SKYLINE PRASHASTI, MUMBAI V. ITO 22(2)(3), MUMBAI

ITA 2416/MUM/2015

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 9708 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 10 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-03-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: J
• Next Hearing Date: 25-05-2017
• Assessment Year: 2010-2011
• Appeal Filed On: 28-04-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AARJU GARODIA
• Keywords: Business income; Depreciation; Business expenditure; Proportionate interest
• Section: 143(3); 56(2); 37

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH J, MUMBAI BEFORE SHRI MAHAVIR SINGH, JUDICIAL MEMBER AND SHRI RAJESH KUMAR, ACCOUNTANT MEMBER ITA NO.69/M/2013 ASSESSMENT YEAR: 2009-10 ITA NO.3103/M/2015 ASSESSMENT YEAR: 2010-11 DCIT-22(2)/ASST. COMMISSIONER OF INCOME TAX- 27(3), 4 TH FLOOR, TOWER NO.6, VASHI RAILWAY STATION COMPLEX, VASHI, NAVI MUMBAI 400 703 VS. M/S. SKY STAR, SKYLINE OASIS, PREMIER ROAD, NEAR VIDYAVIHAR STATION, GHATKOPAR (W), MUMBAI 400 086 PAN: ABCFS0618M (APPELLANT) (RESPONDENT) ITA NO.7741/M/2012 ASSESSMENT YEAR: 2009-10 M/S. SKY STAR, SKYLINE OASIS, PREMIER ROAD, NEAR VIDYAVIHAR STATION, GHATKOPAR (W), MUMBAI 400 086 PAN: ABCFS0618M VS. DCIT-22(2), MUMBAI (APPELLANT) (RESPONDENT) ITA NO.2416/M/2015 ASSESSMENT YEAR: 2010-11 M/S. SKYLINE PRASHASTI, (FORMERLY KNOWN AS M/S. SKY STAR) SKYLINE OASIS, PREMIER ROAD, NEAR VIDYAVIHAR STATION, GHATKOPAR (W), MUMBAI 400 086 PAN: ABCFS0618M VS. ITO-22(2)(3), MUMBAI (APPELLANT) (RESPONDENT) ITA NO.69/M/2013 & ORS. M/S. SKY STAR 2 PRESENT FOR: ASSESSEE BY : SHRI ANUJ KISNADWALA, A.R. REVENUE BY : SHRI AARJU GARODIA, D.R DATE OF HEARING : 20.12.2018 DATE OF PRONOUNCEMENT : 27.03.2018 O R D E R PER RAJESH KUMAR, ACCOUNTANT MEMBER: THE ABOVE TITLED APPEALS TWO BY THE REVENUE AND TW O BY THE ASSESSEE HAVE BEEN PREFERRED AGAINST THE ORDER DATED 27.02.2015 & 31.10.2012 OF THE COMMISSIONER OF INCOME T AX (APPEALS) [HEREINAFTER REFERRED TO AS THE CIT(A)] R ELEVANT TO ASSESSMENT YEARS 2009-10 AND 2010-11. ITA NO.7741/M/2012 FOR A.Y. 2009-10 (ASSESSEES APPEAL) 2. THE GROUNDS RAISED BY THE ASSESSEE ARE AS UNDER: 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT (A) ERRED IN AFFIRMING THE DECISION OF ASSESSING OFFICER FOR DIS ALLOWING PROPORTIONATE INTEREST EXPENDITURE AND MUNICIPAL TAXES OF RS.2,04 ,11,342/- AND RS.11,60,281/- WHICH IS IN PROPORTION TO THE NON LE T OUT AREA, WHILE CALCULATING 'INCOME FORM HOUSE PROPERTY. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT (A) ERRED IN ENHANCING THE ASSESSED INCOME BY DIRECTING THE AO T O ASSESS 'INCOME FROM SERVICE CHARGES' OF RS.95,85,405/- UNDER THE HEAD ' INCOME FROM HOUSE PROPERTY' INSTEAD OF 'BUSINESS INCOME' AND THEREBY DISALLOWING BUSINESS EXPENDITURE AND LOSS UNDER BUSINESS HEAD CLAIMED AT RS.2,09,41,853/-. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT (A) ERRED IN AFFIRMING THE DECISION OF THE ASSESSING OFFICER FOR DISALLOWING PROPORTIONATE EXPENDITURE OF RS.2,65,79,851/- WHICH IS IN PROPORT ION TO THE NON LET OUT AREA, WHILE CALCULATING 'BUSINESS INCOME. 4. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT (A) ERRED IN AFFIRMING THE DECISION OF ASSESSING OFFICER FOR ASS ESSING INTEREST INCOME OF RS.11,60,457/- SEPARATELY UNDER THE HEAD 'INCOME FROM OTHER SOURCES' INSTEAD OF NETTING WITH INTEREST PAYABLE A S DONE BY YOUR APPELLANT. ITA NO.69/M/2013 & ORS. M/S. SKY STAR 3 5. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT (A) ERRED IN AFFIRMING THE DECISION OF THE ASSESSING OFFICER FOR DISALLOWING RS.14, 45,965/- U/S 43B. 6. THE APPELLANT CRAVES LEAVE TO ADD TO, ALTER, TO DELETE FROM OR SUBSTANTIATE THE ABOVE GROUND OF APPEAL. 3. THE ISSUE RAISED IN GROUND NO.1 IS AGAINST THE CONFIRMATION OF DISALLOWANCE BY LD. CIT(A) IN RESPE CT OF PROPORTIONATE INTEREST EXPENDITURE OF RS.2,04,11,342/ - AND PROPORTIONATE MUNICIPAL TAXES OF RS.11,60,281/- AS M ADE BY THE AO IN PROPORTION TO THE TOTAL CONSTRUCTED AREA VIS A VIS NON LET OUT AREA WHILE CALCULATING INCOME FROM HOUSE PR OPERTY. 