M/s. J.G. Exports, CHENNAI V. ITO, CHENNAI

ITA 2375/CHNY/2016

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 5987 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 1 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-10-2017
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 16-05-2017
• Assessment Year: 2008-2009
• Appeal Filed On: 18-08-2016
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: M PALANICHAMY IRS JCIT
• Assessee Lawyers: D ANAND
• Section: 27

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH : CHENNAI . , , BEFORE SHRI ABRAHAM P.GEORGE, ACCOUNTANT MEMBER AND SHRI GEORGE MATHAN, JUDICIAL MEMBER ./I.T.A. NOS.2372, 2373, 2374, 2375, 2376, 2377 & 2378/ MDS/2016 / ASSESSMENT YEARS :2005-06, 2006-07, 2007-08, 200 8- 09, 2009-10, 2010-11 & 2011-2012. M/S. JG EXPORTS, NO.55, NARAYANAMUDALI STREET, CHENNAI 600 079. [PAN AAAFJ 3129M] VS. THE INCOME TAX OFFICER, BUSINESS CIRCLE X (2) CHENNAI 600 006. ( / APPELLANT) ( /RESPONDENT) ! ' # / APPELLANT BY : SHRI. D. ANAND, ADVOCATE $%! ' # /RESPONDENT BY : SHRI. M. PALANICHAMY, IRS, JCIT. & ' ' () /DATE OF HEARING : 10-10-2017 *+ ' () /DATE OF PRONOUNCEMENT : 11-10-2017 / O R D E R PER BENCH: THESE ARE APPEALS FILED BY THE ASSESSEE DIRECTED AGAINST ORDERS DATED 27.05.2016 OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS)-5, CHENNAI FOR THE IMPUGNED ASSESSMENT YE ARS. GROUNDS TAKEN BY THE ASSESSEE FOR ALL THE YEARS ARE COMMON AND THESE ARE REPRODUCED HEREUNDER:- ITA NOS.2372-2378/2016. :- 2 -: 1 THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) -5 IS NOT IN ACCORDANCE WITH LAW AND IS T HEREFORE UNSUSTAINABLE 2. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) - OUGHT NOT TO HAVE HELD THAT THE INCOME FROM PROPERT Y SITUATED AT NO.9 CHANDRAPPA MUDALI STREET, SOWCARPE T, CHENNAI 600 079 SHOULD BE ASSESSED UNDER THE HEAD 'INCOME FROM PROPERTY' INSTEAD OF INCOME FROM BUSIN ESS ESPECIALLY WHEN THE APPELLANT WAS NOT THE OWNER OF THE LAND AND ONLY OWNED THE SUPERSTRUCTURE ON LAND BELO NGING TO SOMEONE ELSE. 3. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) -5 OUGHT TO HAVE APPRECIATED THE FACT THAT THE APPELLA NT FIRM HAD PAID LEASE RENTAL FOR THE LAND TAKEN ON LEASE A ND OUGHT TO HAVE ALLOWED THE OUTGO ON THIS SCORE. 