Kirloskar Systems Limited, Bangalore V. DCIT, Bangalore

ITA 2/BANG/2014

• Counselvise Citation: 221114 RSA 2014
• Duration Of Justice: 11 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-12-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 23-09-2015
• Assessment Year: 2010-2011
• Appeal Filed On: 01-01-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: FARHAT HUSSAIN QURESHI
• Keywords: Business income; Depreciation; Opportunity of being heard; Earning of tax free income; Question of law
• Section: 143(3); 56(2); 14A; 115JB; 56

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCH B BEFORE S HRI RAJPAL YADAV , JUDICIAL MEMBER AND SHRI JASON P. BOAZ, ACCOUNTANT MEMBER I.T . A. NO. 2 /BANG/201 4 (ASSESSMENT YEAR : 20 10 - 11 ) M/S. KIRLOSKAR SYSTEMS LIMITED , EMBASSY STAR, NO.8, PALAC E ROAD, VASANTH NAGAR, BANGALORE - 560 0 52 . APPELLANT. VS. ASST. COMMISSIONER OF INCOME TAX , CIRCLE 11(5) , BANGALORE. .. RESPONDENT. APPELLANT BY : SHRI SUDHEENDRA, C.A. R E SPONDENT BY : SHRI FARHAT HUSSAIN QURESHI. CIT (D.R) DATE OF H EARING : 12.11.2014 . DATE OF P RONOUNCEMENT : 10.12. 201 4 . O R D E R PER SHRI JASON P. BOAZ , A.M . : THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) I, BANGALORE DT. 1 8. 10. 2013 FOR ASS ESSMENT YEAR 20 10 - 11 . 2. THE FACTS OF THE CASE, IN BRIEF, ARE AS UNDER : 2.1 THE ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF REAL ESTATE DEVELOPMENT. FOR ASSESSMENT YEAR 2010 - 11 , THE ASSESSEE FILED ITS RETURN OF INCOME ON 7.10.20 10 DECLAR ING INCOME OF RS.5,09, 69,350. THE ASSESSEE HAD DEVELOPED AN INDUSTRIAL PARK BY NAME KIRLOSKAR BUSINESS PARK AT HEBBAL, BANGALORE WHICH WAS RENTED OUT TO VARIOUS COMPANIES . IN ADDITION TO RENTING OUT 2 IT A NO. 2 /BANG/201 4 THE BUILDINGS IN THE AFORESAID BUSINESS PARK, THE ASSESSEE ALSO UND ERTOOK TO PROVIDE VARIOUS AMENITIES AND SERVICES TO THE TENANTS SUCH AS MAINTENANCE OF ROADS, ETC AND OTHER FIT OUTS COMPRISING OF FURNITURE, PLANT AND MACHINERY, FIXTURES, ETC. FOR WHICH RENT WAS CHARGED. THE RENTALS FOR PROPERTY AND FIT - OUTS WERE FIXE D SEPARATELY BY WAY OF LEASE AGREEMENTS AND APART FROM THIS, THE ASSESSEE ALSO RECEIVED MAINTENANCE CHARGES FOR MAINTENANCE OF THE BUSINESS PARK. IN THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE CONTENDED THAT THE ENTIRE RE NTAL INCOME RECEIVED WAS BU SINESS INCOME WHICH WAS DERIVED ON ACCOUNT OF COMMERCIAL EXPLOITATION OF THE BUSINESS PARK, BY WAY OF PROVIDING FIT OUTS AND VARIOUS OTHER SERVICES AND AMENITIES FOR RENT AND THAT THE DEVELOPMENT OF THE BUSINESS PARK AND RENTING OUT OF THE SAME ALONG WITH A PACK OF SERVICES WAS A COMMERCIAL VENTURE IN THE COURSE OF BUSINESS. THE ASSESSING OFFICER AFTER EXAMINATION OF THE LEASE RENTAL AGREEMENTS ENTERED INTO BY THE ASSESSEE WITH VARIOUS COMPANIES DID NOT CONCUR WITH THE ASSESSEE'S CONTENTIONS AND WAS OF THE VIEW THAT THE RENTAL INCOME FROM THE LETTING OUT OF PROPERTY AND FIT OUTS AND MAINTENANCE CHARGES IS EXIGIBLE TO TAX UNDER THE HEAD INCOME FROM HOUSE PROPERTY AS THE ACTIVITY OF LETTING OUT OF THE BUSINESS PARK ALONG WITH THE PROVISION OF VARIOUS SERVIC ES AND AMENITIES CANNOT BE REGARDED AS COMMERCIAL ACTIVITY. THE ASSESSMENT WAS COMPLETED BY AN ORDER UNDER SECTION 143(3) OF INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS 'THE ACT') DT.2 7 .12.2012 DETERMINING THE INCOME OF THE ASSESSEE UNDER THE NORMA L PROVISIONS AT RS. 9,57,87,523 . W HILE COMPLETING THE ASSESSMENT, THE ASSESSING OFFICER TREATED THE RENTAL INCOME FROM LETTING OUT OF PROPERTY, FIT OUTS I.E. PLANT AND MACHINERY, FURNITURE AND FIXTURES ETC. AS INCOME FROM HOUSE PROPERTY AS AGAINST THE AS SESSEE'S CLAIM OF BUSINESS INCOME. APART FROM THIS, THE ASSESSING OFFICER ALSO MADE CERTAIN ADDITIONS / 3 IT A NO. 2 /BANG/201 4 DISALLOWANCES U NDER SECTION S 14A AND 37 OF THE ACT. THE BOOK PROFITS UNDER SECTION 115JB OF THE ACT WAS COMPUTED AT RS. 16,86,74,063 . 2.2 AGGRIEVED BY THE ORDER OF ASSESSMENT FOR ASSESSMENT YEAR 2010 - 11 DT.2 7.12 .201 0 , THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(APPEALS) I, BANGALORE WHO DISPOSED OFF THE ASSESSEE'S APPEAL BY ORDER DT. 1 8. 10 .2013 ALLOWING THE ASSESSEE PARTIAL RELIEF. 3.0 AGGRIEVED BY THE ORDER OF THE CIT(APPEALS) I, BANGALORE DT. 18.10 .2013 FOR ASSESSMENT YEAR 2009 - 10, THE ASSESSEE IS IN APPEAL BEFORE THIS TRIBUNAL RAISING THE FOLLOWING GROUNDS : 1 (A) . ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT (APPEALS) HAS ERRED IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER IN BRINGING TO TAX INCOME FROM RENTALS AND FIT - OUT S AS INCOME FROM HOUSE PROPERTY AGAINST THE CLAIM OF THE APPELLANT THAT THE SAME IS BUSINESS INCOME. THE APPELLANT COMPANY REITERATES THAT THE RENT FORM FIT OUTS IS DISTINCT ACTIVITY AND CHARGED ACCORDINGLY TO CUSTOMERS AND THE SAME IS CONSIDERED AS BUSINESS ACTIVITY AND CONSEQUENTLY AS BUSINESS INCOME AND CORRESPONDING DEPRECIATION AND OTHER EXPENDITURE ARE ALLOWABLE EXPENDITURE. 1(B) WITHOUT PREJUDICE TO THE ABOVE, THE APPELLANT RELIES ON THE DECISION OF THE HON'BLE INCOME TAX APPELLATE TRIBUNAL C BENCH, BANGALORE IN ITA NOS.720 & 721/BANG/2011 AND 685/BANG/2011 DT.29.11.2013 IN THE APPELLANT S OWN CASE FOR THE A.YS 2006 - 07 AND 2007 - 08 WHEREIN THE ITAT HAS DECIDED THE ISSUE IN FAVOUR OF THE APPELLANT. FACTS AND CIRCUMSTANCES BEING THE SAME, THE ABOVE CLAIM REQUIRES TO BE ALLOWED. 2 (A) . ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT (APPEALS) HAS ERRED IN CONFIRMING THE A CTION OF THE ASSESSING OFFICER IN RECOMPUTING THE DISALLOWANCE TOWARDS EXPENDITURE INCURRED ON EXEMPT INCOME UNDER SECTION 14A OF THE INCOME TAX ACT WHILE COMPUTING THE TOTAL INCOME. 2(B) . THE APPELLANT REITERATES THAT THE METHOD FOLLOWED BY THE APPEL LANT COMPANY IS NOT IN VIOLATION OF THE PROVISIONS OF SECTION 14A OF THE INCOME TAX ACT, 1961 AND CONSEQUENTLY FURTHER DISALLOWANCE OF RS.5,24,321 NEEDS TO BE DELETED. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT (APPEALS) ERRED IN DISAL LOWING THE ENTIRE PROFESSIONAL CHARGES PAID TO EMABSSY MANAGEMENT CONSULTANT PVT. LTD. OF RS.36,00,000 ON THE BASIS OF ENTIRE EXPENDITURE RELATING TO HOUSE PROPERTY. THE EXPENSES ALLOWABLE SHOULD BE PROPORTIONATE RELATING TO FIT OUTS AND MAINTENANCE. THE APPELLANT SEEKS LEAVE TO ADD / TO AMEND ANY OF THE FOREGOING GROUNDS AS AND WHEN CONSIDERED NECESSARY AT THE TIME OF HEARING. 4 IT A NO. 2 /BANG/201 4 4.0 WHETHER FIT - OUT RENT IS INCOME FROM HOUSE PROPERTY . 4.1 IN THE GROUNDS RAISED AT S.NO.1 (A) AND 1(B) , THE ASSESSEE HA S CHALLENGED THE FINDING OF THE LEARNED CIT (APPEALS) IN TREATING THE RENT RECEIVED BY IT FROM FIT - OUTS, FIXTURES AND EQUIPMENT, PLANT AND MACHINERY, ETC. RELATING TO KIRLOSKAR BUSINESS PARK AS INCOME FROM HOUSE PROPERTY INSTEAD OF TREATING IT AS INCOME FROM BUSINESS AS CLAIMED BY THE ASSESSEE. 4.2 AFTER CONSIDERING THE CLAIMS OF THE ASSESSEE AND REASONING OF THE ASSESSING OFFICER, THE LEARNED CIT (APPEALS) DECIDED THIS ISSUE AGAINST THE ASSESSEE, FOLLOWING HIS PREDECESSOR S ORDERS FOR ASSESSMENT YEARS 2006 - 07 AND 2007 - 08 IN THE ASSESSEE'S OWN CASE. IN THE AFORESAID ORDER THIS ISSUE WAS DECIDED AGAINST THE ASSESSEE FOR THE REASON THAT THE RENT FROM FIT - OUTS IS TAXABLE UNDER THE HEAD INCOME FROM HOUSE PROPERTY AS -- (I) FIT - OUTS ARE AN INEXTRICABLE PA RT OF THE PREMISES LET OUT TO TENANTS; (II) FIT - OUTS CANNOT BE REGARDED AS STOCK - IN - TRADE OF THE ASSESSEE; AND (III) SINCE RENT FORM LETTING OUT OF THE PROPERTY IS ACCEPTED AS INCOME FALLING UNDER THE HEAD INCOME FROM HOUSE PROPERTY , RENT FROM OUTFITS CANNOT BE TREATED AS BUSINESS INCOME . 4.3 BEFORE US, THE LEARNED AUTHORISED REPRESENTATIVE OF THE ASSESSEE SUBMITTED THAT THIS ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE AS IT WAS CONSIDERED BY THE CO - ORDINATE BENCH OF THIS TRIBUNAL IN THE ASSESSEE'S OWN CASE FOR THE EARLIER ASSESSMENT YEARS 2006 - 07 AND 2007 - 08 IN ITA NOS.720, 721 & 685/BANG/2011 DT.29.11.2013 AND HELD TO BE NOT TAXABLE AS INCOME FROM HOUSE PROPERTY AT PARAS 7.1 TO 7.16 AT PAGES 9 TO 16 OF THE SAID ORDER. THE LEARNED AUTHORISED REPRESEN TATIVE PRAYED THAT SINCE THE ISSUE OF RENT RECEIVED ON FIT - OUTS, FIXTURES, ETC WAS HELD IN 5 IT A NO. 2 /BANG/201 4 FAVOUR OF THE ASSESSEE AS BEING NOT TAXABLE AS INCOME FROM HOUSE PROPERTY BY THE AFORESAID DECISION, THE APPEAL OF THE ASSESSEE BE ALLOWED ON THIS GROUND. 4.4 PER CONTRA, THE LEARNED DEPARTMENTAL REPRESENTATIVE SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. 