Sameer Rajendra Shah, Sangli V. Joint CIT, Range 1, Sangli

ITA 1061/PUN/2013

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 1918 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 11 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-04-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 09-03-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 10-05-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: DHEERAJ KUMAR JAIN
• Keywords: Business income; Depreciation; Application of stay; Additional evidence; Valuation report
• Section: 80IB; 154

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A , PUNE , , BEFORE MS. SUSHMA CHOWLA, JM AND SHRI PRADIP KUMAR KEDIA , AM . / ITA NO. 1 061 /PN/201 3 / ASSESSMENT YEAR : 20 0 9 - 1 0 SAMEER RAJENDRA SHAH, 446, MANGALIK, GULMOHAR COLONY, SANGLI 4 1 6416 . / APPELLANT PAN: A CGPS2835K VS. THE JT. COMMISSIONER OF INCOME TAX , RANGE 1, SANG LI . / RESPONDENT . /SA NO .08/PN/2016 ARISING OUT OF ITA NO.1061/PN/2013 / ASSESSMENT YEAR : 2009 - 10 SAMEER RAJENDRA SHAH, 446, MANGALIK, GULMOHAR COLONY, SANGLI 416416 APPLICANT PAN: ACGPS2835K V S. THE JT. COMMISSIONER OF INCOME TAX, RANGE 1, SANGLI RESPONDENT / APPELLANT BY : SHRI C.H. NANIWADEKAR / RESPONDENT BY : SHRI DHEERAJ KUMAR JAIN / DATE OF HEARING : 1 7 . 0 3 .20 1 6 / DATE OF PRONOUNCEMENT: 29 . 0 4 .201 6 ITA NO. 1 061 /PN/20 1 3 AND SA NO.08/PN/2016 S AMEER RAJENDRA SHAH 2 / ORDER PER SUSHMA CHOWLA, J M : TH IS APPEAL FILED BY THE ASSESSEE IS AGAINST THE ORDER OF CIT (A) , KOLHAPUR , DATED 1 4 . 03 .20 1 3 RELATING TO ASSESSMENT YEAR 20 0 9 - 1 0 AGAINST ORDER PASSED UNDER SE CTION 1 4 3(3) OF THE INCOME - TAX ACT , 1961 (IN SHORT THE ACT) . 2 . THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: - 1. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED ON FACTS AND IN LAW IN TREATING RENTAL INCOME RECEIVED FROM M/S BIG BAZA R AS 'INCOME FROM HOUSE PROPERTY' AS AGAINST 'INCOME FROM BUILDING, OWNING & OPERATING A MULTIPLEX THEATRE' WITHIN THE MEANING OF SEC. 80 - IB(7A) OF THE ACT, AS CLAIMED BY THE ASSESSEE AND CONSEQUENTLY ERRED IN DENYING DEDUCTION U / S 80 - IB(7A) OF THE ACT ON THE SAID INCOME. HE FAILED TO APPRECIATE THE ISSUE IN ITS PROPER PERSPECTIVE. HE ALSO FAILED TO APPRECIATE THE SCHEME OF SEC.80 - IB(7A) R.W.S. 80 - IB (14)(DA) AND RULE 18DDB OF THE I. T. RULES. HE FURTHER FAILED TO APPRECIATE THAT COMMERCIAL SHOPS IS A MANDAT ORY REQUIREMENT FOR BUILDING, OWNING AND OPERATING A MULTIPLEX THEATRE. 2. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED ON FACTS AND IN LAW IN RESTRICTING DEDUCTION U / S 80 - IB(7A) TO RS.31,09,491 (WITH IN LAW IN RESTRICTING DEDUCTION U / S 80 - IB(7A) TO RS.31,09,491 (WITH REFERENCE TO PROFITS OF RS.62,18,983) AS AG AINST RS.60,14,734 (WITH REFERENCE TO PROFITS OF RS.1,20,29,467) CLAIMED BY THE ASSESSEE. 3. WITHOUT PREJUDICE TO GROUND NO.1 & 2, A ) THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED ON FACTS AND IN LAW IN NOT ALLOWING THE EXPENSES INCLUDING DEPRECI ATION ON CAR ETC. N OT CONSIDERED BY THE A O WHILE CALCULATING THE DEDUCTION U / S 80IB(7A). B ) THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED ON FACTS AND IN LAW IN NOT ALLOWING THE DEPRECIATION ON MACHINERY SUCH AS AIR CONDITIONERS ETC. FROM THE ALLEG ED INCOME FROM BIG BAZAR. 4. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED ON FACTS AND IN LAW IN UPHOLDING DISALLOWANCE OF COST OF IMPROVEMENT TO THE EXTENT OF RS.67,02,224 IN RESPECT OF SHORT TERM CAPITAL GAINS ON SALE OF PLOTS. 5. THE LEARN ED COMMISSIONER OF INCOME TAX (APPEALS) ERRED ON FACTS AND IN LAW IN TREATING THE LOSS ON REDUCTION IN REALIZABLE VALUE OF CLOSING STOCK, AMOUNTING TO RS.23,00,000 AS 'CAPITAL LOSS' AS AGAINST 'BUSINESS LOSS' CLAIMED BY THE ASSESSEE. HE FAILED TO APPRECIAT E THE NATURE OF THE BUSINESS OF THE ASSESSEE AS ALSO THE ACCEPTED PRINCIPLES OF VALUATION AND ACCOUNTING OF CLOSING STOCKS. 6. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED ON FACTS AND IN LAW IN NOT DEALING WITH THE GROUND THAT THE A O HAS FAIL ED TO TAKE INTO ACCOUNT THE LOSS AS PER PROFIT & LOSS ACCOUNT (DEVELOPMENT ACTIVITY) ITA NO. 1 061 /PN/20 1 3 AND SA NO.08/PN/2016 S AMEER RAJENDRA SHAH 3 WHILE DISALLOWING THE LOSS AND F URTHER THE RECTIFICATION APPLICATION U / S 154 IS PENDING WITH A O 7. THE APPELLANT CRAVES LEAVE TO ADD, ALTER, DELETE OR SUBSTITUTE ALL OR A NY OF THE ABOVE GROUNDS OF APPEAL. 3. THE ISSUE IN GROUNDS OF APPEAL 1 AND 2 RAISED BY THE ASSESSEE IS AGAINST PARTIAL DENIAL OF DEDUCTION UNDER SECTION 80 - IB(7A) O F THE ACT. 4. BRIEFLY, IN THE FACTS OF THE PRESENT CASE, THE ASSESSEE FOR THE YEAR UNDER C ONSIDERATION HAD FURNISHED RETURN OF INCOME DECLARING TOTAL INCOME OF RS. 60,19,240/ - . THE ASSESSEE WAS ENGAGED IN THE BUSINESS OF EXHIBITION OF FILMS IN THE MULTIPLEX THEATRE, NAMED NEW PRIDE, SANGLI, WHICH CONSISTED OF THREE CINEMA SCRE E NS. THE ASSESS EE FOR THE YEAR UNDER CONSIDERATION HAD DECLARED NET PROFIT OF RS. 1,01,41,664/ - IN RESPECT OF NEW PRIDE MULTIPLEX. THE ASSESSEE HAD ALSO RENTED A PORTION OF THIS BUILDING TO BIG BAZAAR, AGAINST WHICH IT HAD RECEIVED RENTAL INCOME OF RS. 85,95,520/ - AND A FTER DEBITING VARIOUS EXPENSES, NET PROFIT WAS DECLARED AT RS.20,45,827/ - . A GAINST THE SAID INCOME FROM MULTIPLEX AND RENTAL INCOME, THE ASSESSEE HAD CLAIMED DEDUCTION UNDER SECTION 80IB(7A) OF THE ACT. THE ASSESSEE HAD ALSO CARRIED OUT ANOTHER BUSINESS ACTIVITY OF DEVELOPER UNDER THE NAME AND STYLE OF ADINATH DEVELOPERS, WHERE HE HAD DECLARED NET LOSS OF RS.23 LAKHS. THE ASSESSEE FURTHER HAD SHOWN SHORT TERM CAPITAL GAINS OF RS. 21,65,791/ - ON SALE OF TWO PLOTS OF LAND. THE ASSESSING OFFICER NOTED THAT THOUGH THE GP DECLARED DURING THE YEAR UNDER CONSIDERATION WAS COMPARATIVELY HIGHER THAN THE GP FOR THE PRECEDING TWO YEARS, HOWEVER, THERE WAS FALL IN NP RATE AS COMPARED TO THE EARLIER YEARS. THE ASSESSEE EXPLAINED THAT THE REASON FOR FALL IN NET PROFIT WAS THE DECREASE IN SALE OF TICKETS BY ABOUT RS.22 LAKHS. FURTHER, THERE WAS INCREASE IN STAFF COST BY RS.11 LAKHS AND THERE WAS REDUCTION IN WORK - IN - PROGRESS OF BUILDING SHOWN ON ACCOUNT OF DAMAGES TO THE BUILDING AT RS.23 LAKHS. THE ASSESSING OFFICER ITA NO. 1 061 /PN/20 1 3 AND SA NO.08/PN/2016 S AMEER RAJENDRA SHAH 4 NOTED THAT IN THE CONCERN ADINATH DEVELOPERS, THE ASSESSEE HAD CLAIMED DEDUCTION OF RS.23 LAKHS IN WORK - IN - PROGRESS, WHICH WAS CAPITAL LOSS. THE ASSESSEE WAS SHOW CAUSED TO EXPLAIN THE SAME. IN REPLY, THE ASSESSEE POINTED OUT THAT THE BUILDING WAS CONSTR UCTED IN ASSESSMENT YEAR 2001 - 02 AND DUE TO DESIGNING DEFECTS, CRACKS DEVELOPED IN THE ROOF AS WELL AS WALLS AND THE FLATS COULD NOT BE SOLD AND WERE SHOWN AS WORK - IN - PROGRESS . D URING THE YEAR UNDER CONSIDERATION , SINCE THE REALIZABLE VALUE OF FLATS WERE LOWER, THE ASSESSEE OBTAINED VALUATION CERTIFICATE FROM THE ARCHITECT AND CLOSING VALUE OF WORK - IN - PROGRESS WAS DECLARED AT RS.3,95,000/ - AS AGAINST OPENING WORK - IN - PROGRESS OF