4. THE FACTS IN BRIEF ARE THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE AO OBSERVED FROM THE EXAMINATION OF PROFIT & LOSS ACCOUNT AND THE COMPUT ATION OF INCOME OF THE ASSESSEE THAT ASSESSEE RECEIVED INCOM E FROM M/S. VODAFONE ESSAR LTD. AND M/S. INDUS TOWER LTD B Y WAY RENTAL FOR THE PREMISES LET OUT TO THESE COMPANIES. WHILE COMPUTING INCOME FROM HOUSE PROPERTY, THE ASSESSEE H AS REDUCED FROM THE NET ANNUAL VALUE AN AMOUNT OF RS.2,44,30,092/- ON LOAN TAKEN FOR THE CONSTRUCTION OF THE PROPERTY BEING INTEREST PAYMENTS COMPRISING OF RS.1,41,61,312/- AS POST CONSTRUCTION PERIOD INTERES T AND RS.1,02,68,780/- AS PRE-CONSTRUCTION PERIOD INTEREST . THE AO OBSERVED THAT UP TO THE YEAR END I.E. 31.03.09 THE ASS ESSEE HAS CONSTRUCTED ONLY 6 TH FLOOR OUT OF TOTAL 8 FLOORS THUS CONSTRUCTING TOTAL AREA OF 3,15,000 SQ. FT. OUT OF T HIS, 40,000 SQ. FT. HAS BEEN LEASED OUT TO M/S. VODAFONE ESSAR LTD . AND 11,819 SQ. FT. TO M/S. INDUS TOWER LTD. THE AO OBSERV ED THAT ITA NO.69/M/2013 & ORS. M/S. SKY STAR 4 THE ASSESSEE HAS ONLY LET OUT ONLY 16.45% OF THE TOT AL CONSTRUCTED AREA DURING THE YEAR WHEREAS WHILE COMP UTING THE INCOME FROM HOUSE PROPERTY DEDUCTION WAS CLAIMED IN RESPECT OF INTEREST WHICH RELATED TO THE ENTIRE PROJECT COM PLETED TILL THE YEAR END. ACCORDINGLY, A SHOW CAUSE NOTICE WAS ISSU ED TO THE ASSESSEE AS TO WHY THE CLAIM OF THE ASSESSEE AS REG ARDS INTEREST LOAN SHOULD NOT BE RESTRICTED PROPORTIONA TELY TO THE AREA LET OUT DURING THE YEAR. THE ASSESSEE REPLIED THE SHOW CAUSE NOTICE BY SUBMITTING THAT THE INTEREST PAID Q UA THE SAID PROPERTY WAS ELIGIBLE TO BE CLAIMED UNDER SECTION 2 4 OF THE ACT WHILE COMPUTING THE INCOME FROM HOUSE PROPERTY AND ALSO EXPENSES UNDER SECTION 37 OF THE ACT WHILE COMPUTIN G THE INCOME FROM THE BUSINESS OR PROFESSION. THE ASSESS EE ALSO RELIED ON THE DECISION OF HONBLE SUPREME COURT AND HONBLE GUJARAT HIGH COURT IN THE CASE OF SARABHAI MANAGEME NT CORPORATION LTD. VS. CIT REPORTED IN 192 ITR 151 ( SC) AND [1976] 102 ITR 25 (GUJ). HOWEVER, THE REPLY OF THE A SSESSEE DID NOT FIND FAVOUR WITH THE AO AND HE ACCORDINGLY ALLOWED ONLY THE INTEREST AND MC TAXES IN PROPORTION TO THE AREA LET OUT THEREBY DISALLOWING PROPORTIONATE INTEREST EXPENDIT URE OF RS.2,04,11,342/- AND MUNICIPAL TAXES OF RS.11,60,281 /-. 5. IN THE APPELLATE PROCEEDINGS, THE LD. CIT(A) DISMI SSED THE APPEAL OF THE ASSESSEE AFTER CONSIDERING THE SU BMISSIONS AS FILED BY THE ASSESSEE BY OBSERVING AND HOLDING A S UNDER: 5.2 I HAVE GONE THROUGH THE SAME IT IS A READING O F SUBMISSION MADE BY APPELLANT AS REPRODUCED ABOVE MAKES IT CLEAR THA T THE APPELLANT HAS NOT DENIED THE FACT ABOUT TOTAL CONSTRUCTED AREA, LET O UT PORTION OF CONSTRUCTED AREA, INTEREST DEBITED COMPRISING OF PRE-CONSTRUCTI ON INTEREST OF RS.1,02,68,780/- AND POST-CONSTRUCTION INTEREST OF RS.1,41,61,312/-. APPELLANT ITA NO.69/M/2013 & ORS. M/S. SKY STAR 5 HAS ALSO NOT DENIED THAT MUNICIPAL TAXES PERTAIN TO ENTIRE HOUSE PROPERTY WHERE AS THE LETOUT AREA IS ONLY 16.45% OF THE SAME . IN VIEW OF THIS WHERE FACTS ARE NOT DENIED AND EXPENSES HAVE TO BE ALLOWE D AS PER THE PROVISION OF SEC.24 OF THE ACT DEALING WITH THE INCOME FROM HP A ND IN AGREEMENT WITH THE A.O APPELLANT THAT EXPENSES ALLOWABLE AS PER THE PROVIS IONS ONLY CAN BE ALLOWED. THE AO HAS DISCUSSED THE DECISION CITED BY THE APPE LLANT AS IS EVIDENT FROM PARA 3.2 OF THE ASSESSMENT ORDER AND HAS FOUND THAT THEY DEAL WITH ISSUE OF COMMENCEMENT OF BUSINESS WHEREAS HERE IT IS A CASE OF INCOME FROM HOUSE PROPERTY. IN VIEW OF THIS THE EXPENSES ALLOWED PROP ORTIONATELY AND THERE BY DISALLOWING EXPENSES INCURRED ON NON LET OUT PRO PERTIES, THE ACTION OF AO IS UPHELD. GROUND NO.5 IS DISMISSED. 6. THE LD. A.R. VEHEMENTLY SUBMITTED BEFORE THE BENCH THAT THE ORDER OF THE LD. CIT(A) IS BAD IN LAW TO THE EX TENT THAT THE ACTUAL EXPENDITURE INCURRED ON FOR THE CONSTRUCTION OF THE PROPERTY WAS RESTRICTED ONLY TO THE EXTENT OF AREA LET OUT DURING THE YEAR AND ALSO THE SAME TREATMENT WAS MET ED OUT TO MUNICIPAL TAXES WHICH RESULTED IN THE DISALLOWAN CE OF RS.2,04,11,342/- ON ACCOUNT OF INTEREST EXPENDITURE AND RS.11,60,281/- ON ACCOUNT OF MUNICIPAL TAXES. THE L D. COUNSEL SUBMITTED THAT EVEN IF THE INCOME OF THE CO NSTRUCTION PORTION WHICH IS NOT LET OUT DURING THE YEAR THE AS SESSEE IS ENTITLED TO VACANCY ALLOWANCE AND THE MC TAXES IS A LLOWABLE. SIMILARLY, THE LD. A.R. SUBMITTED THAT THE INTEREST O N THE LOAN BORROWED FOR THE PURPOSE OF CONSTRUCTION HAS TO BE ALLOWED UNDER SECTION 24 O THE ACT. THE LD. A.R. SUBMITTED THAT FROM A.Y. 2014-15 ALMOST ENTIRE CONSTRUCTED AREA WAS LET OUT BY THE ASSESSEE WHICH PROVED THE INTENTION OF THE ASSE SSEE THAT THE AREA WAS CONSTRUCTED ONLY WITH THE INTENT TO LE ASE OUT THE SAME. THE LD. A.R. REITERATED HIS ARGUMENT THAT EVEN IF THE NOTIONAL RENT IS OFFERED AS INCOME, THE ASSESSEE WOU LD BE ENTITLED TO VACANCY ALLOWANCE AS PER SECTION 23 OF THE ACT. SIMILARLY, THE LD. COUNSEL SUBMITTED THAT AS PER PROV ISO TO ITA NO.69/M/2013 & ORS. M/S. SKY STAR 6 SECTION 23 THE MUNICIPAL TAXES ARE ALLOWED AS DEDUC TION ON PAYMENT BASIS AND SIMILARLY THE PROVISIONS OF SECTI ON 24 OF THE ACT AND ALSO AS PER 2 ND PROVISO AND EXPLANATION TO SECTION 24 PROVIDES FOR DEDUCTION QUA INTEREST EXPENDITURE ON BORROWED CAPITAL USED FOR THE PURPOSE OF CONSTRUCTION OF THE PROPERTY THE INCOME OF WHICH THE ASSESSABLE UNDER THE HEAD I NCOME FROM PROPERTY. 