2. THESE APPEALS HAVE BEEN FILED WITH A DELAY OF TWO D AYS. CONDONATION PETITION HAS BEEN FILED. REASON SHOWN FOR THE DELAY SEEMS TO BE JUSTIFIED. LD. DEPARTMENTAL REPRESENTAT IVE DID NOT RAISE ANY SERIOUS OBJECTION. DELAY IS CONDONED. APPEALS ARE ADMITTED 3. A READING OF THE GROUNDS RAISED BY THE ASSESSEE CL EARLY SHOW THAT IT IS AGGRIEVED ON TREATMENT OF RENTAL I NCOME RECEIVED BY IT, UNDER THE HEAD INCOME FROM HOUSE PROPERTY AND D ISALLOWANCE OF THE CLAIM OF LEASE RENTAL PAID ON THE LAND. 4. LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT ASSESSE E HAD FOR ASSESSMENT YEAR 2005-06 SHOWN THE INCOME FROM R ENTAL UNDER THE HEAD INCOME FROM BUSINESS/PROFESSION. HOWEVER, ACCORDING TO HIM, FOR ASSESSMENT YEARS 2008-09, 2009-10 AND 2010-2011 , ASSESSEE HAD SHOWN SUCH RENTAL INCOME UNDER THE HEAD INCOME FRO M OTHER ITA NOS.2372-2378/2016. :- 3 -: SOURCES. LD. COUNSEL FAIRLY ADMITTED THAT ASSESS EE HAD ITSELF SHOWN THE VERY SAME INCOME UNDER THE HEAD INCOME FROM H OUSE PROPERTY FOR ASSESSMENT YEARS 2006-07, 2007-08 AND 2011-12. HOWEVER, AS PER THE LD. AUTHORISED REPRESENTATIVE, THE LD. ASS ESSING OFFICER HAD CONSIDERED THE RENTAL INCOME UNDER THE HEAD INCOM E FROM HOUSE PROPERTY FOR ALL THE YEARS. AS PER THE LD. AUTHO RISED REPRESENTATIVE, EVEN FOR THOSE YEARS, WHERE ASSESSEE HAD SHOWN RENT AL INCOME UNDER THE HEAD INCOME FROM OTHER SOURCES, LD. ASSESSING OFFICER HAD CONSIDERED THE GROSS RENT WITHOUT NETTING OFF THE LEASE RENT PAID ON THE LAND. FURTHER, AS PER THE LD. AUTHORISED REPRE SENTATIVE, SINCE THE BUILDING ON WHICH ASSESSEE HAD RECEIVED RENT WAS SI TUATED ON A LEASED LAND, AUTHORITIES BELOW OUGHT HAVE CONSIDERED THE R ENT RECEIVED, NET OF THE LEASE RENT PAID FOR THE LAND, UNDER THE HEAD INCOME FROM OTHER SOURCES AND NOT UNDER THE HEAD INCOME FROM HOUS E PROPERTY. LD. AUTHORISED REPRESENTATIVE SUBMITTED THAT LD. ASSESS ING OFFICER HAD RELIED ON SUB SECTION (IIIB) TO SEC. 27 OF THE INCO ME TAX ACT, 1961 (IN SHORT THE ACT) FOR CONSIDERING THE ASSESSEE AS THE OWNER OF THE HOUSE PROPERTY. AS PER THE LD. AUTHORISED REPRESEN TATIVE THE SAID SECTION CLEARLY REFERRED TO SUB SECTION (F) TO SEC TION 269 UA OF THE ACT. ACCORDING TO HIM, BY VIRTUE OF SECTION 269(F) OF TH E ACT, ASSESSEE COULD BE DEEMED AS AN OWNER ONLY WHEN THE CONDITIONS FO R PART PERFORMANCE MENTIONED IN SECTION 53A OF THE TRANSFE R OF PROPERTY ACT, ITA NOS.2372-2378/2016. :- 4 -: 1882 WAS SATISFIED. ACCORDING TO HIM, THE LAND ON W HICH ASSESSEE HAD CONSTRUCTED THE BUILDING, FROM WHICH IT WAS EARNING THE RENTAL INCOME, WAS TAKEN ON LEASE WITHOUT EXECUTING ANY LEASE AGR EEMENT AS SUCH. HENCE, ACCORDING TO HIM, SECTION 53A OF THE TRANS FER OF PROPERTY ACT HAD NO APPLICABILITY. CONTENTION OF THE LD. AUTHORI SED REPRESENTATIVE WAS THAT THE LAND WAS NOT OWNED BY THE ASSESSEE AND HENCE THE RENTAL FROM THE BUILDING SITUATED IN SUCH LAND COUL D BE