DCIT, New Delhi V. M/s. Tube Rose Estate Pvt. Ltd., New Delhi

ITA 2609/DEL/2012

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 74148 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 8 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-01-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: H
• Next Hearing Date: 20-01-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 30-05-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SAMEER SHARMA
• Keywords: Sale consideration of property below Jantri Value; Capital asset; Business income; Business expenditure; Rule of consistency; Capital expenditure
• Section: 143(3); 50C; 37(1)

Judgement Text

ITA NOS. 3482/DEL/2011 & 2609/DEL/2012 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH H NEW DELHI BEFORE SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER AND SHRI A.T. VARKEY, JUDICIAL MEMBER I.T.A. NOS. 3482/DEL/2011 & 2609/DEL/2012 A.YRS. : 2008-09 & 2009-10 A SSTT. COMMISSIONER OF INCOME TAX, CIRCLE 16(1), NEW DELHI VS. M/S TUBE ROSE ESTATE PVT. LTD., 3-4, ENKAY HOUSE, MALCHA MARG, SHOPPING CENTRE, CHANKYAPURI, NEW DELHI 110 021 (PAN: AAACT 2687F) (APPELLANT) (APPELLANT) (APPELLANT) (APPELLANT) (RESPONDENT) (RESPONDENT) (RESPONDENT) (RESPONDENT) ASSESSEE BY : SH. R.S. SINGHVI, CA & SH. SATYAJEET GOEL, CA DEPARTMENT BY : SH. SAMEER SHARMA, SR. D.R. ORDER ORDER ORDER ORDER PER PER PER PER SHAMIM YAHYA: AM SHAMIM YAHYA: AM SHAMIM YAHYA: AM SHAMIM YAHYA: AM THESE APPEALS BY THE REVENUE ARE DIRECTED AGAINST THE RESPECTIVE ORDERS OF THE LD. COMMISSIONER OF INCOME T AX (APPEALS-IX), NEW DELHI FOR THE CONCERNED ASSESSMENT YEARS. SINC E THE ISSUES ARE CONNECTED AND THE APPEALS WERE HEARD TOGETHER. THES E ARE BEING CONSOLIDATED FOR THE SAKE OF CONVENIENCE AND DISPO SED OF BY THIS COMMON ORDER. 2. ONE ISSUE RAISED IN ITA NO. 3482/DEL/2011 (A.Y. 2008-09) IS THAT LD. CIT(A) HAS ERRED IN NOT UPHOLDING THE ACTION OF THE ASSESSING OFFICER IN CALCULATING THE CAPITAL GAINS FROM THE SALE OF F LATS DURING THE YEAR AT RS. 52,59,685/-. ITA NOS. 3482/DEL/2011 & 2609/DEL/2012 2 3. IN THIS CASE AO NOTED THAT ASSESSEE IN THE COMP UTATION OF INCOME HAS SHOWN LONG TERM CAPITAL GAIN OF RS. 19,2 2,065/- ON THE SALE OF FLATS AT 17, NK TOWERS, GURGAON. THE ASSESSEE F URNISHED PROVISIONAL ALLOTMENT LETTER FOR SALE OF FLATS AS EVIDENCE OF S ALE OF FLATS. THE FLATS WERE NOT REGISTERED IN THE NAME OF THE PARTIES SOLD . THE AO ASKED THE ASSESSEE TO FURNISH THE JUSTIFICATION OF THE PRICES AND ASKED AS TO WHY THE