SAIDARSHAN BUSINESS CENTRES P.LTD, MUMBAI V. ASST CIT 7(2), MUMBAI

ITA 1773/MUM/2016

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 0915 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 9 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-01-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2010-2011
• Appeal Filed On: 23-03-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: CIRCUMSTANCES OF CASE
• Keywords: Business income; Depreciation; Earning of tax free income
• Section: 142(1); 234B; 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL H BENCH, MUMBAI BEFORE SHRI P. K. BANSAL , VP AND SHRI AMARJIT SINGH , JM / I .T.A. NO. 1773 / M/ 20 1 6 ( / ASSESSMENT YEAR: 20 10 - 11 ) M/S. SAIDARSHAN BUSINESS CENTRES PVT. LTD., 405 - 408, NAVBHARAT ESTATE, B - WING, ZAKARIA BUNDER ROAD, SEWRI (W) MUMBAI - 400015 / VS. ACIT - 7(2) MUMBAI ./ ./ PAN/GIR NO. : AAACS 5801 J ( / APPELLANT ) .. ( / RESPONDENT ) / DATE OF HEARING : 15.11 .2017 / DATE OF PRONOUNCEMENT : 05 . 01.2018 / O R D E R PER AMARJIT SINGH, JM: THE ASSESSEE HAS FILED THE PRESENT APPEAL AGAINST THE ORDER DATED 28 .01.201 6 PASSED BY THE COMMISSIONER OF INCOME TAX (APPEALS) - 14 , MUMBAI [HEREINAFTE R REFERRED TO AS THE CIT(A)] RELEVANT TO THE A.Y. 2010 - 11 . 2 . THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS: - 1. IN THE FACTS & CIRCUMSTANCES OF THE CASE AND IN LAW THE A.O. ERRED IN TREATING INCOME FROM 'BUSINESS CENTRE' BEING RUN AS 'BUSINESS' (AS PER OBJECT CLAUSE OF MEMORANDUM OF ASSOCIATION) AS ASSESSEE BY: SHRI ANUJ KISNADWALA (AR) DEPARTMENT BY: SHRI M.C. OMI NINGSHEN (DR) ITA. NO.1773/M/2016 A.Y. 2011 - 12 2 'INCOME FROM HOUSE PROPERTY' AS AGAINST ASSESSING THE SAME AS 'BU SINESS INCOME'. THE ID. CIT(A) UPHELD THE STAND TAKEN BY THE AO MERELY BASED ON EARLIER DECISION OF ITAT IN ASSESSES OWN CASE, WITHOUT TAKING INTO ACCOUNT RATIO OF DECISIONS RENDERED BY VARIOUS COURTS & TRIBUNALS & ESPECIALLY DECISION OF APEX COURT IN CHEN NAI PROPERTIES & INVESTMENTS LTD. [2015] 56 TAXMANN.COM 456(SC) & MUMBAI TRIBUNAL DECISIONS IN ACIT VS STELLAR DEVELOPMENT PVT. LTD. [2015] 54 TAXMANN.COM 252(MUM - TRI) & WSN GLOBAL SERVICES PVT. LTD.[2011] 45 SOT 74 (MUM - TR I ), WHICH WERE PRONOUNCED SUBSEQU ENT TO THE ORDER OF THE ITAT IN ASSESSES OWN CASE RELIED UPON BY THE CIT(A). 2. IN THE FACTS & CIRCUMSTANCES OF THE CASE AND IN LAW THE A.O. WAS NOT JUSTIFIED IN TREATING INCOME FROM 'BUSINESS CENTRE' OFFERED AS 'BUSINESS INCOME' AS 'INCOME FROM HOUSE PROPERTY' AND CONSEQUENTLY ERRED IN NOT ALLOWING DEDUCTION FOR EXPENSES FOR OPERATING THE 'BUSINESS CENTRE' & DEPRECIATION ON THE IMMOVABLE PROPERTIES HELD BY THE COMPANY. 