M/s K.G. Estate Pvt. Ltd., Kolkata V. ITO, WD-8(3),Kolkata, Kolkata

ITA 1449/KOL/2012

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 83138 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 11 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-09-2014
• Appeal Filed By: Assessee
• Bench Allotted: B
• Next Hearing Date: 01-09-2014
• Assessment Year: 2006-2007
• Appeal Filed On: 10-10-2012
• Court: TRIBUNAL
• Department Lawyers: RAVI JAIN
• Keywords: Business income
• Section: 143(3)

Judgement Text

, B , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH: KOL KATA () BEFORE , /AND , ! ) [BEFORE SHRI MAHAVIR SINGH, JM & SHRI SHAMIM YAHYA, AM] ' / I.T.A NO.1449/KOL/2012 #$ %&/ ASSESSMENT YEARS: 2006-07 M/S. K. G. ESTATE PVT. LTD. VS. INCOME-TAX OFFI CER, WD-8(3), KOLKATA (() /APPELLANT ) (*+()/ RESPONDENT ) DATE OF HEARING: 01.09.2014 DATE OF PRONOUNCEMENT: 10 .09.2014 FOR THE APPELLANT: SHRI SUBHAS AGARWAL, ADVOCATE FOR THE REVENUE: SHRI RAVI JAIN, CIT / ORDER PER SHRI MAHAVIR SINGH, JM : THIS APPEAL BY ASSESSEE IS ARISING OUT OF ORDER OF CIT(A)-VIII, KOLKATA IN APPEAL NO. 199/CIT(A)-VIII/KOL/08-09 DATED 13.08.2012. ASSESS MENT WAS FRAMED BY ITO, WARD-8(3), KOLKATA U/S. 143(3) OF THE INCOME-TAX ACT, 1961 (HE REINAFTER REFERRED TO AS THE ACT) FOR AY 2006-07 VIDE HIS ORDER DATED 20.11.2008. 2. THE ONLY ISSUE IN THIS APPEAL OF ASSESSEE IS AG AINST THE ORDER OF CIT(A) CONFIRMING THE ACTION OF AO IN TREATING THE RENTAL INCOME EARNED A S INCOME FROM HOUSE PROPERTY INSTEAD OF INCOME DECLARED BY THE ASSESSEE UNDER THE HEAD INC OME FROM BUSINESS OR PROFESSION. FOR THIS, ASSESSEE HAS RAISED FOLLOWING GROUND NO.1: 1. THAT UNDER THE FACTS AND CIRCUMSTANCES OF THE CA SE, HONBLE CIT(A) HAS ERRED IN TREATING THE LEASE RENTAL INCOME EARNED UNDER THE H EAD INCOME FROM HOUSE PROPERTY INSTEAD OF INCOME FROM BUSINESS OR PROFESSION. 3. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUGH FACTS AND CIRCUMSTANCES OF THE CASE. BRIEF FACTS ARE THAT THE ASSESSEE COMPANY RECEIVED RENTAL INCOME FROM ONE HOUSE PROPERTY AT MUMBAI AND DECLARED THE INCOME UNDER THE HEAD INCO ME FROM BUSINESS OR PROFESSION. THE TENANT IN THE PROPERTY IS THE PROPRIETARY FIRM OF T HE DIRECTOR OF THE ASSESSEE COMPANY. THE ASSESSEE IS THE OWNER OF THE PROPERTY, WHICH IS A F LAT AT MUMBAI AND THE TENANT HAS DEDUCTED TDS U/S. 194-I OF THE ACT. THE ASSESSEE CLAIMED VA RIOUS EXPENSES AGAINST THIS RENTAL INCOME BY DECLARING RENT AT RS. 9 LACS. BUT THE AO BY GOING T HROUGH THE RENT RECEIVED FROM THE SAME TENANT IN RESPECT OF THE SAME PROPERTY DURING THE F Y 2002-03 RELEVANT TO AY 2003-04 WHICH WAS AT A RENT OF RS.15 LACS. THIS MATTER IS PENDING BEFORE CIT(A). THE AO HAS TAKEN THE FAIR 2 ITA NO.1449/K/2012 K. G. ESTATE PVT. LTD., AY 2006-07 MARKET VALUE OF THE RENT AT RS.15 LACS AND COMPUTED THE INCOME OF THE ASSESSEE UNDER THE HEAD INCOME FROM HOUSE PROPERTY. AGGRIEVED, ASSESSEE PR EFERRED APPEAL BEFORE CIT(A), WHO ALSO CONFIRMED THE ACTION OF AO IN ASSESSING THE RENTAL INCOME RECEIVED BY THE ASSESSEE UNDER THE HEAD INCOME FROM HOUSE PROPERTY AS AGAINST CLAIMED BY THE ASSESSEE AS