M/S. SHEETU EDUCATIONAL SERVICES P. LTD., Indore V. THE DCIT 5(1), Indore

ITA 26/IND/2015

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 5778 (ITAT-INDORE)
• Duration Of Justice: 2 year(s) 1 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-02-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 12-01-2017
• Assessment Year: 2007-2008
• Appeal Filed On: 08-01-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: A R VERMA
• Assessee Lawyers: S N AGRAWAL
• Keywords: Reopening of assessment; Depreciation; Business expenditure; Rule of consistency; Question of law; Tangible material; Commercial expediency; Reason to believe; Reassessment proceedings
• Section: 234B; 147; 148; 263

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL, INDORE BENCH, INDORE .., .., % BEFORE SHRI D.T. GARASIA, JUDICIAL MEMBER AND SHRI O.P. MEENA, ACCOUNTANT MEMBER M/S. SHEETU EDUCATIONAL SERVICE PVT. LTD., KHANDWA ROAD, INDORE PAN NO. AAGCS3911B VS. DY. CIT, 5(1), INDORE. / APPELLANT / RESPONDENT / APPELLANT BY SHRI S.N. AGRAWAL, FCA / RESPONDENT BY SHRI A.R.VERMA, DR DATE OF HEARING 12.01.2017 DATE OF PRONOUNCEMENT 28.02.2017 .. . / I.T.A. NOS. 24 TO 26/IND/2015 AND I.T.A.NOS. 352 TO 354/IND/2016 #% % / A.YS.: 2005-06 TO 2010-11 M/S.SHEETU EDUCATIONAL SERVICES P.LTD. I.T.A.NOS. 24 TO 26/IND2015 AND 352 TO 354/IND/2016 PAGE 2 OF 66 / O R D E R PER O.P. MEENA, ACCOUTANT MEMEBR. THESE APPEALS ARE FILED BY THE ASSESSEE AGAINST THE SEPARATE ORDERS OF LD. COMMISSIONER OF INCOME TAX ( APPEALS)-II, INDORE [HEREINAFTER REFERRED TO AS THE CIT (A)] DAT ED 31.10.2014, PERTAINING TO ASSESSMENT YEARS 2005-06 TO 2007- 08 AND SEPARATE ORDERS OF CIT(A)-II, INDORE DATED 2 9.01.2016, PERTAINING TO ASSESSMENT YEARS 2008-09 TO 2010-11. 2. THE ASSESSEE HAS TAKEN FOLLOWING GROUNDS OF APPEA L:- ITA NO.24/IND/2015/ ASSESSMENT YEAR 2005-06 : 1.1) THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE L D. CIT (A) ERRED IN APPROVING THE STAND OF THE ASSESSING O FFICER IN ISSUANCE OF NOTICE U/S 147 OF THE ACT MERELY FOR TH E REASON THAT ASSESSMENT AS SET-ASIDE BY THE LD CIT IN THE CASE OF THE ASSESSEE FOR THE ASST YEAR 2007-08 WAS NOT CHALLENGED BY THE ASSESSEE BEFORE THE HONBLE ITAT. 1.2) THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE. THE LD CIT(A) ERRED IN APPROVING THE ISSUANCE OF T HE NOTICE U/S 147 OF THE ACT AS VALID WITHOUT PROPERLY M/S.SHEETU EDUCATIONAL SERVICES P.LTD. I.T.A.NOS. 24 TO 26/IND2015 AND 352 TO 354/IND/2016 PAGE 3 OF 66 APPRECIATING THE SUBMISSION MADE BEFORE HIM AND ABSENCE OF ANY NEW TANGIBLE MATERIAL IN POSSESSION O F THE ASSESSING OFFICER. 2.1) THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE, THE LD CIT(A) ERRED IN MAINTAINING NOTIONAL ADDITIO N MADE BY THE ASSESSING OFFICER UNDER THE HEAD OF INC OME FROM HOUSE PROPERTY OF RS 19,83,732/- WITHOUT PROPER LY APPRECIATING THE FACTS OF THE PRESENT CASE AND SUBM ISSION MADE BEFORE HIM. 2.2) THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE, THE LD CIT(A) ERRED IN MAINTAINING THE TAXING OF NO TIONAL INCOME ON ACCOUNT OF BUILDING USED FOR THE PURPOSE OF RUNNING OF THE SCHOOL BY M/S. JASLEEN EDUCATIONAL SOCIETY IN THE HAND OF THE ASSESSEE EVEN WHEN NO DEDUCTION ON ACCOUNT OF RENT WAS CLAIMED BY THAT SOC IETY. HENCE, FOLLOWING THE SAME PRINCIPLE AS APPLIED BY TH E LD CIT(A) FOR INTEREST, THE RENTAL INCOME IS NOT REQUI RES TO BE TAXED AS INCOME OF THE ASSESSEE. M/S.SHEETU EDUCATIONAL SERVICES P.LTD. I.T.A.NOS. 24 TO 26/IND2015 AND 352 TO 354/IND/2016 PAGE 4 OF 66 2.3) THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE, THE LD CIT(A) ERRED IN MAINTAINING THE NOTIONAL ADD ITION OF RENTAL INCOME IN THE HAND OF THE ASSESSEE EVEN WH EN BUILDING WAS LEASED OUT FOR LONG TERMS PERIOD AND THEREFORE DEEMED OWNERSHIP OF THE BUILDING AS PER SECTION 27(IIIB) BELONGING TO THE LESSEE. 2.4) THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE, THE LD CIT(A) ERRED IN NOT MAKING ANY COMMENTS ON CALCULATION OF NOTIONAL RENT OF 19,83,732/-WHICH IS ARBITRARY WITHOUT ANY BASIS. 3) THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD CIT(A) ERRED IN NOT ALLOWING THE DEDUCTION ON ACCOUNT OF INTEREST EQUAL TO THE AMOUNT OF RENTAL INCOME AS TA XED BY THE ASSESSING OFFICER EVEN WHEN THE SAME WAS EXPRESSLY ME NTIONED IN THE AGREEMENT /UNDERSTANDING AS EXECUTED BETWEEN THE ASSESSEE WITH M/S. JASLEEN EDUCATIONAL SERVICES SOCI ETY. 4) THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD CIT(A) ERRED IN MAINTAINING DISALLOWANCE OF ENTIR E EXPENSES AS CLAIMED BY THE ASSESSEE OF RS 3,35,652/- AGAINST ITS M/S.SHEETU EDUCATIONAL SERVICES P.LTD. I.T.A.NOS. 24 TO 26/IND2015 AND 352 TO 354/IND/2016 PAGE 5 OF 66 COACHING INCOME WITHOUT PROPERLY APPRECIATING THE FA CT OF THE CASE AND SUBMISSION MADE BEFORE HIM. 5) THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE, THE LD CIT(A) ERRED IN MAINTAINING DISALLOWANCE OF DEPR ECIATION OF RS 5,72,905/-EVEN WHEN THE SAID BUILDING WAS USED BY THE ASSESSEE FOR COACHING AND ALSO USED BY THE SOCIETY FOR RUNNING OF THE SCHOOL. 6) THE LD CIT(A) WAS ALSO ERRED IN DECIDING THE CHAR GING OF INTEREST AS CONSEQUENTIAL IN NATURE EVEN WHEN IN THE CASE OF RE-ASSESSMENT INTEREST IS CHARGEABLE UNDER SUB-SECT ION (3) OF SECTION 234B OF THE INCOME TAX ACT. ITA NO.25/IND/2015/ ASSESSMENT YEAR 2006-07 : 1.1) THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE L D CIT (A) ERRED IN APPROVING THE STAND OF THE ASSESSING O FFICER IN ISSUANCE OF NOTICE U/S 147 OF THE ACT MERELY FOR TH E REASON THAT ASSESSMENT AS SET-ASIDE BY THE LD CIT I N THE CASE OF THE ASSESSEE FOR THE ASST YEAR 2007-08 WAS N OT CHALLENGED BY THE ASSESSEE BEFORE THE HONBLE ITAT. M/S.SHEETU EDUCATIONAL SERVICES P.LTD. I.T.A.NOS. 24 TO 26/IND2015 AND 352 TO 354/IND/2016 PAGE 6 OF 66 1.2) THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE. THE LD CIT(A) ERRED IN APPROVING THE ISSUANCE OF T HE NOTICE U/S 147 OF THE ACT AS VALID WITHOUT PROPERLY APPRECIATING THE SUBMISSION MADE BEFORE HIM AND ABSENCE OF ANY NEW TANGIBLE MATERIAL IN POSSESSION O F THE ASSESSING OFFICER. 2.1) THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE, THE LD CIT(A) ERRED IN MAINTAINING NOTIONAL ADDITIO N MADE BY THE ASSESSING OFFICER BY TAXING THE ANNUAL LETTING VALUE OF THE BUILDING UNDER THE HEAD OF INC OME FROM HOUSE PROPERTY OF RS 20,53,990/- WITHOUT PROPER LY APPRECIATING THE FACTS OF THE PRESENT CASE AND SUBM ISSION MADE BEFORE HIM. 2.2) THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE, THE LD CIT(A) ERRED IN MAINTAINING THE TAXING OF NO TIONAL INCOME ON ACCOUNT OF BUILDING USED FOR THE PURPOSE OF RUNNING OF THE SCHOOL BY M/S. JASLEEN EDUCATIONAL SOCIETY IN THE HAND OF THE ASSESSEE EVEN WHEN NO DEDUCTION ON ACCOUNT OF RENT WAS CLAIMED BY THAT SOC IETY M/S.SHEETU EDUCATIONAL SERVICES P.LTD. I.T.A.NOS. 24 TO 26/IND2015 AND 352 TO 354/IND/2016 PAGE 7 OF 66 HENCE, FOLLOWING THE SAME PRINCIPLE AS APPLIED BY TH E LD CIT(A) FOR INTEREST, THE RENTAL INCOME IS NOT REQUI RES TO BE TAXED AS INCOME OF THE ASSESSEE. 2.3) THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE, THE LD CIT(A) ERRED IN MAINTAINING THE NOTIONAL ADD ITION OF RENTAL INCOME IN THE HAND OF THE ASSESSEE EVEN WH EN BUILDING WAS LEASED OUT FOR LONG TERMS PERIOD AND THEREFORE DEEMED OWNERSHIP OF THE BUILDING AS PER SECTION 27(IIIB) BELONGING TO THE LESSEE. 2.4) THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE, THE LD CIT(A) ERRED IN NOT MAKING ANY COMMENTS ON CALCULATION OF NOTIONAL RENT OF 20,53,990/-WHICH IS ARBITRARY WITHOUT ANY BASIS. 3) THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD CIT(A) ERRED IN NOT ALLOWING THE DEDUCTION ON ACCOUNT OF INTEREST EQUAL TO THE AMOUNT OF RENTAL INCOME AS TA XED BY THE ASSESSING OFFICER EVEN WHEN THE SAME WAS EXPRESSLY ME NTIONED IN THE AGREEMENT /UNDERSTANDING AS EXECUTED BETWEEN THE ASSESSEE WITH M/S. JASLEEN EDUCATIONAL SERVICES SOCI ETY. M/S.SHEETU EDUCATIONAL SERVICES P.LTD. I.T.A.NOS. 24 TO 26/IND2015 AND 352 TO 354/IND/2016 PAGE 8 OF 66 4) THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD CIT(A) ERRED IN MAINTAINING DISALLOWANCE OF E NTIRE EXPENSES AS CLAIMED BY THE ASSESSEE OF RS 4,45,470/ - AGAINST ITS COACHING INCOME WITHOUT PROPERLY APPRECIATING TH E FACT OF THE CASE AND SUBMISSION MADE BEFORE HIM. 5) THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD CIT(A) ERRED IN MAINTAINING DISALLOWANCE OF DEPRECIATION OF RS 6,22,197/-EVEN WHEN THE SAID BUIL DING WAS USED BY THE ASSESSEE FOR COACHING AND ALSO USED BY THE SOCIETY FOR RUNNING OF THE SCHOOL. 6) THE LD CIT (A) WAS ALSO ERRED IN DECIDING TH E CHARGING OF IN INTEREST AS CONSEQUENTIAL IN NATURE EVEN WHEN IN THE CASE OF RE-ASSESSMENT INTEREST IS CHARGEABLE UNDER SUB-SECT ION (3) OF SECTION 234B OF THE INCOME TAX ACT. ITA NO.26/IND/2015/ ASSESSMENT YEAR 2007-08 : 1.1) THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE L D CIT (A) ERRED IN MAINTAINING NOTIONAL ADDITION MADE BY THE ASSESSING OFFICER BY TAXING THE ANNUAL LETTING VALU E OF THE PROPERTY UNDER THE HEAD OF INCOME FROM HOUSE PROPER TY M/S.SHEETU EDUCATIONAL SERVICES P.LTD. I.T.A.NOS. 24 TO 26/IND2015 AND 352 TO 354/IND/2016 PAGE 9 OF 66 OF RS. 21,44,910/-WITHOUT PROPERLY APPRECIATING THE FACTS OF THE PRESENT CASE AND SUBMISSION MADE BEFORE HIM. 1.2) THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE, THE LD CIT(A) ERRED IN MAINTAINING THE TAXING OF N OTIONAL INCOME ON ACCOUNT OF BUILDING USED FOR THE PURPOSE OF RUNNING OF THE SCHOOL BY M/S. JASLEEN EDUCATIONAL SOCIETY IN THE HAND OF THE ASSESSEE EVEN WHEN NO DEDUCTION ON ACCOUNT OF RENT WAS CLAIMED BY THAT SOC IETY. HENCE, FOLLOWING THE SAME PRINCIPLE AS APPLIED BY TH E LD. CIT(A) FOR INTEREST, THE RENTAL INCOME IS NOT REQU IRES TO BE TAXED AS INCOME OF THE ASSESSEE. 