BEOND TEXTILE P.LTD, MUMBAI V. ITO 1(1)(1), MUMBAI

ITA 1089/MUM/2017

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 1114 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 9 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-11-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2012-2013
• Appeal Filed On: 16-02-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S K BEPARI
• Keywords: Business income; Opportunity of being heard
• Section: 115JB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL 'SMC' BENCH, MUMBAI BEFORE SHRI SAKTIJIT DEY, JUDICIAL MEMBER ITA NO. 1089/MUM/2017 (ASSESSMENT YEAR: 2012-13) M/S. BEOND TEXTILE PVT. LTD. 101, CAMA INDL. ESTATE SUN MILL COMPOUND LOWER PAREL, MUMBAI 400013 VS. INCOME TAX OFFICER - 1(1)(1) AAYAKAR BHAVAN, M.K. ROAD MUMBAI 400020 PAN AACCB5566B APPELLANT RESPONDENT APPELLANT BY: SHRI DHARMESH SHAH RESPONDENT BY: SHRI S.K. BEPARI DATE OF HEARING: 26.09.2018 DATE OF PRONOUNCEMENT: 30.11.2018 O R D E R PER SAKTIJIT DEY, JM THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-2, MUMBAI DATE D 13.12.2016 AND IT RELATES TO ASSESSMENT YEAR 2012-13. 2. THE ONLY ISSUE ARISING FOR CONSIDERATION IN THE AFO RESAID APPEAL IS, WHETHER THE INCOME OF ` 39.10 LAKHS RECEIVED FROM BUSINESS CENTRE AND AUXILIARY SERVICES OFFERED SHOULD BE TREATED AS BUS INESS INCOME AS CLAIMED BY THE ASSESSEE OR ASSESSED AS INCOME FROM HOUSE PR OPERTY AND OTHER SOURCE AS HELD BY THE DEPARTMENTAL AUTHORITIES. 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE, A C OMPANY, FILED ITS RETURN OF INCOME FOR THE IMPUGNED ASSESSMENT YEAR O N 24.09.2012 DECLARING TOTAL INCOME AT ` 3,02,123/- UNDER THE NORMAL PROVISIONS AND BOOK PROFIT OF ` 17,24,275/- UNDER SECTION 115JB OF THE INCOME TAX A CT, 1961 (HEREINAFTER 'THE ACT'). DURING ASSESSMENT PRO CEEDINGS THE ASSESSING OFFICER (AO) WHILE EXAMINING THE FACTS AND MATERIAL ON RECORD FOUND THAT THE INCOME RECEIVED BY THE ASSESSEE AMOUNTING TO ` 39.10 LAKHS FROM ITA NO. 1089/MUM/2017 M/S. BEOND TEXTILE PVT. LTD. 2 LETTING OUT CERTAIN PROPERTIES HAS BEEN SHOWN AS IN COME FROM BUSINESS. FURTHER, HE FOUND THAT THE RENT RECEIVED FROM GENER ATOR SET PROVIDED IN THE PROPERTY WAS ALSO TREATED AS BUSINESS INCOME. THE A O WAS OF THE VIEW THAT SINCE THE ASSESSEE IS OWNER OF THE PROPERTY AND HAS GIVEN IT ON MONTHLY RENTAL BASIS THE INCOME RECEIVED BY THE ASSESSEE HA S TO BE ASSESSED AS HOUSE PROPERTY INCOME. ACCORDINGLY, HE CALLED UPON THE ASSESSEE TO EXPLAIN WHY ITS CLAIM OF OFFERING THE INCOME UNDER THE HEAD BUSINESS AND PROFESSION SHOULD NOT BE DISALLOWED. THOUGH, THE A SSESSEE THROUGH ELABORATE WRITTEN