3. WITHOUT PREJUDICE TO THE ABOVE, IT IS PRAYED THAT INCOME FROM RUNNING THE BUSINES S CENTRE, AT THE LEAST BE HELD AS 'INCOME FROM OTHER SOURCES' & NOT AS 'INCOME FROM HOUSE PROPERTY'. CONSEQUENTLY, ASSESSEE IS ALSO ENTITLED TO DEDUCTION FOR EXPENSES FOR OPERATING THE 'BUSINESS CENTRE' & DEPRECIATION ON THE IMMOVABLE PROPERTIES HELD BY IT WHICH WERE ERRONEOUSLY NOT ALLOWED BY THE AD. THE ID. CIT(A) CONFIRMED THE ORDER OF THE AO MERELY BASED ON EARLIER DECISION OF ITAT IN ASSESSES OWN CASE, WITHOUT TAKING INTO ACCOUNT RATIOOF THE DECISION OF BOMBAY HIGH COURT IN DUDHSAGAR INVESTMENTS PVT.LT D.[2014] 49 TAXMANN.COM354(BOM). RENDERED SUBSEQUENT TO THE ORDER OF THE ITAT IN ASSESSES OWN CASE RELIED UPON BY THE C 11(A). 4. THE LEARNED AO HAS ERRED IN LAW AND FACTS IN RESTRICTING THE DEDUCTION OF EXPENSES TO THE EXTENT OF INR 29.08,102 OUT OF INR 41,06,956. HE OUGHT TO HAVE ALLOWED REMAINING EXPENSES OF INR 11,98.854. 5. THE LEARNED AO HAS ERRED IN LAW AND FACTS IN NOT ALLOWING DEPRECIATION OF INR 10,76.747 ON SEWRI PREMISES, ALTHOUGH THE SAID PROPERTY WAS USED FOR ASSESSES FINANCING BUSINESS AND B USINESS CENTRE ACTIVITIES AFTER SALE OF PAREL PROPERTY IN A.Y. 2004 - 05. THE ID. CIT(A) ERRED IN CONFIRMING THIS VIEW OF THE AO. 6. THE LEARNED AO HAS ERRED IN LAW AND FACTS IN CALCULATING TAX AND INTEREST U/S 234B OF THE ACT. ITA. NO.1773/M/2016 A.Y. 2011 - 12 3 7. THE APPELLANT CRAVES LEAVE TO ADD, AMEND, ALTER AND/OR DELETE ANY OF THE GROUNDS OF APPEAL BEFORE OR DURING THE COURSE OF APPEAL. 3 . THE BRIEF FACTS OF THE CASE ARE THAT T HE ASSESSEE FILED ITS E - RETURN OF INCOME DECLARING TOTAL I NCOME TO THE TUNE OF RS.8,78,59,654/ - ON 15 . 10 .20 10 FOR THE A.Y. 2010 - 11 WHICH ONLY COMPRISES OF SHORT TERM CAPITAL GAINS EARNED BY THE ASSESSEE ON TRANSACTIONS OF SHARES. THE CASE WAS SELECTED FOR SCRUTINY UNDER CASS . THEREAFTER, THE NOTICES U/S 143(2) AND 142(1) OF THE ACT WERE ISSUED AND SERVED UPON THE ASSESSEE . THE ASSESSEE COMPANY IS MAINLY ENGAGED IN THE BUSINESS OF PROVIDING BUSINESS CENTRE SERVICE, BORROWING AND LENDING ACTIVITIES AND DEPB TRADING ACTIVITY. THE ASSESSEE OWNS A BUSINESS PREMISES I.E., 405 - 408, NAVBHARAT ESTATE, B WING, 4 TH FLOOR, Z AKARIA BUNDER ROAD, SEWRI (W), MUMBAI - 400015 WHICH WAS LET OUT TO VARIOUS TENANTS. THE ASSESSEE RECEIVED THE RENT TO THE TUNE OF RS.34,56,600/ - THE ASSESSEE HAS SHOWN THE RENTAL INCOME TO THE TUNE OF RS.34,56,600/ - AS INCOME FROM BUSINESS INSTEAD OF INCOME FROM HOUSE PROPERTY. THEREFORE, THE NOTICE WAS GIVEN AND AFTER THE RECEIPT OF REPLY, THE SAID INCOME WAS TREATED AS INCOME FROM HOUSE PROPERTY. THEREAFTER, CERTAIN CLAIM OF DEPRECIATION AND EXPENDITURE TO EARN THE EXEMPT INCOME U/S 14A AND OTHER EXPENSES WERE DISALLOWED AND THE INCOME OF THE ASSESSEE WAS ASSESSED TO THE TUNE OF RS. 8,94,56,480/ - . FEELING AGGRIEVED, THE ASSESSEE FILED AN APPEAL BEFORE THE CIT(A) WHO DISMISSED THE APPEAL OF ASSESSEE , THEREFORE, THE ASSESSEE HAS FILED THE