1.3) THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE, THE LD CIT(A) ERRED IN MAINTAINING THE NOTIONAL ADD ITION OF RENTAL INCOME IN THE HAND OF THE ASSESSEE EVEN WH EN BUILDING WAS LEASED OUT FOR LONG TERMS PERIOD AND THEREFORE DEEMED OWNERSHIP OF THE BUILDING AS PER SECTION 27(IIIB) BELONGING TO THE LESSEE. 1.4) THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE, THE LD CIT(A) ERRED IN MAKING ANY COMMENTS ON M/S.SHEETU EDUCATIONAL SERVICES P.LTD. I.T.A.NOS. 24 TO 26/IND2015 AND 352 TO 354/IND/2016 PAGE 10 OF 66 CALCULATION OF NOTIONAL RENT OF RS. 21,44,910/- WHIC H IS ARBITRARY WITHOUT ANY BASIS. 2) THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD CIT(A) ERRED IN NOT ALLOWING THE DEDUCTION ON ACCOUNT OF INTEREST EQUAL TO THE AMOUNT OF RENTAL INCOME AS TA XED BY THE ASSESSING OFFICER EVEN WHEN THE SAME WAS EXPRESSLY ME NTIONED IN THE AGREEMENT /UNDERSTANDING AS EXECUTED BETWEEN THE ASSESSEE WITH M/S JASLEEN EDUCATIONAL SERVICES SOCIE TY. 3) THAT ON THE FACTS AND IN THE CIRCUMSTANCE S OF THE CASE, THE LD CIT(A) ERRED IN MAINTAINING DISALLOWANCE OF E NTIRE EXPENSES AS CLAIMED BY THE ASSESSEE OF RS 4,90,583/ - AGAINST ITS COACHING INCOME WITHOUT PROPERLY APPRECIATING TH E FACT OF THE CASE AND SUBMISSION MADE BEFORE HIM. 4) THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD CIT(A) ERRED IN MAINTAINING DISALLOWANCE OF DEPRECIATION OF RS 5,06,445/-EVEN WHEN THE SAID BUI LDING WAS USED BY THE ASSESSEE FOR COACHING AND ALSO USED BY THE SOCIETY FOR RUNNING OF THE SCHOOL. M/S.SHEETU EDUCATIONAL SERVICES P.LTD. I.T.A.NOS. 24 TO 26/IND2015 AND 352 TO 354/IND/2016 PAGE 11 OF 66 5) THE LD CIT (A) WAS ALSO ERRED IN DECIDING THE CHARGING OF INTEREST IS CONSEQUENTIAL IN NATURE EVEN WHEN IN THE CASE OF RE-ASSESSMENT INTEREST IS CHARGEABLE UNDER SUB-SECT ION (3) OF SECTION 234B OF THE INCOME TAX ACT. ITA NO.352/IND/2016 : ASSESSMENT YEAR 2008-09: 1.1) THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE LD CIT (A) ERRED IN APPROVING THE STAND OF THE ASSESSING OFFICER IN ISSUANCE OF NOTICE U/S 147 OF THE ACT MERELY FOR THE REASON THAT ASSESSMENT AS SET-ASIDE BY THE LD CIT IN THE CASE OF THE ASSESSEE FOR THE ASST YEAR 2007-08 WAS NOT CHALLENGED BY THE ASSESSEE BEFORE THE HONBLE ITAT. 1.2) THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE. THE LD CIT(A) ERRED IN APPROVING THE ISSUANCE OF THE NOTICE U/S 147 OF THE ACT AS VALID WITHOUT PROPERLY APPRECIATING THE SUBMISSION MADE BEFORE HIM AND ABSENCE OF ANY M/S.SHEETU EDUCATIONAL SERVICES P.LTD. I.T.A.NOS. 24 TO 26/IND2015 AND 352 TO 354/IND/2016 PAGE 12 OF 66 NEW TANGIBLE MATERIAL IN POSSESSION OF THE ASSESSING OFFICER. 2.1) THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE, THE LD CIT(A) ERRED IN MAINTAINING NOTIONAL ADDITIO N MADE BY THE ASSESSING OFFICER UNDER THE HEAD OF INC OME FROM HOUSE PROPERLY OF RS 22,77,160 /- WITHOUT PROPE RLY APPRECIATING THE FACTS OF THE PRESENT CASE AND SUBM ISSION MADE BEFORE HIM. 2.2) THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE, THE LD CIT (A) ERRED IN MAINTAINING THE TAXING OF N OTIONAL INCOME ON ACCOUNT OF BUILDING USED FOR THE PURPOSE OF RUNNING OF THE SCHOOL BY M/S. JASLEEN EDUCATIONAL SOCIETY IN THE HAND OF THE ASSESSEE EVEN WHEN NO DEDUCTION ON ACCOUNT OF RENT WAS CLAIMED BY THAT SOC IETY HENCE, FOLLOWING THE SAME PRINCIPLE AS APPLIED BY TH E LD CIT(A) FOR INTEREST, THE RENTAL INCOME IS NOT REQUI RES TO BE TAXED AS INCOME OF THE ASSESSEE. 2.3) THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE, THE LD CIT(A) ERRED IN MAINTAINING THE NOTIONAL ADD ITION M/S.SHEETU EDUCATIONAL SERVICES P.LTD. I.T.A.NOS. 24 TO 26/IND2015 AND 352 TO 354/IND/2016 PAGE 13 OF 66 OF RENTAL INCOME IN THE HAND OF THE ASSESSEE EVEN WH EN BUILDING WAS LEASED OUT FOR LONG TERMS PERIOD AND THEREFORE DEEMED OWNERSHIP OF THE BUILDING AS PER SECTION 27(IIIB) BELONGING TO THE LESSEE. 2.4) THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE, THE LD CIT(A) ERRED IN NOT MAKING ANY COMMENTS ON CALCULATION OF NOTIONAL RENT OF 22,77,160/-WHICH IS ARBITRARY WITHOUT ANY BASIS. 3) THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD CIT(A) ERRED IN NOT ALLOWING THE DEDUCTION ON ACCOUNT OF INTEREST EQUAL TO THE AMOUNT OF RENTAL INCOME AS TA XED BY THE ASSESSING OFFICER EVEN WHEN THE SAME WAS EXPRESSLY ME NTIONED IN THE AGREEMENT /UNDERSTANDING AS EXECUTED BETWEEN THE ASSESSEE WITH M/S JASLEEN EDUCATIONAL SERVICES SOCIE TY. 4) THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD CIT(A) ERRED IN MAINTAINING DISALLOWANCE OF ENTIR E EXPENSES AS CLAIMED BY THE ASSESSEE OF RS 34,640/-WITHOUT PRO PERLY APPRECIATING THE FACTS OF THE CASE AND SUBMISSION M ADE BEFORE HIM. M/S.SHEETU EDUCATIONAL SERVICES P.LTD. I.T.A.NOS. 24 TO 26/IND2015 AND 352 TO 354/IND/2016 PAGE 14 OF 66 5) THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE, THE LD CIT(A) ERRED IN MAINTAINING DISALLOWANCE OF DEPR ECIATION OF RS 5,29,073/- EVEN WHEN THE SAID BUILDING WAS USED BY THE ASSESSEE AND ALSO BY THE SOCIETY FOR RUNNING OF THE SCHOOL. 6) THE LD CIT(A) WAS ALSO ERRED IN DECIDING THE C HARGING OF INTEREST IS CONSEQUENTIAL IN NATURE EVEN WHEN IN THE CASE OF RE- ASSESSMENT INTEREST IS CHARGEABLE UNDER SUB-SECTION (3) OF SECTION 234B OF THE INCOME TAX ACT. ITA NO.353/IND/2016 : ASSESSMENT YEAR 2009-10 : 1.1 THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE L D CIT (A) ERRED IN APPROVING THE STAND OF THE ASSESSI NG OFFICER IN ISSUANCE OF NOTICE U/S 147 OF THE ACT MERELY FOR THE REASON THAT ASSESSMENT AS SET-ASIDE BY THE LD CIT IN THE CASE OF THE ASSESSEE FOR THE ASST YEAR 2007-08 WAS NOT CHALLENGED BY THE ASSESSEE BEFORE THE HONBLE ITAT. 1.2 THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE. THE LD CIT(A) ERRED IN APPROVING THE ISSUANC E OF THE NOTICE U/S 147 OF THE ACT AS VALID WITHOUT M/S.SHEETU EDUCATIONAL SERVICES P.LTD. I.T.A.NOS. 24 TO 26/IND2015 AND 352 TO 354/IND/2016 PAGE 15 OF 66 PROPERLY APPRECIATING THE SUBMISSION MADE BEFORE HIM AND ABSENCE OF ANY NEW TANGIBLE MATERIAL IN POSSESSION OF THE ASSESSING OFFICER. 2.1 THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD CIT(A) ERRED IN MAINTAINING NOTIONAL ADDITION MADE BY THE ASSESSING OFFICER UNDER THE HEAD OF INCOME FROM HOUSE PROPERLY OF RS 24,05,275/-WITHOUT PROPERLY APPRECIATING THE FACTS OF THE PRESENT CASE AND SUBMISSION MADE BEFORE HIM. 2.2 THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD CIT (A) ERRED IN MAINTAINING THE TAXIN G OF NOTIONAL INCOME ON ACCOUNT OF BUILDING USED FOR THE PURPOSE OF RUNNING OF THE SCHOOL BY M/S. JASLEEN EDUCATIONAL SOCIETY IN THE HAND OF THE ASSESSEE EVEN WHEN NO DEDUCTION ON ACCOUNT OF RENT WAS CLAIMED BY THAT SOCIETY HENCE, FOLLOWING THE SAME PRINCIPLE AS APPLIED BY THE LD CIT(A) FOR M/S.SHEETU EDUCATIONAL SERVICES P.LTD. I.T.A.NOS. 24 TO 26/IND2015 AND 352 TO 354/IND/2016 PAGE 16 OF 66 INTEREST, THE RENTAL INCOME IS NOT REQUIRES TO BE TAXED AS INCOME OF THE ASSESSEE. 2.3 THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD CIT(A) ERRED IN MAINTAINING THE NOTIONAL ADDITION OF RENTAL INCOME IN THE HAND OF T HE ASSESSEE EVEN WHEN BUILDING WAS LEASED OUT FOR LONG TERMS PERIOD AND THEREFORE DEEMED OWNERSHIP OF THE BUILDING AS PER SECTION 27(IIIB) BELONGING TO THE LESSEE. 2.4 THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD CIT(A) ERRED IN NOT MAKING ANY COMMENTS ON CALCULATION OF NOTIONAL RENT OF 24,05,275/-WHICH IS ARBITRARY WITHOUT ANY BASIS. 3) THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD CIT(A) ERRED IN NOT ALLOWING THE DEDUCTION ON ACCOUNT OF INTEREST EQUAL TO THE AMOUNT OF RENTAL INCOME AS TA XED BY THE ASSESSING OFFICER EVEN WHEN THE SAME WAS EXPRESSLY ME NTIONED IN THE AGREEMENT/UNDERSTANDING AS EXECUTED BETWEEN THE ASSESSEE WITH M/S. JASLEEN EDUCATIONAL SERVICES SOCI ETY. M/S.SHEETU EDUCATIONAL SERVICES P.LTD. I.T.A.NOS. 24 TO 26/IND2015 AND 352 TO 354/IND/2016 PAGE 17 OF 66 4) THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD CIT(A) ERRED IN MAINTAINING DISALLOWANCE OF ENTIR E EXPENSES AS CLAIMED BY THE ASSESSEE OF RS 4,729/-WITHOUT PROP ERLY APPRECIATING THE FACTS OF THE CASE AND SUBMISSION M ADE BEFORE HIM. 5) THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE, THE LD CIT(A) ERRED IN MAINTAINING DISALLOWANCE OF DEPR ECIATION OF RS 4,93,017/- EVEN WHEN THE SAID BUILDING WAS USED BY THE ASSESSEE AND ALSO BY THE SOCIETY FOR RUNNING OF THE SCHOOL. 6) THE LD CIT(A) WAS ALSO ERRED IN DECIDING THE C HARGING OF INTEREST IS CONSEQUENTIAL IN NATURE EVEN WHEN IN THE CASE OF RE- ASSESSMENT INTEREST IS CHARGEABLE UNDER SUB-SECTION (3) OF SECTION 234B OF THE INCOME TAX ACT. ITA NO.354/IND/2015/ ASSESSMENT YEAR 2010-11 1.1) THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE L D CIT (A) ERRED IN APPROVING THE STAND OF THE ASSESSING O FFICER IN ISSUANCE OF NOTICE U/S 147 OF THE ACT MERELY FOR TH E REASON THAT ASSESSMENT AS SET-ASIDE BY THE LD CIT IN THE M/S.SHEETU EDUCATIONAL SERVICES P.LTD. I.T.A.NOS. 24 TO 26/IND2015 AND 352 TO 354/IND/2016 PAGE 18 OF 66 CASE OF THE ASSESSEE FOR THE ASST YEAR 2007-08 WAS NOT CHALLENGED BY THE ASSESSEE BEFORE THE HONBLE ITAT. 1.2) THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE. THE LD CIT(A) ERRED IN APPROVING THE ISSUANCE OF T HE NOTICE U/S 147 OF THE ACT AS VALID WITHOUT PROPERLY APPRECIATING THE SUBMISSION MADE BEFORE HIM AND ABSENCE OF ANY NEW TANGIBLE MATERIAL IN POSSESSION O F THE ASSESSING OFFICER. 