Assistant Commissioner Of Income Tax, Circle - 1(2)(2), Bangalore V. M/s. Nitesh Infrastructure & Constructions, Bangalore

ITA 1039/BANG/2019

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 4532 (ITAT-BANGALORE)
• Duration Of Justice: 2 year(s) 4 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-09-2021
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: C
• Assessment Year: 2012-2013
• Appeal Filed On: 13-05-2019
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: H KABILA A DDL BENGLAURU
• Assessee Lawyers: K R VASUDEVAN
• Keywords: Business income; Depreciation; Business expenditure; Revised return; Reason to believe
• Section: 143(3); 133(6); 13; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH : BANGALORE BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SMT. BEENA PILLAI , JUDICIAL MEMBER IT A NO. 1039/ BANG/2019 ASSESSMENT YEAR : 2012 - 13 THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE 1(2)(3), BENGALURLU. VS. M/S. NITESH INFRASTRUCTURE & CONSTRUCTIONS, NO.25A, 2 ND FLOOR, IMPERIAL COURT, CUNNINGHAM ROAD, BENGALURU 560 052. PAN: AADFN 2384F APPELLANT RESPONDENT APPELLANT BY : S HRI H. KABILA, A DDL.CIT(DR)(ITAT), BENGLAURU. RESPONDENT BY : SHRI K.R . VASUDEVAN, ADVO CATE DATE OF HEARING : 27 . 0 8 .202 1 DATE OF PRONOUNCEMENT : 23 .0 9 .202 1 O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST T HE ORDER DATED 14.3.2019 OF THE PRINCIPAL COMMISSIONER OF INCOME T AX (APPEALS)-2, BENGALURU [PCIT(A)] FOR THE ASSESSMENT YEAR 2012-13 . 2. THE ASSESSEE IS A PARTNERSHIP FIRM ENGAGED IN TH E BUSINESS OF DEVELOPMENT OF REAL ESTATE PRIMARILY COMMERCIAL BUI LDINGS ON JOINT DEVELOPMENT BASIS AND THEREAFTER RENTING THE PORTIO N OF THE DEVELOPED PROPERTY RECEIVED UNDER JOINT DEVELOPMENT TERMS. 3. THE BUSINESS ACTIVITIES OF THE APPELLANT INCLUDE S: - ITA NO.1039/BANG/2019 PAGE 2 OF 14 (A) IDENTIFYING POTENTIAL PROPERTIES IN CENTRAL BUSINES S DISTRICT' FOR JOINT DEVELOPMENT; (B) HOLDING TALKS AND NEGOTIATION WITH THE POTENTIAL LA ND OWNERS FOR DRAWING UP THE MODALITIES AND ARRANGEMENT OF WO RKING FOR THE DEVELOPMENT; (C) SEEKING LEGAL CLEARANCES, ENGAGE FIRM OF ARCHITECTS FOR DESIGN CONCEPTUALIZATION AND DRAWING PLANS, OBTAIN APPROVA L OF PLANS AND OTHER CLEARANCES FROM APPROPRIATE AUTHORITIES, ENGAGE CIVIL CONTRACTORS FOR THE CONSTRUCTION, MONITOR AND SUPER VISE THE PROJECTS AND SUCH; (D) UPON COMPLETION OF CONSTRUCTION HOLD FORMAL LAUNCH OF THE PROPERTIES TO ATTRACT CORPORATE TENANTS FOR THE PRO PERTIES DEVELOPED; (E) NEGOTIATE AND ENTER INTO AGREEMENT WITH THE TENANTS FOR ITS AND THE LAND OWNER SHARE IN THE DEVELOPED PROPERTIE S; (F) MAINTAIN THE LET OUT PROPERTIES ON BEHALF OF THE TE NANTS, LIKE PROVIDING SECURITY SERVICES, UNINTERRUPTED POW ER SUPPLY THROUGH STAND BY GENERATORS, ETC. 4. SINCE INCEPTION, THE ASSESSEE HAD BUILT THREE C OMMERCIAL PROPERTIES ON JOINT DEVELOPMENT BASIS. AS PER THE TERMS OF JOI NT DEVELOPMENT AGREEMENT, IN LIEU OF CARRYING OUT THE CONSTRUCTION OF THE BUILDING, THE ASSESSEE WAS ENTITLED TO GET THE LEASE HOLD RIGHTS OF AN AGREED PORTION OF THE DEVELOPED PROPERTY FOR A SPECIFIED PERIOD OF TI ME, DURING WHICH PENDENCY IT WAS ENTITLED TO LET OUT THE SAME AND EA RN RENTAL INCOME AND UPON THE COMPLETION OF THE SPECIFIED PERIOD OF THE LEASE PERIOD, THE ASSESSEE WAS REQUIRED TO SURRENDER SUCH LEASE HOLD RIGHTS OF THE DEVELOPED PROPERTY BACK TO THE LANDLORD. 