D.C.I.T., Circle - 6, Kolkata, Kolkata V. National Engineering Industries Ltd., Kolkata

ITA 1509/KOL/2009

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 7949 (ITAT-KOLKATA)
• Duration Of Justice: 7 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-03-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2006-2007
• Appeal Filed On: 27-08-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K HARIPRASAD
• Assessee Lawyers: R N BAJORIA
• Keywords: Business income; Depreciation; Business expenditure; Reasonable cause

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL : C BENCH : KOLKATA [ BEFORE SHRI B.R.MITTAL, J.M. & SHRI B.C. MEENA, A.M. ] I.T.A.NO. 1509 (KOL) OF 2009 ASSESSMENT YEAR 2006-07 DY.COMMISSIONER OF INCOME-TAX -VS- NATIONAL ENGIN EERING INDS. LTD. CIRCLE-6, KOLKATA. KOLKATA (PAN-AAACN9969L) ( APPELLANT ) ( RESPONDEN T ) APPELLANT BY : SRI K. HARIPRASAD, CIT RESPONDENT BY : SRI R.N.BAJORIA O R D E R PER SRI B.C.MEENA, A.M. : THIS IS THE APPEAL FILED BY THE REVENUE AGAINST THE ORDER DATED 04.5.2009 OF C.I.T.(A)-VI, KOLKATA FOR ASSESSMENT YEAR 2006-07. 2. THERE IS A DELAY OF 18 DAYS IN FILING OF THIS A PPEAL BY THE REVENUE. THE REVENUE HAS SUBMITTED CONDONATION PETITION EXPL AINING THE REASONS FOR SUCH DELAY. AFTER HEARING BOTH THE SIDES ON TH E ISSUE, WE FIND THAT THE DELAY WAS FOR REASONABLE CAUSE. WE, THEREFORE, CON DONE THE DELAY AND ADMIT THE APPEAL FOR HEARING ON MERITS. 3. THE GROUNDS RAISED IN THIS APPEAL BY THE REVEN UE READ AS UNDER : 1. THAT, ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN LAW AS WELL AS ON FACTS IN DELETING THE ADDITION OF RS.1,65,46,320/-, MADE BY THE ASSESSING OFFICER AS RENT RECE IVABLE, WITHOUT CONSIDERING THE FACT THAT HE HIMSELF CONFIRMED SIMILAR ADDITION IN THE CASE OF NTS (P) LTD. FOR A.Y. 2004-05. 2. THAT, ON THE FACTS AND CIRCUMSTANCES OF THE CASE, TH E LD. CIT(A) HAS ERRED IN LAW AS WELL AS ON FACTS IN DELETING THE ADDITION OF RS.1,65,46,320/- WITHOUT CONSIDERING THE PROVISIONS OF THE AC T WHICH STATES THAT WHERE A PROPERTY OR ANY OF ITS PART IS LET OUT THEN IF ACTUAL RENT RECEIVED OR RECEIVABLE IS IN EXCESS OF THE ANN UAL VALUE OF THE PROPERTY, SUCH RENT RECEIVED OR RECEIVABLE WILL BE TR EATED AS THE ANNUAL VALUE OF THE PROPERTY. 3. THAT, ON THE FACTS AND CIRCUMSTANCES OF THE CASE, TH E LD. CIT(A) HAS ERRED IN LAW AS WELL AS ON FACTS IN HOLDING THAT THE SERVIC E CHARGES RECEIVED BY THE ASSESSEE FROM THE TENANTS ARE BUSINESS INCOME 2 INSTEAD OF INCOME FROM HOUSE PROPERTY WITHOUT CONSIDERING THE FACT THAT SUCH SERVICES ARE INSEPARABLE PART OF TENANCY AGRE EMENT AND IN ABSENCE OF ANY TENANT SUCH SERVICES WILL BECOME REDUNDANT. 