DCIT, Circle - 7(1), Kolkata, Kolkata V. M/s. Ganesh Realty & mall Development Pvt. Ltd., Kolkata

ITA 1622/KOL/2017

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 7833 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-07-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2011-2012
• Appeal Filed On: 10-07-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: C J SINGH
• Assessee Lawyers: MRS NILIMA JOSHI F CAAR
• Keywords: Business income; Depreciation
• Section: 143(3); 143(1); 28; 10

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : KOLKATA [BEFORE HONBLESHRI J. SUDHAKAR REDDY, AM &SHRI S.S. GODARA, JM] I.T.A NO. 1621/KOL/2017 A.Y 2010-11 I.T.A NO. 1622/KOL/2017 A.Y 2011-12 D.C.I.T, CIR-7(1), KOLKATA VS. M/S. GANESH REALT Y & MALL DEVELOPMENT PVT. LTD. PAN: AACCG 7821N (APPELLANT) (RESPOND ENT) SHRI A.K. NAIK, C IT/DR FOR THE APPELLANT/DEPARTMENT : SHRI C.J. SIN GH, JCIT/.DR FOR THE RESPONDENT /ASSESSEE :MRS. NILIMA JOSHI, F CA/AR DATE OF HEARING : 17-05-2019 DATE OF PRONOUNCEMENT :- 22.07-2019 ORDER SHRI S.S. GODARA, JM : 1. THESE TWO REVENUES APPEALS FOR ASSESSMENT YEARS 2010-11 AND 2011-12 ARISE AGAINST THE CIT(A), 15, KOLKATA SEPARATE ORDERS, BOTH DATE D 28-04-2017, PASSED IN CASE NOS. 238/CIT(A)-15/15-16/CIR-7/R&T/KOL AND 239/CIT(A)-15 /15-16/CIR-7/R&T/KOL; RESPECTIVELY INVOLVING PROCEEDINGS U/S 143(3) OF TH E ACT. HEARD BOTH THE PARTIES. CASE FILES PERUSED. 2.THE REVENUES IDENTICAL FORMER SUBSTANTIVE GROUND S IN BOTH THE IMPUGNED ASSESSMENT YEARS CHALLENGES CORRECTNESS OF THE CIT(A)S ACTIO N TREATING THE ASSESSEESLICENCE FEE RECEIPTS OF RS.45,63,699/- AND RS. 2,36,36,658/-, U TILITY CHARGES ON RENTING OF VARIOUS FACILITIES INVOLVING SUMS OF RS. 1,17,76,064/- AND RS. 5,86,46,193/- AS WELL AS ALLOWING DEPRECIATION CLAIMS OF RS.8,04,49,959/- AND RS.6,89 ,49,057/- (ASSESSMENT YEAR-WISE); AS BUSINESS INCOME THAN INCOME FROM HOUSE PROPERTY AND OTHER SOURCES; RESPECTIVELY. 2 ITA NOS. 1621 & 1622/KOL/17 M/S. GANESH REALTY & MALL DEV.PVT. LTD. 2 ITA NOS. 1621 & 1622/KOL/17 M/S. GANESH REALTY & MALL DEV.PVT. LTD. 3. THE REVENUES DURING THE COURSE OF HEARING CASE IS THAT THE ASSESSING OFFICER HAD RIGHTLY ASSESSED THE ABOVE FIRST HEAD OF LICEN CE FEE RECEIVED AS HOUSE PROPERTY INCOME THAN BUSINESS INCOME IN THE TWO ASSESSMEN T YEARS IN ISSUE. IT PLEADS ON THE SAME ANALOGYTHAT UTILITIES SERVICES RECEIPTS HAD AL SO BEEN CORRECTLY ASSESSED AS INCOME FROM OTHER SOURCES. WE DEEM IT APPROPRIATE TO EX TRACT THE CIT(A)S DETAILED DISCUSSION FOR DECIDING THE MAIN ISSUE OF TAXPAYER S LICENCE FEE RECEIPTS AS BUSINESS INCOME AS FOLLOWS:- 3.1 GROUNDS OF APPEAL NO. 1, 2 & 4 THE ASSESSEE IS A DEVELOPER AND IT IS RUNNING A MAL L. IT HAS EARNED INCOME FROM LICENSE FEE, UTILITY CHARGES AND PROFIT ON SALE OF COMMERCIAL PROPERTIES. DURING THE YEAR IT HAS EARNE D INCOME OF RS. 1,63,39,733/- FROM LICENSE FEES AND UTILITY CHA RGES. THIS INCLUDES, OF RS. 45,63,669/- FROM RENT AND RS. 1,17 ,76,064/- FROM UTILITY CHARGES. ASSESSEE HAS ALSO EARNED PROFIT OF RS. 1,07,03,030/- ON SALE OF COMMERCIAL SPACE. ASSESSEE HAD DECLARED ITS RECEIPTS UNDER THE HEAD 'INCOME FROM BUSINESS'. ASSESSEE HAD ALSO CLAIMED DEPRECIATION OF RS. 8,04,49,959/- ON I TS BUILDINGS. HOWEVER, AO HAS NOT ACCEPTED ASSESSEE'S SUBMISSIONS . HE HAS ASSESSED RENTAL INCOME OF RS. 45,63,669/- UNDER THE HEAD 'INCOME FROM HOUSE PROPERTY'. UTILITY CHARGES OF RS. 1,17,7 6,064/- HAS BEEN ASSESSED UNDER THE HEAD 'INCOME FROM OTHER SOU RCES'. DEPRECIATION OF RS. 8,04,49,959/- HAS BEEN DISALLOW ED. ONLY THE PROFIT ON SALE OF COMMERCIAL SPACE HAS BEEN ASSESSE D UNDER THE HEAD INCOME FROM BUSINESS. APPELLANT HAS MADE THE FOLLOWING SUBMISSIONS/OBJECT IONS AGAINST THE ACTION OF THE AO:- (I) IT IS SUBMITTED THAT APPELLANT IS ENGAGED IN TH E BUSINESS OF LETTING OUT OF UNITS FOR COMMERCIAL PURPOSES AFTER ACQUISITION OF THESE PROPERTIES. AO HAS ARBITRARILY CHANGED THE H EADS OF ASSESSABILITY OF RENT AND UTILITY CHARGES. 