RS.26,95,000/ - . THE ASSESSEE DECLARED NET LOSS OF RS.23 LAKHS. IT WAS FURTHER POINTED OUT BY THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE THAT THE SAID FLATS WERE SOLD DURING THE FINANCIAL YEAR 2010 - 11 FOR RS.6,51,000/ - AND PROFIT ON SALE WAS OFFERED TO TAX IN THE RELEVANT YEAR. THE ASSESSEE FURTHER POINTED OUT THAT THE SAID BUILDING WAS COMPLETED IN THE YEAR 1998 AND THE MARKET VALUE OF THE SAID FLATS A S REMAINED UN - SOLD WERE REDUCED AFTER NEARLY EIGHT YEARS , ON THE BASIS OF VALUATION OF A REGISTERED VALUER, WHO DETERMINED THE REALIZABLE VALUE OF THE SAID PROPERTY. THE ASSESSING OFFICER NOTED THAT THE ASSESSEE HAD FAILED TO FURNISH ANY PROOF IN SUPPORT OF HIS CONTENTION OF DEVELOPING CRACKS, RUSTING OF DOORS AND WINDOWS, ETC. AND THE SUBMISSIONS OF THE ASSESSEE WERE OF GENERAL NATURE. FURTHER, THE ASSESSING OFFICER FOUN D CONTRADICTORY STATEMENTS BEING MADE BY THE ASSESSEE THAT IN THE FIRST LETTER, IT WAS STATED THAT THE BUILDING WAS CONSTRUCTED IN ASSESSMENT YEAR 2001 - 02 AND IN THE SECOND SUBMISSION, IT WAS STATED THAT THE BUILDING WAS COMPLETED IN 1998. HOWEVER, IN THE VALUATION REPORT, THE VALUER HAD INSPECTED THE PROPERTY ON 17.01.2009 AND POINTED OUT THE DETAILS AND FURTHER, THE SAID VALUATION REPORT WAS OF SURVEY AND LOSS ASSESSMENT REPORT DATED 17.09.200 9 . ITA NO. 1 061 /PN/20 1 3 AND SA NO.08/PN/2016 S AMEER RAJENDRA SHAH 5 THE ASSESSING OFFICER THUS, HELD THAT EVEN IF IT WAS ADMIT TED THAT THERE WAS LOSS, IT PERTAINS TO ASSESSMENT YEAR 2004 - 05 AND HAD NO RELEVANCE TO ASSESSMENT YEAR 2009 - 10 . THE ASSESSING OFFICER ALSO REJECTED THE OTHER CONTENTION OF ASSESSEE THAT DUE TO INSUFFICIENT DESIGNED FOUNDATION SIZE AND BLACK COTTON SOIL T HE PROBLEM OF SUPPORTING THE STRUCTURE HAD BECOME SERIOUS SINCE IN SANGLI AND ADJACENT AREAS, SIMILAR SOIL WAS FOUND. THE ASSESSING OFFICER WAS OF THE VIEW THAT THE SUBMISSIONS OF ASSESSEE AND VALUATION REPORT WERE NOT CONVINCING AND HENCE, THE LOSS CLAIM ED WAS CAPITAL LOSS. IN VIEW THEREOF, THE CAPITAL LOSS OF RS.23 LAKHS WAS DISALLOWED AND ADDED BACK TO THE TOTAL INCOME OF THE ASSESSEE. 5. THE ASSESSING OFFICER IN RESPECT OF RENTAL INCOME RECEIVED FROM BIG BAZAA R PANTALOON RETAIL (INDIA) LTD. I.E. BIG BAZAAR, NOTED THAT THE BUILDING CONSTRUCTED BY THE ASSESSEE WAS IN SUCH A MANNER THAT ON THE BASEMENT AND GROUND FLOOR, THERE WERE BIG HALLS, WHICH IN TURN, WERE RENTED TO BIG BAZAAR. THE ASSESSEE WAS RUNNING MULTIPLEX ON THE FIRST FLOOR OF BUILDING, WHIC H COMPRISED 52% OF THE TOTAL AREA. THE ASSESSEE HAD RECEIVED RENT FROM BIG BAZAAR OF RS.85,95,520/ - FOR LETTING OUT BASEMENT AND GROUND FLOOR OF THE BUILDING AND THE FIRST FLOOR WAS USED FOR MULTIPLEX. THE ASSESSEE HAD PREPARED SEPARATE TRADING ACCOUNT F OR THE RENTAL INCOME WHICH IS INCORPORATED AT PAGE 6 OF THE ASSESSMENT ORDER AND THE ASSESSING OFFICER NOTED THAT THE ASSESSEE HAD CLAIMED DEDUCTION ON ACCOUNT OF BANK INTEREST AND CHARGES OF RS. 28,55,330/ - AND DEPRECIATION OF RS.27,34,312/ - , AGAINST THE R ENT RECEIPTS. THE ASSESSING OFFICER FURTHER OBSERVED THAT THE BANK INTEREST AND DEPRECIATION PERTAIN TO THE ENTIRE BUILDING I.E. MULTIPLEX AT FIRST FLOOR AND THE PORTION LET OUT ON BASEMENT AND GROUND FLOORS. SINCE THE ASSESSEE WAS IN RECEIPT OF RENT FRO M LET OUT PROPERTY AND WAS NOT CARRYING OUT ANY ACTIVITY OF THE NATURE OF TRADE OR COMMERCE, AS PER ITA NO. 1 061 /PN/20 1 3 AND SA NO.08/PN/2016 S AMEER RAJENDRA SHAH 6 THE ASSESSING OFFICER, THE INCOME WAS REQUIRED TO BE ASSESSED AS INCOME FROM HOUSE PROPERTY AND ASSESSEES CLAIM OF VARIOUS EXPENSES AS PER THE PROFIT & LOS S ACCOUNT WAS NOT ADMISSIBLE. THE ASSESSING OFFICER HELD THAT THE SAID RENT RECEIVED FROM BIG BAZAAR IS TO BE ASSESSED AS INCOME FROM HOUSE PROPERTY AND ADMISSIBLE DEDUCTION UNDER SECTION 24 OF THE ACT WERE COMPUTED AND INCOME FROM HOUSE PROPERTY WAS CALC ULATED AT RS.53,03,032/ - . FURTHER, THE ASSESSING OFFICER TOOK NOTE OF DEPRECIATION CHART FILED BY THE ASSESSEE AND NOTED THAT 25% OF THE ASSETS EXCLUDING FIGURES WERE UTILIZED FOR BIG BAZAAR AND 75% OF ASSETS WERE USED FOR FIRST FLOOR PORTION I.E. MULTIPL EX OF THE BUILDING. CONSEQUENTLY, THE ASSESSING OFFICER RE - COMPUTED THE DEPRECIATION TO BE ALLOWED TO THE ASSESSEE AND SIMILARLY BANK INTEREST AND CHARGES WERE ALSO ALLOWED IN THE SAME PROPORTION I.E. 75% AGAINST THE INCOME FROM MULTIPLEX. IN VIEW THEREO F, TH E INCOME FROM MULTIPLEX WAS RE - CASTED AS PER PROFIT & LOSS ACCOUNT UNDER PARA 6.2 AT PAGE 11 OF THE ASSESSMENT ORDER. THE ASSESSEE WAS HELD TO BE ENTITLED FOR DEDUCTION UNDER SECTION 80IB OF THE ACT ON THE PROFIT OF RS.62,18,983/ - AND NOT ON RS.1,01, 41,664/ - . THE ASSESSEE WAS HELD TO CLAIM THE DEDUCTION UNDER SECTION 80IB OF THE ACT AT RS.31,09,491/ - AS AGAINST RS.60,14,733/ - CLAIMED BY THE ASSESSEE IN THE COMPUTATION OF INCOME. THE ASSESSING OFFICER FURTHER HELD THAT THE ASSESSEE WAS NOT ENTITLED T O CLAIM THE DEDUCTION ON THE ENTIRE BUILDING UNDER SECTION 80IB OF THE ACT SINCE THE BASEMENT AND THE GROUND FLOOR WERE GIVEN ON RENT TO BIG BAZAAR AND THE ASSESSEE WAS OWNING THE BUILDING AND OPERATING MULTIPLEX THEATRE ON FIRST FLOOR. FURTHER, THE ASSES SING OFFICER OBSERVED THAT THE ASSESSEE HAD VIOLATED THE CONDITIONS LAID DOWN IN RULE 18DB OF THE INCOME TAX RULES, 1962 (IN SHORT THE RULES) RENDERING IT INELIGIBLE FOR DEDUCTION UNDER SECTION 80IB (7A) OF THE ACT. THE ASSESSEE WAS SHOW CAUSED IN THIS R EGARD AND THE REPLY OF THE ASSESSEE IS INCORPORATED UNDER PARA 6.5 AT ITA NO. 1 061 /PN/20 1 3 AND SA NO.08/PN/2016 S AMEER RAJENDRA SHAH 7 PAGES 12 AND 13 OF THE ASSESSMENT ORDER AND AFTER NOTING THE PROVISIONS OF THE ACT I.E. 80IB(7A) OF THE ACT, THE ASSESSING OFFICER HELD THAT THE ASSESSEES CLAIM OF DEDUCTION UNDER SECTI ON 80IB(7A) OF THE ACT WAS NOT ACCEPTABLE FOR THE FOLLOWING REASONS: - A) BUILDING IS NOT MEANT FOR MULTIPLEX ONLY; B) FAILURE TO COMPLY WITH THE PROVISIONS OF RULE 18DB(4) OF THE RULES I.E. NOT FILING THE AUDIT REPORT IN FORM NO.10CCBA AND ONLY FURNISHIN G COPY OF THE SAME DURING THE COURSE OF ASSESSMENT PROCEEDINGS, TO WHICH COPY OF OPERATING LICENCE WAS NOT ENCLOSED, WHICH WAS FILED ONLY WHEN THE ASSESSING OFFICER SPECIFICALLY ASKED FOR; C) INCORRECT WORKING OF DEDUCTION BY INCLUDING RENTAL INCOME OF B IG BAZAAR IN THE PROFIT FROM LETTING THE MULTIPLEX; AND D) DISCREPANCY IN ADOPTING THE FIGURE OF MULTIPLEX PROFIT FOR CLAIMING THE DEDUCTION UNDER SECTION 80IB(7A) OF THE ACT I.E. ON ACCOUNT OF DEPRECIATION AND BANK INTEREST AND CHARGES. 6. THE ASSESSING OFFICER THUS, RE - COMPUTED DEDUCTION UNDER SECTION 80IB(7A) OF THE ACT . 