AJAY BUILDERS, MUMBAI V. ITO RG 12(1)(1), MUMBAI

ITA 2338/MUM/2015

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 4181 (ITAT-MUMBAI)
• Duration Of Justice: 9 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-02-2016
• Appeal Filed By: Assessee
• Bench Allotted: SMC
• Assessment Year: 2010-2011
• Appeal Filed On: 23-04-2015
• Court: TRIBUNAL
• Keywords: Business income

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL I , BENCH MUMBAI BEFORE SHRI R.C.SHARMA, AM & SHRI AMARJIT SINGH , JM ./ ITA NO. 2338 / MUM/20 1 5 ( / ASSESSMENT YEAR : 20 10 - 20 11 ) M/S AJ AY BUILDERS, MANEK VILLA GROUND FLOOR, RAFI AHMED KIDWAI ROAD, WADALA MUMBAI - 400031 VS. ITO, RANGE - 12(1) - 1, MUMBAI ./ ./ PAN/GIR NO. : A AA FA 3946 P ( / APPELLANT ) .. ( / RESPONDENT ) /ASSESSEE B Y : MR. J.V.CHHABRIA /REVENUE BY : SHRI V.S.JADHAV / DATE OF HEARING : 03 /0 2 /2016 / DATE OF PRONOUNCEMENT 04/02 /201 6 / O R D E R PER R.C.SHARMA (A.M) : THIS IS AN APPEAL FILED BY THE AS SESSEE AGAINST THE ORDER OF CIT(A) - MUMBAI, FOR THE ASSESSMENT YEAR 20 10 - 11 . 2. ONLY GRIEVANCE OF THE ASSESSEE RELATES TO TREATING THE RENT RECEIVED OUT OF LEAVE AND LICENSE OF PREMISES AS INCOME FROM HOUSE PROPERTY IN PLACE OF INCOME OFFERED UNDER THE HEAD INCOME FROM BUSINESS. 3. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORD PERUSED. FACTS IN BRIEF ARE THAT ASSESSEE IS ENGAGED IN THE BUSINESS OF BUILDING CONSTRUCTION. ONE OF ITS PREMISES WAS GIVEN TO SISTER CONCERN ON LEAVE AND LICENSE BASIS, INCOME OF WHI CH WAS OFFERED AS BUSINESS INCOME, HOWEVER, SAME WAS TREATED AS INCOME FROM HOUSE PROPERTY AND EXPENSES ITA NO. 2338 /1 5 2 CLAIMED BY THE ASSESSEE WERE DIS ALLOWED. THE CONTENTION OF ASSESSEE BEFORE THE AO WAS THAT ITS INTENTION WAS NEVER TO LET OUT THE PROPERTY BUT TO SELL T H E SAME, T HE SAID RENTAL INCOME WAS EARNED ONLY BECAUSE THE ASSESSEE WAS DEBARRED FROM MAKING ANY THIRD PARTY RIGHTS IN VIEW OF COURTS ORDER. HENCE, TILL SUCH TIME THE DISPUTE WAS FINALLY SETTLED AND TILL THE TIME THE SAID STOCK - IN - TRADE WAS SOLD, IT WAS DECIDED TO EARN SOME INCOME FROM THE PROPERTY. THIS WAS A CLEAR CASE OF EXPLOITATION OF THE STOCK - IN - TRADE UNDER COMPULSION SINCE THE PROPERTY COULD NOT HAVE BEEN SOLD. THE INCOME WAS, THEREFORE, IN THE NATURE OF BUSINESS INCOME. HOWEVER, THE AO DID NOT A CCEPT ASSESSEES CONTENTION AND TREATED THE SAME AS INCOME UNDER THE HEAD INCOME FROM HOUSE PROPERTY. 4. BY THE IMPUGNED ORDER, THE CIT(A) CONFIRMED THE ACTION OF THE AO, AGAINST WHICH ASSESSEE IS IN FURTHER APPEAL BEFORE US. 5. IT WAS ARGUED BY LD. AR THA T FROM THE YEAR 1997 - 98 TILL 2009 - 2010 INCOME WAS OFFERED UNDER THE HEAD INCOME FROM BUSINESS AND THE SAME WAS ACCEPTED, AND THERE IS NO CHANGE IN THE FACTS AND CIRCUMSTANCES OF THE CASE DURING THE YEAR UNDER CONSIDERATION, ACCORDINGLY, THE AO WAS NOT JUST IFIED IN CHANGING ITS STAND. HE FURTHER DREW OUR ATTENTION TO THE COURT ORDER ACCORDING TO WHICH ASSESSEE HAD GIVEN THIS PREMISES TO SISTER CONCERN, INSOFAR AS TITLE OF THE PROPERTY WAS DEFECTIVE AND THE HONBLE HIGH COURT ITSELF HAS ALLOWED THE ASSESSEE T O GIVE IT ON LEAVE AND LICENSE TILL FURTHER ORDER OF THE COURT. ACCORDINGLY, ASSESSEE HAS NO INTENTION TO EARN RENTAL INCOME OUT OF THE STOCK - IN - TRADE. ITA NO. 2338 /1 5 3 6. ON THE OTHER HAND, LD. DR RELIED ON THE ORDER OF THE AUTHORITIES BELOW. 