RATES AS PRESCRIBED BY THE REGISTRAR OFFICE, GU RGAON, SHOULD NOT BE APPLIED. ASSESSEE SUBMITTED THAT CIRCLE RATE @ RS. 4000 PER SQFT IS FOR THOSE BUILDING, WHICH HAVE GOT LICENSED FROM GOVERN MENT AND HAVE UNRESTRICTED USE IN THE FORM OF AREA, ELEVATION ETC . THEY ARE NOT ENTITLED TO PAY ANY LEASE MONEY OR OTHER PERIODIC CHARGES TO THE GOVERNMENT. IN THE CASE OF THE ASSESSEE BUILDING THE RATE OF RS . 1600/- PER SQFT. IS APPLICABLE. SINCE THE SAME WAS PURCHASED FROM HSIDC WHICH HAS VARIOUS RESTRICTIONS AND ANNUAL LEASE MONEY IS PAYAB LE. THEREFORE, THE CURRENT SALE WAS REASONABLE AND COMPARABLE TO CIRCL E RATE. BUT, THE AO WAS NOT SATISFIED WITH THE ABOVE. HE OBSERVED THAT THE PROPERTY UNDER CONSIDERATION WAS A COMMERCIAL BUILDING AND FLATS WERE IN FACT OFFICE. THE AO PROCEEDED TO REFER TO THE CIRCLE R ATE OBTAINED FROM THE REGISTRAR OF PROPERTY. HE APPLIED THE RATE OF RS. 4000/- PER SQFT.. ACCORDING TO THIS CALCULATION LONG TERM CAPITAL GAI N WORKED OUT TO RS. 52,59,685/- AS AGAINST RS. 19,22,065/- DECLARED BY THE ASSESSEE. ACCORDINGLY, ADDITION OF RS. 34,37,620/- WAS MADE T OWARDS LONG TERM CAPITAL GAIN ON SALE OF OFFICE. 4. UPON ASSESSEES APPEAL LD. CIT(A) CONSIDERED THE ISSUE. LD. CIT(A) OBSERVED THAT THERE IS NO DISPUTE THAT CIRCL E RATE IS TO BE APPLIED IF DECLARED SALE PRICE IS LESS THAN THE CIRCLE RATE . THAT THE FLATS WERE SOLD ON 9.4.2007 AS SEEN FROM THE AGREEMENTS FOR SA LE. THAT IN CASE OF THE APPELLANT, THE FLATS WERE ON LEASE HOLD LAND. T HAT THE CIRCLE RATE AS ITA NOS. 3482/DEL/2011 & 2609/DEL/2012 3 ON DATE OF SALE OF FLATS I.E. ON 9.4.07 WAS RS. 300 0 PER SQFT. HOWEVER, THE AO APPLIED THE CIRCLE RATE OF RS. 4000 WHICH IS ON THE BASIS OF CIRCLE RATE NOTIFICATION DATED 4.7.07 AND EVEN OTHE RWISE, CIRCLE RATE OF RS. 4000 IS IN RESPECT OF FREE HOLD PROPERTY WHICH HAVE DISTINGUISHING FEATURE AS COMPARED TO LEASE HOLD PROPERTY AS REGARD ING PERMISSIBLE USE, PAYMENT OF LEASE RENT, THE PERIOD OF OWNERSHIP OR VARIOUS OTHER ENCUMBRANCES. THAT THERE IS NO DISPUTE THAT ASSESSE E HAS BEEN PAYING LEASE CHARGES AND VARIOUS OTHER TAXES TO THE GOVERNMENT IN THE CONTEXT OF LEASE HOLD RIGHTS. 