5. OF THE THREE PROPERTIES DEVELOPED, THE BUILDING NITESH TIMESQUARE & NITESH BROADWAY WAS DEVELOPED BY THE APPELLANT ON J D BASIS WITH MS. NALINI MOHAN, WHERE THE ASSESSEE WAS ENTITLED TO LE ASE RIGHTS OF 50 % PORTION OF THE BUILT SPACE IN THESE BUILDINGS FOR A TERM OF 65 YEARS. IN ITA NO.1039/BANG/2019 PAGE 3 OF 14 RESPECT OF THE THIRD PROPERTY, NITESH LEXINGTON AVE NUE, THE ASSESSEE HAD BUILT THIS BUILDING ON THE LAND WHICH WAS LEASED FR OM THE ARCHDIOCESE OF BANGALORE FOR A PERIOD OF 40 YEARS FOR A PAYMENT OF LAND RENT, WHICH COMPRISED OF NON-REFUNDABLE PORTION DEPOSIT AND ANN UAL LAND RENT. 6. THE ASSESSEE BEING ENTITLED ONLY TO THE LEASE HO LD RIGHTS OF THE DEVELOPED PROPERTY FOR A SPECIFIED PERIOD AS PER TH E JOINT DEVELOPMENT TERMS, IT REQUIRED THE ASSESSEE TO RECOVER ITS INVE STMENT MADE IN THE CONSTRUCTION OF THE PROPERTY ALONG WITH THE PROFITS . 7. FOR THE AY 2012-13, THE ASSESSEE FILED ITS RETUR N OF INCOME ON 06/09/2012 DECLARING A TAXABLE INCOME OF RS. 36,08, 340 AFTER INTER-HEAD SET OFF OF THE BUSINESS LOSS AND INCOME FROM HOUSE PROPERTY AND ACCORDINGLY PAID THE TAX OF RS. 10,82,501. IN THE R ETURN, THE ASSESSEE HAD DISCLOSED THE RENTAL INCOME EARNED FROM LETTING OUT THE PROPERTY UNDER INCOME FROM HOUSE PROPERTY, ALTHOUGH THE NATURE OF ACTIVITY CARRIED OUT WAS AKIN TO BUSINESS AND SUCH INCOME WAS PARTIALLY SET OFF AGAINST THE BUSINESS LOSS. 8. DURING THE PROCEEDINGS U/S 143(3) OF THE ACT, TH E AO HAD CONCLUDED THE ASSESSMENT BY RE-COMPUTING THE TAXABL E INCOME OF THE APPELLANT AT RS. 2,88,46,1901- AFTER DISALLOWANCE I ADDITIONS I ALTERATIONS UNDER THE FOLLOWING MAJOR HEADS:- SL. NO. PARTICULARS - AMOUNT (RS) 1 DISALLOWANCE OF OFFICE RENT 57,60,000 2 DISALLOWANCE OF LAND RENT 1,67,58,000 3 INTEREST PAID ON TERM LOAN 67,77,347 4 DISALLOWANCE OF DEPRECIATION ON INTERIORS 22,24,430 5 PARKING FEES 40,96,500 6 DISALLOWANCE OF REPAIRS AND MAINTENANCE 2 5,05,516 7 DISALLOWANCE OF INAUGURATION EXPENSES 5,53,430 8 PROFESSION & CONSULTANCY CHARGES 15,79,395 ITA NO.1039/BANG/2019 PAGE 4 OF 14 9 WRITE BACK OF CERTAIN SUNDRY CREDITORS AS INCOME 20,86,354 9. AFTER CONCLUDING THE ASSESSMENT U/S 143(3) FOR T HE AY 2012-13, THE AO HAD SERVED UPON THE ASSESSEE THE NOTICE U/S 148 RELEVANT TO AYS 2008- 09 TO 2011-12 PROPOSING TO RE-ASSESS THE APPELLANT' S INCOME ULS 147 FOR THOSE YEARS. 10. SHORTLY AFTER THE AO HAD PASSED THE ORDER U/S 1 43(3) FOR THE AY 2012-13, THE HONBLE SUPREME COURT HAD PASSED A JUD GMENT DATED 9.4.2015 IN THE CASE OF CHENNAI PROPERTIES & INVESTMENTS LTD. V. CIT, CIVIL APPEAL NO.4494 OF 2004, WHICH FACTS WERE IDENTICAL TO THAT OF THE ASSESSEES CASE. THE COURT HAD HELD THAT IT WAS TH E NATURE OF ACTIVITY OF THE ASSESSEE AND NATURE OF OPERATIONS IN RELATION T O THEM WHICH DETERMINES THE NATURE OF INCOME AND CONCLUDED THAT INCOME FROM LETTING OUT OF PROPERTIES WAS BUSINESS INCOME, IF THE PRIMARY BUSI NESS ACTIVITY OF THE ASSESSEE WAS LETTING PROPERTIES FOR RENT. RELYING O N THIS JUDGMENT THE ASSESSEE HAD REVISED THE RETURNS OF INCOME FOR THE AYS 2013-14 & 2014-15 BY OFFERING THE INCOME UNDER THE HEAD BUSINESS, INS TEAD OF HOUSE PROPERTY. 