4. THAT, ON THE FACTS AND CIRCUMSTANCES OF THE CASE, TH E LD. CIT(A) HAS ERRED IN LAW AS WELL AS ON FACTS IN HOLDING THAT THE SERVIC E CHARGES RECEIVED BY THE ASSESSEE FROM THE TENANTS ARE BUSINESS INCOME INSTEAD OF INCOME FROM HOUSE PROPERTY WITHOUT CONSIDERING THE DECISION OF HONBLE KOLKATA HIGH COURT, PRONOUNCED IN THE C ASE OF SHAMBHU INVESTMENT (P) LTD. [249 ITR 47], WHERE IT WAS HELD THAT WHEN RENDERING SERVICES TO THE TENANTS ARE INTEGRAL PAR T OF THE TENANCY AGREEMENT SUCH SERVICE CHARGES BECOME PART O F INCOME FROM HOUSE PROPERTY. 4. AT THE OUTSET OF THE HEARING, THE LD. A/R SUBMI TTED THAT THE ISSUE INVOLVED IN GROUNDS NO. 1 & 2 ABOVE IS COVERED BY T HE DECISION OF HONBLE I.T.A.T. IN THE ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2005-06 VIDE ITA NO. 855 (KOL)/2008, ORDER DATED 18/9/2009. THE LD. DEPARTMENTAL REPRESENTATIVE ALSO DID NOT OBJECT TO THE ABOVE SUB MISSION OF THE LD. A/R THAT THE ISSUE OF ANNUAL LETTING VALUE OF THE PROPE RTY IS COVERED BY THE SAID DECISION OF I.T.A.T. 5. AFTER HEARING BOTH THE SIDES, WE FIND THAT THE I.T.A.T. HAS DEALT WITH THIS ISSUE IN PARAS-6 TO 9 OF ITS ORDER, WHEREIN TH E I.T.A.T. HELD AS UNDER :- 6. IN RESPECT OF GROUND NO. 2, THE AO HAS DEALT THE ISSUE AS UNDER : NOW COMES THE ISSUE DETERMINING THE ANNUAL VALUE OF THE PROPERTY EAR MARKED FOR LET OUT. IN THE SUBMISSION DT. 20.9.07 AS REP RODUCED HEREINBEFORE IT IS SEEN THAT THE CONSTRUCTION OF THE BUILDING NAMED 'BIRLA TOWERS' AT 25, BARAKHAMBA ROAD, WAS COMPLETE AND THE SANCTION FROM N. DELHI MUNICIPAL COUNSEL IN RESPECT OF ELECTRICAL LOAD W AS RECEIVED ON 27.04.2000 AND ACTUAL ELECTRICITY CONNECTION WAS RECEIVED ON 12.05.04. IT IS FURTHER SEEN THAT AREA TOTALING TO 3,746 SQ. FT. WA S LET OUT ON RENT TO THREE COMPANIES AND TOTAL RENT RECEIVED WAS TO THE T UNE OF RS.15,14,927/-. IT WAS FURTHER STATED IN SUBSEQUENT SUBM ISSIONS THAT TILL 31.3.2005, 3,747 SQ. FT. WERE LET OUT AND EFFORTS WERE ON FOR LETTING OUT THE BALANCE AREA. SUCH AREA WERE LET OUT FROM TIME TO TIME IN SUBSEQUENT YEARS. THEREFORE, IT IS CLEAR THAT THE PROPERTY EAR MA RKED FOR LET OUT WAS COMPLETE IN ALL RESPECT DURING FY 2004-05. SECTION 23 OF THE IT ACT STATES THAT ANNUAL VALUE OF ANY PROPERTY SHALL BE DEEMED TO BE - A} THE SUM FOR WHICH THE PROPERTY MIGHT REASONABLY EXPECTED TO LET FROM YEAR TO YEAR. 3 B) WHERE THE PROPERTY OR ANY PART OF THE PROPERTY IS LET AN D ACTUAL RENT RECEIVED OR RECEIVABLE BY THE OWNER IN RESPECT THEREOF IS A EXCESS OF THE SUM REFERRED TO IN CLAUSE (A) THE AMOUNT SO RECEIVED OR REC EIVABLE. C} WHERE THE PROPERTY OR ANY PART OF THE PROPERTY IS LET AND WAS VACANT DURING THE WHOLE OR ANY PART OF THE PREVIOUS YEAR AND