SELF SHINE INDUSTRIES, MUMBAI V. DCIT 20(3), MUMBAI

ITA 1715/MUM/2012

• Counselvise Citation: 171519914 RSA 2012
• Duration Of Justice: 2 year(s) 4 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-07-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: E
• Next Hearing Date: 17-07-2014
• Assessment Year: 2008-2009
• Appeal Filed On: 12-03-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: PITAMBAR DAS
• Keywords: Business income; Opportunity of being heard

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL E BENCH, MUMBAI . . , ! . . '#$ , & '() '! '! '! '! BEFORE SHRI H.L. KARWA, PRESIDENT, AND SHRI P.M.JAG TAP, AM ' ./ I.T.A. NO. 1715/MUM/2012 ( *+ *+ *+ *+ , , , , / ASSESSMENT YEAR: 2008-09) M/S SELF SHINE INDUSTRIES C-10, PRINCE ARCADE, CENTRAL ROAD, MAROL, MIDC, ANDHERI (EAST), MUMBAI-400093 + + + + / VS. DCIT - 20(3), MUMBAI. )- & ' ./ PAN : AAAFS1212N . -/ / APPELLANT) .. ( 01-/ / RESPONDENT ) -/ 2 3 ' / ASSESSEE BY: SHRI K.GOPAL 01-/ 2 3 ' / RESPONDENT BY : SHRI PITAMBAR DAS ' + 2 $& / DATE OF HEARING : 17/07/2014 45, 2 $& / DATE OF PRONOUNCEMENT : 30/07/2014 (6 / O R D E R PER P.M.JAGTAP, AM: THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF LD. CIT(A)-31, MUMBAI DATED 26/12/2011 AND ALTHOUGH AS MANY AS FIVE GROUNDS RAISED ARE THEREIN, THE SOLITARY ISSUE INVO LVED IN THIS APPEAL OF THE ASSESSEE IS RELATING TO THE DETERMINATION OF HEAD O F INCOME UNDER WHICH THE INCOME RECEIVED FROM BUSINESS SERVICE CENTRE IS CHARGEABLE TO TAX. 2. THE ASSESSEE IN THE PRESENT CASE IS A PARTNERSHI P FIRM, WHICH FILED ITS RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION O N 24/09/2008 DECLARING TOTAL INCOME OF RS.3,41,540/-. IN THE SA ID RETURN, INCOME RECEIVED FROM BUSINESS SERVICE CENTRE IN THE FORM O F LICENSE FEES AND SERVICE CHARGES WAS DECLARED BY THE ASSESSEE UNDER THE HEAD PROFIT & ITA NO.1715/MUM/2012 M/S SELF SHINE INDUSTRIES 2 GAINS OF BUSINESS OR PROFESSION AND AFTER CLAIMING VARIOUS EXPENSES AGAINST THE SAID INCOME, NET INCOME WAS OFFERED TO TAX. 3. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, ENQ UIRIES WERE MADE BY THE AO WITH THE PARTIES WHO HAD OCCUPIED THE BUS INESS SERVICES CENTRE OF THE ASSESSEE. THESE ENQUIRIES MADE BY THE AO RE VEALED THE FOLLOWING FACTS; 1. THE PROPERTY WAS GIVEN ON MONTHLY RENT. 2. THE RENT WAS DETERMINED KEEPING IN VIEW AREAS OC CUPIED BY THE TENANTS AS SEEN FROM CLAUSE 3 OF AGREEMENT REPRODUCED AS ABOVE. 3. PAYMENTS WERE MADE BY THE TENANTS AFTER DEDUCTIO NS TDS U/S 194J OF THE ACT. 4. AGREEMENT WITH ALL THE TENANTS ARE ON THE SAME P ATTERN AS REPRODUCED HEREINABOVE IN THE CASE OF M/S J.R. TECHNOLOGIES. 5. NO SERVICE CENTRE WAS RUN BY THE ASSESSEE NOR AN Y SERVICE WERE PROVIDED BY THE ASSESSEE TO ANY OF THE TENANTS. 