5. LD. CIT(A) FURTHER OBSERVED THAT HE HAS GONE THR OUGH THE CIRCLE RATE NOTIFICATION ISSUED BY THE CONCERNED AUTHORITI ES ON 17.4.2006 AND 4.7.2007. IN THE CASE OF THE ASSESSEE THE SALE OF FLATS TOOK PLACE ON 9.4.2007 AND AS SUCH PREVAILING CIRCLE RATE AS ON 9 .4.2007 WAS TO BE APPLIED. HOWEVER, HE NOTED THAT THE AO HAS APPLIED THE CIRCLE NOTIFICATION ON 4.7.2007. THAT AS PER THE CIRCLE RATE NOTIFICATION PREVAILING CIRCLE RATE ON THE DATE OF SALE OF PROP ERTY WAS RS. 3000 PER SQFT. HOWEVER, THE AO APPLIED THE REVISED CIRCLE RATE RS. 4000/- WHICH WAS EFFECTIVE FROM 4.7.2007. THE ASSESSEE SOLD THE FLATS OF RS. 3500/- PER SQFT AND THE PREVAILING CIRCLE RATE AS ON DATE WAS AT RS. 3000/- PER SQFT. LD. CIT(A) ACCORDINGLY, HELD EVEN IF THE CON CEPT OF LEASE HOLD AND FREE HOLD PROPERTY IS DISREGARDED, DECLARED SALE PR ICE IS MORE THAN THE PREVAILING CIRCLE RATE AND PROVISIONS OF SECTION 50 C ARE NOT APPLICABLE. ACCORDINGLY, LD. CIT(A) DELETED THE ADDITION. 6. AGAINST THE ABOVE ORDER THE REVENUE IS IN APPEAL BEFORE US. 7. WE HAVE HEARD BOTH THE COUNSEL AND PERUSED THE RECORDS. LD. COUNSEL OF THE ASSESSEE SUBMITTED THAT AO HAS ERRONE OUSLY APPLIED SECTION 50C. THE PROPERTY IN THIS CASE IS A LEASE HOLD PROPERTY AND ITA NOS. 3482/DEL/2011 & 2609/DEL/2012 4 HAS NOT BEEN REGISTERED. UNDER SUCH CIRCUMSTANCES, THE PROVISION OF SECTION 50C ARE NOT APPLICABLE. HE FURTHER POINTE D OUT THAT EVEN IF SECTION 50C IS INVOKED THE CIRCLE RATE IN THIS CASE WAS RS. 3000 PER SQFT ON THE DATE OF SALE. THE ASSESSEE HAS SHOWN RS. 3 500 PER SQFT AS THE RATE OF SALE OF PROPERTY. HENCE, IT WAS CONTENDED THAT AO HAS TOTALLY ERRED IN APPLYING THE RATE OF 4000/- PER SQFT WHIC H WAS APPLICABLE FROM A SUBSEQUENT DATE. 7.1 LD. DR ON THE OTHER HAND COULD NOT DISPUTE THE SUBMISSION OF THE LD. COUNSEL OF THE ASSESSEE THAT THE PROPERTY W AS LEASE HOLD PROPERTY AND IT WAS NOT REGISTERED. FURTHERMORE, HE ALSO COULD NOT DISPUTE THE SUBMISSION THAT CIRCLE RATE ON THE DATE OF SALE WAS RS. 3000 PER SQFT., HOWEVER, THE ASSESSEE HAS SHOWN RS. 3500 PER SQFT. 8. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS AND PERUSED THE RECORDS. WE FIND THAT AS PER THE EXTANT PROVISIONS OF SECTION 50C(1) IT WAS PROVIDED THAT :- WHERE THE CONSIDERATION RECEIVED OR ACCRUING AS A RESULT OF THE TRANSFER BY AN ASSESSEE OF A CAPITAL ASSET, BEING LAND OR BUILDING OR BOTH, IS LESS THAN THE VA LUE ADOPTED OR ASSESSED BY ANY AUTHORITY OF A STATE GOVERNMENT (HEREAFTER IN THIS SECTION REFERRED TO AS THE STAMP VALUATION AUTHORITY) FOR THE PURPOSE OF PAYMENT OF STAMP DUTY IN RESPECT OF SUCH TRANSFER, TH E VALUE SO ADOPTED OR ASSESSED SHALL, FOR THE PURPOSE S OF SECTION 48, BE DEEMED TO BE THE FULL VALUE OF THE CONSIDERATION RECEIVED OR ACCRUING AS A RESULT OF S UCH TRANSFER. ITA NOS. 3482/DEL/2011 & 2609/DEL/2012 5 8.1 FROM THE ABOVE, IT IS CLEAR THAT THE EXTANT PROV ISION OF SECTION 50C WERE