3 ITA NOS. 1621 & 1622/KOL/17 M/S. GANESH REALTY & MALL DEV.PVT. LTD. 3 ITA NOS. 1621 & 1622/KOL/17 M/S. GANESH REALTY & MALL DEV.PVT. LTD. (II) ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF LETTING OUT OF UNITS FOR COMMERCIAL PURPOSES AFTER ACQUISITION OF PROPERTY. THESE ACTIVITIES HAVE BEEN MENTIONED IN THE OBJECTS IN ME MORANDUM OF ASSOCIATION (AO HAS MENTIONED THE MAIN OBJECTS IN T HE ASSESSMENT ORDER). ALONG WITH LETTING OUT OF UNITS, ASSESSEE PROVIDES SERVICES (UTILITIES) WHICH ARE ESSENTIAL FOR MAINTENANCE AND FUNCTIONING OF THESE UNITS. SOME OF THE MAIN UTILITIES PROVIDED I NCLUDE, HVAC SYSTEM FOR AIR CONDITIONING, DG SETS FOR POWER BACK UP, FIRE FIGHTING SYSTEM, SECURITY ETC. HENCE, ASSESSEE FEEL S THAT IT IS INVOLVED IN BUSINESS ACTIVITIES. (III) ASSESSEE HAS RELIED ON THE JUDGMENT OF HON'BL E SUPREME COURT IN CHENNAI PROPERTIES AND INVESTMENT LTD. VS. CIT(2015) 56 TAXMANN.COM 456. AO HAD RELIED ON THE JUDGMENT OF M ADRAS HIGH COURT IN THE SAME CASE. HOWEVER, HON'BLE SUPRE ME COURT HAS REVERSED THE JUDGMENT OF THE HON'BLE MADRAS HIG H COURT. JUDGMENT OF HON'BLE SUPREME COURT IS IN FAVOUR OF ASSESSEE'S CASE. (IV) ASSESSEE SUBMITS THAT OBJECT OF THE COMPANY SH OULD BE KEPT IN MIND WHILE DECIDING THE NATURE OF RECEIPTS IN ITS HAND. RENT AND UTILITY CHARGES ARE BUSINESS INCOME. IN SUPPORT OF THIS PROPOSITION ASSESSEE HAS RELIED ON THE DECISION OF ITAT ORDER D ATED 29/04/2015 IN MANGALAM FASHION LTD. KOLKATA VS. CIT -7, KOLKATA, WHEREIN IT HAS BEEN HELD THAT RECEIPTS FR OM UTILITY SERVICES ARE INTIMATELY CONNECTED WITH THE PROPERT Y ITSELF AND PART AND PARCEL OF THE INCOME DERIVED FROM THESE TENANT S . (V) APPELLANT HAD MADE TWO SEPARATE AGREEMENTS WITH THE TENANTS. ONE WAS FOR LEASE OF THE COMMERCIAL PROPERTIES AND THE OTHER WAS FOR PROVIDING UTILITY SERVICES. APPELLANT HAS SUBM ITTED THAT UTILITY PERIOD MENTIONED IN THE AGREEMENT COINCIDES WITH LI CENSE PERIOD FOR WHICH LEASE IS GIVEN. THUS, UTILITY SERVICES AR E INSEPARABLE PART OF LICENSE FEES/RENT AGREEMENT. (VI) APPELLANT SUBMITS THAT IT HAS USED ITS ASSETS FOR COMMERCIAL PURPOSES ALONG WITH THE SERVICES RENDERED TO LICENS EES. HENCE, BOTH THE ACTIVITIES ARE IN THE NATURE OF BUSINESS A CTIVITIES. IN SUPPORT OF THIS PROPOSITION, APPELLANT HAS RELIED ON THE FOLLOWING JUDGMENTS/ DECISIONS:- 4 ITA NOS. 1621 & 1622/KOL/17 M/S. GANESH REALTY & MALL DEV.PVT. LTD. 4 ITA NOS. 1621 & 1622/KOL/17 M/S. GANESH REALTY & MALL DEV.PVT. LTD. (A)CIT VS. NATIONAL STORAGE PVT. LTD, (1967) 66 ITR 596 (SC)- SUPREME COURT OBSERVED THAT IN CASES WHERE THE INCO ME RECEIVED IS NOT FROM THE BARE LETTING OF THE TENEMENT OR FRO M THE LETTING ACCOMPANIED BY INCIDENTAL SERVICES OR FACILITIES, B UT THE SUBJECT HIRED OUT IS A COMPLEX ONE AND THE INCOME OBTAINED IS NOT SO MUCH BECAUSE OF BARE LETTING OF TENEMENT BUT BECAUSE OF THE FACILITIES AND SERVICES RENDERED, THE OPERATIONS INVOLVED IN S UCH LETTING OF THE PROPERTY MAY BE OF THE NATURE OF BUSINESS OR TR ADING OPERATIONS AND INCOME DERIVED MAY BE OF NATURE' OF BUSINESS OR TRADING OPERATION.' (B) KARNI PROPERTIES LTD. VS CIT, (1971) 82 ITR 547 (SC) WHERE SUPREME COURT HELD THAT IF THE SERVICES RENDERED BY THE ASSESSEE ARE THE RESULTS OF ITS ACTIVITIES CARRIED ON CONTIN UOUSLY