Dr. D. Raghu Ram, Hyderabad V. DDIT (International Taxation)-II, Hyderabad

ITA 111/HYD/2012

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 66603 (ITAT-HYDERABAD)
• Duration Of Justice: 10 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-12-2012
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2008-2009
• Appeal Filed On: 27-01-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: VIDISHA KALRA
• Assessee Lawyers: A V RAGHURAM
• Keywords: Depreciation
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B, HYDERABAD BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER ITA NO. 111/HYD/2012 ASSESSMENT YEAR: 2008-09 DR. G. RAGHU RAM , APPELLANT HYDERABAD. (PAN AHXPG7433R) VS. DY. DIRECTOR OF INCOME-TAX (INTERNATIONAL TAXATION)-II, RESPONDENT HYDERABAD APPELLANT BY : SHRI A.V. RAGHURAM RESPONDENT BY : SMT. VIDISHA KALRA DATE OF HEARING : 20/11/2012 DATE OF PRONOUNCEMENT : 20/12/ 2012 ORDER PER ASHA VIJAYARAGHAVAN, J.M.: THIS APPEAL PREFERRED BY THE ASSESSEE IS DIRECTED A GAINST THE ORDER OF THE CIT(A)-V, HYDERABAD DATED 31/10/2011 F OR THE ASSESSMENT YEAR 2008-09. THERE WAS A DELAY OF 19 DA YS IN FILING THIS APPEAL BEFORE US. AFTER HEARING THE PARTIES, W E CONDONE THE DELAY AND ADMITTED THE APPEAL FOR ADJUDICATION. 2. BRIEFLY THE FACTS OF THE CASE ARE THAT THE ASSE SSEE FILED HIS RETURN OF INCOME ON 10/10/2008 ADMITTING TOTAL INCO ME OF RS. 2,07,200/- CONSISTING OF INCOME FROM HOUSE PROPERTY , BUSINESS AND OTHER SOURCES. ASSESSMENT U/S 143(3) OF THE IT AC W AS COMPLETED DETERMINING THE TOTAL INCOME OF THE ASSESSEE AT RS. 26,48,120/- BY TREATING THE HIRE CHARGES AS INCOME FROM HOUSE PROP ERTY. ITA NO. 111/HYD/2012 G. RAGHURAM 2 3. AGGRIEVED, THE ASSESSEE PREFERRED THE APPEAL BEF ORE THE CIT(A). 4. BEFORE THE CIT(A), THE ASSESSEE AGITATED THE ONL Y ISSUE RELATING TO THE TREATMENT OF INCOME FROM AMENITIES DERIVED BY THE ASSESSEE AS INCOME FROM HOUSE PROPERTY. 5. BRIEFLY, THE FACTS ARE THAT THE ASSESSEE IS AN N RI AND FILED HIS RETURN OF INCOME FOR THE AY 2008-09 ON 10/10/2008 D ECLARING TOTAL INCOME OF RS. 2,07,200/-. THE ASSESSEE ADMITTED HIR E CHARGES OF EQUIPMENT, INTERIORS AND FURNITURE AMOUNTING TO RS. 49,03,891/- UNDER THE HEAD INCOME FROM BUSINESS AND CLAIMED DEP RECIATION OF RS. 39,12,090/- AND INTEREST ON BORROWED CAPITAL OF RS. 39,07,103/- AND ARRIVED AT A NET LOSS OF RS. 29,15,302/- UNDER THE HEAD BUSINESS. THE AO TREATED AFOREMENTIONED INCOME FROM INTERIORS ETC. AS INCOME FROM HOUSE PROPERTY AND DISALLOWED THE CL AIM OF DEPRECIATION. 6. AGGRIEVED, THE ASSESSEE CARRIED THE MATTER IN AP PEAL BEFORE THE CIT(A). 