INCOME FROM BUSINESS OR PROFESSION BY OBSERVING AS UNDER: I HAVE CAREFULLY CONSIDERED THE SUBMISSION OF THE A PPELLANT ALONG WITH THE DECISIONS OF THE CASE LAWS RELIED UPON, PERUSED THE FACTS OF THE CASE INCLUDING THE IMPUGNED ASSESSMENT ORDER AND OTHER MATERIALS BROUGHT ON REC ORD AND FOR THE FOLLOWING REASONS, I AM OF THE OPINION THAT THE AO HAS CORRECTLY ASSESSE D THE RENTAL INCOME UNDER THE HEAD OF INCOME FROM HOUSE PROPERTY INSTEAD OF INCOME FRO M BUSINESS OR PROFESSION AS SHOWN BY THE APPELLANT. 1.0 IN SUPPORT OF THE SUBMISSION THAT THE RENTAL INCOME IS BUSINESS INCOME, THE APPELLANT HAS SUBMITTED THAT IT HAS LEASED ITS OFFICE PREMISES TO THE LICENSEE AS PER THE LEAVE & LICENCE AGREEMENT AS THE APPELLANT FOR THE TIME BEING WERE NOT IN NEED OF THE SAID PREMISES AND WERE DESIROUS OF GIVING ON LEAVE AND LICENSE THE SA ID OFFICE PREMISES WITH A MOTIVE TO EARN INCOME FROM THE BUILDING FOR A TEMPORARY PERIO D WITH AN INTENTION AND ULTIMATE OBJECT OF EXPLOITING THE ASSET OF THE COMPANY IN TH E BEST POSSIBLE MANNER FOR THE MAXIMUM COMMERCIAL GAINS. FOR THIS THE LD. COUNSEL RELIED ON THE HONBLE SUPREME COURTS DECISION IN THE CASE OF S.G. MERCANTILE COR PORATION (P.) LTD. VS. COMMISSIONER OF LNCOME TAX [1972] 83 ITR 700 (SC) AND ALSO THE D ECISIONS OF THE OTHER HIGH COURTS REFERRED ABOVE. 1.1. IN THE CASE OF S.G. MERCANTILE CORPORATION (P,) LTD . VS. COMMISSIONER OF INCOME TAX (SUPRA) REFERRED TO BY THE LD. AR, THE ASSESSEE WAS ENGAGED IN THE ACTIVITY OF TAKING A PROPERTY ON LEASE, SETTING UP A MARKET THEREON AND LETTING OUT THE SHOPS AND STALLS IN THE MARKET. THUS, THE IMPORTANT QUESTION WHICH AROSE IN THE LATTER CASE WAS WHETHER THE ACQUISITION OF THE-PROPERTY ON LEASE AND LETTING OU T OF THE SHOP IN THE LATTER CASE WAS IN THE COURSE OF INVESTMENT OR WHETHER IT WAS ESSENTIA LLY A PART OF THE BUSINESS AND TRADING OPERATION OF THE ASSESSEE AND IT WAS HELD AS THE AC TIVITY OF THE ASSESSEE WAS THAT OF A TRADER AND NOT AS OWNER. WHEREAS IN THE PRESENT CAS E, THE UNUSED VACANT PREMISES HAS BEEN LEASED TO ONLY ONE PARTY AND NO FURNITURE OR F IXTURES OR ANY KIND OF SERVICE IS GIVEN TO THE LESSEE (MR. K.G. SINGHANIA (PROPRIETOR & PAR TNER OF SINGHANIA & CO., ADVOCATES & SOLICITORS, MUMBAI ), HENCE THE FACT OF THE APPEL LANT COMPANYS CASE DIFFERS FROM THE CASE OF S.G. MERCANTILE CORPORATION (P.) LTD. VS. C OMMISSIONER OF LNCOME TAX (SUPRA) RELIED BY THE APPELLANTS COUNSEL. 1.2. SIMILARLY, THE FACTS OF THE OTHER CASES RELIED UPON BY THE A/R ARE DISTINGUISHABLE FROM THE FACTS OF THE APPELLANTS CASE AND THUS THE DECISION S OF THOSE CASES ARE NOT APPLICABLE TO THE INSTANT CASE OF THE APPELLANT. 1.3. IN THE CASE OF THE APPELLANT COMPANY THE LETTING OU T OF THE PREMISES TO MR. K.G. SINGHANIA ( PROPRIETOR & PARTNER OF SINGHANIA & CO. , ADVOCATES & SOLICITORS, MUMBAI IS SIMPLE LETTING OUT OF THE UNUSED VACANT PROPERTY AN D IT IS NOT THE CASE OF COMMERCIAL EXPLOITATION OF THE PROPERTY AND ACCORDINGLY I AM O F THE VIEW THAT RENT RECEIVED BY THE APPELLANT COMPANY SHOULD BE ASSESSED UNDER THE HEAD OF INCOME FROM HOUSE PROPERTY AND NOT UNDER THE HEAD OF PROFIT AND GAIN OF BUSIN ESS OR PROFESSION AND THUS, THIS GROUND OF APPEAL ON THIS ISSUE IS DISMISSED. AGGRIEVED, NOW ASSESSEE IS IN APPEAL BEFORE US. 4. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUGH FACTS AND CIRCUMSTANCES OF THE CASE. FACTS ARE UNDISPUTED THAT THE ASSESSEE H AS RECEIVED RENT AND TENANT HAS DEDUCTED TDS U/S. 194-I OF THE ACT. THE TERMS OF A GREEMENT ARE ONLY TENANCY ON ANNUAL 3 ITA NO.1449/K/2012 K. G. ESTATE PVT. LTD., AY 2006-07 BASIS AND TENANT IS A PROPRIETORSHIP CONCERN OF ONE OF THE DIRECTORS OF THE ASSESSEE COMPANY. ONCE IT IS A FACT THAT THE ASSESSEE HAS EA RNED RENTAL INCOME FROM HOUSE PROPERTY THE INCOME EARNED IS TO BE ASSESSED UNDER THE HEAD INCOME FROM HOUSE PROPERTY AS HELD BY VARIOUS JUDGMENTS OF HONBLE A PEX COURT AND PARTICULARLY HONBLE SUPREME COURT IN THE CASE OF SHAMBHU INVESTMENT PVT . LTD. VS CIT (2003) 263 ITR 143 (SC). THE HONBLE APEX COURT IN THIS CASE HELD THA T THE ASSESSEE HAS LET OUT A PORTION OF THE PREMISES TO VARIOUS OCCUPANTS WITH FURNITURE, F IXTURES, LIGHT, AIR-CONDITIONERS FOR BEING USED AS TABLE SPACES. UNDER AN AGREEMENT, TH E ASSESSEE PROVIDED SERVICES LIKE WATCH AND WARD STAFF, ELECTRICITY, WATER AND OTHER COMMON AMENITIES AND SERVICES RENDERED WAS NOT SEPARATELY CHARGED BUT THE MONTHLY RENT INCLUDES ALL THESE CHARGES PAID TO THE ASSESSEE. IN SUCH SITUATION, HONBLE SUPREM E COURT STATED THAT, IT CANNOT BE SAID THAT THE ASSESSEE WAS EXPLOITING THE PROPERTY FOR I TS COMMERCIAL BUSINESS ACTIVITIES AND SUCH BUSINESS ACTIVITIES WERE PRIME MOTIVE AND LETT ING OUT THE PROPERTY WAS A SECONDARY ONE. SIMILARLY, IN THE PRESENT CASE BEFORE US ALSO , THE MAIN OBJECT OF THE ASSESSEE IS EARNING A RENT SIMPLICITOR AND NOT EXPLOITING THE P ROPERTY FOR THE BUSINESS ACTIVITIES. MERELY BECAUSE INCOME IS ATTACHED TO ANY IMMOVABLE PROPERTY, IT CANNOT BE THE SOLE FACTOR FOR ASSESSING SUCH INCOME AS INCOME FROM HO USE PROPERTY. WHAT HAS TO BE SEEN IS, WHAT WAS THE PRIMARY OBJECT OF THE ASSESSEE WHI LE EXPLOITING THE PROPERTY? AS IN THE PRESENT CASE, THE MAIN INTENTION OF THE ASSESSEE CO MPANY IS LETTING OUT THE PROPERTY AND EARNING RENTAL INCOME AND HENCE, IN SUCH CIRCUMSTAN CES, THE ONLY CONCLUSION WILL BE THAT THIS RENTAL INCOME IS NOTHING BUT INCOME FROM HOUS E PROPERTY 5. AS THE ISSUE IS SQUARELY COVERED IN FAVOUR OF TH E REVENUE AND AGAINST THE ASSESSEE, WE HAVE NO HESITATION IN CONFIRMING THE ORDERS OF T HE LOWER AUTHORITIES. ACCORDINGLY, THIS ISSUE OF THE ASSESSEES APPEAL IS DISMISSED. 6. IN THE RESULT, APPEAL OF ASSESSEE IS DISMISSED. 7. ORDER IS PRONOUNCED IN THE OPEN COURT ON 10.09.2 014. SD/- SD/- , ! , (SHAMIM YAHYA ) (MAHAVIR SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 10 TH SEPTEMBER, 2014 ,- #./ 0 JD.(SR.P.S.) 4 ITA NO.1449/K/2012 K. G. ESTATE PVT. LTD., AY 2006-07 1 *2 3 2%4- COPY OF THE ORDER FORWARDED TO: 1 . () / APPELLANT M/S. K. G. ESTATE PVT. LTD., C/O, AGARW AL VISHWANATH & ASSOCIATES, 7B, DACRES LANE, 1 ST FLOOR, KOLKATA-700 069 2 *+() / RESPONDENT ITO, WARD-8(3), KOLKATA. 3 . # ( )/ THE CIT(A), KOLKATA 4. 5. # / CIT KOLKATA 2:; *# / DR, KOLKATA BENCHES, KOLKATA +2 */ TRUE COPY, #