2.1) THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE, THE LD CIT(A) ERRED IN MAINTAINING NOTIONAL ADDITIO N MADE BY THE ASSESSING OFFICER UNDER THE HEAD OF INC OME FROM HOUSE PROPERLY OF RS 26,11,915/- WITHOUT PROPER LY APPRECIATING THE FACTS OF THE PRESENT CASE AND SUBM ISSION MADE BEFORE HIM. 2.2) THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE, THE LD CIT(A) ERRED IN MAINTAINING THE TAXING OF NO TIONAL INCOME ON ACCOUNT OF BUILDING USED FOR THE PURPOSE OF RUNNING OF THE SCHOOL BY M/S. JASLEEN EDUCATIONAL SOCIETY IN THE HAND OF THE ASSESSEE EVEN WHEN NO M/S.SHEETU EDUCATIONAL SERVICES P.LTD. I.T.A.NOS. 24 TO 26/IND2015 AND 352 TO 354/IND/2016 PAGE 19 OF 66 DEDUCTION ON ACCOUNT OF RENT WAS CLAIMED BY THAT SOC IETY HENCE, FOLLOWING THE SAME PRINCIPLE AS APPLIED BY TH E LD CIT(A) FOR INTEREST, THE RENTAL INCOME IS NOT REQUI RES TO BE TAXED AS INCOME OF THE ASSESSEE. 2.3) THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE, THE LD CIT(A) ERRED IN MAINTAINING THE NOTIONAL ADD ITION OF RENTAL INCOME IN THE HAND OF THE ASSESSEE EVEN WH EN BUILDING WAS LEASED OUT FOR LONG TERMS PERIOD AND THEREFORE DEEMED OWNERSHIP OF THE BUILDING AS PER SECTION 27(IIIB) BELONGING TO THE LESSEE. 2.4) THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE, THE LD CIT(A) ERRED IN NOT MAKING ANY COMMENTS ON CALCULATION OF NOTIONAL RENT OF 26,11,915/-WHICH IS ARBITRARY WITHOUT ANY BASIS. 3) THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD CIT(A) ERRED IN NOT ALLOWING THE DEDUCT ION ON ACCOUNT OF INTEREST EQUAL TO THE AMOUNT OF RENTAL I NCOME AS TAXED BY THE ASSESSING OFFICER EVEN WHEN THE SAME WAS EXPRESSLY MENTIONED IN THE AGREEMENT /UNDERSTANDING AS M/S.SHEETU EDUCATIONAL SERVICES P.LTD. I.T.A.NOS. 24 TO 26/IND2015 AND 352 TO 354/IND/2016 PAGE 20 OF 66 EXECUTED BETWEEN THE ASSESSEE WITH M/S JASLEEN EDUCATIONAL SERVICES SOCIETY. 4) THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD CIT(A) ERRED IN MAINTAINING DISALLOWAN CE OF ENTIRE EXPENSES AS CLAIMED BY THE ASSESSEE OF RS 22 ,012 /- AGAINST ITS COACHING INCOME WITHOUT PROPERLY APPRECI ATING THE FACT OF THE CASE AND SUBMISSION MADE BEFORE HI M. 5) THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD CIT(A) ERRED IN MAINTAINING DISALLOWANCE OF DEPRECIATION OF RS 4,61,523/-EVEN WHEN THE SAID BUIL DING WAS USED BY THE ASSESSEE FOR COACHING AND ALSO USED BY THE SOCIETY FOR RUNNING OF THE SCHOOL. 6) THE LD CIT(A) WAS ALSO ERRED IN DECIDING THE CHA RGING OF INTEREST IS CONSEQUENTIAL IN NATURE EVEN WHEN IN THE CASE OF RE-ASSESSMENT INTEREST IS CHARGEABLE UNDER SUB- SECTION (3) OF SECTION 234B OF THE INCOME TAX ACT. 3. COMMON GROUNDS HAVE BEEN TAKEN BY THE LD. AUTHORIZE D REPRESENTATIVE OF THE ASSESSEE EXCEPT THE FIGURES. SINCE THE FACTS ARE COMMON, WE ARE DECIDING FOR THE SAKE OF BR EVITY M/S.SHEETU EDUCATIONAL SERVICES P.LTD. I.T.A.NOS. 24 TO 26/IND2015 AND 352 TO 354/IND/2016 PAGE 21 OF 66 I.T.A.NO. 24/IND/2015 FOR THE ASSESSMENT YEAR 2005- 06, THE DECISION OF WHICH WILL BE BINDING ON ALL THE APPEALS. 4. GROUND NOS. 1.1 TO 1.2 FOR THE ASSESSMENT YEARS 200 5- 06, 2006-07 AND ASSESSMENT YEAR 2008-09 TO 2010-11 RELATE TO APPROVING THE REOPENING OF ASSESSMENT BASED ON F INDINGS GIVEN IN SET ASIDE ORDERS U/S 263 OF THE INCOME-TAX ACT, 1961. 5. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT THE ASSESSEE HAD FILED HIS ORIGINAL RETURN OF TOTAL INCOME ON 31 -10-2005 DECLARING TOTAL LOSS OF RS 6,65,769/-. THE NOTICE U /S 148 OF THE ACT DATED 29-03-2012 WAS ISSUED AND SERVED UPON THE ASSESSEE ON 30.03.2012. COPY OF REASONS WERE RECORD ED PRIOR TO THE ISSUANCE OF THE NOTICE U/S 148 OF THE ACT. T HE ASSESSEE VIDE LETTER DATED 08-04-2012 HAS STATED THAT ORIGI NAL RETURN AS FILED ON 31-10-2005 MAY BE TREATED AS FILED IN RESP ONSE TO THE NOTICE ISSUED U/S 148 OF THE ACT. THE ASSESSEE HAS TAKEN LAND ON LEASE FROM LUTHRA FAMILY FOR LEASE PREMIUM AND A NNUAL LEASE RENT. FOR CONSTRUCTION OF THE SCHOOL BUILDING AMOUNTS WERE RECEIVED FROM M/S JASLEEN EDUCATION SERVICE SOC IETY AND THE SAID BUILDING WAS GIVEN TO M/S JASLEEN EDUCATION SERVICE M/S.SHEETU EDUCATIONAL SERVICES P.LTD. I.T.A.NOS. 24 TO 26/IND2015 AND 352 TO 354/IND/2016 PAGE 22 OF 66 SOCIETY FOR RUNNING OF SCHOOL. THE ASSESSEE ALSO RU NS COACHING ON THIS BUILDING ITSELF. IT WAS UNDERSTOOD BETWEEN T HE ASSESSEE AND M/S JASLEEN EDUCATIONAL SERVICE SOCIETY, THAT N O INTEREST WAS PAID BY THE ASSESSEE NOR RENT WAS CHARGED FROM TH E SOCIETY. SINCE, THE BUILDING WAS USED BY THE ASSESSE E FOR THE PURPOSE OF HIS BUSINESS, THE DEPRECIATION ON THE SA ME WAS CLAIMED BY THE ASSESSEE. IN THE RE-OPENED ASSESSMEN T ORDER AS PASSED BY THE ASSESSING OFFICER, FOLLOWING AMOUNT WAS ADDED TO THE TOTAL INCOME OF THE ASSESSEE:- S.NO NATURE OF ADDITION AMOUNT [RS] 1 INCOME FROM HOUSE PROPERTY 13,88,612 2 DISALLOWANCE OUT OF EXPENSES 3,35,652 3 DISALLOWANCE OF DEPRECIATION OF BUILDING 5,72,905 22,97,169 6. THE LD. CIT[A] VIDE HIS ORDER DATED 31-10-2014 HAS DISMISSED THE APPEAL AS FILED BY THE ASSESSEE AGAIN ST THE ORDER AS PASSED U/S 143[3]/147 OF THE ACT DATED 18-03-201 3. M/S.SHEETU EDUCATIONAL SERVICES P.LTD. I.T.A.NOS. 24 TO 26/IND2015 AND 352 TO 354/IND/2016 PAGE 23 OF 66 7. THE ASSESSE IN THIS APPEAL HAS CHALLENGED THE RE-OP ENING OF THE ASSESSMENT U/S 147 OF THE ACT. THE ASSESSE H AD FILED ITS RETURN OF TOTAL INCOME ON 30.10.2005 DECLARING TOTA L LOSS OF RS 6,65,769/-. THE SAID RETURN WAS ACCEPTED SUMMARILY B Y THE DEPARTMENT AS FILED BY THE ASSESSE. THE ASSESSING O FFICER ISSUED NOTICE U/S 148 OF THE ACT ON 29-03-2012. THE ASSESSEE VIDE HIS LETTER DT 08-04-2012 HAS REQUESTED TO TREA T THE RETURN AS ORIGINALLY FILED ON 30-10-2005 VIDE ACK NO 00251 07068 IN RESPONSE TO THE NOTICE AS ISSUED U/S 148 OF THE ACT . SINCE, COPY OF THE SAID LETTER WAS NOT ACKNOWLEDGED. HENCE, SAME COPY OF THE LETTER WAS ACKNOWLEDGED ON 16-08-2012. TH AT ASSESSE VIDE ITS LETTER DT 09-04-2012 REQUESTED TO PROVIDE THE COPY OF REASONS AS RECORDED FOR RE-OPENING OF THE C ASE WHICH WAS NOT PROVIDED TO THE ASSESSE. HENCE, THE ASSESSE VIDE ITS LETTER DATED 16-08-2012 HAS AGAIN REQUESTED TO PRO VIDE THE COPY OF REASON RECORDED FOR RE-OPENING OF THE COMPL ETED ASSESSMENT. THE ASSESSING OFFICER HAS PROVIDED THE REASONS AS RECORDED FOR RE-OPENING OF THE ASSESSMENT, WHICH REA DS AS UNDER :- M/S.SHEETU EDUCATIONAL SERVICES P.LTD. I.T.A.NOS. 24 TO 26/IND2015 AND 352 TO 354/IND/2016 PAGE 24 OF 66 THE ASSESSEE FILED ITS RETURN ON 30-10-2005 DECLAR ING LOSS OF RS 6,65,769/- AND CLAIMING CARRY FORWARD THE SAME FOR SET OFF IN NEXT YEARS. THIS LOSS INCLUDE S RS 6,65,769/- FOR DEPRECIATION ON BUILDING, WHICH WAS RENTED TO M/S JASLEEN EDUCATION SERVICE SOCIETY, WIT HOUT CONSIDERATION. THE ASSESSEE HAS CLAIMED DEPRECIATIO N, WHICH IS NOT ALLOWABLE AS THE BUILDING HAS NOT BEEN UTILIZED FOR THE BUSINESS PURPOSE OF THE ASSESSEE. FURTHER THE ASSESSEE HAS ALSO NOT DECLARED INCOME FROM HOUS E PROPERTY, INCOME OF WHICH IS TAXABLE UNDER THE HEAD OF HOUSE PROPERTIES, HOWEVER NO INCOME HAS BEEN DECLAR ED BY THE ASSESSEE. IN VIEW OF THE ABOVE FACTS, I HAVE REASON TO BELIEVE THAT INCOME CHARGEABLE TO TAX MORE THAN RS 2,00,000/- HA S ESCAPED ASSESSMENT IN TERM OF EXPLANATION 2 OF SECT ION 147 OF THE INCOME TAX ACT. ACCORDINGLY, NOTICE UNDE R SECTION 148 OF INCOME TAX ACT, 1961 IS TO BE ISSUED . THEREFORE NECESSARY APPROVAL MAY KINDLY BE ACCORDED . M/S.SHEETU EDUCATIONAL SERVICES P.LTD. I.T.A.NOS. 24 TO 26/IND2015 AND 352 TO 354/IND/2016 PAGE 25 OF 66 THAT ON THE BASIS OF REASON FOR RE-OPENING OF THE A SSESSMENT AS COMMUNICATED TO THE ASSESSEE. THE COMPLETED ASSESSM ENT WAS RE-OPENED FOR THE FOLLOWING REASONS:- (A) DEPRECIATION ON THE BUILDING WHICH WAS RENTED TO M/S JASLEEN EDUCATION SERVICE SOCIETY WAS CLAIMED BY THE ASSESSEE. (B) DEPRECIATION ON BUILDING WAS CLAIMED EVEN WHEN NO RENT WAS CHARGED FOR THE SAID BUILDING. (C) DEPRECIATION IS NOT ALLOWABLE. SINCE, THE BUILDI NG IS NOT USED FOR THE PURPOSE OF BUSINESS OF THE ASSESSE E. (D) THE ASSESSEE HAS NOT DECLARED ANY INCOME UNDER THE HEAD OF INCOME FROM HOUSE PROPERTY EVEN WHEN RENTAL INCOME REQUIRES TO BE TAXED UNDER THIS HEAD. 8. THE LD. AUTHORIZED REPRESENTATIVE OF THE ASSESSEE H AS FILED DETAILED WRITTEN SUBMISSIONS RELYING UPON THE VARIOUS JUDICIAL PRONOUNCEMENTS, WHICH ARE MENTIONED AS UNDE R :- (I) CIT VS. KELVINATOR OF INDIA LIMITED, 320 ITR 561 ( S. C. ). (II) SHAH UNMESH INDRAVADAN VS. ITO, 6 DTR 318. (AHM. I.T.A.T. ) M/S.SHEETU EDUCATIONAL SERVICES P.LTD. I.T.A.NOS. 24 TO 26/IND2015 AND 352 TO 354/IND/2016 PAGE 26 OF 66 (III) K. G. HOTEL (P) LTD VS. ACIT, 113 ITR 99 (I.T.A.T. AGRA BENCH) (IV) CIT VS. ORIENT CRAFT LIMITED, I.T.A.NO. 555/2012 DATED 12.12.2012 (DEL) (V) A.N.LAKSHMAN SHENOY V. ITO,(1958) 34 ITR 275 (S.C.) (VI) SHEO NATH SINGH VS. AAC, (1971) 82 ITR 147 ( S. C.) . (VII) CIT VS. SHERI ATUL KUMAR SWAMI, 362 ITR 693 (DEL) (VIII) TARA CHAND JAIN, I.T.A.NO. 2282/KOL/2014 ( I.T.A.T. KOL.) (IX) GAS & POWER INVESTMENT CO., (APPEAL NO. I.T.A.NO. 1118/MUM/2014 DATED 5.2.2016 ( I.T.A.T. MUM.) 9. THE LD. AUTHORIZED REPRESENTATIVE OF THE ASSESSEE FURTHER CONTENDED THAT THE ABOVE REASONS WERE RECORDED BY T HE AO ON THE BASIS OF BALANCE SHEET OF THE ASSESSEE AND NO N EW TANGIBLE MATERIAL CAME INTO THE NOTICE OF THE AO AS TO JUSTI FY THE REOPENING OF THE COMPLETED ASSESSMENT. THE LD. CIT( A) WAS NOT RIGHT IN APPROVING THE RE-OPENING OF THE ASSESSMENT EVEN WHEN IT IS PROVED THAT THE SAME WAS REOPENED IN ABSENCE O F ANY NEW MATERIAL IN POSSESSION OF THE AO. THE ASSESSMENT AS RE- M/S.SHEETU EDUCATIONAL SERVICES P.LTD. I.T.A.NOS. 24 TO 26/IND2015 AND 352 TO 354/IND/2016 PAGE 27 OF 66 ,OPENED IS, THEREFORE, NOT VALID AND THE SAME NOW RE QUIRES TO BE QUASHED AS INVALID. 