ACIT, Circle-6(1), New Delhi V. C J International Hotels Ltd, New Delhi

ITA 255/DEL/2018

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 7914 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 7 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-08-2020
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2014-2015
• Appeal Filed On: 09-01-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: JAGDISH SINGH
• Keywords: Depreciation; Question of law; Set aside
• Section: 22

Judgement Text

1 ITA NOS. 254 & 255/DEL/2018 IN THE INCOME TAX APPELLAT E TRIBUNAL DELHI BENCH: B NEW DELHI BEFORE SHRI R. K. PANDA, ACCOUNTANT MEMBE R AND MS SUCHITRA KAMBLE, JUDIC IAL MEMBER ITA NO. 254 /DEL/2018 ( A .Y 2013-14) ITA NO. 255/DEL/2018 ( A. Y 2014-15) (THROUGH VIDEO CONFEREN CING) ACIT ROOM NO. 389, C. R. BUILDING, NEW DELHI (APPELLANT) VS C J INTERNATIONAL HOTELS LTD. 8, HOTEL LE-MERIDIAN, WINDSOR PLACE, JANPATH, NEW DELHI AAACC0174E (RESPONDENT) APPELLANT BY SH. JAGDISH SINGH, SR. DR RESPONDENT BY SH. TARANDEEP SINGH, ADV ORDER PER SUCHITRA KAMBLE, JM THESE TWO APPEALS ARE FILED BY THE REVENUE AGAINST THE ORDER DATED 29/09/2017 PASSED BY CIT(A)-2, NEW DELHI FOR ASSES SMENT YEARS 2013-14 & 2014-15 RESPECTIVELY. 2. THE GROUNDS OF APPEAL ARE AS UNDER:- ITA NO. 254 /DEL/2018 (A.Y. 2013-14) 1. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE AND IN LAW, THE LD.CIT(A) HAS ERRED IN DELETING THE ADDITION MADE B Y THE A.O ON THE ISSUE OF INCOME FROM HOUSE PROPERTY AMOUNTING TO RS.6,96,49, 798/- BY IGNORING THE DATE OF HEARING 25.08.2020 DATE OF PRONOUNCEMENT 26.08.2020 2 ITA NOS. 254 & 255/DEL/2018 FACT THAT THE ANNUAL LETTING VALUE OF THE PROPERTY KNOWN AS WEST TOWER WAS TAXABLE AS INCOME FROM HOUSE PROPERTY ITA NO. 255/DEL/2018 (A.Y. 2014-15) 1. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE AND IN LAW, THE LD.CIT(A) HAS ERRED IN DELETING THE ADDITION MADE B Y THE A.O ON THE ISSUE OF INCOME FROM HOUSE PROPERTY AMOUNTING TO RS.6,96,49, 798/- BY IGNORING THE FACT THAT THE ANNUAL LETTING VALUE OF THE PROPERTY KNOWN AS WEST TOWER WAS TAXABLE AS INCOME FROM HOUSE PROPERTY. 3. THE FACTS OF BOTH THE APPEALS FOR A.YS. 2013-14 AND 2014-15 ARE IDENTICAL; THEREFORE, WE ARE TAKING UP FACTS OF ASS ESSMENT YEAR 2013-14. THE ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF RUNN ING 5 STAR SUPER DELUXE HOTEL IN NEW DELHI, IN THE NAME AND STYLE OF LE ME RIDIEN. THE ASSESSEE COMPANY FILED ITS RETURN DIGITALLY ON 28/09/2013 DE CLARING INCOME OF RS. 20,19,49,590/-. ON PERUSAL OF THE RETURN OF INCOME AND DETAILS FILED BY THE ASSESSEE COMPANY, THE ASSESSING OFFICER OBSERVED TH AT THE ASSESSEE COMPANY OWNS PROPERTY ADJACENT TO HOTEL BUILDING KNOWN AS W EST TOWER. THIS