11. IN RESPONSE TO THE NOTICES ISSUED U/S 148, THE ASSESSEE RELYING ON THE ABOVE SC RULING FILED REVISED RETURNS OF INCOME FOR THE AYS 2008-09 TO 2011-12 BY DISCLOSING THE INCOME UNDER BUSINESS INS TEAD OF HOUSE PROPERTY CLAIMING REFUND OF TAXES PAID. 12. THE RETURN OF INCOME WAS TAKEN UP FOR SCRUTINY ASST FOR THE AYS 2013-14 AND 2014-15 WHERE THE ASSESSMENT WAS CONCLU DED BY THE AO TREATING THE INCOME OF THE APPELLANT AS BUSINESS IN COME BASED ON THE RULING OF THE HONBLE SUPREME COURT IN THE CASE OF CHENNAI PROPERTIES & INVESTMENTS LTD. (SUPRA) . ITA NO.1039/BANG/2019 PAGE 5 OF 14 13. CONSEQUENTLY, THE AO WHO HAD INITIATED THE PROC EEDINGS U/S 148 FOR THE AYS 2008-09 TO 2011-12, HAD CONCLUDED THE PROCE EDINGS U/S 147 BY IGNORING THE REVISED RETURNS OF INCOME FILED BY THE ASSESSEE FOR THE AY 2008-09 TO 2011-12 IN WHICH IT HAD CLAIMED TAX REFU ND ARISING FROM CHARGE OF DEPRECIATION UNDER BUSINESS AND ACCEPTED THE INC OME DISCLOSED IN THE ORIGINAL RETURN OF INCOME FILED FOR THE AYS 2008-09 TO 2011-12. 14. ON APPEAL BY THE ASSESSEE FOR AY 2012-13, THE C IT(APPEALS) ALLOWED IT. AGAINST THIS, THE REVENUE IS IN APPEA L BEFORE US. 15. THE FIRST ISSUE FOR CONSIDERATION IS WITH REGAR D WHETHER THE INCOME OF ASSESSEE IS TO BE ASSESSED UNDER THE HEAD HOUSE PR OPERTY OR INCOME FROM BUSINESS. IN THIS REGARD, THE ASSESSEE HAS R AISED THE FOLLOWING GROUNDS:- 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE DISALLOWA NCES MADE BY THE ASSESSING OFFICER BY FOLLOWING THE JUDGMENT OF THE SUPREME COURT IN THE CASE OF CHENNAI PROPERTIES AND INVESTM ENTS LTD VS CIT, 373 ITR 673 THOUGH THE FACTS OF THE INSTANT CA SE ARE DIFFERENT. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD. CIT(A) ERRED IN HOLDING THAT THE ENTIR E INCOME OF THE ASSESSEE REQUIRED TO BE ASSESSED UNDER THE HEAD INC OME FROM BUSINESS, WITHOUT GIVING ANY REASONS FOR THE SAME. 4. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) HAS ERRED IN ALLOWING RELIEF TO THE ASSESSEE WITHOUT APPRECIATING THE FACT THAT THE ASSESSEE HAD DECLARE D INCOME FROM HOUSE PROPERTY FROM LEASED BUILDINGS BUT CLAIMED VA RIOUS EXPENSES SUCH AS LEASE RENT, DEPRECIATION, REPAIRS AND MAINTENANCE, INAUGURATION EXPENSES ETC RELATING TO THE LEASED BUILDINGS AS BUSINESS EXPENSES WHICH IS NOT AS PER THE PROVISIONS OF SEC 24( A) OF THE IT ACT. ITA NO.1039/BANG/2019 PAGE 6 OF 14 5. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD. CIT(A) WAS NOT JUSTIFIED IN HOLDING TH AT THE INCOME OF THE ASSESSEE FROM LEASED PROPERTIES IS TO BE ASS ESSED AS BUSINESS INCOME IGNORING THE FACT THAT THE ASSESSEE HAS OFFERED THE LEASE RENT AS ITS HOUSE PROPERTY INCOME IN THE RETURN OF INCOME. 