APPLICABLE TO THOSE PROPERTIES WHICH ARE R EGISTERED. THE PROPERTIES WHICH ARE NOT REGISTERED DO NOT COME UND ER THE AMBIT OF SECTION 50C. THIS POSITION WAS CHANGED BY INSERTIO N OF FINANCE ACT, 2009 W.E.F. 1.10.2009 BY WHICH THE WORD ASSESSABLE WAS INSERTED IN THOSE CASES WHERE PROPERTY HAS NOT BEEN REGISTERED. THUS WE FIND THAT PROVISIONS OF SECTION 50C ARE NOT APPLICABLE IN THE IMPUGNED ASSESSMENT YEAR. FURTHERMORE, IN THE CASE OF LEASE HO LD PROPERTY WHICH HAS NOT BEEN REGISTERED, SECTION 50C CANNOT B E INVOKED. FURTHERMORE, WE NOTE THAT LD. CIT(A) HAS GIVEN A FIN DING THAT THE PREVAILING CIRCLE RATE ON THE DATE OF SALE WAS RS. 3000/- PER SQFT. AGAINST THIS THE ASSESSEE HAS ADOPTED RS. 3500 PER SQFT. THUS, AO HAS WRONGLY TAKEN CIRCLE RATE @ RS. 4000/- PER SQFT. WH ICH WAS APPLICABLE FROM THE SUBSEQUENT DATE. 9. ACCORDINGLY, IN THE BACKGROUND OF THE AFORESAID DISCUSSIONS AND PRECEDENTS, WE DO NOT FIND ANY INFIRMITY IN THE ORDE R OF LD. CIT(A), HENCE, WE UPHOLD THE SAME. 10. ANOTHER ISSUE RAISED IS THAT LD. CIT(A) HAS ERR ED IN DELETING THE DISALLOWANCE OF RS. 78,84,115/- FOR THE ASSTT YEAR 2008-09 (RS. 65,43,266/- FOR ASSTT. YEAR 2009-10) IN CONNECTION WITH THE MAINTENANCE CHARGES RECEIPT. 11. SINCE THE FACTS ARE COMMON, WE ARE ADJUDICATING THE ISSUE WITH REFERENCE TO THE FACTS AND FIGURES OF ASSTT. YEAR 2 008-09. 12 IN THIS CASE THE ASSESSEE IS A BUILDER WHO IS IN THE BUSINESS OF REAL ESTATE. AO OBSERVED FROM THE ASSESSEES DOCUME NT FILED THAT THE ASSESSEE IS GETTING RENT FROM THE OFFICE PREMISES LE T OUT AS WELL AS MAINTENANCE CHARGES FOR BUILDING, REIMBURSEMENT FOR A IR ITA NOS. 3482/DEL/2011 & 2609/DEL/2012 6 CONDITIONINGS, MAINTENANCE, HOUSEKEEPING ETC. IT WAS OBSERVED THAT THE ASSESSEE IS PROVIDING SERVICES LIKE RUNNING AND OPERATION OF LIFTS, CLEANING OF FLOORS, WINDOW PANELS, WHITE WASHING ET C. IT WAS ALSO OBSERVED THAT THE ASSESSEE IS UNDER CONTRACT TO MAI NTAIN TOTAL AREA OF 150,061 SQURE FEET OUT OF WHICH 51,101 SQ.FT. IS OW NED BY THE ASSESSEE ITSELF WHILE BALANCE AREA OF 97,960/- SQFT IS SOLD OUT AREA. HOWEVER AS PER THE TERMS OF CONTRACT IT IS PROVIDING MAINTENAN CE SERVICES TO THEM AS WELL. AO OBSERVED THAT THUS AREA OWNED BY THE AS SESSEE WORKED OUT TO 34.72% AND 65.28% OF THE AREA IS OWNED BY OTHERS . IN COMPUTATION OF INCOME FURNISHED BY THE ASSESSEE IT HAS SHOWN INC OME FROM HOUSE PROPERTY AT RS. 4,54,10,619/- AND HAD CLAIMED DEDUC TION OF 30% ON THE SAME U/S. 24 OF THE ACT BESIDES INTEREST EXPENSE OF RS. 41,752/- RELATED TO