4.5 WE HAVE HEARD BOTH PARTIES AND PERUSED AND CAREFULLY CONSIDERED THE MATERIAL ON RECORD. AS HIGHLIGHTED BY THE LEARNED AUTHORISED REPRESENTATIVE, WE FIND THA T THE SAME ISSUE OF WHETHER THE RENTAL INCOME RECEIVED ON LEASING / RENTING OUT OF FIT - OUTS, FURNITURE AND FIXTURES IS TO BE TREATED AS EXIGIBLE TO TAX UNDER THE HEAD INCOME FROM HOUSE PROPERTY OR BUSINESS INCOME WAS CONSIDERED BY THE CO - ORDINATE BENCH OF THIS TRIBUNAL IN THE ASSESSEE'S OWN CASE FOR ASSESSMENT YEARS 2006 - 07 AND 2007 - 08 IN ITA NOS.720,721& 685/BANG/2011. IN THIS ORDER, THE TRIBUNAL HAS ADJUDICATED THE ISSUE IN FAVOUR OF THE ASSESSEE HOLDING THAT THE INCOME DERIVED FROM LETTING OUT OF TH E FIT - OUTS, FURNITURE AND FIXTURES, ETC IS NOT CHARGEABLE TO TAX UNDER THE HEAD INCOME FROM HOUSE PROPERTY . THE OPERATIVE PORTION OF THIS ORDER AT PARAS 7.1 TO 7.1.6 THEREOF IS EXTRACTED HEREUNDER : RENT RECEIVED ON FIT - OUT S, FIXTURES ETC: 7.1. IT IS AN UNDISPUTED FACT THAT DURING THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEARS UNDER DISPUTE, THE ASSESSEE HAD LET OUT THE BUILDINGS IN ITS INDUSTRIAL PARK FOR RENT. APART FROM LETTING OUT THE BUILDINGS TO ITS TENANTS, THE ASSESSEE HAD ALSO PROVIDED CERTAIN AMENITIES AND SERVICES SUCH AS ROADS IN THE INDUSTRIAL PARK, MULTIPLE CAR PARKING, SECURITY, STREET LIGHTS, POWER SUPPLY AND MAINTENANCE OF ELECTRICAL INSTALLATIONS AND BUILDINGS, ACS, FIXTURES, LIFTS, FIT - OUTS COMPRISIN G OF FURNITURE, PLANT AND MACHINERY ETC., 7.1.2. AS RIGHTLY HIGHLIGHTED OUT BY THE ASSESSEE DURING THE COURSE OF HEARING, THE RENTS FOR THE BUILDINGS AND VARIOUS AMENITIES PROVIDED WERE FIXED SEPARATELY IN THE LEASE AGREEMENTS ENTERED INTO. BEING QUERIE D AT THE TIME OF ASSESSMENT PROCEEDINGS, THE ASSESSEE HAD CONTENDED BEFORE THE RESPECTIVE AOS THAT THE ENTIRE RENTALS INCOME WAS ON ACCOUNT OF COMMERCIAL EXPLOITATION OF THE PROPERTIES 6 IT A NO. 2 /BANG/201 4 BY WAY OF PROVIDING PROPERTY, FIT - OUTS AND VARIOUS AMENITIES FOR RENT A ND THAT THE DEVELOPMENT OF INDUSTRIAL PARK AND PROVIDING THE SAME ALONG WITH AMENITIES WAS A COMMERCIAL VENTURE IN THE COURSE OF BUSINESS AND, THEREFORE, RENTALS RECEIVED FOR BOTH (BUILDING + AMENITIES) ARE TO BE TAXABLE AS BUSINESS INCOME . HOWEVER, THE AOS TOOK A VIEW THAT THE RENTAL INCOME FROM PROPERTY AND FIT - OUTS ARE TAXABLE UNDER THE HEAD INCOME FROM HOUSE PROPERTY ON THE PREMISE THAT THE ACTIVITY OF LETTING OUT OF INDUSTRIAL PARK ALONG WITH PROVISION OF VARIOUS SERVICES AND AMENITIES CANNOT BE R EGARDED AS A COMPLEX COMMERCIAL ACTIVITY. 7.1.3. BEFORE THE FIRST APPELLATE AUTHORITY, THE ASSESSEE HAD, HOWEVER, AGITATED ONLY THE ISSUE OF THE RENTS RECEIVED ON FIT - OUTS WHICH SHOULD BE TAXABLE AS BUSINESS INCOME BUT NOT UNDER THE HEAD HOUSE PROPERTY . THIS PLEA OF THE ASSESSEE WAS, HOWEVER, TURNED DOWN BY THE CIT (A) FOR THE REASONS RECORDED IN HIS FINDINGS. 7.1.4 IN THE PRESENT CASE, THE ASSESSEE IS ENGAGED IN THE BUSINESS OF DEVELOPMENT, OPERATION AND MAINTENANCE OF INDUSTRIAL PARK. THE INCOME FROM FIT OUTS LET OUT WAS RECEIVED IN COURSE OF BUSINESS CARRIED ON BY THE ASSESSEE COMPANY. THE FIT OUT RENT WAS EARNED FROM LETTING VARIOUS FACILITIES SUCH AS INTERIORS, FURNITURE AND FIXTURES, ELECTRICAL FITTINGS ETC. THE OBSERVATION OF THE LEARNED ASSESSI NG OFFICER AND THE CIT (A) THAT THE FIT OUTS FORM AN INTEGRAL PART OF THE STRUCTURE OWNED BY THE ASSESSEE AND HENCE THE RENTAL INCOME FROM THESE FIT OUTS IS TO BE TREATED AS INCOME FROM HOUSE PROPERTY IS WITHOUT MERIT. RENT IS SEPARATELY FIXED FOR FIT OUT S GIVEN ON RENT. THE AMOUNT OF RENT FOR THE LET OUT BUILDINGS IS FIXED BASED ON VARIOUS FACTORS SUCH AS EXTENT OF AREA (IN SQ.FT, SQ.METR ETC) LET OUT, LOCATION OF THE BUILDING WHETHER LOCATED IN AN AREA PROXIMATE TO CIVIC AMENITIES AND FACILITIES, TYPE OF CONSTRUCTION ETC. HOWEVER, RENT FOR THE LET OUT OF FIT OUTS ARE FIXED BASED ON OTHER FACTORS SUCH AS TYPE OF FIT OUT PROVIDED, ITS ESTIMATED USEFUL LIFE, THE PROBABLE MAINTENANCE COST OF FIT OUTS ON ACCOUNT OF WEAR AND TEAR, REPLACEMENT ETC. THERE WAS A N INCREMENT IN RENT FROM BUILDING IN SUBSEQUENT YEARS. HOWEVER, THERE WAS NO SUCH INCREMENT IN THE FIT OUT RENT. FIT OUTS HAVE A SHORTER USEFUL LIFE THAN THAT OF THE BUILDING OR SUPERSTRUCTURE. THEY ARE ALSO SUSCEPTIBLE TO ACCELERATED WEAR AND TEAR, LIABLE FOR REPLACEMENT ON ACCOUNT OF CHANGES IN TRENDS IN OFFICE DECORUM ETC. ON ACCOUNT OF