16. THE LD. DR SUBMITTED THAT THE ASSESSEE HAS DECL ARED INCOME FROM HOUSE PROPERTY IN RESPECT OF THE THREE PROPERTIES V IZ., NITESH TIMESQUARE, NITESH BROADWAY & NITESH LEXINGTON AVENUE AND THE C IT(APPEALS) WAS NOT JUSTIFIED IN CHANGING THE HEAD OF INCOME FROM HOUSE PROPERTY TO BUSINESS INCOME. 17. ON THE OTHER HAND, THE LD. AR SUPPORTED THE ORD ER OF THE CIT(APPEALS) AND RELIED ON THE JUDGMENT OF HONBLE SUPREME COURT IN THE CASE OF CHENNAI PROPERTIES & INVESTMENTS LTD. V. CIT, 373 I TR 676 (SC) WHEREIN IT WAS HELD THAT IF THE ENTIRE INCOME IS FR OM LETTING OUT OF PROPERTY, THEN IT SHOULD BE TREATED AS BUSINESS INCOME. HE S UBMITTED THAT THE ASSESSEE HAS REVISED THE RETURNS OF INCOME FROM AYS 2008-09 TO 2011-12 SHOWING THE RENTAL INCOME AS INCOME FROM BUSINESS. THE AO HAS CONCLUDED THE PROCEEDINGS U/S. 147 ACCEPTING THE OR IGINAL INCOME (THEREBY ALLOWING ALL THE EXPENSES WHICH HAVE BEEN DISALLOWE D IN THIS YEAR) AND IGNORING THE REVISED RETURN OF INCOME, UNDER WHICH THERE IS CLAIM OF TAX REFUND ARISING FROM CHARGE OF DEPRECIATION. SIMILA RLY, THE ASSESSEE HAD FILED RETURNS FOR AYS 2013-14 & 2014-15 SHOWING THE RENTAL INCOME AS 'INCOME FROM BUSINESS', AFTER SCRUTINY THE INCOME W AS ACCEPTED AS BUSINESS INCOME, RELYING ON THE DECISION IN THE CAS E OF CHENNAI PROPERTIES & INVESTMENTS LTD (SUPRA) . THEREFORE, THE AO HIMSELF HAS TREATED THE RENTAL INCOME AS 'INCOME FROM BUSINESS' FOR THE LAT ER YEARS AND IT CANNOT BE ANY DIFFERENT FOR THIS YEAR. 18. FURTHER IT WAS SUBMITTED THAT THE FACTS OF CHENNAI PROPERTIES & INVESTMENTS LTD (SUPRA) APPLY SQUARELY TO ASSESSEE'S CASE INASMUCHAS :- ITA NO.1039/BANG/2019 PAGE 7 OF 14 (I) THE OBJECTIVE IS TO ACQUIRE PROPERTIES AND LET OUT THOSE PROPERTIES FOR RENTAL INCOME. (II) THE ENTIRE INCOME WHICH ACCRUED WAS FROM LETTING OU T OF THESE PROPERTIES AND THERE IS NO OTHER INCOME EXCEP T THE LETTING OUT OF THESE PROPERTIES. 19. IT WAS SUBMITTED THAT SINCE THE FACTS OF THE AS SESSEE'S CASE ARE EXACTLY SIMILAR TO THAT OF CHENNAI PROPERTIES & INVESTMENTS LTD (SUPRA) , THE CIT(A) HAS RIGHTLY RELIED ON THE SAME. AS THE RENT AL INCOME IS TO BE ASSESSED AS 'BUSINESS INCOME' THE EXPENSES INCURRED FOR THE PURPOSE OF BUSINESS ARE RIGHTLY HELD TO BE ALLOWABLE EXPENDITU RE. 20. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. IT IS ADMITTED FACT THAT IN AYS 2013-14 & 2014-15, THE AO ASSESSED THE INCOME AS INCOME FROM BUSINESS. THIS IS ALSO SUPPO RTED BY THE JUDGMENT OF SUPREME COURT IN CHENNAI PROPERTIES & INVESTMENTS LTD (SUPRA) . IN OUR OPINION, THE CIT(APPEALS) WAS JUSTIFIED IN DIRECTIN G THE AO TO ASSESS THE RENTAL INCOME FROM THE ABOVE PROPERTIES AS INCOME F ROM BUSINESS PLACING RELIANCE ON THE ABOVE JUDGMENT OF SUPREME COURT. A CCORDINGLY, WE DIRECT THE AO TO RECOMPUTE THE INCOME OF THE ASSESSEE AS I NCOME FROM BUSINESS ONLY AFTER GIVING THE ALLOWABLE DEDUCTION AS BUSINE SS EXPENDITURE IN THIS ASSESSMENT YEAR ALSO. THIS GROUND OF THE REVENUE I S DISMISSED. 21. GROUND NO.6 OF THE REVENUE IS AS FOLLOWS:- 6. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD. CIT(A) WAS NOT JUSTIFIED IN ALLOWING T HE CLAIM OF INTEREST ON TERM LOAN WITHOUT DELIBERATING UPON MER ITS OF THE CASE AND IGNORING THE FACT THAT THE CLAIM IS CONTRARY TO THE PROVISION OF SEC 24( A). 