IT. THE INCOME FROM MAINTENANCE AND OTHER S ERVICES INCLUDING REIMBURSEMENTS HAVE BEEN SHOWN AS INCOME F ROM BUSINESS AND PROFESSION AND HAD CLAIMED ALL THE EXPENSES AGAI NST SUCH INCOME. THE INCOME BROADLY FALLS UNDER THE FOLLOWING HEADS: - I) MAINTENANCE INCOME RS. 2,74,58,525/- II) REIMBURSEMENT (AIR CONDITIONER) RS. 42,79,053/ - III) REIMBURSEMENT (MAINTENANCE) RS. 2,07,493/- IV) HOUSEKEEPING CHARGES RS. 4,84,245/- TOTAL TOTAL TOTAL TOTAL RS. 3,24,29,316/ RS. 3,24,29,316/ RS. 3,24,29,316/ RS. 3,24,29,316/- -- - AO OBSERVED THAT THE INCOME OF RS. 3,24,29,316/- IS FROM THE PROPERTY WHICH ARE OWNED BY ASSESSEE AS WELL FROM OT HERS. AO OPINED THAT THE MAINTENANCE INCOME AND OTHER REIMBURSEMENT L IKE AIR CONDITIONERS, HOUSEKEEPING, MAINTENANCE ARE IN THE NATURE OF RENTAL INCOME AND ARE PART AND PARCEL OF RENTAL INCOME. HE FURTHER OBSERVED ITA NOS. 3482/DEL/2011 & 2609/DEL/2012 7 THAT THIS RENTAL INCOME HAS BEEN SPLITTED BY THE A SSESSEE TO CLAIM THE ENTIRE EXPENSE AS BUSINESS EXPENDITURE. AS PER SE CTION 24 OF THE IT ACT ONLY 30% DEDUCTION OUT OF RENT AMOUNT IS TO BE ALLOWED TO THE ASSESSEE IN RESPECT OF HOUSE PROPERTY FOR COLLECTI ON OF RENT, REPAIR AND MAINTENANCE OF BUILDING AND THERE IS NO SEPARATE PRO VISION FOR ALLOWABILITY OF EXPENSE UNDER ANY OTHER HEAD OF INC OME. IN VIEW OF ABOVE, AO HELD THAT THE FOLLOWING INC OME RECEIVED BY THE ASSESSEE IS BEING TREATED AS INCOME FROM HOUSE P ROPERTY: I) MAINTENANCE INCOME RS. 2,74,58,525/- II) REIMBURSEMENT (AIR CONDITIONER) RS. 42,79,053 /- III) REIMBURSEMENT (MAINTENANCE) RS. 2,07,493/- IV) HOUSEKEEPING CHARGES RS. 4,84,245/- TOTAL TOTAL TOTAL TOTAL RS. 3,24,29,316/ RS. 3,24,29,316/ RS. 3,24,29,316/ RS. 3,24,29,316/- -- - AO FURTHER HELD THAT HOWEVER, SINCE THE ASSESSEE I S OWNING ONLY 34.72% OF THE ENTIRE AREA HENCE A PROPORTIONATE INC OME OF RS. 1,12,59,458/- (34.72% OF 324,29,316) ONLY IS BEING TREATED AS INCOME FROM HOUSE PROPERTY AND THE BALANCE INCOME IS ALLO WED TO BE TREATED AS INCOME FROM BUSINESS AND PROFESSION. AO OBSERV ED THAT THE ASSESSEE IS ALSO ALLOWED TO CLAIM STANDARD DEDUCTIO N OF 30% OF THE AFORESAID RENTAL INCOME COMPRISING IN MAINTENANCE INC OME AND OTHER REIMBURSEMENTS. HOWEVER, THE EXPENSES FOR EARNING TH E AFORESAID IS TO BE DISALLOWED. 