Swar Maya Infotech P.Ltd, Delhi V. ITO, Ward-22(4), New Delhi

ITA 2480/DEL/2018

AI Insights

The case involves Swar Maya Infotech P. Ltd., which is engaged in facility management services and derives rental income from leasing commercial space. The dispute arose from the assessment order passed by the Assessing Officer under Section 143(3) of the Income Tax Act, 1961, for the Assessment Year 2014-15, which was challenged by the assessee. The Commissioner of Income Tax (Appeals) re-characterized the income from 'house property' to 'business income' and denied several deductions claimed. The Tribunal found that the CIT(A) had not provided justifiable reasons for the departure from the method of income determination used in previous years and allowed the appeal, directing the Assessing Officer to re-assess the income in a manner consistent with past practices and legal provisions.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 121529 (ITAT-DELHI)
• Duration Of Justice: 5 year(s) 3 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-07-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 24-07-2023
• Assessment Year: 2014-2015
• Appeal Filed On: 09-04-2018
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH “B” DELHI BEFORE SHRI CHANDRA MOHAN GARG, JUDICIAL MEMBER & SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER I.T.A. No.2480/DEL/2018 Assessment Year 2014-15 Swar Maya Infotech P. Ltd. B-203, Rose Wood Apartment Mayur Vihar Phase-1, Delhi Vs. ITO, Ward-22(4) New Delhi TAN/PAN: AAHCS6835P (Appellant) (Respondent) Appellant by: Shri Ved Jain, Adv. Ms. Supriya Mehta, CA Respondent by: Shri Vivek Kumar Upadhyay, Sr.DR Date of hearing: 25 07 2023 Date of pronouncement: 25 07 2023 O R D E R PER PRADIP KUMAR KEDIA, A.M.: T he capt ione d a ppeal has bee n file d by t he assess ee a gainst the order of the ld. Commiss i oner of Income T ax (A ppeals ) -X XX , N ew D elhi ( ‘C IT (A )’ i n s hor t) da te d 28. 02. 2018 a rising fr om the assess me nt orde r dat ed 21. 12. 20 16 pass ed by th e Assessing O fficer (A O) unde r Sect ion 14 3(3) of t he Inc ome T ax A ct, 19 61 (t he Act ) co ncerning AY 2014-1 5. 2. T he grou nds of appea l ra ised b y the assesse e read as unde r: “ 1 . O n t h e f a c t s a n d c i r c u m s t a n c e s o f t h e c a s e , t h e o r d e r p a s s e d b y t h e l e a r n e d C o m m i s s i o n e r o f I n c o m e T a x ( A p p e a l s ) [ CI T ( A ) ] i s b a d b o t h i n t h e e y e o f l a w a n d o n f a c t s . 2 . O n t h e f a c t s a n d c i r c u m s t a n c e s o f t h e c a s e , l e a rn e d C I T ( A ) h a s e r r e d b o t h o n f a c t s a n d i n l a w i n e n h a n c i n g t h e i n co m e o f t h e a s s e s s e e I.T.A. No.2480/Del/2018 2 w i t h o u t f o l l o w i n g d u e p r o c e d u r e a s p r e s c r i b e d u n d e r t h e l a w . 3 . O n t h e f a c t s a n d c i r c u m s t a n c e s o f t h e c a s e , t h e l e a r n e d C I T ( A ) h a s e r r e d b o t h o n f a c t s a n d i n l a w i n h o l d i n g t h a t r e n ta l i n c o m e e a r n e d b y t h e a s s e s s e e t o b e a s s e s s e d a s ' i n c o m e u n d e r t h e h ea d b u s i n e s s & p r o f e s s i o n ' a s a g a i n s t ' i n c o m e u n d e r t h e h e a d h o u s e p r o p e r t y ' d e c l a r e d b y t h e a s s e s s e e . 4 . O n t h e f a c t s a n d c i r c u m s t a n c e s o f t h e c a s e , t h e l e a r n e d C I T ( A ) h a s e r r e d b o t h o n f a c t s a n d i n l a w i n m a k i n g e n h a n c e m e nt o f i n c o m e b y d i s a l l o w i n g a n a m o u n t o f R s . 