PRESENT APPEAL BEFORE US. ITA. NO.1773/M/2016 A.Y. 2011 - 12 4 ISSUE NO. 1 TO 3 : - 4 . ISSUE NO. 1 & 3 ARE INTER - CONNECTED ARE BEING TAKEN UP TOGETHER FOR ADJUDICATION. UNDER THESE ISSUES THE ASSESSEE HAS CHALLENGED THE TREATMENT OF INCOME GIVEN BY THE AO RECEIVED AS RENT TO THE TUNE OF RS. 34,56,600/ - . THE ASSESSEE FILED THE RETURN OF INCOME BY SHOWING THE RENTAL INCOME TO THE TUNE OF RS.34,56,600/ - AS INCOME FROM THE BUSINESS. HOWEVER, THE ASSESSING OFFICER TREATED THE SAME AS INCOME FROM HOUSE PROPERTY. SUBSEQUENTLY THE FINDING OF THE ASSESSING OFFICER HAS BEEN CONFIRMED BY THE CIT(A) . T HE LD. REPRESENTATIVE OF THE ASSESSEE HAS ARGUED THAT THE HONBLE ITAT IN THE ASSESSEES OWN CASE HAS REMANDED TH ESE ISSUE S BEFORE THE AO IN ITA. NO. 2026/M/2016 DATED 06.1 0.2016 , T HEREFORE, THESE ISSUES ARE LIABLE TO BE REMANDED BEFORE THE AO TO DECIDE THE MATTER OF CONTROVERSY AFRESH IN VIEW OF THE DIRECTION RAISED THEREIN. HOWEVER, ON THE OTHER HAND, THE LD. REPRESENTATIVE OF THE DEPARTMENT HAS REFUTED THE SAID CONTENTION S. WE HAVE HEARD THE ARGUMENT ADVANCED BY THE LD. REPRESENTATIVE OF THE PARTIES AND PERUSED THE RECORD. COPY OF ORDER IN ITA. NO.2026/M/2016 FOR THE A.Y. 2011 - 12 DATED 06.10.2016 HAS BEEN PERUSED. WE OBSERVED THAT THE THESE ISSUES HAVE BEEN REMANDED BEFORE THE AO TO DECIDE THE MATTER AFRESH. R ELEVANT FINDING HAS BEEN GIVEN IN PARA NO. 6 OF THE JUDGMENT IS HEREBY REPRODUCED BELOW: - 6. WE HAVE HEARD THE RIVAL SUBMISSIONS PERUSED THE RELEVANT FINDING GIVEN IN THE IMPUGNED ORDERS AS WELL AS THE MATERIAL REFERRED TO BEFORE US. FROM THE PERUSAL OF THE CERTAIN ITA. NO.1773/M/2016 A.Y. 2011 - 12 5 FACTS NOTED BY THE ASSESSING OFFICER AND CIT (A) IT IS SEEN THAT, ASSESSEE IS EN GAGED IN THE BUSINESS OF PROVIDING BUSINESS CENTRE SERVICES'. IN THE YEAR 994 - 95, THE ASSESSEE HAS AMENDED ITS 'OBJECTS' (WHICH FACT HAS BEEN NOTED AT PAGE 2 OF THE CIT(A)'S ORDER), WHICH READS AS UNDER: - TO CARRY ON THE BUSINESS OF ESTABLISHING RUNNING OPERATING AND MAINTAINING AND CONDUCTING BUSINESS SERVICES THEREIN, TO LEASE, SUB - LEASE, LET, SUB - LET SUB - LICENSE, RENT, HIRE OR COMPANYS LAND, PREMISES, PROPERTIES SHOPS, OFFICES, GALAS, WORKSHOPS, FACTORIES OR OTHER PLACED OF BUSINESS OR ANY PART THEREO F, WHETHER LEASEHOLD OR FREE HOLD OR OTHERWISE USED, OCCUPIED, OWNED OR POSSESSED BY THE COMPANY, WITH OR WITHOUT ANY FURNITURE, FIXTURES, FITTINGS ARTICLES, EFFECT OR OTHERWISE THINGS THEREIN. IN PURSUANCE OF THE SAID OBJECT, THE NAME OF THE COMPANY WAS ALSO CHANGED TO SAIDARSHAN BUSINESS CENTERES PVT. LTD. FOR RUNNING OF BUSINESS CENTRE ACTIVITIES, THE ASSESSEE HAS BEEN RENDERING VARIOUS TYPES OF SERVICES, WHICH HAS BEEN ELABORATED AT PAGE 2 & 3 OF THE APPELLANT ORDER. HOWEVER, IN THE A.Y. 2003 - 04, TH E TRIBUNAL AFTER DETAILED DISCUSSION AND