IN AN ORGANIZED MANNER, WITH A SET PURPOSE AND WITH A VIE W TO EARN PROFITS, THOSE ACTIVITIES WOULD CONSTITUTE BUSINESS ACTIVITIES AND THE INCOME ARISING THEREFROM WOULD BE ASSESSABLE UN DER SECTION 10 (OF THE 1922 ACT) I.E, AS BUSINESS INCOME UNDER SECTION 28 OF THE I.T. ACT, 1961) (C) PFH MALL AND RETAIL MANAGEMENT LTD. VS. ITO, (2 007) 112 TTJ (KOL) 523: MERE FACT THAT INCOME IS ATTACHED T O IMMOVABLE PROPERTY CANNOT BE SOLE CRITERION FOR ASSESSMENT O F SUCH INCOME AS INCOME FROM HOUSE PROPERTY. AS THE MAIN INTENTIO N WAS TO EXPLOIT THE IMMOVABLE PROPERTY BY WAY OF COMPLEX CO MMERCIAL ACTIVITIES, IT WAS HELD AS BUSINESS INCOME. FURTHER , NO TENANCY RIGHTS WERE GIVEN. (VII) ENTIRE RECEIPT FROM 2 AGREEMENTS CONSTITUTE A COMPOSITE BUSINESS AND THERE IS NO SCOPE FOR ARTIFICIAL SEGRE GATION. (VIII) ASSESSEE IS ENTITLED FOR DEPRECIATION ON THE LET OUT BUILDINGS, AS LETTING OUT ACTIVITY IS BUSINESS IN NATURE. I HAVE CONSIDERED THE FACTS OF THE CASE AND S UBMISSIONS OF THE ASSESSEE. IN ASSESSMENT ORDER, AO HAS DISCUSSED VAR IOUS JUDGMENTS. HOWEVER, AFTER THE JUDGMENT OF HON'BLE S UPREME COURT IN CHENNAI PROPERTIES & INVESTMENT LTD. (SUPR A), JUDGMENTS DISCUSSED BY THE LD. AO ARE NOT RELEVANT TO THE FACTS OF 5 ITA NOS. 1621 & 1622/KOL/17 M/S. GANESH REALTY & MALL DEV.PVT. LTD. 5 ITA NOS. 1621 & 1622/KOL/17 M/S. GANESH REALTY & MALL DEV.PVT. LTD. THIS CASE. HON'BLE SUPREME COURT HAS HELD THAT IF O NE OF THE MAIN OBJECTS OF COMPANY IS LETTING OUT OF PROPERTIES, TH EN THIS ACTIVITY WOULD BE CONSIDERED AS BUSINESS ACTIVITY. THIS JUDG MENT CLEARLY SUPPORTS THE STAND OF THE ASSESSEE. HENCE, THERE IS NO NEED FOR ANY CONTRARY INTERPRETATION OF THIS ISSUE. IN ASSESSEE' S CASE LETTING OUT OF PROPERTY ALONG WITH SALE OF COMMERCIAL PROPERTY , IS INCLUDED IN THE MAIN OBJECTS OF THE COMPANY. HENCE, AO IS DIREC TED TO ASSESS THE RECEIPTS FROM LETTING OUT OF PROPERTY UNDER THE HEAD 'INCOME FROM BUSINESS'. FURTHER, APPELLANT HAS MENTIONED TH AT LETTING OUT OF PROPERTY AND PROVIDING UTILITY SERVICES ARE COMP LEMENTARY TO EACH OTHER. HENCE, BOTH THESE ACTIVITIES ARE BUSINE SS ACTIVITIES. THIS VIEW IS ALSO SUPPORTED BY THE DECISION OF KOLK ATA ITAT IN MANGALAM FASHION LTD. (SUPRA). IN VIEW OF THE JUDGM ENT OF THE HON'BLE SUPREME COURT AND THE DECISION OF KOLKATA I TAT, AS MENTIONED IN ABOVE, AO IS DIRECTED TO ASSESS LICENS E FEES AND UTILITY CHARGES AS INCOME UNDER THE HEAD BUSINESS A ND PROFESSION. AS LETTING OF THE BUILDINGS ARE HELD AS BUSINESS AC TIVITY, CONSEQUENTIALLY, AO IS ALSO DIRECTED TO ALLOW DEPRE CIATION OF RS. 8,04,49,959/- ON THESE BUILDINGS. THESE GROUNDS ARE ALLOWED. 4. WE HAVE HEARD THE RIVAL CONTENTIONS. THE ASSESSE ES DETAILED PAPER BOOK ( PAGES 1 TO 101) COMPRISING OF WRITTEN SUBMISSIONS DT. 21- 03-2017 BEFORE THE CIT(A) IN LOWER APPELLATE PROCEEDINGS, SAMPLE COPY OF LICENCE AND U TILITY SERVICES AGREEMENTS DATED 19- 09-2009, AUDITED ACCOUNTS FOR THE TWO A.Y(S), COMP UTATION(S) OF INCOME AND PROCESSING U/S. 143(1) FOR THE A/YS 2014-15 TO 201 6-17 ACCEPTING ITS RECEIPTS DERIVED FROM LICENCE FEES AND UTILITY SERVICE IN ISSUE AS B USINESS INCOME; RESPECTIVELY,STANDS PERUSED. 