22. THE FACTS ARE THAT OUT OF THE TOTAL INTEREST PA ID ON BORROWED CAPITAL FOR THE PURPOSES OF CONSTRUCTION OF THE COMMERCIAL BUILDING NITESH ITA NO.1039/BANG/2019 PAGE 8 OF 14 LEXTINGTON AVENUE OF RS.1,01,66,020, THE AO DISALLO WED A SUM OF RS. 67,77,347/- ON THE GROUND THAT THE ADDITIONAL LOAN WAS OBTAINED ONLY JUST PRIOR TO THE COMPLETION OF THE BUILDING AND HENCE N OT MEANT FOR THE PURPOSES OF CONSTRUCTION AS PER SECTION 24(B) OF TH E ACT WHICH STATES THAT 'THE DEDUCTION ON INTEREST IS ALLOWED ONLY WHEN THE PROPERTY HAD BEEN ACQUIRED, CONSTRUCTED, REPAIRED, RENEWED OR RE-CONS TRUCTED WITH BORROWED CAPITAL'. ACCORDINGLY THE PORTION OF INTEREST ON TH E ADDITIONAL LOAN OF RS. 8.00 CRORES, AMOUNTING TO RS. 67,77,981 WAS DISALLO WED U/S. 24(B). 23. BEFORE THE CIT(APPEALS), THE ASSESSEE SUBMITTED THAT IT HAD INITIALLY AVAILED TERM LOAN FROM BANK OF BARODA DURING OCT 20 10 AMOUNTING TO RS. 4.00 CRORES FOR THE CONSTRUCTION OF THE BUILDING NI TESH LEXINGTON AVENUE, WHICH LOAN AMOUNT WAS FAR LOWER THAN THE ACTUAL COS T OF CONSTRUCTION. LATER, WHEN THE CONSTRUCTION WAS IN PROGRESS IT HAD AVAILE D THE ADDITIONAL LOAN OF RS.12.00 CRORES TOWARDS THE SAME PROJECT SOMETIME I N AUG. 2011 AND LIQUIDATED THE INITIAL LOAN OF RS. 4.00 CRORES, WHE REBY THE NET LOAN FOR THE PROJECT WAS RS. 12.00 CRORES. THE BUILDING PROJECT WAS COMPLETED DURING SEPT. 2011 AND LET OUT FROM 1 ST SEPT. 2011. THE TOTAL COST OF CONSTRUCTION OF THE BUILDING PROJECT NITESH LEXINGTON AVENUE WAS RS . 12.78 CRORES WHICH WAS CONSTRUCTED TO THE PROSPECTIVE TENANTS, BANK OF BARODA, WHO REQUIRED THE BUILDING WITHIN A SPECIFIED PERIOD OF TIME. WIT H THE TIME CONSTRAINT TO COMPLETE THE CONSTRUCTION, THE APPELLANT HAD TO AUG MENT FUNDS FROM OTHER SOURCES OVER AND ABOVE THE SANCTIONED AMOUNT OF RS. 4.00 CRORES. SIMULTANEOUSLY, THE ASSESSEE HAD MADE APPLICATION F OR THE ADDITIONAL LOAN FROM THE BANK FOR THE SAME PROJECT WHICH GOT SANCTI ONED SOMETIME DURING AUG. 2011 AND THE TOP UP LOAN AMOUNT OF RS. 8.00 CR ORES WAS USED TO CLEAR THE OUTSIDE BORROWINGS. IT WAS CONTENDED THAT THE AOS CONCLUSION THAT LOAN WAS AVAILED AT THE END OF THE CONSTRUCTION AND MIGHT HAVE BEEN FOR DIFFERENT PURPOSES IS BASELESS AND ARBITRARY. ON A CONSIDERATION OF THESE ITA NO.1039/BANG/2019 PAGE 9 OF 14 SUBMISSIONS, THE CIT(APPEALS) ALLOWED THIS GROUND O F THE ASSESSEE. AGAINST THIS, THE REVENUE IS IN APPEAL BEFORE US. 24. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON THI S ISSUE. SINCE WE HAVE HELD THAT INCOME OF THE ASSESSEE FROM THE ABOV E PROPERTY IS TO BE ASSESSED AS INCOME FROM BUSINESS, THE ASSESSEE IS ENTITLED TO INTEREST ON TERM LOAN U/S. 36(1)(III) INSTEAD OF SECTION 24(A) OF THE ACT. HOWEVER, IF THE FUND HAS BEEN USED FOR THE PURPOSE OF BUSINESS, THE ASSESSEE HAS TO ESTABLISH THAT THE ADDITIONAL LOAN OF RS.8 CRORES W AS ACTUALLY USED FOR REPAYMENT OF THE LIABILITY WHICH HAS BEEN USED FOR THE PURPOSE OF ACQUIRING NEW ASSETS FOR THE PURPOSE OF BUSINESS. FURTHER, I F THE ADDITIONAL LOAN HAS BEEN ADVANCED AS A LOAN TO ANY RELATED PARTY, THE A SSESSEE CANNOT CLAIM ANY INTEREST ON IT AS BUSINESS EXPENDITURE. THEREF ORE, THIS ISSUE IS REMITTED BACK TO THE FILE OF AO FOR EXAMINATION OF THE ABOVE FACTS AND DECIDE THE ISSUE AFRESH, AFTER DUE OPPORTUNITY TO T HE ASSESSEE. 