BUILDING IS LOCATED IN THE SAME COMPOUND IN WHICH THE HOTEL BUILDING IS LOCATED. THIS BUILDING IS NOT USED FOR THE HOTEL BUSINESS OF THE ASSESSEE COMPANY. IT HAS DIFFERENT ENTRANCE AND OTHER INFRASTRUCTURAL SERVIC ES SUCH AS LIFTS, STAIRS AND PARKING SLOTS ETC. THE ASSESSING OFFICER HELD THAT THE ASSESSEE COMPANY HAD SUB LICENSED OFFICES AND APARTMENT IN THIS BUILDING TO VARIOUS PARTIES. THE SUB-LICENSE IS GIVEN TO VARIOUS PARTIES FOR A PERIO D OF 9 YEARS AND 11 MONTHS WHICH IS RENEWED ON THE REQUEST OF SUB-LICENSEE. T HE ASSESSEE COMPANY IS NOT CHARGING ANY RENT, LEASE, OR LICENSE FEE FROM THESE PARTIES. IT HAD RECEIVED INTEREST FREE SECURITY DEPOSITS IN THE YEAR OF ORIG INAL SUB LICENSED PERIOD TO WHICH THE ASSESSEE COMPANY SHOWING AS UNSECURED LOA N IN ITS BALANCE SHEET. THE ASSESSEE WAS SHOW CAUSED AS TO WHY INCOME FROM HOUSE PROPERTY IN RESPECT OF WEST TOWER BE NOT COMPUTE AND ADDED BACK TO THE TOTAL INCOME LIKE IN THE PRECEDING YEARS. THE ASSESSEE FILED REPLY D ATED 18/1/2016 AND 10/3/2016. THE ASSESSING OFFICER HELD THAT THE ANN UAL RENTAL INCOME IN 3 ITA NOS. 254 & 255/DEL/2018 RESPECT OF WEST TOWER WAS RS. 6,96,49,798/- AND TH US TAXED THE SAME, UNDER THE HEAD INCOME FROM HOUSE PROPERTY AND ADDED TO TH E TOTAL INCOME OF THE ASSESSEE. 4. BEING AGGRIEVED BY THE ASSESSMENT ORDER, THE ASS ESSEE FILED APPEAL BEFORE THE CIT(A). THE CIT(A) ALLOWED THE APPEAL OF THE A SSESSEE BY FOLLOWING THE HONBLE DELHI HIGH COURT DECISION DATED 5 TH FEBRUARY, 2016 IN THE ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2008-09. 5. THE LD. DR SUBMITTED THAT THE ASSESSEE OWNS PROP ERTY ADJACENT TO HOTEL BUILDING KNOWN AS WEST TOWER. THIS BUILDING IS LOCA TED IN THE SAME COMPOUND IN WHICH THE HOTEL BUILDING IS LOCATED. THIS BUILDI NG IS NOT USED FOR THE HOTEL BUSINESS OF THE ASSESSEE COMPANY. IT HAS DIFFERENT ENTRANCE AND OTHER INFRASTRUCTURAL SERVICES SUCH AS LIFTS, STAIRS AND PARKING SLOTS ETC. IT HAS BEEN FOUND THAT THE ASSESSEE COMPANY HAD SUB LICENSED OF FICES AND APARTMENTS IN THIS BUILDING TO VARIOUS PARTIES. THE SUB-LICENSE I S GIVEN TO VARIOUS PARTIES FOR A PERIOD OF 9 YEARS AND 11 MONTHS WHICH IS RENEWABL E ON THE REQUEST OF SUB- LICENSEE. THE ASSESSEE COMPANY IS NOT CHARGING ANY RENT, LEASE OR LICENSE FEE FROM THESE PARTIES. IT HAD RECEIVED INTEREST FREE S ECURITY DEPOSITS IN THE YEAR OF ORIGINAL SUB-LICENSE TO WHICH THE ASSESSEE COMPANY IS SHOWING AS UNSECURED LOAN IN ITS BALANCE SHEET. THE LD. DR FURTHER SUBMI TTED THAT ON BEING CONFRONTED ON THESE ISSUES OF NON-DISCLOSURE OF REN TAL INCOME, THE ASSESSING OFFICER HAS ATTRACTED PROVISION OF SECTION 22 AND E STIMATED THE ANNUAL LET-OUT VALUE OF THE PROPERTY AND COMPUTED THE RENTAL INCOM E. THIS ISSUE OF ADDITION