7. ANOTHER ISSUE CONSIDERED BY THE ASSESSING OFFICER WAS THE COST OF IMPROVEMENT OF TWO PLOTS SOLD BY THE ASSESSEE DURING THE YEAR, AGAINST WHICH IT HAD DECLARED SHORT TERM CAPITAL GA INS OF RS.21,65,791/ - . THE ASSESSING OFFICER NOTED THAT WHILE COMPUTING THE SHORT TERM CAPITAL GAINS, THE ASSESSEE HAD DECLARED COST OF IMPROVEMENT IN RESPECT OF PLOT NO.1 AT RS.65,52,239/ - AND IN RESPECT OF PLOT NO.2 AT RS.29,06,400/ - I.E. TOTAL OF RS.94 ,58,639/ - . DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE WAS ASKED TO FURNISH THE DETAILS AND IT WAS POINTED OUT THAT THE SAID EXPENDITURE WAS INCURRED TO RAISE PLINTH LEVEL OF PLOT OF LAND IN ORDER TO BE MARKETABLE. THE AMOUNT WAS CLAIMED TO BE SPENT ON PURCHASING MU RUM AND LEVELING THE LAND. THE ASSESSEE FURNISHED THE DETAILS OF EXPENSES ALONG WITH ADDRESSES OF THE SUPPLIERS. THE ASSESSEE LATER ON FURNISHED NAMES OF PERSONS AND THE AMOUNT PAID TO THEM FOR MURUM FILLING, LEVELING AND FENCIN G WORK IN ORDER TO VERIFY THE GENUINENESS OF ITA NO. 1 061 /PN/20 1 3 AND SA NO.08/PN/2016 S AMEER RAJENDRA SHAH 8 EXPENSES. THE STATEMENTS OF TWO PERSONS WERE RECORDED DURING THE COURSE OF ASSESSMENT PROCEEDINGS. THE ASSESSEE WAS ASK ED TO PRODUCE THREE PERSONS. HOWEVER, THE ASSESSEE COULD NOT PRODUCE THE SAID THREE PERSO NS AND THE ASSESSING OFFICER NOTED THAT THE PAYMENTS WERE MADE THROUGH CASH OR BEARER CHEQUES AND THE ASSESSEE COULD NOT PRODUCE THE PERSONS AND THE PERSONS WHO WERE PRODUCED, HAD GIVEN CONTRADICTORY STATEMENTS, HENCE THE ASSESSEE WAS HELD TO HAVE NOT SUBS TANTIATED ITS CLAIM OF COST OF IMPROVEMENT AND THE SAME WAS REJECTED AND ONLY 25% OF THE EXPENSES WERE ALLOWED AND THE INCOME FROM SHORT TERM CAPITAL GAINS WAS RE - WORKED IN THE HANDS OF ASSESSEE. 8. THE CIT(A) VIDE PARA 6 AT PAGE 2 OF THE APPELLATE ORDER OBSERVED THAT THE CONTENTION OF THE ASSESSEE THAT DEDUCTION SHOULD BE ALLOWED ON THE ENTIRE INCOME OF MULTIPLEX AND THE RENT FROM B IG BAZAAR , WAS WITHOUT ANY BASIS. THE CIT(A) REFERRED TO THE PROVISIONS OF SECTION 80IB(7A) OF THE ACT, WHICH ALLOWED DEDUCT ION IN THE CASE OF MULTIPLEX THEATRE, WHICH IS NOT LOCATED IN MUNICIPAL JURISDICTION. FURTHER, REFERENCE WAS MADE TO SUB - SECTION (14) OF THE SAID SECTION, WHERE MULTIPLEX HAS BEEN DEFINED TO BE A BUILDING OF A PRESCRIBED AREA COMPRISING OF TWO OR MORE CIN EMA THEATRES AND COMMERCIAL SHOPS OF SUCH SIZE AND NUMBER AND HAVING SUCH OTHER FACILITIES AND AMENITIES. THE CIT(A) HELD THAT THE ASSESSEES CASE WAS NOT QUALIFIED FOR DEDUCTION UNDER SECTION 80IB OF THE ACT AND THE ORDER OF ASSESSING OFFICER IN ASSESSIN G THE RENT FROM BIG BAZAAR AS INCOME FROM HOUSE PROPERTY, WAS UPHELD. FURTHER, THE CIT(A) ALLOWED THE DEDUCTION UNDER SECTION 80IB(7A) OF THE ACT ON INCOME FROM MULTIPLEX ONLY, WHICH WAS COMPUTED BY THE ASSESSING OFFICER AFTER ADJUSTING INCOME BY DEDUCTIN G PROPORTIONATE DEPRECIATION AND BANK INTEREST. THE CIT(A) HELD THAT ON PROFITS OF RS. 62,18,193/ - , THE DEDUCTION UNDER SECTION 80IB (7A) OF THE ACT IS TO BE ALLOWED. FURTHER, IN RESPECT OF DISALLOWANCE OF COST OF ITA NO. 1 061 /PN/20 1 3 AND SA NO.08/PN/2016 S AMEER RAJENDRA SHAH 9 IMPROVEMENT WHILE COMPUTING SHORT TERM CAPI TAL GAINS, THE CIT(A) REFERRED TO THE ORDER OF ASSESSING OFFICER AS TO WHY THE SAID EXPENSES SHOULD BE DISALLOWED. HE FURTHER MAKES REFERENCE TO THE ADDITIONAL EVIDENCE FILED IN THE FORM OF AFFIDAVITS AND FRESH SUBMISSIONS MADE BY THE ASSESSEE IN THIS REG ARD, WHICH IN TURN, WERE SENT TO THE ASSESSING OFFICER TO RE - EXAMINE AND TO OBTAIN A REMAND REPORT. THE CIT(A) VIDE PARA 13 AT PAGE 4 OF THE APPELLATE ORDER OBSERVED THAT THE ASSESSING OFFICER HAS FOUND THAT MOST OF THE EXPENSES COULD NOT BE SUBSTANTIATED . THE A FFIDAVIT AND AVERMENTS WERE NOT SUBSTANTIATED BY ANY DOCUMENTS . THE CIT(A) FURTHER OBSERVED THAT THE AUTHORITIES BELOW HAD OPPOSED ADMISSION OF ADDITIONAL EVIDENCE AS THE ASSESSEE WAS NOT PREVENTED BY SUFFICIENT CAUSE FROM PRODUCING SAME BEFORE THE ASSESSING OFFICER. THE CIT(A) VIDE PARA 14 AT PAGE 5 OBSERVED THAT FROM THE ABOVE FACTS IT APPEARS THAT SINCE THERE WAS NOT ENOUGH TIME BEFORE THE APPELLANT TO PRODUCE DETAILS AND THE PERSONS FOR RECORDING STATEMENTS BEFORE THE ASSESSING OFFICER, THE ADDITIONAL EVIDENCES ARE TO BE ENTERTAINED BY UNDERSIGNED. HOWEVER, THE CIT(A) ALLOWED RELIEF OF ONLY RS.3,91,755/ - IN RESPECT OF PAYMENTS MADE TO THE MUNICIPAL CORPORATION AND REGARDING THE BALANCE AMOUNT, THE CIT(A) AGREED WITH THE ASSESSING OFFICER THA T THE EXPENSES WERE UN - SUBSTANTIATED AND THEREFORE, NOT ALLOWED. THE CIT(A) ALSO UPHELD THE ORDER OF ASSESSING OFFICER IN DISALLOWING THE LOSS OF RS.23 LAKHS AS CAPITAL LOSS. 9. THE ASSESSEE IS IN APPEAL AGAINST THE ORDER OF CIT(A). 10. THE LEARNED AU THORIZED REPRESENTATIVE FOR THE ASSESSEE AFTER TAKING US THROUGH THE FACTUAL ASPECTS OF THE CASE, POINTED OUT THAT THIS WAS THE FOURTH YEAR OF CLAIM OF DEDUCTION UNDER SECTION 80IB(7A) OF THE ACT. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE FAI RLY ADMITTED THAT IN ALL THE EARLIER ITA NO. 1 061 /PN/20 1 3 AND SA NO.08/PN/2016 S AMEER RAJENDRA SHAH 10 YEARS, THE SAID CLAIM WAS ALLOWED BY ISSUING INTIMATION UNDER SECTION 143(1) OF THE ACT. THE GRIEVANCE OF ASSESSEE IN THIS REGARD WAS THAT RENTAL INCOME FROM THE COMMERCIAL SHOPS WAS ASSESSED UNDER THE HEAD INCOME FRO M PROPERTY, WHEREAS THE ASSESSEE CLAIMED THE SAME AS INCOME FROM MULTIPLEX. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE REFERRED TO THE PROVISIONS OF SECTION 80IB(1) OF THE ACT, WHEREIN IT IS PROVIDED THAT THE DEDUCTION SHALL BE ALLOWED UNDE R THE SAID SECTION ON ACCOUNT OF ANY BUSINESS FROM SUB - SECTION 3 TO 11 B OF THE ACT. FURTHER, REFERENCE WAS MADE TO SUB - SECTION 7A TO SECTION 80IB OF THE ACT, WHEREIN IT IS PROVIDED THAT THE DEDUCTION WOULD BE ALLOWED IN RESPECT OF BUILDING OWNING AND OPER ATION OF MULTIPLEX THEATRE. AS PER SECTION 80IB(14)(D) (A) OF THE ACT, MULTIPLEX THEATRE INCLUDES SHOPS AS MAY BE PRESCRIBED. FURTHER, OUR ATTENTION WAS DRAWN TO THE RULE 18DB ( 1 ) (B) OF THE RULES THAT IN THE MULTIPLEX, THERE SHOULD BE AT LEAST THREE CINEMA SCREENS AND THREE COMMERCIAL SHOPS TO QUALITY AS BUSINESS OF MULTIPLEX THEATRE. AS PER CLAUSE (D), THE MINIMUM AREA OF ALL SHOPS SHOULD BE 3000 SQ.FT. AND MINIMUM OF EACH SHOP SHOULD BE 250 SQ.FT. HE FURTHER STRESSED THAT IT WAS NOT EXPECTED THAT THE AS SESSEE SHOULD RUN THESE SHOPS. THE TERM USED IN THE SECTION AND RULE IS COMMERCIAL SHOP AND WHERE THE SHOP IS USED FOR COMMERCIAL PURPOSES , THE CONDITIONS STAND FULFILLED. IT WAS FURTHER CLARIFIED BY HIM THAT THE ASSESSEE WAS NOT RUNNING THE SHOPS ITSELF. AS PER SECTION, THE TERMS USED ARE THEATRE AND COMMERCIAL SHOP , BUT IT DOES NOT IMPLY THAT THE SHOP SHOULD BE RUN BY THE ASSESSEE . W HERE THE COMMERCIAL SHOPS ARE RENTED OUT, THEY HAVE BEEN PUT TO COMMERCIAL USE AND HENCE, FULFILLED THE CONDITIONS. REFE RRING TO THE ASSESSMENT ORDER PASSED IN THE CASE , THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE POINTED OUT THAT AT PAGE 8, THE ASSESSING OFFICER ACKNOWLEDGES THAT ALL THE SHOPS WERE RENTED OUT AND THE RENT HAS BEEN ITA NO. 1 061 /PN/20 1 3 AND SA NO.08/PN/2016 S AMEER RAJENDRA SHAH 11 RECEIVED FROM PANTALOON RETAIL (INDIA) LTD. HOWEVER, NO DEDUCTION WAS ALLOWED BY THE ASSESSING OFFICER BECAUSE OF SHOPS BEING LET OUT. OUR ATTENTION WAS DRAWN TO THE LIST OF FACILITIES PROVIDED BY THE ASSESSEE TO THE LESSEE, WHICH ARE ENLISTED AT PAGE 110 OF THE PAPER BOOK AND WHERE I T WAS COMMERCIALLY BEING EXPLOITED , AGAINST THE RECEIPTS FROM MULTIPLEX ACTIVITY , DEDUCTION UNDER SECTION 80IB(7A) OF THE ACT WAS ALLOWABLE TO THE ASSESSEE. IN THIS REGARD, THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE PLACED RELIANCE ON THE FOLL OWING DECISIONS: - I) M/S. SHREEJI EXHIBITORS VS. ACIT IN ITA NO.640/M/2014 AND M/S. SHREEJI ENTERPRISES VS. ACIT IN ITA NO.2196/M/2013, RELATING TO ASSESSMENT YEAR 2009 - 10, ORDER DATED 14.08.2015; II) DCIT VS. MAGARPATTA TOWNSHIP DEVELOPMENT & CONSTRUCTIO N CO. IN ITA NO.822/PN/2011 AND CO NO.04/PN/2012 , RELATING TO ASSESSMENT YEAR 2007 - 08, ORDER DATED 18.09.2012; AND III) M/S. MUDHOL LAND HOLDING VS. CIT IN ITA NO.987/PN/2013, RELATING TO ASSESSMENT YEAR 2008 - 09, ORDER DATED 28.08.2014. 