25. GROUND NO.7 BY THE REVENUE READS AS FOLLOWS:- 7. ON THE FACTS AND IN CIRCUMSTANCE OF THE CASE A ND IN LAW, THE LD. CIT(A) WAS NOT CORRECT IN HOLDING THAT THE PARKING RENT RECEIVED BY THE ASSESSEE IS TO BE ASSESSED AS BUSIN ESS INCOME IGNORING THE FACT THAT THE RECEIPTS HAD TO BE RIGHT LY TAXED AS INCOME FROM OTHER SOURCES. 26. THE FACTS OF THE CASE ARE THAT THE ASSESSEE FIRM HA D PROVIDED PARKING SPACE IN ITS COMMERCIAL BUILDINGS NITESH BR OADWAY AND NITESH TIME SQUARE AND COLLECTED THE PARKING RENT OF RS.6, 04,500 AND RS.34,92,000 RESPECTIVELY DURING THE FY 2011-12 FOR PROVIDING THE VISITORS TO THE BUILDING WHO PARKED THEIR CARS IN THE PARKIN G AREA. THESE RENTS WERE NOT COLLECTED FROM THE TENANTS TO WHOM THE PROPERTY WAS LET OUT. THE AO WAS OF THE VIEW THAT RENT UNDER THE HEAD INCOME FRO M HOUSE PROPERTY WAS ALWAYS WITH RESPECT TO THE ANNUAL VALUE AND NOT DAI LY COLLECTION AND HENCE SUCH PARKING CHARGES COLLECTED CANNOT BE CLASSIFIED AS RENT UNDER THE HEAD ITA NO.1039/BANG/2019 PAGE 10 OF 14 INCOME FROM HOUSE PROPERTY TO BE ELIGIBLE FOR THE B ENEFIT OF DEDUCTION U/S. 24(A) OF THE ACT. 27. THE CIT(APPEALS) OBSERVED THAT THE RENTAL AGREEMENT S EXECUTED BY THE ASSESSEE WITH ITS TENANTS REQUIRED THE TENANTS TO PAY APART FROM THE RENT, THE CHARGES FOR PARKING FACILITY PROVIDED WHI CH THE AO HAD FAILED TO CONSIDER AS THE TENANTS WERE PAYING THE RENT AND PA RKING CHARGES BY WAY OF CONSOLIDATED AMOUNT. THE AO MISREPRESENTED THE FACTS BY STATING THAT THE ASSESSEE HAD COLLECTED ADHOC PARKING CHARGES ON DAILY BASIS WHICH CANNOT BE ATTRIBUTABLE TO ANY SPECIFIC TENANT, WHER EAS THE AGREEMENT REQUIRED THE TENANT TO PAY ON MONTHLY BASIS ALONG W ITH THE RENT. THE CIT(A) HELD THAT AO WAS NOT JUSTIFIED IN TREATING THE AMOU NT COLLECTED FOR PARKING FACILITY UNDER INCOME FROM OTHER SOURCES. 28. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. THE PARKING RENT IS AKIN TO THE RENTAL INCOME OF TH E ASSESSEE ON THE ABOVE PROPERTIES AND THE SAME IS TO BE ASSESSED AS INCOME FROM BUSINESS INSTEAD OF INCOME FROM HOUSE PROPERTY OR INCOME FRO M OTHER SOURCES. THIS GROUND IS REMITTED TO THE AO TO CONSIDER IT AS PART OF THE BUSINESS INCOME OF THE ASSESSEE. 29. GROUND NO.8 BY THE REVENUE READS AS FOLLOWS:- ON THE FACTS AND IN CIRCUMSTANCE OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN NOT CONSIDERING THE ISSUE OF CE SSATION OF LIABILITY DUE TO MS. NALINI MOHAN; WHICH WAS NOT CO NFIRMED BY THE CREDITOR I.E MS. NALINI MOHAN. 