ACIT 5(1), MUMBAI V. ESSAR PROPERTIES LTD, MUMBAI

ITA 1166/MUM/2011

• Counselvise Citation: 116619914 RSA 2011
• Duration Of Justice: 3 year(s) 1 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-04-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: H
• Next Hearing Date: 24-03-2014
• Assessment Year: 2007-2008
• Appeal Filed On: 08-02-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAVI PRAKASH
• Assessee Lawyers: ANUJ KISNADWALA
• Keywords: Business income; Depreciation; Unabsorbed depreciation

Judgement Text

, INCOME TAX APPELLATE TRIBUNAL,MUMBAI - H BENCH. . , !'#$ '%&'( , &' )* BEFORE S/SH.D.MANMOHAN, VICE-PRESIDEN T & RAJENDRA,ACCOUNTANT MEMBER /. ITA NO.1166/MUM/2011, ' ' ' ' + + + + / ASSESSMENT YEAR-2007-08 ACIT 5(1), R.NO.568, 5 TH FLOOR, AAYAKAR BHAVAN, M.K.ROAD,MUMBAI-400020 VS M/S ESSAR PROPERTIES LTD. ESSAR HOUSE, 11 K.K.MARG, MAHALAXMI,MUMBAI-400034 PAN: AAACE0893Q ( ',- / APPELLANT) ( ./,- / RESPONDENT) '%* 0 1 & / REVENUE BY : SHRI RAVI PRAKASH '23 '23 '23 '23 1 1 1 1 & && & / ASSESSEE BY : SHRI ANUJ KISNADWALA ' ' ' ' 0 00 0 3' 3' 3' 3' / DATE OF HEARING : 24-03-2014 4+ ' 0 3' / DATE OF PRONOUNCEMENT : 02-04-2014 , 1961 0 00 0 '' '' '' '' 254 )1( & && & '353 '353 '353 '353 )&6 )&6 )&6 )&6 ORDER U/S.254(1)OF THE INCOME-TAX ACT,1961(ACT) PER RAJENDRA,AM &' &' &' &' )* )* )* )* '%&'( '%&'( '%&'( '%&'( & && & ' ' ' ' : CHALLENGING THE ORDER DT. 30.11.2010 OF THE CIT(A)- 9,MUMBAI, ASSESSING OFFICER (AO) HAS RAISED FOLLOWING GROUNDS OF APPEAL : 1.WHETHER ON FACTS AND IN THE CIRCUMSTANCES OF TH E CASE AND IN LAW THE LD. CIT(A) HAS ERRED IN HOLDING THE RENTAL INCOME OF RS.2,20,33,759/- SHOUL D BE TREATED AS BUSINESS INCOME. 2.ON FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN HOLDING THAT RENTAL EXPENSES OF RS.2,20,33,795/- AND DEPRECIATIO N OF RS.18,48,995/- ON BUILDING AND RS. 28,65,379/- SHOULD BE ALLOWED SINCE THE INCOME HAS BEEN HELD TO BE TAXABLE UNDER BUSINESS INCOME. 2. ASSESSEE-COMPANY,ENGAGED IN THE BUSINESS OF SERVICE S, LEASING AND BUSINESS CENTRE FACILITIES, MAINTENANCE & RUNNING OF GUEST HOUSE,FILED ITS RETU RN OF INCOME ON 31.10.2007 DECLARING TOTAL INCOME OF RS. NIL.EFFECTIVE GROUND OF APPEAL IS ABO UT HOLDING RENTAL INCOME AS BUSINESS INCOME. DURING THE ASSESSMENT PROCEEDINGS AO FOUND THAT THE ASSESSEE WAS ENGAGED IN THE BUSINESS OF LEASING,PROPERTY-MANAGEMENT-SERVICES AND BUSINESS C ENTRE FACILITIES,THAT IT HAD SHOWN LEASE INCOME ON ACCOUNT OF LEASE RENT OF ITS PREMISES AT RS.1,49,67,056/- AND LEASE INCOME OF PLANT & MACHINERY