OWIN G TO SUCH VACANCY THE ACTUAL RENT RECEIVED OR RECEIVABLE BY THE OWNER IN RESPECT THEREOF IS LESS THAN THE SUM REFERRED TO IN CLAUSE (A), THE AMOUNT SO RECEIVED OR RECEIVABLE. THE ASSESSEE IN ITS SUBMISSION HAS RELIED ON THE PRO VISION OF SEC. 23(L)(C) AS ABOVE. IT MAY BE SEEN THAT THE ABOVE PROVISION IS APPLICABLE WHEN THE PROPERTY IS LET AND WAS VACANT DURING THE WHOLE OR AN Y PART OF THE PREVIOUS YEAR. THE EXPLANATION TO SEC.23(L) ALSO STATES THAT FOR THE PURPOSES OF CL.(B) OR CL.( C) OF THIS SUB SECTION THE AMO UNT OF ACTUAL RENT RECEIVED OR RECEIVABLE BY THE OWNER SHALL NOT INCLUDE, SUBJECT TO SUCH RULES AS MAY BE MADE IN THIS BEHALF, THE AMOUNT OF RE NT WHICH THE OWNER CANNOT REALIZE. SEC.23(1)(A) IS A DEEMING SECTION AND IN THIS CASE TH E PROPERTY SET APART FOR LETTING OUT AND NOT ACTUALLY LET OUT ALL THROUGH TH E YEAR, THE ANNUAL VALUE OF THE PROPERTY WHICH WAS NOT LET OUT WILL BE GO VERNED BY SEC.23(1)(A). IT IS NOT A CASE WHERE THE PROPERTY IS LET AND WAS VACANT DURING THE WHOLE OR ANY PART OF THE PREVIOUS YEAR AS ENVISAGED IN SEC.23(1)(C). THEREFORE, ON THE BASIS OF RENT RECEIVED/R ECEIVABLE THE SUM FOR WHICH THE PROPERTY MIGHT REASONABLY BE EXPECTED TO LET FROM YEAR TO YEAR IS TAKEN ON THE BASIS OF ACTUAL RENT RECEIVED F ROM THE LET OUT PORTION OF THE PROPERTY EARMARKED FOR LETTING OUT. THIS FIND ING GETS SUPPORT FROM THE DECISION IN THE CASE OF SUSHIL AANSAL 254 ITR 42(D EI.) IN WHICH THE DECISION OF APEX COURT IN THE CASE OF LIQUIDATOR OF MAHAMUDABAD PROPERTY P. LTD. (124 ITR 31) WAS CONSIDERED AND IT WAS HELD AS UNDER ' THE FIRST TWO GROUNDS OF APPEAL PERTAIN TO VACANCY ALLOWANCE IN RESPECT OF THE SECOND AND THIRD FLOOR OF THE BUILDING 'SANDHYA DEEP' UNDER THE PROVISIONS OF SECTION 24 OF THE ACT . IT IS ALSO URGED THAT THE AUTHORITIES BELOW WERE WRONG IN ASSESSING TH E INCOME OF THE PORTIONS OF THE PROPERTY WHICH WERE UNOCCUPIED THE CONTENTION ON BEHALF OF THE ASSESSEE IS THAT TILL A BUILDING IS OCCUPIED AFTER IT IS BUILT THE INCOME THEREOF CANNOT BE ASSESSED. ALTERNA TIVELY THE CLAIM IS FOR VACANCY ALLOWANCE FOR THAT PERIOD THE MATTER I S, HOWEVER DIRECTLY COVERED BY RULING OF THE SUPREME COURT IN THE CASE OF LIQUIDATOR OF MAHAMUDABAD PROPERTY P. LTD -VS- CIT( 198 0) 124 ITR 31. RESPECTFULLY, FOLLOWING THE SAME WE HOLD THAT THE AUT HORITIES BELOW WERE CORRECT IN DENYING THE CLAIM FOR VACANCY A LLOWANCE. THEY WERE ALSO CORRECT IN NOTIONALLV ASSESSING THE INCOME FROM THE PROPERTY EVEN WHEN IT WAS NOT LET OUT. ' ANNUAL RENT RECEIVED DURING THE YEAR BY LETTING 3,746 SQ. FT. IS RS.15,14,927/-. THEREFORE, THE TOTAL ANNUAL VALUE FOR 20,554 SQ. FT. WILL BE RS.83,12,282/. 