DCIT, CHENNAI V. AR Holdings and Electronic Pvt Ltd., CHENNAI

ITA 173/CHNY/2016

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 9423 (ITAT-CHENNAI)
• Duration Of Justice: 2 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-04-2016
• Appeal Filed By: Department
• Bench Allotted: C
• Assessment Year: 2012-2013
• Appeal Filed On: 01-02-2016
• Court: TRIBUNAL
• Department Lawyers: A V SREEKANTH
• Assessee Lawyers: S SRIDHAR
• Keywords: Business income; Depreciation
• Section: 142(1)

Judgement Text

, , IN THE INCOME - TAX APPELLATE TRIBUNAL C BENCH, CHENNAI , . , BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER & SHRI DUVVURU RL REDDY , JUDICIAL MEMBER ./ I.T.A.NO. 173/MDS/2016 / ASSESSMENT YEAR :20 12 - 13 THE DEPUTY COMMISSIONER OF INCOME TAX, C ORPORATE CIRCLE 1 (1), CHENNAI 600 034 . VS. M/S. AR HOLDINGS AND ELECTRONIC PVT. LTD., 148, ACROPOLIS G FLOOR, RK ROA D, MYLAPORE, CHENNAI 600 004. [PAN: A AE C A5650K ] ( / APPELLANT ) ( / RESPONDENT ) / APPELLANT BY : SHRI A.V. SREEKANTH , JCIT / RESPONDENT BY : SHRI S. SRIDHAR , ADVOCATE / D ATE OF HEARING : 3 0 . 0 3 .201 6 / DATE OF P RONOUNCEMENT : 29 . 0 4 .201 6 / O R D E R PER DUVVURU RL REDDY , JUDICIAL MEMBER : THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS ) 1, CHENNAI DATED 14 . 09 .201 5 RELEVANT TO THE ASSESSMENT YEAR 20 12 - 13 . THE ONLY EFFECTIVE GROUND RAISED IN THE APPEAL OF THE REVENUE RELATES TO DELETION OF ADDITION RELATING TO TREATING THE RENTAL INCOME UNDER THE HEAD INCOME FROM HOUSE PROPERTY AND AMEN ITY CHARGES UNDER THE HEAD PROFITS & GAINS FROM BUSINESS OR PROFESSION. I.T.A. NO . 173 /M/ 1 6 2 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS PROPERTY DEVELOPERS AND REAL ESTATE FILED ITS RETURN OF INCOME ON 27.09.2012 ADMITTING A TOTAL INCOME OF .64,99,120/ - . THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY AND NOTICE UNDER SECTION 143(2) OF THE INCOME TAX ACT 1961 [ ACT IN SHORT] DATED 13.08.2013 WAS DULY SERVED ON THE ASSESSEE. FURTHER, NOTICE UNDER SECTION 142(1) OF THE ACT WAS ALSO ISSUED TO THE ASSESSEE CALLING FOR DETAILS AND THE DETAILS WERE DULY FILED BY THE ASSESSEE. THE ASSESSEE IS OWNER OF LAND AND BUILDING IN PLOT NO. 45 TO 47 AND 50 TO 52 AT PERUNGUDI, CHENNAI, COMPRISING 1.922 ACRES TOGETHER WITH THE BUILDING MEASURING A BUILT UP AREA OF 57,000 SQ.FT. BY VIRTUE OF LEASE DEED DATED 14.03.2005, THE ASSESSEE HAS LET OUT THIS PREMISES TO THREE PERSONS VIZ., SHRI HARINDER SINGH, SHRI HARBINDER SINGH AND SHRI GURBINDER SINGH. THE ASSESSEE HAS DISCLOSED A PORTION OF THE RENTAL RECEIPTS OF .1,58,76,896/ - UNDER