THE ABOVE DIFFERENCES IN THE INHERENT NATURE OF THESE TWO PROPERTIES, IT CANNOT BE CONSIDERED THAT THE FIT OUTS ARE AN INTEGRAL PART OF THE BUILDING. THE PROVISIONS OF TH E COMPANIES ACT, INCOME TAX ACT AND RULES RECOGNIZE THE SEPARATE EXISTENCE OF ASSETS ATTACHED TO BUILDINGS OR SUPERSTRUCTURE. FOR EXAMPLE, THE RATE OF DEPRECIATION FOR BUILDING, PLANT AND MACHINERY, FURNITURE AND FITTINGS ARE DIFFERENT. THIS IS SO EVEN IF THE PLANT AND MACHINERY IS EMBEDDED PERMANENTLY INTO THE EARTH AND FURNITURE AND FITTINGS ARE ATTACHED TO THE BUILDING. AS PER NOTE 5 TO NEW APPENDIX I OF IT RULES, WHICH PRESCRIBES THE DEPRECIATION RATES FOR VARIOUS ASSETS, ELECTRICAL FITTINGS INCLUDE ELE CTRICAL WIRING, SWITCHES, SOCKETS, OTHER FITTINGS AND FANS, ETC. THUS ASSETS PERMANENTLY ATTACHED TO BUILDING ARE TREATED SEPARATELY AND THEY ARE ENTITLED TO SEPARATE RATE OF DEPRECIATION. 7 IT A NO. 2 /BANG/201 4 7.1.5. THE VARIOUS JUDGMENTS ON A SIMILAR CIRCUMSTANCE HAVE HELD THAT LETTING OUT OF THE BUILDING TOGETHER WITH FURNITURE, FIXTURES ETC., SHOULD NOT BE ASSESSED UNDER THE HEAD HOUSE PROPERTY . TO ILLUSTRATE FURTHER, WE SHALL ANALYZE THE JUDGMENTS OF THE HON BLE JURISDICTIONAL HIGH COURT ON A SIMILAR ISSUE, AS UNDER: (I) CIT V. SHANKARANARAYANA HOTELS (P) LTD (1993) 201 ITR 0138 (KAR): THE ISSUE BEFORE THE HON BLE COURT WAS WHETHER, THE TRIBUNAL WAS RIGHT IN HOLDING THAT THE COMPOSITE RENT RECEIVED BY THE ASSESSEE FROM ITS TENANTS SHOULD BE SPLIT AND THE AMOUNTS ATTRI BUTABLE TO THE PROPERTY ONLY SHOULD BE ASSESSED UNDER THE HEAD PROPERTY INCOME , WHILE THE AMOUNT ATTRIBUTABLE TO AMENITIES PROVIDED/SERVICES RENDERED BY THE ASSESSEE TO THE TENANTS SHOULD BE ASSESSED UNDER THE HEAD OTHER SOURCES ? AFTER HEARING THE R IVAL PARTIES AND ALSO EXTENSIVELY REFERRING THE EARLIER RULINGS OF THE VARIOUS HON BLE COURTS INCLUDING THE CASES OF (I) SHAH (DC) V. CIT (1979) 118 ITR 0419 (KAR); (II) KARNANI PROPERTIES LTD CASE (1971) 82 ITR 547 (SC); (III) CIT V. KANAK INVESTMENTS (P VT) LTD (1974) 95 ITR 419 (CAL); & (IV) INDIAN CITY PROPERTIES LTD V. CIT (1978) 111 ITR 19 (CAL), THE HON BLE COURT HAD HELD THAT IN CASE THERE IS INSEPARABILITY, AS STATED ABOVE, THEN IT WILL NOT BE INCOME FROM HOUSE PROPERTY AT ALL BUT WOULD BE INCO ME FALLING UNDER THE PRESENT SECTION 56 (2)(III). FURTHER, WHAT FOLLOWS FROM THIS IS THAT IN CASE OF SEPARABILITY, THE TWO SETS OF INCOME ATTRIBUTABLE TO THE TWO SEPARATE ENTITIES ALSO SHOULD BE ASSESSED UNDER THE RESPECTIVE HEADS. IN OTHER WORDS, THE INC OME THAT SHOULD BE ATTRIBUTED TO THE PROPERTY AS SUCH ALONE SHOULD BE ASSESSED UNDER SECTION 22. IN VIEW OF THE ABOVE DISCUSSION, WE HAVE NO HESITATION IN HOLDING THAT THE COMPOSITE RENT RECEIVED BY THE ASSESSEE COULD BE SPLIT UP . (II) CIT V. SRI S MOHAN KUMAR (HUF) (2011) 201 TAXMAN 161 (KAR): THE SUBSTANTIAL QUESTION OF LAW RAISED BEFORE THE HON BLE COURT WAS THAT (1) WHETHER THE TRIBUNAL WAS JUSTIFIED IN HOLDING THAT THE RENTAL INCOME RECEIVED BY THE ASSESSEE S FROM LETTING OUT THE BUILDING TOGETH ER WITH FURNITURE, FIXTURES AND EQUIPMENT SHOULD BE BIFURCATED UNDER THE TWO HEADS: (A) INCOME FROM HOUSE PROPERTY ; (B) INCOME FROM OTHER SOURCES INSOFAR AS THE INCOME FROM FURNITURE, FIXTURES AND EQUIPMENT IS CONCERNED NOT THE ENTIRE RENTAL INCOME UNDER THE H EADING OF INCOME FROM HOUSE PROPERTY THE INCOME IS TO BE ASSESSED AS INCOME FROM HOUSE PROPERTY. REFERRING THE CASES OF (I) CIT V. SHAMBHU INVESTMENT (P) LTD (2001) 249 ITR 47 (CAL); (II) SULTAN BROS (P) LTD V. CIT (1964) 51 ITR 353 (SC); & (III) TARAPO RE & CO V. 8 IT A NO. 2 /BANG/201 4 CIT (2003) 259 ITR 389 (MAD) AND ALSO ANALYZING THE PROVISIONS OF SECTIONS 22,23,27,56 OF THE ACT, THE HON BLE COURT HAD RULED THAT - 17. THEREFORE, FROM THE AFORESAID STATUTORY PROVISIONS, IT IS CLEAR THAT IF THE INCOME IS TO BE CHARGEABLE UND ER THE HEADING OF INCOME FROM HOUSE PROPERTY IT SHOULD BE THE INCOME WHICH REPRESENTS THE ANNUAL VALUE OF PROPERTY CONSISTING OF ANY BUILDING OR LANDS APPURTENANT THERETO OF WHICH THE ASSESSEE IS THE OWNER AND ONLY SUCH INCOME SHALL BE CHARGEABLE TO INCO ME - TAX UNDER THE HEAD INCOME FROM HOUSE PROPERTY. WHEN SECTION 56(2)(III)MAKES IT EXPLICITLY CLEAR THAT THE INCOME FROM MACHINERY OR FIXTURE BELONGING TO THE ASSESSEE AND LET OUT ON HIRE, IF IT IS NOT CHARGEABLE UNDER THE HEADING OF PROFITS AND GAINS O F BUSINESS OR PROFESSION , THEN IT HAS TO BE CHARGED TO INCOME - TAX UNDER THE HEAD INCOME FROM OTHER SOURCES . IF THE AFORESAID INCOME IS INSEPARABLE FROM LETTING OUT THE SAID PLANT AND MACHINERY OTHER THAN THE INCOME OF SUCH LETTING OUT CANNOT IF IT IS N OT CHARGEABLE TO INCOME - TAX UNDER PROFITS AND GAINS OR PROFESSION , IS CHARGEABLE UNDER THE HEAD INCOME FROM OTHER SOURCES. THEREFORE UNDER THESE CIRCUMSTANCES, THE INCOME DERIVED FROM LETTING OUT THE FURNITURE AND FIXTURE IS NOT CHARGEABLE UNDER THE H EADING OF INCOME FROM HOUSE PROPERTY . 