ATIQUREHMAN IMTIYAZ AHMED ATLASWALA, MUMBAI V. ACIT 17(3), MUMBAI

ITA 1085/MUM/2013

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 4409 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 11 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-01-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 07-05-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 07-02-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A RAMACHANDRAN
• Keywords: Business income
• Section: 37

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH A, MUMBAI BEFORE SHRI N.K.BILLAIYA, ACCOUNTANT MEMBER AND SHRI PAWAN SINGH, JUDICIAL MEMBER ITA NO.1085/MUM/2013 ASSESSMENT YEAR: 2008-09 ATIQUREHMAN IMTIYAZ AHMED ATLASWALA, 21ND GHELABHAI STREET, MA DANPURA, MUMBAI-400058. PAN: AAFPA4566L VS. ACIT, CIR 17(3), PIRAMAL CHAMBERS, PAREL, MUMBAI-400012. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI DEEPAK TRALSH AWALA REVENUE BY : SHRI A. RAMACHANDR AN (DR) DATE OF HEARING : 23.11.2015 DATE OF PRONOUNCEMENT : 08.01.2016 O R D E R PER PAWAN SINGH, JM: 1. THIS APPEAL IS FILED BY THE ASSESSEE AGAINST THE OR DER DATED 09.11.2012 PASSED BY CIT(A)-16, MUMBAI IN RESPECT OF ASSESSMENT YEAR (AY ) 2008-09 FOR NOT ALLOWING THE DEDUCTION U/S 24(1) OF THE INCOME TAX ACT, 1961 (THE ACT). 2. THE BRIEF FACT OF THE CASE ARE THAT THE ASSESSEE FI LED HIS RETURN OF INCOME FOR AY-2008- 09 DECLARING TOTAL INCOME OF RS. 23,31,080/-. THE R ETURN OF INCOME WAS SELECTED FOR SCRUTINY AND AFTER SERVING THE STATUTORY NOTICE AND GIVING THE OPPORTUNITY BESIDES OTHER ALLOWANCE/DEDUCTION. THE AO MADE THE ADDITION OF RS. 36,00,000/- ON ACCOUNT OF INCOME FROM BUSINESS IN THE ASSESSMENT ORDER DAT ED 07.12.2010, BY OBSERVING THAT ASSESSEE HAD A BUSINESS SERVICE AGREEMENT WITH M/S ATLAS ASSOCIATE ON 07.11.2006 FOR 36 MONTHS AND THE ASSESSEE ASKED AS TO WHY SUCH SERVICE CHARGES SHOULD NOT BE TREATED AS INCOME FROM BUSINESS INSTEAD OF INCOME F ROM HOUSE PROPERTY AS OFFERED IN THE RETURN OF INCOME AND WHY A DEDUCTION @ 30% CLAI MED IN THE INCOME FROM SERVICE CHARGE SHOULD NOT BE DISALLOWED. THE ASSESSEE CONTE NTED BEFORE THE AO THAT AN 2 ITA NO. 1085/M/2013 ATIQUREHMAN IMTIYAZ AHMED ATLASWALA. AGREEMENT WAS MADE IN THE FORM OF BUSINESS SERVICE AGREEMENT. THE SERVICE CHARGE WERE NOTHING BUT RENT FOR USE OF PREMISES FOR THE P ROPERTY LET OUT UNDER THE LEAVE AND LICENSE AGREEMENT AND ALSO MADE THE REFERENCE OF CI RCULAR NO. 4 OF 2008 DATED 28.07.2008 WHEREIN IT IS MENTIONED THAT SERVICE TAX PAID BY THE TENANT DOES NOT PARTAKE THE NATURE OF INCOME OF THE LANDLORD. 3. AFTER CONSIDERING THE CONTENTION OF ASSESSEE AND AN ALYZING THE BUSINESS AGREEMENT, THE AO CONCLUDED THAT ASSESSEE WAS ENGAGED IN THE B USINESS OF PROVIDING VARIOUS BUSINESS SERVICES TO ITS CUSTOMERS WHICH WERE MENTI ONED IN THE SCHEDULE OF SERVICE AGREEMENT I.E. USE OF TELEPHONE AND EPABX, USE OF F AX, TYPEWRITER, COMPUTER, RECEPTIONISTS, AIR-CONDITIONER AND USE OF FURNITURE & FIXTURES AS PER THE CLAUSE 34 OF THE SAID AGREEMENT AND THE SERVICE CHARGE OF RS. 3, 00,000/- PER MONTH WAS PAID BEING MINIMUM CHARGES AND ACCORDINGLY THE DEDUCTION @ 30% ON SERVICE CHARGE WAS NOT ALLOWED AND TREATED IT BUSINESS INCOME IN ITS ORDER DATED 07.12.2010 AGAINST WHICH THE APPEAL WAS FILED BEFORE THE CIT(A). 