The ITO, Ward 2 (1), JAMNAGAR V. M/s Hiras Hotel Pvt Ltd, JAMNAGAR

ITA 1365/RJT/2010

• Counselvise Citation: 136524914 RSA 2010
• Duration Of Justice: 1 year(s) 4 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-04-2012
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 20-04-2012
• Assessment Year: 2007-2008
• Appeal Filed On: 30-12-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: MK SINGH
• Keywords: Business income

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBULAL; RAJKOT BENCH, RAJKOT . .. . . . . . , , , , . .. . . . . . , , , , $ $ $ $ BEFORE SHRI T. K. SHARMA, JM AND SHRI D. K . SRIVASTAVA, AM ITA NO.1365RJT/2010 / ASSESSMENT YEAR 2007-08 INCOME-TAX OFFICER V. M/S. HIRAS HOTEL PVT. L TD. WARD-2(1), JAMNAGAR. C/O. HOTEL GOLDEN CROWN BEDI BUNDER ROAD, JAMNAAGAR PAN: AAACH5333A. DATE OF HEARING : 20-04-2012. DATE OF PRONOUNCEMENT : 30 -04-2012. REVENUE BY: SHRI M. K. SINGH, D.R ASSESSEE BY: NONE . / / / / ORDER . .. . . . . . /D. K. SRIVASTAVA: THE APPEAL FILED BY THE DEPARTMENT IS DIRECTED AGAINST THE ORDER PASSED BY THE CIT(A) ON 27-10-2010 ON THE FOLLOWING GROUNDS:- 1. THE CIT(A) HAS ERRED I AW AND ON FACTS IN TREAT ING THE INCOME OF RS.14,08,332/- SHOWN AS BUSINESS INCOME EARNED F ROM LETTING OUT OF THE PROPERTY. 2. THE CIT(A) HAS ERRED IN LAW AND ON FACTS IN HOLD ING THAT THE INCOME EARNED BY THE ASSESSEE WAS ASSESSABLE UNDER THE HEAD INCOME FROM BUSINESS OR PROFESSION INSTEAD O F TREATING THE SAME AS INCOME UNDER THE HEAD INCOME FROM HOUS E PROPERTY. 3. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE CIT(A) OUGHT TO HAVE UPHELD THE ORDER OF THE ASSESSING OFF ICER. 4. IT IS THEREFORE PRAYED THAT THE ORDER OF THE CIT (A) BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED. 5. THAT THE REVENUE CRAVES LEAD TO ADD, AMEND, ALTE R OR WITHDRAW ANY GROUNDS OF APPEAL. 2. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT T HE ASSESSEE FILED ITS RETURN OF INCOME FOR THE YEAR UNDER APPEAL ON 28-09-2007 RETU RNING NIL INCOME. AFTER PROCESSING, THE RETURN WAS TAKEN UP FOR SCRUTINY. O N SCRUTINY OF ACCOUNTS AND AUDIT REPORT, THE ASSESSING OFFICER NOTICED THAT THE ASSE SSEE HAD LET OUT ITS HOTEL BUILDING TOGETHER WITH RESTAURANT, FURNITURE, FITTINGS AND E QUIPMENT TO M/S RELIANCE INDUSTRIES. HE FURTHER NOTICED THAT RENTAL INCOME OF RS.14,08,3 32/- WAS TREATED BY THE ITA 1365/2010. 