30. THE AO HAS ADDED A SUM OF RS. 20,86,354 UNDER CREDITORS TO INCOME CITING CESSATION OF LIABILITY, BASED ON THE CONFIRMATION RECEIVED FROM THE CREDITOR, MS. NALINI MOHAN U/S. 133(6) OF IT ACT 1961, WHO HAD RESPONDED TO THE NOTICE ISSUED BY THE DEPT. BY STAT ING NO SUCH DUES EXIST IN ITA NO.1039/BANG/2019 PAGE 11 OF 14 HER BOOKS. ON APPEAL, THE CIT(APPEALS) ALLOWED THE APPEAL OF THE ASSESSEE. AGAINST THIS, THE REVENUE IS IN APPEAL BE FORE US. 31. THE LD. AR SUBMITTED THAT THE BUILDING PROJECT NITESH TIME SQUARE WAS DEVELOPED IN THE LAND OWNED BY NALINI MOHAN AS PER THE JOINT DEVELOPMENT TERMS WHERE THE ASSESSEE AND THE LANDLO RD SHARED 50:50 OF THE DEVELOPED AREA. HOWEVER, THE ASSESSEE FIRM WAS NOT CONFERRED ANY OWNERSHIP OF THE 50% OF THE AREA DEVELOPED, BUT WAS GRANTED LEASE HOLD RIGHTS OF 50% OF THE DEVELOPED AREA FOR A PERIOD OF 65 YEARS DURING WHEN IT WAS FREE TO USE THE SAME IN THE MANNER IT DEEMED FI T AND THEREAFTER THE EXPIRY OF 65 YEARS THE LEASE HOLD RIGHTS WOULD CEAS E IN FAVOUR OF THE LAND OWNER NALINI MOHAN. 32. AS PER THE JOINT DEVELOPMENT TERMS, THE ENTIRE DEVELOPED PORTION OF THE BUILDING WERE JOINTLY HELD BY THE LAND OWNER AN D THE ASSESSEE FIRM WITH NO CLEAR DEMARCATION OF THE AREAS IN THE BUILDING I N FAVOUR OF THE EITHER PARTY. FURTHER THE ASSESSEE FIRM WAS RESPONSIBLE FO R ENGAGING TENANTS FOR THE ENTIRE BUILDING BELONGING TO BOTH PARTIES AND T HE RENTAL PROCEEDS WERE SHARED 50:50. THE ASSESSEE USED TO COLLECT THE SEC URITY DEPOSIT AND THE RENTS FROM THE TENANTS AND SHARE ONLY THE RENTS BEL ONGING TO THE SHARE OF THE LAND OWNER NALINI MOHAN. DURING SUCH PROCESS, O NE TENANT M/S. DTZ INTERNATIONAL AT NITESH TIME SQUARE HAD VACATED THE PREMISES AND THE RENTAL DUES FROM SUCH PARTY WAS ADJUSTED AGAINST TH E SECURITY DEPOSIT HELD BY THE ASSESSEE FIRM WHILE RETURNING THE SAME TO TH E TENANT. THE SHARE OF RENT RELATING TO MS. NALINI MOHAN WHICH WAS ADJUSTE D FROM THE DEPOSIT HAD AMOUNTED TO RS. 20,86,354 WHICH WAS SHOWN AS PAYABL E IN THE BOOKS OF THE ASSESSEE FIRM UNDER SUNDRY CREDITORS. HOWEVER T HE ASSESSEE FIRM HAD HELD BACK THE PAYMENT IN VIEW OF THE FACT THAT THE SAID NALINI MOHAN HAD NOT CLEARED SOME OF THE PAYMENTS DUE TOWARDS THE IN TERIOR WORKS CARRIED OUT BY THE ASSESSEE ON BEHALF OF NALINI MOHAN. ITA NO.1039/BANG/2019 PAGE 12 OF 14 33. IN VIEW OF THE FACT THAT THIS AMOUNT BECOMES DUE WH EN THE ISSUES ARE SORTED OUT, THE LIABILITY APPEARING IN THE BOOK S CANNOT BE WRITTEN BACK AS CESSATION OF LIABILITY AS IT WOULD BECOME PAYABLE O NE DAY AND HENCE ADDITIONS MADE BY THE AO WERE LIABLE TO BE DELETED IN THIS REGARD FOR THE AY 2012-13. 34. IT WAS FURTHER SUBMITTED ON THE DEPRECIATION CH ARGE THAT CONSEQUENT TO THE CHANGE IN THE METHOD OF TREATING RENTAL INCO ME AS BUSINESS INCOME, THE ASSESSEE HAD BEEN FILING ITS RETURN OF INCOME U NDER INCOME FROM HOUSE PROPERTY AGAINST WHICH INCOME IT WAS SETTING OFF TH E LOSS FROM BUSINESS AND PAYING TAX ON THE BALANCE, IF ANY. AT THE TIME WHEN THE ASSESSEE WAS OFFERING ITS INCOME UNDER HOUSE PROPERTY, IT WAS NO T CLAIMING DEPRECIATION ON SUCH PROPERTIES WHICH WERE LET OUT BY THE FIRM. FURTHER, WHILE BUSINESS LOSSES WERE SET OFF AGAINST THE PROPERTY INCOME FOR THE SAME YEAR, DEPRECIATION ON SUCH PROPERTIES LET OUT WERE NOT SE T OFF. 35. IT WAS SUBMITTED THAT DURING THE SCRUTINY ASST. PROCEEDINGS FOR THE AY 2012-13, THE AO HAD DISALLOWED CERTAIN EXPENDITU RES IN THE BUSINESS FROM BEING SET OFF AGAINST THE PROPERTY INCOME ON T HE GROUNDS THAT PROPERTY INCOME ENJOYED A STANDARD DEDUCTION OF 30% AND SOME OF THE BUSINESS EXPENSES WERE RELATING TO SUCH PROPERTIES WHICH CAN NOT BE ALLOWED. 