7. THE LD. D.R., ON THE OTHER HAND, RELIED HEAVILY ON TH E ORDER OF AUTHORITIES BELOW. THE LD. D.R. CONTENDED TH AT THE ASSESSEE HAS LET OUT A PART OF THE TOTAL CONSTRUCTE D AREA AND THEREFORE HAS TO BE ALLOWED ONLY THAT PART OF THE E XPENDITURE INCURRED ON INTEREST AND MC TAXES WHICH IS ATTRIBUT ABLE TO THE LET OUT PROPERTY AND NOT THE AREA WHICH COULD NOT B E LET OUT DURING THE YEAR AND THUS THE LD. D.R. PRAYED THAT TH E ORDER OF THE LD. CIT(A) BE AFFIRMED. 8. WE HAVE HEARD BOTH THE PARTIES AND PERUSED CAREFU LLY THE RELEVANT MATERIAL ON RECORD AS PLACED BEFORE US. TH E UNDISPUTED FACTS OF THE CASE ARE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF CONSTRUCTION OF PROPERTIES FOR T HE PURPOSE OF LETTING OUT. TILL THE YEAR END 31.03.08 THE ASSESSEE CONSTRUCTED AND COMPLETED SIX FLOORS OUT OF TOTAL 8 FLOORS THEREBY COMPLETING CONSTRUCTION OF 3,15,000 SQ. FT. TIL L THE YEAR END. WHEREAS THE AREA LET OUT DURING THE YEAR WAS ONLY TO 2 PARTIES NAMELY M/S. VODAFONE ESSAR LTD. APPRO XIMATELY 40,000 SQ. FT. AND M/S. INDUS TOWER LTD. OF 11,819 SQ. FT. THUS AGGREGATING TO 51,819 SQ. FT. WHICH WORKED OUT TO 16 .45% OF THE TOTAL AREA CONSTRUCTED. WE FIND MERIT IN THE A RGUMENT OF ITA NO.69/M/2013 & ORS. M/S. SKY STAR 7 THE LD. A.R. THAT EVEN IF THE NOTIONAL RENT IN RESPECT OF THE AREA WHICH IS NOT LET OUT DURING THE YEAR IS TAKEN , THE ASSESSEE WILL BE ENTITLED TO VACANCY ALLOWANCE AS P ER SECTION 23 OF THE ACT AND PROVISO TO SECTION 23 PROVIDES FO R DEDUCTION OF MUNICIPAL TAXES UNDER THE HEAD INCOME FROM HOUSE PROPERTY ON PAYMENT BASIS. SIMILARLY, PROVISIONS OF SECTION 24 ,2 ND PROVISO AND EXPLANATION TO SECTION 24 PROVIDED FOR DEDUCTION OF INTEREST INCURRED ON THE BORROWED CAPI TAL FOR THE CONSTRUCTION OF THE PROPERTY AND NO RESTRICTION OF ANY KIND WHATSOEVER HAS BEEN PROVIDED IN THE SAID SECTION. AFTER CAREFULLY GOING THROUGH THE FACTS OF THE CASE AND A RGUMENTS OF BOTH THE PARTIES, WE ARE OF THE CONSIDERED VIEW THA T THE INTEREST AND MUNICIPAL TAXES HAVE TO BE ALLOWED IN TOTO AND CANNOT BE RESTRICTED IN PROPORTION TO THE AREA LET OUT DURING THE YEAR. THE INTENTION OF THE ASSESSEE IS VERY CLE AR THAT THE PROPERTY WAS CONSTRUCTED FOR THE PURPOSE OF LETTING OUT AND IN THE SUBSEQUENT YEAR THE ENTIRE PROPERTY WAS LET OUT . THE GROUND NO 1 RAISED BY THE ASSESSEE IS ALLOWED AND A O ID DIRECTED ACCORDINGLY. 9. THE ISSUE RAISED IN GROUND NO.2 IS AGAINST THE E NHANCING OF ASSESSED INCOME BY LD. CIT(A) BY DIRECTING THE AO TO ASSESS THE INCOME FROM SERVICE CHARGES OF RS.95,85,40 5/- UNDER THE HEAD INCOME FROM HOUSE PROPERTY AS AGAINS T THE BUSINESS INCOME OFFERED BY THE ASSESSEE AND ALSO DI RECTING TO DISALLOW THE BUSINESS EXPENDITURE AND LOSS UNDER TH E HEAD BUSINESS O RS.2,09,41,853/-. 10. THE FACTS OF THE CASE ARE THAT THE LD. CIT(A) DU RING THE ITA NO.69/M/2013 & ORS. M/S. SKY STAR 8 COURSE OF APPELLATE PROCEEDINGS OBSERVED THAT THE A SSESSEE HAS SHOWN LOSS IN THE PROFIT AND LOSS ACCOUNT AT RS.2,09,41,853/- AND FINALLY THE LOSS WAS ASSESSED B Y THE AO AT RS.3,70,699/-. THE LD. CIT(A) NOTED THAT THE AO H AS ASSESSED THE BUSINESS INCOME ON ONE HAND WHEREAS ON THE OTHER HAND COMPUTED THE PROFITS FROM CONSTRUCTION A CTIVITY AT 8% OF THE TOTAL WORK IN PROGRESS. THE LD. CIT(A) OBS ERVED THAT THE ASSESSEE HAS CREATED AN ASSET AND HAS CAPI TALIZED THE ENTIRE WORK IN PROGRESS AND THUS THERE WAS NO COMME RCIAL ACTIVITY OF CONSTRUCTION AND ULTIMATELY DELETED TH E ESTIMATION OF INCOME @ 8% ON THE GROUND THAT ASSESSEE HAS NOT CONSTRUCTED THE BUILDING FOR THE PURPOSE OF SELLING BUT FOR THE PURPOSE OF RENTING OUT. SIMULTANEOUSLY, THE LD. CIT( A) CALLED UPON THE ASSESSEE TO JUSTIFY THE TREATMENT OF SERVI CE CHARGES FOR AMENITIES FEE AS INCOME FROM THE BUSINESS AND ACCORDINGLY ISSUED A SHOW CAUSE NOTICE AS TO WHY TH E SAME SHOULD NOT BE TREATED AS INCOME FROM HOUSE PROPERTY FOR THE REASONS THAT THE AMENITIES ARE INDISPENSABLE TO THE LETTING OUT OF THE PROEPRTY. ACCORDINGLY, THE LD. CIT(A) ISSUED A SHOW CAUSE NOTICE TO THE ASSESSEE TO JUSTIFY THE CLAIM O F BUSINESS LOSS OF RS.2,09,41,853/- WHICH WAS ASSESSED BY THE A O AT RS.3,70,699/- AS THE