11. WITH RESPECT TO GROUND OF APPEAL NO.3 , THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE STATED THAT THE SAME WAS AN ALTERNATE GROUND OF APPEAL TO GROUNDS OF APPEAL NO.1 AND 2, WHEREIN THE CIT(A) HAD NOT ALLOWED THE EXPENSES INCLUDING DEPRECIATION ON CAR WHILE CAL CULATING DEDUCTION UNDER SECTION 80IB(7A) OF THE ACT . FURTHER PLEA WAS RAISED ON ACCOUNT OF DEPRECIATION ON MACHINERY SUCH AS AIR - CONDITIONERS, ETC. AGAINST INCOME RECEIVED FROM BIG BAZAAR. 12. THE LEARNED DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE POIN TED OUT THAT WHEN A PER SON IS CARRYING ON HIS BUSINESS , THEN HE ACCOUNTS FOR THE RISK. HOWEVER, WHEN THE PERSON GIVES ON RENT, THERE IS NO RISK AND ONLY REVENUE SHARING. THOUGH THE ASSESSEE CLAIMS TO HAVE GIVEN VARIOUS FACILITIES TO THE LESSEE, BUT ALL T HESE ARE BASIC FACILITIES PROVIDED TO THE LESSEE. THE LEARNED DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE FURTHER STATED THAT THE ASSESSEE ITA NO. 1 061 /PN/20 1 3 AND SA NO.08/PN/2016 S AMEER RAJENDRA SHAH 12 HIMSELF HAD MADE T W O PROFIT & LOSS ACCOUNT S, ONE ON ACCOUNT OF RENTAL INCOME AND THE SECOND ON ACCOUNT OF MULTIPLEX INCOME. THE LEARNED DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE FURTHER STRESSED THAT UNDER SECTION 80IB(7A) OF THE ACT, THE ASSESSEE SHOULD HAVE BUILT UP AND OWN ED BUILDING AND FURTHER OPERATE D THE SAME, WHICH W ERE THE KEY WORD S AND WHERE THE ASSESSEE WA S NOT OPERATING ITS COMMERCIAL SHOP S , IT WAS NOT ENTITLED TO THE CLAIM OF DEDUCTION UNDER SECTION 80IB(7A) OF THE ACT. THE LEARNED DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE PLACED RELIANCE ON THE RATIO LAID DOWN BY THE HONBLE SUPREME COURT IN SHAMBHU I NVESTMENT P. LTD. VS. CIT (2003) 263 ITR 143 (SC) AND MUMBAI BENCH OF TRIBUNAL IN MARWAR TEXTILES (AGENCY) (P.) LTD. VS. ITO (2009) 116 ITD 335 (MUM) FOR THE PROPOSITION THAT WHERE EVEN IF FACILITIES WERE PROVIDED, IT WAS PROPERTY INCOME AND NOT BUSINESS I NCOME. 13. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE IN REJOINDER POINTED OUT THAT THE PROVISIONS OF SECTION HAD TO BE SEEN IN TOTALITY AND WHERE RENT ALONE WAS NOT FACTOR AND FACILITIES WERE PROVIDED TO THE SAID LESSEE AS PER THEIR REQUIREME NT, THE ASSESSEE WAS TAKING RISK AND WAS ENGAGED IN BUSINESS ACTIVITY. 14. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE ISSUE ARISING IN THE PRESENT APPEAL IS IN RELATION TO THE CLAIM OF DEDUCTION UNDER SECTION 80IB(7A) OF THE ACT. FOR THIS PURPOSE, THE PROVISION S OF SECTION MAY BE CONSIDERED AND THE RELEVANT PROVISIONS OF SECTION READ AS UNDER: - 80IB(1) - WHERE THE GROSS TOTAL INCOME OF AN ASSESSEE INCLUDES ANY PROFITS AND GAINS DERIVED FROM ANY BUSINESS REFERRED TO IN SUB - SECTIONS (3) TO [(11), (11A) AND (11B)] (SUCH BUSINESS BEING HEREINAFTER REFERRED TO AS THE ELIGIBLE BUSINESS), THERE SHALL, IN ACCORDANCE WITH AND SUBJECT TO THE PROVISIONS OF THIS SECTION, BE ALLOWED, IN COMPUTING THE TOTAL INCOME OF THE ASSESSEE, A DEDUCTION FR OM SUCH PROFITS AND GAINS OF AN AMOUNT EQUAL TO SUCH PERCENTAGE AND FOR SUCH NUMBER OF ASSESSMENT YEARS AS SPECIFIED IN THIS SECTION. (2) ITA NO. 1 061 /PN/20 1 3 AND SA NO.08/PN/2016 S AMEER RAJENDRA SHAH 13 (3) (4) (5) (6) (7) ( 7A ) THE AMOUNT OF DEDUCTION IN THE CASE OF ANY MULTIPLEX THEATRE SHALL BE (A) FIFT Y PER CENT OF THE PROFITS AND GAINS DERIVED, FROM THE BUSINESS OF BUILDING, OWNING AND OPERATING A MULTIPLEX THEATRE, FOR A PERIOD OF FIVE CONSECUTIVE YEARS BEGINNING FROM THE INITIAL ASSESSMENT YEAR IN ANY PLACE : PROVIDED THAT NOTHING CONTAINED IN THIS C LAUSE SHALL APPLY TO A MULTIPLEX THEATRE LOCATED AT A PLACE WITHIN THE MUNICIPAL JURISDICTION (WHETHER KNOWN AS A MUNICIPALITY, MUNICIPAL CORPORATION, NOTIFIED AREA COMMITTEE OR A CANTONMENT BOARD OR BY ANY OTHER NAME) OF CHENNAI, DELHI, MUMBAI OR KOLKATA; (B) THE DEDUCTION UNDER CLAUSE (A) SHALL BE ALLOWABLE ONLY IF (I) SUCH MULTIPLEX THEATRE IS CONSTRUCTED AT ANY TIME DURING THE PERIOD BEGINNING ON THE 1ST DAY OF APRIL, 2002 AND ENDING ON THE 31ST DAY OF MARCH, 2005; (II) THE BUSINESS OF THE MULTIPLEX TH EATRE IS NOT FORMED BY THE SPLITTING UP, OR THE RECONSTRUCTION, OF A BUSINESS ALREADY IN EXISTENCE OR BY THE TRANSFER TO A NEW BUSINESS OF ANY BUILDING OR OF ANY MACHINERY OR OF PLANT PREVIOUSLY USED FOR ANY PURPOSE; (III) THE ASSESSEE FURNISHES ALONGWITH THE RETURN OF INCOME, THE REPORT OF AN AUDIT IN SUCH FORM AND CONTAINING SUCH PARTICULARS AS MAY BE PRESCRIBED 83 AND DULY SIGNED AND VERIFIED BY AN ACCOUNTANT, AS DEFINED IN THE EXPLANATION BELO W SUB - SECTION (2) OF SECTION 288 , CERTIFYING THAT THE DEDUCTION HAS BEEN CORRECTLY CLAIMED. DEDUCTION HAS BEEN CORRECTLY CLAIMED. ..... 14 (DA) MULTIPLEX THEATRE MEANS A BUILDING OF A PRESCRIBED AREA , COMPRISING OF TWO OR MORE CINEMA THEATRES AND COMMERCIAL SHOPS OF SUCH SIZE AND NUMBER AND HAVING SUCH OTHER FACILITIES AND AMENITIES AS MAY BE PRESCRIBED . 15. THE RELEVANT RULES IN THIS REGARD ARE 18D B (1) OF THE RULES , WHICH READ AS UNDER: - 18DB (1) FOR THE PURPOSE OF SUB - SECTION (7A) AND CLAUSE (DA) OF SUB - SECTIO N (14) OF SECTION 80 - LB, THE MULTIPLEX THEATRE SHALL HAVE THE FOLLOWING F ACILITIES AND AMENITIES : - ( A ) THE TOTAL BUILT - UP AREA OCCUPIED BY ALL THE CINEMA THEATRES COMP RISED IN THE MULTIPLEX SHA LL NOT BE LESS THAN 22,500 SQUARE FEET, AND SHALL CONSIST AT LEAST 50 % OF THE TOTAL BUILT - UP AREA OF THE MULTIPLEX EXCLUDING THE AREA SPECIFIED FOR PARKING. ( B ) THE MULTIPLEX THEATRES SHALL BE COMPRISED OF AT LEAST THREE CINEMA THEATRES AND AT LEAST THREE COM MERCIAL SHOPS. ( C ) TOTAL SEATING CAPACITY OF ALL THE CINEMA THEATRES COMPRISED IN THE MULTIPLEX SHALL BE AT LEAST 900 SEATS, AND NO CINEMA THEATRE SHOULD CONSIST OF LESS THAN 100 SEATS. ITA NO. 1 061 /PN/20 1 3 AND SA NO.08/PN/2016 S AMEER RAJENDRA SHAH 14 ( D ) THE TOTAL BUILT - UP AREA OCCUPIED BY ALL THE COMMERCIAL SHOPS CO MPRISED IN THE MULTIPLEX THEATRE SHALL NOT BE LESS THAN 3000 SQ. FT., AND THE MINIMUM BUILT - UP AREA OF EACH SHOP SHALL NOT BE LESS THAN 250 SQ.FT. ( E ) THERE SHALL BE AT LEAST ONE LOBBY OR FOYER IN THE CINEMA THEATRES WHOSE AREA SHALL BE AT LEAST 3 SQ. FT. PER SEAT. ( F ) TH E MULTIPLEX THEATRE SHALL HAVE ADEQUATE PARKING, TOILET BLOCKS AND OTHER PUBLIC CONVENIENCES, AS PER LOCAL BUILDING OR CINEMA REG ULATIONS AND SHALL ALSO FULFIL ALL LOCAL BUILDING OR CINEMA REGULATIONS IN RES PECT OF FIRE AND SAFETY. ( G ) THE CINEMA THEATRES COM PRISED IN THE MULTIPLEX THEATRE SH ALL USE MODERN STEREO PROJECTION SYSTEMS WITH AT LEAST TWO SCREEN SPEAK ERS PER SCREEN AND ONE SURROUND SPEAKER PER 25 SEATS IN A THEATRE. ( H ) THE CINEMA THEATRES SHALL USE SEATS WITH SEAT PITCH NOT LESS THAN 20 (CENTRE TO CEN TRE). ( I ) TICKETING SYSTEM EMPLOYED BY THE CINEMA THEATRES SHALL BE FULLY COM PUTERISED. ( J ) THE MULTIPLEX THEATRE CINEMA SHALL BE CENTRALLY AIR - CONDITIONED. 