Nishant Enclaves Pvt.Ltd., Hy, Hyderabad V. ITO, Ward-16(2), Hyderabad

ITA 1732/HYD/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 61965 (ITAT-HYDERABAD)
• Duration Of Justice: 9 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-07-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2007-2008
• Appeal Filed On: 10-10-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K E SUNIL BABU

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B, HYDERABAD BEFORE SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER AND SHRI D. KARUNAKARA RAO, ACCOUNTANT MEMBER ITA NO. 1732/HYD/2011 ASSESSMENT YEAR: 2007-08 NISHANT ENCLAVES PVT. LTD., APPELLANT HYDERABAD. (PAN/GIR NO. AAACN7988B/N-113) VS. INCOME TAX OFFICER, WARD 16(2), RESPONDENT HYDERABAD APPELLANT BY : SHRI SAMUEL NAGADESI RESPONDENT BY : SHRI K.E. SUNIL BABU DATE OF HEARING : 24/05/2012 DATE OF PRONOUNCEMENT : 27/07/ 2012 ORDER PER ASHA VIJAYARAGHAVAN, J.M.: THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAI NST THE ORDER OF THE CIT(A)-V, HYDERABAD DATED 18/07/2011 F OR THE ASSESSMENT YEAR 2007-08. 2. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF DEVEL OPMENT OF PROPERTIES AMONG OTHER OBJECTIVES. THE ASSESSEE DURING THE FINANCIAL YEAR 2006-07, RELEVANT TO THE ASSESSMENT YEAR 2007- 08 CONSTRUCTED A PART OF THE BUILDING ON PROPERTY B EARING NO.8- 2-351/N/1, ROAD NO.2, BANJARA HILLS, HYDERABAD AND LET OUT THE PART OF PROPERTY TO M/S. RANGOLI SAREES PVT LTD ., BY VIRTUE OF TWO AGREEMENTS, ONE LEASE DEED DT.1.9.2006, ANOT HER ONE ITA NO. 1732/HYD/2011 NISHANT ENCLAVES P. LTD. 2 LEAVE & LICENCE AGREEMENT DT.1.9.2006. THE LEASE CONSIDERATION WAS FIXED AT A COMPOSITE RENT OF RS.5 ,50,000/- PER MONTH WITH THE CONDITION THAT OBLIGATION TO PAY MONTHLY RENT SHALL COMMENCE FROM 1.12.2006. 3. THE AO, WHILE COMPLETING THE ASSESSMENT U/S.143( 3) OF THE ACT, DETERMINED THE ASSESSED INCOME AT RS. 15,9 6,596/-. 4. AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE P REFERRED AN APPEAL BEFORE THE CIT(A) STATING THAT THE AO HA S COMPUTED THE RENT AND AMENITIES FOR 5 MONTHS AT RS.16,50,000 /- AND RS.11,00,000/- INSTEAD OF RS.13,20,000/- AND RS.8,8 0,000/- RESPECTIVELY AS PER AUDITED BOOKS OF ACCOUNTS. 5. IT WAS SUBMITTED BEFORE CIT(A) THAT THE AO HAD E RRED IN COMPUTING THE RENT FOR THE PERIOD OF FIVE MONTHS WH EREAS THE ASSESSEE HAD RECEIVED THE RENT ONLY FOR FOUR MONTHS AND AS PER AGREEMENT, THE EFFECTIVE DATE IS FROM 1.12.2006 AND AS SUCH COVERING THE PERIOD FOR FOUR MONTHS ONLY DURING THE PREVIOUS YEAR. IT WAS FURTHER SUBMITTED THAT THE AO HAD NOT ICED FROM THE TDS CERTIFICATE THAT THE ASSESSEE HAD RECEIVED RENT OF RS. 27,50,000/- FOR FIVE MONTHS, THOUGH THE ASSESSEE HAD CLARIFIED DURING THE ASSESSMENT PROCEEDINGS THAT T HE LESSEE HAD ERRONEOUSLY MENTIONED THE TDS FOR THE MONTH OF APRIL 2007 IN THE TDS CERTIFICATE ISSUED FOR THE FINANCIA L YEAR 2006- 07 WHICH IS UNDER CONSIDERATION. THE DEDUCTOR, M/S . RANGOLI SAREES PVT LTD SAID THAT HAS PAID THE TDS ON 7.4.2 007 AND NOT BEFORE 31.3.2007 VIDE CHEQUE NO.617528 AND THE REFORE ITA NO. 1732/HYD/2011 NISHANT ENCLAVES P. LTD. 3 THAT WAS RELATED TO PAYMENT TOWARDS RENT AND AMENIT IES FOR THE MONTH OF APRIL 2007 PAID IN ADVANCE BY THEM IN FIRST WEEK. 6. THE CIT(A) HELD THAT THE LEASE DEEDS ARE EFFECTI VE FROM 1.11.06 AND THE OBLIGATION OF THE LESSEE TO PAY MON THLY RENT SHALL COMMENCE FROM 1.12.2006. THE CIT(A) HELD THA T THE PROPERTY IN QUESTION WAS TAKEN ON LEASE FROM 1.11.2 