ASSESSEE WAS NOT CARRYING ON AN Y BUSINESS ACTIVITY AND THEREFORE, CANNOT HAVE ANY BU SINESS LOSS AND WHY THE SAME SHOULD NOT BE TREATED AS ZERO. SH OW CAUSE NOTICE WAS REPLIED BY THE ASSESSEE VIDE LETTER DATE D 28.10.2000 WHEREIN IT WAS SUBMITTED THAT SERVICE CHAR GES OF RS.95,85,405/- HAS BEEN SHOWN AS BUSINESS INCOME AN D WHATEVER THE EXPENSES HAVE BEEN INCURRED BY THE ASS ESSEE IN ITA NO.69/M/2013 & ORS. M/S. SKY STAR 9 CONNECTION WITH PROVIDING THE SERVICES AND RUNNING AND MAINTENANCE OF BUSINESS WERE CLAIMED AND DEBITED TO THE PROFIT & LOSS ACCOUNT AND HENCE THIS HAS RESULTED I N A LOSS OF RS.2,09,41,853/-. THE LOSS HAS BEEN EXPLAINED BY THE ASSESSEE AS INCURRED ON ACCOUNT OF INCURRING OF EXP ENSES ON DAY TODAY BASIS AS ONLY PART OF BUILDING AT APPROXI MATELY 16.45% WAS LET OUT AND THE ASSESSEE HAS TO MAINTAIN THE ENTIRE BUILDING RESULTING INTO LOSS UNDER THE HEAD BUSINESS. THE SAID CONTENTION OF THE ASSESSEE DID NOT FIND FA VOUR WITH THE LD. CIT(A) AND THE LD. CIT(A) ENHANCED THE ASSES SMENT OF THE ASSESSEE BY OBSERVING AND HOLDING AS UNDER: 6.1 I HAVE ALSO GONE THROUGH AGREEMENT DATED 30TH OF DECEMBER 2008 CALLED 'AMENITIES AGREEMENT' ENTERED BY THE APPELLA NT WITH THE SAME PARTY THAT IS INDUS TOWERS LTD. THIS AGREEMENT SAYS THAT FOR THE OFFICE NUMBER 304 ONLY AS PER THE REQUIREMENT OF CLIENT CERTAIN AMENITIES FOR MOR E BENEFICIAL AND CONVENIENT USE OF THE SAID PREMISE THE APPELLANT, CALLED THE SERVI CE PROVIDED HERE WILL GIVE CERTAIN AMENITIES. THE LIST OF AMENITIES SURPRISINGLY ARE L ISTED IN ANNEXURE B WHICH ARE ADVERBATUM THE SAME AS GIVEN BELOW- 1. IG SET FOR COMMON AREAS 2. A SPACE FOR ONE DG SETS STACKABLE 3. FURNISHED VIOLETS AND TOTAL FLOOR FINISH 4. COMMON AREA TILING AND FINISHING 5. LANDSCAPE GARDEN AREA 6. FITNESS AREA - CHARGE ABLE 7. CAFE AREA CHARGEABLE 8. GRAND ENTRANCE LOBBY 9. BEAUTIFICATION OF THE THE FERRY OF THE PREMISES 10. A SPACE FOR SIGNAGE IS AS PER OUR DRAWINGS. THIS AGREEMENT IS ALSO ACCOMPANIED BY A ANNEXURE C WHICH SAYS COMPUTATION OF MONTHLY RENT PAYABLE UNDER AMENITIES AGREEMENT ' AND THEN IN A TABLE IT SHOWS THE AMOUNT OF RENT STARTING FROM 11.1.2008 21 0/31/2011 AN AMOUNT RS.5,17,081/- FOLLOWED BY A RENT OF RS.5,94,643/- F OR THE PERIOD FROM 11/1/2011 TO 10/31/2014 AND SO ON DELHI 10/31/2023. 6.2 THUS IT IS CLEAR FROM THE READING OF THESE TWO AGREEMENTS ENTERED BY THE APPELLANT WITH THE SAME PARTY THAT AMENITIES ARE TH E SAME AND COVERED BY A LEASE DEED AND AGAIN IN AMENITIES AGREEMENT AND THE WORD USED IS RENT ONLY FOR BOTH THE AGREEMENTS. AS MENTIONED ABOVE BY THE AMENITIES AGR EEMENT TO FURTHER SERVICES ITA NO.69/M/2013 & ORS. M/S. SKY STAR 10 OR AMENITIES HAVE BEEN PROVIDED. IT IS A DIFFERENT MATTER THAT THESE AMENITIES ARE IN FACT SUCH INDISPENSABLE THINGS WITHOUT WHICH THE PR EMISE CANNOT HE RENTED OUT. EVEN IF IT IS ACCEPTED THAT SAME REQUIRES SOME SERV ICES FOR WHICH MANPOWER IS ACQUIRED, IT IS NOTEWORTHY THAT IN THE LEASE DEED O NLY APPELLANT HAS CHARGED FOR MAINTENANCE AS WELL AS THE UPKEEP OF THE BUILDING A T THE RATE OF RS.2/- PER SQUARE FOOT PER MONTH IN CLAUSE 2.3 UNDER ARTICLE 2 OF THE SAID LEASE DEED. IN VIEW OF THIS THE IT IS SEEN THAT THE APPELLANT IS TAKING CONTRAD ICTORY STAND WHERE ON ONE HAND HE SAYS THAT HE IS ONLY CREATING AN ASSET AND HENCE AL L THE EXPENSES INCURRED FOR THE CONSTRUCTION OF THE SAID BUILDING ARE CAPITALISED A S CAPITAL WORK IN PROGRESS AND THEN ON THE OTHER HAND ONCE PART OF THE ASSET OWNED BY T HEM WHICH CAME INTO EXISTENCE AND LET OUT TO ON THE RENT, THE APPELLANT ARE TRYIN G TO BIFURCATE THE RENT FOR THE SAME FACILITIES WHICH ARE IN THE NATURE OF MAINTENA NCE AND UPKEEP OF THE BUILDING BY ENTERING INTO A SEPARATE AGREEMENT AND SHOWING I T AS BUSINESS RECEIPT. 6.4 THUS IN THE GIVEN SET OF FACTS AVAILABLE IN THE CASE OF APPELLANT WHERE HE IS CONSTRUCTING A BUILDING AS AN ASSET ONLY AND THUS A RE OWNER OF THE BUILDING THE INCOME FROM LETTING OUT THE BUILDING IS IN THE NATU RE OF HOUSE PROPERTY INCOME. AS DISCUSSED ABOVE SINCE THE AMENITIES IN THE LEASE DE ED AND AGAIN IN THE AMENITIES AGREEMENT ARE ONE AND THE SAME FOR WHICH MONTHLY RE NT IS BEING CHARGED BY THE APPELLANT AND FOR WHICH APPELLANT ENTERED INTO A DI FFERENT AGREEMENT, THE NATURE OF AMOUNT BEING RECEIVED BY NO STRETCH OF IMAGINATION CAN BE BUSINESS RECEIPT, AS CLAIMED BY THE APPELLANT. IN THE DECISION CITED IN [2010] 5 TAXMANN.COM 39 (HYD. - ITAT) ALSO IT WAS DECIDED BY A HONOURABLE TRIBUNALS THAT WHEN ASSESSEE EXPLOITS A PROPERTY TO DERIVE RENTAL INCOME IT HAS TO BE HELD