OF RENTAL INCOME IS COMMON FOR AY 2001-02 ONWARD IN ASSESSEES OWN CASE WHEREIN THE CIT (A), TRIBUNAL (ITAT) AND JURISDICTI ONAL HIGH COURT DECIDED THE ISSUE IN FAVOUR OF ASSESSEE. HOWEVER, DEPARTMENT HA S NOT ACCEPTED THE DECISION OF ABOVE AUTHORITY AND FILED SLP BEFORE TH E APEX COURT ON MERIT OF THE CASE CHALLENGING THE ADDITION DELETED BY THE APPELL ATE AUTHORITY. THUS, THE LD. DR SUBMITTED THAT IN THIS CASE NON-CHARGING OF RENT AL INCOME ON THE PART OF THE ASSESSEE IN RESPECT OF WEST TOWER ADJACENT TO H OTEL LE-MERIDIAN IS BASED 4 ITA NOS. 254 & 255/DEL/2018 ON FACT AND LAW IN WHICH ASSESSEE RECEIVED THE RENT IN THE GARB OF INTEREST FREE SECURITY DEPOSIT FROM THE USER (SUB-LEASEE) OF THE PROPERTY WHICH HAS RIGHTLY BEEN ESTIMATED AND TAXED U/S 22/23 OF THE IT ACT. T HEREFORE, ADDITION MADE BY THE ASSESSING OFFICER SHOULD BE UPHELD. IN THIS REGARD, THE LD. DR RELIED ON THE VARIOUS JUDGMENTS OF THE HONBLE HIGH COURTS. T HE SAME ARE AS FOLLOWS: 1. RAM PERSHAD & SONS VS CIT (DEL) 81 TAXMAN 332 2. CIT VS G. RAMESAN (KER) 241 ITR 426 3. N. NATARAI VS DCIT (MAD) 266 ITR 277 3. CIT VS PARASMAL CHORDIA (MAD) 233 ITR 147 4. VISVESWARAVA IND. RES. DEV. CENTRE VS DCIT 59 IT D 156 (MUM) 5. CIT VS DHUN D. DALAI (MAD) 233 ITR 143 6. THE LD. AR RELIED UPON THE ORDER OF THE CIT(A) A ND THE HONBLE DELHI HIGH COURT DECISION IN THE ASSESSEES OWN CASE FOR A.Y. 2008-09. 7. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE M ATERIAL AVAILABLE ON RECORD. THE HONBLE DELHI HIGH COURT IN CASE OF CI T VS. C. J. INTERNATIONAL HOTELS LTD. (2011) 197 TAXMAN 230 (DELHI) HELD AS U NDER:- 10. THE ASSESSEE PREFERRED APPEAL AGAINST THIS ORDER BEFORE THE CIT(A). IN THIS APPEAL, THE ASSESSEE TOOK AN ADDIT IONAL GROUND PREDICATED ON THE PROVISIONS OF SECTION 27(III) REA D WITH SECTION 269UA(F) (II) OF THE ACT AND SUBMITTED THAT UNDER T HOSE PROVISIONS, IT WOULD BE A SUB-LICENSEE AS DEEMED OWNER WOULD BE CH ARGED TO TAX IN HIS HANDS. THE C1T(A) CONSIDERED THIS ARGUMENT, WHI CH WAS PURELY A LEGAL ARGUMENT BASED ON THE INTERPRETATION OF THE A FORESAID SECTIONS ON ADMITTED FACTS ON RECORD, BUT DID NOT ACCEPT THE AFORESAID PLEADING. AFTER CONSIDERING OTHER SUBMISSIONS OF TH E APPELLANT, WHICH WERE RAISED BEFORE THE ASSESSING OFFICER, THE CIT(A ) UPHELD THE ORDER OF THE ASSESSING OFFICER ON THIS GROUND. IN THIS S CENARIO, THE ASSESSEE PREFERRED FURTHER APPEAL BEFORE THE INCOME -TAX APPELLATE TRIBUNAL (HEREINAFTER REFERRED TO AS THE THIS TIME , BEFORE THE TRIBUNAL, 5 ITA NOS. 254 & 255/DEL/2018 THE ASSESSEE SUCCEEDED IN ITS ATTEMPT TO DEMONSTRAT E THAT DIE ASSESSEE COULD NOT BE LIABLE TO PAY ANY SUCH TAX FI XING LETTING VALUE ON NOTIONAL BASIS WHEN, IN FACT, NO SUCH AMOUNT OF RENT/LICENSE FEE WAS