5 8 , 1 5 , 2 2 0 / - c l a i m e d b y t h e a s s e s s e e u n d e r s e c t i o n 2 4 ( a ) o f t h e I n c o m e T a x A c t . 5 . O n t h e f a c t s a n d c i r c u m s t a n c e s o f t h e c a s e , t h e l e a r n e d C I T ( A ) h a s e r r e d b o t h o n f a c t s a n d i n l a w i n m a k i n g e n h a n c e m e nt o f i n c o m e b y d i s a l l o w i n g a n a m o u n t o f R s . 3 1 , 4 7 , 4 8 1 / - c l a i m e d b y t h e a s s e s s e e u n d e r s e c t i o n 2 4 ( b ) o f t h e I n c o m e T a x A c t t r e a t i n g t h e s a m e t o b e p r i o r p e r i o d e x p e n s e s . 6 . O n t h e f a c t s a n d c i r c u m s t a n c e s o f t h e c a s e , t h e l e a r n e d C I T ( A ) h a s e r r e d b o t h o n f a c t s a n d i n l a w i n n o t a l l o w i n g t h e s e t - o f f o f c u r r e n t y e a r b u s i n e s s l o s s o f R s . 4 1 , 1 9 , 0 6 1 / - i n c u r r e d b y th e a s s e s s e e w i t h i n c o m e f r o m h o u s e p r o p e r t y a s p e r s e c t i o n 7 1 o f t h e A c t . 7 . Wi t h o u t p r e j u d i c e t o t h e a b o v e a n d i n t h e a l t e r na t i v e , L d . C I T ( A ) h a s e r r e d b o t h o n f a c t s a n d i n l a w i n n o t a l l o w i n g a n a m o u n t o f R s . 1 , 3 3 , 4 6 , 4 9 7 / - s u o m o t t o d i s a l l o w e d b y t h e a s s e s se e w h i l e c o m p u t i n g i n c o m e u n d e r t h e h e a d b u s i n e s s a n d p r o f e ss i o n . ” 3. Br ie fl y s tated, the assess ee-compa ny is e ngage d i n the bus iness of fac il i ty ma nage ment s ervi ce and busi ne ss sup port ser vi ce. A dd it i ona ll y, t he ass essee- co mpan y has derived rental inco me by le asi ng of commercia l space. T he ass esse e-compan y fi led ret urn o f income f or A ssess ment Y ea r 2015-16 in ques ti on w her ei n t he ass e ssee decl ared re ntal income u nde r the hea d ‘i nc ome from h ous e pr ope rt y’ w he reas the in come de ri ved b y wa y of fac il i ty manag ement servi ces w ere decla re d unde r t he hea d ‘bus iness income’ an d s ubje cte d t o expenses and deduct ions as avail able unde r law . Resultantl y, th e assesse e has s how n inc ome fro m hous e p rope rt y at R s.7 1, 40, 06 2/- w he re as bus ine ss l oss o f Rs. 41, 19,061/- w as cla i me d for the Assess me nt Yea r 2015 -16 i n que st ion. T he A s sessing O ff ice r w hile fra mi ng the assess ment I.T.A. No.2480/Del/2018 3 order un der Se ct i on 143 (3) of the A ct i nt er al ia dis all ow ed the bus iness loss at R s .41, 19, 06 1/-. 4. A gg rieve d, t he as s essee prefe rred appeal b efo re the C IT (A ). A fter cons ide ring the s ubmiss ions ma de on b ehal f of the assess ee, the C IT (A ) co ncl uded t ha t the as sessee is carr yi ng on the act iv it ies of faci l it y ma nagemen t etc. in a s ys te matic m anne r yea r af te r yea r and the build in gs use d as business assets a re show n as bus iness assets of the assesse e- com pan y. The C IT (A ) conclude d that the renta l income decla red unde r the h ead ‘i ncome fro m hous e pro pert y’ als o s hould be assessed under t he head ‘business inco me. T he C IT (A ) t hus after gi ving s how c aus e notice e tc. re - charac te rized the ent i re income as bus in ess i nc ome and als o denied deducti on cla i med und er S ec ti on 24(a) as w ell as i nt er est re la ting to pri or period claimed under Sec t ion 2 4(b) of t he A ct. Certain deduc tio ns w ere a ll ow ed t ow ar ds re pair and main te na nce etc. In ess