2 ASSESSEE AS OTHER INCOME IN THE ACCOUNTS. PERUSAL O F THE TDS CERTIFICATE ISSUED BY RELIANCE INDUSTRIES REVEALED TAX WAS DEDUCTED AT SO URCE TREATING THE IMPUGNED SUM AS RENT U/S19 4-I OF THE INCOME-TAX ACT. 3. THE ASSESSING OFFICER ALSO PERUSED THE AGREEMENT EXECUTED BY THE ASSESSEE WITH M/S. RELIANCE INDUSTRIES LTD. AND NOT ICED THAT THE ASSESSEE WAS THE ABSOLUTE OWNER OF RESIDENTIAL PREMISES, I.E., 20 RO OMS IN ADDITION TO OTHER SPACE IN THE BUILDING KNOWN AS GOLDEN CROWN AT JAMNAGAR. HE FURTHER NOTICED FROM THE AGREEMENT THAT THE TENANT WAS TO MEET ALL EXPENSES INCLUDING ELECTRICAL CHARGES, MUNICIPAL TAXES, WATER CHARGES, SOCIETY CHARGES, ET C. AFTER CONSIDERING THE EXPLANATION OF THE ASSESSEE, THE ASSESSING OFFICER DID NOT ACCEPT THE SUBMISSION OF THE ASSESSEE THAT THE RENTAL INCOME SHOULD BE ASSES SED AS BUSINESS INCOME. HE ASSESSED THE RENTAL INCOME AS INCOME FROM HOUSE PRO PERTY. IN SUPPORT OF HIS DECISION, THE ASSESSING OFFICER RELIED UPON THE JUD GMENT OF THE HONBLE SUPREME COURT IN NEW SAVAN SUGAR & GUR REFINERY CO. LTD. V. C.I.T., 74 ITR 1 (SC) AND KRISHNA OBEROI V. UNION OF INDIA, 257 ITR 105 (AP). 4. ON APPEAL, THE LD. CIT(A) ACCEPTED THE PLEA OF T HE ASSESSEE THAT THE RENTAL INCOME SHOULD BE ASSESSED AS BUSINESS INCOME AND DI RECTED THE AO ACCORDINGLY. HIS OBSERVATIONS IN THIS BEHALF ARE CONTAINED IN PA RA-5 OF THE APPELLATE ORDER, WHICH READS AS UNDER:- 5. I HAVE CAREFULLY CONSIDERED THE ISSUE AND GONE THROUGH THE RECORDS, IT IS SEEN THAT THE APPELLANT COMPANY IS RUNNING HOTEL SINCE 1998. IN THE YEAR UNDER CONSIDERATION THE ENTIRE HOTEL WAS RENTED TO RELIANCE INDUSTRIES LIMITED ALONG WITH ALL AMENITIES. IT IS BUSINESS OF THE CO MPANY TO LET THE HOTEL AND EARN INCOME. THE DECISIONS RELIED ON BY AR ARE ALS O RELEVANT. THERE WAS ONLY TEMPORARY STOPPAGE OF HOTEL BUSINESS DUE TO LU LL IN BUSINESS AND THE INTENTION OF THE APPELLANT WAS TO RESUME THIS BUSIN ESS. AFTER THIS AGREEMENT CASE TO AN END, APPELLANT HAS AGAIN STARTED THE HOT EL BUSINESS IN THE SAME PREMISES FROM THE YEAR 2010. THEREFORE, DECISION OF CALCUTTA HIGH COURT IN THE CASE OF CIT V. PARK HOTEL (P) LTD. REPORTED IN 200 ITR PAGE 122 CLEARLY COVERS THE ISSUE. SIMILAR VIEW IS EXPRESSED BY HON BLE APEX COURT IN THE CASE OF SHRI LAKSHMI SILK MILLS LTD. REPORTED IN 20 ITR PAGE 451, THAT INCOME FROM LETTING OUT COMMERCIAL ASSET WOULD BE BUSINESS INCO ME IN THESE CIRCUMSTANCES. ON THE FACTS AND CIRCUMSTANCES OF T HE CASE, IN MY CONSIDERED OPINION THERE IS NO JUSTIFICATION IN ASS ESSING INCOME OF THE APPELLANT UNDER THE HEAD INCOME FROM HOUSE PROPERT Y, HENCE AO IS DIRECTED TO ASSESS RENT INCOME EARNED BY THE APPELLANT AS BU SINESS INCOME. 5. AGGRIEVED BY THE ORDER PASSED BY THE CIT(A), THE DEPARTMENT IS NOW IN APPEAL BEFORE THIS TRIBUNAL. NOTICE OF HEARING WAS SENT BY RPAD FIXING THE APPEAL FOR HEARING ON 20 TH APRIL, 2012. THE ASSESSEE NEITHER ENTERED APPEARAN CE ON 20 TH ITA 1365/2010. 3 APRIL,2012 NOR FILED ANY APPLICATION FOR ADJOURNMEN T. IN THIS VIEW OF MATER, THE APPEAL FILED BY THE DEPARTMENT IS BEING DISPOSED OF F EX-PARTE QUA THE ASSESSEE. 