10. ON THE OTHER HAND THE LD. DEPARTMENTAL REPRESENTATI VE SUPPORTED THE ORDERS OF THE LOWER AUTHORITIES. 11. WE HAVE CONSIDERED THE FACTS, RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE HAVE ALSO PERUSED THE CASE LAWS RELIED UPON BY THE LD. AUTHO RIZED REPRESENTATIVE OF THE ASSESSEE. WE FIND THAT THE AS SESSEE HAS CHALLENGED THE RE-OPENING OF THE ASSESSMENT BY ISSU ING NOTICE U/S 148 OF THE ACT. THE MAIN GROUND OF DISPUTE WAS THAT NO FRESH MATERIAL CAME INTO THE NOTICE OF THE ASSESSEE . THE ASSESSEE HAS DISCLOSED ENTIRE FACTS WITH THE RETURN OF TOTAL INCOME AND IN ITS AUDITED FINAL ACCOUNT. THE CASE F OR THIS YEAR WAS RE-OPENED ON THE BASIS OF FINDING AS NOTED BY TH E CIT WHILE PASSING THE ASSESSMENT ORDER U/S 263 IN THE ASSESSMENT YEAR 2007-08. THE ASSESSEE HAS LEASED OU T THE BUILDING TO M/S JASLEEN EDUCATIONAL SERVICE SOCIETY WAS NOT PROPERLY DISCLOSED IN THE RETURN OF TOTAL INCOME AN D ALSO NOT REFLECTED IN THE AUDITED FINAL ACCOUNT. HENCE, THE PRIMA FACIE M/S.SHEETU EDUCATIONAL SERVICES P.LTD. I.T.A.NOS. 24 TO 26/IND2015 AND 352 TO 354/IND/2016 PAGE 28 OF 66 THE AO HAS REASON TO BELIEVE FOR ISSUANCE OF THE NO TICE U/S 148 OF THE ACT. FURTHER THE ASSESSEE HAS ALSO NOT C HALLENGED THE ORDER U/S 263 FOR ASSESSMENT YEAR 2007-08 PASSE D BY THE CIT BY SETTING-ASIDE THE ASSESSMENT. THIS MEANS THA T THERE WAS VALID REASON AND FRESH MATERIAL AVAILABLE WITH TH E AO TO REOPEN THE ASSESSMENT. THUS, THE GROUND NO 1 OF TH IS APPEAL CHALLENGING THE ISSUANCE OF THE NOTICE U/S 148 OF T HE ACT HAS NO FORCE AND THIS GROUND OF APPEAL IS REJECTED. 12. GROUND NOS. 2.1, 2.2, 2.3 & 2.4 FOR ASSESSMENT YEAR S 2005-06, 2006-07 AND GROUND NOS. 1.1 TO 1.4 FOR ASS ESSMENT YEAR 2007-08 AND GROUND NOS. 2.1 TO 2.4 FOR ASSESSM ENT YEAR 2008-09 TO 2010-11 RELATE TO MAINTAINING NOTIONAL A DDITION ON ACCOUNT OF HOUSE PROPERTY INCOME OF RS. 19,83,732/- & RS. 20,53,990/-, RS. 21,44,910/-, RS. 22,77,160/-, RS. 24,05,275/- AND RS. 26,11,915/- RESPECTIVELY. HOWEVE R, THE FACTS AND FIGURES RELATING TO ASSESSMENT YEAR 2005- 06 ARE DISCUSSED ONLY, AS FACTS ARE IDENTICAL FOR ALL ASSE SSMENT YEARS. 13. GROUND NO. 3 FOR ASSESSMENT YEAR 2005-06, 2006-07 A ND GROUND NO.2 FOR ASSESSMENT YEAR 2007-08 AND GROUND NO. 3 M/S.SHEETU EDUCATIONAL SERVICES P.LTD. I.T.A.NOS. 24 TO 26/IND2015 AND 352 TO 354/IND/2016 PAGE 29 OF 66 FOR ASSESSMENT YEAR 2008-09 TO 2010-11 RELATE TO NO T ALLOWING DEDUCTION OF INTEREST OUT OF NOTIONAL INCOME FROM H OUSE PROPERTY. THESE GROUNDS RELATE TO ASSESSING THE INC OME FROM HOUSE PROPERTY, HENCE, THE SAME ARE BEING CONSIDERE D TOGETHER. 14. THE ASSESSEE IN THE PRESENT GROUNDS OF APPEAL HAVE CHALLENGED THE TAXABILITY OF INCOME UNDER THE HEAD INCOME FROM HOUSE PROPERTY ON NOTIONAL BASIS. THE ASSESSEE COM PANY IS RUNNING COACHING CLASSES IN ITS BUILDING AND THE S AID BUILDING CONSTRUCTED ON ITS LEASEHOLD PLOT WAS ALSO USED BY J ASLEEN EDUCATIONAL SERVICE SOCIETY FOR RUNNING OF SCHOOL I N THE NAME OF AUCKLAND ACADEMY. THAT IN THE YEAR UNDER CONSIDERAT ION COACHING INCOME WAS VERY LESS BUT IN LAST THREE TO FOUR YEARS , THE ASSESSEE COMPANY EARNED SUBSTANTIAL AMOUNT ON ACCOUNT OF COA CHING INCOME. IT IS ALSO NOT CORRECT TO SAY THAT THE SAID BUILDING IS NOT USED FOR THE PURPOSE OF BUSINESS OF THE ASSESSEE. I N THIS RESPECT, IT IS CLARIFIED THAT THE LEASING OUT OF THE BUILDING T O M/S JASLEEN EDUCATIONAL SERVICE SOCIETY IS THE BUSINESS OF THE ASSESSEE. COPY OF MEMORANDUM & ARTICLES OF ASSOCIATION OF THE COMP ANY IS M/S.SHEETU EDUCATIONAL SERVICES P.LTD. I.T.A.NOS. 24 TO 26/IND2015 AND 352 TO 354/IND/2016 PAGE 30 OF 66 ENCLOSED. THE SAID BUILDING IS ALSO USED FOR THE RU NNING OF THE SCHOOL AUCKLAND ACADEMY, ONE OF THE SCHOOLS RUN BY THE SOCIETY. IN ADDITION TO THE LETTING OUT OF THE PROP ERTY FOR RUNNING OF SCHOOL, THE ASSESSEE WAS ALSO USING THE SAID PROPERT Y FOR RUNNING OF ITS PROFESSIONAL COACHING CLASSES TILL THE ASSES SMENT YEAR 2007- 08. ON PERUSAL OF THE AUDITED FINAL ACCOUNT, IT WAS FOUND THAT THE ASSESSEE WAS HAVING COACHING INCOME TILL THE ASST Y EAR 2007-08, BUT IN TURN NO SEPARATE RENT WAS PAID FOR IT. THUS, THE SAID BUILDING WAS ALSO USED BY THE ASSESSEE FOR RUNNING O F ITS COACHING CLASSES. IN VIEW OF THE ABOVE, WHEN THE BUILDING CON STRUCTED BY THE ASSESSEE WHICH IS ON THE LEASE HOLD LAND OWNED BY THE INDIVIDUAL FAMILY MEMBERS OF LUTHRA AND BUILDING WA S USED BY THE ASSESSEE FOR THE PURPOSE OF ITS PROFESSIONAL COACHI NG CLASSES TILL THE ASST YEAR 2007-08 AND ALSO LEASING OUT THE CONS TRUCTED BUILDING TO M/S JASLEEN EDUCATIONAL SERVICE SOCIETY FOR RUNNING OF ITS SCHOOL IN THE NAME OF AUCKLAND ACADEMY. THE ASS ESSEE HAD NOT CHARGED RENTAL INCOME FROM THE SOCIETY AND IN T URN ALSO NOT PAID INTEREST ON THE AMOUNT OF LOAN TAKEN FROM THAT SOCIETY FOR CONSTRUCTION OF THE BUILDING. THUS, THE ASSESSING O FFICER WAS NOT M/S.SHEETU EDUCATIONAL SERVICES P.LTD. I.T.A.NOS. 24 TO 26/IND2015 AND 352 TO 354/IND/2016 PAGE 31 OF 66 JUSTIFIED IN NOTIONALLY TAXING THE PROPERTY INCOME U/S 23 OF THE ACT. MORESO, WHEN THE PROVISION OF SECTION 22 TO 27 IS NOT APPLICABLE IN THE CASE OF THE ASSESSEE. THE ASSESSE E COMPANY WAS NOT THE OWNER OF LAND BUT INDIVIDUAL FAMILY MEMBERS OF THE LUTHRA FAMILY WAS THE ACTUAL OWNERS OF THE LAND AND THE ASSE SSEE COMPANY HAS TAKEN LAND ON LEASE FROM THE INDIVIDUAL FAMILY MEMBERS. THE SAID LAND WAS TAKEN ON LEASE WITH ANNUA L LEASE RENT OF RS 1000/- PER ANNUM AND LEASE PREMIUM OF RS 40000/-. 15. THE LD CIT[A] OBSERVED THAT THERE WAS NO PROVISION IN THE INCOME TAX ACT FOR SET-OFF OF RENTAL INCOME AGAINST THE INTEREST LIABILITY. THE LD CIT[A] WHILE DECIDING THE APPEAL O F THE ASSESSEE REFERRED THE ORDER AS PASSED IN THE CASE OF THE ABO VE ASSESSEE FOR THE ASST YEAR 2007-08 WHEREIN IN PARAS 3.3 TO 3.5 OF THE ORDER AND CONFIRMED THE ADDITION OF RS. 21,44,910/- FOR ASSES SMENT YEAR 2007-08 AND ACCORDINGLY, ADDITION OF RS. 19,83,732/ - FOR ASSESSMENT YEAR 2005-06 WAS CONFIRMED. 16. THE LD CIT[A] IN HIS ORDER HAS OBSERVED THE FOLLOWIN G FACTS WHILE DECIDING THE APPEAL AS FILED BY THE ASSE SSEE:- M/S.SHEETU EDUCATIONAL SERVICES P.LTD. I.T.A.NOS. 24 TO 26/IND2015 AND 352 TO 354/IND/2016 PAGE 32 OF 66 [I] THE BUILDING WAS LET-OUT TO M/S JASLEEN EDUCATIONAL SERVICE SOCIETY, AN ASSOCIATE CONCERN O F THE APPELLANT. [II] THAT NO RENT WAS CHARGED FOR THIS PREMISES FRO M THE ASST YEAR 2005-06. [III] THE SUBSTANTIAL FUNDS WERE MADE AVAILABLE FOR CONSTRUCTION OF THE BUILDING BY M/S JASLEEN EDUCATIONAL SERVICE SOCIETY TO THE ASSESSEE. [IV] THAT NO INTEREST WAS CHARGED BY M/S JASLEEN EDUCATION SERVICE SOCIETY FROM THE ASSESSEE. 17. THE LD. AUTHORIZED REPRESENTATIVE OF THE ASSESSEE F URTHER CONTENDED THAT HONBLE MUMBAI BENCH OF ITAT IN THE CASE OF SONATA INFORMATION TECHNOLOGY VS. ASSESSEE [ APPEAL NO 1507 OF 2012 DT 05-07-2012 ] HAD AN OCCASION TO DISCUSSED T HE ISSUE OF COMMERCIAL EXPEDIENCY, IN PARA 5 OF THE ORDER, HON BLE BENCH HAS STATED THAT :- _________ASSESSEE RELIED JUDICIAL DECISIONS TO HI GHLIGHT THAT COMMERCIAL EXPEDIENCY MEANS ANYTHING THAT SERV ES TO PROMOTE AND INCLUDES EVERY MEANS SUITABLE TO THAT E ND AND EXPENDITURE WHICH A PRUDENT MAN MAY INCUR FOR T HE PURPOSE OF BUSINESS. THE DECISIONS RENDERED IN THE FOLLOWING CASES WERE REFERRED TO FOR THE ABOVE PROP OSITION VIZ., INDIAN STEEL & WIRE PRODUCTS LTD. V. CIT (1968) 69 ITR 379 & CALCUTTA LANDING & SHIPPING CO. LTD. V. C IT M/S.SHEETU EDUCATIONAL SERVICES P.LTD. I.T.A.NOS. 24 TO 26/IND2015 AND 352 TO 354/IND/2016 PAGE 33 OF 66 (1967) 65 ITR 1, CALCUTTA. IT WAS ARGUED THAT IT WA S THE PREROGATIVE OF THE BUSINESSMAN HOW TO RUN THE BUSIN ESS AND IT IS NOT UPON THE REVENUE TO PRESCRIBE WHAT EXPENDITURE AN ASSESSEE SHOULD INCUR AND IN WHAT CIRCUMSTANCES IT SHOULD INCUR. IT WAS REITERATED TH AT EVERY BUSINESSMAN KNOWS HIS INTEREST BEST - CIT V. DHANRA JGIRJI RAJA NARASINGHIRJI (1973) 91 ITR 544 (SC). THE DECI SION OF THE HON'BLE SUPREME COURT IN THE CASE OF CIT VS. WALCHAND & CO. (1967) 65 ITR 381 (SC) WAS REFERRED TO AND IT WAS SUBMITTED THAT IN APPLYING THE TEST OF COMMERCIAL EXPEDIENCY WHETHER THE EXPENDITURE WAS WHOLLY AND EXCLUSIVELY LAID OUT FOR THE PURPOSE OF BUSINESS, REASONABLENESS OF THE EXPENDITURE HAS TO BE JUDGED FROM THE POINT OF VIEW OF THE BUSINESS MAN A ND NOT OF THE REVENUE. THE HON'BLE BOMBAY HIGH COURT'S DEC ISION IN THE CASE OF ARUNA MILLS (31 ITR 153) WAS ALSO RE FERRED TO WHEREIN IT WAS HELD AS FOLLOWS: 'NOW, WE HAVE HAD OCCASION TO POINT OUT IN SEVERAL DECISIONS THAT WHAT THE INCOME-TAX PURPORTS TO TAX IS BUSINESS PROFITS, AND BUSINESS PROFITS ARE THE TRUE PROFITS OF A BUSINESS AS ASCERTAINED ACCORDING TO COMMERCIA L PRINCIPLES. THERE MAY BE AN EXPENDITURE OR THERE MA Y BE A LOSS WHICH MAY NOT BE AN ADMISSIBLE LOSS UNDER ANY OF THE PROVISIONS OF SECTION 10(2) (CORRESPONDING TO SECTI ON 29 OF THE 1961 ACT) AND YET SUCH AN EXPENDITURE OR LOSS W OULD HAVE TO BE ALLOWED IN ORDER TO DETERMINE WHAT WERE THE TRUE PROFITS OF A BUSINESS, AND IT IS THE DUTY OF E VERYONE WHO HAS ANYTHING TO DO WITH TAXING BUSINESS- PEOPLE TO UNDERSTAND WHAT ARE THE PRINCIPLES OF COMMERCIAL EXPEDIENCY. UNLESS ONE UNDERSTANDS THESE ITA NO.150 7 OF 2012 SONATA INFORMATION TECHNOLOGY LTD MUMBAI E BEN CH PRINCIPLES IT IS DIFFICULT TO MAKE A PROPER ASSESSM ENT ON A BUSINESS OR ON A BUSINESSMAN.' 