enc e, t he C IT (A ) re-char acterized the nat ure of income as well as de nied seve ra l expe nses cla imed as incu rre d f or the pur pos es of bus iness. T he r el evan t opera tive pa ra graph of the order o f the CI T(A ) is reproduced her eunde r: “ The a p p e ll a nt w a s gi v e n t h e r e q ui s i t e n o t ic e f or enh a nc e m e n t a s r e p r o d u c e d a b o v e . T he r e p l y of t he ap pe l l a nt h a s bee n d ul y c o ns i de r e d . I h a v e e x am i ne d t h e r e p l y a nd t h e f a c ts a t h an d . I t i s e s t a b li s he d th a t t h e m a i n a c t i v i t y o f t he a pp e l l an t i s e ar n i n g i n c om e f r o m g i v in g ou t p r o pe r ty on l e as e . T h e a pp e ll a n t i s c a r r y i n g t hi s a c t i v i t y i n a s y s t e m at i c m a n n e r , y e a r af t e r y e a r . T he a p pe l l a n t i s a l s o r e nd e r i ng f ac i l i t y m a n a g e m e nt s e rv i c e s , in c o nn e c t i on w i t h p r o pe r ti e s t h a t h av e be e n l e a s e d o ut. T he m a i n a c t i v it y o f t h e a p p e l l a nt an d t h e m a i n i nc o m e e ar ned b y t he a p pe l l a n t is f r o m l e as in g o ut p r op e r t i e s on r e nt . Th e a p pe l l an t , in h i s b al a nc e s h e e t , i s s h ow i n g t h e s e bu i l di n g s as bus i n e s s a s s e t s . T he i n c o m p l e t e bu i l di n gs h a v e be e n s ho w n a s W or k in P r o g r e s s . S i nc e t h e s u bs t a n ti v e a c t iv i t y o f t he a pp e l l an t c ompa ny i s gi v i ng o u t p r o pe r t y o n l e a s e ( a nd gi v i n g f ac i l i t y m a n a ge me n t s e r v i c e s c o nn e c t e d w i t h t h e b ui l d i n g s ) , I h o l d t h at t h e ap p el l a nt ' s i n c o m e I.T.A. No.2480/Del/2018 4 ( s o ug h t t o be s ho w n u n de r t he h e ad i n c om e f r o m h o use p r o p e r t y ) s ho ul d b e as s e s s e d i n c o m e u n de r t he H e ad I nc o m e f r om B u s i n e s s a n d P r o f e s s i o n. S i nc e t h e i nc o m e h i t h e r t o s h o w n u nd e r t h e h e a d I nc om e f r o m H ou s e P r op e r t y is h e l d by m e t o be I nc o m e f r o m B u s ine s s a n d P r of e s s i o n , th e d e d u c t io n c l ai m e d u / s . 24 (a ) am ou nti n g t o R s . 5 8 , 1 5 , 2 2 0 / - i s d i s a l l o w e d . T h e a pp e l l a n t w i l l b e all o w e d r e p ai r a nd m ai n t e n a nc e e x p e n s e s o n ly t o t he e x t e nt t h at h av e be e n ac t u al l y i n c ur r e d. Th e i n te r e s t r e l a t i ng t o p r i or p e r i od w i ll b e d i s a ll o w e d . H ow e v e r , t he a p pe l l an t w i ll b e f r e e t o t r e a t t he s am e a s p a r t of c a pi t a l v a l ue of a s s e t s . D e p r e c i at i o n w i l l be al l o wa b le o n l y t o t he e x t e n t al l o w a b l e u n d e r t h e I T. A c t . A c c o r d i ng l y , i nc om e o f t he a p pe l l a n t g e t s e nh an c e d t o t h e e x t e n t as de t a i le d abo v e . ” 5. A gg rieve d b y t he action of t he CIT (A ) resul ti ng in enhan ce me nt o f taxa bl e inco me, t he assessee prefe rred appe al be fore t he T ri bunal. 