13. HENCE, THE ASSESSING OFFICER DID NOT ACCEPT THE SUBMISSION THAT ENTIRE EXPENDITURE AS CLAIMED BY IT RELATES ONLY TO MAINTENANCE BUSINESS OF THE ASSESSEE. AO OPINED THAT THE EX PENSES IS ALSO ITA NOS. 3482/DEL/2011 & 2609/DEL/2012 8 PERTAINING TO INCOME WHICH WAS EARNED UNDER THE HO USE PROPERTY. AO FURTHER FOUND THAT THE NET EXPENSES CLAIMED AGAINS T THE INCOME FROM MAINTENANCE AND REIMBURSEMENT INCOME WAS RS. 3,24,29, 316/-. THAT SINCE 34.72% OF THE MAINTENANCE AND REIMBURSEMENT IN COME HAS BEING TREATED AS INCOME FROM HOUSE PROPERTY, HENCE , THE PROPORTIONATE EXPENSES OF RS. 1,12,59,458/- (34.72% OF RS. 324,29,316) WAS HELD TO BE RELATABLE TO INCOME FROM MAINTENANCE HOUSEKEEPING AND REIMBURSEMENT RELATED TO PROPERTY O WNED BY THE ASSESSEE. THE DISALLOWANCE WAS THUS WORKED OUT AS UNDER:- EXPENSES ALLOWED RS. 1,12,61,952/- LESS: 30% STANDARD DEDUCTION ALLOWED ON TREATING MAINTENANCE INCOME OF RS. 1,12,59,458/-, AS RENTAL INCOME RS. 33,77,837/- NET DISALLOWANCE RS. 78,84,115/- 14. THE AO ADDED THE ABOVE AMOUNT OF RS. 78,84,115 /- TO THE BUSINESS INCOME OF THE ASSESSEE AS PER RETURN. 15. AGAINST THE ABOVE ORDER THE ASSESSEE APPEALED BEFORE THE LD. CIT(A). LD. CIT(A) NOTED THAT THESE MAINTENANCE RECE IPTS HAVE BEEN TREATED AS BUSINESS INCOME FROM ASSTT. YEAR 2001-02 AND IT WAS APPROVED BY THE ITAT VIDE ITS ORDER DATED 30.5.20 08 IN ITA NO. 4530/DEL/2004 FOR ASSTT. YEAR 2001-02. THE OBSERVAT ION OF THE ITAT WAS AS UNDER:- 3.3 WE HAVE PERUSED THE RECORDS AND CONSIDERED THE MATTER CAREFULLY. THE ISSUE RAISED IN THIS GROUND IS WHETHER THE BROKERAGE PAID BY THE ASSESSEE IN CONNECTION WI TH ITA NOS. 3482/DEL/2011 & 2609/DEL/2012 9 RENTING OUT OF THE PREMISES CAN BE ALLOWED AS DEDUCT ION FROM THE INCOME RECEIVED BY THE ASSESSEE FROM MAINTENANCE AND FURNISHING CHARGES. THE ASSESSEE HAD ENTERED INTO THE AGREEMENT WITH THE TENANTS AS PER WHICH IN ADDITION TO THE RENT PAYABLE FOR THE USE OF THE PRO PERTY, THE TENANTS WERE ALSO REQUIRED TO PAY SEPARATELY FOR TH E MAINTENANCE AND FURNISHING OF THE PROPERTY. THE ASSE SSEE HAS PAID ONEMONTH RENT IN RESPECT OF RENT OF THE PR OPERTY AND ONE MONTH CHARGES RECEIVABLE IN RESPECT OF MAINTENANCE AND FURNISHING TO THE BROKERS, WHO HAD INTRODUCED THE TENANTS. THE INCOME RECEIVED FROM MAINTENANCE AND FURNISHING HAS BEEN ASSESSED AS BUSI NESS INCOME OF THE ASSESSEE AND THERE IS NO DISPUTE ABOU T THIS FACT. ONCE THE INCOME HAS BEEN ASSESSED UNDER THE HE AD 'BUSINESS', THE SCOPE OF ALLOWABILITY OF EXPENDITUR E BECOMES QUITE WIDE. WHILE COMPUTING THE INCOME FROM BUSINESS, ANY EXPENDITURE INCURRED WHOLLY AND EXCLUSIVELY FOR BUS INESS PURPOSE IS ALLOWABLE AS DEDUCTION U/S 37(1) PROVIDE D THE SAME IS NOT THE PERSONAL EXPENDITURE OF THE ASSESSE E AND IS NOT A CAPITAL EXPENDITURE. IN