18. IN THE PRESENT CASE THE ASSESSEE HAS TAKEN A PRUDEN T DECISION FOR NEITHER TAKING RENT FROM M/S JASLEEN E DUCATION M/S.SHEETU EDUCATIONAL SERVICES P.LTD. I.T.A.NOS. 24 TO 26/IND2015 AND 352 TO 354/IND/2016 PAGE 34 OF 66 SERVICE SOCIETY NOR PAID INTEREST ON THE AMOUNT OF LOAN TAKEN FROM THE SOCIETY. THE DISPUTE THE AO CAN RAISE WAS ONLY I N RESPECT OF THE QUANTUM OF AMOUNT BUT NOT THE DEAL AS DONE BY T HE ASSESSEE. THE ASSESSEE IN THIS CASE HAS DECIDED NOT TO CHARG E RENTAL INCOME IN LIEU OF INTEREST DUE ON LOAN AMOUNT. HERE, THE Q UANTUM OF INTEREST AND RENTAL INCOME ARE SAME. SINCE, THIS IS A BETTER DEAL BY THE ASSESSEE WITH M/S JASLEEN EDUCATIONAL SOCIETY. T HE AMOUNT OF RENT WAS ASCERTAINED EQUIVALENT TO THE INTEREST ON L OAN. THE LD CIT[A] WHILE DECIDING THE APPEAL AS FILED FOR THE AS ST YEAR 2007-08 HAS DISCUSSED THE EFFECT WHEN REVENUE IS EFFECTED:- M/S SHEETU EDUCATIONAL SERVICES P LTD M/S JASLEEN EDUCATION SERVICE SOCIETY TO INTEREST PAID NIL RENTAL INCOME NIL TO RENT PAID NIL BY INTEREST INCOME NIL NIL NIL NIL NIL 19. THE LD. AUTHORIZED REPRESENTATIVE OF THE ASSESSEE F URTHER CONTENDED THAT IF WE TAKE AN EXAMPLE THAT THE SAID B UILDING WAS LET OUT BY THE ASSESSEE TO SOME OTHER CONCERNS AND AT THE SAME TIME LOAN WAS ALSO TAKEN FROM SOME OTHER PERSONS. I N THAT CASE THE SITUATION WOULD BE AS UNDER, IN THIS CALCULATION WE HAVE M/S.SHEETU EDUCATIONAL SERVICES P.LTD. I.T.A.NOS. 24 TO 26/IND2015 AND 352 TO 354/IND/2016 PAGE 35 OF 66 CONSIDERED THE FIGURE AS TAKEN BY THE AO IN HIS ORD ER, THOUGH THE SAME WAS DISPUTED BY US IN THE APPEAL IN COMING GROU NDS:- M/S SHEETU EDUCATIONAL SERVICES P LTD M/S JASLEEN EDUCATION SERVICE SOCIETY TO INTEREST PAID 1983732 BY RENTAL INCOME 1983732 TO RENT PAID 1983732 BY INTEREST INCOME 1983732 1983732 1983732 1983732 1983732 20. THAT IN VIEW OF THE ABOVE CALCULATION THE ASSESSEE H AD NEITHER CHARGED RENTAL INCOME NOR PAID INTEREST. HE NCE, EFFECTIVELY THERE WAS NO ESCAPEMENT OF INCOME. THAT IN CASE OF M/S JASLEEN EDUCATION SERVICE SOCIETY, THE SAID SOC IETY HAS NEITHER PAID RENT FOR THE BUILDING NOR CHARGED INTE REST INCOME. HENCE, EFFECTIVELY THERE WAS NO ESCAPEMENT OF INCOME . IF THE ASSESSEE HAS TAKEN LOANS FROM OUTSIDE PARTIES, IN T HAT CASE, THE ASSESSEE WAS LIABLE TO PAY INTEREST INCOME AND AT THE SAME TIME ALSO EARNED RENTAL INCOME FROM M/S JASLEE N EDUCATIONAL SERVICE SOCIETY OR ANY OTHER PARTIES. H ENCE, EFFECTIVE INCOME IN THAT CASE WAS ALSO ZERO. IF M/S JASLEEN EDUCATION SERVICE SOCIETY ADVANCED AMOUNT TO ANY OT HER PARTIES, IN THAT CASE, THE SAID SOCIETY EARNED INTE REST INCOME M/S.SHEETU EDUCATIONAL SERVICES P.LTD. I.T.A.NOS. 24 TO 26/IND2015 AND 352 TO 354/IND/2016 PAGE 36 OF 66 ON THE AMOUNT AS ADVANCED BY IT BUT AT THE SAME TIM E THE SAID SOCIETY WAS ALSO LIABLE TO PAY RENT ON THE BUILDING TAKEN FOR THE PURPOSE OF ITS SCHOOL. HENCE, EFFECTIVELY THERE WAS NO CHANGE IN THE INCOME AS DECLARED BY THE SOCIETY. THE LD CIT[A ] WHILE DECIDING THE APPEAL OF THE ASSESSEE REFERRED THE OR DER AS PASSED IN THE CASE OF THE ABOVE ASSESSEE FOR THE AS ST YEAR 2007-08 WHEREIN IN PARAS 3.3 TO 3.5 OF THE ORDER, AL L ASPECT HAS BEEN CONSIDERED. THE LD CIT[A] WAS OF THE OPINIO N THAT IF INTEREST WAS NOT CHARGED BY M/S JASLEEN EDUCATIONAL SOCIETY, IN THAT CASE, THERE WAS NO INCOME IN THE HAND OF TH E JASLEEN EDUCATIONAL SOCIETY AND AT THE SAME TIME THERE WAS N O EXPENSES IN THE CASE OF THE ASSESSEE. HOWEVER, RENT AL INCOME REMAIN TO BE TAXED IN THE HAND OF THE ASSESSEE BUT THE LD CIT[A] TOTALLY IGNORED THAT WHAT ABOUT RENT PAID BY THE SOCIETY TO THE ASSESSEE COMPANY. SIMILAR TO THE SETTING OFF OF INTEREST, THE AMOUNT OF RENT HAS ALSO BE SET- OFF WITH EACH OT HER. HENCE, EVEN FOLLOWING THE PRINCIPLE OF THE LD CIT[A] HIMSEL F IN THAT CASE ALSO THERE WAS NO INCOME IN THE HAND OF THE ASS ESSEE COMPANY. IN VIEW OF THE ABOVE, THE LD. AUTHORIZED M/S.SHEETU EDUCATIONAL SERVICES P.LTD. I.T.A.NOS. 24 TO 26/IND2015 AND 352 TO 354/IND/2016 PAGE 37 OF 66 REPRESENTATIVE OF THE ASSESSEE CONTENDED THAT AS PE R VIEW TAKEN BY THE LD. CIT(A) IN THE CASE OF THE ASSESSEE AS TAKEN IN THE ASST YEAR 2007-08, IT WAS URGED UPON US TO CONSI DER THE SAME AND DELETE THE EITHER NOTIONAL TAXABILITY OR A LLOWED SET-OFF OF INTEREST AGAINST THE NOTIONAL TAXABILITY OF INCO ME. 21. THE FACTS IN THE PRESENT CASE ARE THE ASSESSEE HAS TAKEN LAND ADMEASURING 1.5 ACRES ON LEASE FROM INDIVIDUAL FAMILY MEMBERS OF THE LUTHRAS FAMILY ON LEASE THROUGH REG ISTERED LEASE DEED DT 24-08-1999 AT A ONETIME PREMIUM OF RS 40000 /- AND ANNUAL LEASE RENT OF RS 1000/-. THE SAID LAND WAS D EMARCATED FOR EDUCATIONAL PURPOSES BY JOINT DIRECTOR OF THE TOWN & COUNTRY PLANNING VIDE ITS LETTER NO 288/IND DT 20-01-1999. COPY OF THE SAID LEASE DEED WAS FILED. AS PER THE LEASE DEED SO EXECUTED THE SAID LAND CAN BE USED FOR EDUCATIONAL PURPOSES. THE LESSEE HAS RIGHT TO SUB-LEASE THE SAID LAND BUT FOR EDUCATIONA L PURPOSES. FROM THE LEASE DEED IT IS CLEAR THAT THE SAID LAND WAS NOT SOLD BY THE LUTHRA FAMILY TO THE ASSESSEE BUT RIGHT TO USE WAS TRANSFERRED TO THE ASSESSEE. THE OWNERSHIP OF THE LAND IS STILL WITH THE LUTHRA FAMILY. AS PER THE TERM OF LEASE DEED, THE ASSESSEE CAN CONSTRUCT A M/S.SHEETU EDUCATIONAL SERVICES P.LTD. I.T.A.NOS. 24 TO 26/IND2015 AND 352 TO 354/IND/2016 PAGE 38 OF 66 BUILDING ON THE SAID LAND. HOWEVER, AS PER TERMS OF THE LEASE DEED, THE SAID LAND CAN BE USED FOR THE PURPOSE OF EDUCAT ION ONLY. THAT IN THE PRESENT CASE, THE ASSESSEE HAS CONSTRUCTED A BUILDING ADMEASURING 18570 SQ FTS. BREAKUP OF THE SAME IS AS UNDER:- S.NO PARTICULARS AREA 1 TOTAL LAND AREA 1.5 ACRES 2 CONSTRUCTED AREA [I] GROUND FLOOR AREA 8060 SQ FTS [II] FIRST FLOOR AREA 8060 SQ FTS [III] AUDITORIUM AREA 1500 SQ FTS [IV] GENERATOR ROOM 250 SQ FTS [V] LIBRARY / READING ROOM 700 SQ FTS TOTAL CONSTRUCTED AREA 18570 SQ FTS 22. THAT FROM THE BALANCE SHEET IT IS CLEAR THAT ALMOST ENTIRE AMOUNT TOWARDS CONSTRUCTION WERE CONTRIBUTED BY M/S JASLEEN EDUCATIONAL SERVICE SOCIETY TO WHOM SAID BUILDING WAS LEASED OUT BY THE ASSESSEE FOR RUNNING OF THE SCHOOL VIZ AUCKL AND ACADEMY. THE OBJECT OF THE ASSESSEE WAS TO EARN PROF IT FROM TAKEN THE SAID LAND ON LEASE AND AGAIN SUB-LEASE. H OWEVER, IN ABSENCE OF THE FINANCE, THE ASSESSEE BOUND TO ENTER INTO AN M/S.SHEETU EDUCATIONAL SERVICES P.LTD. I.T.A.NOS. 24 TO 26/IND2015 AND 352 TO 354/IND/2016 PAGE 39 OF 66 UNDERSTANDING WITH JASLEEN EDUCAIONAL SERVICE SOCIET Y FOR CONSTRUCTION OF THE BUILDING ON THE SAID LAND A ND THEREFORE ENTIRE AMOUNT TOWARDS CONSTRUCTION WERE CONTRIBUTED B Y JASLEEN EDUCATIONAL SERVICE SOCIETY AND IN TURN, BOTH THE P ARTIES OF THE AGREEMENT HAS AGREED THAT NO RENT WAS CHARGED BY THE ASSESSEE AND IN TURN NO INTEREST IS TO BE PAID ON THE AMOUNT OF DEPOSIT. THE LD. AUTHORIZED REPRESENTATIVE OF THE ASSESSEE A LSO FILED COPY OF THE SAID AGREEMENT PLACED AT PAGE NOS. 78 TO 80 OF PAPER BOOK. IN THE PRESENT CASE, THE ASSESSEE HAS TAKEN LAND ON LEASE FROM INDIVIDUAL FAMILY MEMBER OF THE LUTHRAS FAMILY. TH E ANNUAL LEASE RENT AS PAID BY THE ASSESSEE WAS OF RS 1000/- P.A. THE BUILDING WAS CONSTRUCTED BY THE ASSESSEE FROM THE AMOUNT AS R ECEIVED FROM THE SOCIETY. HENCE, THE SCHOOL BUILDING WAS CON STRUCTED WITH THE FINANCE OF M/S JASLEEN EDUCATIONAL SERVICE SOCI ETY. PRIOR TO THE SAID CONSTRUCTION, THE LAND OF THE ASSESSEE IS SIMPLY A VACANT LAND WHICH IS NOT TAXABLE U/S 23 OF THE INCOME TAX A CT. THUS, IN THE PRESENT CASE, IF NO RENT WAS ACTUALLY RECEIVED B Y THE ASSESSEE COMPANY IN THAT CASE, THE AMOUNT OF LEASE RENT AS P AID BY THE ASSESSEE OF RS 1000/- P.A TO THE INDIVIDUAL FAMILY MEMBER OF THE M/S.SHEETU EDUCATIONAL SERVICES P.LTD. I.T.A.NOS. 24 TO 26/IND2015 AND 352 TO 354/IND/2016 PAGE 40 OF 66 LUTHRA FAMILY CAN ONLY BE DISALLOWED BUT IN NO CASE, THE SAME IS TAXABLE U/S 23 OF THE INCOME TAX ACT. THE ASSESSEE ALSO USED ITS BUILDING PREMISES FOR RUNNING OF THE COACHING CLASS ES. THE ASSESSEE HAD CLAIMED DEPRECIATION ON THE BUILDING WH ICH WAS USED BY IT FOR THE PURPOSE OF ITS BUSINESS AND ALSO LEASED OUT AS PER TERM AGREED BY THE ASSESSEE COMPANY WITH AUCKLAN D ACADEMY. THUS, THERE IS NO REASON FOR TAXING THE NO TIONAL INCOME BY INVOKING THE PROVISION OF SECTION 23 OF T HE INCOME TAX ACT. THE ASSESSEE HAS LEASED OUT THE SAID BUILDING FOR LONG TERM USED BY AUCKLAND ACADEMY AND THEREFORE OWNERSHIP OF THE LAND BELONGING TO LUTHRA FAMILY AND OWNERSHIP ON RIG HT TO USE WITH AUCKLAND ACADEMY. SINCE, ENTIRE AMOUNT FOR CONSTRUCTION WAS CONTRIBUTED BY AUCKLAND ACADEMY. TH E ASSESSING OFFICER WAS GROSSLY ERRED IN NOTIONALLY TA XING THE RENTAL INCOME IN THE HAND OF THE ASSESSEE. AS PER PROVISION OF SECTION 27[IIIB] OF THE ACT, IF A PERSON WHO ACQUIRE ANY RIGHTS [EXCLUDING ANY RIGHTS BY WAY OF A LEASE FROM MONTH TO MONTH OR FOR A PERIOD NOT EXCEEDING ONE YE AR] IN OR WITH RESPECT TO ANY BUILDING OR PART THEREOF, BY VIRTUE OF ANY SUCH M/S.SHEETU EDUCATIONAL SERVICES P.LTD. I.T.A.NOS. 24 TO 26/IND2015 AND 352 TO 354/IND/2016 PAGE 41 OF 66 TRANSACTIONS AS IS REFERRED TO IN CLAUSE (F) OF SEC TION 269UA, SHALL BE DEEMED TO BE THE OWNER OF THAT BUILDING OR PART T HEREOF. THAT IN THE PRESENT CASE IN HAND ALSO, THE BUILDING AS CONS TRUCTED ON THE LEASE HOLD PLOT WAS LEASED OUT TO AUCKLAND ACADEMY FOR LONG TERM PERIOD AND NOT ON MONTH TO MONTH LEASE. THE AS SESSEE HAS TAKEN LAND ON LEASE FOR 99 YEARS AND THE SAME WAS AL SO LEASED OUT FOR LONG TERM PURPOSE. HENCE, AS PER PROVISION OF S ECTION 27[IIIB] OF THE ACT, DEEMED OWNERSHIP OF THE BUILDING TRANSFERRE D TO AUCKLAND ACADEMY. HENCE, THERE WAS NO REASON FOR TA XING THE NOTIONAL RENT IN THE HAND OF THE ASSESS. THE LD. AU THORIZED REPRESENTATIVE OF THE ASSESSEE RELIED UPON THE DECI SION OF HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. C.J. INTERN ATIONAL HOTELS LTD AS REPORTED IN 197 TAXMAN 230/ 53 DTR 92 , WHERE IN THE SIMILAR ISSUE HAS BEEN DISCUSSED IN DETAIL. HENCE, THE ASSESSING OFFICER WAS NOT JUSTIFIED IN NOTIONALLY ADDING AN AM OUNT OF RS 19,83,732/- TO THE INCOME OF THE ASSESSEE UNDER THE HEAD OF INCOME FROM HOUSE PROPERTY IN LIGHT OF DETAILED DIS CUSSION IN PARA 2.6 TO 2.9 OF THIS LETTER. M/S.SHEETU EDUCATIONAL SERVICES P.LTD. I.T.A.NOS. 24 TO 26/IND2015 AND 352 TO 354/IND/2016 PAGE 42 OF 66 23. THE LD. DEPARTMENTAL REPRESENTATIVE RELIED UPON TH E ORDERS OF THE LOWER AUTHORITIES. 