CONSIDERED ONLY UNDER THE HEAD INCOME FROM OTHER SOURCES AND NO T FROM THE HEAD INCOME FROM HOUSE PROPERTY. AS PER THE LD. AUT HORISED REPRESENTATIVE IF THE RENTALS WERE CONSIDERED UNDE R THE HEAD INCOME FROM OTHER SOURCES ASSESSEE WILL BE ELIGIBLE TO S ET OFF THE LEASE RENTAL PAID FOR THE LAND AS EXPENDITURE LAID OUT WHOLLY AN D EXCLUSIVELY FOR THE PURPOSE OF EARNING THE RENTAL INCOME FROM THE BUIL DING. THUS, AS PER THE LD. AUTHORISED REPRESENTATIVE NECESSARY DIRECTI ONS HAD TO BE GIVEN TO THE AUTHORITIES BELOW FOR CORRECTLY ASSESSING TH E RENTAL INCOME UNDER THE HEAD INCOME FROM OTHER SOURCES AND NO T AS INCOME FROM HOUSE PROPERTY. 5. PER CONTRA, LD. DEPARTMENTAL REPRESENTATIVE SUBMIT TED THAT ASSESSEE WAS THE OWNER OF THE BUILDING. ACCORDING TO HIM, ASSESSEE HAD RENTED IT OUT TO MULTIPLE TENANTS AND WAS EARNI NG RENTAL INCOME THEREFROM. AS PER THE LD. DEPARTMENTAL REPRESENTAT IVE , BY VIRTUE OF JUDGMENTS OF HONBLE JURISDICTIONAL HIGH COURT IN T HE CASE OF KEYARAM ITA NOS.2372-2378/2016. :- 5 -: HOTELS P. LTD VS. DCIT, 373 ITR 494 AND THAT OF KE YARAM HOTELS P. LTD VS. ACIT, 300 ITR 118 , SUCH INCOME COULD BE CONSIDERED ONLY UNDER THE HEAD INCOME FROM HOUSE PROPERTY. LD. DEPAR TMENTAL REPRESENTATIVE ALSO POINTED OUT THAT SPECIAL LEAVE PETITION FILED AGAINST THE ABOVE JUDGMENT WAS DISMISSED BY HONBL E APEX COURT AND REPORTED (2015) 235 TAXMANN 512 . 6. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND PERUSE D THE ORDERS OF THE AUTHORITIES BELOW. IT IS NOT DISPUTED BY THE LD. AUTHORISED REPRESENTATIVE THAT FOR ASSESSMENT YEARS 2006-07, 2 007-08 AND 2011- 12, ASSESSEE ITSELF HAD SHOWN THE RENTAL INCOME U NDER THE HEAD INCOME FROM HOUSE PROPERTY IN THE RETURNS FILED BY IT. FOR ASSESSMENT YEARS 2008-09, 2009-10 AND 2010-2011, AS SESSEE HAD SHOWN SUCH INCOME UNDER THE INCOME FROM OTHER SOU RCES. IT IS ONLY FOR ASSESSMENT YEAR 2005-06, AMONG THE VARIOUS YEAR S IN APPEAL BEFORE US, THAT ASSESSEE HAD SHOWN THE RENTAL INCO ME UNDER THE HEAD INCOME FROM BUSINESS/PROFESSION. WHAT WE NOTE FROM THE ASSESSMENT ORDERS FOR THE IMPUGNED ASSESSMENT YEARS IS THAT ASSESSEE HAD NOT CARRIED ON ANY EXPORT BUSINESS THOUGH, IT H AD IN ITS NAME THE WORD EXPORTS. IT HAS NOT BEEN DISPUTED BY THE A SSESSEE THAT THE HOUSE PROPERTY LOCATED AT NO.9, CHANDRAPPA MUDALI S TREET SOWCARPET, CHENNAI 600 079, ON WHICH IT WAS EARNING THE RENTAL INCOME WAS CONSTRUCTED BY IT, THOUGH IT WAS SITUATED IN A LEA SED LAND. OWNERSHIP ITA NOS.2372-2378/2016. :- 6 -: OF THE BUILDING THEREFORE VESTED WITH THE ASSESSEE. MAY BE ASSESSEE WAS NOT SURE UNDER