THIS CASE, THE BROKER AGE HAS BEEN PAID TO THE PARTY, WHICH HAS BROUGHT INCOME TO THE ASSESSEE IN THE FORM OF MAINTENANCE AND FURNISHING CHARGES. IT IS LIKE COMMISSION PAID TO THE COMMISSION AGENTS FOR PROCURING BUSINESS ORDER FOR THE ASSESSE E. THE EXPENDITURE INCURRED HAS NOT RESULTED INTO THE CREA TION OF ANY CAPITAL ASSET OR GENERATION OF ANY NEW SOURCE O F INCOME. THE EXPENDITURE IS OF REVENUE IN NATURE AND IS DIRECTLY LINKED TO THE BUSINESS OF THE ASSESSEE REL ATING TO ITA NOS. 3482/DEL/2011 & 2609/DEL/2012 10 MAINTENANCE AND FURNISHING OF THE PROPERTY. THIS HAS ALREADY BEEN ACCEPTED BY THE A. O. AS BUSINESS INCO ME. THEREFORE, IN VIEW, THE BROKERAGE PAID @ MAINTENANCE AND FURNISHING CHARGES FOR ONE MONTH HAS TO BE ALLOWED A S DEDUCTION UNDER THE HEAD BUSINESS'. 15. LD. CIT(A) CONCLUDED AS UNDER:- THE AO ALSO ACCEPTED THAT MAINTENANCE INCOME IS TO BE ASSESSED AS BUSINESS INCOME. IT IS FURTHER SEEN T HAT MAINTENANCE RECEIPTS IN ENTIRETY WERE ASSESSED AS BUSINESS INCOME AS EVIDENT FROM THE ASSESSMENT ORDER DTD. 23-11-09 PASSED UNDER SECTION 143(3) FOR A.Y. 2007-08. THERE IS NO CHANGE OF FACTS. RULE OF CONSISTENCY IS TO BE FOLLOWED UNLESS THERE IS CHANG E OF FACTS OR LAW. THE AO HAS MADE SOME THEORETICAL EXERCISE OF BIFURCATING' MAINTENANCE RECEIPTS IN THE RATIO OF PROPERTY OWNED VIS-A.-VIS THE TOTAL PROPER TY. THERE IS NO LEGAL BASIS FOR TREATING A PORTION OF BUSINESS RECEIPTS AS RECEIPTS ASSESSABLE UNDER THE HEAD INCOME FROM HOUSE PROPERTY WITHOUT PROVING THA T RECEIPTS TOTALLY FALL IN THE CATEGORY OF INCOME DERI VED FROM PROPERTY WHICH IS ESSENTIAL FOR CLASSIFYING THE INCOME UNDER THE HEAD 'INCOME FROM HOUSE PROPERTY'. THE ACTION OF THE AO IS NOT APPROVED. 16. AGAINST THE ABOVE ORDER THE REVENUE IS IN APPEA L BEFORE US. 17. LD. DR RELIED UPON THE ORDERS OF THE AO. HE SU BMITTED THAT THE AO HAS RIGHTLY MADE THE DISALLOWANCE. HE SUBMITTED T HAT CERTAIN PORTION OF THE MAINTENANCE RECEIPT WERE ACTUALLY HO USE PROPERTY ITA NOS. 3482/DEL/2011 & 2609/DEL/2012 11 INCOME AND HENCE EXPENSE IN RELATION THERETO HAS BEEN RIGHTLY RESTRICTED BY THE AO TO 30%. HENCE, HE PLEADED THA T THE ORDER OF THE AO MAY BE SUSTAINED. 