18. THE FINDING RECORDED BY THE TRIBUNAL IS IN ACCORDANCE WITH LAW AND DOES NOT SUFFER FROM ANY ILLEGALITY OR INFIRMITY AND, THEREFORE, IT DOES NOT CALL FOR INTERFERENCE WHILE COMING TO THE ABOVE CONCLUSION, T HE HON BLE COURT HAD ALSO DISTINGUISHED THE RULING OF THE HON BLE SUPREME COURT IN THE CASE OF SHAMBHU INVESTMENTS (SUPRA). FOR APPRECIATION OF FACTS, THE RELEVANT PORTION OF THE OBSERVATION OF THE HON BLE COURT IS REPRODUCED AS UNDER: 11 . WE HAVE TO SEE THE STATUTORY PROVISION CONTAINED IN S. 56 WHICH DEALS WITH INCOME FROM OTHER SOURCES. SUB - S. (1) OF S. 56 MAKES IT CLEAR THAT INCOME OF EVERY KIND WHICH IS NOT TO BE EXCLUDED FROM THE TOTAL INCOME UNDER THIS ACT SHALL BE CHARGEABLE TO INCOME - TAX UNDER THE HEAD 'INCOME FROM OTHER SOURCES'; IF IT IS NOT CHARGEABLE TO INCOME - TAX UNDER ANY OF THE HEADS SPECIFIED IN S. 14, ITEMS A TO E, SUB - S. (2) OF S. 56 SPECIFICALLY STATES THE RATE OF INCOME - TAX WHICH SHALL BE CHARGEABLE TO INCOME - TAX UNDER THE HEAD INC OME FROM OTHER SOURCES . SUB - CL. (II) PROVIDES THAT 'INCOME FROM MACHINERY, PLANT OR FURNITURE BELONGING TO THE ASSESSEE AND LET ON HIRE, IF THE INCOME IS NOT CHARGEABLE TO INCOME - TAX UNDER THE HEAD PROFITS AND GAINS OF BUSINESS OR PROFESSION . CLAUSE (II I) ALSO PROVIDES THAT 'WHERE AN ASSESSEE LETS ON HIRE MACHINERY, PLANT OR FURNITURE BELONGING TO HIM AND ALSO BUILDINGS AND THE LETTING OF THE BUILDINGS IS INSEPARABLE FROM THE LETTING OF THE SAID MACHINERY, PLANT OR FURNITURE, THE INCOME FROM SUCH LETTING , IF IT IS NOT CHARGEABLE TO INCOME - TAX UNDER THE HEAD 'PROFITS AND GAINS OF BUSINESS OR PROFESSION'. THEREFORE, THE INTENTION OF THE LEGISLATURE IS EXPLICIT. IF THE MACHINERY, PLANT AND FURNITURE ARE NOT SEPARATE FROM THE LETTING OF THE SAID MACHINERY, TH E INCOME FROM SUCH MACHINERY, PLANT ALONG WITH THE INCOME FROM THE BUILDING, THE INCOME IS CHARGEABLE TO INCOME - TAX UNDER THE HEAD OF INCOME FROM OTHER SOURCES , IF IT DOES NOT FALL UNDER 'PROFITS AND GAINS OF BUSINESS OR PROFESSION'. THEREFORE, UNDER NO CIRCUMSTANCE THE INCOME FROM LETTING OUT THE FURNITURE AND FIXTURE BECOMES CHARGEABLE TO INCOME - TAX UNDER THE HEAD OF INCOME FROM HOUSE PROPERTY . 9 IT A NO. 2 /BANG/201 4 (III) IN THE CASE OF CIT V. M/S. VELANKANI INFORMATION SYSTEMS PVT. LTD & OTHERS IN ITA NO.273/2012 C/W, I .T.A.NOS.274/2012, 275/2012, 276/20122, 374/2011 & 375/2011 DATED 2.4.2013, THE ISSUE BEFORE THE HON BLE JURISDICTIONAL HIGH COURT WAS, AMONG OTHERS, THAT WHETHER THE APPELLATE AUTHORITIES WERE CORRECT IN HOLDING THAT THE RENTAL INCOME EARNED BY THE AS SESSEE COMPANY FROM LETTING OUT BUILDING SHOULD BE BROUGHT TO TAX UNDER THE HEAD INCOME FROM BUSINESSES AND NOT UNDER THE HEAD INCOME FROM HOUSE PROPERTY AS HELD BY THE ASSESSING OFFICER? EXTENSIVELY QUOTING AND ALSO ANALYZING THE PROVISIONS OF SEC TIONS 22, 28, 56 (1), 80IA OF THE ACT AND REFERRING TO THE RULINGS OF VARIOUS JUDICIARIES INCLUDING THE HON BLE SUPREME COURT IN (I) EAST INDIA HOUSING & LAND DEVELOPMENT TRUST LTD V. CIT (1961) 42 ITR 49 (SC); (II) KARANPURA DEVELOPMENT CO. LTD V. CIT (1 962) 44 ITR 362 (SC); (III) SULTAN BROS. (P) LTD (SUPRA); (IV) CIT V. NATIONAL STORAGE (P) LTD (1967) 66 ITR 596 (SC); & (IV) THE HON BLE JURISDICTIONAL HIGH COURT IN THE CASE OF ADDL. CIT V. HINDUSTAN MACHINE TOOLS LTD (1980) 121 ITR 798 (KAR), THE HON B LE COURT HAD OBSERVED THUS 25. WE HAVE TO FIND OUT IN THAT CONTEXT WHAT WAS THE INTENTION OF THE PARTIES IN ENTERING INTO THE LEASE TRANSACTION. IT IS NOT THE NUMBER OF AGREEMENTS WHICH ARE ENTERED INTO BETWEEN THE PARTIES WHICH IS DECISIVE IN DETERMI NING THE NATURE OF TRANSACTION. WHAT IS THE OBJECT OF ENTERING INTO MORE THAN ONE