5. WE NOW COME TO THE BASIC RELEVANT FACTS REGARDIN G THE ABOVE FORMER ISSUE OF ASSESSMENT OF ASSESSEES LICENCE FEE INCOME DERIVED FROM RENTING OUT OF UNSOLD SHOPS IN THE SHOPPING MALL IN QUESTION. THIS TAXPAYER IS A C OMPANY ENGAGED IN PROPERTY(IES) DEVELOPMENT BUSINESS. IT CLAIMED THE IMPUGNED RENT AL AND UTILITIESINCOME RECEIVED AS BUSINESS INCOME FOLLOWED BY CONSEQUENTIAL DEPRECIAT ION RAISED IN BOTH THE IMPUGNED ASSESSMENT YEARS. RELEVANT ASSESSMENT ORDER IN FOR MER ASSESSMENT YEAR SUGGESTS THAT 6 ITA NOS. 1621 & 1622/KOL/17 M/S. GANESH REALTY & MALL DEV.PVT. LTD. 6 ITA NOS. 1621 & 1622/KOL/17 M/S. GANESH REALTY & MALL DEV.PVT. LTD. THE TAXPAYER HAD PURCHASED 92 UNITS OF COMMERCIAL S PACE COMPRISING VARYING MEASUREMENTS FROM ITS HOLDING COMPANY M/S. BENGAL A MBUJA HOUSING DEVELOPMENT LTD. BAHDL FOR RS.86,39,45,273/-. IT SOLD A PORT ION THEREOF FOR RS.82,8022,050/- TO VARIOUS PARTIES. COMING TO UNSOLD STOCK, THE ASSES SEE GAVE IT ON RENT BY WAY OF LICENSE AGREEMENT TO VARIOUS PARTIES FOR 108 MONTHS SUBJECT TO A 18 MONTHS LOCK-IN PERIOD COMMENCING ON OR FROM EXPIRY OF 60 DAYS FROM THE DA TE OF POSSESSION. THE ASSESSEE, ITS ABOVE STATED HOLDING COMPANY &ITS TENANTS (SUPRA) ACTED AS LINCESOR/ CONFIRMING PARTY & LICENCEE(S); RESPECTIVELY. IT FURTHER EXECUTED VA RIOUS AGREEMENTS WITH THE SAID LICENSEES FOR PROVIDING THEM UTILITY SERVICES AS WE LL. 6. THE ASSESSING OFFICER CAME ACROSS THE ASSESSEES P & L ACCOUNT STATING BUSINESS INCOME UNDER THE ABOVE TWO HEADS OF LICENC E FEE AND UTILITY SERVICE CHARGES AS WELL AS PROFIT ON SALE OF BUILDING (COMMERCIAL SPAC E) AMOUNTING TO RS.1,63,39,733/- AND RS.1,07,03,030/-; RESPECTIVELY. HE ISSUED A SHOW CA USE DT. 5-1-13 PROPOSING TO ASSESS THE RENTAL AND UTILITY SERVICES INCOME(SUPRA) AS IN COME FROM HOUSE PROPERTY AND FROM OTHER SOURCES ; RESPECTIVELY THAN BUSINESS INCOME. THE ASSESSEE PLEADED TO HAVE BEEN ACTING AS A COMPANY ENGAGED IN LETTING OUT IT S COMMERCIAL SPACE/UNITS FOR BUSINESS PURPOSES. AND THAT THE UTILITY SERVICE CHA RGES INCOME VERY MUCH FORMED PART AND PARCEL OF THE SAID RENTAL INCOME ONLY. THE ASSE SSING OFFICERS ASSESSMENT ORDER DATED 12-03-2013 INDICATES THAT IT HAD ALSO PLACED ON RECORD THE RELEVANT MEMORANDUM OF ASSOCIATION AS UNDER: 'A) THE OBJECTS OF THE ASSESSEE COMPANY AS MENTIONE D IN THE MEMORANDUM OF ASSOCIATION OF THE COMPANY ARE AS FOL LOWS: TO ACQUIRE BY PURCHASE, LEASE, EXCHANGE, HIRE OR OTHERWISE, LANDS AND PROPERTY OF ANY TENURE OR ANY INTEREST IN THE SAME AND TO ERECT AND CONSTRUCT HOUSES, BUILDINGS .... AND TO SELL, LEASE , LET MORTGAGE OR OTHERWISE DISPOSE OF THE LANDS, HOUSES, BUILDINGS A ND OTHER PROPERTY OF THE COMPANY OR OTHERS AND FRAMING AND EXECUTION OF INFR ASTRUCTURE DEVELOPMENT SCHEMES. 7 ITA NOS. 1621 & 1622/KOL/17 M/S. GANESH REALTY & MALL DEV.PVT. LTD. 7 ITA NOS. 1621 & 1622/KOL/17 M/S. GANESH REALTY & MALL DEV.PVT. LTD. TO CONSTRUCT, EXECUTE, CARRYOUT, EQUIP, IMPROVE, ALTER, DEVELOP, DECORATE, MAINTAIN, FURNISH, ADMINISTER, TAKE/GIVE ON RENT / LEASE, MANAGE OR CONTROL PUBLIC AND PRIVATE WORKS AND CONVENIENCE OF ALL KIN DS INCLUDING MALLS, MARKET, COMMERCIAL COMPLEXES, SHOPS, OFFICES, AND F LATS. TO MANAGE LAND, BUILDING AND OTHER PROPERTY WHETH ER BELONGING TO THE COMPANY OR NOT, AND TO COLLECT RENTS AND INCOME AND TO PROVIDE OR SUPPLY TO TENANTS, OCCUPIERS AND OTHERS ALL OR ANYOF THE S ERVICES THAT MAY BE NEEDED IN A COMMERCIAL, BUSINESS OR OTHER ORGANIZAT ION EITHER WITH OR WITHOUT CONSIDERATION. 7. THE ASSESSEE NEXT EXPLAINED THAT IT HAD EXPLOITE D THE COMMERCIAL POTENTIAL OF THE UNITS HELD/PURCHASED IN THE CITY CENTRE MALL BY LETTING OUT THE SAME TO LICENCEE PARTIES FOLLOWED BY UTILITY CHARGES RECEIPTS REALIZ ED TO ENSURE BETTER AMENITIES TO THE LICENSED COMMERCIAL SPACE. IT AVERRED THAT THE SAID UTILITY SERVICES WERE IN THE NATURE OF PROVISION OF HIGH VOLTAGE AIR CONDITIONING SYSTE M FOR FACILITATING AIR-CONDITIONING OF THE LICENCED SPACE, PROVISION FOR 100% DG SET POWER BACKUP AND PROVISION OF FIREFIGHTING SYSTEM/SPRINKLER SYSTEM AND FIRE ALARM SYSTEM ETC. IT LASTLYQUOTED JUDICIAL PRECEDENTS IN SUPPORT OF THE CONTENTION SEEKING TO TREAT ITS RENTAL AS WELL AS UTILITY SERVICE INCOME TO BE ASSESSABLE AS BUSINESS INCOME. 