7. BEFORE THE CIT(A), THE ASSESSEE ARGUED THAT THE FACTS IN HIS CASE WERE SIMILAR TO THE FACTS IN THE CASE OF M/S L ULLA BROTHERS TRUST, SECUNDERABAD THAT THE APPEAL WAS DECIDED BY THE CIT(A)-VI, HYDERABAD VIDE HIS ORDER IN APPEAL NO. 0150/07-08/C IT(A)-VI/2008- 09 DATED 15/05/2008 IN FAVOUR OF THE ASSESSEE. THE ASSESSEE ALSO FILED WRITTEN SUBMISSIONS, WHICH WERE EXTRACTED BY THE CIT(A) IN HIS ORDER AT PAGES 3 & 4. AFTER CONSIDERING THE SUBMISS IONS OF THE ASSESSEE, THE CIT(A) HELD AS FOLLOWS: ITA NO. 111/HYD/2012 G. RAGHURAM 3 4.2 I HAVE SEEN CAREFULLY THE FACTS AND EVIDENCE AN D I FIND THAT IN THE APPELLANTS OWN CASE FOR THE AYS 2005-0 6 & 2006- 07, THE HONBLE ITAT, HYDERABAD HAS GIVEN A DECISIO N IN FAVOUR OF THE REVENUE AND HAS CLEARLY HELD THAT THE INCOME IN QUESTION IS TO BE TREATED AS INCOME FROM HOUSE PROPERTY. IN THIS ORDER, THE HONBLE ITAT DULY CONSIDERED THE APPEAL ORDERS IN THE CASE OF M/S LULLA BROTHERS TRUST REFERRED TO BY THE APPE LLANT. 4.2.1 SINCE THE ISSUE INVOLVED IN THE CURRENT YEAR IS IDENTICAL, THEREFORE, RESPECTFULLY FOLLOWING THE OR DERS OF THE WORTHY ITAT IN THE APPELLANTS OWN CASE AS REFERRED TO ABOVE, I HOLD THAT THE INCOME COMPUTATION BY THE AO IS CORRE CT AND THE INCOME IN QUESTION HAS TO BE TREATED AS INCOME FROM HOUSE PROPERTY. 8. AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE US A ND HAS RAISED THE FOLLOWING GROUNDS OF APPEAL:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E THE ORDER OF THE CIT(A) IS ERRONEOUS, ILLEGAL AND AGAINST THE LAW AND PREJUDICIAL TO THE APPELLANT. 2. THE CIT(A) ERRED IN SUSTAINING THE FINDING OF TH E AO THAT THE RENT FROM AMENITIES DERIVED BY THE APPELLANT IS ASS ESSABLE UNDER THE HEAD INCOME FROM HOUSE PROPERTY. THE CI T(A) FAILED TO APPRECIATE THAT RENT FROM AMENITIES PROVI DED BY THE APPELLANT ARISE FROM A SEPARATE AGREEMENT AND THERE FORE THE DECISION OF LULLA BROTHERS TRUST IS MORE APPOSITE T O THE FACTS OF THE APPELLANTS CASE. 3. THE CIT(A) FELL IN ERROR IN NOT APPRECIATING THE FACT THAT THE RENT ON AMENITIES IS FOR INTERIORS WHICH ARE NOT PE RMANENT IN NATURE AND ARE PROVIDED TO THE TENANTS REQUIREMENT . THE CIT(A) FAILED TO APPRECIATE THAT THE ORDER OF HONB LE ITAT IN THE ASSESSEES OWN CASE COULD NOT BE APPLIED IN VIE W OF PENDENCY OF APPEAL OF APPELLANT BEFORE HIGH COURT C OUPLED WITH AVAILABILITY OF CONTRARY DECISION OF HONBLE ITAT I N THE CASE OF LULLA BROTHERS TRUST WHICH HAS BECOME FINAL. 