ACIT 6(3), MUMBAI V. MAHINDRA LIFESPACE DEVELOPERS LTD ( FORMERLY KNOWN AS M.S, MAHINDRA GESCO DEVELOPERS LTD), MUMBAI

ITA 1044/MUM/2011

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 5716 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 11 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-01-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: G
• Next Hearing Date: 01-01-2014
• Assessment Year: 2007-2008
• Appeal Filed On: 04-02-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K C P PATNAIK
• Assessee Lawyers: D S MAINKAR
• Keywords: Business income; Depreciation; Business expenditure

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL G BENCH, MUM BAI , , BEFORE SHRI SANJAY ARORA, AM AND SHRI VIJAY PAL RA O, JM ./ I.T.A. NO. 1326/MUM/2011 ( / ASSESSMENT YEAR: 2007-08) MAHINDRA LIFESPACE DEVELOPERS LTD. (FORMERLY KNOWN AS M/S. MAHINDRA GESCO DEVELOPERS LTD.), 5 TH FLOOR, MAHINDRA TOWERS, ROAD NO.13, WORLI, MUMBAI-400 018 / VS. ASST. CIT, CIRCLE 6(3), ROOM NO.522, 5 TH FLOOR, AAYAKAR BHAVAN, M. K. ROAD, MUMBAI-400 020 ./ ./PAN/GIR NO. AAACG 8904 C ( !' #$% / ASSESSEE ) : ( /REVENUE ) & ./ I.T.A. NO. 1044/MUM/2011 ( / ASSESSMENT YEAR: 2007-08) ASST. CIT, CIRC.-6(3), ROOM NO.522, 5 TH FLOOR, AAYAKAR BHAVAN, M. K. ROAD, MUMBAI-400 020 / VS. MAHINDRA LIFESPACE DEVELOPERS LTD. (FORMERLY KNOWN AS M/S. MAHINDRA GESCO DEVELOPERS LTD.), 5 TH FLOOR, MAHINDRA TOWERS, ROAD NO.13, WORLI, MUMBAI-400 018 ./ ./PAN/GIR NO. AAACG 8904 C ( /REVENUE ) : ( !' #$% / ASSESSEE ) !' #$% & ' / ASSESSEE BY : SHRI D. S. MAINKAR & ' / REVENUE BY : SHRI K. C. P. PATNAIK & SHRI MAURYA PRATAP ( ! ) & % * / DATE OF HEARING : 01.01.2014 +,- & % * / DATE OF PRONOUNCEMENT : 31.01.2014 2 ITA NOS. 1326 & 1044/MUM/2011 (A.Y. 2007-08) MAHINDRA LIFESPACE DEVELOPERS LTD. . / O R D E R PER SANJAY ARORA, A. M.: THESE ARE CROSS APPEALS, I.E., BY THE ASSESSEE AND THE REVENUE, ARISING OUT OF THE ORDER BY THE COMMISSIONER OF INCOME TAX (APPEALS)-1 2, MUMBAI (CIT(A) FOR SHORT) DATED 30.11.2010, PARTLY ALLOWING THE ASSESSEES AP PEAL CONTESTING ITS ASSESSMENT U/S.143(3) OF THE INCOME TAX ACT, 1961 (THE ACT H EREINAFTER) FOR THE ASSESSMENT YEAR (A.Y.) 2007-08 VIDE ORDER DATED 03.12.2009. 2. WE MAY TAKE UP THE ASSESSEES APPEAL FIRST, I.E. , IN THE ORDER THE TWO APPEALS WERE HEARD BY US. THE PRINCIPAL ISSUE ARISING IN THE ASS ESSEES APPEAL, PROJECTED PER ITS FIRST THREE GROUNDS, IS THE HEAD OF INCOME UNDER WHICH TH E HIRE CHARGES ON THE OPERATION OF A COMMERCIAL COMPLEX, BEING AT RS.452.32 LACS FOR THE CURRENT YEAR, IS TO BE ASSESSED, I.E., EITHER AS INCOME FROM HOUSE PROPERTY OR AS BUSIN ESS INCOME. EXPLAINING THE ASSESSEES CASE, THE LD. AUTHORIZED REPRESENTATIVE (AR), THE A SSESSEES COUNSEL, WOULD SUBMIT THAT THE ISSUE IS COVERED IN THE ASSESSEES FAVOUR BY TH E DECISION BY THE TRIBUNAL IN ITS OWN CASE FOR EARLIER YEARS, I.E., A.Y. 2001-02 (IN ITA NO.3404/MUM/2006 DATED 06.04.2009) AND A.Y. 2004-05 (IN ITA NO.2247/MUM/2008 DATED 08. 