8. CASE FILES SUGGEST THAT THE ASSESSING OFFICER DE CLINED THE ASSESSEES ENTIRE FOREGOING EXPLANATION IN HIS IDENTICAL ASSESSMENT ORDER(S) IN ISSUE. HE OBSERVED FIRST OF ALL THATASSESSEES RENTAL AND UTILITY SERVICE INCO ME WERE VERY MUCH SEPARABLE SINCE INVOLVING DIFFERENT SETS OF AGREEMENT. HE WAS THER EAFTER OF THE VIEW THAT COMPOSITE CHARGES RECEIVED FOR LETTING OUT OF VARIOUS SERVICE S RENDERED COULD BE SPLIT UP AS WELL. HE HELD THAT ASSESSEES UTILITY CHARGES INCOME RECE IVED SEPARATELY FOLLOWED BY A PORTION THEREOF BEING PASSED OVER TO ITS HOLDING COMPANY (S UPRA); COULD NOT BE TAKEN AS PART AND PARCEL OF RENTAL INCOME. HE ACCORDINGLY TREATED THE SAID UTILITY INCOME RS.11,77,064/- (SUPRA) IN FORMER ASSESSMENT YEAR AS INCOME FROM OTHER SOURCES. 8 ITA NOS. 1621 & 1622/KOL/17 M/S. GANESH REALTY & MALL DEV.PVT. LTD. 8 ITA NOS. 1621 & 1622/KOL/17 M/S. GANESH REALTY & MALL DEV.PVT. LTD. 9. COMING TO RENTAL INCOME OF RS.45,64,669/- IN FO RMER ASSESSMENT YEAR,THE ASSESSING OFFICERS VIEW WAS THAT THE LICENSE PERIO D OF 108 MONTHS WAS SUBJECT TO AN 18 MONTHSLOCK-IN-PERIOD. IT SUFFICIENTLY INDICATED ASSESSEES INTENTION TO EARN RENTAL INCOME ONLYTHAN ANY ADVENTURE IN COMMERCIAL SPACE A S BUSINESS. HE ACTED ACCORDINGLY TO TREAT THE IMPUGNED RENTAL INCOME AS HOUSE PROPE RTY INCOME. SUFFICE TO SAY, THE ASSESSING OFFICER PROCEEDED ON THE SAME LINE IN THE LATTER ASSESSMENT YEAR AS WELL. THE CIT(A) HAS REVERSED THE ASSESSING OFFICERS ACTION( S) VIDE ABOVE EXTRACTED DETAILED REASONING. 10. LEARNED CIT/DRS FIRST AND FOREMOST VEHEMENT C ONTENTION IS THAT THE IMPUGNED CIT(A)S ORDERS UNDER CHALLENGE ARE TOTALLY NOT SP EAKING SINCE HE HAS NEITHER FRAMED ANY POINTS OF THE DETERMINATION NOR HAS HE ADJUDICA TED THE ISSUE(S) INVOLVED IN THE INSTANT CASE REGARDING ASSESSMENT OF RENTAL AND UTI LITY SERVICE INCOME AS PRESCRIBED U/S. 250(6) OF THE ACT. WE FIND NO MERIT IN THE REVENUE S INSTANT FIRST ARGUMENT ALLEGING VIOLATION OF THE ABOVE STATUTORY PROVISION. THE FAC T REMAINS THAT ALTHOUGH THE CIT(A) S FINDINGS UNDER CHALLENGE ARE IN A SINGLE PARA, HE H AS DECIDED THE ISSUE AGAINST THE DEPARTMENT IN THE LIGHT OF HONBLE APEX COURTS DEC ISION IN CHENNAI PROPERTIES & INVESTMENT V/S. CIT REPORTED IN (2015) 56 TAXMANN. COM 456(SC).HE HAS THEREAFTER CONCLUDED THAT ASSESSEES TWIN INCOMES DESERVE TO B E ASSESSED UNDER THE HEAD BUSINESS INCOME ONLY. WE THEREFORE DECLINE FIRST IDENTICAL G ROUND RAISED AT REVENUES BEHEST. 11. LEARNED CIT/DRS NEXT ARGUMENT IS THAT THE ASSE SSING OFFICER HAD RIGHTLY ASSESSED THE ASSESSEES RENTAL INCOME AS INCOME FRO M HOUSE PROPERTY AND NOT BUSINESS INCOME. MR. NAYAKREITERATES THAT THE TAXPAYER HAD R ENTED ITS UNSOLD STOCK FOR ON LONG TERM BASIS WHICH SUFFICIENTLY INDICATES ITS INTENTI ON OF EARNING STABLE RENTAL INCOME NOT INVOLVING ANY ADVENTURE IN THE NATURE OF TRADE OR BUSINESS.HE SEEKS TO DISTINGUISH THE HONBLE APEX COURTS ABOVE STATED DECISION (SUPRA)H OLDING THATTHE CONCERNED TAXPAYER HAD DULY PROVED ITS BUSINESS ACTIVITIES OF RENTING OUT OF PROPERTIES ONLY. MR. NAYAK, CONTINUES HIS CHALLENGE TO CORRECTNESS OF THE CIT( A)S FINDINGS UNDER CHALLENGE 9 ITA NOS. 1621 & 1622/KOL/17 M/S. GANESH REALTY & MALL DEV.PVT. LTD. 9 ITA NOS. 1621 & 1622/KOL/17 M/S. GANESH REALTY & MALL DEV.PVT. LTD. ACCEPTING ASSESSEES CLAIM THAT ASSESSEE HAD ACQUIR ED POSSESSION OF UNSOLD COMMERCIAL SPACE AND GAVE THE SAME ON RENT/LEASE TO LICENSEE O N LONG TERM BASIS THEREBY