7. WE HAVE CONSIDERED RIVAL CONTENTIONS AND FOUND FROM THE RECORD THAT THE ASSESSEE AS A DEVELOPER GOT DEVELOPMENT RIGHTS FOR CONSTRUCTION OF THE PROPERTY BEARING PLOT NO.553, 555 AND 556 ALONG WITH 2 OLD STRUCTURES/BUILDINGS NAMELY LAXMI NIVAS AND FUTNANI CHAMBERS AND ON THE TOTAL L AND AREA, 3 BUILDINGS WERE CONSTRUCTED NAMELY OLYMPUS (GROUND = 16 STOREY), DIVINE HOUSE (GROUND + 3 FLOORS FOR ALTERNATE ACCOMMODATION OF OLD TENANTS) AND TRADE CENTRE (GROUND FLOOR COMMERCIAL STRUCTURE HAVING 7 SHOPS OF WHICH 1 SHOP FOR ALTERNATE ACCOMM ODATION AND BALANCE 6 SHOPS POSSESSED BY AJAY BUILDERS, I.E., THE ASSESSEE). IN THE YEAR 1986, MEMBERS OF OLYMPUS CHS LTD. FILED A CASE IN THE CITY CIVIL COURT AND CLAIMED THAT TRADE CENTRE PREMISES SHOULD BE HANDED OVER TO THE SOCIETY FOR COMMUNITY AND SO CIETY OFFICE PURPOSES. AS PER THE HIGH COURT ORDER, THE TITLE OF THE PROPERTY WAS DEFECTIVE TO THE EXTENT OF PRECONDITIONS SPECIFIED IN THE HIGH COURT ORDER. ACCORDINGLY, NO PERSON WAS INTERESTED TO BUY SUCH A DEFECTIVE BUILDING. ACCORDINGLY, ASSESSEE WAS FORCED TO LEASE THE PROPERTY, AS THEY ARE UNABLE TO SELL IT BECAUSE OF THE DEFECTIVE TITLE, AS PER THE PRECONDITION ORDER GIVEN BY THE HONBLE HIGH COURT. THERE WERE NO CERTAINTY AS TO WHEN THE DECISION OF THE COURT WILL BE FINAL. THE COURT PERMISSION WAS ONLY CONDITIONAL AS REGARDS AS ASSESSEE/LICENSOR BUT ALSO FOR THE LESSEE WHO HAD TO FILE ON AFFIDAVIT IN COURT AFFIRMING THEIR WILLINGNESS TO REMOVE THEMSELVES FROM THE LEASED PREMISES IMMEDIATELY AS PER COURT ORDER. ITA NO. 2338 /1 5 4 8. UNDER THE ABOVE PECULIAR CIRCUMSTAN CES, INCOME DERIVED FROM LEAVE AND LICENSE AGREEMENT SHOULD BE ASSESSED AS BUSINESS INCOME AND NOT AS INCOME FROM HOUSE PROPERTY. EVEN ON CONSISTENCY, WE FOUND THAT DEPARTMENT HAS CONSISTENTLY ASSESSING THE INCOME FROM SAID PREMISES AS INCOME FROM BUSINESS FROM ASSESSMENT YEAR 1997 - 98 TO 2009 - 2010. IN EARLIER YEAR AO WAS DIRECTED BY THE CIT(A) TO TREAT THE INCOME FROM BUSINESS AND THE DEPARTMENT DID NOT TAKE THE MATTER FURTHER INTO APPEAL, THEREFORE, AS FAR AS DEPARTMENT IS CONCERNED, THE MATTER HAS ATTAINE D FINALITY. ACCORDINGLY, WE DO NOT FIND ANY MERIT IN THE ACTION OF LOWER AUTHORITIES FOR TREATING THE INCOME UNDER THE HEAD INCOME FROM HOUSE PROPERTY IN PLACE OF BUSINESS INCOME OFFERED BY THE ASSESSEE AND CONSISTENTLY ACCEPTED BY THE DEPARTMENT IN ALL TH E EARLIER YEARS. 9 . IN THE RESULT, APPEAL OF ASSESSEE IS ALLOWED . O RDER PRONOUNCED IN THE OPEN COURT ON THIS 04/02 / 201 6 . SD/ - ( AMARJIT SINGH ) SD/ - ( R.C.SHARMA ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI ; DATED 04/02 /201 6 . . /PKM , . / PS / COPY OF THE ORDER FORWARDED TO : / BY ORDER, / ( ASSTT. REGISTRAR) , / ITAT, MUMBAI 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A), MUMBAI. 4. / C IT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE. //TRUE COPY//