Karnataka State Tourism Development Corporation LImited, Bangalore V. DCIT, Bangalore

ITA 1069/BANG/2016

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 8608 (ITAT-BANGALORE)
• Duration Of Justice: 7 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-01-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Assessment Year: 2009-2010
• Appeal Filed On: 26-05-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: SATYANARAYANA MURTHY
• Section: 32; 147; 131; 68; 246; 69; 145; 27; 148; 54; 37; 6; 56; 263; 63; 132; 12; 28; 144; 10; 90; 154; 2; 11; 15; 271(1)(b); 139; 92; 12A

Judgement Text

IN THE INCOME TAX APPELLATE TRI BUNAL BANGALORE BENCH C, BANGALORE BEFORE SHRI A. K. GARODIA, ACCOUNTANT MEMBER AND SHRI VIJAY PAL RAO, JUDICIAL MEMBER ITA NOS.1069 & 1070(BANG) 2016 (ASSESSMENT YEARS: 2009-10 & 2011-12) KARNATAKA STATE TOURISM DEVELOPMENT CORPN. LTD. NO.49, II FLOOR, WEST AVENUE, KANIJIA BHAVAN, RACE COURSE ROAD, BANGALORE -560 001 PAN NO.AACCK3563F APPELLANT VS THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-4(1) (1), BANGALORE RESPONDENT ASSESSEE BY : SHRI SATYANARAYANA MURTHY, CA REVENUE BY : SHRI M.K.BIJU, JCIT DATE OF HEARING : 10-01-2017 DATE OF PRONOUNCEMENT : 25-01-2017 O R D E R PER SHRI A.K.GARODIA, AM BOTH THESE APPEALS ARE FILED BY THE ASSESSEE WHICH ARE DIRECTED AGAINST THE ORDERS OF THE LD.CIT (A)-IV, BANGALORE DATED 22-03-2016 FOR ASSESSMENT YEARS : 2009-10 & 2011-12. BOTH THESE AP PEALS WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY WAY OF THIS C OMMON ORDER FOR THE SAKE OF CONVENIENCE. ITA NOS.1069 & 1070(B)/2016 2 2. THE ASSESSEEE HAS RAISED THE FOLLOWING GROUNDS I N ITS APPEAL FOR THE ASSESSMENT YEAR 2009-10:- 1.ON T H E FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) ERRED IN CONFIRMING NOTIONAL INCOME OF RS.1,61,20,000/- TOWARDS LAND LEASED TO KARNATAKA GOLF ASSOCIATION (KGA) 1.1. T H E LD. CIT(A) FAILED TO APPRECIATE THE FACT THAT THE PRINCIPLE OBJECTIVE AND BUSINESS OF THE COMPANY IS TOURISM DEVELOPMENT AND THE LEASE WAS GRANTED AS PART OF TOURISM DEVELOPMENT WITH KSIDC BEING A PASS THROUGH ENTITY. THE ACCOUNTS OF THE COMPANY WAS DULY AUDITED BY GOVERNMENT AUDIT AND DETAILS INTIMATED TO GOVERNMENT OF KARNATAKA. THE LD. CIT(A)-I FAILED TO APPRECIATE TH E FACTS THAT THE IT ACT NORMALLY CONTEMPLATES TAXING REAL INCOME AND NOT NOTIONAL INCOME. 1.2 THE LD. CIT(A)-I FAILED TO APPRECIATE THE FACT THAT THE ASSESSEE IS A WHOLLY OWNED STATE GOVERNMENT COMPANY AND THE LAND LOCATED AT CHALLAGHATTA TANK BED WAS LEASED TO KARNATAKA GOLF ASSOCIATION AS PER THE DIRECTIONS OF THE STAT E GOVERNMENT FOR THE PURPOSE OF PROMOTING PLAYING OF GOLF BY ITS MEMBERS, GUESTS AND OTHERS. 1.3. THE LD. CIT(A)-I FAILED TO APPRECIATE THE FACT THAT KGA IS A REGISTERED UNDER MYSORE SOCIETIES REGISTRATION ACT, 1960 (MYSORE ACT NO.17 OF 1960) U/ 12A OF THE IT ACT, 1961. ITA NOS.1069 & 1070(B)/2016 3 1.4 THE LD. CIT(A)-I FAILED TO APPRECIATE THE FACT THAT THE PROCEEDINGS O GOVERNMENT OF KARNATAKA WHEREIN IT WAS HELD THE KARNATAKA GOLF ASSOCIATION HAS TO PAY 2% OF THEIR ANNUAL GROSS INCOME AS LEASE RENT. COPY OF THE PROCEEDINGS ENCLOSED. 