THAT INCOME REALIZED BY HIM BY WAY OF RENTAL INCOME FROM A BUILDING WITH OTHER ASS ET ATTACHED TO THE BUILDING, IS TO BE ASSESSED AS 'INCOME FROM HOUSE PROPERTY' ONLY. I N 2010-TIOL-266-ITAT-HYD, IN THE CASE OF SHRI G RAGHURAM, ITA NO.69/HYD/2010 IT WAS DECIDED THAT SAME HAS TO BE TAXED UNDER THE HEAD HOUSE PROPERTY INCOME TH E HEAD NOTES OF THE CASE ARE REPRODUCED AS UNDER:- ASSESSEE IS THE OWNER OF CERTAIN LAND AND DEVOLVED THE SAME TO A DEVELOPER FOR DEVELOPING SUPERSTRUCTURE ON IT - ASSESSEE RENTED OUT THE SUPE RSTRUCTURE TO M/S SATYAM COMPUTERS BY VIRTUE OF TWO AGREEMENTS ONE IS FOR RE NTING PREMISES AND THE OTHER IS FOR PROVIDING AMENITIES LIKE DG SETS, TRANSFORMERS AND FURNITURE AND FIXTURE. ASSESSEE OFFERED THE RENTAL INCOME FOR TAXATION UNDER THE HEAD 'INCO ME FROM HOUSE PROPERTY' AND OFFERED THE RECEIPTS OF AMENITIES AFTER DEDUCTING INTEREST PAID ON LOAN TAKEN FOR THE MODIFICATION OF THE SUPERSTRUCTURE AS PER THE REQUIREMENT OF THE TENANT , AND DEPRECIATION, UNDER THE HEAD 'BUSINESS INCOME' 40 TOOK THE VIEW THAT THOUGH THER E WERE TWO AGREEMENTS YET THE INCOME FROM AMENITIES SHOULD BE ASSESSED UNDER HEAD 'INCOM E FROM HOUSE PROPERTY'. BESIDE THIS THE 40 ALSO TOOK THE VIEW THAT THERE IS TRANSFER IN THIS CASE, AS PER THE PROVISIONS OF SECTION 2(47) AND CAPITAL GAIN IS CHARGEABLE AND FOR THAT P URPOSE THE MARKET VALUE, SUPERSTRUCTURE IS TO BE TAKEN AS SALE CONSIDERATION - CIT(A) DIRECTED TH E 40 TO TAX THE INCOME FROM THE AMENITIES UNDER THE HEAD INCOME FROM OTHER SOURCES AND ALSO A LLOWED DEPRECIATION AND OTHER EXPENSES - FOR THE PURPOSE OF CAPITAL GAIN THE CIT( A) DIRECTED THE AO TO CONSIDER THE MARKET VALUE OF LAND, AS ON THE DATE OF TRANSFER, A S SALE CONSIDERATION-MATTER WENT TO THE TRIBUNAL . AFTER HEARING BOTH THE PARTIES THE BENCH HAS HELD T HAT, ++ KEEPING IN VIEW THE NATURE OF ACTIVITIES OF THE TENANT, THE AM ENITIES ARE PROVIDED BY THE ASSESSEE TO ITA NO.69/M/2013 & ORS. M/S. SKY STAR 11 EXPLOIT THE PROPERTY IN MOST PROFITABLE MANNER. IN THE PRESENT CASE, THE ASSESSEE MADE SEPARATE LEASE AGREEMENTS AS PER TAX PLANNING WHERE AS THE LEASE FROM THE LESSEES POINT OF VIEW IS ONLY FOR THE PROPERTY AS A WHOLE. THIS IS E VIDENT FROM THE FACTS THAT (A) THE TDS CERTIFICATES CLEARLY SHOW THAT THE ENTIRE PAYMENTS MADE BY SATYAM COMPUTERS IS TOWARDS RENT - A SIMPLE COMPOSITE PAYMENT DONE EVERY MONTH (B) THE ASSESEE IN SPITE OF REPEATED REQUESTS, COULD NOT FURNISH DETAILS OF THE ASSETS O N WHICH LEASE RECEIPTS WAS BEING SHOWN AND DEPRECIATION WAS BEING CLAIMED. ++ (C) THE AGREEMENT FOR PROVIDING INTERIORS WAS DO NE WITH SDE ENGINEERS WHICH IS THE SAME ENTITY WITH WHOM THE ASSESEE HAD ENTERED INTO FOR D EVELOPMENT PROPERTY, I.E., THE PROPERTY DEVELOPER WAS PROVIDING THE INTERIORS - THIS PROVES THE POINT THAT THE AMENITIES WHICH ARE BEING STATED AS LEASED OUT SEPARATELY ARE IN FACT NOTHING SEPARATE BUT ARE PART OF THE PROPERTY, INTEGRAL TO MAKE THE PROPERTY VIABLE FOR BEING USED AS A COM MERCIAL BUILDING; ++ (D) THE BUILDING ITSELF IS THE AMENITY BEING PRO VIDED HERE AND THAT IS WHY THE AGREEMENT FOR LEASE OF AMENITIES PRESCRIBES THE LEASE AMOUNT IN T ERMS OF SQ.FT - RS.15 PER SQ.FT. PER MONTH, WHICH IS THE SAME RATE AT WHICH THE PROPERTY LEASE WAS ALSO AGREED UPON. WITHOUT THESE AMENITIES, THE BARE BUILDING IS OF NO USE, WHICH IS A COMMON FEATURE IN ANY PROPERTY; ++ THE ASSESSEE MADE TWO AGREEMENTS, ONE FOR LETOUT OF THE PROPERTY AND ANOTHER FOR PROVIDING AMENITIES AND THERE IS A DOUBT IN THE MIND OF THE A SSESSING OFFICER REGARDING THE CORRECTNESS OF THE INCOME DECLARED BY THE ASSESSEE AS 'INCOME FROM HOUSE PROPERTY' AND INCOME FROM BUSINESS. HE HAS TREATED THE ENTIRE INCOME I.E. AS 'INCOME FROM HOUSE PROPERTY'. ADMITTEDLY, THE AUTHORITIES HAVE THE FREEDOM TO GO BEYOND THE DOCUM ENTS TO FIND OUT THE REAL INTENTION OF THE PARTIES. IN THIS CASE, THOUGH THERE IS TWO AGREEMEN TS THE REAL INTENTION OF THE PARTIES IS DIFFERENT FROM WHAT APPEARS EX FACIE. SINCE THERE IS A DOUBT, THE ASSESSING OFFICER IS JUSTIFIED IN GOING BEYOND THE DOCUMENTS TO FIND OUT REAL INTENTION OF THE PARTIES BY IGNORING THE APPARENT. IN THIS CIRCUMSTANCE, THE ASSESSING OFFICER HAS TO REMOVE T HE FACADE TO EXPOSE THE REAL INTENTION OF THE PARTIES CLEVERLY CLOAKED AND THE ACTUAL AGREEMENT C ANNOT BE GIVEN EFFECT TO. ++ THE ASSESSING OFFICER CAME TO THE CORRECT CONCLU SION THAT REAL RENTAL VALUE WAS BIFURCATED INTO TWO SEPARATE INCOME VIZ., ONE IS RENTAL INCOME OF H OUSE PROPERTY AND ANOTHER IS HIRE CHARGES OF THE EQUIPMENT. FURTHER, IN THE CASE OF