16. UNDER THE PROVISIONS OF SECTION 80IB(1) , DEDUCTION IN RESPECT OF PROFITS AND GAINS FROM CERTAIN IN DUSTRIAL UNDERTAKINGS ARE PROVIDED. AS PER SUB - SECTION (1) TO SECTION 80IB OF THE ACT, WHERE THE GROSS TOTAL INCOME OF AN ASSESSEE INCLUDES ANY PROFITS AND GAINS DERIVED FROM ANY BUSINESS REFERRED TO IN SUB - SECTION ( 3) TO SECTION 11B OF THE ACT, THEN, IN ACCORDANCE WITH AND SUBJECT TO PROVISIONS OF SAID SECTION, DEDUCTION WOULD BE ALLOWED IN COMPUTING TOTAL INCOME OF THE ASSESSEE , EQUAL TO SUCH PERCENTAGE AND FOR SUCH NUMBER OF YEARS AS SPECIFIED IN THE SECTION. UNDER SUB - SECTION 7A, IT IS PROVIDED THAT I N RESPECT OF DEDUCTION IN THE CASE OF ANY MULTIPLEX THEATRE, AMOUNT SHALL BE 50% OF THE PROFITS AND GAINS DERIVED FROM THE BUSINESS OF BUILDING , OWNING AND OPERATING A MULTIPLEX THEATRE FOR A PERIOD OF FIVE CONSECUTIVE YEARS BEGINNING FROM INITIAL ASSESSME NT YEAR , IN ANY PLACE. IT IS FURTHER PROVIDED THAT NOTHING CONTAINED IN THIS CLAUSE SHALL APPLY TO MULTIPLEX THEATRE LOCATED AT A PLACE WITHIN MUNICIPAL JURISDICTION OF CHENNAI, DELHI, MUMBAI OR CALCUTTA. AS PER SUB - CLAUSE (B) TO SECTION 80IB(7A) OF THE ACT, THE DEDUCTION UNDER CLAUSE (A) SHALL BE ITA NO. 1 061 /PN/20 1 3 AND SA NO.08/PN/2016 S AMEER RAJENDRA SHAH 15 ALLOWABLE ONLY IF SUCH MULTIPLEX THEATRE IS CONSTRUCTED AT ANY TIME DURING THE TIME BEGINNING THE FIRST DAY OF APRIL, 2002 . FURTHER, IT IS PROVIDED THAT THE BUSINESS OF MULTIPLEX IS NOT FORMED BY SPLITTING OR R E - CONSTRUCTION OF BUSINESS ALREADY IN EXISTENCE OR BY TRANSFER TO A NEW BUSINESS , OF BUILDING OR O F ANY MACHINERY OR OF A PLANT PREVIOUSLY USED FOR ANY PURPOSE . UNDER CLAUSE (B) (III) , IT IS FURTHER PROVIDED THAT THE ASSESSEE IS OBLIGED TO FURNISH ALONG W ITH RETURN OF INCOME, THE REPORT OF AN AUDIT IN SUCH FORM AND CONTAINING SUCH PARTICULARS AS MAY BE PRESCRIBED AND DULY SIGNED AND VERIFIED BY AN ACCOUNTANT, CERTIFYING THAT THE DEDUCTION HAS BEEN CORRECTLY CLAIMED. FURTHER, UNDER SECTION 80IB(14) OF TH E ACT, THE TERM MULTIPLEX THEATRE IS DEFINED UNDER CLAUSE (DA) . IT PROVIDES THAT MULTIPLEX THEATRE WOULD MEAN A BUILDING OF A PRESCRIBED AREA COMPRISING OF TWO OR MORE CINEMA THEATRES AND COMMERCIAL SHOPS OF SUCH SIZE AND NUMBER AND HAVING SUCH OTHER FACI LITIES AND AMENITIES AS MAY BE PRESCRIBED. ALL THESE SPECIFICATIONS ARE PROVIDED UNDER RULE 18DB OF THE RULES. AS PER RULE 18DB OF THE RULES, THE PRESCRIBED AREA, FACILITIES AND AMENITIES FOR MULTIPLEX THEATRE AND PARTICULARS OF AN AUDIT REPORT, FOR CLAI MING DEDUCTION UNDER SECTION 80IB(7A) AND CLAUSE (DA) OF SUB - SECTION 14 OF SECTION 80IB OF THE ACT. THE RULE PROVIDES THAT MULTIPLEX THEATRE SHALL HAVE, AS PER CL AUSE (A), TOTAL BUILT UP AREA OCCUPIED BY ALL THE CINEMA THEATRES COMPRISED IN THE MULTIPLEX SHALL NOT BE LESS THAN 22,500 SQ.FT. AND SHALL CONSIST AT LEAST 50% OF THE TOTAL BUILT UP AREA OF THE MULTIPLEX EXCLUDING THE AREA SPECIFIED FOR PARKING. AS PER CLAUSE THEREUNDER, THE MULTIPLEX THEATRE SHALL BE COMPRISED OF AT LEAST THREE CINEMA THEATRES AND AT LEAST THREE COMMERCIAL SHOPS. FURTHER AS PER CLAUSE (C), THE TOTAL CAPACITY OF ALL THE CINEMA THEATRES COMPRISED IN THE MULTIPLEX SHALL BE AT LEAST 900 SEATS AND NO CINEMA THEATRE SHOULD CONSIST OF LESS THAN 100 SEATS. AS PER CLAUSE (D), THE TOTAL BUILT UP AREA OCCUPIED BY ALL ITA NO. 1 061 /PN/20 1 3 AND SA NO.08/PN/2016 S AMEER RAJENDRA SHAH 16 THE COMMERCIAL SHOPS COMPRISED IN THE MULTIPLEX THEATRE SHALL NOT BE LESS THAN 3000 SQ.FT. AND MINIMUM BUILT UP AREA OF EACH SHOP SHALL NOT BE LESS THAN 250 SQ.FT. FURTHER, CONDITIONS ARE PROVIDED FOR LOBBY OR FIRE IN THE CI NEMA THEATRE, PROVISION OF ADEQUATE PARKING, TOILET BLOCKS AND OTHER PUBLIC CONVENIENCE, THE SEATING, TICKETING AND STEREO PROJECTIONS SYSTEMS TO BE USED BY EACH OF THE CINEMA THEATRE. 17. READING ALL THE PROVISIONS OF THE ACT I.E. SECTION 80IB(1), 80IB (7A) AND THEREAFTER, 80IB(14)(DA) AND THE RULES PRESCRIBED THEREUNDER I.E. RULE 18DB, IT TRANSPIRES THAT DEDUCTION FROM THE ELIGIBLE PROFITS AND GAINS OF BUSINESS OF MULTIPLEX THEATRE ARE ALLOWABLE TO THE ASSESSEE, WHERE THE PROFITS AND GAINS ARE DERIVED F ROM THE BUSINESS OF BUILDING , OWNING AND OPERATING A MULTIPLEX THEATRE. THE TERM USED IN SECTION 80IB(7A) OF TH E ACT IS DERIVED FROM, WHICH IS WIDER IN CONNOTATION AND IN RELATION TO THE BUSINESS OF BUILDING , OWNING AND OPERATING A MULTIPLEX THEATRE. THE TERM MULTIPLEX THEATRE MEANS A BUILDING HAVING AT LEAST THREE CINEMA THEATRES AND AT LEAST THREE COMMERCIAL SHOPS. WHERE THE ASSESSEE IS ENGAGED IN THE BUSINESS OF MULTIPLEX THEATRE MEANS A BUILDING OF PRESCRIBED AREA COMPRISING OF CINEMA THEATRES AND THE COMMERCIAL SHOPS AS PRESCRIBED UNDER RULE 18DB OF THE RULES . UNDER SECTION 80IB(14)(C) OF THE ACT, INITIAL ASSESSMENT YEAR IN RESPECT OF EACH OF THE UNDERTAKING IS SPECIFIED AND VIDE CLAUSE (5) , IT IS PROVIDED THAT IN CASE OF MULTIPLEX THEATRE, THE IN ITIAL ASSESSMENT YEAR WILL BE RELEVANT TO THE YEAR IN WHICH CINEMA HALL BEING PART OF MULTIPLEX THEATRE ST ARTS OPERATIONS ON A COMMERCIAL BASIS. IN OTHER WORDS, THE ACT RECOGNIZES THE RUNNING OF CINEMA HALL TO BE A DISTINCT ACTIVITY FROM RUNNING OF COMMER CIAL SHOPS. ITA NO. 1 061 /PN/20 1 3 AND SA NO.08/PN/2016 S AMEER RAJENDRA SHAH 17 1 8 . THE ASSESSEE ADMITTEDLY, FULFILLS ALL THE CONDITIONS VIS - - VIS CINEMA HALLS I.E. IT HAS THREE CINEMA THEATRES RUNNING IN THE COMPLEX AND IT FULFILLS ALL THE OTHER CONDITIONS, AGAINST WHICH THE CIT(A) HAS DIRECTED THE ASSESSING OFFICER TO GRANT THE DEDUCTION UNDER SECTION 80IB(7A) OF THE ACT. HOWEVER, NO DEDUCTION HAS BEEN GRANTED IN RESPECT OF COMMERCIAL SHOPS ON THE SURMISE THAT THE SAID SHOPS ARE RENTED OUT BY THE ASSESSEE AND HENCE, ARE NOT COMMERCIALLY EXPLOITED BY IT FOR THE PURPOSE OF RUNNING ITS BUSINESS. THE QUESTION WHICH ARISES BEFORE US IS WHETHER SUCH A VIEW TAKEN BY THE AUTHORITIES BELOW IS A PLAUSIBLE VIEW. WE WOULD AGAIN REFER TO THE DEFINITION OF MULTIPLEX THEATRE IN SECTION 80IB(14)(DA) OF THE ACT , WHICH CLEARLY LAYS DO WN THAT THE MULTIPLEX MEANS A BUILDING OF PRESCRIBED AREA COMPRISING OF TWO OR MORE CINEMA THEATRES AND COMMERCIAL SHOPS OF SUCH SIZE AND NUMBER, ETC. THE WORD USED BETWEEN THE TWO I.E. CINEMA THEATRE AND COMMERCIAL SHOPS IS AND . I N OTHER WORDS, BOTH T HE ACTIVITIES HAVE TO BE CARRIED ON BY