6. When the matter w as calle d fo r hearin g, the ld. couns el for the asses see a t the ou tse t s ubmi tted t he c omp ut at ion of inc ome as pe r ret urn o f i nco me fi le d fo r A ssess men t Y ear 2014-15 i n que st ion and als o furnished a lte rn ati ve computati ons f or tw o sit ua tio ns (i ) wh er e t he w hol e o f th e i nco me d er ived by w a y of re nt al income and fac il it y mana ge me nt i ncome a re trea ted as taxable und er the he ad ‘i nc ome f rom ho use pro pert y (ii ) where suc h re nt al i nco me is re-c ha racte ri zed as bus i ness i nc ome of the assessee. O n the basis of co mputa ti ons, th e l d. counsel submi t te d that it w il l no t ma ke any f unda me ntal di ffe rence to the Rev en ue if one of the courses is ado pted. T he l d. couns el in the sa me vei n submit ted th at t he C IT (A ) has c om mi tted fa ul t not onl y in re - charac te riz in g the income but also ar bit rari l y re fuse d t o a llow several expe nses clai med as pe r Profi t & L os s Account wit hout gi vi ng an y j us tifia ble reas ons for denial of cla ims aga i nst bu siness inco me as re-characte rized b y the C IT(A ) himsel f. The ld. counsel ther ea fter su bmi tted that the assessee i n th e past has bee n I.T.A. No.2480/Del/2018 5 decla ri ng th e re nt al i nc ome unde r t he he ad ‘income from house pro pert y’ w hereas faci lit y ma na ge me nt se rv ices i ncome w ere cla imed un der the hea d ‘bus iness or profess iona l i ncome’. T he l d. counse l thus s ubmit ted t ha t havi ng re ga rd to doct rine of consiste nc y, t he me th od of de te rminati on of t axable i nc ome shoul d not be dis turbed wi thou t show in g a n y compelli ng justi ficat ion for doing s o. The ld. co uns el thus s ubmitt ed tha t the ma tter ma y, at b es t, be re mi tte d bac k t o th e f ile of t he Assessing O fficer f or comp utat io n of t otal inc ome consiste nt w ith the me thod a dopted in the earli er years and in accord ance wi th law . 7. T he l d. D R for t he Revenue, on the ot he r hand, re lied up on the or de r of the CIT (A ). 8. We ha ve ca re ful ly conside re d t he rival su bmiss i ons. The cont rove rs y revolves around ta xa bil it y o f rental income and faci lit y ma na ge me nt se rvi ces i nc ome unde r the a ppropriate h ea d and al low abi lit y of deducti ons and expend it ure in accor dance wit h law . 9. A fte r per usal o f the ass ess ment o rde r and t he first a ppe lla te order a nd on app raisa l of the fi na ncial acco unts a nd als o the di ffe re nt me tho ds of co mpu ta tion demons t rated on behalf o f the assessee, w e are i ncl ined to a gree w ith the arguments can vasse d on behalf o f the assessee. H av ing reg ar d to t he cl ai m of the assessee t ha t i nco me offered in the pas t in t he simi la r ci rc ums ta nces has bee n apportioned under t he head ‘in come fro m house proper t y’ and ‘ bus iness i nc ome ’ an d t he ta xa bl e i nco me has been co mpute d a ft er c lai m of deduct ions s tatu tor il y av ail able a nd expens es i ncur red fo r t he purpose of busi nes s in accordance w it h law , there does not appea r t o b e any jus ti ficati on to depa rt I.T.A. No.2480/Del/2018 6 ther ef rom in the p resent c ase i n the Assess me nt Y ear 2014- 15 i n que st ion base d on su rmises and fl ee ting observa tions. We t hus set asi de the ac tion of the C IT (A ) and restore the ma tter to the fi le of the A ssess ing O ffi cer for rede te rmin ati on of taxable i ncome under the approp riate he ad an d a fter a llow ing the stat utory and ot he r deduc ti ons and cla im tow a rds ex pe ns es under t he respe cti ve hea ds of i nc ome i n accordance w ith law . 10. In the r esu lt, the appeal of t he a ssessee is all ow ed f or sta tis ti ca l purpos es . Order dictated and pronounced in the open Court on 25/07/2023 Sd/- Sd/- [CHANDRA MOHAN GARG] [PRADIP KUMAR KEDIA] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: /07/2023 Prabhat