BRT LTD, MUMBAI V. ASST CIT CIR 2(1)(1), MUMBAI

ITA 2001/MUM/2017

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 8698 (ITAT-MUMBAI)
• Duration Of Justice: 7 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-10-2017
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: SMC
• Next Hearing Date: 31-05-2017
• Assessment Year: 2012-2013
• Appeal Filed On: 21-03-2017
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: M HEMALATHA
• Keywords: Business income; Depreciation

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH SMC, MUMBAI BEFORE SHRI G.S.PANNU, ACCOUNTANT MEMBER ITA NO. 2001/MUM/2017 (ASSESSMENT YEAR 2012-13) BRT LIMITED, NEVILLE HOUSE, J.N.HEREDIA MARG, BALLARD ESTATE, MUMBAI 400 001 PAN: AAACB 2433K ...... APPELLANT VS. THE ACIT, CIR.2(1)(1) MUMBAI - 400 020 ...... RESPONDENT APPELLANT BY : MS. ARATI VISSANJI RESPONDENT BY : MS. M. HEMALATHA DATE OF HEARING : 02/08/2017 DATE OF PRONOUNCEMENT : 25/10/2017 ORDER THE CAPTIONED APPEAL FILED BY THE ASSESSEE PERTAI NING TO ASSESSMENT YEAR 2008-09 IS DIRECTED AGAINST AN ORD ER PASSED BY CIT(A)- 3 MUMBAI DATED 19/01/2017, WHICH IN TURN ARISES OUT OF AN ORDER PASSED BY THE ASSESSING OFFICER UNDER SECTION 143( 3) OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT) DATED 28/02/2015 . 2. IN THIS APPEAL, ASSESSEE HAS RAISED THE FOLLOW ING GROUNDS OF APPEAL:- 1. THE LEARNED CIT ( A ) ERRED IN TREATING THE L ICENSE FEES RECEIVED BY YOUR APPELLANT AS INCOME UNDER THE HEAD ' INCOME FR OM HOUSE PROPERTY', IN RESPECT OF THE SAME BUSINESS PROPERTY ON WHICH D EPRECIATION HAS BEEN CLAIMED AND ALLOWED FOR MANY YEARS. 2 ITA NO. 2001/MUM/2017 (ASSESSMENT YEAR 2012-13) 2. THE LEARNED CIT (A) FURTHER ERRED IN NOT FOLLO WING THE JUDGMENT PASSED BY THE HONORABLE SUPREME COURT (SC) IN THE C ASE OF M/S RAYALA CORPORATION PVT. LTD. VS. ASSISTANT COMMISSIONER OF INCOME TAX PRONOUNCED ON AUGUST 11, 2016 IN WHICH THE HONORABL E SC HAS FOLLOWED ITS OWN JUDGMENT IN THE CASE OF M/S CHENNAI PROPERT IES & INVESTMENTS LTD. VS. THE COMMISSIONER OF INCOME TAX, TAMILNADU -I PRONOUNCED ON APRIL 2015 WHEREIN IT DULY ACCEPTED THE POSITION TH AT IN A CASE WHERE THE ASSESSE IS NOT ENGAGED IN ANY OTHER BUSINESS ACTIVI TY AND RENTING IS THE ONLY ACTIVITY IT IS CARRYING ON, THE RENTAL INCOME GENERATED FROM THE SAID ACTIVITY SHOULD BE TREATED AS INCOME FROM BUSINESS AND PROFESSION ONLY. THE SAID JUDGMENT WAS BROUGHT TO THE NOTICE OF CIT( A) DURING THE APPELLATE PROCEEDINGS THROUGH SUBMISSIONS. 3. ALTHOUGH ASSESSEE HAS RAISED MULTIPLE GROUNDS OF APPEAL BUT IN SUM AND SUBSTANCE THE SOLITARY DISPUTE REVOLVES ARO UND THE NATURE OF INCOME EARNED BY THE ASSESSEE FROM LETTING OUT ITS PREMISES INCLUDING LAND AND FACTORY BUILDING, FACILITIES AND OTHER AM ENITIES TO ONE M/S.NAVNIT MOTORS PVT. LTD. IN BRIEF, THE RELEVANT FACTS ARE THAT EARLIER ASSESSEE WAS ENGAGED IN THE BUSINESS OF MANUFACTURE OF RINGS TRAVELERS, TEXTILE RINGS AND OPEN END ROTORS SPINNING MACHINE COMPONENTS, ETC. THE SAID BUSINESS IS NOW DISCONTINUED AND DURING TH E YEAR UNDER CONSIDERATION ASSESSEE HAD SHOWN INCOME OF RS.90,99 ,756/- FROM LICENCE FEE, COMPENSATION OF AMENITIES, ETC. THE SAID INCOME WAS DERIVED IN TERMS OF TWO AGREEMENTS DATED 04/01/2010 ENTERED INTO WITH M/S.NAVNIT MOTORS PVT. LTD. FIRSTLY, AS PER A LEAVE AND LICENCE AGREEMENT DATED 04/01/2010, ASSESSEE HAD LEASED OUT ITS LAND AND FACTORY PREMISES TO M/S.NAVNIT MOTORS PVT. LTD. F OR A PERIOD OF 60 MONTHS IN TERMS OF WHICH IT WAS TO RECEIVE COMPENSA TION OF RS.2,80,000/- PER MONTH FOR THE FIRST 36 MONTHS AND THEREAFTER @ RS.3,22,000/- PER MONTH FOR THE BALANCE OF 24 MONT HS. THE AFORESAID INCOME EARNED BY THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION WAS TREATED AS BUSINESS INCOME, WHEREAS THE ASSESSING O FFICER TREATED THE SAME AS AN INCOME ASSESSABLE UNDER THE HEAD HOUSE P ROPERTY. AS A 3 ITA NO. 2001/MUM/2017 (ASSESSMENT YEAR 2012-13) CONSEQUENCE, THE ASSESSING OFFICER ADOPTED THE RENT AL INCOME AT RS.90,99,756/- AND AFTER ALLOWING STATUTORY DEDUCTI ON UNDER SECTION 24 OF THE ACT, THE INCOME UNDER THE HEAD INCOME FRO M HOUSE PROPERTY WAS ASSESSED AT RS.63,69,829/-. THE PRIMARY REASON PREVAILING WITH THE ASSESSING OFFICER TO ASSESS THE SAID INCOME UNDER T HE HEAD INCOME FROM HOUSE PROPERTY WAS THAT ASSESSEE INTENDED TO EARN A STABLE RENTAL INCOME THROUGH THE LEAVE AND LICENCE AGREE MENT AND THAT NO COMPLEX AMENITIES OR SERVICES WERE PROVIDED. ACCOR DING TO THE ASSESSING OFFICER, IT WAS A CASE OF PROVIDING A P ROPERTY ON LEASE WITH THE PRE-EXISTING AMENITIES WHICH WERE PART AND PARC EL OF THE PROPERTY. THE SAID ACTION OF THE ASSESSING OFFICER WAS CHALLE NGED IN APPEAL BEFORE THE CIT(A), WHO HAS ALSO AFFIRMED THE DECISION OF T HE ASSESSING OFFICER. AGAINST SUCH A DECISION, ASSESSEE IS IN FURTHER APP EAL BEFORE THE TRIBUNAL. 4. BEFORE ME THE LD.REPRESENTATIVE FOR THE ASSESSEE HAS REFERRED TO THE COPIES OF THE TWO AGREEMENTS ENTERED INTO WITH M/S.NAVNIT MOTORS PVT. LTD., WHICH HAS BEEN PLACED IN THE PAPER BOOK . IT HAS ALSO BEEN POINTED OUT THAT THE MEMORANDUM AND ARTICLES OF ASS OCIATION OF THE ASSESSEE COMPANY, INTER-ALIA, PROVIDE THAT ONE OF T HE OBJECTS OF THE ASSESSEE WAS TO DERIVE INCOME BY WAY OF LEASING, ET C. ON THIS BASIS, IT IS SOUGHT TO BE POINTED OUT THAT THE INCOME HAS BEEN RIGHTLY DECLARED BY THE ASSESSEE TO BE BUSINESS INCOME. IN THE COURSE OF HEARING, THE LD.REPRESENTATIVE FOR THE ASSESSEE HAS ALSO REFERRE D TO THE JUDGMENTS OF THE HON'BLE SUPREME COURT IN THE CASES OF CHENN AI PROPERTIES & INVESTMENT PVT. LTD. VS. CIT, 373 ITR 673(SC) AND R AYALA CORPORATION PVT. LTD. VS. ACIT, CIVIL APPEAL NO.6437 OF 2016 DA TED 11 TH AUG.2016. 4 ITA NO. 2001/MUM/2017 (ASSESSMENT YEAR 2012-13) 5. ON THE OTHER HAND, THE LD. DEPARTMENTAL REPRESEN TATIVE HAS REITERATED THE REASONING ADVANCED BY THE LOWER AUT HORITIES, WHICH HAVE BEEN NOTED IN THE EARLIER PARA AND ARE NOT BEING R EPEATED FOR THE SAKE OF BREVITY. 