LETTING OF T HE MACHINERY, PLANT OR FURNITURE, SEC 56(2) (III) OF THE ACT IS APPLICABLE, BUT ONLY LETTING OF BUILD ING WITH CERTAIN AMENITIES, THIS PROVISION IS NOT APPLICABLE AND IN THAT EVENT, THE INCOME FROM LETTI NG OUT WAS CHARGEABLE UNDER THE HEAD 'INCOME FROM HOUSE PROPERTY'. THE HIRE CHARGES SAID TO HAVE BEEN COLLECTED FOR THE PURPOSE OF PROVIDING AMENITIES AND THE RENT FOR THE BUILDING WOULD NOT C OME UNDER THE PURVIEW OF SEC .K(2)(III) OF THE ACT. THE WORD 'PLANT' CANNOT BE LIBERALLY CONSTRUED SO AS TO INCLUDE A1TTEMS. IT IS NOT POSSIBLE TO GIVE SUCH A WIDE CONSTRUCTION AS SUGGESTED BY THE L EARNED COUNSEL FOR THE ASSESSEE; 6.5 IN VIEW OF THIS, I AM NEITHER IN AGREEMENT WITH THE AO THAT INCOME FROM BUSINESS CAN BE ASSESSED NOR WITH THE APPELLANT THA T INCOME FROM BUSINESS SHOULD HAVE BEEN REFLECTED. IT IS FOR THE REASON THAT INCO ME FROM BUSINESS THE SECTIONS GOVERNING THE SAME BEING SECTION28 ONWARDS OF THE A CT ARE NOT APPLICABLE WHERE APPELLANT IS NOT IN BUSINESS WHERE THE INTENTION IS TO MAKE PROFIT FROM THE ACTIVITY. FOR CREATING AN ASSET THOUGH IT HAS BEEN SHOWN IN F ORM OF PROFIT & LOSS ACCOUNT IT IS BASICALLY THE EXPENSES AND RECEIPTS OF RENT WHEN TH E ACTIVITY IS NOT ITSELF BUSINESS ACTIVITY THE APPLICABILITY OF THE SEC GOVERNING BUS INESS INCOME WHICH IN THIS CASE IS SEC 37 OF THE ACT DOES NOT ARISE. IN VIEW OF THIS T HE AO'S ACTION OF ALLOWING EXPENSES RELATED TO NON LET OUT PORTION IS UPHELD FOR THE RE ASON THAT THERE IS NO INCOME FROM ITA NO.69/M/2013 & ORS. M/S. SKY STAR 12 BUSINESS AND HENCE THERE CANNOT BE A LOSS. IN VIEW OF THIS THE NET LOSS REFLECTED AT RS.2,09,41,853/- AND ASSESSED AT RS.3,70,699/- IS T AKEN AT ZERO AS MENTIONED ABOVE ALREADY. THE A 0 IS DIRECTED TO COMPUTE THE ENTIRE RENTAL INCOME UNDER THE HEAD HOUSE PROPERTY INCOME BY TAKING THE RENTAL INCOME F IGURE RS.1,14,28,595/- ALONG WITH RS.95,85,405/- AS THE RENT AND TO GIVE DEDUCTI ON AS PER PROVISIONS OF SECTION 24 OF THE ACT ONLY WHICH ARE ALREADY CONSIDERED BY A.0 IN COMPUTATION UNDER THE HEAD 'INCOME FROM HOUSE PROPERTY'. THERE IS AN ENHA NCEMENT IN HOUSE PROPERTY OF THE APPELLANT BY THE AMOUNT OF RS95,85,405/-. ACCO RDINGLY GROUND NUMBER 6 IS DISMISSED. 11. THE LD. A.R. SUBMITTED BEFORE US THAT THE ACT OF THE LD. CIT(A) IN TREATING THE LOSS FROM BUSINESS AS SHOWN BY THE ASSESSEE AT RS.2,09,41,853/- AT NIL AND TREATING TH E INCOME ON ACCOUNT OF SERVICE CHARGES OF RS.95,85,405/- AS INCOME FROM THE HOUSE PROPERTY WAS NOT CORRECT AND AGAINST THE LAW. THE LD. A.R. SUBMITTED THAT THE ASSESSEE ENTERED INTO TW O SEPARATE AGREEMENTS ONE AS REGARDS THE LEASING OUT OF PREMISES AND SECOND IN RESPECT OF VARIOUS AMENITIES TO BE PROVIDED BY THE ASSESSEE TO THE TENANTS. THE LEASE RENT WAS OFFERED TO TAX UNDER THE INCOME FROM HOUSE PROPERTY WHEREAS THE SERVICE CHARGES RECEIVED FOR THE AMENITIES PROV IDED WERE OFFERED TO TAX AS BUSINESS INCOME. HOWEVER, THE LD. CIT(A), AFTER PERUSING THE AGREEMENT WITH M/S. INDUS TOWER L TD. WHICH CONTAINS THE DETAILS OF AMENITIES TO BE PROVI DED TO THE TENANT IN THE ANNEXURE B WHICH COMPRISED OF DG SET FOR COMMON AREAS, SPACE FOR ONE DG SETS STACKABLE, FINI SHED TOILETS AND TOTAL FLOOR FINISH, COMMON AREA TILLING AND FINISHING, LANDSCAPE GARDEN AREA, FITNESS AREA-CHARGEABLE, CAFE TERIA- CHARGEABLE, GRAND ENTRANCE LOBBY, BEAUTIFICATION OF PERIPHERY OF THE PREMISES AND SPACE FOR SIGNAGE AS PER DRAWIN GS. THE LD. CIT(A) OBSERVED THAT THE AMENITIES WERE INDISPEN SABLE TO THE LETTING OUT OF THE PREMISES AND ACCORDINGLY TRE ATED THE ITA NO.69/M/2013 & ORS. M/S. SKY STAR 13 SERVICE CHARGES AS CHARGES UNDER THE HEAD INCOME FR OM HOUSE PROPERTY. THE LD. A.R. SUBMITTED THAT FOR ALL THE YE ARS RIGHT FROM 2010-11 TO 2014-15 THE SERVICES HAVE BEEN TREA TED UNDER THE HEAD BUSINESS INCOME AND ACCEPTED BY THE DEPARTMENT TILL AY 2012-13 AND PENDING FOR REMAININ G TWO YEARS. THE LD. A.R. SUBMITTED THAT FOLLOWING THE PRIN CIPLE OF CONSISTENCY THE SAME SHOULD BE ACCEPTED IN THE CURR ENT YEAR ALSO AS THE ASSESSEE IS HAVING SEPARATE AGREEMENT F OR THE AMENITIES AND IT IS ONLY INADVERTENT MENTIONING OF AMENITIES IN ONE OF THE AGREEMENTS. THE LD. CIT(A) REACHED A CO NCLUSION WHICH IS CONTRARY TO THE SUBSEQUENT YEARS. THE LD . A.R. RELIED IN THE CASE OF CIT VS. KARGIL INDIA LTD. IN IA NO.1 OF 2016 DATED 28.11.16. FINALLY, THE LD. A.R. SUBMITTED TH AT IN VIEW OF THE ACCEPTED POSITION BY THE REVENUE IN THE SUBSEQUENT YEARS EVEN IN THE ASSESSMENT PROCEEDING CONCLUDED UNDER SECTION 143(3) OF THE ACT FROM A.Y. 2010-11 TO 2012-13 THE SAME SHOULD BE ACCEPTED IN THE CURRE NT YEAR ALSO AND THE ORDER OF LD. CIT(A) ENHANCING THE INCO ME AND REJECTING THE CLAIM OF THE ASSESSEE QUA BUSINESS EX PENSES SHOULD BE REVERSED. 