24. WE HAVE HEARD THE RIVAL SUBMISSIONS OF BOTH THE PAR TIES AND HAVE PERUSED THE MATERIAL AVAILABLE ON RECORD. WE F IND THAT THE ASSESSEE HAS LAND ADMEASURING 1.5 ACRES ON LEASE TH ROUGH REGISTERED LEASE DEED DTD. 24.08.1999 FROM INDIVIDU AL MEMBERS OF LUTHRA FAMILY. AS PER THE LEASE DEED THE LAND SO GI VEN UNDER LEASE CAN BE USED ONLY FOR THE EDUCATIONAL PURPOSES . IT IS ALSO CLEAR FROM LEASE DEED THAT THE SAID LAND OWNERSHIP WAS NOT TRANSFERRED BUT RIGHT TO USE ONLY WAS TRANSFERRED. THE ASSESSEE HAS RECEIVED ADVANCE FROM JASLEEN EDUCATIONAL SERVICE SOCIETY WHI CH WAS UTILIZED FOR CONSTRUCTION OF SCHOOL BUILDING THEREO N. THE ASSESSEE HAS GIVEN THE SAID BUILDING TO JASLEEN EDUCATIONAL SERVICE SOCIETY FOR RUNNING SCHOOL IN NAME OF AUCKLAND ACADEMY. THE ASSESSEE HAD ENTERED IN TO AN DEED OF SUBLEASE DTD. 28.08.19 99 AS APPEARING AT PAGE NO 164 TO 170 OF PAPER BOOK FOR T HE PERIOD OF 30 YEARS . THE ASSESSEE FURTHER ENTERED IN TO AN DEED OF AGREEMENT DTD. 31.03.2000 APPEARING AT PAGE NO 171 - 172 OF PAPER BOOK ACCORDING TO WHICH THE ASSESSEE HAS AGREED WITH JASL EEN M/S.SHEETU EDUCATIONAL SERVICES P.LTD. I.T.A.NOS. 24 TO 26/IND2015 AND 352 TO 354/IND/2016 PAGE 43 OF 66 EDUCATIONAL SERVICE SOCIETY BEING TENANT OF SAID SC HOOL BUILDING THAT TENANT HAS DEPOSITED WITH THE OWNER AN AMOUNT OF SECURITY DEPOSIT ON WHICH INTEREST SHALL NOT BE CHARGED BY JA SLEEN EDUCATIONAL SERVICE SOCIETY AND IN TURN THE OWNER I. E. M/S. SHEETU EDUCATIONAL SERVICE PVT. LTD. SHALL NOT CHA RGE RENT ON SAID BUILDING. THUS, AS PER MUTUAL UNDERSTANDING OF BOTH PARTIES OF AGREEMENT THERE CAN BE NO INCOME ON ACCOUNT OF REN T RECEIPTS OR ANY PAYMENT OF INTEREST ON ACCOUNT OF ADVANCES/ D EPOSITS RECEIVED FROM JASLEEN EDUCATIONAL SERVICE SOCIETY. THE LD. CIT (A) HAD CONSIDERED THIS ASPECT AND VIEWED THAT RENTAL I NCOME IF ANY WOULD BE SET-OFF AGAINST THE INTEREST PAYABLE TO JAS LEEN EDUCATIONAL SERVICE SOCIETY ON ADVANCES. THUS, EFFE CTIVELY THERE IS NO ESCAPEMENT OF INCOME. HOWEVER, CIT(A) DID NOT AL LOW THE SET-OFF OF INTEREST AGAINST RENTAL INCOME BY SAYING THAT T HERE IS NO PROVISION OF DEDUCTION OF INTEREST AGAINST RENTAL I NCOME. 25. WE FURTHER FIND THAT THE ASSESSEE HAD LEASED OUT TH E SAID BUILDING TO JASLEEN EDUCATIONAL SERVICE SOCIETY FOR 30 YEARS FOR RUNNING THEREON AS SCHOOL. THEREFORE, THIS AMOUNTS TO DEEMED TRANSFER OF OWNERSHIP OF BUILDING TO JASLEEN EDUCATI ONAL SERVICE M/S.SHEETU EDUCATIONAL SERVICES P.LTD. I.T.A.NOS. 24 TO 26/IND2015 AND 352 TO 354/IND/2016 PAGE 44 OF 66 SOCIETY APPEAR PROVISION OF SECTION 27(IIB) OF THE ACT WHICH READS AS UNDER:-27. 'OWNER OF THE HOUSE PROPERTY', 'ANNUAL CHARGE', ETC., DEFINED.- FOR THE PURPOSES OF SECTIONS 22 TO 26-- '** ** ** (IIIB) A PERSON WHO ACQUIRES ANY RIGHTS (EXCLUDING ANY RIGHTS BY WAY OF A LEASE FROM MONTH TO MONTH OR FOR A PERIOD NOT EXCEEDING ONE YEAR) IN OR WITH RESPECT TO ANY BUILDING OR PART THEREOF, BY VIRTUE OF ANY SUCH TRA NSACTION AS IS REFERRED TO IN CLAUSE (F) OF SECTION 269UA, S HALL BE DEEMED TO BE THE OWNER.' 26. FOR THE PURPOSES OF SECTION 27 (IIIB), IT IS NECES SARY TO UNDERSTAND THE DEFINITIONS OF 'IMMOVABLE PROPERTY' AND 'TRANSFER' IN SECTION 269UA (D) AND (F), WHICH READ AS UNDER :- '296UA.** ** ** (2)(D) 'IMMOVABLE PROPERTY' MEANS-(I) ANY LAND OR A NY BUILDING OR PART OF A BUILDING, AND INCLUDES, WHERE ANY LAND OR ANY BUILDING OR PART OF A BUILDING IS TO BE TRANSFERRED TOGETHER WITH ANY MACHINERY, PLANT, FURNITURE, FITTINGS OR OTHER THINGS, SUCH MACHINERY , PLANT, FURNITURE, FITTINGS OR OTHER THINGS ALSO. M/S.SHEETU EDUCATIONAL SERVICES P.LTD. I.T.A.NOS. 24 TO 26/IND2015 AND 352 TO 354/IND/2016 PAGE 45 OF 66 EXPLANATION. --FOR THE PURPOSES OF THIS SUB-CLAUSE, 'LAND, BUILDING, PART OF A BUILDING, MACHINERY, PLA NT, FURNITURE, FITTINGS AND OTHER THINGS' INCLUDE ANY RIGHTS THEREIN ; ( II ) ANY RIGHTS IN OR WITH RESPECT TO ANY LAND OR ANY BUILDING OR A PART OF A BUILDING (WHETHER OR NOT INCLUDING ANY MACHINERY, PLANT, FURNITURE, FITTINGS OR OTHER THINGS THEREIN) WHICH HAS BEEN CONSTRUCTED OR WHICH IS TO BE CONSTRUCTED, ACCRUING OR ARISING FROM ANY TRANSACTION (WHETHER BY WAY OF BECOMING A MEMBER OF, OR ACQUIRING SHARES IN, A CO-OPERATIVE SOCIETY, COMPANY OR OTHER ASSOCIATION OF PERSONS OR BY WAY OF ANY AGREEMENT OR ANY ARRANGEMENT OF WHATEVER NATURE), NOT BEING A TRANSACTION BY WAY OF SALE, EXCHANGE OR LEASE OF SUCH LAND, BUILDING OR PART OF A BUILDING ; ( F ) 'TRANSFER'- ( I ) IN RELATION TO ANY IMMOVABLE PROPERTY REFERRED TO IN SUB-CLAUSE(I) OF CLAUSE (D), MEANS TRANSFER OF S UCH M/S.SHEETU EDUCATIONAL SERVICES P.LTD. I.T.A.NOS. 24 TO 26/IND2015 AND 352 TO 354/IND/2016 PAGE 46 OF 66 PROPERTY BY WAY OF SALE OR EXCHANGE OR LEASE FOR A TERM OF NOT LESS THAN TWELVE YEARS, AND INCLUDES ALLOWING THE POSSESSION OF SUCH PROPERTY TO BE TAKEN OR RETAINED IN PART PERFORMANCE OF A CONTRACT OF TH E NATURE REFERRED TO IN SECTION 53A OF THE TRANSFER O F PROPERTY ACT, 1882 (4 OF 1882). EXPLANATION. --FOR THE PURPOSES OF THIS SUB-CLAUSE, A LEASE WHICH PROVIDES FOR THE EXTENSION OF THE TERM THEREOF BY A FURTHER TERM OR TERMS SHALL BE DEEMED TO BE A LEASE FOR A TERM OF NOT LESS THAN TWELVE YEA RS, IF THE AGGREGATE OF THE TERM FOR WHICH SUCH LEASE IS TO BE GRANTED AND THE FURTHER TERM OR TERMS FOR WHICH IT CAN BE SO EXTENDED IS NOT LESS THAN TWELVE YEARS ; ( II ) IN RELATION TO ANY IMMOVABLE PROPERTY OF THE NATURE REFERRED TO IN SUB-CLAUSE (II) OF CLAUSE (D) , MEANS THE DOING OF ANYTHING (WHETHER BY WAY OF ADMITTING AS A MEMBER OF OR BY WAY OF TRANSFER OF SHARES IN A CO-OPERATIVE SOCIETY OR COMPANY OR OTHE R M/S.SHEETU EDUCATIONAL SERVICES P.LTD. I.T.A.NOS. 24 TO 26/IND2015 AND 352 TO 354/IND/2016 PAGE 47 OF 66 ASSOCIATION OF PERSONS OR BY WAY OF ANY AGREEMENT OR ARRANGEMENT OR IN ANY OTHER MANNER WHATSOEVER) WHICH HAS THE EFFECT OF TRANSFERRING, OR ENABLING TH E ENJOYMENT OF, SUCH PROPERTY.' 27. THUS, SUB CLAUSE (I) OF SECTION 269UA(F) MAKES INTE R ALIA TRANSACTION OF LEASE FOR A TERM OF NOT LESS THAN TW ELVE YEARS, A TRANSFER IN RELATION TO THE IMMOVABLE PROPERTY REFE RRED TO IN SUB-CLAUSE (I) OF CLAUSE (D). THE EXPLANATION APPEN DED TO SUB- CLAUSE (I) OF SECTION 269UA (F) CLARIFIES THAT A LE ASE WHICH PROVIDE FOR THE EXTENSION OF TERM BY A FURTHER TERM OR TERMS SHALL BE DEEMED TO BE A LEASE IF THE AGGREGATE OF T HE TERM FOR WHICH SUCH LEASE IS TO BE GRANTED AND THE FURTHER TE RM OR TERMS IS NOT LESS THAN TWELVE YEARS. THE ESSENTIAL C ONDITION, THEREFORE, FOR A TRANSFER OF AN IMMOVABLE PROPERTY REFERRED TO IN CLAUSE (D)(I) OF SECTION 269UA IS THAT LEASE MUS T BE FOR A TERM OF NOT LESS THAN TWELVE YEARS. FOR COMPUTING TWE LVE YEARS, IT IS NOT NECESSARY THAT INITIAL TERM OF LEASE MUST BE LESS OF TWELVE YEARS, BUT IF THE LEASE PROVIDES FOR EXTENSIO N OF LEASE AND SUCH LEASE HAS BEEN EXTENDED BY A FURTHER TERM OR TERMS M/S.SHEETU EDUCATIONAL SERVICES P.LTD. I.T.A.NOS. 24 TO 26/IND2015 AND 352 TO 354/IND/2016 PAGE 48 OF 66 AND THE AGGREGATE OF SUCH TERM IS NOT LESS THAN TWEL VE YEARS, IT IS DEEMED TO BE A TRANSFER OF IMMOVABLE PROPERTY AN D SUCH TRANSFEREE IS DEEMED TO BE OWNER OF SUCH IMMOVABLE P ROPERTY UNDER SECTION 27(IIIB) OF THE INCOME TAX ACT. 28. IN THE LIGHT OF ABOVE PROVISION WE FIND THAT THE OWN ERSHIP OVER THE BUILDING WAS DEEMED TO HAVE BEEN TRANSFERRE D U/S 27(IIIB) TO JASLEEN EDUCATIONAL SERVICE SOCIETY AS THE ASSESSEE HAS LET OUT THE SCHOOL BUILDING EXCEEDING MORE THAN 12 YEARS OF LEASE AS PER SUBLEASE DEED DTD. 28.08. 1999 PAGE NO 164 TO 170 OF PAPER BOOK AND SUBSEQUENT DEED DAT ED 31.03.2000. THEREFORE, THE IS NO QUESTION OF ANY NO TIONAL INCOME IN THE HANDS OF THE ASSESSEE ON ACCOUNT OF I NCOME FROM HOUSE PROPERTY UNDER AS PER PROVISION OF SEC TION 27(IIIB) OF THE ACT . THE LD. A.R. HAS RELIED IN THE CASE O F NAHALCHAND LALOOCHAND (P) LTD. VS. ACIT, MUMBAI[2014] 52 TAXMA NN.COM 1567(SC)/ [2015] 228 TAXMAN 1(SC) WHEREIN IT WAS HELD THAT THE ESSENTIAL CONDITION, FOR A TRANSFER OF AN IMMOV ABLE PROPERTY REFERRED TO IN CLAUSE (D)(I) OF SECTION 269UA IS TH AT LEASE MUST BE FOR A TERM OF NOT LESS THAN TWELVE YEARS. FOR COMPU TING TWELVE M/S.SHEETU EDUCATIONAL SERVICES P.LTD. I.T.A.NOS. 24 TO 26/IND2015 AND 352 TO 354/IND/2016 PAGE 49 OF 66 YEARS, IT IS NOT NECESSARY THAT INITIAL TERM OF LEA SE MUST BE LESS OF TWELVE YEARS. BUT IF THE LEASE PROVIDES FOR EXTE NSION OF LEASE AND SUCH LEASE HAS BEEN EXTENDED BY A FURTHER TERM OR TERMS AND THE AGGREGATE OF SUCH TERM IS NOT LESS THAN TWE LVE YEARS, IT IS DEEMED TO BE A TRANSFER OF IMMOVABLE PROPERTY AN D SUCH TRANSFEREE IS DEEMED TO BE OWNER OF SUCH IMMOVABLE PROPERTY UNDER SECTION 27(IIIB) OF THE INCOME TAX ACT. [PARA 3] IN THE PRESENT CASE THE ASSESSEE HAS RENTED OUT THE SAID B UILDING FOR 30 YEARS OF LEASE, HENCE, FACTS OF THIS DECISION IS SQUARELY COVERED. 