4. THE CIT(A) OUGHT TO HAVE HELD THAT THE RENT FROM AMENITIES IS ASSESSABLE UNDER THE HEAD INCOME FROM OTHER SOU RCES AND SHOULD HAVE GRANTED THE DEPRECIATION. ITA NO. 111/HYD/2012 G. RAGHURAM 4 9. WE HAVE HEARD THE ARGUMENTS OF BOTH THE PARTIES AND PERUSED THE RECORD. WE FIND THAT THE ISSUE IN DISPUTE IS SQ UARELY COVERED BY THE DECISION OF THE JURISDICTIONAL BENCH OF ITAT, H YDERABAD IN ASSESSEES OWN CASE FOR AY 2005-06 & 2006-07 IN ITA NOS. 6/HYD/2010 AND OTHERS VIDE ORDER DATED 30 TH APRIL, 2010, WHEREIN THE TRIBUNAL HAS DEALT THE ISSUE AT PARA 6 AND AT P ARA 9 OF THE ORDER, WHICH ARE AS FOLLOWS: THE AR SUBMITTED THAT THE RENTAL INCOME RECEIVED F ROM THE LETTING OF AMENITIES IS INCOME FROM BUSINESS AND THIS WAS COVERED IN FAVOUR OF THE ASSESSEE BY THE ORDER OF THIS TRIBUNA L DATED 7.3.2008 IN ITA NO.528/HYD/2005 IN THE CASE OF LALLU BROTHER S TRUST, SECUNDERABAD VS. ACIT FOR THE ASSESSMENT YEARS 2000 -01. WE HAVE GONE THROUGH THIS ORDER. THERE IS NO READY MA DE FORMULA FOR DECIDING THIS ISSUE. EACH CASE HAS TO BE DECIDED O N ITS OWN FACTS AND AS SUCH, WE HAVE TO SEE THE FACTS OF THE PRESEN T CASE. AS WE HAVE GONE THROUGH THE ENTIRE FACTS OF THE CASE AND ALSO AGREEMENT ENTERED BETWEEN THE PARTIES I.E. THE RENT AGREEMENT AND ALSO WE HAVE GONE THROUGH VARIOUS ITEMS GIVEN ON HIRE CHARG ES TO THE TENANTS. WE HAVE ALSO GONE THROUGH THE AMENITIES PROVIDED TO THE TENANTS. 9. THE ANNUAL RENT IN A CASE WHEN THE PROPERTY IS LET THROUGH OUT THE YEAR IS THE ACTUAL RENT RECEIVED OR RECEIVABLE BY THE OWNER. WHEN THE AMOUNT OF THE ACTUAL RENT RECEIVED OR RECE IVABLE BY THE OWNER, IS KNOWN THAT WOULD CONSTITUTE THE BASIS FOR DETERMINING THE ANNUAL VALUE AND IT IS THAT VALUE WHICH WILL HAVE T O FORM THE BASIS FOR DETERMINING THE INCOME FROM HOUSE PROPERTY AND FOR ALLOWING DEDUCTION FROM INCOME FROM HOUSE PROPERTY TO THE EX TENT IS PERMITTED UNDER THE OTHER PROVISIONS OF THE ACT. I N THE PRESENT CASE, THE ASSESSEE MADE TWO AGREEMENTS ONE FOR LE T OUT OF THE PROPERTY AND ANOTHER FOR PROVIDING AMENITIES AND TH ERE IS A DOUBT IN THE MIND OF THE ASSESSING OFFICER REGARDING THE COR RECTNESS OF THE INCOME DECLARED BY THE ASSESSEE AS INCOME FROM HOU SE PROPERTY AND INCOME FROM BUSINESS. HE HAS TREATED THE ENTIRE INCOME I.E. AS INCOME FROM HOUSE PROPERTY. ADMITTEDLY, THE AUTH ORITIES HAVE THE FREEDOM TO GO BEYOND THE DOCUMENTS TO FIND OUT THE REAL INTENTION OF THE PARTIES. IN THIS CASE, THOUGH THERE IS TWO AGREEMENTS THE REAL INTENTION OF THE PARTIES TO A DOCUMENT IS DIFF ERENT WHAT APPEARS FROM IT EX FACIE. SINCE THERE IS A DOUBT, THEN THE ASSESSING OFFICER IS JUSTIFIED IN GOING BEYOND THE DOCUMENTS TO FIND OUT REAL INTENTION OF THE PARTIES BY IGNORING THE APPARENT HAS TO BE AND HAS ALWAYS BEEN CONCEDED. IN THIS CIRCUMSTANCE, THE ASSESSING OFFI CER HAS TO REMOVE ITA NO. 111/HYD/2012 G. RAGHURAM 5 THE FAADE TO EXPOSE THE REAL INTENTION OF THE