AT RS.72,00,000/-,THAT IT HAD CLAIMED ADM INISTRATIVE EXPENSES OF RS. 16,95,993/-, THAT NET PROFIT HAD BEEN ARRIVED AT RS. 81,67,346/-,THAT THE ASSESSEE COMPANY HAD CLAIMED LEASE RENT AS BUSINESS INCOME.HE ASKED THE ASSESSEE ,VIDE QUESTIO NNAIRE DATED 17.09.2008,TO EXPLAIN AS TO WHY THE RENTAL INCOME FROM PROPERTY SHOULD NOT BE TREAT ED AS INCOME FROM HOUSE PROPERTY.IN RESPONSE,IT WAS SUBMITTED THAT THE LEASING OF PROPE RTY ITSELF WAS THE BUSINESS OF THE ASSESSEE- COMPANY AND WAS CONGRUENT WITH THE OBJECT CLAUSE IN THE MEMORANDUM OF ASSOCIATION OF THE COMPANY,THAT INCOME SHOULD BE CHARGED UNDER THE HEA D INCOME FROM BUSINESS,THAT THE TRIBUNAL IN THE ASSESSEES OWN CASE HAD DECIDED THE ISSUE IN FA VOUR OF THE ASSESSEE IN ITA NO.2328/ MUM/ 2004 FOR AY.1997-98 AND IN ITA NO.3464/ M/ 05 FOR A Y.2001-02,VIDE ORDER DATED 29.02.2008. HOWEVER, THE AO RELYING UPON THE DECISION OF THE HO NBLE SUPREME COURT DELIVERED IN THE CASE OF 2 ITA NO.1166/MUM/2011 M/S ESSAR PROPERTIES LTD. SHAMBOO INVESTMENT PVT.LTD.(263ITR143),HELD THAT IN COME IN RESPECT OF THE PREMISES OWNED BY THE ASSESSEE,WAS TO BE ASSESSED UNDER THE HEAD INC OME FROM HOUSE PROPERTY.AFTER ALLOWING DEDUCTION U/S.24 IN RESPECT OF REPAIRS AND FINANCE CHARGES,HE COMPUTED THE INCOME FROM HOUSE PROPERTY AT RS.61,21,511/-.VIDE HIS ORDER DATED 18. 12.2008 PASSED U/S.143(3) OF THE ACT,HE COMPLETED THE ASSESSMENT ON A TOTAL INCOME OF NIL A FTER ALLOWING SET OFF OF UNABSORBED DEPRECIATION OF RS.1,66,97,023/-. 3. AGAINST THE ORDER OF THE AO,ASSESSEE-COMPANY PREFER RED AN APPEAL BEFORE THE FIRST APPEAL AUTHORITY(FAA).AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE AND THE ASSESSMENT ORDER HE HELD AS UNDER : 2.3 THIS ISSUE IS COVERED IN FAVOUR OF THE APPELLANT, BY THE EARLIER ORDERS OF CIT(A) AS WELL AS BY THE MUMBAI ITAT, THE FINDINGS OF MY PREDECESSOR, CI T(A) IN ASSESSMENT YEAR 2006-07 ON THIS ISSUE ARE AS UNDER: IN THE APPELLATE PROCEEDINGS, THE AUTHORISED REPRE SENTATIVE OF THE APPELLANT BROUGHT TO MY KNOWLEDGE THE DECISION OF ITAT MUMBAI BENCH IN T HE CASE OF ASSESSMENT YEAR 2001- 02 AND ALSO IN ASSESSMENT YEAR 1997-98 DATED 29.02. 2008 IN ITA NO. 2328/MUM/2004 HEREIN ITAT ALLOWED THE APPEAL OF THE APPELLANT AND DISMISSED APPEAL OF THE DEPARTMENT HOLDING THAT RENTAL RECEIPTS BY LEASING ACTIVITY IS REQUIRED TO BE TAXED UNDER THE HEAD BUSINESS INCOME. FOLLOWING THE DECISION OF ITAT I H OLD THAT THE RENTAL RECEIPTS OF THE APPELLANT ARE REQUIRED TO BE TAXED UNDER THE HEAD B USINESS INCOME. IN THE ASSESSMENT ORDER THE ASSESSING