ACIT, New Delhi V. M/s. S.G.S. Infratech Ltd., New Delhi

ITA 1218/DEL/2015

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 7180 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 4 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-07-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: G
• Assessment Year: 2010-2011
• Appeal Filed On: 03-03-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K TEWARI
• Keywords: Business income; Proportionate interest

Judgement Text

ITA NO. 1218/DEL/2015 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: G NEW DELHI BEFORE SHRI G.D. AGRAWAL, HONBLE PRESIDENT & SHRI K.N. CHARY, JUDICIAL MEMBER ITA NO.-1218/DEL/2015 ( ASSESSMENT YEAR: 2010-11) ACIT CIRCLE 22(2), ROOM NO. 226, 2 ND FLOOR, C.R. BLDG., I.P. ESTATE, NEW DELHI. VS S.G.S. INFRATECH LTD. (FORMERLY SGS AGENCIES LTD.) R-10, GREEN PARK MAIN, NEW DELHI. PAN NO. AABCS6180M APPELLANT RESPONDENT REVENUE BY SH. K. TEWARI, SR. DR ASSESSEE BY NONE ORDER PER K. NARSIMHA CHARY, J.M. THIS IS AN APPEAL BY THE REVENUE AGAINST THE ORDER DATED 16.12.2014 OF LD. COMMISSIONER OF INCOME TAX (APPEA LS)- 8, (LD. CIT(A)) NEW DELHI RELATING TO AY 2010-11. 2. THE ASSESSEE IS A COMPANY DERIVING INCOME FROM T HE BUSINESS OF OPERATING COMMERCIAL MALL AT PUNE AND R ENTING OF SHOPS AT THE COMMERCIAL MALL AT PUNE AND ALSO THE F ACTORIES AT GURGAON. FOR THE AY 2010-11 ASSESSEE FILED THEIR R ETURN OF INCOME ON 14.10.2010 DECLARING A LOSS OF RS. 5,71,6 4,383/-. THOUGH THE ASSESSEE INITIALLY DIVIDED ITS OPERATION S IN THE MALL AS INCOME FROM HOUSE PROPERTY AND PROFITS AND GAINS OF BUSINESS OR DATE OF HEARING 11.07.2018 DATE OF PRONOUNCEMENT 11.07.2018 ITA NO. 1218/DEL/2015 2 PROFESSION, AT THE INSTANCE OF THE LD. AO THEY HAVE BIFURCATED THE EXPENSES, ADVICE INTO RENTAL INCOME, BUSINESS INCOM E AND MALL TENANTS SHARE OF COMMON EXPENSES RECOVERED FROM THE M ON PRO- RATA BASIS IN RATION OF BUSINESS INCOME TO RENTAL I NCOME. SIMILARLY, THE EXPENSES HAVE BEEN BIFURCATED AS EXP ENSES EXCLUSIVELY AGAINST RENTAL INCOME, INADMISSIBLE EXP ENSES ADDED BACK TO RETURNED INCOME, COMMON JOINT EXPENSES INCU RRED ON BEHALF OF MALL TENANTS AND ON OWN BUSINESS (RECOVER ED FROM TENANTS ON PRO-RATA BASIS), DIRECT EXPENSES INCURRE D EXCLUSIVELY FOR OWN BUSINESS AND LASTLY ADMINISTRATIVE AND CORP ORATE EXPENSES INCURRED. 3. AO FOUND THAT THE TOTAL RECEIPTS OF THE ASSESSEE WERE 16,60,86,641/- AND THE BUSINESS INCOME WAS RS. 1,40 ,43,948/-. THE BUSINESS INCOME CONSTITUTES ONLY 8.5% OF THE TO TAL INCOME. HOWEVER, THE ASSESSEE CHARGED THE ENTIRE ADMINISTRA TIVE AND CORPORATIVE EXPENSES TO THE TUNE OF RS. 1,20,23,094 /- TO THE BUSINESS INCOME ALONE. ACCORDING TO THE LD. ASSESS ING OFFICER (THE AO) IT IS NOT JUSTIFIED, BECAUSE THE RENTAL INCOME FROM MALL AND OTHER RECEIPTS OF COMMON EXPENSES RECOVERED FRO M TENANTS IS A FULL TIME JOB AND REQUIRE A LAW OF ADMINISTRATIVE ATTENTION. ON THIS PREMISE, LD. AO DISALLOWED 50% OF THE ADMINIST RATIVE EXPENSES AND ADDED IT BACK TO THE INCOME OF THE ASS ESSEE. 