12. THE LD. D.R., ON THE OTHER HAND, RELIED HEAVILY ON THE ORDER OF LD. CIT(A) BY SUBMITTING THAT IT IS ONLY FO R THE PURPOSE OF TAX AVOIDANCE, THE ASSESSEE HAS ENTERED I NTO SEPARATE LEASE/LICENSE AGREEMENT AND AMENITIES AGRE EMENT AND SHOWN THE INCOME FROM LEASE AND LICENSE UNDER T HE INCOME FROM HOUSE PROPERTY WHEREAS THE SERVICE CHAR GES WERE SHOWN UNDER THE HEAD BUSINESS INCOME IN ORDER TO CL AIM THE ITA NO.69/M/2013 & ORS. M/S. SKY STAR 14 BUSINESS EXPENSES IN RELATION TO THE ENTIRE PROPERT Y OF THE ASSESSEE WHICH WAS NOT EVEN LET OUT DURING THE YEAR . THE LD. D.R. SUBMITTED THAT IN VIEW OF THESE FACTS THE ORDE R OF THE LD. CIT(A) DESERVED TO BE AFFIRMED. 13. HAVING HEARD THE RIVAL SUBMISSIONS OF BOTH THE PARTIES AND PERUSING THE MATERIAL ON RECORD, WE FIND THAT I N THIS CASE THE ASSESSEE HAS ENTERED INTO SEPARATE AGREEMENTS O NE FOR LEASE OF PREMISES AND SECOND FOR PROVIDING VARIOUS AMENITIES FOR WHICH SERVICE CHARGES WERE CHARGED BY THE ASSES SEE AND THE SAME WAS NOT TREATED AS PART OF THE HOUSE PROPE RTY INCOME AND AS SUCH SHOWN UNDER THE HEAD INCOME FROM THE BUSINESS. THE ASSESSEE ALSO CLAIMED EXPENSES INCUR RED ON THE MAINTENANCE OF THE ENTIRE PROPERTY WHICH IS NOT EVE N LET OUT DURING THE YEAR RESULTING INTO THE LOSS FROM THE BU SINESS AT RS.2,09,41,853/-. IT IS WORTH NOTING THAT THE SAME S ERVICE CHARGES RECEIVED IN THE SUBSEQUENT YEARS UNDER THE SAME AND SIMILAR AGREEMENTS WAS SHOWN AS INCOME FROM BUSINES S RIGHT FROM 2010-11 TO 2014-15 AND ACCEPTED IN THE SCRUTIN Y ASSESSMENT WHICH WAS FINALIZED FROM 2010-11 TO 2012 -13 AND PENDING FOR DISPOSAL FOR THE A.Y. 2013-14 AND 2014-1 5. IN OUR OPINION, THE ASSESSEE HAS CHARGED SEPARATELY FOR PRO VIDING VARIOUS AMENITIES TO THE TENANTS WHICH HAS RIGHTLY BEEN SHOWN UNDER THE HEAD INCOME FROM BUSINESS AND RIGHTLY CLA IMED THE VARIOUS EXPENSES INCURRED BY THE ASSESSEE WHICH HAS RESULTED INTO A LOSS OF RS.2,09,41,853/-. ONCE IT IS PROVED THA T THE BUSINESS OF THE ASSESSEE IS TO CONSTRUCT , COMPLETE AND LET OUT THE PROPERTIES , THEN THE EXPENSES HAVE TO BE ALLOWE D TO THE ITA NO.69/M/2013 & ORS. M/S. SKY STAR 15 ASSESSEE. UNDER THESE CIRCUMSTANCES, WE ARE NOT IN A POSITION TO SUSTAIN THE ORDER PASSED BY THE LD. CIT(A) WHICH IS NOT CORRECT, IN VIEW OF THE UNDERLYING FACTS. ACCORDING LY, WE SET ASIDE THE ORDER OF THE LD. CIT(A) AND DIRECT THE AO TO TREAT THE INCOME FROM SERVICE CHARGES AS INCOME FROM BUSINESS INCOME AND ALLOW THE CLAIM OF THE EXPENSES AS CLAIMED BY T HE ASSESSEE. ACCORDINGLY, THIS GROUND IS ALLOWED. 14. THE ISSUE RAISED IN GROUND NO.3 IS AGAINST THE CONFIRMATION OF PROPORTIONATE DISALLOWANCE OF EXPEN DITURE OF RS.2,65,79,851/- AS MADE BY THE AO IN RELATION TO TH E AREA NOT LET OUT DURING THE YEAR WHILE COMPUTING THE BUS INESS INCOME. THE FACTS IN BRIEF ARE THAT THE AO OBSERVE D DURING THE ASSESSMENT PROCEEDINGS THAT OUT OF TOTAL AREA CONST RUCTED UP TO THE YEAR AND ONLY 51819 SQ. FT. WHICH WORKS OUT T O 16.45% WAS LET OUT TILL THE YEAR END. HOWEVER, THE ENTIRE EXPENSES OF PHASE 1 OF SKY LINE ICON BUILDING (COMPLETED ON 30. 11.08) FROM DECEMBER TO MARCH WERE CLAIMED BY THE ASSESSEE UNDER THE HEAD INCOME FROM BUSINESS ON THE PLEA THAT ONCE THE CONSTRUCTED SPACE IS AVAILABLE FOR USE AND IS NOT U NDER WORK IN PROGRESS, THE EXPENSES INCURRED ON IN MAINTAINING TH E SPACE IS ALLOWABLE AS BUSINESS EXPENDITURE AND ACCORDINGLY T HE AO DISALLOWED THE 83.55% OF SUCH EXPENSES THERETO REDUC ING THE LOSS FROM THE BUSINESS. IN THE APPELLATE PROCEEDING S, THE LD. CIT(A) DID NOT DEAL WITH THESE ISSUE RAISED BY THE ASSESSEE. THE LD. A.R. SUBMITTED THAT WHEN THE ASSESSEE HAS A LREADY COMMENCED ITS BUSINESS, THE IMPOSITION OF CONDITION BY THE AO TO THE PROPORTIONATE ALLOWANCE IS WRONG AND AGAINST THE ITA NO.69/M/2013 & ORS. M/S. SKY STAR 16 ESTABLISHED PRINCIPLE OF BUSINESS NORMS. THE LD. A.R . SUBMITTED THAT ONCE THE BUSINESS HAS COMMENCED THE EXPENSES HAVE TO BE ALLOWED FULLY AND NOT IN PARTS. THE LD. A.R. PRAYED THAT THE DISALLOWANCE AS WORKED OUT BY TH E AO ON THE BASIS OF AREA NOT LET OUT I.E. 83.55% SHOULD BE DELETED. 15. THE LD. D.R., ON THE OTHER HAND, RELIED ON THE ORD ER OF AO ON THIS ISSUE AND SUBMITTED THAT SINCE THE ASSES SEE HAS NOT LET OUT THE PREMISES FULLY DURING THE YEAR THER EFORE, THE PROPORTIONATE DISALLOWANCE WAS VERY MUCH CORRECT AS PER THE ACCEPTED BUSINESS PRINCIPLES. 