SAID TRANSACTIONS IS TO BE LOOKED INTO. HOWEVER, IF FOR ENJOYMENT OF LEASE, THE SUBJECT MATTER OF ALL THE AGREEMENTS IS NECESSARY, THEN NOTWITHSTANDING THE FACT THAT THERE ARE MORE THAN ONE AGREEMENT OR ONE LEASE DEED, THE TRANSACTION IS ONE. AS ALL THE AGREEMENTS ARE ENTERED INTO CONTEMPORANEOUSLY AND THE OBJECT IS TO ENJOY THE ENTIRE PROPERTY VIZ., BUILDING FURNITURE AND THE ACCESSORIES AS A WHOLE WHICH IS NECESSARY FOR C ARRYING ON THE BUSINESS, THEN THE INCOME DERIVED THERE FROM CANNOT BE SEPARATED BASED ON THE SEPARATE AGREEMENT ENTERED INTO BETWEEN THE PARTIES. WHAT HAS TO BE SEEN IS, WHAT WAS THE PRIMARY OBJECT OF THE ASSESSEE WHILE EXPLOITING THE PROPERTY. IF IT IS FOUND APPLYING SUCH PRINCIPLE THAT THE INTENTION IS FOR LETTING OUT THE PROPERTY OR ANY PORTION THEREOF, THE SAME MAY BE CONSIDERED AS RENTAL INCOME OR INCOME FROM PROPERTIES. IN CASE, IF IT IS FOUND THAT THE MAIN INTENTION IS TO EXPLOIT IMMOVABLE PROPERT Y BY WAY OF COMPLEX COMMERCIAL ACTIVITIES, IN THAT EVENT IT MUST BE HELD AS BUSINESS INCOME. 26. SUB - SECTION (1) OF SECTION 56 MAKES IT CLEAR THAT INCOME OF EVERY KIND WHICH IS NOT BE EXCLUDED FROM THE TOTAL INCOME UNDER THIS ACT SHALL BE CHARGEABLE TO I NCOME - TAX UNDER THE HEAD INCOME FROM OTHER SOURCES , IF IT IS NOT CHARGEABLE TO INCOME - TAX UNDER ANY OF THE HEADS SPECIFIED IN SECTION 14, ITEMS A TO E. SUB - SECTION (2) OF SECTION 56 SPECIFICALLY STATES THAT THE INCOMES SHALL BE CHARGEABLE TO INCOME - TAX UNDER THE HEAD INCOME FROM OTHER SOURCES. CLAUSE (II) OF SECTION 56(2) PROVIDES THAT INCOME FROM MACHINERY, PLANT OR FURNITURE BELONGING TO THE ASSESSEE AND LET ON HIRE, IF THE INCOME IS NOT CHARGEABLE TO INCOME - TAX UNDER THE HEAD PROFIT AND GAINS OF B USINESS OR PROFESSION. CLAUSE (III) ALSO PROVIDES THAT WHERE AN ASSESSEE LETS ON HIRE MACHINERY, PLANT OR FURNITURE BELONGING TO HIM AND ALSO BUILDINGS, AND THE LETTING OF THE BUILDINGS IS INSEPARABLE FROM THE LETTING OF THE SAID MACHINERY, PLANT OR FURN ITURE, THE INCOME FROM SUCH LETTING, IF IT IS NOT CHARGEABLE TO INCOME - TAX UNDER THE HEAD PROFITS AND GAINS OF 10 IT A NO. 2 /BANG/201 4 BUSINESS OR PROFESSION . THEREFORE, THE INTENTION OF THE LEGISLATURE IS EXPLICIT. THE PROVISION IS CLEAR I.E., IF THE LETTING OF THE BUILDING, PLANT, MACHINERY AND FURNITURE IS INSEPARABLE, THE INCOME FROM SUCH LETTING SHOULD ORDINARILY FALL WITHIN THE HEAD PROFITS AND GAINS OF BUSINESS OR PROFESSION . BUT FOR ANY REASON, IF IT DOES NOT FALL UNDER THAT HEAD, IT SHALL FALL UNDER THE HEAD INCOME FROM OTHER SOURCES , BUT CERTAINLY NOT UNDER THE HEADING INCOME FROM HOUSE PROPERTY. IF THE INTENTION IS TO EXPLOIT COMMERCIAL PROPERTY BY PUTTING UP CONSTRUCTION AND LETTING IT OUT FOR THE PURPOSE OF GETTING RENTAL INCOME, THEN NOTWITHSTANDING THE FACT THAT THE FURNITURE AND FITTINGS ARE PROVIDED TO THE LESSEE, THE INCOME FROM THE BUILDING FALL UNDER THE HEAD INCOME FROM HOUSE PROPERTY. BUT IF THE ASSESSEE IS IN THE BUSINESS OF TAKING LAND, PUTTING UP COMMERCIAL BUILDINGS THEREON AND LETTING OUT SUCH BU ILDINGS WITH ALL FURNITURE AS HIS PROFESSION OR BUSINESS, THEN NOTWITHSTANDING THE FACT THAT HE HAS CONSTRUCTED A BUILDING AND HE HAS ALSO PROVIDED OTHER FACILITIES AND EVEN IF THERE ARE TWO SEPARATE RENTAL DEEDS, IT DOES NOT FALL WITHIN THE HEADING OF INC OME FROM HOUSE PROPERTY. THEREFORE, FIRSTLY WHAT IS THE INTENTION BEHIND THE LEASE AND SECONDLY WHAT ARE THE FACILITIES GIVEN ALONG WITH THE BUILDINGS AND DOCUMENTS EXECUTED IN RESPECT OF EACH OF THEM IS TO BE SEEN. THIRDLY, IT IS TO BE FOUND OUT WHETHER IT IS INSEPARABLE OR NOT. IF THEY ARE INSEPARABLE AND THE INTENTION IS TO CARRY ON THE BUSINESS OF LETTING OUT THE COMMERCIAL PROPERTY AND CARRYING AT COMPLEX COMMERCIAL ACTIVITY AND GETTING RENTAL INCOME THEREFROM, THEN SUCH A RENTAL INCOME FALLS UNDER THE HEADING OF PROFITS AND GAINS OF BUSINESS OR PROFESSION. IN FACT, ANY OTHER INTERPRETATION WOULD DEFEAT THE VERY OBJECT OF INTRODUCTION OF SECTION 80 - IA AS WELL AS THE SCHEME WHICH IS FRAMED BY THE GOVERNMENT FOR DEVELOPMENT OF INDUSTRIAL PARKS IN THE COUNTRY. IN THAT VIEW OF THE MATTER, THE FINDING RECORDED BY THE APPELLATE AUTHORITY AS WELL AS THE TRIBUNAL IS IN ACCORDANCE WITH LAW AND DOES NOT SUFFER FROM ANY LEGAL INFIRMITY WHICH CALLS FOR INTERFERENCE .. 