PART IES CLEVERLY CLOAKED AND THE ACTUAL AGREEMENT CANNOT BE GIVEN EF FECT. THE ONLY BONA FIDE DOCUMENT TO BE ACTED UPON NOT OTHERWISE. THERE IS A SERIOUS DOUBT AND ALSO IT IS SHOCKING THE CONSCIOUS OF THE BENCH, WHETHER THE ASSESSEE IS GETTING HIRE CHARGES EQUAL TO THE RENTAL AMOUNT FOR PROVIDING AMENITIES. IT CANNOT BE REAL ONE AND ASSESSING OFFICER REQUIRED TO SEE THE ACTUAL RENTAL VALUE OF THE PROPERTY IN THAT PLACE AND BRING THAT AMOUNT INTO TAX UNDER THE HEAD INCOME FROM HOUSE PROPERTY. AS SUCH, IN THE PRESENT CASE, THE ASSESSING OFFICER CAME TO THE CORRECT CONCLUSIO N THAT REAL RENTAL VALUE WAS BIFURCATED INTO TWO SEPARATE INCOME VIZ., ONE IS RENTAL INCOME OF HOUSE PROPERTY AND ANOTHER IS HIRE CHARG ES OF THE EQUIPMENT. FURTHER, IN THE CASE OF LETTING OF THE MACHINERY, PLANT OR FURNITURE, SEC.56(2) (III) OF THE ACT IS APPLICA BLE, BUT ONLY LETTING OF BUILDING WITH CERTAIN AMENITIES, THIS PROVISION IS NOT APPLICABLE AND IN THAT EVENT, THE INCOME FROM LETTING OUT WAS CHARGEABLE UNDER THE HEAD INCOME FROM HOUSE PROPERTY. THE HIRE CHA RGES SAID TO HAVE BEEN COLLECTED FOR THE PURPOSE OF PROVIDING AM ENITIES AND THE RENT FOR THE BUILDING NOT COME UNDER THE PURVIEW OF SEC.56(2)(III) OF THE ACT. THE WORD PLANT CANNOT BE LIBERALLY C ONSTRUED SO AS TO INCLUDE ALL ITEMS NOTED IN ANNEXURE I APPEARING ELS EWHERE IN THE ORDER, WITHIN THE AMBIT OF THE WORD PLANT. IT IS NOT POSSIBLE TO GIVE SUCH A WIDE CONSTRUCTION AS SUGGESTED BY THE LEARNE D COUNSEL FOR THE ASESSEE. IN THE CASE OF SULTAN BROTHERS PVT.LT D. V. CIT 51 ITR 353 (SC) WHAT WAS LET OUT TO THE TENANT WAS A BUILD ING FITTED UP WITH THE FURNITURE AND FIXTURES, FOR BEING RUN AS A HOTEL. THEREFORE, THE SUPREME COURT HELD THAT SINCE THE BUILDING WAS LET ALONG WITH THE FURNITURE AND FIXTURES, THE PROVISIONS OF SEC.5 6(2) (III) WOULD BE APPLICABLE AND THE INCOME FROM BUILDING SHOULD BE A SSESSED UNDER THE HEAD OTHER SOURCES. BUT ACCORDING TO THE FAC T ARISING IN THE PRESENT CASE, PLANT AND MACHINERY OR FURNITURE WAS NOT HIRED BY THE ASSESSEE ALONG WITH THE BUILDING. THEREFORE, THE D ECISION OF THE APEX COURT IN SULTAN BROS CASE SUPRA, WILL NOT BE A PPLICABLE TO THE FACTS OF THE PRESENT CASE. THUS, ON A PLAIN READIN G OF SEC.56(2) (III) OF THE ACT, IN THE LIGHT OF THE FACTS OF THE CASE, WE HOLD THAT CONCLUSION REACHED BY THE CIT(A) IS NOT CORRECT. FU RTHER, NO PRECISE TEST CAN BE LAID OUT TO ASCERTAIN WHETHER INCOME RE FERRED TO BY WHATEVER NOMENCLATURE, LEASE AMOUNT, RENT OR LICENC E FEE RECEIVED BY AN ASSESSEE FROM LEASING OR LETTING OUT OF ASSE TS WOULD FALL UNDER THE HEAD PROFIT AND GAINS OF BUSINESS OR PRO FESSION AND IT HAS