16. HAVING HEARD BOTH THE PARTIES AND PERUSED THE M ATERIAL ON RECORD, WE FIND THAT THE AO HAS DISALLOWED PROPOR TIONATE EXPENSES EQUAL TO 83.55% WHICH REPRESENTED THE AREA NOT LET OUT DURING THE YEAR THEREBY DISALLOWING RS.2,65,79,851/ - BEING EXPENSES FROM DECEMBER 2008 TO MARCH 2009 IN RESPECT OF SKY LINE ICON BUILDING WHICH WAS COMPLETED ON 30 .11.08. WE FIND THAT THE BUILDING HAS BEEN COMPLETED AND AV AILABLE FOR USE IN THE BUSINESS AND ONCE IT IS PROVED THAT THE ASSESSEE HAS COMMENCED ITS BUSINESS, THE PROPORTIONATE DISALL OWANCE ON THE BASIS OF AREA NOT LET OUT DURING THE YEAR IS NOT CORRECT. IN VIEW OF THE SAME, WE ARE INCLINED TO DIRECT THE A O TO DELETE THE DISALLOWANCE OF RS.2,65,79,851/-. THE GROUND RAIS ED BY THE ASSESSEE IS ALLOWED. 17. GROUND NOS.4 & 5 ARE NOT PRESSED AND THEREFORE DISMISSED AS NOT PRESSED. ITA NO.69/M/2013 & ORS. M/S. SKY STAR 17 ITA NO.69/M/2013 (REVENUES APPEAL) 18. THE ONLY ISSUE RAISED BY THE REVENUE IN VARIOUS GROUNDS OF APPEAL IS AGAINST THE DELETION OF RS.1,87,01,268/ - BY LD. CIT(A) AS ESTIMATED BY THE AO AS BUSINESS INCOME AT 8% OF THE WORK IN PROGRESS. 19. AT THE OUTSET, THE LD. A.R. BROUGHT TO THE NOTIC E OF THE BENCH THAT THE ISSUE RAISED BY THE REVENUE IN THE P RESENT APPEAL IS SQUARELY COVERED IN FAVOUR OF THE ASSESSE E BY THE DECISION OF THE CO-ORDINATE BENCH OF THE TRIBUNAL I N ASSESSEES OWN CASE IN ITA NO.2124/M/2011 FOR A.Y. 2007-08 AND OTHERS VIDE ORDER DATED 31.07.12 AND ITA NO.6580/M/2007 FOR A.Y. 2003-04 VIDE ORDER DATED 11.05.16. 20. THE LD. D.R. FAIRLY AGREED TO THE CONTENTION OF THE LD. A.R. THAT ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE CO-ORDINATE BENCH OF THE TRIBUNAL I N ASSESSEES OWN CASE. 21. HAVING HEARD RIVAL CONTENTIONS OF BOTH THE PART IES AND PERUSED THE MATERIAL ON RECORD AND AFTER CAREFULLY PERUSING DECISIONS OF THE CO-ORDINATE BENCH OF THE TRIBUNAL, WE OBSERVE THAT THE IDENTICAL ISSUE HAS BEEN DECIDED BY THE CO -ORDINATE BENCH OF THE TRIBUNAL IN THE EARLIER YEARS IN FAVOU R OF THE ASSESSEE. THE LD. CIT(A) ALSO ALLOWED THE APPEAL OF THE ASSESSEE BY HOLDING THAT THE ASSESSEE WAS NOT HOLDI NG THE WORK IN PROGRESS AS STOCK IN TRADE BUT AS CAPITAL W ORK IN PROGRESS AND ACCEPTED THE CONTENTION OF THE ASSESSE E THAT ASSESSEE HAS NO PROFIT ON THE SAID CONSTRUCTION WHI CH CAN BE ITA NO.69/M/2013 & ORS. M/S. SKY STAR 18 ESTIMATED BY APPLYING THE PERCENTAGE COMPLETION MET HOD. WE, THEREFORE, FOLLOWING THE DECISION OF THE CO-ORDIN ATE BENCHES OF THE TRIBUNAL AND MAINTAINING THE CONSIST ENCY THEREWITH, UPHOLD THE ORDER OF THE LD. CIT(A) AND DI SMISS THE APPEAL OF THE REVENUE. ITA NO.2416/M/2015 (ASSESSEES APPEAL) 22. AT THE OUTSET, THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT GROUND NOS.1 TO 3 ARE NOT PRESSED. ACCORDINGLY , GROUND NOS.1 TO 3 ARE DISMISSED AS NOT PRESSED. 23. THE ISSUE RAISED IN GROUND NO.4 IS AGAINST AFFI RMING THE ACTION OF THE AO IN DISALLOWING PROPORTIONATE INTER EST EXPENDITURE AND MUNICIPAL TAXES TO THE AREA NOT LET OUT BY THE ASSESSEE OUT OF THE TOTAL CONSTRUCTED AREA WHILE CA LCULATING THE INCOME FROM HOUSE PROPERTY. SINCE WE HAVE ALREADY DE CIDED THE IDENTICAL ISSUE IN FAVOUR OF THE ASSESSEE IN IT A NO.7741/M/2012 IN GROUND NO.1, THEREFORE, OUR FINDING ON THE SAID GROUND WOULD, MUTATIS MUTANDIS, WOULD APPLY TO THIS GROUND AS WELL. ACCORDINGLY, THE ISSUE IS DECIDED IN FAVOUR OF THE ASSESSEE. 24. THE ISSUE RAISED IN GROUND NO.5 IS IDENTICAL TO ONE AS DECIDED BY US IN GROUND NO.3 OF ITA NO.7741/M/2012 A ND THEREFORE OUR FINDING ON THE SAID GROUND WOULD, MUTA TIS MUTANDIS, WOULD APPLY TO THIS GROUND AS WELL. ACCOR DINGLY, THIS GROUND IS ALSO ALLOWED. ITA NO.3103/M/2015 (REVENUES APPEAL) ITA NO.69/M/2013 & ORS. M/S. SKY STAR 19 25. THE IDENTICAL ISSUE HAS BEEN DECIDED BY US IN I TA NO.69/M/2013 AGAINST THE REVENUE AND IN FAVOUR OF T HE ASSESSEE. THEREFORE, FOLLOWING THE SAME RATIO, WE D ISMISS THE APPEAL FILED BY THE REVENUE BY UPHOLDING THE ORDER OF THE LD. CIT(A) ON THIS ISSUE AS THE ISSUE HAS BEEN DECIDED BY THE CO- ORDINATE BENCH OF THE TRIBUNAL IN ASSESSEES OWN CA SE IN THE EARLIER YEARS. 26. IN THE RESULT, ASSESSEES APPEALS ARE ALLOWED A ND THE REVENUES APPEALS ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 27.03.2018. SD/- SD/- (MAHAVIR SINGH) (RAJESH KUMAR) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED: 27.03.2018. * KISHORE, SR. P.S. COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT (A) CONCERNED, MUMBAI THE DR CONCERNED BENCH //TRUE COPY// [ BY ORD ER DY /ASSTT. REGISTRAR, ITAT, MUMBAI.