M/s. G.V.Foundations Pvt. Ltd., CHENNAI V. ITO, CHENNAI

ITA 238/CHNY/2010

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 4961 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 3 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-06-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 06-06-2011
• Assessment Year: 2003-2004
• Appeal Filed On: 01-03-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: DR I VIJAYAKUMAR
• Assessee Lawyers: ANAND DEVKUMAR
• Keywords: Invalid notice; Business income; Depreciation; Difference of opinion; Reason to believe; Change of opinion
• Section: 147; 148; 56

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHENNAI BENCH C : CHENNAI [BEFORE DR. O.K. NARAYANAN, VICE-PRESIDENT AND SHRI HARI OM MARATHA, JUDICIAL MEMBER] I.T.A NOS. 236 TO 241/MDS/2010 ASSESSMENT YEARS : 2001-02 TO 2006-07 M/S G.V. FOUNDATIONS PVT. LTD NEW NO.101, OLD NO.48, 1 ST AVENUE INDIRA NAGAR, ADYAR CHENNAI 600 020 VS THE INCOME-TAX OFFICER COMPANY WARD II(1) CHENNAI [PAN - AABCG5826C] (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI ANAND DEVKUMAR RESPONDENT BY : DR. I. VIJAYAKUMAR O R D E R PER HARI OM MARATHA, JUDICIAL MEMBER: THESE ARE SIX APPEALS FILED BY THE ASSESSEE, F OR ASSESSMENT YEARS 2001-02 TO 2006-07, IN WHICH A COMMON ISSUE R EGARDING THE HEAD UNDER WHICH RECEIPTS FROM OFFICE SPACE GIVEN O N LICENCE HAVE TO BE TAXED - WHETHER UNDER THE HEAD BUSINESS INCOME OR INCOME FROM HOUSE PROPERTY. THESE APPEALS ARE FILED AGAINST T WO SEPARATE ORDERS - ONE FOR ASSESSMENT YEARS 2001-02 TO 2004-05 AND S ECOND FOR ASSESSMENT YEARS 2005-06 AND 2006-07, PASSED BY THE LD. CIT(A), CHENNAI, ON 22.12.2009. SINCE COMMON ISSUE IS IN VOLVED IN ALL THESE ITA 236 TO 241/10 :- 2 -: APPEALS, WE PROCEED TO DECIDE THEM BY A COMMON ORDE R FOR THE SAKE OF CONVENIENCE AND BREVITY. 2. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT THE ASSESSEE- COMPANY HAS CLAIMED INCOME FROM LICENCING OF ITS B USINESS CENTRE AS BUSINESS INCOME AS AGAINST WHICH THE ASSESSING OF FICER HAS HELD IT TO BE INCOME FROM HOUSE PROPERTY. UNDISPUTEDLY, TH E ASSESSEE HAS PROVIDED SERVICES LIKE PROVISION OF LIFT, RECEPTION IST BESIDES OTHER SECRETARIAL SERVICES, DATA PROCESSING, CONFERENCE R OOM, ETC AND HAS ALSO PROVIDED TOILETS AND PANTRIES ET AL. THE LD. CIT(A) HAS CONFIRMED THE ORDER OF THE ASSESSING OFFICER. NOW THE ASSESS EE IS FURTHER AGGRIEVED. FOR READY REFERENCE, WE ARE EXTRACTING THE GROUNDS TAKEN IN ASSESSMENT YEAR 2001-02 WHICH WOULD GIVE A CLEAR PICTURE OF FACTS AND ISSUES INVOLVED IN OTHER YEARS: 1. THE COMMO N ORDER OF T HE L E A RN E D CIT (A P PEA L S) -III D A T ED 22.12. 2 009 IN I T A NO.3 2 2, 3 23 ,3 24 / 07 -0 8 & 9 41 / 0 6 - 07 F O R TH E A S SESS M E N T Y E ARS FR O M 2001-0 2 T O 2 0 0 4-05 AND T H E ASSESSME NT OR D E R O F TH E AS S ES SIN G OFFI C ER D A TED 30. 11 .2006 A R E AR BIT RA R Y, IN C ORR EC T AN D BASE L ES S B O TH ON L A W A S W E LL AS O N FAC T S . 2. RELEVANT DATES IN THE CASE 2002-03, 2003-04 AN D 2004-05 2001-02 2002-03 2003-04 2004-05 I. RETURN FILED ON 14.9.01 27.6.02 14.7.03 25.6.04 II. NOTICE U/S 148 28.3.06 19.3.07 19.3.07 19.3.07 III. ASSESSEES LETTER SEEKING REASONS 25.4.06 26.3.07 26.3.07 26.3.07 IV. LETTER FURNISHING REASONS - 26.7.07 26.7.07 26.7.07 V. OBJECTIONS ON JURISDICTION 18.9.06 3.10.07 3.10.07 3.10.07 ITA 236 TO 241/10 :- 3 -: VI. REPLY LETTER TO OBJECTIONS - 9.10.07 9.10.07 9.10.07 VII. ASSESSEES LETTER ON MERITS - 17.10.07 17.10.07 17.10.07 VIII. ASSESSMENT ORDER PURSUANT TO NOTICE U/S 148 30.11.06 26.11.07 26.11.07 26.11.07 3. NOTICE U/S 148 LACKS JURISDICTION FOR ASSES SMENT YEAR 2001-02, 2002-03, 2003-04 AND 2004-05: 3.0 T H E L EAR N E D CIT ( A PP E ALS ) H A S DI S MISS E D TH E JURI S DICTI O N A L O B JEC T IO N S O N TH E FOLL O WIN G R EASON S: A. T H E D EC I S I O N R E LI E D UP O N B Y TH E APP E LL A NT I . E . 