2. WITHOUT PREJUDICE TO THE ABOVE, THE APPELLANT SUBMITS THAT IF ANY DEEMED RENT IS TO BE TAXED ON NOTIONAL INCOME, THEN CORRESPONDING LIABILITY FOR EXPENSES IN RESPECT OF ANY RENT PAYABLE TO GOVERNMENT OF KARNATAKA SHOULD ALSO BE ALLOWED AS DEDUCTION. 3. SIMILARLY, THE ASSESSEE HAS RAISED THE FOLLOWIN G GROUNDS IN ITS APPEAL NO.1070(B)/2016:- 1.ON T H E FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) ERRED IN CONFIRMING NOTIONAL INCOME OF RS.1,61,20,000/- TOWARDS LAND LEASED TO KARNATAKA GOLF ASSOCIATION (KGA) 1.1. T H E LD. CIT(A) FAILED TO APPRECIATE THE FACT THAT THE PRINCIPLE OBJECTIVE AND BUSINESS OF THE COMPANY IS TOURISM DEVELOPMENT AND THE LEASE WAS GRANTED AS PART OF TOURISM DEVELOPMENT WITH KSIDC BEING A PASS THROUGH ENTITY. THE ACCOUNTS OF THE COMPANY WAS DULY AUDITED BY GOVERNMENT AUDIT AND DETAILS INTIMATED TO GOVERNMENT OF KARNATAKA. THE LD. CIT(A)-I FAILED TO APPRECIATE TH E FACTS THAT THE IT ACT NORMALLY CONTEMPLATES TAXING REAL INCOME AND NOT NOTIONAL INCOME. ITA NOS.1069 & 1070(B)/2016 4 2 THE LD. CIT(A)-I FAILED TO APPRECIATE THE FACT THAT THE ASSESSEE IS A WHOLLY OWNED STATE GOVERNMENT COMPANY AND THE LAND LOCATED AT CHALLAGHATTA TANK BED WAS LEASED TO KARNATAKA GOLF ASSOCIATION AS PER THE DIRECTIONS OF THE STAT E GOVERNMENT FOR THE PURPOSE OF PROMOTING PLAYING OF GOLF BY ITS MEMBERS, GUESTS AND OTHERS. 3. THE LD. CIT(A)-I FAILED TO APPRECIATE THE FACT THAT KGA IS A REGISTERED UNDER MYSORE SOCIETIES REGISTRATION ACT, 1960 (MYSORE ACT NO.17 OF 1960) U/ 12A OF THE IT ACT, 1961. 1.4 THE LD. CIT(A)-I FAILED TO APPRECIATE THE FACT THAT THE PROCEEDINGS O GOVERNMENT OF KARNATAKA WHEREIN IT WAS HELD THE KARNATAKA GOLF ASSOCIATION HAS TO PAY 2% OF THEIR ANNUAL GROSS INCOME AS LEASE RENT. COPY OF THE PROCEEDINGS ENCLOSED. 2. WITHOUT PREJUDICE TO THE ABOVE, THE APPELLANT SUBMITS THAT IF ANY DEEMED RENT IS TO BE TAXED ON NOTIONAL INCOME, THEN CORRESPONDING LIABILITY FOR EXPENSES IN RESPECT OF ANY RENT PAYABLE TO GOVERNMENT OF KARNATAKA SHOULD ALSO BE ALLOWED AS DEDUCTION. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A)-I ERRED IN DISALLOWING THE PRIOR PERIOD EXPENDITURE OF RS.25,81,422/- ON THE GROUND THAT NO SPECIFIC PROOF OR JUSTIFICATION HAS BEEN PROVIDED. ITA NOS.1069 & 1070(B)/2016 5 4. IT WAS SUBMITTED BY THE LD. AR OF THE ASSESSES THAT IN THE ASSESSMENT YEAR 2009-10, ONLY ONE ISSUE IS INVOLVED I.E. ADDITION OF NOTIONAL INCOME OF RS.1,61,20,000/-. HE FURTHER SUB MITTED THAT FOR ASSESSMENT YEAR 2011-12, ONE ISSUE INVOLVED IS SAME I.E. ADDITION OF NOTIONAL INCOME OF RS.1,61,20,000/- AND THE OTHER I SSUE INVOLVED IN THE ASSESSMENT YEAR 2011-12 IN GROUND NO.3 IS REGARDING DISALLOWANCE OF PRIOR PERIOD EXPENDITURE OF RS.25,81,422/-. HE SU BMITTED THAT GROUND NO.3 IN ASSESSMENT YEAR 2011-12 IS NOT PRESSED AN D ACCORDINGLY, THIS GROUND OF THE ASSESSEE IS REJECTED AS NOT PRESSED. 