4 THEREFORE, THE AO MADE THE ADDITION (RS.83,12,282 RS.15,14,9 27) OF RS.67,97,355/-. IN APPEAL, THE LD. CIT(A), DELETED THE AFORESA ID ADDITION AS MADE BY THE AO. 7. AT THE TIME OF HEARING BEFORE US, THE LD. D.R. RELIED ON THE ORDER OF THE AO AND PRAYED BEFORE THE BENCH TO CONFIRM THE SAME. 8. ON THE OTHER HAND, THE LD. COUNSEL FOR THE ASSESSEE WHILE REITERATING HIS SAME SUBMISSION AS SUBMITTED BEFORE THE LOW ER AUTHORITIES RELIED ON THE ORDER OF THE LD. CIT(A). HE ALSO S UBMITTED THAT THIS ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE C OORDINATE BENCH DECISION IN THE CASE OF DCIT VS- M/S. GMMCO LTD., ITA NO . 854/KOL/2008, AY 2005-06 DATED 14.8.2008, WHICH HAS BEEN UPHELD BY HONBLE HIGH COURT OF CALCUTTA VIDE ITS ORDER DATED 13.1. 2009.. HE LASTLY SUBMITTED THAT THE ACTION OF THE LD. CIT(A) IN THIS REGARD MAY BE UPHELD. 9. WE HAVE HEARD BOTH THE SUBMISSIONS AND HAVE PERUSE D THE MATERIAL AVAILABLE ON RECORD. WE ALSO FIND THAT THE ISSUE ON HAND IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE ORD ER OF THE COORDINATE BENCH IN THE CASE OF DCIT VS- M/S. GMMCO L TD., ITA NO. 854/KOL/2008, AY 2005-06 DATED 14.8.2008, WHEREIN AN IDENT ICAL ISSUE WAS DECIDED BY THE TRIBUNAL, WHICH READS AS UNDER : 17. HEARD BOTH THE PARTIES AT LENGTH, PERUSED THE MATE RIAL AVAILABLE ON RECORD AND ON CAREFUL PERUSAL OF THE CASE LAWS CITED B Y BOTH THE PARTIES, WE FIND FORCE IN THE CONTENTION OF THE LD. COUNSEL F OR THE ASSESSEE THAT THE RATIO OF THE DECISION OF ITAT MUMBAI BENCH REPO RTED IN 110 ITD 158 (SUPRA) IS SQUARELY APPLICABLE TO THE FACTS OF THIS C ASE. SINCE THE LD. CIT(A) HAS GIVEN RELIEF TO THE ASSESSEE BY FOLLOWING TH E DECISION OF ITAT MUMBAI BENCH, WE FIND NO INFIRMITY IN THE ORDER OF TH E LD. CIT(A). FOR THE SAKE OF BREVITY THE RELEVANT PORTION OF THE ORDER OF THE LD. CIT(A) IS REPRODUCED AS UNDER : 7.2. I HAVE CONSIDERED THE SUBMISSION OF THE LD. A/R OF THE APPELLANT AND ALSO GONE THROUGH THE ASSESSMENT ORDER. CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE, I AM INCLIN ED TO ACCEPT THE SUBMISSION OF THE LD. A/R OF THE APPELLANT. SECTION 23 WAS AMENDED W.E.F., A.Y. 2002-03. CBDT'S CIRCULAR NO. 14/2001 WHICH HAS BEEN FILED AT PAGE 75 & 76 OF THE PAPER BOOK HAS BEEN PERUSED. THE CBDT HAS CLARIFIED IN THE ABOVE CIRCULAR THAT T HE SUBSTITUTE OF SECTION 23 RETAINS THE EXISTING CONCEPT OF ANNUAL VA LUE AS BEING THE SUM FOR WHICH THE PROPERTY MIGHT REASONABLY BE EXPE CTED TO BE LET FROM YEAR TO YEAR I.E., ANNUAL LETTING VALUE (ALV). HOWEVE R, IN CASE OF LET OUT PROPERTY, THE CONCEPT OF 'ANNUAL RENT' HAS BEEN REMOVED. THE NEW SECTION PROVIDES THAT WHERE THE PROPERTY OR ANY PART OF THE PROPERTY IS LET AND THE ACTUAL