08.2012), TAKING US THROUGH THE RELEVANT PART OF THE TRIBUNALS ORDER FOR A.Y. 2001 -02, BEING THE LEAD ORDER. ON BEING QUESTIONED AS TO HOW THE ASSESSEE CLAIMS AN IDENTIT Y OF FACTS WITH THE PRECEDING YEARS, FOR THE SAID DECISIONS TO BE APPLICABLE, HE WOULD TAKE US TO PARA 4 OF THE ASSESSMENT ORDER AS WELL AS PARAS 4 & 4.1 OF THE IMPUGNED ORDER, WHICH CLARIFY AND STATE OF THERE BEING NO MATERIAL CHANGE IN THE SITUATION FOR THE CURRENT YE AR. FURTHER, ON BEING POINTED OUT THAT THE GROSS RECEIPT AS PER THE ASSESSMENT ORDER (RS.11.89 CRORES) IS AT VARIANCE WITH THE AMOUNT IN DISPUTE AS PROJECTED BY THE ASSESSEES GROUND NO .1, IT WAS SUBMITTED BY THE COUNSEL THAT THE LD. CIT(A) HAD ALLOWED PART RELIEF TO THE ASSES SEE INASMUCH AS IT IS ONLY THE RENT COMPONENT THAT STOOD CONFIRMED BY HIM AS INCOME FRO M HOUSE PROPERTY, WITH THE BALANCE AMOUNT RECEIVED HAVING BEEN CONFIRMED BY HIM AS AGA INST THE SERVICES AND AMENITIES PROVIDED, SO THAT THE SAME WAS ASSESSABLE AS BUSINE SS INCOME U/S.28 OF THE ACT. 3 ITA NOS. 1326 & 1044/MUM/2011 (A.Y. 2007-08) MAHINDRA LIFESPACE DEVELOPERS LTD. THE LD. DEPARTMENTAL REPRESENTATIVE (DR), ON BEING CONFRONTED WITH THE SAME, COULD NOT POINT OUT EITHER ANY MISTAKE OR ERROR IN THE ORDERS BY THE TRIBUNAL BEING RELIED UPON BY THE ASSESSEE OR ANY CHANGE IN THE FACTS AND CIRCUMSTANCES OF THE CASE. 3. WE HAVE HEARD THE PARTIES, AND PERUSED THE MATER IAL ON RECORD. AS CLARIFIED BY THE APEX COURT PER ITS CONSTITUTION BENCH DECISION IN T HE CASE OF SULTAN BROTHERS (P.) LTD. VS. CIT [1964] 51 ITR 353 (SC), THE LAW DOES NOT DRAW ANY D ISTINCTION ON THE BASIS OF THE NATURE OF THE LETTING, I.E., COMMERCIAL OR OTHERWIS E. A THING IS NOT BY ITS VERY NATURE A COMMERCIAL ASSET. AN ASSET, WHEN IT USED FOR BUSINESS, MAY BE DESCRIBED AS SO, AND BUSINESS COULD BE CARRIED OUT WITH PRACTICALLY ALL THINGS. AS SUCH, THERE IS NO BASIS IN LAW FOR HOLDING AN INCOME TO BE FROM BUSINESS UNDER THE ACT ON THE BASIS OF COMMERCIAL EXPLOITATION OF A HOUSE PROPERTY ON IT BEING LET. S O HOWEVER, AT THE SAME TIME, THE LAW ITSELF, PER SECTION 56(2)(III), PROVIDES FOR A COMP OSITE LETTING, I.E., INVOLVING MACHINERY, PLANT, FURNITURE AND FIXTURE, ETC. BESIDES BUILDING , AS BEING EITHER BUSINESS INCOME OR INCOME FROM OTHER SOURCES, WHERE THEIR LETTING IS INTEGRAL AND INSEPARABLE FROM THE LETTING OF THE BUILDING. THIS IS, AS EXPLAINED BY THE APEX COURT IN SULTAN BROS. (P.) LTD . (SUPRA), FOR THE REASON THAT IT THEN BECOMES A NEW