CREATING A RIGHT IN THEIR FAVOUR. HIS CASE IS THAT THE ASSESSE E HAD NOT PERFORMED ANY ACTIVITY ON ITS OWN AT ALL. HE URGED US TO LIFT THE CORPORATE VEIL EMPLOYED AT ASSESSEES BEHEST. HONBLE APEX COURTS DECISIONS IN MYSORE MINERALS LTD. VS. CIT IN (1995) 239 ITR 775, CIT V. PODAR CEMENT (P.) LTD [1997] 226 ITR625 /92 TAXMAN 541 (SC), RAJ DADARKAR& ASSOCIATES V. ACIT (2017) 394 ITR 592/ 248 TAXMAN 1 (SC) ARE QUOTED IN SUPPORT. MR. NAYAK ACCORDINGLY SEEKS TO RESTORE THE ASSESSING O FFICERS FINDINGS TREATING ASSESSEES LICENCE FEE AS WELL AS UTILITY SERVICES INCOME UND ER THE HEAD INCOME FROM HOUSE PROPERTY AND FROM OTHER SOURCES; RESPECTIVELY. 12. LEARNED AUTHORIZED REPRESENTATIVE FIRST OF ALL TAKES US THROUGH THE ASSESSEES DETAILED PAPER BOOK (PAGES 1 TO 101)COMPRISING OF I TS WRITTEN SUBMISSIONS DT. 21-03- 2017 SUBMITTED BEFORE THE LEARNED CIT(A), SAMPLE CO PY OF LICENSE AGREEMENT DT. 19-09- 2009, SAMPLE COPY OF UTILITIES AGREEMENT DT. 19-09- 2009, COPIES OF AUDITED ACCOUNTS FOR BOTH THE A/YS, COPIES OF COMPUTATION(S) &INTIMATION (S)FOR ASSESSMENTYEARS 2014-15 TO 2016-17. SHE SUBMITS THAT THE DEPARTMENT HAS NOT RA ISED ANY DISPUTE QUA THE VERY ISSUE IN ALL THESE SUCCEEDING ASSESSMENT YEARS. SHE AVERS THAT THE CIT(A) HAS RIGHTLY ASSESSED THE IMPUGNED RECEIPTS AS BUSINESS INCOME IN THE LOW ER APPELLATE PROCEEDINGS. SHE STRONGLY SUPPORTS THE IMPUGNED LOWER APPELLATE REAS ONING DELETING THE IMPUGNED ADDITION WHICH STANDS EXTRACTED IN THE PRECEDING PA RAGRAPHS OF THIS ORDER. 13. WE HAVE GIVEN OUR THOUGHTFUL CONSIDERATION TO RIVAL CONTENTIONS. THERE IS HARDLY ANY DISPUTE THAT THE ISSUE BETWEEN THE PARTIESIN A BOVE ASSESSMENT OF TAXPAYERS LICENCE FEE AND UTILITY SERVICES INCOME AS TO WHETHER THE SAME IS LIABLE TO BE ASSESSED AS BUSINESS INCOME OR NOT. THE ASSESSEE HAD ADMITTEDLY PURCHASED THE COMMERCIAL SPACE IN ISSUE FROM ITS HOLDING COMPANY AND THEREAFTER, IT EXECUTED LICENCE DEED(S) WITH THE 10 ITA NOS. 1621 & 1622/KOL/17 M/S. GANESH REALTY & MALL DEV.PVT. LTD. 10 ITA NOS. 1621 & 1622/KOL/17 M/S. GANESH REALTY & MALL DEV.PVT. LTD. VARIOUS PARTIES. IT ALSO CHARGED FOR UTILITY SERVIC ES BY WAY OF SEPARATE AGREEMENTS. WE WISH TO REITERATE THAT IT HAS ALREADY ON RECORD TH AT THIS TAXPAYERS MEMORANDUM OF ASSOCIATION CONTAINING MAIN CLAUSE(A) MAKES IT CLEAR THAT ACQ UISITION OF LAND AND PROPERTIES BY WAY OF LEASE, EXCHANGE, HIRE OR OTHER WISE AND MANAGEMENT THEREOFTHROUGH THE VARIOUS MODES FORMINGITS MAIN BUSINESS ACTIVITY . 14. WE NOW PROCEED TO EXAMINE THE ASSESSEES OBJECT S/ACTIVITIES IN THE LIGHT OF VARIOUS JUDICIAL PRECEDENTS. FIRST OF ALL COMES THE HONBLE APEX COURTS DECISION IN CHENNAI PROPERTIES & INVESTMENT LTD (SUPRA) HOLDING THAT LETTING OUT OF PROPERTIES WAS BUSINESS ACTIVITY OF THE CONCERNED TAXPAYER. THEIR LORDSHIPS HAVE ADJUDICATED THE ISSUE AGAINST THE REVENUE THEREFORE. WE FIND IN THIS BACK DROP THAT THE TAXPAYER BEFORE US HAS ALSO SATISFIED THE VERY TEST SINCE ITS MAIN ACTIVIT Y IS THAT OF ACQUIRING AND MANAGING LAND AND BUILDINGS AS WELL AS TO PROVIDE FOR VARIOUS AN CILLARY SERVICES. THEIR LORDSHIPS NEXT DECISION IN KEYARAM HOTELS (P) LTD V/S. DCIT (2015) 63 TAXMANN.COM 301(SC) DEALT WITH AN ASSESSEE WHO WAS NOT ENGAGED IN RENTING BUS INESS ACTIVITY BUT DERIVED RENTAL INCOME WHICH WAS HELD AS NOT IN THE NATURE OF BUSIN ESS INCOME. WE RE-EMPHASIZE HERE THAT THIS TAXPAYER HAS INDEED CARRIED OUT ITS BUSIN ESS ACTIVITY OF RENTING OF COMMERCIAL SPACE AS PER ITS MEMORANDUM OF ASSOCIATION AS IS EV IDENT FROM THE BOOKS OF ACCOUNTS NOT DISPUTED AT REVENUES INSTANCE. 