RENT RECEIVED OR RECEI VABLE IS IN EXCESS OF THE ALV, THE AMOUNT SO RECEIVED OR RECEIVABLE SHALL BE THE ANNUAL 5 VALUE. THEREFORE, IT IS CLEAR THAT WHERE ANY PART OF T HE PROPERTY WAS VACANT THEN ONLY ACTUAL RENT HAS TO BE TAKEN. IT HAS BE EN FURTHER CLARIFIED IN THE AFORESAID CIRCULAR THAT WHERE THE PROPERTY OR ANY PART OF THE PROPERTY IS LET OUT AND WHETHER TAKEN DUR ING THE WHOLE OR ANY PART OF THE PREVIOUS YEAR AND OWING TO SUCH VACA NCY THE ACTUAL RENT RECEIVED OR RECEIVABLE IS LESS THAN THE ALV A SU M SO RECEIVED OR RECEIVABLE SHALL BE THE ANNUAL VALUE. RELIANCE IS ALSO BEE N PLACED ON THE DECISION OF ITAT, MUMBAI 'C' BENCH, MUMBAI REP ORTED IN 110 ITD 158 (2008) IN THE CASE OF PREMSUDHA EXPORT PVT. L TD VS. ACIT, CENTRAL CIRCLE-10, MUMBAI WHERE ITAT HAS HELD THAT IF A PROPERTY IS HELD WITH AN INTENTION TO LET OUT WITH THOSE MADE FOR LE TTING IT OUT IT CAN BE SAID THAT SUCH A PROPERTY IS A LET OUT PROPER TY AND THEREFORE, IT IS ONLY LETTING VALUE WOULD BE WORKED OUT AS PER CL AUSE 'C' OF SECTION 23(1). IN THE APPELLANT'S CASE FACTS ARE NOT DISPUTED IN THE ASSESSMENT ORDER. THE AREA MEANT TO BE LET OUT WAS PA RTLY LET OUT AND THE BALANCE AREA MEANT TO BE LET OUT WAS NOT IN FACT LET OUT DURING THE YEAR. THERE IS NO DOUBT THAT IN FACT SUCH AREA IS LET OUT IN THE NEXT FINANCIAL YEAR. SECTION 23 WAS SUBSTITUTED BY THE FINANCE ACT, 2001 W.E.F., 01.04.2002. THE CASE LAWS RELIED UPON BY THE AO ARE WITH REFERENCE TO THE OLD PROVISION OF SECTION 23 AND THE SUBSTITUTE OF PROVISION OF SECTION 23 WAS NOT CONSID ERED IN THE CASE LAWS RELIED UPON BY THE AO. IN VIEW OF THE ABOVE, TH E ADDITION OF RS.25,49,040/- MADE BY THE AO IS HEREBY ORDERED TO BE D ELETED. ACCORDINGLY, GROUND NO. 6 IS ALLOWED. IN VIEW OF THE ABOVE, WE FIND NO INFIRMITY IN THE ORD ER OF THE LD. CIT(A) AND THE SAME IS HEREBY UPHELD. THEREFORE, THIS GROUND OF THE REVENUE IS DISMISSED. RESPECTFULLY FOLLOWING THE ABOVE ORDER OF THE COORDINATE B ENCH, WHICH HAS ALSO BEEN UPHELD BY THE HONBLE JURISDICTIONAL HIGH COU RT VIDE ITS ORDER DATED 13.1.2009 AVAILABLE IN THE PAPER BOOK, WE UPHOLD THE ACT ION OF THE LD. CIT(A) AND, THEREFORE, THE GROUND OF APPEAL OF THE REVENUE IS DISMISSED. RESPECTFULLY FOLLOWING THE ABOVE ORDER OF THE COORD INATE BENCH, WE UPHOLD THE ORDER OF THE C.I.T.(A) ON THE ISSUE AND DISMISS GROUNDS NO. 1 & 2 OF THE REVENUES APPEAL. 