7.1.6. IN TOTALITY OF THE FACTS AND CIRCU MSTANCES OF THE ISSUE AS NARRATED ABOVE AND IN CONSONANCE WITH THE RULINGS OF THE HON BLE JURISDICTIONAL HIGH COURT (SUPRA), WE ARE OF THE OPINION THAT THE INCOME DERIVED FROM LETTING OUT THE OUT - FITS, FIXTURES, FURNITURE ETC., IS NOT CHARGEABLE UNDER THE HEAD INCOME FROM HOUSE PROPERTY . IT IS ORDERED ACCORDINGLY. THE ABOVE DECISION OF THE CO - ORDINATE BENCH OF THIS TRIBUNAL (SUPRA) WAS FOLLOWED BY ANOTHER CO - ORDINATE BENCH OF THIS TRIBUNAL IN THE ASSESSEE'S OWN CASE FOR ASSESSMENT YEAR 2009 - 10 IN I TA NO.808/BANG/2013 DT.24.1.2014. FOLLOWING THE AFORESAID DECISION S OF THE CO - ORDINATE BENCH ES OF THIS TRIBUNAL IN THE ASSESSEE'S OWN CASE FOR ASSESSMENT YEARS 2006 - 07 , 2007 - 08 AND 2009 - 10 (SUPRA), WE HOLD THAT THE INCOME DERIVED BY THE ASSESSEE FROM LE TTING OUT OF FIT - OUTS, FURNITURE AND FIXTURES, ETC. IS NOT EXIGIBLE TO TAX UNDER THE HEAD INCOME FROM HOUSE PROPERTY , AS HELD BY THE AUTHORITIES BELOW, BUT AS BUSINESS INCOME SINCE THE FACTS REMAIN THE SAME IN THE YEAR UNDER CONSIDERATION 11 IT A NO. 2 /BANG/201 4 ALSO. CONSEQ UENTLY THE ASSESSEE'S GROUNDS AT S. NOS. 1(A) AND 1(B) ARE ALLOWED. IT IS ORDERED ACCORDINGLY. 5.0 DISALLOWANCE U/S.14A OF THE ACT. 5.1 IN THE GROUNDS RAISED AT S.NOS.2(A) AND 2(B) , THE ASSESSEE CHALLENGES THE LD. CIT(A) S ACTION IN UPHOLDING T HE DISALLOWANCE OF RS.5,24,321 MADE U/S.14A OF THE ACT BY THE ASSESSING OFFICER. THE LD. A.R. SUBMITTED THAT THE ASSESSEE HAD SUO MOTO DISALLOWED AN AMOUNT OF RS.2,15,83,629 U/S.14A OF THE ACT IN THE RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION WHICH HAS BEEN OBSERVED BY THE A.O. AT PAGES 6 AND 7 OF THE ORDER OF ASSESSMENT. THE A.O., IN THE ORDER OF ASSESSMENT DISALLOWED A FURTHER AMOU N T OF RS.5,24,321 U/S. 14A AS COMPUTED AT PAGE 7 OF THE ORDER OF ASSESSMENT WHICH HAS BEEN CONFIRMED BY THE LD. CIT(A ) BY HOLDING THAT THE EXPENSES OF RS.76,28,498 CONSIDERED FOR FURTHER DISALLOWANCE, I.E. ELECTRICITY CHARGES, RENT, VEHICLE MAINTENANCE, PRINTING AND STATIONERY, A PORTION OF LEGAL AND PROFESSIONAL CHARGES, DIRECTORS SITTING FEES AND MISC. EXPENSE ARE ALS O INDIRECTLY RELATABLE TO THE EARNING OF EXEMPT INCOME. THE LD. A.R. FURTHER SUBMITTED THAT IN VIEW OF THE FACT THAT THE ASSESSEE HAD ALREADY MADE A SUO MOTO DISALLOWANCE AMOUNTING TO RS.2,15,83,629, FURTHER DISALLOWANCE OFRS.5,24,321 IS NOT WARRANTED IN THE FACTS AND CIRCUMSTANCES OF THE CASE, SINCE THE EXPENSES CONSIDERED FOR THE EXTRA DISALLOWANCE OF RS.5,24,,321 ARE NOT EITHER DIRECTLY OR INDIRECTLY INCURRED FOR EARNING THE EXEMPT INCOME. 5.2 PER CONTRA, THE LD. D.R. VEHEMENTLY SUPPORTED THE ORDE RS OF THE AUTHORITIES BELOW ON THE DISALLOWANCE OF RS/5,24,328 MADE AND SUSTAINED U/S. 14A OF THE ACT. 12 IT A NO. 2 /BANG/201 4 5.3 WE HAVE HEARD THE RIVAL CONTENTIONS ON THE ISSUE OF DISALLOWANCE OF RS.5,24,321 U/S. 14A OF THE ACT AND PERUSED AND CAREFULLY CONSIDERED THE MA TERIAL ON RECORD. ON AN APPRECIATION OF THE FACTS OF THE CASE ON HAND, WE FIND THAT THE ASSESSING OFFICER HAS NOT BROUGHT ON RECORD ANY MATERIAL EVIDENCE IN SUPPORT OF HIS PROPOSITION THAT THE EXPENSES AMOUNTING TO RS.76,28,458 CONSIDERED BY THE ASSESSING OFFICER FOR MAKING THE FURTHER DISALLOWANCE OF RS.5,24,321 I.E. ELECTRICITY CHARGES, RENT, VEHICLE MAINTENANCE, PRINTING AND STATIONERY, TRAVELLING EXPENSES, LEGAL AND PROFESSIONAL CHARGES, DIRECTORS SITTING FEES AND MISC. EXPENSES ARE INCURRED EITHER DIRE CTLY OR INDIRECTLY FOR EARNING THE EXEMPT INCOME. IN THIS VIEW OF THE MATTER, WE SET ASIDE THE ISSUE OF DISALLOWANCE OF RS.5,24,321 U/S. 14A OF THE ACT BACK TO THE FILE OF THE ASSESSING OFFICER WITH A DIRECTION TO EXAMINE WHETHER THE EXPENSES TOTALLY AMOU NTING TO RS.76,28,498 CONSIDERED FOR MAKING THE FURTHER DISALLOWANCE OF RS.5,24,321 U/S. 14A OF THE ACT IS ACTUALLY INCURRED DIRECTLY OR INDIRECTLY FOR EARNING OF THE EXEMPT INCOME AND TO ADJUDICATE THEREON WHETHER ANY FURTHER DISALLOWANCE U/S.14A OF THE ACT IS WARRANTED OR NOT IN THE FACTS AND CIRCUMSTANCES OF THE CASE ON HAND. NEEDLESS TO ADD, THE ASSESSEE IS TO BE ALLOWED ADEQUATE OPPORTUNITY OF BEING HEARD AND TO FILE DETAILS REQUIRED. IT IS ORDERED ACCORDINGLY. CONSEQUENTLY THE GROUNDS AT S.NOS.2 (A ) AND 2(B) ARE TREATED AS ALLOWED FOR STATISTICAL PURPOSES ONLY. 6. DISALLOWANCE OF LEGAL, PROFESSIONAL AND CONSULTANCY CHARGES : RS.36 ,00,000 . 