RECEIVED BY THE ASSESSEE. THE TRIBUNAL EXAMINED THE LICENSE AGREEMENT ENTERED INTO BETWEEN THE NDMC AND THE ASS ESSEE ON THE BASIS OF WHICH IT HAS COME TO THE CONCLUSION THAT I T IS THE NDMC, WHICH IS THE 'OWNER OF THE PREMISES AND REMAINS TO BE THE OWNER OF THE PREMISES IN QUESTION'. THE TRIBUNAL HAS FURTHER ACCEPTED THE SUBMISSIONS OF THE ASSESSEE THAT IN VIEW OF THE PRO VISIONS OF SECTION 27(III) OF THE ACT, IT IS THE SUB-LICENSEE WHO WOULD BE 'D EEMED OWNER' OF THOSE PREMISES WHICH THE SUB-LICENSEES WHEREOF TRAN SFERRED TO THE PRESENT OCCUPIERS AND THOSE OCCUPIERS ARE PAYING R ENT/LICENSE FEE TO THE SUB LICENSEES. ON THAT BASIS, THE TRIBUNAL HAS SET ASIDE THE ADDITION MADE BY THE ASSESSING OFFICER AND DELETED THIS COMPONENT OF INCOME HOLDING THAT THE SAME WOULD NOT BE CHARGE ABLE TO TAX. 11. THIS IS HOW THE DEPARTMENT HAS FILED THE APPEA LS PERTAINING TO DIFFERENT ASSESSMENT YEARS. AS POINTED OUT ABOVE, T HOUGH THE ISSUES BEFORE THE ASSESSING OFFICER, CIT(A) AS WELL AS THE TRIBUNAL WERE NUMEROUS, IN THESE APPEALS PRIMARILY ONE QUESTION O F LAW WHICH IS FORMULATED AND REPRODUCED ABOVE HAS BEEN PRESSED BY THE DEPARTMENT. 12. FOR DIE AFORESAID REASONS, WE ARE OF THE VIEW THAT DIE APPROACH OF THE TRIBUNAL IN DECIDING THE AFORESAID ISSUE IS PER FECTLY JUSTIFIED. THERE IS NO REASON TO INTERFERE WITH THE SAME. WE CLARIFY TH AT THE ASSESSEE WOULD NOT BE ENTITLED TO DEPRECIATION ON THIS PURPOSE. WE , THUS, ANSWER THE QUESTION OF LAW IN FAVOUR OF THE ASSESSEE AND AGAIN ST DIE REVENUE, AS A RESULT THEREOF ALL THESE APPEALS ARE DISMISSED. THUS, IN VIEW OF THE DECISION OF THE HONBLE DELHI HIGH COURT IN THE ASSESSEES OWN CASE ON THE SIMILAR ISSUE, THE PRESENT APPEAL I S ALSO COVERED IN FAVOUR OF 6 ITA NOS. 254 & 255/DEL/2018 THE ASSESSEE. THE GROUNDS RAISED BY THE REVENUE FOR A.Y. 2013-14 ARE THEREFORE DISMISSED. AS REGARDS THE APPEAL FOR A.Y. 2014-15, THE SAME IS IDENTICAL HENCE DISMISSED AS WELL. 8. IN RESULT, BOTH THE APPEALS OF THE REVENUE ARE D ISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 26 TH DAY OF AUGUST, 2020 . SD/- SD/- (R. K. PANDA) (SUCHITRA KAMBLE) ACCOUNTANT MEMBER JUDICIAL M EMBER DATED: 26/08/2020 R. NAHEED COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI 7 ITA NOS. 254 & 255/DEL/2018 DATE OF DICTATION DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE OTHER MEMBER DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. PS/PS DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR. PS/PS DATE ON WHICH THE FINAL ORDER IS UPLOADED ON THE WEBSITE OF ITAT DATE ON WHICH THE FILE GOES TO THE BENCH CLERK DATE ON WHICH THE FILE GOES TO THE HEAD CLERK THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER DATE OF DISPATCH OF THE ORDER