TO BE DETERMINED FROM THE POINT OF VIEW OF A BUSINE SSMAN IN THAT BUSINESS DEPENDING UPON THE FACT AND CIRCUMSTANCES OF EACH CASE AND THERE IS NO READYMADE JACKET FORMULA. THE RATI O LAID DOWN BY ONE CASE CANNOT BE APPLIED OR FIT TO THE FACTS OF T HE PRESENT CASE. WE HAVE TO SEE THE INTENTION OF THE ASSESSEE WHETHE R THE LETTING WAS THE DOING OF A BUSINESS OR TO EXPLOITATION OF H IS PROPERTY BY AN OWNER. THE ASSESSEE WHEN EXPLOITED THE PROPERTY TO DERIVE RENTAL INCOME IT HAS TO BE HELD THAT THE INCOME REALIZED B Y HIM BY WAY OF ITA NO. 111/HYD/2012 G. RAGHURAM 6 RENTAL INCOME FROM A BUILDING IF THE PROPERTY WITH OTHER ASSET ATTACHED TO THE BUILDING TO BE ASSESSED AS INCOME FROM HOUSE PROPERTY ONLY. THE ONLY EXCEPTIONS ARE CASES WHER E THE LETTING OF THE BUILDING IS INSEPARABLE FROM LETTING OF THE MAC HINERY, PLANT AND FURNITURE. IN SUCH CASES, IT HAS TO BE HELD THAT T HE RENTAL WOULD NOT HAVE BEEN REALIZED BUT FOR THE LETTING OUT OF THE M ACHINERY, PLANT OR FURNITURE ALONG WITH SUCH BUILDING AND THEREFORE, R ENTAL RECEIVED FOR THE BUILDING IS TO BE ASSESSED UNDER THE HEAD INCO ME FROM OTHER SOURCES. IN THE PRESENT CASE, ON THE FACTS OF THE CASE, IT IS CLEAR THAT THE ASSESSEE AS THE OWNER OF THE BUILDING WAS ONLY EXPLOITING THE PROPERTY AS OWNER BY LETTING OUT THE SAME AND R EALIZING INCOME BY WAY OF RENT. SUCH RENTAL INCOME WAS LIABLE TO B E ASSESSED UNDER THE HEAD INCOME FROM HOUSE PROPERTY. THE VARIOUS ASSETS LET OUT TO THE TENANTS ARE INCIDENTAL TO LETTING OUT THE B UILDING BEING INTEGRAL PART OF THE LETTING. ACCORDINGLY, WE RE VERSE THE ORDER OF THE CIT(A) AND RESTORE THAT OF THE ASSESSING OFFICE R. THIS GROUND OF THE REVENUE IS ALLOWED. 10. SINCE THE ISSUE UNDER CONSIDERATION IS SIMILAR TO THAT OF THE CASE DECIDED BY THE TRIBUNAL IN ASSESSEES OWN CASE FOR AY 2005-06 AND 2006-07 (SUPRA), RESPECTFULLY FOLLOWING THE SAM E, WE UPHOLD THE ORDER OF THE CIT(A) IN CONFIRMING THE ACTION OF THE AO IN TREATING THE INCOME IN QUESTION AS INCOME FROM HOUSE PROPERTY AND DISMISS THE GROUNDS RAISED BY THE ASSESSEE IN THIS REGARD. 11. IN THE RESULT, APPEAL OF THE ASSESSEE IS DISMIS SED. PRONOUNCED IN THE OPEN COURT ON 20 TH DECEMBER, 2012. SD/- SD/- (CHANDRA POOJARI) (ASHA VIJAYARAGH AVAN) ACCOUNTANT MEMBER JUDICIAL MEMBE R HYDERABAD, DATED: 20 TH DECEMBER, 2012. KV ITA NO. 111/HYD/2012 G. RAGHURAM 7 COPY TO:- 1) DR. G. RAGHURAM C/O SRI AV RAGHURAM, ADVOCATE, FLAT NO. 610, 6 TH FLOOR, BABUKHAN ESTATE, BASHEERBAGH, HYDERABAD 500 001. 2) DDIT(IT)-II, , HYDERABAD. 3) THE CIT (A)-V, HYDERABAD 4) THE DIT(INTERNATIONAL TAXATION), HYDERABAD 5) THE DEPARTMENTAL REPRESENTATIVE, I.T.A.T., HYDE RABAD.