WHICH HEAD OF INCOME, THE RENTA LS HAD TO BE SHOWN. HOWEVER, INCOME EARNED BY THE ASSESSEE BY EXPLOITING THE PROPERTY BY LETTING IT OUT DE HORS, ANY COMMERCIAL OR BUSINESS ACTIVITY IS CHARGEABLE UNDER THE HEAD INCOME FROM HOUSE P ROPERTY AS HELD BY JURISDICTIONAL HIGH COURT IN THE CASE OF KEYARAM HOTELS P. LTD (SUPRA). ARGUMENT OF THE LD. AUTHORISED REPRESENTATIVE IS THAT, ASSESSEE COULD NOT BE CONSIDERED AS OWNER OF THE PR OPERTY SINCE THE LAND WAS A LEASED ONE AND SECTION 27(IIIB) WOULD NO T BE ATTRACTED. ACCORDING TO HIM, LEASE AGREEMENT FOR LEASING THE LAND ON WHICH THE BUILDING WAS CONSTRUCTED BY THE ASSESSEE WAS ONLY AN ORAL ONE AND NOT A WRITTEN ONE. HOWEVER, IN OUR OPINION ANSWER TO THE QUESTION LIES IN SECTION 22 OF THE ACT, WHICH IS THE CHARGING SEC TION. SECTION 22 OF THE ACT IS REPRODUCED HEREUNDER:- THE ANNUAL VALUE OF PROPERTY CONSISTING OF ANY BUILDINGS OR LANDS APPURTENANT THERETO OF WHICH THE ASSESSEE IS THE OWNER, OTHER THAN SUCH PORTIONS OF SUCH PROPERTY AS HE MAY OCCUPY FOR THE PURPOSES OF ANY BUSINESS OR PROFESSION CARRIED ON BY HIM THE PROFITS OF WHICH ARE CHARGEABLE TO INCOME-TAX, SHAL L BE CHARGEABLE TO INCOME-TAX UNDER THE HEAD 'INCOME FROM HOUSE PROPERTY'. A READING OF THE ABOVE SECTION CLEARLY SHOW THAT A NNUAL VALUE OF THE PROPERTY WHICH IS IN THE NATURE OF A BUILDING IS T O BE CHARGED UNDER THE HEAD INCOME FROM HOUSE PROPERTY, IF THE A SSESSEE IS THE OWNER OF THE SUCH BUILDING. ADMITTEDLY ASSESSEE WAS THE OWNER OF THE ITA NOS.2372-2378/2016. :- 7 -: BUILDING THOUGH IT MIGHT NOT BE THE OWNER OF THE L AND. IT IS NOT ESSENTIAL THAT A PERSON WHO OWNS A BUILDING SHOULD BE OWNER OF THE LAND UPON WHICH IT STANDS FOR ASSESSING THE RENTAL INCOME UNDER THE HEAD INCOME FROM HOUSE PROPERTY. IN THE CIRCUM STANCES, WE ARE OF THE OPINION THAT LOWER AUTHORITIES WERE JUSTIFIED I N CONSIDERING THE RENTAL INCOME UNDER THE HEAD INCOME FROM HOUSE PR OPERTY. ONCE INCOME IS ASSESSED UNDER THE HEAD INCOME FROM HOU SE PROPERTY, ASSESSEE WILL BE ELIGIBLE ONLY FOR ALLOWANCE MENTIO NED IN SECTION 24 OF THE ACT. WE THUS DO NOT FIND ANY REASON TO INTERFE RE WITH THE ORDERS OF THE LOWER AUTHORITIES. 7. IN THE RESULT, THE APPEALS OF THE ASSESSEE STAND DISMISSED. ORDER PRONOUNCED ON WEDNESDAY, THE 11TH DAY OF OCTO BER, 2017, AT CHENNAI. SD/- SD/- ( ) (GEORGE MATHAN) / JUDICIAL MEMBER ( . '#'$ ) (ABRAHAM P. GEORGE) % &' / ACCOUNTANT MEMBER - ' / CHENNAI . / DATED:11 TH OCTOBER, 2017. KV / ' $(0 1 2 1 ( / COPY TO: 1 . ! / APPELLANT 3. & 3( ( ) / CIT(A) 5. 167 $(8 / DR 2. $%! / RESPONDENT 4. & 3( / CIT 6. 79 :' / GF