KIND OF INCOME, NOT COVERED U/S. 9 (OF THE 1922 ACT, CORRESPONDING TO S. 22 OF THE 1961 AC T). THAT IS, INCOME, NOT FROM THE OWNERSHIP OF THE BUILDING ALONE, BUT AN INCOME WHIC H THOUGH ARISING FROM BUILDING, WOULD NOT HAVE ARISEN IF THE PLANT, MACHINERY, OR F URNITURE HAD NOT BEEN LET ALONG WITH IT. IT FURTHER GOES ON TO EXPLAIN THE CONCEPT OF 'INSEP ARABLE LETTING' AS NOT ONE WHERE THE TWO, I.E., THE BUILDING AND PLANT, MACHINERY OR FURNITUR E, ARE INSEPARABLY CONNECTED WHEN LET OUT, BUT THAT THE LETTING OF ONE IS INSEPARABLE FRO M THAT OF THE OTHER. THAT IS, THE INSEPARABILITY REFERRED TO IN SEC. 56(2)(III) IS ON E ARISING FROM THE INTENTION OF THE PARTIES TO THE ARRANGEMENT. IN THE INSTANT CASE, THE TRIBUNAL HAS GIVEN A DEFIN ITE AND CLEAR FINDING OF THE ASSESSEE PROVIDING, APART FROM BUILT-UP SPACE, A RA NGE OF SERVICES AND FACILITIES, WHICH ARE INTRINSICALLY LINKED TO THE LETTING OF THE BUILDING , SPECIFYING THE MACHINERY DEPLOYED, SO THAT IT IS A CASE OF COMPOSITE LETTING. FURTHER, TH OUGH THE SERVICES STAND PROVIDED PER 4 ITA NOS. 1326 & 1044/MUM/2011 (A.Y. 2007-08) MAHINDRA LIFESPACE DEVELOPERS LTD. DIFFERENT AGREEMENTS, THEY CANNOT BE CONSIDERED AS DE HORS AND SEPARATE FROM EACH OTHER INASMUCH AS THEY FORM PART OF A SINGLE ARRANGEMENT. IT IS ON THE BASIS OF THESE FINDINGS THAT THE TRIBUNAL HAS RENDERED ITS DECISION, FOR WH ICH REFERENCE IS MADE TO PARAS 14 & 15 OF ITS ORDER FOR A.Y. 2001-02 (SUPRA), WHICH IN FAC T STAND REPRODUCED IN ITS SUBSEQUENT ORDER FOR A.Y. 2004-05 (SUPRA). NO INFIRMITY IN THE SAID FINDINGS HAS BEEN BROUGHT TO OUR NOTICE. THAT THE SAME CONTINUES TO OBTAIN FOR THE C URRENT YEAR AS WELL STANDS ABUNDANTLY CLARIFIED BY THE ORDERS OF THE AUTHORITIES BELOW, T O WHICH REFERENCE WAS DRAWN DURING HEARING. UNDER THE CIRCUMSTANCES, WE FIND NO REASON FOR ANY CHANGE IN THE CONSISTENT VIEW ADOPTED BY THE TRIBUNAL, WHICH ON FACTS APPEAR TO BE CONSISTENT WITH THE LAW AS EXPLAINED IN THE CASE OF SULTAN BROTHERS (P.) LTD. (SUPRA) INASMUCH AS WE HAVE, IN VIEW OF THE UNDISPUTED PARITY OF FACTS, NOT EXAMINED THE SA ME IN DETAIL. WE, ACCORDINGLY, DIRECT FOR THE ASSESSMENT OF THE GROSS RECEIPT AS BUSINESS INCOME. WE DECIDE ACCORDINGLY. 4. GROUND NOS. 2 & 3, WHICH WERE NOT SPECIFICALLY A RGUED BEFORE US, WE FIND AS NOT ARISING OUT OF THE IMPUGNED ORDER. THE SAME AGITATE THE NON-ALLOWANCE OF OPERATING EXPENSES (RS.4,89,82,387/-) AND DEPRECIATION ON BUI LDING (RS.1,18,48,523/-) CLAIMED BY THE ASSESSEE AS BUSINESS EXPENDITURE/DEDUCTION IN C OMPUTING THE BUSINESS INCOME. THERE IS NO DISCUSSION QUA THE SAME IN THE ASSESSMENT ORDER; THE ASSESSING AU THORITY IGNORING THE SAME IN VIEW OF THE INCOME BEING ASSESSED AS IN COME FROM HOUSE PROPERTY. THE SAME THUS ARISE AS A DIRECT FALL OUT OF THE ADJUDICATION OF THE ASSESSEES GROUND NO.1, AND ARE THUS MAINTAINABLE BEFORE US. ON MERITS, THE MATTER WOULD REQUIRE BEING RESTORED BACK TO THE FILE OF THE A.O. FOR VERIFICATION OF THE ASSESS EES CLAIMS, AND ADJUDICATION IN ACCORDANCE WITH THE LAW. WE DECIDE ACCORDINGLY. 