FOLLOWING THE RATIO LAID DOWN BY THE HONBLE CALCUTTA HIGH COURT IN THE CASE OF CIT VS. SHAMBHU INVESTMENT PVT. LTD. REPORTED IN (2001) 249 ITR 47 WHICH LATER ON WAS A DECISION, VARIOUS EXPENSES HAVE BEEN DISALLOWED IN THE MANNER PROVIDED BY TRIBUNAL. IN THIS YEAR, THE CASE OF THE LD. COUNSEL BEFORE US IS THAT, IN THE LIGHT OF THE LATEST SUPREME COURT DECISIONS, THE EARLIER PRECEDENCE SHOULD NOT BE FOLLOWED BECAUSE, NOW THE LAW AS HAS BEEN CULLED OUT FROM THESE APEX COURT DECISIONS ARE THAT, IF THE NATURE OF ACTIVITIES CARRIED OUT BY THE ASSESSEE ARE IN ACCORDANCE WITH THE 'OBJECTS' ENSHRINED IN THE MOA, THAT IS. IN; THE PURPOSE OF SYSTEMATIC BUSINESS ACTIVITY THEN SAME NEEDS TO BE EXAMINED IN THAT LIGHT. WE AGREE WIT H THIS PROPOSITION OF THE LD. COUNSEL, BECAUSE ULTIMATELY, THE MANDATE OF THE LAW IS THAT INCOME IS TO BE ASSESSED UNDER THE CORRECT HEAD OF INCOME AND ALSO THE STATUTORY DEDUCTIONS AND EXPENDITURE AS ADMISSIBLE UNDER LAW HAVE TO BE ALLOWED. THE CANNOT BE ESTOPPELS AGAINST THE LEVY AND IF SUPREME COURT DECISION ANY LAW THEN IT HAS TO RECKON AS LAW WHICH A1WYXITED. ACCORDINGLY, WE ARE SETTING ASIDE THIS ENTIRE 1USTAH1LITV OF INCOME FROM THE BUSINESS CENTRE' TO THE ASSESSING OFFICER TO EXAMINE, WHETHER THE S AME IS ASSESSED UNDER THE HEAD 'BUSINESS INCOME' OR 'INCOME FROM HOUSE PROPERTY' IN THE LIGHT OF ITA. NO.1773/M/2016 A.Y. 2011 - 12 6 THE AFORESAID SUPREME COURT DECISIONS. THE ASSESSING OFFICER SHALL PROVIDE SUFFICIENT OPPORTUNITY TO THE ASSESSES TO PRESENT ITS CASE IN THIS REGARD. WITH THIS OBSERVATION, GROUND NO.] IS TREATED AS ALLOWED FOR STATISTICAL PURPOSES. 5. IN VIEW OF THE SAID ABOVE MENTIONED ORDER, WE NOTICED THAT THE MATTER OF CONTROVERSY IS PENDING BEFORE THE AO TO DECIDE THE MATTER AFRESH IN VIEW OF CERTAIN INSTRUCTION RAISED BY THE HONBLE ITAT IN THE ASSESSEES OWN CASE DATED 06.10.2016. IN VIEW OF THE SAID CIRCUMSTANCES, WE SET ASIDE THE FINDING OF THE CIT(A) ON THIS ISSUE AND REMAND THE CASE BEFORE THE AO TO DECIDE THE MATTER AFRESH IN VIEW OF THE GUIDELINES/INSTRUCTION IN THE ORDER DATED 06.10.2016 IN THE ASSESSEES OWN CASE FOR THE A.Y. 2011 - 12 IN ITA. NO. 2026/M/2016 . ACCORDINGLY, THIS ISSUE IS DECIDED IN FAVOUR OF THE ASSESSEE. ISSUE NO. 4 & 5 : - 6 . ISSUE NOS. 4 & 5 ARE NOT PRESSED BEFORE US, THEREFORE, THESE ISSUES ARE DECIDED IN FAVOUR OF THE REVENUE AGAINST THE ASSESSEE BEING NOT PRESSED. 7 . IN THE RESULT , THE APPEAL OF THE ASSESSEE IS HEREBY ORDERED TO BE PARTLY ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT ON 05 .01 . 2018 SD/ - SD/ - ( P. K. BANSAL ) ( AMARJIT SINGH ) VICE PRESIDENT JUDICIAL MEMBER ITA. NO.1773/M/2016 A.Y. 2011 - 12 7 MUMBAI; DATED : 05 . 0 1 . 201 8 VIJAY / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE. / BY ORDER, //TRUE COPY// / (DY./ASSTT.REGISTRAR) , / ITAT, MUMBAI