2 55 I T R 22 0 APPL Y T O A CAS E WH E R E N O ASSE S S M E NT H A S B EE N CO MPL E T E D U / S . 1 43 ( 3 ) A ND R EO P E NIN G I S NO T P E R M I T T E D O N M E R E C H ANG E O F O PIN I O N A ND TH E R E FORE THI S CASE I S N O T APP L I C AB L E T O A P P E LL A N T ' S C A SE, W H E R E RE ASS ESS M E NT I S M A D E O NL Y AFT E R PR OC E SS IN G U / S. 1 43 (1) AN D N O ASS E S S M E NT H AS B EE N MAD E U / S . 14 3 ( 3 ) . B. T H E D EC I SI ON OF TH E H O N ' BL E S UPREM E COURT IN TH E CA S E O F A C I T V S . RAJ E S H J H AVE R I S T OC K BR O K E RS (P) L TD R E P O RT E D IN 291 ITR 500 ( S C) W AS R E LI E D UP O N B Y C I T (A PP E A LS) AND FO LL OWE D B Y H I M . 3.1 N OW TH E ISS U E B EFO R E U S , I S AS T O H OW D O WE G E T OVER TH E A F O R E SA I D R E AS O N S: - T H E F I R S T R E A S ON G I VE N B Y TH E L E ARN E D C L T (A PP E ALS ) IS FACTUALL Y IN CO R R E C T , A S TH E D EC I SIO N QU O T E D B Y TH E APP E LLANT IS A PPLI E D IN C AS ES WH E R E NO ASSES S M E NT U / S . 1 4 3 ( 3 ) H AS B EE N CO MPL E T E D . L E T U S N OW FI RS T TAK E V IP E N KHANNA VS. C IT 255 I TR 220 (P&H) WH E R EI N IT WAS OB SE R V ED B Y TH E H O N ' BL E HI G H COURT AS FOLL O WS TH E R E B Y R EF UTIN G TH E CO NT E NT I O N O F TH E ASSESS IN G O FFI CE R. T H E CO NT E NTION O F TH E A SS ES SIN G OFFIC E R IN ORD E R D A T E D 09.10 . 0 7 THAT SINC E THER E N O ASS E S S M E NT WAS MAD E FOR ALL TH E AB O V E YE A R S, TH E R E WA S N O Q U ESTION OF CHANGE OF OPINIO N IS I N CORREC T B ECA U SE , J URI S D I CT IO N FOR BA C K A S S E S S M E NT I S LIMITED AS EX PL A IN ED A S F O LL OW S : - 'A N IMP O RTAN T P RI NC I PL E OF L A W W A S E XPLA I N E D IN VIPAN KHANN A V. CI T ( 200 2) 2 55 I TR 2 20 ( P & H ) ON TH E PO WE R S AV A I LABL E TO TH E AS SESSI N G OF F I CER UND E R SEC T ION 1 47 OF T H E I N CO M E - T A X A CT. TIM E LIMITS AR E SET OUT IN L AW FOR S T R I C T OB SE R VA N CE BO TH BY T H E ASS E SSEE O R THE R EVE NU E . A NOT ICE F OR SCRUTINY O F ACCOUNTS UND E R SEC T I ON 1 43(2) HA S TO BE ISS U ED WI THIN 12 M ONT HS FR OM T H E E ND OF TH E MON TH IN W HICH RET URN IS F IL E D , IF I T IS NO T S O ISS U E D , THE ASSE SSI NG OFFICE R CAN, NO DO UB T , E XE R C IS E H I S POWE R UND ER S EC TI O N 147 , B U T IT CAN NO T BE ITA 236 TO 241/10 :- 4 -: D ON E ME R E L Y F OR S CR U TINIZ I NG THE R ET URN OR VE R IFIC A TION OF TH E SA M E . WHE R E TH E AS S ES S ING OFFICER HA S I SSU ED N OTICE UNDE R SECT I O N 14 7 ACCOMPA N IE D B Y A LE T TE R INDI C ATIN G T HAT H E W AN TE D T O VERIFY T H E CL A I M O F CA RR IAGE EX P E N S E S AND T H E I N C OME I N R E SP EC T OF E A C H TRU C K , BESI D ES C H EC K TH E O VE RDRAFT AC C OUNT APA R T F R O I II SUC H OTH E R D E TAIL S, TH E R E W AS ABSOLUT E LY NO INF E R E NC E OF ANY E SCAP E ME N T OF IN C OM E , SO AS TO JU S T IF Y NOTIC E UND E R S EC T I ON 1 47. TH E NOTI C E HAS TO BE IS S U E D ONL Y UND E R S E CTIO N 14 3( 2) IN S UCH C A SES . S EC T I ON 147 I S NOT AN E XT E N S ION OF THE RI G HT UND E R SE C T ION 143 (2 ) , AS O T H E R W I SE TH ERE W OULD H AVE B EE N NO PURPOSE IN LAYIN G DO W N TH E TIM E L IMI T OF O N E Y E AR . TH E H IG H COU R T IN AN E LABORAT E JUDGEM E NT HAS INTER ALIA , R E L IE D UP O N BOA R D' S CIR C ULAR N O .5 49 , DAT E D 3 1ST O C TOB E R, 19 8 9 ([1990] 182 ITR ( ST .) 1 ), EX PLAININ G T H E N EW PROC E DU R E, W HI C H HAD C OM E INTO V O G UE FROM 01.04.1989 , WH E R E IN T H E B OA R D H AS I N UNMI S TAKABLE TERMS AD V I SE D ITS OFFICERS THAT , IF THE ASSESSEE HA S N OT B EE N SE R VED WIT H A NOT ICE UND E R SEC TION 14 3 (2 ) W ITHIN THE S TIPULATED TIM E , H E C AN T A K E I T T H AT TH E RETURN FI L E D BY HIM HA S B EC OM E FINAL AND THAT NO SCRUTINY PROC EE DIN GS A R E T O BE S T A RT E D I N R E SP EC T OF THAT R E TU R N. THE SUPR E M E COURT IN CIT V. SUB EN G IN EERI N G W O RK S P . LT D . [1992J 19 8 ITR 297 HAD H E LD THAT THE JURI S DI C TION OF TH E A SSESS I NG O FF I CE R U N D ER SEC TI O N 147 IS C ONFIN E D ONLY TO IN C OM E W HI C H HAD ESCA P E D A S SES S ME NT O R HA S BEE N U N D E R-A SSE S SE D AND DOES NOT E XTEND TO RE V ISING, R E OPENIN G OR R ECO N S ID E RIN G TH E W H O L E AS S ESS M E NT . IT HA S POINT E D OUT THAT THIS D EC I S ION S TILL HOLD S G OOD EVE N UND E R T H E N E W PROCEDUR E . SIN CE TH E ASS E S S IN G O FFIC ER S A RE PRON E TO ASSUME THAT TH E Y A R E E NTITL E D T O I S SU E NOTI C E UNDER SECT I ON 147 W ITH I N TH E TIM E P E RMITT E D FOR TH E S AME A S A M A T TE R OF ROUTIN E, TH E Y J E OPARDI ZE TH E REVE NU E' S CA SE , EV EN WHER E SOME ADDITION MAY OTH E R W I S E B E W ARRANT E D BY NOTIC E, W H E R E TH E RE IS E SCAP E MENT OF INCOM E . TIM E L I MIT S S T I PUL ATED BY TH E S TATUTE HA VE A S ANCTITY , WHI C H CANNOT BE LIGHTLY DISR EGA RD E D . IT IS FO R T H I S R E A S ON THAT A R E ASS E S S M E NT WHICH IS AN E XER C ISE ORDINARILY UND E RTAK E N BEYO N D T H E TIM E LIMIT FOR NORMAL A SSE SS ME NT W OULD R E QUIR E SATISFA C TION OF T H E CO N DITIO N S PR ESC RIB E D FOR JURISDICTION. WH E R E TH E RE IS ADEQUAT E DIS C LO S UR E OF R E L EVA NT FAC T S I N T H E IN C OM E -T A X R E TURN OR ANN E XURES THER E TO , IT IS NOT ORDINARILY OP E N TO TH E R EV E NU E TO ASSUM E JURISDI C TION A S SUCH A S SUMPTION WOULD TANTAMOUNT TO C H A N GE OF O P I N IO N . E VE N WHER E AN ASSESSM E NT HAS NOT BEEN MAD E, BECAUS E TH E C A SE I S NOT C HO SE N FOR SCRUTINY, TH E INF E R E N C E CANNOT B E DIFFERENT' (EMPHASI S SUPPLI E D ) . ITA 236 TO 241/10 :- 5 -: T H E D ECIS I O N IN VIPAN KUM A R ' S C AS E (S UPRA) WAS FOLLO WE D IN A BI ND IN G DEC I S I ON OF T H E MA DRA S HI G H COURT IN CI T V. M . CH E LL A PPAN ( 2006 ) 2 8 1 ITR 44 4 (M AD ) , T H O U G H IN A D IFFE R E N T C ONT EX T , IN APPRO V AL OF TH E RA TIONAL E OF THI S D E CI S ION. I N TH E CASE UND E R Q U ES T ION, TH E ASS E SSI N G OFFICE R W HIL E F URN IS HIN G R E ASONS FOR R E O P E NIN G IN L E TT E R D A T E D 2 6 . 09 . 0 7 H AS S T A T E D AS FOLLO WS : - FOR ASS T . YEA R 2 0 0 2 -0 3 T O 20 04 -05 - ' ON A P E RUSAL OF RECORDS FOR TH E A S ST . Y E A R 2 00 2 - 0 3 TO 2004-0 5 , IT IS S EE N THAT THE RENTAL INCOM E RECEIVED FROM L E TTIN G OUT OF BU SI N ESS C E NTR E HAS BEEN CLAIM E D AS BUSIN E SS INCOME AND THE EXP E NS E S IN C LUDIN G D E PR EC IATI O N HAS B EE N C LAIM E D AND ALLO WE D. IN ORDER TO A S S ESS THIS R ECE IPT UND E R TH E H E AD ' HOU S E PROP E RTY' , BASING ON THE DE C ISION IN TH E C A S E OF M/S. SHAMBU IN VES TM E NT S ( P ) LTD 1 29 TA X MAN 70 (SC) , TH E ASSESSM E NT S HA VE B EE N R E OP E N E D AND N OTI CES U /S .1 48 I SS U E D ' . T H E A P E X CO URT D E C I SIO N C IT E D ABOVE WA S R E ND ERE D O N 21 .0 1 .200 3 . T H E DEPAR T M E NT H A D A MPL E O P P ORTUNIT Y T O I SS U E N O TIC E U / S. 1 43 B ASE D ON THI S D ECIS I O N FO R A L L T H E SE YEARS. BUT THE DEPARTMENT DID NOT UTILIZE THE OPPORTUNITY. THE INFORMATION ABOUT SUPREME COURT JUDGEMENT WAS VERY MUCH AVAILABLE DURING THE PERIOD AVAILABLE FOR ISSU E OF NOTICE U/S. 143 (2). HENCE, THERE IS NO NEW INFORMATION AT THE TIME OF ISSUE OF NOTICE U/S. 148. THEREFORE, IT IS A CASE OF INVALID NOTICE U/S 148 AS THERE IS NO NEW INFORM ATION. JUST, BECAUSE, THE CASE HAS NOT BEEN CHOSEN FOR SCR UTINY, IT IS NOT OPEN TO REVENUE TO ASSUME JURISDICTION, AS S UCH ASSUMPTION WOULD TANTAMOUNT TO CHANGE OF OPINION. CONSEQUENTLY, NOTICE U/S 148 DATED 19.03.07 FOR ASS T. YEAR 2001-02, 2002-03 TO 2004-05, ASSUMING JURISDIC TION, BASED ON APEX COURT DECISION RENDERED ON 21ST JANUA RY, 2003, WHEN NOTICE FOR ISSUE OF NOTICE U/S 143 (2) HAD NOT EXPIRED, IS A CASE OF MERE CHANGE OF OPINION AND HE NCE, LACK JURISDICTION. HENCE, IT IS OBVIOUS THAT THE RE ASON GIVEN BY LEARNED CIT (APPEALS) - III FOR NOT CONSIDERING THE ABOVE DECISION QUOTED BY THE APPELLANT ON THE GROUN D THAT IT IS A CASE WHERE ASSESSMENT U/S 143 (3) WAS COMP LETED IS FACTUALLY INCORRECT. HENCE, LEARNED CIT (APPEALS ) - III OUGHT TO HAVE CONSIDERED THE RATIONAL BEHIND THE AB OVE DECISION AND FOLLOWED IT. 3.2 THE SECOND REASON GIVEN BY LEARNED CIT (APPEAL S) - III IS THAT DECISION IN ACLT VS. RAJESH JHAVERI STOCK B ROKERS (P) LTD REPORTED IN 291 ITR 500 (SC) WAS SQUARELY APPLICABLE TO THE FACTS OF THE PRESENT CASE. BUT, T HIS CASE IS DISTINGUISHABLE ON FACTS AND CAN IN FACT BE APPLIED TO APPELLANT'S CASE IN ITS FAVOUR AS THE CONDITION REQ UIRED TO BE ITA 236 TO 241/10 :- 6 -: SATISFIED BY THE ASSESSING OFFICER AS LAID DOWN BY THE ABOVE APEX COURT DECISION TO THE EFFECT THAT THERE MUST BE A 'REASON TO BELIEVE' THAT INCOME HAS ESCAPED ASSES SMENT IS NOT SATISFIED AS THERE IS 'NO FRESH INFORMATION' TO WARRANT ISSUE OF NOTICE U/S 148, AS EXPLAINED IN PARA 1.1 AND WHICH WAS NOT AVAILABLE DURING THE TIME GIVEN BY TH E STATUTE TO ISSUE NOTICE U/S 143 (2). 4. THE LEARNED CIT (APPEALS) - OUGHT TO HAVE CONSI DERED THE FOLLOWING CONTENTIONS OF THE APPELLANT THAT APE X COURT DECISION RELIED UPON BY THE DEPARTMENT IS DISTINGUI SHABLE AND NOT APPLICABLE TO THE FACTS OF THE CASE. BUT, H E HAS SIMPLY CONCLUDED AS FOLLOWS WITHOUT GIVING ANY REAS ONS 'I AM UNABLE TO AGREE TO THIS CONTENTIONS'. A FULL REA DING OF THE ABOVE JUDGEMENT CLEARLY INDICATES THAT WHERE TH E PROPERTY IS LET OUT WITH AN OBJECT OF DERIVING INCO ME THEREFROM, IT IS ONLY TO BE CHARGED AS 'INCOME FROM HOUSE PROPERTY'. BUT, THIS IS FACTUALLY INCORRECT AS THE HEAD NOTE INDICATES THAT WHEN THE PRIMARY OBJECT IS TO EXPLOI T THE IMMOVABLE PROPERTY BY WAY OF COMMERCIAL ACTIVITIES, IT MUST BE HELD AS BUSINESS INCOME AND THE DECISION TO TREA T THE ASSESSEE'S INCOME AS INCOME FROM HOUSE PROPERTY WAS TAKEN MAINLY BECAUSE, 'THE ENTIRE COST OF THE PROPE RTY LET OUT TO THE OCCUPANTS HAD BEEN RECOVERED AS AND BY W AY OF INTEREST-FREE ADVANCE BY THE ASSESSEE'. BUT, NO SUC H ADVANCE HAS BEEN RECOVERED BY THE APPELLANT AND THEREFORE, THE SAID APEX COURT DECISION IS NOT APPL ICABLE TO THE FACTS OF THE APPELLANT'S CASE AND THE SAID APEX COURT DECISION IS FULLY EXPLAINED BELOW AS TO ITS APPLICA BILITY TO THE APPELLANT'S CASE THE APEX COURT DECISION IN THE CASE OF M/S. SHAMBU INVESTMENTS (P) LTD VS. CLT REPORTED IN 263 ITR 143 , AFFIRMING THE DECISION OF THE CALCUTTA HIGH COURT I N CIT VS. SHAMBU INVESTMENTS (P) LTD (2001) 249 ITR 47 IS NOT APPLICABLE TO THE FACTS OF THIS CASE, AS IT WAS HEL D AS FOLLOWS :- 'THE ASSESSEE OWNED AN IMMOVABLE PROPERTY COSTING ` 5,42,443/-. IT OCCUPIED A PORTION OF THE PROPERTY AND LET OUT THE REST TO BE USED AS TABLE SPACE TO OCCUPANTS, WITH FURNITURE AND FIXTURES AND LIGHTS A ND AIR-CONDITIONERS. THE ASSESSEE PROVIDED SERVICES LI KE WATCH AND WARD STAFF, ELECTRICITY AND WATER AND OTH ER COMMON AMENITIES. THE MONTHLY RENT PAYABLE WAS INCLUSIVE OF ALL CHARGES. THE ASSESSEE HAD ALSO RECOVERED BY WAY OF SECURITY FROM THE OCCUPANTS A SUM OF ` 4,25,000/-. THE HIGH COURT HELD THAT THE INCOME FROM THE PROPERTY WAS ASSESSABLE IN THE HANDS OF ASSESSEE AS INCOME FROM HOUSE PROPERTY (SEE [2001] 249 ITR 47 (CAL)). THE ASSESSEE PREFERRED APPEALS TO THE SUPREME COURT. THE ITA 236 TO 241/10 :- 7 -: SUPREME COURT DISMISSED THE APPEALS HOLDING THAT THERE WAS NO REASON TO INTERFERE WITH THE CONCLUSIO N ARRIVED AT BY THE HIGH COURT'. THE CALCUTTA HIGH COURT HAS HELD AS FOLLOWS :- THE HEAD NOTE IN 249 ITR 47 AS FOLLOWS: `'MERELY BECAUSE INCOME IS ATTACHED TO ANY IMMOVABL E PROPERTY, THAT CANNOT BE THE SOLE FACTOR FOR ASSESS MENT OF SUCH INCOME AS INCOME FROM PROPERTY. IF THE MAIN INTENTI ON OF THE ASSESSEE IS TO LET OUT THE PROPERTY OR ANY PORTION THEREOF THE INCOME MUST BE CONSIDERED AS RENTAL INCOME OR INCOM E FROM PROPERTY WHEREAS IF THE PRIMARY OBJECT IS TO EXPLOI T THE IMMOVABLE PROPERTY BY WAY OF COMPLEX COMMERCIAL ACT IVITIES, IN THAT EVENT IT MUST BE HELD AS BUSINESS INCOME. THE COST OF THE IMMOVABLE PROPERTY OWNED BY THE ASS ESSEE WAS ` 5,42,443/-. A PORTION OF THE PROPERTY WAS USED BY THE ASSESSEE ITSELF FOR ITS OWN BUSINESS PURPOSE. THE R EST OF THE PROPERTY HAD BEEN LET OUT TO THE VARIOUS OCCUPANTS WITH FURNITURES, FIXTURES, LIGHTS, AIR-CONDITIONERS FOR BEING USED AS TABLE SPACE. UNDER AN AGREEMENT WITH THOSE OCCUPANT S, THE ASSESSEE PROVIDED SERVICES LIKE WATCH AND WARD STAF F, ELECTRICITY, WATER AND OTHER COMMON AMENITIES. THE SERVICES RENDERED TO THE VARIOUS OCCUPANTS ACCORDING TO THE SAID AGREEMENT WAS NOT SEPARATELY CHARGED AND THE MONTHL Y RENT PAYABLE WAS INCLUSIVE OF ALL CHARGES TO THE ASSESSE E. THE ASSESSEE HAD RECOVERED A SUM OF ` 4,25,000/- AS AND BY WAY OF SECURITY ADVANCE FROM THREE OCCUPANTS. THE INCOM E DERIVED BY THE ASSESSEE FROM THE PROPERTY WAS ASSESSED AS B USINESS INCOME BY THE ASSESSING OFFICER. THE COMMISSIONER REMANDED THE MATTER TO THE ASSESSING OFFICER WITH A DIRECTION TO ASSESS THE INCOME AS INCOME FROM PROPERTY, BUT T HE TRIBUNAL RESTORED THE ORDER OF THE ASSESSING OFFICE R, ON A REFERENCE: HELD, THAT IT WAS EVIDENT FROM THE AGREEMENT THAT T HE ASSESSEE HAD LET OUT THE FURNISHED OFFICE TO THE OC CUPANTS ON A MONTHLY RENTAL WHICH WAS INCLUSIVE OF ALL CHAR GES TO THE ASSESSEE. THE ENTIRE COST OF THE PROPERTY LET O UT TO THE OCCUPANTS HAD BEEN RECOVERED AS AND BY WAY OF INTER EST- FREE ADVANCE BY THE ASSESSEE. THEREFORE, IT COULD N OT BE SAID THAT THE ASSESSEE WAS EXPLOITING THE PROPERTY FOR ITS COMMERCIAL L BUSINESS ACTIVITIES'. THE CRUCIAL FACT THAT DECIDED THE ISSUE IN THE ABOV E CASE WAS THAT THE ENTIRE COST OF THE PROPERTY LET OUT TO OCC UPANTS HAS BEEN RECOVERED AS AND BY WAY OF INTEREST FREE ADVAN CE BY THE ASSESSEE. THE ASSESSING OFFICER DID NOT CITE AN Y SUCH HEAVY ADVANCE IN THE CASE OF THE ASSESSEE. BECAUSE, THE ITA 236 TO 241/10 :- 8 -: BUSINESS CENTRE CHARGES ADVANCE IS GENERALLY 6 TO 1 0 MONTHS. BUSINESS CENTRE CHARGES, WHICH NOWHERE NEAR THE COST OF OFFICE SPACE AND OTHER FIXED ASSETS WHICH WORKS OUT TO AND 50 LAKHS . HENCE, THIS APEX COURT DECISION CANNOT BE APPLIED TO THE FACTS OF THE ASSESSEE, ON THIS GROUN D AND HENCE, THE ENTIRE FOUNDATION OF THE ASSESSMENT ORDE R RELYING UPON THIS CASE IS WITHOUT APPRECIATION OF THIS CRUC IAL AND DISTINGUISHABLE PIECE OF EVIDENCE AND HENCE, ALL AD DITIONS FOR ALL THE ASST. YEARS I.E. 2001-02 TO 2004-05 RELYING UPON THIS CASE, WHICH IS NOT APPLICABLE TO THE ASSESSEE, ARE THEREFORE, PERSE ILLEGAL, ARBITRARY, BASELESS, MECHANICAL AND WITHOUT ANY LOGIC. THE LEARNED CIT (APPEALS) DID NOT GET OVER THE CON TENTION OF THE APPELLANT THAT INCOME FROM LEASE / LICENSING OF BUSINESS CENTRE CAN ONLY BE BUSINESS INCOME VIDE ASST. CIT V S. SAPTARISHI SERVICES LTD (2004)265 ITR 379 (GUJ)SPEC IAL LEAVE AGAINST THIS DECISION HAS ALSO BEEN REFUSED BY THE SUPREME COURT (2003) 264 ITR ST 36. IN THE CASE OF EVEREST HOTELS LTD V CIT (1978) 114 ITR 779 (CAL) APPLIED I N CIT V ROY CHOWDHURY (K.G.) (1992) 195 ITR 801 (CAL), THE LESSOR INTENDED THAT DURING THE PERIOD OF THE LEASE, THE B UILDING ALONG WITH THE FITTINGS, FURNITURE, GOODWILL, EQUIP MENTS, ETC., WHICH WERE LEASED OUT SHOULD BE USED FOR THE PURPOS ES OF A HOTEL BUSINESS. THERE WAS EVIDENCE TO THE EFFECT TH AT ON THE EXPIRY OF THE LEASE, THE LESSOR HAD RESUMED POSSESS ION OF THE BUILDINGS AND FITTINGS, ETC, AND WAS CARRYING T HE HOTEL BUSINESS AS BEFORE. IT WAS HELD THAT INCOME DERIVED FROM THE LETTING OUT OF THE BUILDING ALONG WITH THE FITTINGS , FURNITURE, ETC. CONSTITUTED BUSINESS INCOME AND WAS NOT ASSESSABLE UNDER SECTION 56 (2)(III). LIKEWISE, WHERE RENTS WERE REC EIVED BY LETTING OUT ACCOMMODATION TO THE GOVERNMENT DEPARTMENTS FOR LOCATING A BRANCH OF THE STATE BANK, POST OFFIC E, POLICE STATION, CENTRAL EXCISE OFFICE, ETC. AND ALSO FURNI TURE, THE LATTER BEING ONLY INCIDENTAL TO THE LETTING OUT OF THE BUILDING, THE INCOME WAS HELD TO BE TAXABLE UNDER SECTION 28 OF THE ACT AS RECEIPTS FROM BUSINESS CIT (ADDL) V NATIONAL NEWSPRINT & PAPER MILLS LTD (1978) 114ITR 398 (MP). SEE ALSO CIT V NATIONAL NEWSPRINT & PAPER MILLS LTD (19 78) 114 ITR 388 (MP). 6. THE LEARNED CIT (APPEALS) DID NOT GET OVER THE CONTENTION OF THE APPELLANT THAT INCOME FROM COMMER CIAL ASSET CAN ONLY BE BUSINESS NCOME VIDE CIT VS. VST MOTORS (P) LTD IN 226 ITR 155 (MAD). 7 . THE LEARNED CIT (APPEALS) DID NOT GET OVER THE CONTENTION OF THE APPELLANT THAT APEX COURT DECISIO N IN SULTAN BROTHERS (P) LTD VS. CIT (1964) 51 ITR 353 N EED TO BE FOLLOWED IN AS MUCH AS INTENTION OF THE ASSESSEE NEED ITA 236 TO 241/10 :- 9 -: TO BE STUDIED AS FOLLOWS:- (I) WAS IT THE INTENTION IN MAKING THE LEASE THAT THE BUILDING AND TILE MACHINERY, PLANT AND FURNITURE SHOULD BE ENJOYED TOGETHER? (II) WAS IT THE INTENTION TO MAKE THE LETTING OF TH E BUILDING AND THE MACHINERY, FURNITURE AND PLANT PRACTICALLY ONE LETTING? (III) WOULD ONE HAVE BEEN LET ALONE, WOULD IT HAVE BEEN ACCEPTED WITHOUT THE OTHER? IF THE ANSWERS TO THE FIRST TWO QUESTIONS WERE IN T HE AFFIRMATIVE AND THE LAST WAS THE NEGATIVE, THEN, IT WAS REMARKED, IT HAD TO BE HELD THAT IT WAS INTENDED TH AT TILE LETTING WOULD BE INSEPARABLE AND THAT SECTION 12(4) WAS ATTRACTED. IN THE CASE BEFORE US, THE INTENTION BEING THAT OFF ICE SPACE TOGETHER WITH INTERIORS, CABINS, CHAIRS & TABLES ET C. SHOULD BE ENJOYED TOGETHER AND HENCE PRACTICALLY ONE LETTI NG, AND WITHOUT OFFICE SPACE FULLY FURNISHED WOULD NOT HAVE BEEN ACCEPTED BY OTHER, THE INCOME FROM HIRING/LICENSING SUCH OFFICE SPACE WITH INTERIORS, BUSINESS CABINS, FURNI TURE & FITTINGS CAN BE ASSESSED AS BUSINESS INCOME AND IF NOT, ONLY AS INCOME FROM OTHER SOURCES AND NOT AS INCOME FROM HOUSE PROPERTY. 8. THE LEARNED CIT (APPEALS) DID NOT GET OVER THE CONTENTION OF THE APPELLANT THAT EVEN IF ONE ASSUME S THAT BUSINESS CENTRE CHARGES IS NOT A BUSINESS INCOME, S ECTION 56 (2)(III) OF INCOME TAX ACT, 1961 OUGHT TO HAVE F OLLOWED BY THE ASSESSING OFFICER. THIS WAS NOT DONE VIDE OR IENT HOSPITAL LTD. VS. DCIT 315 ITR 422 (MAD). 9. THE LEARNED CIT (APPEALS) OUGHT TO HAVE CONSID ERED THAT CASES RELIED UPON BY THE DEPARTMENT ARE DISTIN GUISHED IN GROUNDS OF APPEAL FILED BY THE APPELLANT. 10. THE CIT (APPEALS) - III OUGHT TO HAVE CONSIDER ED THE CONTENTION OF THE APPELLANT THAT TREATING BUSINESS CENTRE CHARGES AS INCOME FROM HOUSE PROPERTY IS NOT BENEFI CIAL TO REVENUE, IN THE LONG RUN AS DEPRECIATION IS ONLY ON WDV, WHEREAS STATUTORY DEDUCTION OF 30% IS ON BUSINESS C ENTRE CHARGES RECEIVED AND THIS IS A PERMANENT ONE AND DECREASING LIKE DEPRECIATION. ITA 236 TO 241/10 :- 10 - : 11. THE CIT (APPEALS) OUGHT TO HAVE CONSIDERED TI LE GROUNDS OF APPEAL TAKEN BY TILE APPELLANT THAT THE ASSESSEE HAS BEEN IN THE BUSINESS OF LICENSING OUT BUSINESS CENTRE CONSISTING OF PROPERTY ALONGWITH FURNITURES AND FIX TURES INCLUDING AIR CONDITIONERS, TOGETHER WITH MAINTENAN CE ON LICENSE AND RECEIVES COMPOSITE BUSINESS CENTRE CHAR GES. AS THE ABOVE LICENSING OUT OF BUSINESS CENTRE IS IN THE COURSE OF THE BUSINESS OF THE ASSESSEE, THE INCOME THEREFROM IS RIGHTFULLY TO BE CHARGED UNDER BUSINES S. IN THIS CONNECTION, IT IS EMPHASIZED THAT MAIN OBJECTS OF T HE ASSESSEE COMPANY IS TO CARRYON LICENSE, SELL, DEVEL OP, MANAGE AND DEAL IN PROPERTIES AND THE MAIN OBJECTS AS STATED IN THE MEMORANDUM OF ASSOCIATION ARE REPRODU CED BELOW FOR HIGHLIGHTING THE FACT THAT THE COMPANY INTENDS TO CARRYON BUSINESS BY LICENSING OUT BUSINESS CENTRES AND NOT MERE EXPLOITATION OF COMMERCIAL OFFICE SPACE BY LET TING OUT. TO PURCHASE, TAKE ON LEASE OR IN EXCHANGE OR OTHERWISE ACQUIRE, LEASE OUT, HIRE, SELL, DEVELOP, MANAGE AND DEAL IN PROPERTIES AND REAL ESTATES AND LANDS AND BUILDINGS, HOUSES, SHOPS, FLATS, HEREDITMENTS, HOLIDAY RESORTS, ESTATES OR ANY INTER EST THEREIN OR ANY RIGHTS CONNECTED THEREWITH AND TO CARRY ON BUSINESS AS REAL ESTATE AGENTS, BUILDERS, CONTRACTORS, MERCHANTS AND DEALERS IN ANY AND ALL KINDS OF MATERIALS, ARTICLES AND THINGS REQUIRED IN CONNECTION THEREWITH'. IN NUTSHELL, THE ASSESSEE CARRIES ON BUUSINESS OF L ICENSING OF 'BUSINESS CENTRE' IN COMMERCIAL COMPLEX WITH ALL FA CILITIES LIKE CABINS, AIR CONDITIONERS, PANTRY, RECEPTION AND CON FERENCE HALL. 'LICENSING IS NOT AN ACTIVITY FALLING UNDER THE HEA D 'INCOME FROM HOUSE PROPERTY', AS THE WORD LICENSE IS AN AUTHORIT Y TO DO AN ACT WHICH WOULD BE OTHERWISE A TRESPASS. IT PASSES NO INTEREST. IT DOES NOT GIVE THE LICENSEE AN EXCLUSIVE RIGHT TO TH E USE OF THE PROPERTY. LICENSING IS A BUSINESS ACTIVITY AND INCO ME FROM LICENSING OF BUSINESS CENTRE CAN ONLY BE BUSINESS I NCOME. THIS IS SIMILAR TO LICENSING OF VAULT FOR STORAGE OF FIL MS. 'LICENSING' DOES NOT INCLUDE WITHIN ITS MEANING 'LETTING OUT'. 12. HENCE, BASED ON THE ABOVE GROUNDS, FACTS AND CIRCUMSTANCES OF THE CASE, THE ASSESSEE PRAYS FOR D ELETION OF ALL ADDITIONS FOR ASST. YEAR 2001-02 TO 2004-05 BY TREA TING BUSINESS CENTRE CHARGES AS INCOME FROM HOUSE PROPER TY BASED ON INAPPLICABLE APEX COURT DECISION IN THE CA SE OF SHAMBU INVESTMENTS (P) LTD 129 TAXMAN 70 (SC) AND R ENDER JUSTICE. ITA 236 TO 241/10 :- 11 - : 3. WE HAVE HEARD THE RIVAL SUBMISSIONS IN THE LIGHT O F THE PROVISIONS OF THE ACT. AFTER HEARING BOTH SIDES , WE HAVE FOUND IT FOR A FACT THAT THE ASSESSEE HAS PROVIDED CONFERENCE RO OM, SECURITY SERVICES, FULL FLEDGED BUSINESS CENTRE WITH SEPARAT E CABINS, RECEPTION, FULLY AIR CONDITIONED AND LOCAL AREA NETWORKING, VI SITORS CHAIRS, ETC. APART FROM TOILETS AND PANTRY. TO SUPPORT THIS CL AIM, THE LD.AR HAS RELIED ON A DECISION OF HON'BLE JURISDICTIONAL HIGH COURT RENDERED IN THE CASE OF CIT VS V.S.T MOTORS (P) LTD, 226 ITR 155. ON THE OTHER HAND, THE DEPARTMENT HAS RELIED ON A DIFFERENT DECISION O F THE HON'BLE JURISDICTIONAL HIGH COURT WHICH WAS RENDERED IN THE CASE OF A.R COMPLEX VS ITO, 167 TAXMAN 46, IN WHICH LETTING OUT OF COMMERCIAL COMPLEX WAS HELD TO BE INCOME FROM HOUSE PROPERTY . AFTER HEARING BOTH SIDES, WE HAVE FOUND FOR A FACT THAT THE ASSES SEE HAS GIVEN THEIR OFFICE SPACE IN 1H AND 4L, CENTURY PLAZA, 560-562, ANNA SALAI, TEYNAMPET, CHENNAI -18, SITUATED IN MOUNT ROAD, WHI CH IS A COMMERCIAL ESTABLISHMENT, ALONGWITH THE ABOVE AMENI TIES. THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CI T VS V.S.T. MOTORS PVT. LTD. (SUPRA) HAS HELD AS UNDER: HELD, (I) THAT INASMUCH AS THE BUILDING IN QUESTION ON MOUNT ROAD WAS A COMMERCIAL ASSET, THE ASSESSEE COULD EXPLOIT IT EITHER BY ITSELF OR BY LETTING IT TO OTHERS. THEREFORE, IN A MATT ER LIKE THIS THE FUNDAMENTAL POSITION THAT HAD TO BE ASCERTAINED WAS WHETHER A PARTICULAR BUILDING OR PREMISES WAS A COMMERCIAL ASSET OR A HOUSE PROPERTY. IF THE PREMISES WERE A COMMERCIAL ASSET, ITA 236 TO 241/10 :- 12 - : THEN THE INCOME DERIVED THEREFROM WOULD AMOUNT TO BUSINESS INCOME, OTHERWISE IT WOULD BE INCOME DERIVED FROM PROPERTY ASSESSABLE UNDER THE HEAD 'PROPERTY INCOME'. ON THE FACTS, THE TRIBUNAL HAD FOUND IN THE PRESENT CASE THAT THE PROPERTY IN QUESTION WAS A COMMERCIAL ASSET, WHICH WAS USED BY THE ASSESSEE AS SUCH IN THE BEGINNING AND LATER ON AFTER SHIFTING ITS BRANCHES TO OUTSIDE STATIONS, THE SECOND FLOOR HAD BECOME SURPLUS AND WAS EXPLOITED BY THE ASSESSEE BY LETTING IT OUT TO OTHERS. THEREFORE THE RENTAL INCOME DERIVED THEREFROM WAS RIGHTLY ASSESSABLE UNDER THE HEAD 'BUSINESS INCOME' ; 4. THE FACTS OF THE ABOVE HON'BLE JURISDICTIONAL HIGH COURTS DECISION AND THE CASE IN HAND ARE SAME AND SIMILAR TO EACH OTHER. THE DECISIONS ON WHICH THE DEPARTMENT HAS RELIED ON ARE IN FACT ON DIFFERENT FOOTING. IN THAT CASE, THE PROPERTY WAS ACTUALLY LET OUT AND IN ONE OF THE CASE, THE ASSESSEE HAD RECEIVED RENT IN ADVANCE. THE PERUSAL OF THE RECORD REVEALS THAT THE COMMERCIAL C OMPLEX OF THE ASSESSEE HAS NOT BEEN LET OUT IN THE SAME MANNER AS IT IS ENVISAGED IN SECTION 22 OF THE ACT. SECTION 22 OF THE ACT READS AS UNDER: INCOME FROM HOUSE PROPERTY. 16 22. 17 THE ANNUAL VALUE OF PROPERTY CONSISTING OF ANY BUILDINGS 18 OR LANDS APPURTENANT 18 THERETO OF WHICH THE ASSESSEE IS THE OWNER 18 , OTHER THAN SUCH PORTIONS OF SUCH PROPERTY AS HE MAY OCCUPY 18 FOR THE PURPOSES OF ANY BUSINESS OR PROFESSION CARRIED ON BY HIM THE PROFIT S OF WHICH ARE CHARGEABLE TO INCOME-TAX, SHALL BE CHARGE ABLE TO INCOME-TAX UNDER THE HEAD INCOME FROM HOUSE PROPERTY. ITA 236 TO 241/10 :- 13 - : 5. A PLAIN READING OF THE ABOVE SECTION SHOW THAT TH ERE HAS TO BE A RELATION BETWEEN THE OWNER OF THE PROPERTY AND TH E OCCUPIER OF THE PROPERTY AS THAT OF OWNER AND TENANT. IN THE GIVEN CASE, THE ASSESSEE HAS NOT GIVEN THE PROPERTY ON RENT, BUT HAS GIVEN T HE COMMERCIAL COMPLEX ON LICENCE FOR THREE YEARS INSTANTANEOUS U SER, HENCE, THE INCOME FROM THIS COMMERCIAL ASSET IS TO BE TREATED AS BUSINESS INCOME AND NOT INCOME FROM HOUSE PROPERTY. THE DECISION OF THE HON'BLE JURISDICTIONAL HIGH COURT RENDERED IN THE C ASE OF CIT VS V.ST MOTORS PVT. LTD. (SUPRA) IS DIRECTLY ON THE ISSUE SO, WE ARE BOUND TO FOLLOW. SUCH CASES ARE TO BE DECIDED ON THE BASIS OF FACTS OF A PARTICULAR CASE AND CANNOT BE GENERALIZED. WE HAVE RENDERED THIS DECISION IN THE GIVEN FACTS AND CIRCUMSTANCES OF TH IS CASE ALONE. THEREFORE, ON MERITS, THE ASSESSEE SUCCEEDS AND WE SET ASIDE THE FINDING OF THE LD. CIT(A) IN ALL THESE YEARS ON MER ITS OF THE CASE AND ORDER THAT THIS RECEIPT IS TO BE ACCEPTED UNDER THE HEAD INCOME FROM BUSINESS IN ALL THESE YEARS. 6. THE OTHER GROUNDS RELATING TO JURISDICTION POINT WA S NOT REALLY PRESSED BEFORE US, THEREFORE, WE DISMISS THE SAME. 7. IN THE RESULT, ON MERITS, ALL THE APPEALS STAND ALL OWED, BUT THE JURISDICTION POINT, IN WHATEVER YEARS IT HAS BEEN R AISED, FAILS. ITA 236 TO 241/10 :- 14 - : 8. TO SUMMARIZE THE RESULT, THE APPEALS FOR ASSESSMEN T YEARS 2001-02 TO 2004-05 STANDS PARTLY ALLOWED WHEREAS TH E APPEALS FOR ASSESSMENT YEARS 2005-06 AND 2006-07 STAND ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT ON 8.6.2011. SD/- SD/- (DR. O.K. NARAYANAN) VICE-PRESIDENT (HARI OM MARATHA) JUDICIAL MEMBER DATED: 8 TH JUNE, 2011 RD COPY TO: APPELLANT/RESPONDENT/CIT(A)/CIT/DR