6. WHILE PLEADING ON GROUNDS NO.3 & 4 ABOVE, THE L D. DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT ALTHOUGH THIS ISSUE I S ALSO COVERED BY THE EARLIER DECISION OF I.T.A.T. IN THE ASSESSEES OWN CASE, AS CITED BY THE ASSESSEES LD. A/R, HOWEVER, IN VIEW OF DECISION OF HONBLE CALCUTTA HIGH COURT IN THE CASE OF SHAMBHU INVESTMENT (P) LTD. [2 49 ITR 47], THE SERVICE CHARGES RECEIVED FROM THE TENANTS SHOULD BE TAXED A S INCOME FROM HOUSE 6 PROPERTY. THE LD. A/R SUBMITTED THAT THERE ARE SEP ARATE AGREEMENTS FOR THE TENANCY AND THE SERVICES PROVIDED TO THE TENANT S. THE ASSESSEE HAS PROVIDED COMMON SERVICES TO ALL THE OCCUPANTS OF TH E BUILDING AND SOME OF THEM ARE TENANTS OF THE ASSESSEE. SOME PORTION OF THE BUILDING IS SELF- OCCUPIED AND SOME PORTION IS OCCUPIED BY OTHER OWNE RS OR TENANTS OF THE OTHER OWNERS. THESE SERVICES INCLUDE RUNNING & MAI NTENANCE OF AIR- CONDITIONERS, LIFTS, PUMPS, TRANSFORMERS, GENERATOR S, CLEARING & REPAIRS, PROVIDING SECURITY, WATER SUPPLY ETC. FOR THESE SER VICES, SEPARATE CHARGES ARE BEING RECEIVED BY THE ASSESSEE. THEREFORE, THE FACTS OF THE PRESENT CASE ARE DIFFERENT THAN THE CASE RELIED UPON BY THE LD. DEPARTMENTAL REPRESENTATIVE. THE HONBLE I.T.A.T. HAS ALREADY D ECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE IN THE ASSESSEES OWN CASE IN ITA NO. 855 (KOL)/ 2008. 7. AFTER HEARING BOTH THE SIDES AND CONSIDERING TH EIR PLEADINGS, WE FIND THAT THE I.T.A.T. HAS DECIDED THE ISSUE AS UNDER :- 10. IN RESPECT OF GROUND NO. 3, THE AO HAS DEALT THE ISSUE AS UNDER : IT HAS BEEN REFERRED TO EARLIER THAT IN THE SUBMIS SION DATED 20.09.2007, IT WAS AGREED WITH ALL THE TENANTS AND OTHER CO OWNERS THAT THE ASSESSEE WILL PROVIDE COMMON SERVICES TO THE TENANTS. THE COMMON SE RVICES ARE FOR RUNNING AND MAINTENANCE OF AIRCONDITIONERS, LIFTS, CLEA NING AND REPAIRING, PROVIDING SECURITY, PROVIDING FACILITIES FOR RELATED B USINESS NEEDS. SEPARATE CHARGES WERE RECEIVED FOR PROVIDING SUCH S ERVICES. THE ASSESSEE HAS ALSO FURNISHED SUCH INCOME RECEIVED AND EXPENSES INCURRED. IT HAS FURTHER BEEN STATED THAT NET INCOME FROM SUCH ACTIVITIES IS BEING SHOWN AS INCOME FROM BUSINESS. IN A SEPARATE PARA IN THE SAID SUBMISSION IT HAS FUR THER BEEN STATED THAT DEPRECIATION ON PLANT AND MACHINERY USED FOR PROVID ING COMMON SERVICES HAS BEEN CLAIMED. THE MACHINERIES DEPLOYED IN THE SAID BUILDIN G ARE : FIRE SUPPRESSION SYSTEM ELEVATOR HVAC CENTRAL AIRCONDITIONERS ELECTRICALS DG SET THE VALUE OF THE ABOVE MACHINERY AS PER DETAILS FILED IS R S.4,23,19,657/-. THE INCOME AND EXPENDITURE ON MAINTENANCE HAS BEEN DISCLOSED BY THE ASSESSEE AS UNDER : 7 MAINTENANCE INCOME BUILDING MAINTENANCE SERVICE 17,37,402 REIMBURSEMENT OF AC EXPENSES 78,200 REIMBURSEMENT OF ELECTRICAL EXPENSES 8,12,420 REIMBURSEMENT OF POWER UTILIZATION CHARGES 18,62,568 44,90,590 (A) 44,90,590 MAINTENANCE EXPENSES BUILDING RELATING TO PLANT AND MACHINERY 15,50,244 SALARY AND BONUS 3,24,342 CONTRIBUTION TO PF, GRATUITY AND OTHERS 36,837 