THE HEAD INCOME FROM HOUSE PROPERTY AND REMAINING PORTION AS AMENITY CHARGES OF .52,07,342/ - UNDER THE HEAD BUSINESS AND DEBITED DIRECT EXPENSES, ADMINISTRATIVE EXPENSES AND DEPRECIATION AGAINST THE SAME. THE ASSESSING OFFICER HAS O BSERVED THAT SINCE THE INCOME EARNING ACTIVITY IS PRIMARILY BY WAY OF LETTING OUT OF PROPERTY, THE CLAIM OF EXPENDITURE BY WAY OF DEPRECIATION ETC. WAS FOUND TO BE UNTENABLE. 3. FURTHER, DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER HAS NOTICED FROM THE TAX MEMO FILED BY THE ASSESSEE THAT THE I.T.A. NO . 173 /M/ 1 6 3 ASSESSEE HAS CLAIMED RENTAL EXPENSES OF .65,29,414/ - FROM THE RENT RECEIVED OF THE PROPERTY AT PERUNGUDI UNDER THE HEAD INCOME FROM HOUSE PROPERTY WHICH WAS NOT ALLOWABLE UNDER THE PROVISIONS OF THE INCOME TAX ACT. THUS, THE ASSESSEE WAS SHOW - CAUSED AS TO WHY THE SAME SHOULD NOT BE DISALLOWED AND ADDED TO THE INCOME RETURNED UNDER THE HEAD INCOME FROM HOUSE PROPERTY . WHILE CONSIDERING THE SUBMISSIONS FILED BY THE ASSESSEE, THE ASSESSING OFFICER HAS NOT ACCEPTED AND BY FOLLOWING THE DECISION IN THE CASE OF CIT V. A.G. GUPTA & SONS 149 ITR 253 AND ITO V. CHUNNILAL JAIN (ITAT) 60 TTJ 448 WHEREIN IT WAS HELD THAT IF A PARTICULAR EXPENDITURE IS NOT SPECIFICALLY PROVIDED TO BE DEDUCTIBLE, DEDUCTION THEREOF CANNOT BE CLAIMED UNDER SECTION 24, SINCE THE WORD USED IS NAMELY , THE RENTAL EXPENSES OF .65,29,414/ - WAS DISALLOWED AND ADDED BACK TO THE TOTAL INCOME RETURNED UNDER THE HEAD INCOME FROM HOUSE PROPERTY . THE ASSESSING OFFICER HAS ALSO ADDED BACK THE AMENITY CHARGES AND MAINTENANCE CHARGES, AGGREGATING .52,07,342 / - IN THE COMPUTATION OF IN COME FROM HOUSE PROPERTY TREATING THE SAID AMOUNT AS PART OF RENTAL INCOME . 4. AGGRIEVED, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LD. CIT(A). AFTER CONSIDERING THE FACTS IN ISSUE, THE LD. CIT(A) DELETED THE DISALLOWANCES MADE BY THE ASSESSI NG OFFICER. 5. ON BEING AGGRIEVED, THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL. I.T.A. NO . 173 /M/ 1 6 4 THE LD. DR HAS SUBMITTED THAT ON SIMILAR ISSUE IN THE CASE OF M/S. ELNET TECHNOLOGIES LTD. IN TCA NO. 2336 & 2623 OF 2006 & 2169 OF 2008 DATED 09.10.2012, THE DEPARTMENT HA S FILED SLP BEFORE THE HON BLE SUPREME COURT AND THE SAME IS PENDING FOR DISPOSAL AND THEREFORE, PRAYED THAT THE ORDER OF THE LD. CIT(A) SHOULD BE REVERSED. 