THE ASSESSEE IN ORDER TO BE ELIGIBLE FOR DEDUCTION UNDER SECTION 80IB(7A) OF THE ACT. THE CIT(A) HAS ADMITTEDLY ALLOWED THE DEDUCTION UNDER SECTION 80IB(7A) OF THE ACT IN RESPECT OF CINEMA THEATRES . IN CASE , THE ASS ESSEE HAD NO COMMERCIAL SHOPS AND IS ONLY RUNNING CINEMA THEATRES, THE ASSESSEE IS NOT ELIGIBLE FOR THE SAID DEDUCTION. THE ACT CLEARLY PROVIDES THAT THE TWO ACTIVITIES OF CINEMA THEATRE AND COMMERCIAL SHOPS HAS TO BE CARRIED ON SIMULTANEOUSLY IN ORDER TO BE ELIGIBLE TO BE CALLED A MULTIPLEX THEATRE, AGAINST WHICH THE ASSESSEE IS ENTITLED TO THE CLAIM OF DEDUCTION UNDER SECTION 80IB(1) OF THE ACT. WHERE THE ASSESSEE HAS BEEN FOUND TO BE ELIGIBLE FOR THE CLAIM OF DEDUCTION, AGAINST WHICH THE REVENUE IS NOT IN APPEAL, THE FIRST ASPECT OF THE ISSUE STANDS SETTLED IN FAVOUR OF THE ASSESSEE. THE SECOND ASPECT OF THE ISSUE IS THAT WHERE THE ASSESSEE OWNS COMMERCIAL SHOP S WHICH ADMITTEDLY ARE AS PER THE PRESCRIBED AREA AND MERELY BECAUSE THE ITA NO. 1 061 /PN/20 1 3 AND SA NO.08/PN/2016 S AMEER RAJENDRA SHAH 18 SAME ARE RENTED OUT BY THE ASSESSEE , CAN THE ASSESSEE BE SAID NOT TO HAVE EXPLOITED THE SAME FOR COMMERCIAL PURPOSES AND HENCE, NOT ELIGIBLE FOR CLAIM OF DEDUCTION UNDER SECTION 80IB OF THE ACT. 1 9 . IN THIS REGARD, WE REFER TO THE DECISION OF PUNE BENCH OF TRIBUNAL IN DCIT V S. MAGARPATTA TOWNSHIP DEVELOPMENT & CONSTRUCTION CO. (SUPRA) , WHEREIN IN THE FACTS OF THE SAID CASE, THE ASSESSEE WAS ENGAGED IN CONSTRUCTION BUSINESS AND HAD DEVELOPED TOWNSHIP UNDER THE NAME AND STYLE OF MAGARPATTA CITY PROJECT. THE ASSESSEE HAD CONSTR UCTED AND LET OUT THE PARK I.E. CYBER CITY AND INCOME RECEIVED FROM LETTING OUT THE SAME WAS OFFERED AS INCOME FROM BUSINESS. THE CLAIM OF THE ASSESSEE WAS THAT IN MAGARPATTA CITY PROJECT, THE DEVELOPMENT OF INFORMATION TECHNOLOGY PARK WAS APPROVED UNDER SECTION 80IA OF THE ACT AND WAS BONDED AREA UNDER THE SOFTWARE TECHNOLOGY PARK OF INDIA (STPI) NORMS AND HAD VARIOUS AMENITIES TO ITS. FURTHER, HUGE INVESTMENTS WERE MADE IN INSTALLATION OF MANY SPECIALIZED AMENITIES / EQUIPMENTS LIKE TRANSFORMERS FOR THE IT PARK , SPECIAL POWER SUB - STATIONS, CCTV, FIBRE SATELLITE CONNECTIVITY, RADIO MICROWAVE CELL PHONE BOOSTERS, RESTAURANTS, ETC. WHICH WERE PROVIDED TO IT COMPANIES. THE INCOME FROM LICENCE AGREEMENT I.E. SOFTWARE COMPANIES TO WHOM THE IT PARK PREMISES HA D BEEN LET OUT WAS CLAIMED TO BE CONTINUOUS / SYSTEMATIC ACTIVITY WHICH WAS IN THE NATURE OF COMPLEX COMMERCIAL ACTIVITY AND THE ASSESSEE CLAIMED THAT IT WAS ASSESSABLE AS BUSINESS INCOME . T HE TRIBUNAL AFTER TAKING NOTE OF VARIOUS JUDICIAL PROPOSITIONS IN THIS REGARD, HELD IT TO BE ORGANIZED COMMERCIAL ACTIVITY TO BE ASSESSED UNDER THE HEAD INCOME FROM BUSINESS. THE TRIBUNAL IN THIS REGARD PLACED RELIANCE ON THE RATIO LAID DOWN BY SEVERAL HIGH COURTS AND WITH REFERENCE TO HONBLE BOMBAY HIGH COURT IN CI T VS. MOHIDDIN HOTELS (2006) 284 ITR 229 (BOM) , WHEREIN IT WAS HELD THAT WHERE THE SUBJECT MATTER I.E . LET OUT IS NOT A BARE TENEMENT BUT A COMPLEX ONE ITA NO. 1 061 /PN/20 1 3 AND SA NO.08/PN/2016 S AMEER RAJENDRA SHAH 19 WITH INFRASTRUCTURE FACILITIES, THE INCOME DERIVED THEREFROM, WHICH IS NOT SEPARABLE FROM LETTING OUT TH E BUILDING SHALL NOT BE TREATED AS INCOME FROM HOUSE PROPERTY. 20 . SIMILAR PROPOSITION HAS BEEN LAID DOWN BY PUNE BENCH OF TRIBUNAL IN M/S. MUDHOL LAND HOLDING VS. CIT (SUPRA) WHILE DECIDING THE APPEAL AGAINST THE ORDER PASSED UNDER SECTION 263 OF THE A CT. IN THE FACTS OF THE SAID CASE, THE ASSESSEE HAD BUILT UP A IT PARK AND WHICH IN TURN HAD BEEN LEASED TO VARIOUS STPI UNITS AND THE CLAIM OF THE ASSESSEE WAS THAT SINCE IT WAS ENGAGED IN A COMPLEX ACTIVITY OF LEASING OUT NOT ONLY THE SPACE, BUT THE INF RASTRUCTURE FACILITIES, THE INCOME THEREFROM IS TO BE ASSESSED AS INCOME FROM BUSINESS. THE COMMISSIONER IN THE SAID CASE WAS OF THE VIEW THAT THE SAID INCOME IS ASSESSABLE FROM PROPERTY BUT THE ORDER OF COMMISSIONER WAS SET - ASIDE. 2 1. ANOTHER DECISION WHICH HAS BEEN RELIED UPON BY THE LEARNED AUTHORIZED 2 1. ANOTHER DECISION WHICH HAS BEEN RELIED UPON BY THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE IS THE RATIO LAID DOWN BY MUMBAI BENCH OF TRIBUNAL IN M/S. SHREEJI EXHIBITORS VS. ACIT (SUPRA), WHEREIN IT WAS HELD THAT WHERE THE ACTIVITY OF THE ASSESSEE OF NOT ONLY LE ASING OUT ITS PREMISES BUT ALSO PROVIDING AMENITIES AND FACILITIES IS SO COMPLEX, THEN IT CANNOT BE AN ACTIVITY OF MERE LETTING OUT THE BUILDING OWNED BY IT BUT THE SAID ACTIVITY IS A BUSINESS ACTIVITY FOR CONSTRUCTION OF MALL , MAINTAINING IT, LEASING THE SHOP AREA FOR COMMERCIAL EXPLOITATION AND THE SAME IS TO BE ASSESSED AS INCOME FROM BUSINESS. THE RELEVANT FINDING OF THE TRIBUNAL IS AS UNDER: - 7. THE OTHERWISE UNDISPUTED FACTS OF THE CASE ARE THAT THE ASSESSEE ALONG WITH LEASING OF THE PREMISES IS ALS O EARNING SUBSTANTIAL INCOME FROM PROVIDING AMENITIES AND FACILITIES. SUCH FACILITIES ARE NOT THE BASIC FACILITIES REQUIRED FOR OCCUPATION OR RENTING OF A BUILDING OR PREMISES, BUT THESE ARE THE SPECIAL FACILITIES FOR RUNNING OF THE MULTIPLEX/ SHOPPING MAL L AND CINEMA THEATRE AND FOOD COURT ETC. AND ARE MEANT TO ATTRACT THE CUSTOMERS AND PROVIDE COMFORT OF SHOPPING TO THEM. THESE FACILITIES CAN NOT BE SAID TO BE BASIC/NORMAL FACILITIES REQUIRED FOR OCCUPATION OF THE PREMISES. THE COST OF COMMON FACILITIES H AS BEEN ITA NO. 1 061 /PN/20 1 3 AND SA NO.08/PN/2016 S AMEER RAJENDRA SHAH 20 EMBEDDED IN THE LEASE RENTALS WHEREAS THE ASSESSEE IS ALSO RECEIVING SUBSTANTIAL INCOME FOR PROVIDING AMENITIES/FACILITIES TO THE OCCUPANTS/TENANTS. THE ASSESSEE S ACTIVITY THUS CAN NOT BE SAID TO BE MERE LETTING OF THE BUILDING OWNED BY IT BUT ITS ACTIVITY IS A BUSINESS ACTIVITY OF CONSTRUCTION OF MALL, MAINTAINING IT, LEASING THE SHOPS/ AREA FOR THE PURPOSE OF COMMERCIAL EXPLOITATION OF THE ASSET, ARRANGE AND PROVIDE THE FACILITIES AND AMENITIES NOT ONLY TO THE OCCUPANTS/LESSEES BUT ALSO TO PROVID E AND MAINTAIN FACILITIES AND AMENITIES IN THE COMMON AREAS FOR THE ATTRACTION, CONVENIENCE AND COMFORT OF THE CUSTOMERS/VISITORS. IN OUR VIEW, AS PER THE MODERN DAY TRENDS OF RETAIL BUSINESS AND CUSTOMER PREFERENCES, NOT ONLY THE QUANTUM OF RENT/INCOME FR OM THE MULTIPLEX BUT ALSO THE VERY LETTING OF THE PREMISES DEPENDS UPON THE PROVISIONS OF FACILITIES AND AMENITIES PROVIDED TAKING INTO CONSIDERATION NOT ONLY THE NEED AND REQUIREMENTS OF THE BUSINESS ENTITIES/OCCUPANTS BUT ALSO THE COMFORT ZONE OF THE CUS TOMERS/VISITORS. THE ACTIVITY OF CONSTRUCTION OF MULTIPLEX AND CINEMA THEATRE, ITS MAINTENANCE AND PROVIDING AMENITIES AND FACILITIES THEREIN, THUS CAN NOT BE SAID TO BE MERE LETTING OUT OF THE PROPERTY BUT IN OUR VIEW IS A COMPOSITE BUSINESS ACTIVITY. MER ELY BECAUSE INCOME IS ATTACHED TO A PROPERTY IT CANNOT BE A SOLE FACTOR FOR ASSESSING SUCH INCOME AS INCOME FROM HOUSE PROPERTY AND IT HAS TO BE SEEN THAT WHETHER IT WAS THE PRIMARY OBJECTIVE OF THE ASSESSEE TO EXPLOIT THE PROPERTY IN A SIMPLE MANNER OR TO EXPLOIT IT COMMERCIALLY I.E. TO EXPLOIT IT BY WAY OF COMPLEX COMMERCIAL ACTIVITIES TO ARRIVE AT THE GENERATION OF INCOME THAT COULD BE TAXED UNDER THE HEAD INCOME FROM HOUSE PROPERTY OR AS INCOME FROM BUSINESS. IF IT IS FOUND THAT MAIN INTENTION IS TO SIM PLY LET OUT PROPERTY OR ANY PART OF IT, RESULTANT INCOME MUST BE ASSESSED AS INCOME FROM HOUSE PROPERTY BUT IF MAIN INTENTION IS FOUND TO BE EXPLOITATION OF PROPERTY BY WAY OF COMMERCIAL ACTIVITIES, THEN RESULTANT INCOME MUST BE HELD AS BUSINESS INCOME. 