5. REGARDING THE COMMON ISSUE INVOLVED IN BOTH THE SE YEARS I.E. IN RESPECT OF ADDITION OF NOTIONAL INCOME OF RS.1,61,2 0,000/- IN EACH YEAR, HE SUBMITTED THAT THIS ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE TRIBUNAL ORDER IN ASSESSEES OWN CA SE FOR THE ASSESSMENT YEARS 2007-08 AND 2008-09 IN ITA NOS.4 56(B)/2011 & 1614(B)/2013 DATED 12-08-2016. HE SUBMITTED A COP Y OF THIS TRIBUNAL ORDER. 6. THE LD. DR OF THE REVENUE SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. 7. WE HAVE CONSIDERED RIVAL SUBMISSIONS. WE FIND T HAT AS PER THE TRIBUNAL ORDER IN ASSESSEES OWN CASE FOR ASSESSMEN T YEAR 2007-08 & 2008-09, THE SAME ISSUE WAS IN DISPUTE BEING THE AD DITION MADE BY THE AO ON ACCOUNT OF ESTIMATED LEASE RENT OF RS.1.33 LA KHS PER ACRE PER YEAR ITA NOS.1069 & 1070(B)/2016 6 RESULTING INTO ADDITION OF NOTIONAL INCOME OF RS.1, 61,20,000/- IN EACH YEAR AND THE TRIBUNAL DELETED THIS ADDITION IN THES E TWO YEARS BY HOLDING THAT NOTIONAL INCOME CANNOT BE CHARGED TO TAX. IN THE PRESENT TWO YEARS ALSO, THE FACTS ARE SIMILAR AND LD. DR OF THE REVEN UE COULD NOT POINT OUT ANY DIFFERENCE IN FACTS AND THEREFORE, WE FIND NO R EASON TO TAKE A CONTRARY VIEW IN THESE TWO YEARS. HENCE, BY RESPECT FULLY FOLLOWING THE TRIBUNAL ORDER IN ASSESSEES OWN CASE, WE DELETE TH E ADDITION OF RS.1,61,20,000/-IN PRESENT TWO YEARS ALSO. 8. IN THE RESULT, THE APPEAL FOR THE ASSESSMENT YE AR 2009-10 IS ALLOWED, WHEREAS THE APPEAL OF THE ASSESSEE FOR THE ASSESSMENT YEAR 2011-12 IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THE DATE MENT IONED ON THE CAPTION PAGE. SD/- (VIJAY PAL RAO) SD/- (A.K. GARODIA) JUDICAL MEMBER ACCOUNTANT MEMBER PLACE: BANGALORE: D A T E D : 25.01.2017 AM * COPY TO : 1 APPELLANT 2 RESPONDENT 3 CIT(A)-II BANGALORE 4 CIT 5 DR, ITAT, BANGALORE. 6 GUARD FILE BY ORDER AR, ITAT, BANGALORE ITA NOS.1069 & 1070(B)/2016 7 1. DATE OF DICTATION 2. , , DATE ON WHICH TYPED DRAFT IS PLACED BEFORE THE DICT ATING MEMBER .. 3. !' # . $ %# / $ %# # & DATE ON WHICH THE APPROVED DRAFT COMES TO THE PS/SR .PS. 4. ''() & * + DATE ON WHICH THE ORDER IS PLACED BEFORE THE DICTAT ING MEMBER FOR PRONOUNCEMENT 5. * . %# / # . . %# # + DATE ON WHICH THE ORDER COMES BACK TO THE PS/SR.PS .. 6 * !', + DATE OF UPLOADING THE ORDER ON WEBSITE .. 7. ! !', ' , - ) IF NOT UPLOADED, FURNISH THE REASON FOR DOING SO . 8. .% / 0 + DATE ON WHICH THE FILE GOES TO THE BENCH CLERK .. 9. * 1'2 / 34 & 5 + DATE ON WHICH ORDER GOES FOR XEROX &ENDORSEMENT 10. 0 6 / + DATE ON WHICH THE FILE GOES TO THE HEAD CLERK 11. * 7 & 0 8 + THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER . 12. !) * 9() & 0 9() /#5 . + THE DATE ON WHICH THE FILE GOES TO DESPATCH SECTION FOR DESPATCH OF THE TRIBUNAL ORDER 13. * 9() + DATE OF DESPATCH OF ORDER . ITA NOS.1069 & 1070(B)/2016 8