ITO, New Delhi V. M/s Faith Real Estate Pvt. Ltd., New Delhi

ITA 1147/DEL/2011

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 69516 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 8 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-11-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 19-11-2013
• Assessment Year: 2005-2006
• Appeal Filed On: 03-03-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NIDHI SRIVASTAVA
• Keywords: Business income; Tax effect

Judgement Text

ITA NO. 1147/DEL/2011 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH B, NEW DELHI BEFORE SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER AND SHRI A.T. VARKEY, JUDICIAL MEMBER I.T.A. NO. 1147/DEL/2011 A.Y. : 200 5 - 06 INCOME TAX OFFICER, WARD 11(2), ROOM NO. 321, CR BUILDING, NEW DELHI VS. M/S FAITH REAL ESTATE PVT. LTD., C-66, NDSE-II, NEW DELHI 110 049 (PAN: AAACF1927C) (APPELLANT) (APPELLANT) (APPELLANT) (APPELLANT) (RESPONDENT) (RESPONDENT) (RESPONDENT) (RESPONDENT) ASSESSEE BY : SH. G.S. GREWAL, CA DEPARTMENT BY : MS. NIDHI SRIVASTAVA, SR. D.R. ORDER ORDER ORDER ORDER PER SHAMIM YAHYA: AM PER SHAMIM YAHYA: AM PER SHAMIM YAHYA: AM PER SHAMIM YAHYA: AM THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST TH E ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS)-XIII, NEW DELHI DATED 20.12.2010 PERTAINING TO ASSESSMENT YEAR 2005-06. 2. THE GROUNDS RAISED READ AS UNDER:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE, THE CIT(A) HAS ERRED IN TREATING THE COMMISSION ON SALES AS BUSINESS INCOME INSPITE OF INCOME FROM HOUSE PROPERTY ALTHOUGH THE COMMISSION IS TAKEN AGAINST HANDING OVER THE POSSESSION OF HOUSE PROPERTY OWNED BY THE ASSESSEE. 2. THE CIT(A) HAS RELIED UPON THE DECISION OF THE HONBLE HIGH COURT OF DELHI IN ASSESSEES OWN CASE ITA NO. 1147/DEL/2011 2 FOR THE ASSESSMENT YEAR 2001-02, IN WHICH YEAR, THE DEPARTMENT HAD NOT FILED ANY SLP DUE TO LOW TAX EFFECT. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS . 2,12,96,000/- U/S. 2(22)(E) OF THE I.T. ACT, 1961 O N THE GROUND THAT THE RECIPIENT OF PAYMENT IS NOT THE REGISTERED SHAREHOLDER OF THE COMPANY MAKING THE PAYMENT. 4. THE APPELLANT CRAVES LEAVE TO ADD, ALTER OR AMEN D ANY GROUND OF APPEAL RAISED ABOVE AT THE TIME OF HEARING. 3. APROPOS GROUND NO. 1 & 2: APROPOS GROUND NO. 1 & 2: APROPOS GROUND NO. 1 & 2: APROPOS GROUND NO. 1 & 2:- -- - ON THESE ISSUES BOTH THE COUNSEL FAIRLY AGREED T HAT THE ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION O F THE HONBLE JURISDICTIONAL HIGH COURT IN ASSESSEES OWN CASE RE PORTED IN 173 TAXMAN 405 (DEL.). IN THIS CASE IT WAS HELD THAT (H EADS NOTES ONLY) BUSINESS INCOME VIS-A-VIS INCOME FROM HOUSE PROP ERTY-RENT FOR PREMISES BASED ON SALES OF TENANT ASSESSEE HAS GI VEN ITS PREMISES ON RENT TO ER LTD., - AGREEMENT BETWEEN THE ASSESSE E AND ER LTD. IS TO THE EFFECT THAT THE ASSESSEE WOULD RECEIVE 2 PER CENT COMMISSION ON THE SALES MADE BY ER LTD. FOR USE OF THE PREMISE S CONCURRENT FINDING OF FACT ARRIVED AT BY THE CIT(A) AND THE TR IBUNAL THAT THE AGREEMENT WAS NOT A MERE RENT AGREEMENT BUT IT ALSO REQUIRED INVOLVEMENT OF THE ASSESSEE IN THE MAN-AGREEMENT OF THE STORE RUN ITA NO. 1147/DEL/2011 3 BY ER LTD. IN THE SAID PREMISES AND THAT THE ASSIGN MENT WAS NOT SHAM- THEREFORE, AMOUNT RECEIVED BY THE ASSESSEE FO R THE USER OF PREMISES IS TO BE TREATED AS BUSINESS INCOME AND NO T AS INCOME FROM HOUSE PROPERTY- NO SUBSTANTIAL QUESTION OF LA W ARISES FOR CONSIDERATION. 