2 2 . IN THE FACTS OF THE PRESENT CASE, THE ASSESSEE HAD ENTERED INTO A LEAVE 2 2 . IN THE FACTS OF THE PRESENT CASE, THE ASSESSEE HAD ENTERED INTO A LEAVE AND LICENCE AGREEMENT WITH PANTALOON RETAIL (INDIA) LTD. ON 01.03.2008, COPY OF WHICH IS PLACED AT PAGES 80 TO 93 OF THE PAPER BOOK. AS PER THE LEAVE AND LICENCE AGREEMENT, THE AS SESSEE ACKNOWLE DGED TO HAVE CONSTRUCTED A SHOPPING MALL ON THE LAND OWNED BY IT AND THE SAME WAS AGREED TO BE LEASED OUT TO THE LESSEE FOR RUNNING RETAIL OUTLET UNDER THE NAME AND STYLE OF BIG BAZAAR. THE TERMS OF THE LEASE WERE A GREED UPON BETWEEN THE PA RTIES AND THE ASSESSEE LESSOR RECEIVED LEASE MONEY FROM THE SAID PARTY . IN ADDITION TO THE SAID LEASE AGREEMENT, AN ASSET USAGE AGREEMENT WAS EXECUTED BETWEEN THE PARTIES ON 01.03.2008 ITSELF, UNDER WHICH IT WAS AGREED THAT IN AD D ITION TO THE LEASE MONEY RECEIVED PER MONTH , THE ASSESSEE WAS TO RECEIVED USAGE RIGHT OF RS. 4, 2 0, 000/ - PER MONTH. THE OBLIGATION OF ASSETS OWNER WAS TO INSTALL AND HANDOVER THE ASSETS TO PANTALOON ON WHICH IT WAS ALSO TO PROVIDE THE ITA NO. 1 061 /PN/20 1 3 AND SA NO.08/PN/2016 S AMEER RAJENDRA SHAH 21 INSURANCE. FURTHER, IT WAS AGREED THAT THE OWN ER SHALL INSTALL THE N OMINAL UPGRADES AS REQUIRED BY PANTALOON AT PANTALOONS COST. FURTHER, PANTALOON HAD UNDERTAKEN THE OPERATION AND MAINTENANCE OF THE SAID ASSETS AND ALSO EXERCISED THE USAGE RIGHTS IN TERMS OF USAGE GUIDELINES. FURTHER, IT WAS AGREE D THAT PANTALOON SHALL PR OMPTLY INFORM THE OWNER ANY DAMAGE CAUSED TO THE ASSETS. THE LIST OF ASSETS IS PROVIDED IN THE SCH EDULE ATTACHED TO THE AGREEMENT, WHICH READS AS UNDER: - LIST OF ASSETS THE ASSET OWNER HAS ALREADY PROVIDED TO THE PANTALOON THE L IST OF ASSET WHICH IS GIVEN BELOW; A . LIGHTING IN THE COMMON AREAS, VIZ., OUTSIDE THE SAID BUILDING; B . 100% POWER BACK UP WITH DEDICATED DG SETS WITH KVA AS PER REQUIREMENTS AND SPECIFICATIONS OF PRIL, OPERATING COSTS OF WHICH WILL BE BORNE BY PRIL; C . FIRE FIGHT ING SYSTEMS, IF REQUIRED AS PER LOCAL MUNICIPAL REGULATIONS; D . BENEFITS OF ALL WARRANTIES AND OTHER BENEFITS, WHICH MAY BE AVAILABLE TO PURCHASERS OF DG SETS, AND / OR ALL THE ABOVE ITEMS SHALL BE PASSED ON TO PRI; E . BENEFITS OF ANNUAL MAINTENANCE CONTRACTS FO R MAINTENANCE OF ALL THE ABOVE EQUIPMENTS; ABOVE EQUIPMENTS; F . ELECTRICAL FITTINGS, WIRING AS PER PRILS SPECIFICATIONS; G . OVERHEAD WATER TANKS; H . COOLING SYSTEM HAS PROVIDED AS APPROVED BY PRIL. 2 3 . THE CASE OF THE ASSESSEE BEFORE US IS THAT ALL THESE ASSETS WERE PROVIDED AS P ER SPECIFICATIONS OF PANTALOON AND FOR THEIR NEEDS. IT WAS FURTHER STRESSED BY THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE THAT IN CASE THESE ASSETS ARE NOT USED BY PANTALOON, THEN THE SAME MAY NOT BE USED BY THE NEXT LESSEE AND IT CANNOT BE SA ID THAT THESE WERE THE GENERAL ASSETS PROVIDED TO ANY LESSEE. THE LEARNED DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE ON THE OTHER HAND, STRESSED THAT THE ASSETS PROVIDED TO THE LESSEE WE RE IN THE USUAL COURSE WHICH ANY LESSOR SHALL PROVIDE IN RESPECT OF ITS BUILDING. WE ARE OF THE VIEW THAT WHERE THE ASSESSEE HAS BUILD AND CONSTRUCTED AN AREA WITH SPECIFICATIONS OF LESSEE, WHO IN TURN, IS TO OCCUPY THE ITA NO. 1 061 /PN/20 1 3 AND SA NO.08/PN/2016 S AMEER RAJENDRA SHAH 22 SAME FOR CARRYING OUT COMMERCIAL ACTIVITIES AND FURTHER, WHERE THE ASSESSEE HAS PROVIDED CERTAIN OTHER FACILITIES AS REQUIRED BY THE LESSEE, THEN IT IS THE CASE OF COMMERCIAL EXPLOITATION OF ASSETS BY THE ASSESSEE AND SUCH INCOME IS ASSESSABLE AS BUSINESS INCOME IN THE HANDS OF ASSESSEE . IT IS NOT THE CASE OF MERE LETTING OUT OF ASSET OWNED BY THE ASSESSEE , INCOME FROM WHICH, IS ASSESSABLE UNDER THE HEAD INCOME FROM PROPERTY. IT MAY BE KEPT IN MIND THAT THE ASSESSEE HAD DEVELOPED HIS PROJECT FOR A MULTIPLEX THEATRE, WHERE THE BASIC REQUIREMENT IS NOT ONLY BUILDING , OWNING AND RUNNING THE CINEMA BUT ALSO COMMERCIAL ESTABLISHMENTS ALONG WITH IT. MERELY BECAUSE THOSE COMMERCIAL AREAS ARE EXPLOITED BY LEASING OUT THE SAME TO THE THIRD PARTY DOES NOT MEAN THAT THE ASSESSEE HA S NOT COMMERCIALLY EXPLOITED THE SAME. IN THE TOTALITY OF THE ABOVE SAID FACTS AND C IRCUMSTANCES, WE HOLD THAT WHERE THE ASSESSEE HAS FULFILLED THE CONDITIONS OF BUILDING OWNING AND RUNNING THE REQUISITE NUMBER OF CINEMA THEATRES AND COMMERCIAL SHOPS BY WAY OF LEASING THE SAME T HROUGH AN INTEGRATED ACTIVITY OF LEASING NOT ONLY THE PREMISE S BUT ALSO OTHER FACILITIES FOR WHICH IT HAS RECEIVED REMUNERATI ON OVER AND ABOVE LEASE CHARGES, WE HOLD THAT THE ASSESSEE HAVING FULFILLED THE CONDITIONS LAID DOWN IN SECTION 80IB(7A) OF THE ACT READ WITH RULE 18DB OF THE RULES , T HE ASSESSEE IS ENTITLED T O CLAIM THE DEDUCTION UNDER SECTION 80IB(1) OF THE ACT. THE CIT(A) HAS ALREADY ALLOWED THE DEDUCTION UNDER SECTION 80IB OF THE ACT AGAINST THE RUNNING OF MULTIPLEX CINEMAS, BUT THE DEFINITION OF MULTIPLEX THEATRE INCLUDES BOTH THE ACTIVITIES OF RUNNING MU LTIPLEX CINEMAS AND COMMERCIAL SHOPS. IN THE ABSENCE OF EITHER, THE ASSESSEE IS NOT ENTITLED TO CLAIM THE DEDUCTION UNDER SECTION 80IB OF THE ACT. ACCORDINGLY, WE HOLD SO. 2 4 . ANOTHER ASPECT TO BE TAKEN NOTE OF IS THAT MERELY BECAUSE THE ASSESSEE HAS PR EPARED TWO SEPARATE PROFIT & LOSS ACCOUNTS FOR EACH OF THE ACTIVITY AND ITA NO. 1 061 /PN/20 1 3 AND SA NO.08/PN/2016 S AMEER RAJENDRA SHAH 23 HAD LATER FILED CONSOLIDATED FINANCIAL STATEMENTS FOR THE TWO ACTIVITIES DOES NOT DISTINGUISH THE TITLE OF THE ASSESSEE FROM CLAIM MADE BY IT UNDER SECTION 80IB(1) OF THE ACT. ACCORDI NGLY, WE DIRECT THE ASSESSING OFFICER TO ALLOW THE CLAIM OF ASSESSEE. THE GROUNDS OF APPEAL NO.1 AND 2 RAISED BY THE ASSESSEE ARE THUS, ALLOWED. 2 5 . THE GROUND OF APPEAL NO.3 BEING ALTERNATIVE TO GROUNDS OF APPEAL NO.1 AND 2, IS THUS, DISMISSED. 