BALUWALA BUILDERS, MUMBAI V. ADDL CIT 19(2), MUMBAI

ITA 2347/MUM/2015

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 3078 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 4 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-09-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: I
• Assessment Year: 2010-2011
• Appeal Filed On: 24-04-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: DEEPAK RIPOTE
• Keywords: Business income; Depreciation

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH I, MUMBAI BEFORE SHRI G.S.PANNU, ACCOUNTANT MEMBER AND SHRI AMARJIT SINGH, JUDICIAL MEMBER ITA NO. 2347/MUM/2015 (ASSESSMENT YEAR 2010-11) M/S. BALUWALA BUILDERS, C/O. ABBAS Y. BALUWALA, A-902, ARISTO SAPPHIRE, 2 ND HANSABAD LANE, SANTACRUZ (W),MUMBAI 400 054. PAN:AAAFB 4153D ...... APPELLANT VS. THE ADDL. CIT 19(2), 3 RD FLOOR, PIRAMAL CHAMBERS, LALBAUG, MUMBAI .... RESPONDENT APPELLANT BY : SHRI RAMESH IYER RESPONDENT BY : SHRI DEEPAK RIPOTE DATE OF HEARING : 21/07/2016 DATE OF PRONOUNCEMENT : 21 /09/2016 ORDER PER G.S.PANNU,A.M: THE CAPTIONED APPEAL FILED BY THE ASSESSEE PERTAI NING TO ASSESSMENT YEAR 2010-11 IS DIRECTED AGAINST AN ORD ER PASSED BY CIT(A)- 34 MUMBAI DATED 26/02/2015 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 28/02/2013 . 2 ITA NO. 2347/MUM/2015 (ASSESSMENT YEAR 2010-11) 2. IN THIS APPEAL, ALTHOUGH ASSESSEE HAS RAISED M ULTIPLE GROUNDS OF APPEAL, BUT THE SOLITARY DISPUTE REVOLVES AROUND TH E TAXABILITY OF INCOME RECEIVED BY THE ASSESSEE ON LETTING OUT OF ITS PROP ERTY. 3. IN BRIEF, THE RELEVANT FACTS ARE THAT ASSESSEE I S A PARTNERSHIP FIRM ENGAGED IN THE BUSINESS OF BUILDERS AND DEVELOPERS. THE ASSESSEE CARRIED OUT REDEVELOPMENT OF SRA PROJECT AT SAHA RA VILLAGE, ANDHERI EAST, WHICH WAS COMPLETED IN ASSESSMENT YEAR 2009-1 0. IN THE COURSE OF SUCH ACTIVITY, ASSESSEE ALSO CONSTRUCTED A COMME RCIAL COMPLEX CALLED SAHARA CLASSIC, WHERE A PORTION WAS SOLD TO OUTSI DERS AND THE UNSOLD PORTION WAS RETAINED, WHICH WAS LET OUT TO VARIOUS PARTIES. THE RENTAL INCOME SO RECEIVED WAS OFFERED TO TAX UNDER THE HEA D INCOME FROM HOUSE PROPERTY, WHEREAS THE ASSESSING OFFICER TAXE D THE SAME AS INCOME UNDER THE HEAD INCOME FROM BUSINESS. NOTA BLY, THE SAID STAND OF THE ASSESSING OFFICER WAS CONSISTENT WITH HIS ST AND IN THE CASE OF THE ASSESSEE FOR THE EARLIER ASSESSMENT YEAR 2008-09. THE APPEAL OF THE ASSESSEE TO THE CIT(A) HAS ALSO BEEN DISMISSED, AGA INST WHICH ASSESSEE IS IN FURTHER APPEAL BEFORE THE TRIBUNAL. 4. IT WAS NOTED AT THE TIME OF HEARING THAT ONE OF THE REASONS WEIGHING WITH THE CIT(A) TO DISMISS THE APPEAL WAS THE NON-APPEARANCE OF THE ASSESSEE BEFORE HIM IN SPITE OF ISSUANCE OF NOTICES. THE CIT(A) HAS ALSO, ON MERITS, UPHELD THE STAND OF THE ASSESS ING OFFICER IN TREATING THE RENTAL INCOME TO BE ASSESSED AS INCOME FROM BU SINESS. 