SUBMISSION FILED BEFORE THE AO ON 18.12.2014 JUSTIFIED ITS CLAIM, HOWEVER, THE AO DID NOT FIND MERIT IN THE SU BMISSIONS OF THE ASSESSEE. AFTER VERIFYING THE RENT AGREEMENT AND OT HER RELEVANT MATERIAL ON RECORD THE AO WAS OF THE VIEW THAT THE INCOME RECEI VED BY THE ASSESSEE FROM LETTING OUT THE PROPERTY HAS TO BE ASSESSED AS INCOME FROM HOUSE PROPERTY. ACCORDINGLY, HE DISALLOWED ASSESSEES CLA IM OF BUSINESS INCOME. AS REGARDS THE AMOUNT RECEIVED TOWARDS GENERATOR RE NT, THE AO HELD THAT THE SAID AMOUNT IS TAXABLE AS INCOME FROM OTHER SOU RCES. ACCORDINGLY, HE COMPLETED THE ASSESSMENT. BEING AGGRIEVED OF THE AS SESSMENT ORDER SO PASSED THE ASSESSEE PREFERRED APPEAL BEFORE THE LEA RNED CIT(A). AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE THE CIT (A) DID NOT FIND MERIT IN THEM. ACCORDINGLY, HE CONCURRED WITH THE DECISIO N OF THE AO. 4. THE LEARNED AUTHORISED REPRESENTATIVE (A.R.) DRAWIN G OUR ATTENTION TO THE MEMORANDUM AND ARTICLES OF ASSOCIATION OF THE A SSESSEE SUBMITTED THAT ONE OF THE PRIMARY OBJECT OF THE ASSESSEE IS THE AC TIVITY OF LEASING AND SUB- LEASING PROPERTIES. HE SUBMITTED, SINCE IN TERMS OF THE AFORESAID OBJECT THE ASSESSEE HAS CARRIED OUT THE ACTIVITY OF LEASING TH E PROPERTY AS BUSINESS VENTURE AND THIS IS THE ONLY SOURCE OF INCOME OF TH E ASSESSEE, THE INCOME GENERATED FROM PROVIDING BUSINESS CENTRE AND OTHER FACILITIES HAS TO BE ASSESSED UNDER THE HEAD INCOME FROM BUSINESS. THE LEARNED A.R. SUBMITTED, AS PER THE AGREEMENT ASSESSEE HAS TO BEAR THE ELECT RICITY EXPENDITURE. THEREFORE, THE ASSESSEE HAS NOT ONLY LEASED OUT THE PROPERTY BUT ALSO PROVIDED VARIOUS OTHER SERVICES INCLUDING ELECTRICITY. THUS, HE SUBMITTED, THE INCOME DERIVED BY THE ASSESSEE HAS TO BE ASSESSED AS INCOM E FROM BUSINESS. ITA NO. 1089/MUM/2017 M/S. BEOND TEXTILE PVT. LTD. 3 5. THE LEARNED DEPARTMENTAL REPRESENTATIVE (D.R.) STRO NGLY RELYING UPON THE OBSERVATIONS OF THE AO AND THE CIT(A) SUBM ITTED THAT THE ASSESSEE BEING THE OWNER OF THE IMMOVABLE PROPERTY HAVING DERIVED INCOME FROM LETTING IT OUT, SUCH INCOME IS ASSESSABLE AS I NCOME FROM HOUSE PROPERTY. IN SUPPORT OF HIS CONTENTION THE LEARNED D.R. RELIED UPON THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE O F RAJ DADARKAR AND ASSOCIATED VS. ACIT (2017) 394 ITR 592. 