15. WE NEXT NOTICE THAT THEIR LORDSHIPS DECISION IN RAYALA CASE (SUPRA) ALSO SUPPORTS THE ASSESSEE SINCE THE CONCERNED TAXPAYE R ONLY DERIVED RENTAL INCOMEAS PER THE CORRESPONDING CLAUSES IN MEMORANDUM OF ASSOCIAT ION. WE FIND NO MERIT IN REVENUESARGUMENTS PLACING RELIANCE ON THE HONBLE APEX COURTS DECISION IN RAJ DADARKAR & ASSOCIATES(SUPRA) AS WELL. THE LORDSHIPS MAKE IT CLEAR THAT ASSESSEES OBJECTS DO NOT FORM THE SOLE/CONCLUSIVE CRITERIA AN D EACH CASE IS TO BE DECIDED AS PER THE FACTS INVOLVED IN THE LIS. THEIR LORDSHIPS THEN OBS ERVE THAT THE DECISIVE FACTOR IN SUCH A 11 ITA NOS. 1621 & 1622/KOL/17 M/S. GANESH REALTY & MALL DEV.PVT. LTD. 11 ITA NOS. 1621 & 1622/KOL/17 M/S. GANESH REALTY & MALL DEV.PVT. LTD. CASE IS AS TO WHETHER THE ASSESSEE IN ISSUE IS ENGA GED IN A SYSTEMATIC ACTIVITY IS THE NATURE OF BUSINESS OR NOT. WE NOTICE THAT THE SAID TAXPAYER HAD FAILED TO PROVE RENTING OUT ITS PROPERTIES AS THE MAIN SYSTEMATIC BUSINESS ACTIVITY WHEREAS THE FACTS BEFORE US SPEAK OTHERWISE. THIS ASSESSEE HAS PLACED ON RECORD ALL ITS EVIDENCE SUGGESTING ADVENTURE IN THE NATURE OF BUSINESS IN ACQUIRING OF PROFITS FOLLOWED BY SALE AND LICENSEE(S) DERIVING BUSINESS INCOME. THE REVENUE F AILS TO REBUT THIS CRUCIAL ELEMENT. WE THEREFORE DECLINE REVENUES ARGUMENTS SEEK TO RE VIVE THE ASSESSING OFFICERS ACTION THAT THIS TAXPAYERS LICENCE FEE AND UTILITY SERVIC ES INCOME ARE TO BE TREATED AS INCOME FROM HOUSE PROPERTY AND FROM OTHER SOURCES; RESPEC TIVELY. SO IS THE OUTCOME OF THE REVENUES PLEA IS THAT THE CIT(A) FINDINGS GIVE DO UBLE DEPRECIATION CLAIM TO ASSESSEE AS WELL AS ITS LICENSEES. WE FIND NO MERIT IN THE I NSTANT ARGUMENTS OF THE REVENUE IN VIEW OF OUR FOREGOING DISCUSSION BASED ON FACTS ANA LYSED IN LIGHT OF VARIOUS JUDICIAL PRECEDENTS. WE FURTHER WISH TO MAKE IT CLEAR THAT T HE REVENUE ITSELF HAS ACCEPTED THE ASSESSEES TREATMENT OF THE VERY RECEIPTS AS BUSINE SS INCOME IN THE SUCCEEDING ASSESSMENT YEARS AS WELL (SUPRA). WE THUS UPHOLD TH E CIT(A)S IMPUGNED FINDINGS UNDER CHALLENGE. THE REVENUES IDENTICAL FORMER SUB STANTIVE GROUND RAISED IN BOTH THE APPEALS FAILS. THE CIT(A) IS HELD TO HAVE RIGHTLY T REATED ASSESSEES RENTED AND UTILITIES SERVICE INCOME AS BUSINESS INCOME THEREFORE. 16. NEXT COMES REVENUES LATTER SUBSTANTIVE GROUN D/GRIEVANCE SEEKING TO REVIVE SECTION 36(1)(III) INTEREST DISALLOWANCE IN BOTH AS SESSMENTS INVOLVING FIGURES OF RS.37,85,520/- AND RS.35,74,320/- ON ACCOUNT OF INT EREST FREE LOANS GIVEN TO ABOVE THE ASSESSEES HOLDING COMPANY (SUPRA). THE CIT(A) IDE NTICAL DETAILED DISCUSSED QUA THIS LATTER ISSUE READS AS FOLLOW:- 3.2 ASSESSEE HAD GIVEN INTEREST FREE SECURITY DEP OSIT OF RS.3,15,46,000/- TO ITS HOLDING COMPANY M/S. BENGAL AMBUJA HOUSING D EVELOPMENT LTD. ASSESSEE HAD ALSO RECEIVED INTEREST FREE SECURITY D EPOSIT OF RS.2,95,31,149/- FROM ITS LESSEES. AO HAS MENTIONED THAT BY GIVING I NTEREST FREE DEPOSITS 12 ITA NOS. 1621 & 1622/KOL/17 M/S. GANESH REALTY & MALL DEV.PVT. LTD. 12 ITA NOS. 1621 & 1622/KOL/17 M/S. GANESH REALTY & MALL DEV.PVT. LTD. ASSESSEE HAS HURT ITS COMMERCIAL INTEREST. IT HAS B EEN GIVING INTEREST ON LOANS TAKEN BUT HAS GIVEN INTEREST FREE DEPOSITS TO ITS HOLDING COMPANY. HENCE, RELYING ON THE JUDGMENTS OF KERALA HIGH COUR T IN CIT VS. ACCELERATED FREEZE DRYING CO. LTD. (2010) 324 ITR 3 16 AND DECISION OF MUMBAI ITAT IN ADITYA BIRLA PVT. LTD. COMPANY LTD. VS. ITO (2010) 4 ITR (T) 658, AO HAS COMPUTED INTEREST @ 12% ON INTERES T FREE DEPOSIT GIVEN, WHICH COME TO RS. 37,85,520/- AND DISALLOWED THIS A MOUNTS] S. 36(III). APPELLANT HAS SUBMITTED THAT IT HAS GIVEN INTEREST FREE DEPOSITS TO BENGAL AMBUJA HOUSING