WELFARE EXPENSES 9,215 3,70,394 ELECTRICITY 13,20,527 REPAIRS TO BUILDING 1,36,334 GENERAL MAINTENANCE & ESTABLISHMENT (MISC) 6,43,684 24,70,939 (B) 43,91,577 IT IS SEEN FROM THE DETAILS FILED THAT THE ASSESSEE ALO NE OWNS 50% OF THE TOTAL PROPERTY AND THE BALANCE 50% IS OWNED BY THE O THER CO OWNERS OF THE BIRLA GROUP OF COMPANIES. IT IS FURTHER SEEN TH AT THE MACHINERIES DEPLOYED AND OTHER EXPENSES INCURRED FOR PROVIDING S ERVICES IS IN RELATION TO EARNING INCOME FROM THE PROPERTY. ALTHOUGH SEPA RATE AGREEMENTS HAVE BEEN ENTERED INTO BY THE ASSESSEE WITH ITS TENAN TS FOR PROVIDING SERVICE AND RECEIPT OF CHARGES FOR SUCH SERVICES TH E ACTIVITIES RELATED CANNOT BE EQUATED WITH THAT OF BUSINESS. THEREFORE, THE INCOME FROM SERVICE CHARGES IS TO BE TREATED AS INCOME FROM HOU SE PROPERTY. ACCORDINGLY THE SERVICES CHARGES RECEIVED IS EXCLUD ED FROM BUSINESS INCOME AND THE EXPENDITURE RELATED TO THE RENDERING OF SUCH SERVICES INCLUDING DEPRECIATION ON PLANT AND MACHINERIES DEPLO YED IS ADDED TO THE BUSINESS INCOME OF THE ASSESSEE AS UNDER : 1. MAINTENANCE EXPENSES AS PER DETAILS FILED 43,91,577 ADD : DEPRECIATION ON PLANT AND MACHINERY DEPLOYED 25% OF RS.4,23,19,657/- 1,05,79,914 1,49,71,491 THIS AMOUNT IS BEING TREATED AS EXPENSES RELATED T O HOUSE PROPERTY INCOME AND ADDED IN COMPUTATION OF BUSINESS INCOME. IN APPEAL, THE LD. CIT(A) HAS OBSERVED AS UNDER : 6.3 I HAVE CONSIDERED THE SUBMISSIONS OF THE LD. AIR OF THE APPELLANT AND ALSO GONE THROUGH THE ASSESSMENT ORDER. IN THE MU LTI-STORED BUILDING COMPLEX AT BARAKHAMBA ROAD, NEW DELHI THE TOTAL CONST RUCTED AREA IS 81076 SQ. FT. AND APPELLANT OWNS 40541 SQ. FT. THE BALAN CE AREA IS 8 OWNED BY OTHER LIMITED COMPANIES NAMELY, ORIENT PAPER & INDUSTRIES LTD., GMMCO LTD. & HYDERABAD INDUSTRIES LTD. OUT OF THE AREA OWNED BY THE APPELLANT A MAJOR PART OF IT IS USED BY THE APPE LLANT FOR ITS OWN BUSINESS. THE APPELLANT IS RUNNING BUSINESS OF PROVID ING SERVICES TO VARIOUS TENANTS, OWNERS IN THE BUILDING. SUCH SERVIC ES ARE RENDERED BY THE APPELLANT EVEN IN RESPECT OF THE AREA NOT AT ALL O WNED BY IT. THERE ARE SEPARATE AGREEMENTS WITH EACH TENANT I OWNER FOR PRO VIDING COMMON SERVICES. COPY OF ONE OF SUCH AGREEMENT WITH ROLLS ROYC E INDIA LTD. HAS BEEN FILED IN THE PAPER BOOK. THE AREA OCCUPIED BY RO LLS ROYCE INDIA LTD. IS NOT AT ALL OWNED BY THE APPELLANT. SIMILAR AGREEMENTS ARE WITH OTHER PARTIES. THE INCOME RECEIVED FROM RENDERING COMMON S ERVICES IN RESPECT OF THE AREA EVEN NOT OWNED BY THE APPELLANT CANNOT B E TREATED AS INCOME FROM HOUSE PROPERTY AS HAS BEEN DONE BY THE AO. THE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS MODEL MFG. CO. (P) LTD. 175 