6. IN SUPPORT OF APPEAL, THE LD. DEPARTMENTAL REPRE SENTATIVE RELIED UPON THE FINDINGS RECORDING BY THE AO IN HIS ASSESSMENT ORDE R. 7. WE HAVE HEARD THE LD. DEPARTMENTAL REPRESENTATIV E AND ALSO PERUSED THE MATERIALS ON RECORD. IT IS NOT IN DISPUTE THAT THE ASSESSEE IS THE OWNER OF THE PROPERTY IN ITS OWN RIGHT. IT IS ALSO NOT IN DISPUT E THAT THE ASSESSEE HAS LET OUT ITS OWN PROPERTY TO M/S. RELIANCE INDUSTRIES ON PAYMENT OF MONTHLY RENT. PERUSAL OF THE ASSESSMENT ORDER SHOWS THAT THE AO HAS RELIED UPON VARIOUS CLAUSES OF THE AGREEMENT TO HOLD THAT THE ENTIRE PROPERTY WAS LET OUT WITH THE OBVIOUS PURPOSE OF EARNING RENTAL INCOME DURING THE SUBSISTENCE OF THE AGREEMENT AND THAT THE INTENTION OF THE ASSESSEE WAS TO GO OUT OF THE HOTE L BUSINESS ALTOGETHER DURING THE SUBSISTENCE OF THE AGREEMENT. IN THIS FACTUAL MATRI X, THE SHORT QUESTION IS WHETHER THE RENTAL INCOME SHOULD BE ASSESSED AS BUSINESS IN COME, AS CONTENDED BY THE ASSESSEE OR AS INCOME FROM HOUSE PROPERTY AS HELD B Y THE AO. 9. ON GOING THROUGH THE MATERIALS AVAILABLE ON RECO RD, WE ARE SATISFIED THAT THE INTENTION OF THE ASSESSEE WAS TO LET OUT THE ENTIRE PROPERTY WITH THE SOLE PURPOSE OF EARNING RENTAL INCOME DURING THE SUBSISTENCE OF THE AGREEMENT. THE ASSESSEE HAS ALSO SHOWN THE RENTAL INCOME AS OTHER INCOME IN ITS PROFIT AND LOSS ACCOUNT. THE INTENTION OF THE ASSESSEE WAS TO GO OUT OF THE BUSI NESS ALTOGETHER DURING THE SUBSISTENCE OF THE AGREEMENT. THE ISSUE UNDER APPEA L IS COVERED AGAINST THE ASSESSEE BY THE JUDGMENT OF THE HONBLE SUPREME COU RT IN NEW SAVAN SUGAR & GUR REFINERY CO. LTD. V. C.I.T. (SUPRA). THE JUDGMENT I N SHAMBHU INVESTMENT PVT. LTD. V. CIT, 263 ITR 143 (SC) ALSO SUPPORTS THE CASE OF THE AO. 10. RELIANCE PLACED BY THE LD. CIT(A) ON THE JUDGME NT IN CIT V. PARK HOTEL (P) LTD., 200 ITR 122 (CAL.)IS COMPLETELY MISPLACED FOR THE REASON THAT THE ASSESSEE IN THAT CASE WAS NOT THE OWNER OF THE PROPERTY WHEREAS THE ASSESSEE IN THE CASE BEFORE US IS THE OWNER OF THE PROPERTY AND HAS ACCO RDINGLY LET OUT THE PROPERTY AS ITS OWNER. SIMILARLY, THE FACTUAL MATRIX IN SHRI LAXMI SILK MILLS LTD., 20 ITR 451 (SC) RELIED UPON BY THE C.I.T.(A) IS COMPLETELY DIFFEREN T. 11. IN VIEW OF THE AFORESAID, THE ORDER PASSED BY THE CIT(A) IS REVERSED AND THAT OF THE AO RESTORED. ) + 30-04-2012 . ) THIS ORDER PRONOUNCED IN OPEN COURT ON 30-04-2012. SD/- SD/- ( .. / T. K. SHARMA) ( .. / D. K. SRIVASTAVA) /JUDICIAL MEMBER / ACCOUNTANT MEMBER +/ DATE 30/04/2012. /RAJKOT ITA 1365/2010. 4 ) )) ) 12 12 12 12 32 32 32 32 / COPY OF ORDER FORWARDED TO:- 1. 6 / APPELLANT-THE ITO, WARD-2(1), JAMNAGAR.. 2. 186 / RESPONDENT-M/S. HIRAS HOTEL PVT. LTD., JAMNAGAR. . 3. ; / CONCERNED CIT, JAMNAGAR. 4. ;- / CIT (A), JAMNAGAR. 5. 2 1, , / DR, ITAT, RAJKOT 6. / GUARD FILE. / BY ORDER , ASSTT. REGISTRAR , INCOME TAX APPELLATE TRIBUNAL, RAJKOT.