4. IN APPEAL, LD. CIT (A) CONSIDERED THE FACTS OF T HE CASE IN THE LIGHT OF THE DECISION OF THE HONBLE APEX COURT IN CIT VS. CHENNAI PROPERTIES AND INVESTMENTS LTD. (2008) 303 ITR 33 A ND HELD THAT THE RENTAL INCOME RECEIVED FROM THE SHOPS AND FACTO RIES SHOULD BE TREATED AS INCOME FROM HOUSE PROPERTY AND OTHER REC EIPTS SHOULD BE TREATED AS INCOME FROM OTHER SOURCES. THEREFORE , HE DIRECTED ITA NO. 1218/DEL/2015 3 THE LD. AO TO CONSIDER THE ALLOCATION OF THE INTERE ST INCOME ON BORROWED FUNDS IN THE RATIO OF THE AREA OF SHOPS FO R THE CALCULATION OF PROPORTIONATE INTEREST RELATABLE TO THE SHOPS AND OTHER ACTIVITIES OF THE MALL. 5. CHALLENGING THE ORDER OF THE LD. CIT (A) REVENUE PREFERRED THIS APPEAL ON THE FOLLOWING GROUNDS: 1. THE LD.CIT (A) HAS ERRED IN LAW AND ON FACTS IN D ELETING ADDITION OF RS. 60,11,547/- MADE BY THE AO ON ACCOU NT OF DISALLOWANCES OUT OF ADMINISTRATIVE EXPENSES. 2. THE APPELLANT CRAVES TO AMEND, MODIFY, ALTER OR FOR EGO ANY GROUND(S) OF APPEAL AT ANY TIME BEFORE OR DURING TH E HEARING OF THIS APPEAL. 6. WE HAVE PERUSED THE RECORD IN THE LIGHT OF THE S UBMISSIONS OF THE LD. DR. IN THIS MATTER LD. CIT(A) RECORDED THAT THE LD. AO DID NOT FIND THE EXPENSES AS BOGUS, AS SUCH, NO DIS ALLOWANCE OF EXPENSES CAN BE MADE. HOWEVER, LD.CIT (A) DIRECTED THE LD. AO TO CONSIDER THE AREA OF SHOPS FOR CALCULATING THE P ROPORTIONATE OF INTEREST RELATABLE TO THE SHOPS AND OTHER ACTIVITIE S OF THE MALL, WHILE ALLOCATING THE INTEREST INCOME ON BORROWED FU NDS WHICH WAS TAKEN FOR THE PURPOSE OF THE MALL. 7. IN THIS SET OF CIRCUMSTANCES, WE DO NOT FIND ANY REASON TO INTERFERE WITH THE FINDINGS OF THE LD. CIT (A) IN T HE IMPUGNED ORDER BECAUSE THE LD. CIT (A) WHILE RECORDING THE F ACT THAT THERE WAS NO FINDING ON THE PART OF THE LD. AO THAT THE E XPENSES CLAIMED WERE BOGUS. INASMUCH AS THE ENTIRE DISPUTE IN THIS MATTER REVOLVES AROUND THE QUESTION OF THE ALLOCATI ON OF THE EXPENDITURE WHICH THE ASSESSEE CHARGED TO THE BUSIN ESS INCOME. LD. CIT (A) IN THE LIGHT OF THE JUDGMENT OF THE APE X COURT IN CIT VS. CHENNAI PROPERTIES AND INVESTMENTS LTD. (2008) 303 ITR 33 ITA NO. 1218/DEL/2015 4 RIGHTLY HELD THAT THE RENTAL INCOME RECEIVED FROM S HOPS AND FACTORIES SHOULD BE TREATED AS INCOME FROM HOUSE PR OPERTY AND OTHER RECEIPTS SHOULD BE TREATED AS THE INCOME FROM OTHER SOURCES. 8. WE, THEREFORE, DO NOT SEE ANY ILLEGALITY OR IRRE GULARITY IN THE FINDINGS OF THE LD. CIT(A). THERE IS NO REASON FOR US TO INTERFERE WITH THE SAME. HENCE, WE FIND THAT THE GROUNDS OF APPEAL ARE DEVOID OF MERITS AND ARE LIABLE TO BE DISMISSED. 9. WE, ACCORDINGLY, DISMISSED THE SAME. 10. IN THE RESULT, THE APPEAL OF THE REVENUE IS DIS MISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 11.07.2018 SD/- SD/- (G.D. AGRAWAL) (K. NARSIMHA CHA RY) PRESIDENT JUD ICIAL MEMBER DATED: 11.07.2018 *KAVITA ARORA COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT TRUE COPY ASSISTANT REGISTRAR ITAT NEW DELHI ITA NO. 1218/DEL/2015 5 DATE OF DICTATION 11.07.2018 DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 11.07.2018 DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE OTHER MEMBER DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P S/PS 11.71.8 DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 11.7.18 DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR. PS/PS 11.7.18 DATE ON WHICH THE FINAL ORDER IS UPLOADED ON THE WE BSITE OF ITAT 11.7.18 DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 11.7 .18 DATE ON WHICH THE FILE GOES TO THE HEAD CLERK THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER DATE OF DISPATCH OF THE ORDER