.P.S 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER VP 5 APPROVED DRAFT COMES TO THE SR.P.S./PS SR.P.S. 6. KEPT FOR PRONOUNCEMENT ON SR.P S. 7. FILE SENT TO THE BENCH CLERK SR.P.S. 8 DATE ON WHICH FILE GOES TO THE HEAD CLERK 9 DATE OF DISPATCH OF ORDER