6. IT IS SEEN FROM THE TABLE OF TOTAL RECEIPTS & TD S AS APPEARING IN EARLIER PARA THAT THE RECEIPTS OF RENT DIFFERS FROM TENANT TO TENANT IN EACH CASE. THIS GIVES INDICATION THAT MONTHLY RENT INCOME WAS BASE ON TOTAL SPACE PR OVIDED TO THE RESPECTIVE TENANTS AND IT HAS NO LOCUS STANDI WITH PROVIDING OF SERVIC E AS BEING ACCLAIMED BY THE ASSESSEE. THE TOTAL RECEIPTS IN THE CASE OF M/S LI NFOX LOGISTICS (INDIA) PVT. LTD. IS RS. 2766,583/- WHEREAS TOTAL RECEIPTS FROM M/S ARIS HA DIAMONDS CO. PVT. LTD. IS RS.1,59,553 AND FROM M/S TATA TELE SERVICES MAHARAS HTRA LTD. IS RS.1,50,000/-. 7. WHAT WAS LEASED OUT WAS TABLE SPACE WITH THE TUB E LIGHTS, FANS AND AIR CONDITIONERS. THIS CAN BE REGARDED AT THE MOST AS A FURNISHED ACCOMMODATION AND GETS COVERED BY HONBLE SUPREME COURT JUDGMENT REFE RRED TO ABOVE. 4. ON THE BASIS OF ABOVE FINDINGS AND RELYING INTER-ALIA ON THE DECISION IN THE HONBLE SUPREME COURT IN THE CASE OF SHAMBHU INVESTMENTS PVT. LTD. V.S CIT 263 ITR 143 . THE AO HELD THAT THE ENTIRE INCOME RECEIVED BY THE ASSESSEE FROM BUSINESS SERVICE CENTRE IN THE FO RM OF LICENSE FEES AND SERVICE CHARGES WAS CHARGEABLE TO TAX IN THE HANDS OF THE ASSESSEE UNDER THE HEAD INCOME FROM HOUSE PROPERTY. ACCORDINGLY , HE ASSESSED THE SAID INCOME AS HOUSE PROPERTY INCOME OF THE ASSESSEE AFT ER ALLOWING STANDARD DEDUCTION FOR REPAIRS U/S 24 AND DISALLOWING VARIOU S OTHER EXPENSES ITA NO.1715/MUM/2012 M/S SELF SHINE INDUSTRIES 3 CLAIMED BY THE ASSESSEE WHICH IS RESULTED IN SUBSTA NTIAL ADDITION TO THE TOTAL INCOME OF THE ASSESSEE. 5. AGAINST THE ORDER PASSED BY THE AO U/S 143(3), APPE AL WAS PREFERRED BY THE ASSESSEE BEFORE THE LD. CIT(A) AND AFTER CONSIDERING THE SUBMISSION MADE BY THE ASSESSEE AS WELL AS THE MATERIAL AVAILABLE ON RECORD, THE CIT(A) FOUND THAT LIMITED EXTRA AMENITIES WERE PROVIDED BY THE ASSESSEE IS IN THE NATURE OF C ERTAIN FURNITURE AND FIXTURES AND THAT TOO IN CERTAIN SPECIFIC CASES ONLY. HE HELD THAT THESE AMENITIES HOWEVER WERE PART OF THE BUSINESS P REMISES LET OUT BY THE ASSESSEE IN PRINCE ARCADE, ANDHERI, MUMBAI A ND IT WAS THEREFORE NOTHING BUT LETTING OUT OF SOPHISTICATED OR FURNISHED OFFICE PREMISES TO ITS VARIOUS CUSTOMERS OR CLIENTS. HE H ELD THAT ALTHOUGH THE SEPARATE AGREEMENTS TERMED AS BUSINESS SERVICE AGREEMENT AND AMENITIES AGREEMENTS WERE EXECUTED BY THE ASSESSE E WITH THE CONCERN PARTIES, THEY WERE NOTHING BUT THE SEPARATI ON OF THE TOTAL LEASE RENT RECEIVED BY THE ASSESSEE ON LETTING OUT OF ITS FURNISHED OFFICE PREMISES INTO TWO SEPARATE HEADS OF LICENSE FEES AND SERVICE CHARGES. HE THEREFORE UPHELD THE ACTION OF THE AO IN TREATING THE ENTIRE INCOME RECEIVED BY THE ASSESSEE FROM BUSINES S SERVICE CENTRE AS HOUSE PROPERTY INCOME OF THE ASSESSEE. HE ALSO NOTED THAT A SIMILAR ISSUE WAS DECIDED BY HIM AGAINST THE ASSESS EE IN A.Y.2007- 08. AGGRIEVED BY THE ORDER OF THE LD. CIT(A), ASSE SSEE HAS PREFERRED THIS APPEAL BEFORE THE TRIBUNAL. 6. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AN D ALSO PERUSED THE RELEVANT MATERIAL ON RECORD. THE LD. C OUNSEL FOR THE ASSESSEE HAS AGREED THAT THE INCOME RECEIVED BY THE ASSESSEE FROM BUSINESS SERVICE CENTRE IN THE FORM OF LICENSE FEES , WHICH IS IN THE ITA NO.1715/MUM/2012 M/S SELF SHINE INDUSTRIES 4 NATURE OF RENT, IS LIABLE TO BE TAXED UNDER THE HEA D INCOME FROM HOUSE PROPERTY IN THE HANDS OF THE ASSESSEE AS RIGH TLY HELD BY THE AUTHORITIES BELOW. HE HOWEVER HAS CONTENDED THAT S ERVICES CHARGES RECEIVED BY THE ASSESSEE FOR PROVIDING EXTRA AMENIT IES AND OTHER FACILITIES DURING THE COURSE OF RUNNING THE BUSINES S SERVICE CENTRE CONSTITUTED BUSINESS INCOME OF THE ASSESSEE AND THE SAME SHOULD BE ASSESSED UNDER THE HEAD PROFIT & GAIN OF BUSINESS OR PROFESSION AFTER ALLOWING THE CORRESPONDING EXPENSES. IN THIS REGARD, IT IS OBSERVED THAT THERE IS CONTRADICTION IN THE FINDING S GIVEN BY THE AUTHORITIES BELOW ON THIS ASPECT OF THE MATTER. AC CORDING TO THE AO, THE ENQUIRY MADE WITH THE CONCERN PARTIES REVEALED THAT NO EXTRA AMENITIES OR FACILITIES WERE PROVIDED BY THE ASSESS EE IN THE BUSINESS SERVICES CENTRE, WHEREAS THE AO HIMSELF AND LD. CIT (A) AT SOME PLACES IN HIS IMPUGNED ORDER ACCEPTED THAT CERTAIN FACILITIES AND AMENITIES SUCH AS AIR-CONDITIONER, FURNITURE ETC. W ERE PROVIDED BY THE ASSESSEE. THERE IS ALSO A CLEAR CUT MENTION IN THE ORDERS OF THE AUTHORITIES BELOW THAT THERE WERE TWO SEPARATE AGRE EMENTS ENTERED INTO BY THE ASSESSEE WITH THE CONCERNED PARTIES, ON E FOR PROVIDING SPACE IN THE BUSINESS SERVICE CENTER AND THE OTHER FOR PROVIDING AMENITIES AND FACILITIES IN THE BUSINESS SERVICE CE NTRE. THE LICENSE FEES/RENT WAS RECEIVED BY THE ASSESSEE AS PER THE F IRST AGREEMENT WHILE THE SERVICE CHARGES WERE RECEIVED BY THE ASSE SSEE AS PER THE OTHER AGREEMENT AND GOING BY THE QUANTUM OF SERVICE CHARGES RECEIVED, WHICH WERE MORE THAN THE AMOUNT OF LICENS E FEES, THE AO, IN OUR OPINION, SHOULD HAVE CONFRONTED THIS POSITIO N TO THE CONCERNED PARTIES WHILE MAKING ENQUIRY TO FIND OUT THE EXACT FACTUAL POSITION. HAVING REGARD TO ALL THESE FACTS OF THIS CASE, WE A RE OF THE VIEW THAT THIS MATTER SHOULD GO BACK TO THE ASSESSING OFFICER TO DECIDE THE ITA NO.1715/MUM/2012 M/S SELF SHINE INDUSTRIES 5 SAME AFRESH IN ACCORDANCE WITH LAW AFTER VERIFYING ALL THE RELEVANT ASPECTS AND AFTER GIVING THE ASSESSEE A PROPER AND SUFFICIENT OPPORTUNITY OF BEING HEARD. THE AO MAY ALSO TAKE I NTO CONSIDERATION THE FINAL FATE OF THIS ISSUE IN ASSESSEES OWN CASE FOR A.Y.2007-08 7. IN THE RESULT, APPEAL OF THE ASSESSEE IS TREATED AS PARTLY ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT ON 30/07/20 14 (6 2 45, & 7(+ 30/07/2014 , 5 2 # SD/- (H.L.KARWA) SD/- (P.M.JAGTAP) HONBLE PRESIDENT ACCOUNTANT MEMBER MUMBAI; 7(+ /DATED : 30 TH JULY, 2014. F{X~{TA F{X~{TA F{X~{TA F{X~{TA P.S. P.S. P.S. P.S. (6 (6 (6 (6 2 22 2 0*$89 0*$89 0*$89 0*$89 :9,$ :9,$ :9,$ :9,$ / COPY OF THE ORDER FORWARDED TO : 1. -/ / THE APPELLANT 2. 01-/ / THE RESPONDENT. 3. ; ( ) / THE CIT- , MUMBAI. 4. ; / CIT(A)- , MUMBAI 5. 9<# 0*$*+ , , / DR, ITAT, MUMBAI 6. #= > / GUARD FILE. (6+ ' (6+ ' (6+ ' (6+ ' / BY ORDER, '19$ 0*$ //TRUE COPY// ? ?? ? / ' '' '@ @ @ @ ' ' ' ' (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI