SAPHIRE MANAGEMENT SERVICES P.LTD, MUMBAI V. ITO 2(3)(2), MUMBAI

ITA 2387/MUM/2015

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 3848 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 3 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-08-2016
• Appeal Filed By: Assessee
• Bench Allotted: SMC
• Assessment Year: 2006-2007
• Appeal Filed On: 27-04-2015
• Court: TRIBUNAL
• Keywords: Business income; Rule of consistency
• Section: 143(3)

Judgement Text

, . . , IN THE INCOME TAX APPELLATE TRIBUNAL SMC , BENCH MUMBAI BEFORE SHRI R.C.SHARMA, ACCOUNTANT MEMBER ./ ITA NO. 2 387 &2388 / MUM/20 1 5 ( / ASSESSMENT YEAR : 20 06 - 2007 SAPHIRE MAN AGEMENT SERVICES PVT. LTD., 265 BIRYA HOUSE, BAZAR GATE STREET, FORT, MUMBAI - 400001 VS. ITO - 2(3)(2), MUMBAI - 400018 ./ ./ PAN/GIR NO. : A A DCS 0993 E ( / APPELLANT ) .. ( / RESPONDENT ) /ASSESSEE B Y : MS. JIGNA PAREKH /REVENUE BY : MS. BHARTI SINGH / DATE OF HEARING : 0 2 /08 /2016 / DATE OF PRONOUNCEMENT 0 2 / 0 8 /201 6 / O R D E R TH ESE ARE THE APPEAL S FILED B Y THE ASSESSEE AGAINST THE O RDER OF CIT(A) - MUMBAI, FOR THE ASSESSMENT YEAR 20 06 - 2007, WHEREIN THE ASSESSEE IS AGGRIEVED FOR TREATING INCOME OFFERED AS BUSINESS INCOME BUT TREATED BY THE AO AS INCOME FROM HOUSE PROPERTY. 3. AT THE OUTSET, LD. AR PLACED ON RECORD A CHART INDICATING FACT UAL POSITION ACCEPTED BY THE DEPARTMENT FROM ASSESSMENT YEAR 2000 - 2001 TO 2005 - 06, WHEREIN CLAIM OF ASSESSEE REGARDING SOME INCOME HAVING BEEN TAXED UNDER HEAD BUSINESS AND PROFESSION HAS BEEN ACCEPTED BY THE DEPARTMENT. LD. AR PLACED ON RECORD DECISION OF MUMBAI TRIBUNAL IN THE CASE OF SAPPHIRE MANAGEMENT SERVICES PRIVATE LTD., IN ITA NO.4200/MUM/2012, ORDER DATED 27 - 5 - 2015, WHEREIN UNDER THE PRINCIPLE OF CONSISTENCY, THE TRIBUNAL HELD AS UNDER : - ITA NO. 2 387 &2388 /1 5 2 5. WE HAVE HEARD THE RIVAL CONTENTIONS OF THE LD. REPRESENTATIVES OF BOTH THE PARTIES AND HAVE ALSO GONE THROUGH THE RECORDS. THE LD. A.R. OF THE ASSESSEE, BEFORE US, HAS PRODUCED A CHART TO SHOW THAT SINCE THE YEAR 2000 - 01 THE INCOME FROM THE LETTING OUT OF THE DIFFERENT PORTIONS OF THE BUSINESS CENTRE IN QUESTION HAS A LWAYS BEEN TREATED BY THE ASSESSEE AS BUSINESS INCOME. FOR THE ASSESSMENT YEAR 2001 - 02, THE RETURN WAS PROCESSED UNDER SECTION 143(3) OF THE INCOME TAX ACT AND THE INCOME FROM THE BUSINESS CENTRE WAS ACCEP TED AS BUSINESS INCOME. EVEN FOR THE ASSESSMENT YEAR 2005 - 06, THE AO HAD TREATED THE INCOME AS INCOME FROM OTHER SOURCES. HOWEVER, IN APPEAL, THE LD. CIT(A) ACCEPTED THE CLAIM OF THE ASSESSEE THAT THE SAME WAS BUSINESS INCOME. THE LD. A.R. HAS FURTHER EXPL AINED THAT EVEN FOR ASSESSMENT YEAR 2006 - 07 AND 2007 - 08, THE RETURN OF THE ASSESSEE SHOWING THE INCOME FROM THE PREMISES AS BUSINESS INCOME WAS ACCEPTED THOUGH UNDER SECTION 143(1) OF THE ACT. HE HAS FURTH ER STATED THAT FOR THE YEAR UNDER CONSIDERATION I.E. A.Y. 2008 - 09, IT IS FOR THE FIRST TIME THAT THE INCOME FROM THE PREMISES HAS BEEN TREATED BY THE AO AS INCOME FROM HOUSE PROPERTY. HE HAS FURTHER SUBMITTED THAT ON THE BASIS OF THE TREATMENT OF INCOME AS INCOME FROM HOUSE PROPERTY FOR THE YEAR UNDER CONSIDERATION, THE ASSESSMENT FOR THE A.Y. 2006 - 07 & 2007 - 08 HAS ALSO BEEN REOPENED. THE LD. A.R. OF THE ASSESSEE HAS BROUGHT OUR ATTENTION TO THE 'MEMORANDUM OF ASSOCIATION' OF THE ASSESSEE COMPANY WHEREIN TH E MAIN OBJECT OF THE ASSESSEE COMPANY HAS BEEN MENTIONED AS UNDER: 'MAIN OBJECTS OF THE COMPANY TO BE PURSUED BY THE COMPANY ON ITS INCORPORATION: 1. TO ACQUIRE LAND, BUILDING AND TO DEVELOP BUSINESS PREMISES, COMMERCIAL COMPLEXES, OFFICE PREMISES, INDUSTR IAL PLOTS, SHEDS, FACTORIES, WAREHOUSES, GARAGES, SHOPS, SHOWROOMS, BUSINESS CENTRES, RESTAURANTS, HOTELS AND TO CARRY ON THE BUSINESS OF PROVIDING AND MAINTAINING COMMERCIAL CENTRE AND PROVIDE OFFICE SPACE AND OTHER COMMERCIAL FACILITIES LIKE COMMUNICATIO N FACILITIES, DESK - TOP - PUBLISHING SERVICES, DOCUMENT DUPLICATING (XEROX) SERVICES AND OTHER MARKETING AND OTHER SERVICES IN INDIA OR ANY PART OF THE WORLD.' 6. HE HAS FURTHER BROUGHT OUR ATTENTION TO THE COPIES OF MEMBERSHIP AGREEMENT ENTERED INTO BY THE A SSESSEE WITH THE VARIOUS PARTIES TO WHOM IT HAS BEEN OFFERING THE FACILITIES OF ITS BUSINESS CENTRE TO SHOW THAT AS PER THE CLAUSES OF THE AGREEMENT, THE ASSESSEE HAS BEEN OFFERING VARIOUS SERVICES SUCH AS MAIL, MESSAGE, SECRETARIAL ASSISTANCE, OPERATED TE LEPHONE SERVICE, SERVICES OF PEON, SWEEPER ETC. WHICH SERVICES WERE TO BE PROVIDED IN A FURNISHED CABIN FOR THE RESTRICTED PERIOD OF 10 A.M. TO 7 P.M. DURING WEEK DAYS ONLY. AS PER THE CLAUSE OF THE AGREEMENT, THE CABINS OFFERED BY THE ASSESSEE WOULD BE OP ENED AND CLOSED BY THE PEON OF THE ASSESSEE ONLY AND EVEN THERE WAS NO FIXED CABIN RENTED OUT OR PROVIDED TO ANY PARTY AND THE ASSESSEE HAS THE RIGHT TO CHANGE THE CABIN TO BE OFFERED TO ANY PARTY FROM TIME TO TIME WITHOUT ANY NOTICE. THE FACTS ON THE FILE CLEARLY ESTABLISH THAT THOUGH THE ASSESSEE HAD TAKEN THE PREMISES ITA NO. 2 387 &2388 /1 5 3 ON LEASE ON LONG TERM BASIS, HOWEVER, THE ASSESSEE HAD EXPLOITED THE SAME AS BUSINESS CENTRE AND IS OFFERING THE CABINS ERECTED IN THE PREMISES TO DIFFERENT PARTIES FROM TIME TO TIME. THE C ONTROL OF THE PREMISES REMAINS WITH THE ASSESSEE. THE LICENSEES/MEMBERS TO WHOM THE CABINS ARE OFFERED ARE ENTITLED TO USE THE PREMISES DURING THE DAY PERIOD I.E. FROM 10 A.M. TO 7 P.M. AND THAT TOO DURING WEEK DAYS ONLY. THE ASSESSEE HAS NOT PARTED WITH T HE POSSESSION OF THE PREMISES. ALONG WITH THE CABINS, THE ASSESSEE HAS BEEN OFFERING COMPUTER, TELEPHONE, ELECTRICITY AND OTHER FACILITIES. THE INCOME OF THE ASSESSEE FROM EXPLOITATION OF THE SAID PREMISES HAD CONSISTENTLY BEEN TREATED BY THE DEPARTMENT AS BUSINESS INCOME. WE, THEREFORE, DO NOT FIND ANY REASON FOR THE DEPARTMENT TO DEPART FROM ITS EARLIER CONSISTENT STAND RELATING TO THE TREATMENT OF INCOME AS BUSINESS INCOME. EVEN THE FACTS, OTHERWISE, SHOW THAT THE INCOME OF THE ASSESSEE BY WAY OF EXPLOIT ATION OF THE PREMISES FALLS IN THE DEFINITION OF BUSINESS INCOME. WE HOLD ACCORDINGLY. THIS ISSUE IS ACCORDINGLY DECIDED IN FAVOUR OF THE ASSESSEE. 4. I HAVE CONSIDERED RIVAL CONTENTIONS AND FOUND THAT IN ALL THE EARLIER ASSESSMENT YEARS EITHER THE DEPART MENT HAS ACCEPTED ASSESSEES CLAIM OF INCOME UNDER THE HEAD BUSINESS AND PROFESSION EITHER U/S.143(1) OR 143(3). EVEN IN THE ASSESSMENT YEAR 2005 - 06 WHERE THE AO HAS MADE CERTAIN DISALLOWANCE IN RESPECT OF VERY SAME INCOME CLAIMED AS BUSINESS THE CIT(A) HA S DELETED THE DISALLOWANCE AND THE DEPARTMENT HAS NOT FILED APPEAL BEFORE THE TRIBUNAL AND ACCEPTED THE ORDER OF CIT(A). ON THE PRINCIPLE OF CONSISTENCY, RESPECTFULLY FOLLOWING THE ORDER OF THE TRIBUNAL QUOTED ABOVE, I DO NOT FIND ANY JUSTIFICATION IN THE ORDER OF LOWER AUTHORITIES FOR CHANGING ITS STAND WITHOUT CHANGE IN FACTS AND CIRCUMSTANCES DURING THE YEAR UNDER CONSIDERATION. 5 . IN THE RESULT, BOTH APPEAL S OF ASSESSEE ARE ALLOWED . O RDER PRONOUNCED IN THE OPEN COURT ON THIS 0 2 /08 / 201 6 . SD/ - ( R.C.SHA RMA ) / ACCOUNTANT MEMBER MUMBAI ; DATED 0 2 /08 /201 6 ITA NO. 2 387 &2388 /1 5 4 . . /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. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE. //TRUE COPY//