6. IN REJOINDER THE LEARNED A.R. SUBMITTED THAT THE DE CISION CITED BY THE LEARNED D.R. IS FACTUALLY DISTINGUISHABLE AS IN THE FACTS OF THAT CASE THE OBJECT OF THE ASSESSEE WAS NOT LETTING OUT OF PROPE RTY. IN SUPPORT OF HIS CONTENTION THE LEARNED A.R. RELIED UPON THE FOLLOWI NG DECISIONS: - I) CHENNAI PROPERTIES AND INVESTMENTS LTD. VS. CIT (20 15) 373 ITR 673 (SC) II) RAYALA CORPORATION PVT. LTD. VS. ACIT (2016) 386 IT R 500 (SC) III) CIT VS. E-CITY PROJECT CONSTRUCTION PVT. LTD. ITA N O. 149 OF 2015 AND OTHERS DATED 18 TH JULY, 2017 (BOM) IN ADDITION, THE LEARNED A.R. SUBMITTED, I N NO OTHER ASSESSMENT YEAR THE AO HAS DISTURBED ASSESSEES CLAIM OF BUSINESS I NCOME IN RESPECT OF INCOME FROM BUSINESS CENTRE. THE LEARNED A.R. SUBMI TTED, IN ASSESSMENT YEARS 2008-09 TO 2011-12, THOUGH, THE AO HAD REOPEN ED THE ASSESSMENT TO TAX RENTAL INCOME AS INCOME FROM HOUSE PROPERTY, HOWEVER, WHILE DECIDING THE APPEALS OF THE ASSESSEE IN THOSE ASSES SMENT YEARS THE CIT(A) HAS ACCEPTED ASSESSEES CLAIM OF BUSINESS INCOME. T HUS, HE SUBMITTED, ASSESSEES CLAIM SHOULD BE ALLOWED. 7. I HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSED TH E MATERIAL ON RECORD. ON A PERUSAL OF THE ORDERS PASSED BY THE DE PARTMENTAL AUTHORITIES I AM OF THE VIEW THAT WITHOUT PROPERLY EXAMINING TH E OBJECTS OF THE ASSESSEE THE DEPARTMENTAL AUTHORITIES HAVE CONCLUDE D THAT THE INCOME DERIVED BY THE ASSESSEE FROM PROVIDING BUSINESS CEN TRE AND OTHER FACILITIES AS INCOME FROM HOUSE PROPERTY/OTHER SOURCES. IN MY VIEW, THE CLAIM OF THE ASSESSEE NOT ONLY HAS TO BE EXAMINED QUA THE OBJECT S PROVIDED IN THE MEMORANDUM AND ARTICLES OF ASSOCIATION BUT ALSO KEE PING IN VIEW THE ITA NO. 1089/MUM/2017 M/S. BEOND TEXTILE PVT. LTD. 4 DECISIONS RELIED UPON BY BOTH THE PARTIES BEFORE ME . FURTHER, THE ASSESSEES CLAIM THAT IN THE PRECEDING ASSESSMENT Y EARS THE DEPARTMENT HAS ACCEPTED THE INCOME GENERATED FROM BUSINESS CEN TRES AS INCOME FROM BUSINESS NEEDS CONSIDERATION KEEPING IN VIEW THE RU LE OF CONSISTENCY. SINCE, THE AFORESAID FACTORS HAVE NOT BEEN DELIBERA TED/EXAMINED BY THE DEPARTMENTAL AUTHORITIES, I AM INCLINED TO RESTORE THE ISSUE TO THE AO FOR DE NOVO ADJUDICATION AFTER DUE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. WHILE DECIDING THE ISSUE THE AO SHOULD NOT ONLY VER IFY ALL THE RELEVANT FACTS INCLUDING THE INTENTION OF THE ASSESSEE WHETHER TO EXPLOIT THE PROPERTY AS AN OWNER OR TO UTILISE IT AS A TOOL OF TRADE, BUT H E SHOULD ALSO DECIDE THE ISSUE KEEPING IN VIEW THE RATIO LAID DOWN IN THE JU DICIAL PRECEDENTS REFERRED TO ABOVE. WITH THE AFORESAID OBSERVATIONS GROUND RA ISED IS ALLOWED FOR STATISTICAL PURPOSES. 8. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 30 TH NOVEMBER, 2018. SD/ - (SAKTIJIT DEY) JUDICIAL MEMBER MUMBAI, DATED: 30 TH NOVEMBER, 2018 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) -2, MUMBAI 4. THE CIT - 1, MUMBAI 5. THE DR, SMC BENCH, ITAT, MUMBAI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI N.P.