6. I HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSION S. FACTUALLY SPEAKING, THERE IS NO DISPUTE TO THE FACT THAT THE ASSESSEE HAD DISCONTINUED ITS BUSINESS OF MANUFACTURING AND HAS INSTEAD LEASED OUT ITS LAND, FACTORY BUILDINGS AS WELL AS ATTENDANT F ACILITIES AND AMENITIES TO M/S.NAVNIT MOTORS PVT. LTD. FOR A PERIOD OF FI VE YEARS. AT THE TIME OF HEARING IT WAS SPECIFICALLY PUT TO THE LD.REPRESENT ATIVE FOR THE ASSESSEE AS TO WHETHER THE DISCONTINUATION OF BUSINESS WAS A TEMPORARY PHENOMENA OR IT WAS STOPPED WITH NO INTENTION OF RE VIVING IT. IN RESPONSE IT HAS BEEN POINTED OUT THAT THE DISCONTIN UATION OF MANUFACTURING WAS NOT A TEMPORARY CLOSURE. IN THIS BACKGROUND, IT IS APPROPRIATE TO INFER THAT ASSESSEE HAS STOPPED ITS BUSINESS OF MANUFACTURE OF RINGS TRAVELERS, TEXTILE RINGS AND OPEN END ROTORS SPINNING MACHINE COMPONENTS, ETC. WITH NO INTENTION OF REVIVING IT AGAIN. THUS, IN SUCH A BACKGROUND, THE LEASING OUT OF ITS PROPERTY COMPRISING OF LAND FACTORY PREMISES ALONGWITH ATTEN DANTS AMENITIES IS NOT A CASE OF A TEMPORARY MEANS OF EXPLOITING THE P ROPERTY. IN SUCH A SITUATION, THE JUDGMENT OF THE HON'BLE SUPREME COUR T IN THE CASE OF UNIVERSAL PLAST LTD. V. CIT,237 ITR 454(SC) SQUAREL Y COVERS THE CONTROVERSY AND IT HAS TO BE HELD THAT THAT THE LIC ENCE FEE, ETC. EARNED IN TERMS OF THE LEAVE AND LICENCE AGREEMENT WITH M/ S. NAVNIT MOTORS PVT. LTD. IS NOT ASSESSABLE AS BUSINESS INCOME, AS CANVASSED BY THE APPELLANT. 5 ITA NO. 2001/MUM/2017 (ASSESSMENT YEAR 2012-13) 6.1 APART FROM THE ABOVE, IT IS NOTABLE THAT A PERT INENT FACTUAL FINDING HAS BEEN ARRIVED AT BY THE LOWER AUTHORITIES, WHICH IS TO THE EFFECT THAT NO SPECIALIZED OR COMPLEX ARRANGEMENT HAS BEEN ENTE RED BY THE ASSESSEE IN ORDER TO DERIVE THE IMPUGNED LEASE INCO ME. THE AFORESAID FINDING HAS NOT BEEN NEGATED ON THE BASIS OF ANY CO GENT REASON AND, THUS, IT IS A CASE WHERE INCOME HAS BEEN EARNED THR OUGH A RENTAL ARRANGEMENT SIMPLICITER. THUS, IN THIS VIEW OF TH E MATTER THE INCOME HAS BEEN RIGHTLY HELD TO BE TAXABLE UNDER THE HEAD INCOME FROM HOUSE PROPERTY. THUS, THE ORDER OF THE LOWER AUTHORITIE S ON THIS ASPECT IS HEREBY CONFIRMED. 6.2 BEFORE PARTING, I MAY ALSO REFER TO THE RELIANC E PLACED BY THE APPELLANT ON THE JUDGMENTS OF THE HON'BLE SUPREME C OURT IN THE CASE OF CHENNAI PROPERTIES & INVESTMENT PVT. LTD. (SUPRA) A ND RAYALA CORPORATION PVT. LTD.(SUPRA). A PERUSAL OF THE AFO RESAID JUDGMENTS CLEARLY REVEAL THAT THE SAME ARE TOTALLY INAPPLICAB LE IN THE CONTEXT OF THE FACT-SITUATION IN THE INSTANT CASE. IN BOTH THE AF ORESAID JUDGMENTS, THE HON'BLE SUPREME COURT WAS NOT DEALING WITH A SITUAT ION WHERE ASSESSEE HAD TOTALLY DISCONTINUED ITS BUSINESS AND LEASED OU T LAND AND BUILDINGS. THUS, THE AFORESAID DECISIONS RELIED UPON BY THE AS SESSEE DO NOT HELP THE ASSESSEE IN THIS CASE. IN THIS VIEW OF THE MATT ER, THE STAND OF THE ASSESSEE DESERVES TO BE NEGATED. I HOLD SO. 7. IN SO FAR AS THE PLEA OF THE ASSESSEE REGARDING DEPRECIATION IS CONCERNED, THE SAME IS ALSO NOT TENABLE, INASMUCH A S, NONE OF ITS PROPERTIES CAN BE SAID TO HAVE BEEN PUT TO USE FO R BUSINESS. THUS, THE CLAIM OF THE ASSESSEE FOR DEPRECIATION HAS ALSO BEE N RIGHTLY DENIED BY THE LOWER AUTHORITIES. I HOLD SO. 6 ITA NO. 2001/MUM/2017 (ASSESSMENT YEAR 2012-13) 8. IN THE RESULT, APPEAL OF THE ASSESSEE IS DISMISS ED, AS ABOVE. ORDER PRONOUNCED IN THE OPEN COURT ON 25/10/2017 . SD/- (G.S. PANNU) ACCOCUNTANT MEMBER MUMBAI, DATED 25/10/2017 VM , SR. PS 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