DEVELOPING LTD. FOR BUSINESS PURPOSE . ASSESSEE HAD TAKEN LOANS OF 74 CRORES (APPROX) TO PURCHASE VARIOUS COM MERCIAL UNITS BUT HAS GIVEN ONLY 3.15 CRORES AS INTEREST FREE DEPOSITS. A T THE SAME TIME, IT HAS ALSO RECEIVED RS.2,95,31,149/- AS INTEREST FREE DEPOSITS FROM ITS LESSEES. BENGAL AMBUJA HOUSING DEVELOPMENT LTD. IS A JOINT SECTOR C OMPANY WITH WEST BENGAL HOUSING BOARD (OWNED BY GOVT. OF WEST BENGAL ), WHICH MADE ITS MANDATORY TO ALL THE LESSEES TO GIVE DEPOSITS. AS P ER THE AGREEMENT, ASSESSEE HAD TO DEPOSIT SOME AMOUNT IN TERM OF CERT AIN PERCENTAGE OF PER UNIT SALEABLE SPACE OF THEIR RESPECTIVE UNITS TO BE NGAL AMBUJA HOUSING DEVELOPMENT LTD. OR ITS NOMINEES, TO COVER FOR ANY DELAY IN TIMELY PAYMENT OF MAINTENANCE BILLS AND OTHER CHARGES. IN CASE OF DEFAULT THIS DEPOSIT MAY BE UTILIZED TO RECOVER THE ARREARS. I HAVE CONSIDERED THE FACTS OF THE CASE AND SUBMIS SIONS OF THE ASSESSEE. WHILE MAKING THE DISALLOWANCE, AO HAS MENTIONED THA T INTEREST FREE DEPOSITS RECEIVED BY IT IS DIFFERENT FROM INTEREST FREE DEPOSITS. SECONDLY, INTEREST FREE DEPOSITS HAVE NOT BEEN GIVEN FOR ANY BUSINESS PURPOSES. I DO NOT AGREE WITH THE VIEW OF THE AO. ALL RECEIPTS OF THE ASSESSEE GO IN A COMMON FUND AND IT IS NOT POSSIBLE TO DISTINGUISH W HICH RECEIPT IS UTILIZED FOR A PARTICULAR EXPENDITURE/INVESTMENT. INTEREST F REE DEPOSITS GIVEN AND THOSE RECEIVED ARE OF APPROXIMATELY SAME AMOUNT. IN TEREST FREE DEPOSITS HAVE BEEN GIVEN AS PER THE WRITTEN STIPULATION OF T HE HOLDING COMPANY AND THE PURPOSE IS ALSO EXPLAINED. IT IS APPARENT THAT INTEREST FREE DEPOSITS HAVE BEEN GIVEN FOR COMMERCIAL REASONS TO COVER FOR ANY DEFAULT IN PAYMENTS BY LESSES. HENCE, IT IS DEFINITELY FOR BUSINESS PURPO SES. BESIDES DIFFERENCE IN AMOUNTS OF INTEREST FREE DEPOSITS GIVEN AND THOSE R ECEIVED ARE NOT MUCH. HENCE, IT CANNOT BE SAID THAT ASSESSEE, IN ANY WAY, COMPROMISED ITS COMMERCIAL INTEREST. IN VIEW OF THE ABOVE, DISALLOWANCE OF RS.37,85,520/ - IS DELETED. 13 ITA NOS. 1621 & 1622/KOL/17 M/S. GANESH REALTY & MALL DEV.PVT. LTD. 13 ITA NOS. 1621 & 1622/KOL/17 M/S. GANESH REALTY & MALL DEV.PVT. LTD. 17. MR. NAYAKS VEHEMENT CONTENTION IS THAT THE ASS ESSING OFFICER HAD RIGHTLY PROCEEDED TO DISALLOW THE IMPUGNED INTEREST SUM IN VIEW OF ASSESSEES INTEREST FREE LOANS GIVEN TO ITS HOLDING COMPANY. HE FAILS TO DIS PUTE THE CLINCHING FACT THAT THE ASSESSEE HAD NOWHERE GIVEN INTEREST FREE LOAN TO TH E SAID HOLDING ENTITY SINCE IT HAD PROCEEDED TO DEPOSIT THE AMOUNT IN QUESTION IN TERM S OF A FIXED PERCENTAGE GOING BY COMMERCIAL SPACE UNITS. WE MAKE IT CLEAR THAT THE R EVENUE HAS FAILED TO DISPUTE OR CONTROVERT THE FACT THE IMPUGNED SUM WAS TO RECOVER FOR MAINTENANCE & OTHER CHARGES. WE THEREFORE CONCLUDE THIS BACKDROP OF FACTS THAT T HE CIT(A) HAS RIGHTLY DELETED THE IMPUGNED DISALLOWANCE AS THERE IS NO INTEREST FREE LOAN INVOLVED IN FACTS OF THE INSTANT CASE. REVENUES IDENTICAL ARGUMENTS QUA THE INSTANT LATTER ISSUE ARE ALSO REJECTED. 18. THESE TWO REVENUES APPEALS ARE DISMISSED. ORDER PRONOUNCED IN THE COURT ON 22-07-2019 SD/- SD/- [ J. SUDHKAR REDDY ] [ S.S.GODARA ] ACCOUNTANT MEMBER JUDI CIAL MEMBER DATED : 22-07-2019 **PRADIP, SR. PS/DKP COPY OF THE ORDER FORWARDED TO: 1. APPELLANT/REVENUE: DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-7(1), KOLKATA, 5 TH FLOOR, AAYKAR BHAWAN, P-7 CHOWRINGHEE SQ., KOLKATA- 69. 2. RESPONDENT/ASSESSEE: M/S. GANESH REALTY & MALL D EVELOPMENT PVT. LTD 216, A.J.C BOSE ROAD, KOLKATA-17. 3..C.I.T(A).- 4. C.I.T.- KOLKATA. 5. CIT(DR), KOLKATA BENCHES, KOLKATA. TRUE COPY BY ORD ER ASSISTANT REGISTRAR H.O.O/ D.D.O KOLKATA