29. WE ALSO FIND SUPPORT FROM DECISION OF HON`BLE DELH I HIGH COURT IN THE CASE OF CIT VS. C.J. INTERNATIONAL HOTELS LTD. [2011] 197 TAXMAN 230 (DELHI) WHEREIN IT WAS HELD AS UNDER :- 4. WITH THE CONSENT OF THE LEARNED COUNSEL FOR THE PARTIES, WE HAVE HEARD THE MATTER FINALLY AT THIS S TAGE ITSELF. THE FACTS IN BRIEF LEADING TO THE AFORESAID QUESTION OF LAW MAY BE RECAPITULATED FIRST. THE ASSESSEE-COMPAN Y IS RUNNING A FIVE STAR HOTEL KNOWN AS HOTEL LE-MERIDIA N M/S.SHEETU EDUCATIONAL SERVICES P.LTD. I.T.A.NOS. 24 TO 26/IND2015 AND 352 TO 354/IND/2016 PAGE 50 OF 66 WINDSOR PLACE, NEW DELHI. THE LAWN ON WHICH THE HOT EL IS CONSTRUCTED BELONGS TO NDMC AND NDMC HAS EXECUTED A LICENSE DEED IN FAVOUR OF THE ASSESSEE GRANTING LIC ENCE FOR A PERIOD OF 99 YEARS FOR THE RUNNING OF THE AFORESA ID HOTEL. AFTER TAKING THE SAID LAWN ON LICENCE ON THE TERMS EXECUTED IN THE LICENCE DEED, THE ASSESSEE HAD CONS TRUCTED THE SAID HOTEL. ADJACENT TO THE HOTEL, THERE IS ANO THER BUILDING CONSTRUCTED ON THIS VERY LAWN, WHICH IS KN OWN AS WEST TOWER. THIS BUILDING IS LOCATED IN THE SAME COMPOUND IN WHICH THE HOTEL BUILDING IS LOCATED. ADMITTEDLY, THIS BUILDING IS NOT USED FOR HOTEL BUS INESS OF THE ASSESSEE, BUT THE APARTMENTS OF THIS BUILDING W ERE GIVEN ON SUB-LICENCE BASIS TO DIFFERENT PARTIES FOR CARRYING ON BUSINESS AS SPECIFIED ON THE SUB-LICENCE AGREEME NTS. THE LICENCE AGREEMENT WHICH WAS ENTERED INTO BETWEE N THE ASSESSEE AND THE NDMC PERMITS THE ASSESSEE TO S UB- LICENCE THE PORTION OF THE PREMISES. IT IS ON THE B ASIS OF THIS AUTHORIZATION GIVEN IN THE LICENCE DEED THAT THE AS SESSEE HAS SUB-LICENCED OFFICES AND APARTMENTS IN THE WEST M/S.SHEETU EDUCATIONAL SERVICES P.LTD. I.T.A.NOS. 24 TO 26/IND2015 AND 352 TO 354/IND/2016 PAGE 51 OF 66 TOWER TO THE VARIOUS PARTIES. THE SUB-LICENCES GIVE N TO THESE PARTIES ARE FOR A PERIOD OF 9 YEARS AND 11 MO NTHS, WHICH IS RENEWABLE AT THE REQUEST FOR THE SUB-LICEN SEES. THE ASSESSEE IS NOT CHARGING ANY RENT LEASE OR LICE NCE FEE FROM THESE PARTIES INSTEAD, THE ASSESSEE HAS RECEIV ED INTEREST FREE SECURITY DEPOSITS IN THE YEAR OF ORIG INAL SUB- LICENCE, WHICH RECEIPT WAS SHOWN BY THE ASSESSEE- COMPANY AS UNSECURED LOAN IN ITS BALANCE SHEET. THE SUB- LICENCE DEEDS, WHICH ARE EXECUTED BY THE ASSESSEE W ITH THE SUB-LICENSEES ALSO PERMIT THE SUB-LICENSEES TO TRANSFER THE SAME TO ANY OTHER PERSON ON PAYMENT OF TRANSFER CHARGES TO THE ASSESSEE-COMPANY. THUS, THE SUB-LICE NSEE IS ENTITLED TO TRANSFER THE SAID SUB-LICENCE TO THI RD PARTY AS WELL. HOWEVER, AT THE TIME OF TRANSFER OF THE SAID SUB- LICENCE, CERTAIN TRANSFER CHARGES ARE PAYABLE TO TH E ASSESSEE-COMPANY. IT IS NOT IN DISPUTE THAT WHENEVE R THESE TRANSFER CHARGES ARE RECEIVED BY THE ASSESSEE ON TRANSFER OF SUB-LICENCE BY THE SUB-LICENSEE IN FAVO UR OF THE M/S.SHEETU EDUCATIONAL SERVICES P.LTD. I.T.A.NOS. 24 TO 26/IND2015 AND 352 TO 354/IND/2016 PAGE 52 OF 66 THIRD PARTY, THE ASSESSEE IS SHOWING THESE TRANSFER CHARGES AS ITS INCOME AND IS OFFERING THE SAME FOR TAX. 5. THE ASSESSING OFFICER (AO) FOUND THAT ALMOST ALL T HE SUB-LICENSEES HAD TRANSFERRED THEIR SUB-LICENSES AN D VARIOUS OTHER PERSONS WERE, THUS, OCCUPYING THESE PREMISES. THOSE PERSONS HAVE ENTERED INTO THE AGREE MENT WITH THE SUB-LICENSEES AS PER WHICH THEY WERE PAYIN G RENTS TO THE SUB-LICENSEES. IT IS ALSO AN ADMITTED FACT THAT THE RENTS/LICENCE FEES RECEIVED BY THE SUB-LICENSEE S ON THESE TRANSFERS TO THE OCCUPIERS HAS BEEN SHOWN AS RENTAL INCOME AND TAXED AT THE HANDS OF SUB-LICENSEES UNDE R THE HEAD INCOME FROM HOUSE PROPERTY. 6. THE ASSESSING OFFICER, HOWEVER, ASKED THE ASSESSEE TO EXPLAIN WHY PROPERTY KNOWN AS WEST TOWER BE NOT FIX ED ON ITS ANNUAL LETTING VALUE AS PER WHICH SECTION 23 OF THE INCOME-TAX ACT (HEREINAFTER REFERRED TO AS THE ACT ). TO PUT IT OTHERWISE, THE ASSESSING OFFICER WANTED TO FIX A NNUAL LETTING VALUE IN RESPECT OF THE SAID WEST TOWER SUB - LICENSED BY THE ASSESSEE BY FIXING ITS NOTIONAL VAL UE AND M/S.SHEETU EDUCATIONAL SERVICES P.LTD. I.T.A.NOS. 24 TO 26/IND2015 AND 352 TO 354/IND/2016 PAGE 53 OF 66 CHARGING THE TAX THEREUPON UNDER THE HEAD INCOME F ROM HOUSE PROPERTY. IT IS FOR THIS REASON THAT THE AFO RESAID SHOW- CAUSE NOTICE WAS ISSUED. THE ASSESSEE IN REPL Y TO THE SAID NOTICE RAISED VARIOUS OBJECTIONS TO THE AF ORESAID PROPOSED MOVE OF THE ASSESSING OFFICER. SOME OF THE SE OBJECTIONS INCLUDED: (A)THE ASSESSEE WAS ONLY A LICENSEE IN RESPECT OF THE AFORESAID PREMISES AND THE ACTUAL OWNER WAS NDMC. THUS, THE ASSESSEE WAS NOT THE OWNER OF THE PREMISES. THEREFORE, PROVISIONS OF SECTION 23 OF TH E ACT ARE NOT APPLICABLE. (B)IT WAS ALSO HIGHLIGHTED THAT IN THE PREVIOUS YEA RS, THE AFORESAID ARRANGEMENT AS DISCLOSED BY THE ASSESSEE WAS ACCEPTED BY THE ASSESSING OFFICER AND THEREFORE, ON THE PRINCIPLE OF CONSISTENCY, SUCH A MOVE ON THE PART OF THE ASSESSING OFFICER IN FIXING THE ANNUAL LETTING VALUE OF THE WEST TOWER, WHEN NO ACTUAL RENT/LICENCE FEE WAS RECEIVED BY THE ASSESSE E, WAS NOT PROPER. M/S.SHEETU EDUCATIONAL SERVICES P.LTD. I.T.A.NOS. 24 TO 26/IND2015 AND 352 TO 354/IND/2016 PAGE 54 OF 66 (C)THE ASSESSEE HAD ENTERED INTO SUB-LICENCE DEEDS IN RESPECT OF THOSE PORTIONS AND IT COULD NOT BE DEEME D AS LETTING OF THE PROPERTY AND FOR THIS REASON AL SO PROVISIONS OF SECTION 22 OF THE ACT WOULD NOT BE APPLICABLE, AS THE ASSESSEE CONTINUED TO BE IN THE LEGAL OCCUPATION AND POSSESSION. (D)THE USE OF THE PREMISES BY THE SUB-LICENSEES WAS TO ASSIST THE ASSESSEE-COMPANY IN GETTING HOTEL ACCOMMODATION BOOKED FOR THE GUESTS, DELEGATES OF THE SUB-LICENSEES, APART FROM THE INCREASE IN CATER ING AND RESTAURANTS ACTIVITIES USED BY THE SUB-LICENSE ES. THEREFORE, THE USE OF CERTAIN PORTION BY THE SUB- LICENSEES WAS NOT FOR THE PURPOSE OF OR FOR THE BEN EFIT OF THE BUSINESS OF THE ASSESSEE-COMPANY. 7. THE ASSESSING OFFICER, HOWEVER, DID NOT ACCEPT THE AFORESAID EXPLANATION FURNISHED BY THE ASSESSEE . HE WAS OF THE VIEW THAT THE LICENSE AGREEMENT WITH THE NDMC WAS FOR A PERIOD OF 99 YEARS WITH THE RIGH T OF CONSTRUCTING AND DEVELOPING THE PROPERTY WHICH M/S.SHEETU EDUCATIONAL SERVICES P.LTD. I.T.A.NOS. 24 TO 26/IND2015 AND 352 TO 354/IND/2016 PAGE 55 OF 66 MAKES THE ASSESSEE-COMPANY OWNER OF THE PROPERTY. HE ALSO OPINED THAT THE ASSESSEE-COMPANY HAD SUB- LICENSED THE OFFICES AND APARTMENTS TO VARIOUS PERSONS, SOME OF WHOM HAD FURTHER SUB-LICENSED THE SAME; THE ASSESSEE WAS NOT CHARGING ANY RENT, FEES ETC. ON THE SUB-LICENSING OF THESE PROPERTIES, EXCE PT INTEREST FREE SECURITY DEPOSITS WHICH WERE TAKEN BY THE ASSESSEE AT THE TIME OF SUB- LICENCE AGREEMENT. THEREFORE, IT WAS PROPER, IN SUCH CIRCUMSTANCES, TO FIX NOTIONAL ANNUAL LETTING VALUE OF THE PREMISES AND T O CHARGE TAX THEREUPON INSOFAR AS THE ASSESSEE IS CONCERNED. 8. WE MAY ALSO POINT OUT THAT IN ITA NO. 1254 OF 2010, WHICH PERTAINS TO THE ASSESSMENT YEAR 1999- 2000 ORIGINALLY NO SUCH ADDITION WAS MADE. HOWEVER, REASSESSMENT PROCEEDINGS WERE STARTED BY ISSUANCE OF NOTICE UNDER SECTION 143(2) READ WITH SECTION 147 OF THE ACT AND THE TRIBUNAL QUASHED THOSE REASSESSMENT PROCEEDINGS. IT IS NOT NECESSARY M/S.SHEETU EDUCATIONAL SERVICES P.LTD. I.T.A.NOS. 24 TO 26/IND2015 AND 352 TO 354/IND/2016 PAGE 56 OF 66 TO GO INTO THE QUESTION AS TO WHETHER REASSESSMENT PROCEEDINGS WERE INITIATED OR NOT INASMUCH AS ON MERIT ITSELF WE HAVE DECIDED THAT SUCH AN ADDITION WAS NOT PROPER. 9. THE ASSESSING OFFICER THEREAFTER TOOK INTO CONSIDERATION THE RENT/LICENCE FEE, WHICH WAS PAID BY THE OCCUPIERS TO THE SUB-LICENSEES TO WHOM THE ASSESSEE HAD SUB-LICENSED THE PREMISES. THE ASSESSING OFFICER ON THAT BASIS CALCULATED FIRST CA RE FEE AVERAGE AND TREATED THE SAME AS ANNUAL LETTING VALUE OF THE SAID WEST TOWER AND ADDED THE SAME UNDER THE HEAD 'INCOME FROM HOUSE PROPERTY'. 