6. PER CONTRA, THE LD. COUNSEL FOR THE ASSESSEE, BY FILING COPY OF THE ORDER OF THE COORDINATE B ENCH OF THE TRIBUNAL IN ASSESSEE S OWN CASE IN I.T.A. NOS.1741, 1742 & 1743/MDS/2013 FOR THE ASSESSMENT YEARS 2006 - 07, 2007 - 08 AND 2008 - 09 DATED 13.11.2015, SUBMITTED THE ISSUE INVOLVED IN THE APPEAL OF THE REVENUE IS SQUARELY COVERED IN FAVOUR OF THE ASSE SSEE. 7. WE HAVE HEARD BOTH SIDES, PERUSED THE MATERIALS ON RECORD AND GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. WE FIND THAT ON IDENTICAL ISSUE IN SIMILAR SET OF FACTS, THE COORDINATE BENCH OF THE TRIBUNAL IN ASSESSEE S OWN CASE FOR THE ASSESSMENT YEARS 2006 - 07, 2007 - 08 AND 2008 - 09, HAS OBSERVED AND HELD AS UNDER: 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITHER SIDE AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. NORMALLY WHEN THE BUILDING WAS LET OUT, THE RENTAL INCOME HAS TO BE ASSESSED UNDER THE HEAD INCOME FROM BUSINESS . IN THIS CASE, THE ASSESSEE CLAIM S THAT THE BUILDING WAS LET OUT FOR RUNNING DEVELOPMENT OF SOFTWARE IN THE NATURE OF IT PARK. THE ASSESSEE HAS PROVIDED UNINTERRUPTED POWER SUPPLY, NETWORKING AND OTHER FACILITIES WHICH ARE ESSENTIAL FOR IT PARKS. THEREFORE, THE CIT(A) FOUND THAT THE ASSES SEE IS PROVIDING A SYSTEMATIC SERVICE, HENCE, IT HAS TO BE CONSIDERED AS BUSINESS. WHEN THE ASSESSEE PROVIDED UNINTERRUPTED POWER SUPPLY, MAINTENANCE OF NETWORK SYSTEM AND OTHER ACCESSORIES AND AMENITIES ESSENTIAL FOR AN IT INDUSTRY, NATURALLY, THE AMENITY CHARGES IS FOR BUSINESS, I.T.A. NO . 173 /M/ 1 6 5 THEREFORE, THE CIT(A) HAS RIGHTLY FOUND THAT IT HAS TO BE CLASSIFIED AS BUSINESS INCOME. THIS TRIBUNAL DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER OF THE CIT(A). ACCORDINGLY, THE SAME IS CONFIRMED. 6. IN THE RESULT, ALL T HE THREE APPEALS OF THE REVENUE STAND DISMISSED. 8. THE LD. DR COULD NOT CONTROVERT THE ABOVE FINDINGS OF THE COORDINATE BENCH OF THE TRIBUNAL OR FILED ANY HIGHER COURT DECISION HAVING MODIFIED OR REVERSED THE ABOVE DECISION OF THE TRIBUNAL. FURTHER, ON SIMILAR ISSUE IN THE CASE OF M/S. ELNET TECHNOLOGIES LTD. IN TCA NO. 2336 & 2623 OF 2006 & 2169 OF 2008 DATED 09.10.2012, THE DEPARTMENT HAS FILED SLP BEFORE THE HON BLE SUPREME COURT AND THE SAME IS PENDING FOR DISPOSAL CANNOT BE A GROUND TO TAKE A DIFFE RENT VIEW. RESPECTFULLY FOLLOWING THE DECISION OF THE COORDINATE BENCH OF THE TRIBUNAL IN ASSESSEE S OWN CASE FOR EARLIER ASSESSMENT YEARS, THE GROUND RAISED BY THE REVENUE IS LIABLE TO BE DISMISSED. 9 . IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS D ISMISSED. ORDER PRONOUNCED ON THE 29 TH APRIL, 20 16 AT CHENNAI. SD/ - SD/ - ( CHANDRA POOJARI ) ACCOUNTANT MEMBER ( DUVVURU RL REDDY ) JUDICIAL MEMBER CHENNAI, DATED, THE 29 . 0 4 .201 6 VM/ - / COPY TO: 1. / APPELLANT , 2. / RESPONDENT , 3. ( ) / CIT(A) , 4. / CIT , 5. / DR & 6. / GF.