36. THE LD. AR SUBMITTED THAT THE AO HAD REOPENED T HE ASSESSMENTS FOR THE AY 2008-09 TO 2011-12 ON THE GROUNDS THAT THERE WAS A REASON TO BELIEVE THAT TAXABLE INCOME HAD ESCAPED ASSESSMENT. UPON THE RECEIPT OF NOTICES U/S. 147 FOR THE AY 2008-09 TO 2011-12, THE ASSESSEE FIRM FILED REVISED RETURN OF INCOME FOR THE AY 2008-09 TO 2011 -12 OFFERING ITS INCOME UNDER BUSINESS CITING THE RULING OF THE HON'BLE SUP REME COURT IN THE CASE OF CHENNAI PROPERTIES & INVESTMENTS LTD . V. CIT, CIVIL APPEAL NO.4494 OF 2004 (SC). AT THE TIME OF FILING THE REVISED RETUR N OF INCOME FROM THE AY 2008-09 TILL 2014-15, THE ASSESSEE FIRM CALCULATED DEPRECIATION WHICH ITA NO.1039/BANG/2019 PAGE 13 OF 14 HITHERTO WAS NOT CLAIMED ON THE PROPERTIES WHICH WE RE LET OUT. WHILE COMPUTING THE SAME FROM THE AY 2008-09, THE OPENING WDV OF THE BUILDINGS IT HAD CONSIDERED WAS THE CLOSING WDV AS ON 31.3.2007. THE ASSESSEE FIRM WAS DEPRECIATING THE LET OUT PROPERTI ES AS PER THE RATES PRESCRIBED IN THE INCOME TAX ACT IN ITS BOOKS. IN L IGHT OF THE ABOVE, IT IS SUBMITTED THAT THE VALUE OF THE PROPERTIES LET OUT CONSIDERED FOR THE DEPRECIATION IN THE CHANGED CIRCUMSTANCES WAS THE W DV AS ON 1.4.2007. 37. THE LD. DR SUPPORTED THE ORDER OF THE AO. 38. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. THE A MOUNT OF RS.20,86,354 DUE TO NALINI MOHAN AROSE IN THE COURS E OF BUSINESS ACTIVITY OF THE ASSESSEE. THE ASSESSEE HAS SHOWN IT AS LIAB ILITY IN THE BOOKS OF ACCOUNT AS PAYABLE TO NALINI MOHAN. HOWEVER, NOWHER E BEFORE THE AO IT WAS CONFIRMED BY NALINI MOHAN THAT SUCH AMOUNT WAS NOT DUE TO HER. HENCE THE AO TREATED IT AS INCOME FROM BUSINESS UND ER THE PROVISIONS OF SECTION 40(1)(I) OF THE ACT. NOW THE CONTENTION OF THE LD. AR IS THAT SUCH AMOUNT IS PAYABLE TO NALINI MOHAN AND THE ASSESSEE HAS NOT WRITTEN OFF THE SAME AND THE ASSESSEE HAD HELD BACK THE PAYMENT IN VIEW OF THE FACT THAT NALINI MOHAN HAD NOT CLEARED SOME OF THE PAYMENTS D UE TOWARDS THE INTERIOR WORKS CARRIED OUT BY THE ASSESSEE ON BEHAL F OF NALINI MOHAN. HOWEVER, THE DETAILS OF INTERIOR WORK CARRIED OUT B Y THE ASSESSEE ON BEHALF OF NALINI MOHAN IS NOT AT ALL BROUGHT OUT ON RECORD BY THE ASSESSEE TO SHOW THAT THE ASSESSEE ACTUALLY HAS CARRIED OUT THE INTE RIOR WORKS ON BEHALF OF NALINI MOHAN. THERE WAS NO SUCH PLEA OF THE ASSESSE E BEFORE THE AO. THESE FACTS ARE REQUIRED TO BE EXAMINED BY THE AO. HENCE WE DEEM IT FIT TO RESTORE THIS ISSUE TO THE FILE OF THE AO FOR RE- EXAMINATION OF THIS ISSUE AFRESH AFTER DUE OPPORTUNITY TO THE ASSESSEE. ITA NO.1039/BANG/2019 PAGE 14 OF 14 39. IN THE RESULT, THE APPEAL BY THE REVENUE IS PAR TLY ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON THIS 23 RD DAY OF SEPTEMBER, 2021. SD/- SD/- ( BEENA PILLAI ) ( CH ANDRA POOJARI ) JUDICIAL MEMBER ACCOUNTANT MEMBER BANGALORE, DATED, THE 23 RD SEPTEMBER, 2021. / DESAI S MURTHY / COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. BY ORDER ASSISTANT REGISTRAR ITAT, BANGALORE.