ITR 374 (CAL ) & CIT VS RUSSEL PROPERTIES PVT. LTD. 137 ITR 473 (CAL) HAS H ELD THAT SUCH INCOME IS ASSESSABLE AS BUSINESS INCOME AND APPELLAN T IS ENTITLED FOR DEDUCTION OF ACTUAL EXPENSES AND DEPRECIATION. FURTHE R IN RESPECT OF THE AREA OWNED BY THE APPELLANT AND BEING USED FOR ITS OW N BUSINESS EXPENDITURE INCURRED FOR MAINTENANCE OF SUCH AREA H AS NECESSARILY TO BE ALLOWED AS BUSINESS EXPENDITURE. IN VIEW OF THE ABOVE AND IN VIEW OF THE FACTS OF THE CASE THE SERVICE CHARGES HAS TO BE TRE ATED AS INCOME FROM BUSINESS AND THE APPELLANT IS ALSO ENTITLED FOR ALLOWANCE OF EXPENSES AND DEPRECIATION ON ASSETS USED FOR RENDERING SUCH SERV ICES ACCORDINGLY, GROUND NO. 5 IS ALLOWED. AGGRIEVED BY THE SAID ORDER, NOW THE REVENUE IS IN APPEAL BEFORE US. 11. AT THE TIME OF HEARING BEFORE US, THE LD. D.R. HEAVILY R ELIED ON THE ORDER OF THE AO AND PRAYED BEFORE THE BENCH TO CONFIRM THE SAME. 12. ON THE OTHER HAND, THE LD. COUNSEL FOR THE ASSESS EE WHILE REITERATING HIS SAME SUBMISSIONS AS SUBMITTED BEFORE THE LO WER AUTHORITIES RELIED ON THE ORDER OF THE LD. CIT(A). HE ALSO S UBMITTED THAT THE ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE D ECISION OF HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS- MODEL MFG. CO. (P) LTD. 175 ITR 374 (CAL) & CIT VS- RUSSEL PROPERTIES PVT. LTD. 1 37 ITR 473 (CAL). HE, THEREFORE, URGED BEFORE THE BENCH TO CONFIRM THE ACTION OF THE LD. CIT(A). 13. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE M ATERIALS AVAILABLE BEFORE US. WE FIND THAT THE LD. CIT(A) BY FOLLOWING THE DECISIONS OF HONBLE JURISDICTIONAL HIGH COURT CITED SUPRA, HA S GIVEN RELIEF TO THE ASSESSEE. IN THIS VIEW OF THE MATTER AND ALS O FINDING NO CONTRARY MATERIAL BROUGHT ON RECORD BY THE LD. D.R. WE D O NOT FIND ANY INFIRMITY IN THE ORDER OF THE LD. CIT(A) AND THE SAME IS HERE BY UPHELD. THEREFORE, THIS GROUND OF APPEAL OF THE REVENUE IS ALSO DISMISSED. 9 8. FACTS AND CIRCUMSTANCES OF THE ISSUE BEFORE US BEING IDENTICAL TO THOSE FOR ASSESSMENT YEAR 2005-06, THEREFORE, RESPE CTFULLY FOLLOWING THE AFORESAID DECISION OF COORDINATE BENCH, WE UPHOLD T HE ORDER OF THE C.I.T.(A) ON THIS ISSUE AND DISMISS GROUNDS NO. 3 & 4 OF THE REVENUES APPEAL. 9. IN THE RESULT, THE REVENUES APPEAL IS DISMISSE D. ORDER IS PRONOUNCED IN THE COURT ON 31.03.2010. SD/- SD/- [B.R. MITTAL] [B.C. MEEN A] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 31 -03-2010 COPY FORWARDED TO : 1. NATIONAL ENGINEERING & INDS. LTD., 9/1, R.N.MUKHERJ EE ROAD, KOL-1 2. D.C.I.T., CIRCLE-6, KOLKATA. 3. C.I.T.(A)-VI, KOLKATA. 4. THE C.I.T. , KOL- 5. THE DEPARTMENTAL REPRESENTATIVE, ITAT, KOL KATA. TRUE COPY, BY OR DER [DKP] DY. REGISTRAR.