OFFICER HAS NOT ALLOWED EXPENSES OF RS. 49,06,358/- AND DEPRECIATION OF RS. 68,81,881/- ON BUILDING AND DEPRECIATION ON FURNITURE AMOUNTING TO RS.2,92,390/-. THE ASSESSING OFFICER HAS NOT ALLOWE D DEPRECIATION AND OTHER EXPENSES SINCE HE HELD THAT RENTAL RECEIPTS FROM THE BUILDIN G ARE REQUIRED TO BE TAXED UNDER THE HEAD INCOME FROM HOUSE PROPERTY. SINCE, I HELD THAT RE NT RECEIPTS ARE REQUIRED TO BE TAXED UNDER THE HEAD BUSINESS INCOME THESE EXPENSES AS WE LL AS DEPRECIATION IS REQUIRED TO ALLOWED. ACCORDINGLY, THESE GROUNDS OF APPEAL ARE A LLOWED. 2.4 SINCE THE ISSUE INVOLVED IS COVERED BY THE ORDER O F CIT(A) AND JURISDICTIONAL ITAT IN FAVOUR OF THE APPELLANT AND THE FACTS OF THIS YEAR ARE SIMILA R TO THE FACTS OF THE EARLIER YEARS. THEREFORE, THE ASSESSING OFFICER IS DIRECTED TO ASSESS THE RENTAL INCOME AS INCOME UNDER THE HEAD BUSINESS INCOME AND ALLOW THE EXPENSES AS WELL AS DEPRECIATION AS P ER PAST HISTORY OF THE CASE. 4. DURING THE COURSE OF HEARING BEFORE US, REPRESENTAT IVES OF BOTH THE SIDES AGREED THAT THE ISSUE WAS COVERED BY THE ORDERS OF THE TRIBUNAL IN FAVOUR OF THE ASSESSEE.WE FIND THAT DECIDING THE APPEALS FILED BY THE ASSESSEE,TRIBUNAL HAS CONSISTE NTLY HELD THAT INCOME OF THE ASSESSEE SHOULD BE ASSESSED UNDER THE HEAD INCOME FROM BUSINESS AND IT SHOULD BE ALLOWED EXPENSES INCURRED BY IT IN CARRYING OUT ITS BUSINESS.DEPRECIATION CLAIMED BY T HE ASSESSEE HAS ALSO BEEN ALLOWED BY THE TRIBUNAL.FAA HAS GRANTED RELIEF TO THE ASSESSEE,IN PURSUANCE OF THE ORDERS OF THE TRIBUNAL. THUS, THERE IS NO LEGAL INFIRMITY IN HIS ORDER.THEREFORE, RESPECTFULLY FOLLOWING THE ORDERS OF THE TRIBUNAL FOR EARLIER YEARS AND CONFIRMING THE ORDER OF THE F AA,WE DECIDE EFFECTIVE GROUND OF APPEAL AGAINST THE AO. AS A RESULT,APPEAL FILED BY THE AO STANDS DISMISS ED. 738 '23 ' 0 '%9 0 %'3 :. ORDER PRONOUNCED IN THE OPEN COURT ON 2 ND APRIL,2014 . )&6 0 4+ ' & ''' < =) ' 2 .: ,201 4 0 5 > SD/- SD/- ( . / D.MANMOHAN) ( '%&'( '%&'( '%&'( '%&'( / RAJENDRA) !'#$ / VICE PRESIDENT &' &' &' &' )* )* )* )* /ACCOUNTANT MEMBER / MUMBAI, =) ' /DATE: 02.04 . 2014. SK 3 ITA NO.1166/MUM/2011 M/S ESSAR PROPERTIES LTD. )&6 )&6 )&6 )&6 0 00 0 .3 .3.3 .3? ? ? ? @&?+3 @&?+3 @&?+3 @&?+3 / COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE / ',- 2. RESPONDENT / ./,- 3. THE CONCERNED CIT(A)/ A B , 4. THE CONCERNED CIT / A B 5. DR H BENCH, ITAT, MUMBAI / ?C'5 .3 , . . ''' . 6. GUARD FILE/ 5' 7' /'?3 /'?3 /'?3 /'?3 .3 .3.3 .3 //TRUE COPY// )&6' ' / BY ORDER, ! / ' %' DY./ASST. REGISTRAR , /ITAT, MUMBAI