6.1 IN GROUND RAISED AT S.NO.3 , THE ASSESSEE IS AGGRIEVED BY THE DISALLOWANCE OF RS.36 ,00,000 TO M/S. EM BASSY MANAGEMENT CONSULTANTS PVT. LTD. IN THE ORDER OF ASSESSMENT, THE ASSESSING OFFICER DISALLOWED THIS EXPENDITURE FOR THE REASON THAT THE SAID EXPENDITURE WAS RELATABLE TO INCOME FROM HOUSE PROPERTY SINCE THE SERVICES PROVIDED BY THE DEVELOPMENT MANAGE R ARE IN 13 IT A NO. 2 /BANG/201 4 CONNECTION WITH LEASE TRANSACTIONS AND HENCE NOT ALLOWABLE IN COMPUTING THE ASSESSEE'S BUSINESS INCOME. ON APPEAL, THE LD . CIT(A) CONFIRMED THE DISALLOWANCE MADE BY THE ASSESSING OFFICER HOLDING AS UNDER AT PARAS 7.5 AND 7.6 OF HIS ORDER : - 7.5 A PERUSAL OF THE SUPPLEMENTARY AGREEMENT DT.16.5.2005 RELATING TO THE MAINTENANCE CHARGES WOULD BE COLLECTED EITHER BY THE APPELLANT COMPANY OR BY EMCPL. THUS THE AGREEMENT WAS NOT CLEAR IN THIS ASPECT. 7.6 SECONDLY, VIDE AGREEMENT DT.16.9.2006, MAINTENANCE OF PARK AND THE BUILDINGS HAS BEEN ENTRUSTED TO M/S. EMBASSY SERVICES PVT. LTD. M/S. ESPL WOULD CHARGE FOR THE SERVICE MAINTENANCE FORM THE OCCUPIES OF THE BUILDING ON COST PLUS 15% AS SERVICE FEE FOR PROVIDING MAINTENANCE AND MANAGEMENT THEREO F. AS PER THE TERMS OF AGREEMENT, M/S. ESPL HAS TO PAY THE APPELLANT COMPANY 20% OF THE SERVICE FEE COLLECTED BY M/S. ESPL FORM THE TENANTS. DURING THE YEAR, THE APPELLANT RECEIVED A SUM OFRS.2,74,886 ONLY TOWARDS SERVICE CHARGES. IT SHOWS THAT NO EXPEN SES ARE INCURRED BY THE APPELLANT. THUS THE APPELLANT IS RECEIVING FIXED PERCENTAGE OF SERVICE FEES FROM M/S. ESPL AND PAYMENT OF MAINTENANCE CHARGES DOES NOT ARISE. FURTHERMORE, RENT FROM FIT - OUTS IS ASSESSED UNDER THE HEAD NCOME FROM HOUSE PROPERTY A ND THE SAID PAYMENTS ARE NOT ALLOWABLE AGAINST RENT FROM FIT - OUTS. IN VIEW OF THE ABOVE, I DO NOT FIND INFIRMITIES IN THE A.O S OBSERVATIONS AND, THEREFORE, THE DISALLOWANCE OF RS.36,00,000 IS CONFIRMED. 6.2 BEFORE US, THE LEARNED AUTHORISED REPRES ENTATIVE CONTENDED THAT SINCE THE RENTAL INCOME FROM FIT - OUTS, EQUIPMENT, ETC. A RE ASSESSABLE UNDER THE HEAD PROFITS AND GAINS OF BUSINESS , PROPORTIONATE EXPENDITURE IS TO BE ALLOWED AS DEDUCTION. IT WAS SUBMITTED BY THE LEARNED AUTHORISED REPRESENTATIV E THAT THE PAYMENTS TO M/S. EMBASSY MANAGEMENT & CONSULTANTS PVT. LTD. WERE ALSO MADE DURING THE PERIOD RELEVANT TO ASST. YEAR 2007 - 08, APART FROM THIS YEAR, THE ISSUE OF ALLOWABILITY OF DEDUCTION FOR THE EXPENDITURE HAS BEEN RESTORED BACK TO THE FILE OF T HE ASSESSING OFFICER BY THE ORDER OF THE CO - ORDINATE BENCH OF THIS TRIBUNAL IN THE ASSESSEE'S OWN CASE FOR A.Y. 2007 - 08 IN ITA NO.685/BANG/2011 DT.29.11.2013. IT WAS SUBMITTED THAT THE SAME MAY BE FOLLOWED IN THIS YEAR ALSO. 14 IT A NO. 2 /BANG/201 4 6.3 PER CONTRA, THE LEARNE D DEPARTMENTAL REPRESENTATIVE VEHEMENTLY SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW AND PRAYED FOR DISMISSAL OF THE ASSESSEE'S APPEAL. 6.4 WE HAVE HEARD BOTH PARTIES AND PERUSED AND CAREFULLY CONSIDERED THE MATERIAL ON RECORD. ON PERUSAL OF THE OR DER OF THE CO - ORDINATE BENCH OF THIS TRIBUNAL IN THE ASSESSEE'S OWN CASE FOR A.Y. 2007 - 08 IN ITA NO.685/BANG/2011 DT.29.11.2013, WE FIND THAT THE ISSUE REGARDING THE ALLOWABILITY OF PAYMENTS TO M/S. EMBASSY MANAGEMENT & CONSULTANTS PVT. LTD. HAS BEEN SET A SIDE AND RESTORED TO THE FILE OF THE ASSESSING OFFICER. CONSIDERING THAT THE FACTS PERTAINING TO THE SAID CLAIM OF DEDUCTION REMAINS THE SAME FOR BOTH ASST. YEARS 2007 - 08 AND THIS YEAR ALSO, FOLLOWING THE DECISION OF THE CO - ORDINATE BENCH OF THIS TRIBUNAL IN THE ASSESSEE'S OWN CASE FOR A.Y. 2007 - 08, WE RESTORE / REMAND THE ISSUE OF ALLOWABILITY OF DEDUCTION OF PAYMENTS MADE TO M/S. EMBASSY MANAGEMENT & CONSULTANTS PVT. LTD. TO THE FILE OF THE ASSESSING OFFICER FOR DE NOVO CONSIDERATION AND ADJUDICATION THE REON AFTER AFFORDING THE ASSESSEE ADEQUATE OPPORTUNITY OF BEING HEARD AND TO FILE REQUIRED DETAILS. IT IS ORDERED ACCORDINGLY. CONSEQUENTLY, GROUND NO.3 RAISED BY THE ASSESSEE, IS TREATED AS ALLOWED FOR STATISTICAL PURPOSES. 7. IN THE RESULT, THE AS SESSEE'S APPEAL IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 10 TH DEC., 2014. SD/ - SD/ - ( RAJPAL YADAV ) ( JASON P BOAZ ) JUDICIA L MEMBER ACCOUNTANT MEMBER *REDDY GP