4. THE CIT(A) WHILE DEALING WITH THIS GROUND HAS OBSER VED THAT ASSESSEE HAS LET OUT ITS PREMISES AND WAS ALSO ENGAGED IN PROVIDING BUSINESS RELATED SERVICES AND THAT AO HAS RIGHTLY TREATED THE INCOME EARNED AS INCOME FROM BU SINESS. HOWEVER, WHILE DISPOSING THE APPEAL, THE CIT(A) ALLOWED THE EXPENSES ALLOWAB LE U/S. 37 OF THE ACT AND DIRECTED THE AO TO VERIFY WHETHER THE EXPENSES CLAIMED ON AC COUNT OF SERVICE TAX, MAINTENANCE CHARGES, TELEPHONE EXPENSES AND MUNICIP AL TAX WERE ACTUALLY PAID AND IF PAID ALLOWED SUCH DEDUCTION FROM THE SAID ASSESSED BUSINESS INCOME IN ITS ORDER DATED 09.11.2012 AGAINST WHICH THE PRESENT APPEAL IS FILE D BEFORE US. 5. WE HAVE HEARD THE AUTHORISED REPRESENTATIVE (AR) OF THE ASSESSEE AND DEPARTMENTAL REPRESENTATIVE (DR) OF THE REVENUE AND PERUSED THE MATERIAL AVAILABLE ON RECORD. 6. THE AR OF THE ASSESSEE HAS PLACED ON RECORD THE COP Y OF BUSINESS SERVICE AGREEMENT DATED 07.09.2006, COPY OF FINANCIAL STATEMENT FOR A Y 2007-08 AND A COPY OF CBDT CIRCULAR NO. 4/2008 DATED 28.04.2008 ALONG WITH CER TIFICATE THAT THOSE DOCUMENTS WERE FILED BEFORE THE LOWER AUTHORITIES. 7. THE AR FURTHER ARGUED THAT THE AO HAS WRONGLY TREAT ED IT AS BUSINESS INCOME INSTEAD OF HOUSE INCOME AND MADE EMPHASIS THAT THE TITLE OF THE DOCUMENT IS NOT RELEVANT FOR DETERMINING THE NATURE OF DOCUMENT, RATHER ITS CONT ENTS HAS TO BE SEEN AND THE INCOME DERIVED FROM THE BUSINESS AGREEMENT SHOULD BE TREAT ED AS INCOME FROM HOUSE PROPERTY. 3 ITA NO. 1085/M/2013 ATIQUREHMAN IMTIYAZ AHMED ATLASWALA. 8. THE DR RELIED UPON THE ORDER OF AO AND THE CIT(A) A ND ARGUED THAT THE ORDER OF AO AND CIT(A) DOES NOT REQUIRE ANY INTERFERENCE. 9. WE HAVE PERUSED THE CONTENTS OF THE DOCUMENT WITH T HE TITLE BUSINESS SERVICE AGREEMENT BY VIRTUE OF WHICH THE ASSESSEE LET OUT THE PROPERTY TO M/S P.T.K. DESIGNS PVT. LTD, FOR THIRTY SIX MONTHS AT A MONTHL Y CHARGES OF RS. 3,00,000/- , (BEING MINIMUM CHARGES) TO THE ASSESSEE, WITH THE OPTION TO EXTEND FOR ANOTHER THREE YEAR, THUS WE HOLD THAT THE PROPERTY WAS LET OUT BY THE A SSESSEE TO M/S P.T.K. DESIGNS PVT LTD. AND THUS WE HOLD THE INCOME DERIVED FROM THE PROPERTY BE TREATED AS INCOME FROM HOUSE PROPERTY. 10. THE ANDHRA PRADESH HIGH COURT IN P.V.G VS. CIT REPO RTED VIDE 66 ITR 122(AP) HAS HELD THAT, THE TERM BUILDING OR LAND APPURTENANT THERETO INCLU DES MARKET CONSIST OF SHOPS, BUILDING, GOUDOWN AND OPEN SPACE AND THEREFO RE THE INCOME DERIVED BY THE OWNER FROM LETTING OUT THE SHOPS, BUILDING OR GODOW NS MAY BE ASSESSED UNDER THE HEAD INCOME FROM HOUSE PROPERTY 11. THE HONBLE APEX COURT IN SHAMBHU INVESTMENT PVT. L TD. VS. CIT REPORTED VIDE 263 ITR 143, WHILE AFFIRMING THE FINDING OF CALCUTTA HI GH COURT IN CIT VS. SAMBHU NATH HAS HELD THAT LETTING OUT PORTION OF THE PREMISES WITH FURNITURE AND FIXTURES AND PROVIDING SERVICES TO OCCUPANTS AND THE MONTHLY REN T INCLUSIVE OF CHARGES AND SECURITY ADVANCE COVERING ENTIRE COST OF PROPERTY R ECEIVED FROM OCCUPANTS ,INCOME ASSESSABLE AS INCOME FROM PROPERTY. 12. IN VIEW OF THE ABOVE DISCUSSION, WE SET-ASIDE THE F INDING OF AO AND THE CIT(A) AND DIRECT TO TREAT INCOME FROM THE ALLEGED BUSINESS A GREEMENT AS INCOME FROM HOUSE PROPERTY AND ALLOW DEDUCTIONS AS PER LAW, HENCE, TH E APPEAL OF THE ASSESSEE IS ACCEPTED ON THIS GROUND. 13. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 8 TH JANUARY 2016. SD/- SD/- (N.K.BILLAIYA) (PAWAN SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI; DATED 08/01/2016 S.K.PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 4 ITA NO. 1085/M/2013 ATIQUREHMAN IMTIYAZ AHMED ATLASWALA. / BY ORDER, / (ASSTT.REGISTRAR) , / ITAT, MUMBAI 2. / THE RESPONDENT. 3. ( ) / THE CIT(A), MUMBAI. 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. !'# / GUARD FILE. $ //TRUE COPY/