10. THE ASSESSEE PREFERRED APPEAL AGAINST THIS ORDER BEFORE THE CIT(A). IN THIS APPEAL, THE ASSESS EE TOOK AN ADDITIONAL GROUND PREDICATED ON THE PROVISIONS OF SECTION 27(III) READ WITH SECTION 269UA(F)( II) OF THE ACT AND SUBMITTED THAT UNDER THOSE PROVISIONS, IT WOULD BE A SUB-LICENSEE AS DEEMED OWNER WOULD BE CHARGED TO TAX IN HIS HANDS. M/S.SHEETU EDUCATIONAL SERVICES P.LTD. I.T.A.NOS. 24 TO 26/IND2015 AND 352 TO 354/IND/2016 PAGE 57 OF 66 THE CIT(A) CONSIDERED THIS ARGUMENT, WHICH WAS PURELY A LEGAL ARGUMENT BASED ON THE INTERPRETATION OF THE AFORESAID SECTIONS ON ADMITTED FACTS ON RECO RD, BUT DID NOT ACCEPT THE AFORESAID PLEADING. AFTER CONSIDERING OTHER SUBMISSIONS OF THE APPELLANT, WHICH WERE RAISED BEFORE THE ASSESSING OFFICER, THE CIT(A) UPHELD THE ORDER OF THE ASSESSING OFFICER ON THIS GROUND. IN THIS SCENARIO, THE ASSESSEE PREFERR ED FURTHER APPEAL BEFORE THE INCOME-TAX APPELLATE TRIBUNAL (HEREINAFTER REFERRED TO AS THE TRIBUNAL ). THIS TIME, BEFORE THE TRIBUNAL, THE ASSESSEE SUCCEEDED IN ITS ATTEMPT TO DEMONSTRATE THAT THE ASSESSEE COULD NOT BE LIABLE TO PAY ANY SUCH TAX FIXING LETTING VALUE ON NOTIONAL BASIS WHEN, IN FAC T, NO SUCH AMOUNT OF RENT/LICENCE FEE WAS RECEIVED BY THE ASSESSEE. THE TRIBUNAL EXAMINED THE LICENCE AGREEMENT ENTERED INTO BETWEEN THE NDMC AND THE ASSESSEE ON THE BASIS OF WHICH IT HAS COME TO THE CONCLUSION THAT IT IS THE NDMC, WHICH IS THE 'OWNER OF M/S.SHEETU EDUCATIONAL SERVICES P.LTD. I.T.A.NOS. 24 TO 26/IND2015 AND 352 TO 354/IND/2016 PAGE 58 OF 66 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 PROVISIONS OF SECTION 27(III) OF THE AC T, IT IS THE SUB-LICENSEE WHO WOULD BE 'DEEMED OWNER' OF THOSE PREMISES WHICH THE SUB-LICENSEES WHEREOF TRANSFERRED TO THE PRESENT OCCUPIERS AND THOSE OCCUPIERS ARE PAYING RENT/LICENCE FEE TO THE SUB- LICENSEES. ON THAT BASIS, THE TRIBUNAL HAS SET ASID E THE ADDITION MADE BY THE ASSESSING OFFICER AND DELETED THIS COMPONENT OF INCOME HOLDING THAT THE SAME WOULD NOT BE CHARGEABLE TO TAX. 11. THIS IS HOW THE DEPARTMENT HAS FILED THE APPEALS PERTAINING TO DIFFERENT ASSESSMENT YEARS. A S POINTED OUT ABOVE, THOUGH THE ISSUES BEFORE THE ASSESSING OFFICER, CIT(A) AS WELL AS THE TRIBUNAL WERE NUMEROUS, IN THESE APPEALS PRIMARILY ONE QUESTION OF LAW WHICH IS FORMULATED AND REPRODUCED ABOVE HAS BEEN PRESSED BY THE DEPARTMENT. M/S.SHEETU EDUCATIONAL SERVICES P.LTD. I.T.A.NOS. 24 TO 26/IND2015 AND 352 TO 354/IND/2016 PAGE 59 OF 66 12. FOR THE AFORESAID REASONS, WE ARE OF THE VIEW THAT THE APPROACH OF THE TRIBUNAL IN DECIDING THE AFORESAID ISSUE IS PERFECTLY JUSTIFIED. THERE IS NO REASON TO INTERFERE WITH THE SAME. WE CLARIFY THAT THE ASSESSEE WOULD NOT BE ENTITLED TO DEPRECIATION ON T HIS PURPOSE. WE, THUS, ANSWER THE QUESTION OF LAW IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE, AS A RESULT THEREOF ALL THESE APPEALS ARE DISMISSED. 30. SINCE IN THE PRESENT CASE ALSO THE ASSESSEE HAS GIV EN THE BUILDING ON LEASE FOR MORE THAN 12 YEARS HENCE, DEE MED OWNERSHIP HAS BEEN TRANSFERRED TO JASLEEN EDUCATIONA L SERVICE SOCIETY, THEREFORE, NO NOTIONAL INCOME UNDER THE HE AD OF INCOME FROM HOUSE PROPERTY IS CHARGEABLE IN THE CAS E OF THE ASSESSEE. THEREFORE, RESPECTFULLY FOLLOWING THE ABOV E DECISION, WE HOLD THAT THE AO WAS NOT JUSTIFIED IN CHARGING OF NOTIONAL RENTAL INCOME IN THE HANDS OF THE ASSESSEE ON BUILD ING USED FOR RUNNING OF SCHEDULE BY JASLEEN EDUCATIONAL SERV ICE SOCIETY. IN THE LIGHT OF ABOVE FACTS AND CIRCUMSTAN CES, THE ALL ABOVE GROUNDS OF APPEAL FOR ALL THE SIX YEARS ARE A LLOWED AND M/S.SHEETU EDUCATIONAL SERVICES P.LTD. I.T.A.NOS. 24 TO 26/IND2015 AND 352 TO 354/IND/2016 PAGE 60 OF 66 GROUND NO. 3 FOR A.Y. 05-06,06-07, AND 08-09 TO 10- 11 AND GROUND NO. 2 FOR A.Y. 07-08 HAS BECOME INFRUCTUOUS HENCE, TREATED AS DISMISSED. 31. GROUND NO. 4 FOR ASSESSMENT YEARS 2005-06, 2006-07, GROUND NO. 3 FOR ASSESSMENT YEAR 2007-08 AND GROUND NO. 4 FOR ASSESSMENT YEAR 2008-09 TO 2010-11 RELATE TO MAINTA INING DISALLOWANCE OF EXPENSES OF RS. 3,35,652/-, RS. 4,45 ,470/-, RS. 4,90,583/-, RS. 34,640/-, RS. 4,729/- AND RS. 22,01 2/- RESPECTIVELY CLAIMED AGAINST COACHING INCOME. 32. THE LD. COUNSEL FOR THE ASSESSEE CONTENDED THAT IN THIS GROUND OF APPEAL, THE ASSESSEE HAS CHALLENGED THE D ISALLOWANCE OF EXPENSES OF RS 3,35,652/- FOR ASSESSMENT YEAR 2005- 06. THE ASSESSEE HAS SHOWN COACHING INCOME OF RS 5,00,000/- AND AGAINST THE COACHING INCOME, CERTAIN DEDUCTION WAS CLAIMED. THE NATURE OF INCOME AND EXPENSE AS CLAIMED BY THE ASSESSEE AR E AS UNDER:- S. NO. PARTICULARS 2005-06 1 COACHING & OTHER FEE RECEIVED 5,00,000 2. OTHER INCOME - TOTAL INCOME 5,00,000 M/S.SHEETU EDUCATIONAL SERVICES P.LTD. I.T.A.NOS. 24 TO 26/IND2015 AND 352 TO 354/IND/2016 PAGE 61 OF 66 1 SALARIES 2,89,171 2 OFFICE EXPENSES 573 3 LEGAL & PROFESSIONAL CHARGES 1,200 4 LEASE RENT 1,000 5. INSURANCE CHARGES 10,242 6. BANK CHARGES 2,065 7. FILING CHARGES 600 8. AUDIT FEES 4,000 9. PRE - OPERATIVE EXP 1,308 10. RATES & TAXES 22,993 11. PROFESSIONAL TAX 2,500 12 TELEPHONE EXP - 13. CONVEYANCE - 14. FBT TAX - TOTAL EXPENSES 3,35,652 NET PROFIT/LOSS BEFORE DEPRECIATION 1,64,348 15. DEPRECIATION 5,72,905 NET LOSS AFTER DEPRECIATION -4,08,557 33. THE TOTAL EXPENSES AS INCURRED BY THE ASSESSEE WAS OF RS 3,35,652/-. THE ASSESSEE PRIOR TO CLAIMING OF DEPRE CIATION OF RS 5,72,905/- EARNED NET INCOME OF RS 1,64,348/-. THUS , IT IS NOT CORRECT ON THE PART OF THE ASSESSING OFFICER TO DIS ALLOW ENTIRE AMOUNT OF EXPENSES AS CLAIMED BY THE ASSESSEE EVEN WHEN FROM M/S.SHEETU EDUCATIONAL SERVICES P.LTD. I.T.A.NOS. 24 TO 26/IND2015 AND 352 TO 354/IND/2016 PAGE 62 OF 66 THE COACHING BUSINESS, THE ASSESSEE HAVING NET INCO ME OF RS 1,64,348/-.FROM THE EXPENSES, IT IS CLEAR THAT THES E EXPENSES HAVING DIRECT NEXUS WITH THE INCOME AS SHOWN BY THE A SSESSEE. HENCE, THE ASSESSING OFFICER WAS NOT JUSTIFIED IN AC CEPTING THE INCOME OF THE ASSESSEE AND DISALLOWING ENTIRE AMOUNT OF EXPENSES AS CLAIMED BY IT. FROM THE NATURE OF EXPENSES IT IS CLEAR THAT THESE ARE INCIDENTAL TO THE BUSINESS OF THE ASSESSEE COMP ANY. HENCE, THE SAME IS ALLOWABLE AS BUSINESS EXPENDITURE. THE LD. COUNSEL FOR THE ASSESSEE CONCLUDED THAT THE ASSESSING OFFICER WA S NOT JUSTIFIED IN DISALLOWING THE ENTIRE AMOUNT OF EXPENSES AS CLAI MED. THE DISALLOWANCE OF RS 3,35,652/- AS MADE BY THE ASSESSI NG OFFICER MAY BE DELETED IN FULL. 34. THE LD. DEPARTMENTAL REPRESENTATIVE RELIED UPON TH E ORDERS OF THE LOWER AUTHORITIES. 35. WE HAVE CONSIDERED THE FACTS, RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FIND FROM THE ABOVE THAT SINCE THE CORRESPONDING INCOME WAS TAXED BY THE ASS ESSING OFFICER AND DISALLOWANCE OF EXPENSES AS CLAIMED IS NOT JUST IFIABLE, THE DISALLOWANCE OF EXPENSES AS MADE BY THE ASSESSING OF FICER WAS NOT M/S.SHEETU EDUCATIONAL SERVICES P.LTD. I.T.A.NOS. 24 TO 26/IND2015 AND 352 TO 354/IND/2016 PAGE 63 OF 66 JUSTIFIABLE. WE HEREBY DIRECT THE ASSESSING OFFICER TO ALLOW THE DEDUCTION ON ACCOUNT OF EXPENSES AS CLAIMED BY THE ASSESSEE. ACCORDINGLY, THE ABOVE GROUNDS OF APPEAL FOR ALL TH E ASSESSMENT YEARS ARE ALLOWED. 36. GROUND NO. 5 FOR ASSESSMENT YEAR 2005-06 & 2006-07, GROUND NO. 4 FOR ASSESSMENT YEAR 2007-08 AND GROUND NO. 5 FOR ASSESSMENT YEAR 2008-09 TO 2010-11 RELATE TO MAINTA INING OF DISALLOWANCE OF DEPRECIATION OF RS. 5,72,905/-, RS. 6,22,197/-, RS. 5,06,445/-, RS. 5,29,073/-, RS. 4,93,017/- AND RS. 4,61,523/- RESPECTIVELY. 37. THE ABOVE GROUNDS OF APPEAL TAKEN BY THE ASSESSEE I N ALL THE ASSESSMENT YEARS PERTAINING TO DEPRECIATION ON BUIL DING AND OTHER ASSETS LIKE FURNITURE & FIXTURE ETC. THE LD. AUTHOR IZED REPRESENTATIVE OF THE ASSESSEE DID NOT PRESS THE GR OUND RELATING TO DEPRECIATION ON SCHOOL BUILDINGS, HENCE, THE DISALL OWANCE OF DEPRECIATION RELATING TO BUILDING IS DISMISSED AND DEPRECIATION OTHER THAN BUILDING IS ALLOWED ACCORDINGLY. THIS GR OUND IS PARTLY ALLOWED. M/S.SHEETU EDUCATIONAL SERVICES P.LTD. I.T.A.NOS. 24 TO 26/IND2015 AND 352 TO 354/IND/2016 PAGE 64 OF 66 38. GROUND NO. 6 RELATES TO CHARGING OF INTEREST U/S 23 4B FOR ASSESSMENT YEARS 2005-06, 2006-07, 2008-09 TO 2010- 11 AND GROUND NO. 5 OF ASSESSMENT YEAR 2007-08. 39. THE LD. COUNSEL FOR THE ASSESSEE CONTENDED THAT IN GROUND NO 6, THE ASSESSEE CLAIMED INTEREST U/S 234B OF THE ACT , WHICH IS CHARGEABLE AS PER SUB-SECTION [3] OF SECTION 234B O F THE ACT. THE ASSESSMENT ORDER IN THIS CASE WAS PASSED U/S 147 R.W. S 143[3] OF THE ACT AND THEREFORE INTEREST UNDER THIS SECTION I S CHARGEABLE AS PER SUB-SECTION [3] OF SECTION 234B OF THE ACT AS H ELD BY THIS BENCH. THE I.T.A.T., INDORE BENCH IN THE SAID CASE HAS HELD AS UNDER :- '77. WE HAVE CONSIDERED THE RIVAL CONTENTIONS. IN VIEW OF DECISION OF KERALA HIGH COURT IN THE CASE O F LAKSHMIKANTHAN (SUPRA), WE DIRECT THE ASSESSING OFFICER TO RECOMPUTE THE INTEREST U/S 234B WHICH PROVIDES THAT WHERE ORIGINAL ASSESSMENT COMPLETED U/S 143 IS REVISED EITHER U/S 147 OR U/S 153A, THEN INTEREST FOR NON-PAYMENT OR SHORT PAYMENT OF ADVANCE TAX IS PAYABLE ONLY FOR THE PERIOD MENTIONE D M/S.SHEETU EDUCATIONAL SERVICES P.LTD. I.T.A.NOS. 24 TO 26/IND2015 AND 352 TO 354/IND/2016 PAGE 65 OF 66 IN SECTION 234B(3) WHICH PROVIDES FOR INTEREST FROM THE DATE OF COMPLETION OF REGULAR ASSESSMENT U/S 143(1) TILL THE DATE OF COMPLETION OF REASSESSMENT. THE ASSESSING OFFICER IS DIRECTED ACCORDINGLY.' 40. THE LD. AUTHORIZED REPRESENTATIVE OF THE ASSESSEE C ONCLUDED THAT THE LD. CIT(A) HAS CONSIDERED THE SAID GROUND AS CONSEQUENTIAL IN NATURE. THE HON'BLE BENCH IS REQU ESTED TO DIRECT THE AO TO CHARGE INTEREST AS PER SUB-SECTION (3) OF SECTION 234B OF THE ACT. 41. THE LD. DEPARTMENTAL REPRESENTATIVE AGREED TO IT. 42. WE HAVE CONSIDERED THE FACTS, RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE HAVE ALSO PERU SED THE ORDER PASSED BY THIS BENCH. FOLLOWING THE DECISION OF I.T. A.T. INDORE BENCH, THE AO IS DIRECTED TO CHARGE INTEREST U/S 23 4B OF THE INCOME-TAX ACT, 1961, AS PER SUB-SECTION (3) ON THE AMOUNT OF TOTAL INCOME THAT MAY BE FINALLY ASSESSED. 43. IN THE RESULT, ALL THE APPEALS OF THE ASSESSEE FOR ASSESSMENT YEAR 2005-06 TO 2010-11 ARE PARTLY ALLOWED AS PER O UR M/S.SHEETU EDUCATIONAL SERVICES P.LTD. I.T.A.NOS. 24 TO 26/IND2015 AND 352 TO 354/IND/2016 PAGE 66 OF 66 OBSERVATIONS RECORDED ABOVE IN I.T.A.NO. 24/IND/201 5 FOR ALL THE ASSESSMENT YEARS. THE ORDER HAS BEEN PRONOUNCED IN OPEN COURT ON THE 28 TH FEBRUARY,2017. SD/- (..) (D.T.GARASIA) JUDICIAL MEMBER SD/- (..) (O.P.MEENA) ACCOUNTANT MEMBER ( / DATED :28 TH FEBRUARY,2017. CPU*