3.1 IT IS UNDISPUTED THAT THE AGREEMENT IN CONSIDER ATION IS THE SAME ONE WHICH WAS DEALT WITH BY THE HONBLE JURISD ICTIONAL HIGH COURT AS ABOVE. SINCE THE FACTS ARE IDENTICAL, RES PECTFULLY FOLLOWING THE PRECEDENT AS ABOVE, WE UPHOLD THE ORDER OF THE LD. CIT(A). 4. APROPOS GROUND NO. 3 : APROPOS GROUND NO. 3 : APROPOS GROUND NO. 3 : APROPOS GROUND NO. 3 :- -- - THE ASSESSING OFFICER IN THIS CASE HAS ADDED A SUM OF RS. 21,296,000/- RECEIVED BY THE ASSESSEE FROM M/S DS C ONSTRUCTION BY VIRTUE OF APPLICATION U/S. 2(22)(E) OF THE I.T. ACT . 5. BEFORE THE LD. CIT(A) ASSESSEE INTER-ALIA SUBMIT TED THAT THE ASSESSEE COMPANY IS NOT A REGISTERED SHARE HOLDER OF M/S DS CONSTRUCTION LTD. AND THAT IT IS SH. HARPREET SINGH NARULA WHO IS HAVING 45% OF TOTAL SHARES IN M/S FAITH REAL ESTAT E P LTD. AND 98% OF TOTAL SHARES IN DS CONSTRUCTION LTD. IN THESE CIRCUMSTANCES, IT WAS SUBMITTED THAT SINCE THE ASSESSEE IS NOT A REGI STERED SHARE HOLDER IN M/S DS CONSTRUCTION LTD. FROM WHOM THE LO AN/ADVANCE HAS BEEN RECEIVED, THE SAME CANNOT BE ADDED IN THE HAND S OF THE ITA NO. 1147/DEL/2011 4 ASSESSEE U/S. 2(22)(E) OF THE I.T. ACT. SEVERAL CA SE LAWS WERE REFERRED TO IN THIS REGARD AS FOLLOWS:- 1. CIT VS. HOTEL HILLTOP PVT. LTD. REPORTED AT 313 ITR 116 (RAJ.) 2. CIT VS. UNIVERSAL MEDICAR PVT. LTD. REPROTED AT 324 ITR 263 (BOMBAY) 3. ACIT VS. BHAUMIK COLOUR PVT. LTD. REPORTED AT 11 8 ITD 1 (MUMBAI-SB) 4. DCIT VS. NATIONAL TRAVEL SERVICES REPORTED AT 31 SOT 76 (DEL.) 6. CONSIDERING THE ABOVE LD. CIT(A) REVERSED THE O RDER OF THE ASSESSING OFFICER AND DECIDED THE ISSUE IN FAVOUR O F THE ASSESSEE. 7. AGAINST THE ABOVE ORDER THE REVENUE IS IN APPEAL BEFORE US. 8. WE HAVE HEARD BOTH THE COUNSEL AND PERUSED THE RECORDS. WE FIND THAT IT IS UNDISPUTED THAT ASSESSEE COMPANY IS NOT A REGISTERED SHARE HOLDER IN M/S DS CONSTRUCTION LTD. FROM WHOM LOAN/ADVANCE HAS BEEN RECEIVED. IN SUCH CIRCUMSTANCES, RATIO FR OM THE ABOVE CASE LAWS ARE CLEARLY APPLICABLE ON THE FACTS OF T HE PRESENT CASE. SINCE THE ASSESSEE IS NOT A REGISTERED SHARE HOLDE R OF M/S DS CONSTRUCTION, PROVISIONS OF SECTION 2(22)(E) CANNO T BE APPLIED IN THE HANDS OF THE ASSESSEE. ACCORDINGLY, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LD. CIT(A). HENCE, WE AFFIRM THE SAME. ITA NO. 1147/DEL/2011 5 9. IN THE RESULT, THE APPEAL FILED BY THE REVENUE S TANDS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 21/11/2013, U PON CONCLUSION OF HEARING. SD/- SD/- [ [[ [A.T. VARKEY A.T. VARKEY A.T. VARKEY A.T. VARKEY] ]] ] [SHAMIM YAHYA] [SHAMIM YAHYA] [SHAMIM YAHYA] [SHAMIM YAHYA] JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER DATE 21/11/2013 SRBHATNAGAR SRBHATNAGAR SRBHATNAGAR SRBHATNAGAR COPY FORWARDED TO: COPY FORWARDED TO: COPY FORWARDED TO: COPY FORWARDED TO: - -- - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR, ITAT TRUE COPY BY ORDER, ASSISTANT REGISTRAR, ITAT, DELHI BENCHES