5. THE ONLY OTHER ISSUE PER THE ASSESSEES APPEAL ( GROUND NO. 4), WHICH IS ALSO THE SUBJECT MATTER OF THE REVENUES APPEAL, IS THE DIRE CTION BY THE LD. CIT(A) TO THE ASSESSING OFFICER (A.O.) TO RE-COMPUTE THE DISALLOWANCE U/S.1 4A ON A REASONABLE BASIS, RELYING ON THE JUDGMENT BY THE HONBLE JURISDICTIONAL HIGH COU RT IN THE CASE OF GODREJ & BOYCE MFG. CO. LTD. V. DY. CIT [2010] 328 ITR 81 (BOM). THE A.O. COMPUTED THE DIS ALLOWANCE UNDER THE SAID SECTION, WHICH IS ADMITTEDLY APPLICA BLE IN THE INSTANT CASE; THE ASSESSEE 5 ITA NOS. 1326 & 1044/MUM/2011 (A.Y. 2007-08) MAHINDRA LIFESPACE DEVELOPERS LTD. HAVING CLAIMED THE DIVIDEND INCOME OF RS.575 LACS A S TAX EXEMPT U/S.10(34) OF THE ACT, UNDER RULE 8D OF THE INCOME TAX RULES, 1962 (THE R ULES HEREINAFTER). THE LD. CIT(A) OPINED THAT THE FACTS, IN VIEW OF THE SAID PROVISIO N, WARRANT A STATUTORY DISALLOWANCE, WHICH HAD TO BE MADE TOWARD BOTH DIRECT AND INDIREC T EXPENDITURE, OBSERVING THE ASSESSEE TO HAVE INCURRED ADMINISTRATIVE EXPENDITURE AT RS.8 47 LACS AND FINANCIAL CHARGES AT RS.886 LACS. THE MATTER WAS, ACCORDINGLY, REMANDED TO THE FILE OF THE A.O. TO COMPUTE THE SAID DISALLOWANCE ON A REASONABLE BASIS. WE FIND HI S ADJUDICATION TO BE IN ACCORDANCE WITH THE LAW, AS EXPLAINED BY THE HONBLE HIGH COUR T IN GODREJ & BOYCE MFG. CO. LTD. (SUPRA), SO THAT, EVEN AS EXPLAINED DURING HEARING ITSELF, THERE IS NO CAUSE FOR ANY GRIEVANCE TO EITHER SIDE. THE A.O. HAS TO BE SATISF IED WITH THE ASSESSEES CLAIM U/S.14A, IF ANY, AND COMPUTE THE DISALLOWANCE IN A REASONABLE M ANNER BOTH QUA DIRECT AS WELL AS INDIRECT EXPENDITURE, GIVING HIS DEFINITE FINDINGS. WE DECIDE ACCORDINGLY. 6. IN THE RESULT, THE ASSESSEES APPEAL IS PARTLY A LLOWED AND PARTLY ALLOWED FOR STATISTICAL PURPOSES, AND THE REVENUES APPEAL IS D ISMISSED. $- %/ !' #$% & 0. 1 % 2 3& 456 0 7 0. 1 % & % 89 2 & $ & % 89 ORDER PRONOUNCED IN THE OPEN COURT ON JANUARY 31, 2 014 SD/- SD/- (VIJAY PAL RAO) (SANJAY ARORA) / JUDICIAL MEMBER / ACCOUNTANT MEMBER ( :) MUMBAI; ;! DATED : 31.01.2014 .!../ ROSHANI , SR. PS 6 ITA NOS. 1326 & 1044/MUM/2011 (A.Y. 2007-08) MAHINDRA LIFESPACE DEVELOPERS LTD. !' # $%&' (!'% / COPY OF THE ORDER FORWARDED TO : 1. < / THE APPELLANT 2. =>< / THE RESPONDENT 3. ( ?% ( ) / THE CIT(A) 4. ( ?% / CIT CONCERNED 5. B C =%!D' , * D'- , ( :) / DR, ITAT, MUMBAI 6. C E# F ) / GUARD FILE !' ) / BY ORDER, */)+ (DY./ASSTT. REGISTRAR) , ( :) / ITAT, MUMBAI