5. BEFORE US, THE LD. REPRESENTATIVE FOR THE ASSESS EE POINTED OUT THAT THE NOTICE OF HEARING ISSUED BY THE CIT(A) COU LD NOT BE ATTENDED TO SINCE IT WAS SENT TO AN ADDRESS WHICH WAS BELONGING TO A PARTNER, WHO 3 ITA NO. 2347/MUM/2015 (ASSESSMENT YEAR 2010-11) HAD DIED IN DECEMBER, 2013 I.E. AFTER INSTITUTION OF APPEAL BEFORE THE CIT(A). FURTHERMORE, IT IS POINTED OUT THAT THE SA ME ISSUE HAS BEEN ADDRESSED BY THE TRIBUNAL IN THE CASE OF THE ASSESS EE FOR ASSESSMENT YEAR 2008-09 VIDE ITA NO.2023/MUM/2012 DATED 17/04/ 2013. BY REFERRING TO THE SAID DECISION, IT IS SOUGHT TO BE POINTED OUT THAT THE TRIBUNAL HAS UPHELD THE PLEA OF THE ASSESSEE THAT T HE INCOME EARNED BY RENTING OF OFFICE PREMISES WAS ASSESSABLE AS INCOM E FROM HOUSE PROPERTY AND SO FAR AS INCOME FROM HIRING OF FURN ITURE AND FIXTURES IS COCNERNED, THE SAME IS LIABLE TO BE TREATED AS INC OME FROM OTHER SOURCES. 6. THE LD. DEPARTMENTAL REPRESENTATIVE HAS NOT CONT ROVERTED THE AFORESAID FACTUAL MATRIX BROUGHT OUT BY THE LD. REP RESENTATIVE FOR THE ASSESSEE . 7. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIO NS. THE PRECEDENT RELIED UPON BY THE ASSESSEE BEFORE US CLE ARLY COVERS THE CONTROVERSY IN QUESTION, AND THE FOLLOWING DISCUSS ION IN THE ORDER OF THE TRIBUNAL DATED 17/04/2013(SUPRA) IS RELEVANT: 7. WE HAVE CONSIDERED THE ISSUE AND THE SUBMISSION S MADE IN THIS REGARD. WITHOUT GOING INTO THE LEGAL PRINCIPLES REL IED UPON BY EITHER PARTY, THE FACT IS THAT ASSESSEE HAS DEVELOPED THE PROJECT AS PART OF SLUM REHABILITATION PROJECT AND HAD CONSTRUCTED SOM E COMMERCIAL OFFICES ALONG WITH RESIDENTIAL PREMISES. OUT OF COM MERCIAL PREMISES SO CONSTRUCTED, ASSESSEE RETAINED SOME OFFICE SPACE AND ONLY SIX OF THEM HAVE BEEN LEASED ON LEAVE AND LICENSE BASIS AN D IN SOME CASES ALONG WITH CERTAIN FIXTURES AND FURNITURE AS SEEN F ROM THE AGREEMENTS. THERE IS NO OTHER ACTIVITY UNDERTAKEN B Y THE ASSESSEE, SO AS TO CONSTRUE, AS A BUSINESS PROPOSITION. THE F ACTS IN THIS CASE ARE EXACTLY SIMILAR TO THE FACTS IN THE CASE OF SHA MBHU INVESTMENT PVT. LTD. VS. CIT 263 ITR 143(SC) DECIDED BY HONBL E SUPREME COURT, WHEREIN THE INCOME FROM THE PROPERTY WAS HELD TO BE ASSESSABLE AS 4 ITA NO. 2347/MUM/2015 (ASSESSMENT YEAR 2010-11) INCOME FROM HOUSE PROPERTY. THIS DECISION OF THE HONBLE SUPREME COURT IS IN FAVOUR OF THE ASSESSEE, WHEREAS THE LD. CIT(A) STATES IN PAGE 9 OF THE ORDER MENTIONS THAT THE DECISION SUPP ORTS THE CONTENTIONS OF THE REVENUE. WE ARE OF THE CONSIDERE D OPINION THAT THE LEASE RENT IS ASSESSABLE AS INCOME FROM HOUSE P ROPERTY ONLY AS THE ASSESSEE IS OWNER