2 6 . NOW , COMING TO THE ISSUE RAISED IN GROUND OF APPEAL NO.4 IN RESPECT OF THE DISALLOWANCE OF COST OF IMPROVEMENT ON SALE OF PLOTS WHICH WAS DECLARED AS SHORT TERM CAPITAL GAINS ON SALE OF TWO PLOTS, ONE PLOT WAS NEAR MULTIPLEX THEATRE AND THE SECOND PLOT WAS IN THE CITY. WHILE DECLARING INCOME FROM SHORT TERM CAPITAL GAINS, THE ASSESSEE HAD DECLARED COST OF IMPROVEMENT IN RESPECT OF PLOT NO.1 AT RS. 65,52,239/ - AND IN RESPECT OF PLOT NO.2, AT RS. 29,06,400/ - . THE NO.1 AT RS. 65,52,239/ - AND IN RESPECT OF PLOT NO.2, AT RS. 29,06,400/ - . THE ASSESSEE CLAIMED THAT THE SAID AMOUNT WAS SPENT O N PURCHASING MURUM AND LEVELING THE LAND, IN RESPECT OF WHICH DETAILS WERE FURNISHED BEFORE THE ASSESSING OFFICER I.E. NAME OF PERSON FROM WHOM MURUM WAS PURCHASED AND ALSO THE AMOUNTS SPENT ON LEVELING AND FENCING. THE PAYMENTS WERE MADE THROUGH CASH / B EAR ER CHEQUES . THE ASSESSING OFFICER ASKED THE ASSESSEE TO PRODUCE THE SAID PERSONS AND TWO PERSONS WERE PRODUCED. HOWEVER, THE BALANCE THREE PERSONS WERE NOT PRODUCED BEFORE THE ASSESSING OFFICER. THE ASSESSING OFFICER DISALLOWED 75% OF DEVELOPMENT EXP ENSES IN RESPECT OF PLOT NO.1 AT RS. 49,14,179/ - AND RS. 21,79,800/ - IN RESPECT OF PLOT NO.2 FOR WANT OF PROPER VERIFICATION. THE TOTAL DISALLOWANCE MADE BY THE ASSESSING OFFICER WAS RS. 70,93,979/ - . ITA NO. 1 061 /PN/20 1 3 AND SA NO.08/PN/2016 S AMEER RAJENDRA SHAH 24 2 7 . THE CIT(A) TOOK NOTE OF ADDITIONAL EVIDENCE FILED BY THE ASSESSEE, BUT ONLY ALLOWED RELIEF OF RS. 3,91,755/ - I.E. PAYMENT MADE TO MUNICIPAL CORPORATION. 2 8 . THE CASE OF THE ASSESSEE BEFORE US IS THAT NECESSAR Y DETAILS WERE FURNISHED BEFORE THE AUTHORITIES BELOW AND CERTAIN ADDITIONAL EVIDENCE WAS FILED BE FORE THE CIT(A). HOWEVER, THE CLAIM OF ASSESSEE HAS BEEN REJECTED IN ENTIRETY. OUR ATTENTION WAS DRAWN TO THE CONFIRMATION FILED BY THE RESPECTIVE PARTIES AT PAGES 52 TO 57 OF THE PAPER BOOK I.E. IN THE STATEMENT RECORDED BY THE ASSESSING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE POINTED OUT THAT AS AGAINST CASH PAYMENT OF RS. 67,02,224/ - , THE CONFIRMATION OF RS. 47,28,000/ - HAS BEEN FILED BY THE ASSESSEE , WHERE THE PAYMENT MADE OVER AND ABO VE TWO YEARS AND THE SAME IS RECORDED IN THE BOOKS OF ACCOUNT OF ASSESSEE. 2 9 . THE LEARNED DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE STRESSED THAT THERE WAS NO EVIDENCE FILED BEFORE THE ASSESSING OFFICER AND HENCE, NO JUSTIFICATION IN THE CLAIM OF ASS ESSEE. 30. IN THE ENTIRETY OF THE ABOVE SAID FACTS AND CIRCUMSTANCES, IN CASE EXPENDITURE HAS BEEN INCURRED BY THE ASSESSEE MAY BE IN CASH, WHICH IN TURN, IS RECORDED IN THE BOOKS OF ACCOUNT OF ASSESSEE, THEN THERE IS SOME MERIT IN THE CLAIM OF ASSESSEE . FURTHER, THE ASSESSEE DURING THE COURSE OF APPELLATE PROCEEDINGS HAS FURNISHED CONFIRMATION BY WAY OF ADDITIONAL EVIDENCE WHICH HAS NOT BEEN ADMITTED AS THESE WERE NOT FILED BEFORE THE ASSESSING OFFICER. WHERE THE PROCEEDINGS BEFORE THE CIT(A) ARE AN E XTENSION OF PROCEEDINGS ITA NO. 1 061 /PN/20 1 3 AND SA NO.08/PN/2016 S AMEER RAJENDRA SHAH 25 BEFORE THE ASSESSING OFFICER, WE FIND NO MERIT IN THE ORDER OF CIT(A) IN THIS REGARD , ESPECIALLY IN VIEW OF THE CONCESSION ALLOWED FOR ADMISSION OF ADDITIONAL EVIDENCE BY WAY OF RULE 46A OF THE RULES. IN THE ENTIRETY OF THE ABOVE S AID FACTS AND CIRCUMSTANCES, WE DIRECT THE ASSESSEE TO FURNISH NECESSARY DETAILS AND ALSO ESTABLISH ITS CASE BY WAY OF ENTRIES IN THE BOOKS OF ACCOUNT BEFORE THE ASSESSING OFFICER, WHO SHALL AFFORD REASONABLE OPPORTUNITY OF HEARING TO THE ASSESSEE AND LOOK INTO THE MERITS OF CLAIM OF ASSESSEE. IT MAY BE CLARIFIED HERE THAT THE ASSESSING OFFICER IN THE FIRST ROUND HAD ALREADY ALLOWED 25% AS ALLOWABLE IN THE HANDS OF ASSESSEE AND THE CIT(A) HAS FURTHER ALLOWED RS. 3,91,755/ - , AGAINST WHICH THE REVENUE IS NOT IN APPEAL . H ENCE, THE SAME STANDS EXPLAINED AND ALLOWED IN THE HANDS OF ASSESSEE. IN RESPECT OF BALANCE , THE ASSESSING OFFICER SHALL DECIDE AFTER AFFORDING REASONABLE OPPORTUNITY OF HEARING TO THE ASSESSEE. THE GROUND OF APPEAL NO.4 RAISED BY THE ASSESSE E IS THUS, ALLOWED FOR STATISTICAL PURPOSES. 31 . NOW, COMING TO THE LAST GROUND OF APPEAL NO.5 I.E. IN RESPECT OF REVALUATION OF CLOSING STOCK BY THE ASSESSEE. 3 2. THE ASSESSEE HAD RE - WORKED THE REALIZABLE VALUE OF CLOSING STOCK OF CERTAIN FLATS WHICH REMAINED TO BE UNSOLD AND CLAIMED BUSINESS LOSS OF RS. 23 LAKHS. THE CASE OF THE ASSESSEE BEFORE US WAS THAT THE REVALUATION OF STOCK WAS ON THE BASIS OF REPORT OF REGISTERED VALUER. IN RESPECT OF CERTAIN FLATS, WHICH COULD NOT BE SOLD BY THE ASSESSEE FOR PERIOD OF TIME, THE SAID BUILDING WAS CLAIMED TO BE CONSTRUCTED IN THE EARLIER YEARS AND BECAUSE OF LYING VACANT, CERTAIN CRACKS HAD APPEARED IN THE BUILDING AND AS PER THE VALUERS REPORT DATED 17.09.2009 , THE VALUE OF SAID ASSETS HELD AS CLOSING STOCK W AS REVALUED . ITA NO. 1 061 /PN/20 1 3 AND SA NO.08/PN/2016 S AMEER RAJENDRA SHAH 26 WHERE THE ASSESSEE IS FOLLOWING MERCANTILE SYSTEM OF ACCOUNTING AND IS DECLARING CERTAIN ASSETS AS ITS CLOSING STOCK WHICH IS BEING VALUED AT COST OR MARKET PRICE, WHICHEVER IS LESS, THAN THE ASSESSEE IS TO DECLARE ITS ASSETS AT A VALUE WHICH IS LESSER OF THE TWO I.E. COST OR MARKET VALUE. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE HAS DRAWN OUR ATTENTION TO THE COPY OF BALANCE SHEET FILED IN THE PAPER BOOK ALONG WITH TAX AUDIT REPORT AT PAGES 5 TO 18 OF THE PAPER BOOK, WHEREIN IN FORM NO.3CD, IT IS DECLARED THAT THE ASSESSEE WAS ENGAGED IN THE BUSINESS OF MULTIPLEX THEATRE AND LAND DEVELOPMENT AND HOTEL . U NDER THE COLUMN , METHOD OF VALUATION OF CLOSING STOC K EMPLOYED IN THE PREVIOUS YEAR, IT IS MENTIONED THAT NOT APPLICABLE . THE PERUSAL OF BALANCE SHEET OF ADINATH DEVELOPERS AT PAGE 22 OF THE PAPER BOOK DOES NOT REFLECT ANY CLOSING STOCK, BUT WORK - IN - PROGRESS, CASH IN HAND AND NEGATIVE CAPITAL ACCOUNT OF PROPRIETOR HAD BEEN DECLARED IN THE BALANCE SHEET AS ON 31.03.2009 . THE PLE A OF THE ASSESSEE BEFORE US WAS THAT THE WORK - IN - PROGRESS IS THE COST OF FLATS AND THE SAME HAS BEEN RE - WORKED. THE OPENING WORK - IN - PROGRESS WAS RS. 26, 95,000/ - AND CLOSING WORK - IN - PROGRESS WAS RS. 3,95,000/ - AND THE ASSESSEE HAD BOOKED BUSINESS LOSS OF RS. 23 LAKHS. IN THE ENTIRETY OF THE ABOVE SAID FACTS AND CIRCUMSTANCES, WHERE THE ASSESSEE HAD EXERCISED THE OPTION TO REWORK ITS BUSINESS ASSETS, THEN THE SAID LOSS IS BUSINESS LOSS AND NOT CAPITAL LOSS. THE ASSESSEE HAS SOLD THE SAID FLATS IN THE SUCCEEDI NG YEAR FOR SUM OF RS. 6,50,000/ - . THE REVALUATION IS ON THE BASIS OF SCIENTIFIC METHOD I.E. THE REPORT OF VALUER AND THE LOSS BOOKED BY THE ASSESSEE IS ALLOWABLE AS BUSINESS LOSS IN THE HANDS OF ASSESSEE. THE GROUND OF APPEAL NO.5 RAISED BY THE ASSESSEE IS THUS, ALLOWED. 3 3 . THE GROUND OF APPEAL NO.6 RAISED BY THE ASSESSEE IS NOT PRESSED AND HENCE, THE SAME IS DISMISSED AS NOT PRESSED. ITA NO. 1 061 /PN/20 1 3 AND SA NO.08/PN/2016 S AMEER RAJENDRA SHAH 27 3 4 . THE ASSESSEE HAS ALSO FILED STAY APPLICATION AND IN VIEW OF OUR DECIDING THE PRESENT APPEAL, THE STAY APPLICATION MOVED BY THE ASSESSEE IS DISMISSED. 3 5 . IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED AND THE STAY APPLICATION OF THE ASSESSEE IS DISMISSED. ORDER PRONOUNCED ON THIS 29TH DAY OF APRIL , 201 6 . SD/ - SD/ - (PRADIP KUMAR KEDIA) (SUSHMA CHOWLA) / ACCOUNTANT MEMBER / JUDICIAL MEMBER / PUNE ; DATED : 29 TH APRIL , 201 6 . GCVSR / COPY OF THE ORDER IS FORWARDED TO : / 1. / THE APPE LLANT ; 2. / THE RESPONDENT; 3. ( ) / THE CIT (A), KOLHAPUR ; 4. / THE CIT - I/II, KOLHAPUR ; 5. , , / DR A , ITAT, PUNE; 6. / GUARD FILE . / BY ORDER , // TRUE COPY // / SR. PRIVATE SECRETARY , / ITAT, PUNE