006 AND THE RENTAL STARTED FROM THE END OF FIRST MONTH . THEREFORE, HE HELD THAT THE RENT FOR 5 MONTHS WAS PAID BY M/S. RA NGOLI SAREES PVT LTD FOR NOVEMBER, DECEMBER 2006, JANUARY , FEBRUARY & MARCH 2007. FURTHER HE HELD THAT THE PA YMENT MADE ON 2 ND MARCH 2007 PERTAINS TO FEBRUARY, 2007 AND THAT MADE ON 31.3.2007 PERTAINS TO MARCH, 2007. . THE CI T(A) CONFIRMED THE ORDER OF AO. AGGRIEVED THE ASSESSEE IS IN APPEAL BEFORE US. 7. WE HAVE GONE THROUGH THE RECORDS AND LEASE AGREE MENTS. WE FIND THAT THE CIT(A) HAS BEEN MISGUIDED BY THE L EASE DEED EXECUTED ON 1.9.2006. IN THIS DEED THE TERMS OF TH E LEASE HAS BEEN FIXED FOR 9 YEARS W.E.F. 2006 VIDE CLAUSE (1) ON PAGE 5 AND ALSO IN CLAUSE (2)(I) ON PAGE 6. THERE IS A TY POGRAPHICAL ERROR ON PAGE 8 WHERE ERRONEOUSLY DATE HAS BEEN MEN TIONED FROM 1 ST NOVEMBER 2006 BUT ON READING CLAUSE (2) OF THE DEE D AT PAGE 6, IT HAS BEEN SPECIFIED THAT THE DATE IS E FFECTIVE FROM 1 ST DECEMBER 2006. THE FACT THAT THE EFFECTIVE DATE O F CONSIDERATION PAYABLE IS FROM 1 ST DECEMBER 2006 IS CORROBORATED BY VIRTUE OF LEAVE & LICENSE AGREEMENT MADE ON 1 ST SEPTEMBER 2006 FOR AMENITIES. THE THREE PARAS F IRST ONE AT PAGE 3 AND SECOND ONE ON PAGE 4, PARA 3 ON PAGE 5 IN LEAVE ITA NO. 1732/HYD/2011 NISHANT ENCLAVES P. LTD. 4 & LICENSE AGREEMENT SHOW THAT THE EFFECTIVE DATE OF CONSIDERATION PAYABLE IS FROM 1 ST DECEMBER 2006. 8. THE NEXT ASPECT TO BE CONSIDERED IS THE DEDUCTOR M/S. RANGOLI SAREES PVT LTD HAS PAID THE TDS ON 7.4.2007 (AND NOT BEFORE 31.3.2007) VIDE CHEQUE NO.617528 IS RELATED TO PAYMENT TOWARDS RENT AND AMENITIES FOR THE MONTH OF APRIL 2007 AS RENT IS PAYABLE IN ADVANCE IN THE BEGINNING OF THE MONTH. FURTHER, FROM THE AUDITED PROFIT & LOSS ACC OUNT WE FIND THAT RS.22 LAKHS PERTAINS TO RENT AND AMENITIES FOR THE PERIOD OF FOUR MONTHS FROM 1.4.2006 TO 31.3.2007. 9. FURTHER, FROM THE BANK ACCOUNT COPY IT IS ESTAB LISHED THAT THE ACTUAL PAYMENT WAS RECEIVED FOR THE MONTH OF APRIL, 2007. THE CHEQUES HAVE BEEN DEPOSITED IN THE MONTH OF APRIL 2007 HAS BEEN CREDITED ON 9 TH APRIL 2007, AS VERIFIED FROM THE BANK STATEMENT. THAT TDS HAS BEEN PAID BY M/S. RANG OLI SAREES PVT LTD ON 7.4.2007 VIDE CHEQUE NO.617528 I N ADVANCE BY THEM IN THE FIRST WEEK, AS PER STIPULATED TERMS IN THE LEASE DEED AND, HENCE, THE OBSERVATION OF THE CIT(A) THAT THE PAYMENT S MADE ON 2 ND MARCH 2007 PERTAINS TO FEBRUARY 2007 AND THAT MADE ON 31/03/2007 PERTAINS TO MARCH 2007 IS INCORRECT. 10. HENCE, IN OUR OPINION, GOING BY THE TERMS OF LE ASE DEED, WHERE AT ONE PLACE THERE HAS BEEN TYPOGRAPHICAL ERR OR ON PAGE 8 AS 1 ST NOVEMBER 2006, BUT, THE TYPOGRAPHICAL ERROR HAS B EEN IDENTIFIED AS FROM THE OTHER CLAUSES OF THE DEED IT IS CLEAR THAT THE PERIOD OF LEASE STARTS FROM 1 ST DECEMBER, 2006 AND, HENCE, THE ASSESSING OFFICER HAS ERRONEOUSLY COMPUTED THE RENTAL ITA NO. 1732/HYD/2011 NISHANT ENCLAVES P. LTD. 5 INCOME AND THE SAME HAS BEEN CONFIRMED BY CIT(A), W HICH IS INCORRECT. 11. IN THE RESULT, THE ASSESSEES APPEAL IS ALLOWED . PRONOUNCED IN THE OPEN COURT ON 27 TH JULY, 2012. SD/- SD/- (D. KARUNAKARA RAO) (ASHA VIJAYARAGHAVAN ) ACCOUNTANT MEMBER JUDICIAL MEMB ER HYDERABAD, DATED: 27 TH JULY, 2012. KV COPY TO:- 1) NISHANT ENCLAVES P. LTD., C/O S. DAGA & CO., CHARTERED ACCOUNTANTS, 403, PAIGAH PLAZA, BASHEER BAGH, HYDERABAD 500 063. 2) INCOME TAX OFFICER, WARD 16(2), HYDERABAD. 3) THE CIT (A)-V, HYDERABAD 4) THE CIT-IV, HYDERABAD 5) THE DEPARTMENTAL REPRESENTATIVE, I.T.A.T., HYDERABAD.