OF THE PROPERTY AND CONDITION S OF SECTIONS 22 DO SATISFY ASSESSING THE SAME UNDER THE HOUSE PROPE RTY. THE ISSUE OF OCCUPANCY CERTIFICATE, NON COMPLETION OF PROJECT AR E NOT RELEVANT FOR ASSESSING THE INCOME IN THE IMPUGNED ASSESSMENT YEA R. IF THOSE WERE TO BE TAKEN AS MATERIAL, THE ACTION OF THE AO IN BRINGING TO TAX PART OF THE INCOME RECEIVED ON PENDING PROJECT ALSO CANNOT UPHELD, AS SUCH, IT MAY HAVE TO BE SET OFF TO THE EXPENDITU RE ON PROJECT UNDER THE HEAD BUSINESS. NOT ONLY THAT, WHILE SHIFT ING THE INCOME FROM THE HEAD HOUSE PROPERTY TO BUSINESS THE AS SESSING OFFICER FAILED TO CONSIDER THE ALLOWANCE OF DEPRECIATION, I NTEREST AND OTHERS EXPENDITURE RELEVANT FOR CONSIDERING THE COMPUTATIO N UNDER THE HEAD BUSINESS. WE CANNOT UP HOLD THE CONTENTIONS OF THE REVENUE THAT THE LEASED RENT ON THE PROPERTY HAS TO BE CONS TRUED UNDER THE HEAD BUSINESS. IT IS ALSO SEEN THAT THE INCOME RE CEIVED FROM LEASING OF ADVERTISEMENT SPACE WAS ALSO CONSIDERED AS HOUS E PROPERTY WHICH MAY BE INCOME FROM OTHER SOURCES, IF NOT BUSI NESS. THEREFORE, WE ARE NOT IN A POSITION TO UPHOLD THE ORDERS OF TH E AO. WE HOLD THAT THE LEASE INCOME RECEIVED ON LEASING OUT OF TH E PREMISES HAS TO BE CONSIDERED UNDER THE HEAD INCOME FROM THE HO USE PROPERTY. 8. IN HIS ANXIETY TO TAKE IT AS A BUSINESS INCOME, THE ASSESSING OFFICER BROUGHT THE ENTIRE RECEIPT UNDER ONE HEAD A ND CIT(A) ALSO CONFIRMED THE SAME. SINCE WE HOLD THAT INCOME WAS A SSESSABLE AS INCOME FROM HOUSE PROPERTY THE AO HAS DIRECTED TO EXCLUDE THE INCOME FROM FIXTURES AND FURNITURE ETC. WHICH ARE N OT EXACTLY INCOME FROM HOUSE PROPERTY TO BE CONSIDERED AS INCOME F ROM OTHER SOURCES AND IN DOING SO HE HAS TO ALLOW NECESSARY CLAIM FOR DEPRECIATION, IF ANY. FURTHER, THE INCOME RECEIVED ON BANNER ADVERTISEMENT ALSO SHOULD BE CONSIDERED AS INCOME FROM OTHER SOURCES OR BUSINESS AS FACTS MAY DECIDE AFTER DU E EXAMINATION. TO THE EXTENT OF COMPUTATION OF INCOME UNDER VARIOUS H EADS, WE RESTORE THE ISSUE TO THE FILE OF AO TO DO ACCORDING LY, AFTER EXAMINATION OF THE FACTS AND GIVING DUE OPPORTUNITY TO ASSESSEE. IN VIEW OF THE AFORESAID, WE DEEM IT FIT AND PROPE R TO SET-ASIDE THE ORDER OF THE CIT(A) AND DIRECT THE ASSESSING OFFICE R TO RECOMPUTE THE INCOME OF THE ASSESSEE IN TERMS OF THE DECISION OF THE TRIBUNAL DATED 5 ITA NO. 2347/MUM/2015 (ASSESSMENT YEAR 2010-11) 17/04/2013(SUPRA). AS A CONSEQUENCE, THE APPEAL OF THE ASSESSEE IS ALLOWED, AS ABOVE. 8. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES, AS ABOVE. ORDER PRONOUNCED IN THE OPEN COURT ON 21/09/2016 SD/- SD/- (AMARJIT SINGH) (G.S. PANNU) JUDICIAL MEMBER ACCOCUNTANT MEMBER MUMBAI, DATED 21/09/2016 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