18. LD. COUNSEL OF THE ASSESSEE ON THE OTHER HAND SUBMITTED THAT WITHOUT ANY COGENT BASIS, THE AO HAS TREATED THE BU SINESS INCOME IN THE SHAPE OF MAINTENANCE AND OTHER SERVICES INCLUDI NG REIMBURSEMENT AS INCOME FROM HOUSE PROPERTY. HE CLAIMED THAT IN TH E ASSESSMENT ORDER IN THE CONCLUDING COMPUTATION THE AO HAS TREAT ED THE ENTIRE INCOME AS BUSINESS INCOME. STILL HE HAS PROCEEDED TO DISALLOW EXPENDITURES IN THIS REGARD BY TREATING THE CERTAIN PORTION OF THE INCOME AS INCOME FROM HOUSE PROPERTY. LD. COUNSEL OF ASSESSEE SUBMITTED THAT ASSESSEE HAS RECEIPTS FROM MAINTENANC E AND OTHER SERVICES INCLUDING REIMBURSEMENT. IN THIS REGARD, PR OPER AGREEMENT WITH THE TENANTS AND THE RECIPIENTS OF THE SERVICES ARE THERE ON RECORD. HE CLAIMED THAT THESE AGREEMENTS WERE IN THE EXISTE NCE FROM PRECEDING NUMBER OF YEARS AND IN ALL THESE YEARS, TH IS INCOME HAS BEEN TREATED AS INCOME FROM BUSINESS AND NO DISALLOW ANCE HAS BEEN MADE. LD. COUNSEL OF THE ASSESSEE FURTHER REFERRED TO THE TRIBUNAL DECISION IN ASSESSEES OWN CASE FOR ASSTT. YEAR 2 001-02 WHEREIN SUCH RECEIPTS HAVE BEEN ACCEPTED AS BUSINESS INCOME. IN LIGHT OF THE AFORESAID, LD. COUNSEL OF THE ASSESSEE SUBMITTED TH AT THERE IS NO REASON FOR THE AO TO MAKE A DEPARTURE FROM THE EARL IER CONSISTENT METHOD. HENCE, HE PLEADED THAT THE ORDER OF THE LD . CIT(A) MAY BE UPHELD. 19. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS AND PERUSED THE RECORDS. WE FIND THAT IN THIS CASE THE ASSESSEE IS A BUILDER WHO IS ALSO IN THE BUSINESS OF REAL ESTATE AND ASSESSEE IS GETT ING RENT FROM THE OFFICE PREMISES LET OUT AS WELL AS MAINTENANCE CHARG ES FOR BUILDING, ITA NOS. 3482/DEL/2011 & 2609/DEL/2012 12 REIMBURSEMENT OF AIR CONDITIONING MAINTENANCE, HOUSE KEEPING ETC. ASSESSEE WAS ALSO PROVIDING SERVICES LIKE RUNNING AND OPERATION OF LIFT, CLEANING OF FLOORS, WINDOWS PANES, WHITE WASHING ET C. AS PER THE CONTRACTS IN THIS REGARD ASSESSEE IS UNDER A CONTRA CT TO MAINTAIN TOTAL AREA OF 150061 SQFT. OUT OF THE ABOVE, 51101 SQFT. IS OWNED BY THE ASSESSEE ITSELF, WHILE THE BALANCE AREA OF 97960 SQ FT IS SOLD OUT AREA. THE ASSESSEE IN THIS REGARD HAS BEEN RECEIVING MAI NTENANCE AND OTHER SERVICES RECEIPTS FROM ITS TENANTS AS WELL AS FROM PARTIES TO WHOM THE SPACE HAS BEEN SOLD OUT. THE TOTAL RECEIP TS AGAINST THE MAINTENANCE CHARGES AND OTHER SERVICES RECEIPTS AMOU NTED TO 3,24,29,316/-. 20. IN THIS REGARD, ASSESSEE HAS SHOWN INCOME FROM HOUSE PROPERTY AT RS. 4,54,10,619/- AND HAS CLAIMED 30% DEDUCTION O N THE SAME UNDER SECTION 24. HENCE, THE AO OBSERVED THAT WITH RESPECT TO THE PROPORTIONATE MAINTENANCE RECEIPT WHICH CAN BE STAT ED TO HAVE BEEN INCOME FROM THE HOUSE PROPERTY ASSESSEE SHOULD NOT BE ALLOWED FURTHER EXPENSES FOR EARNING THE AFORESAID. HENCE, THE AO HAS WORKED OUT PROPORTIONATE EXPENDITURE OF RS. 1,12,59,458/- (34.72% OF 324,29,316). AO HELD THAT THIS WAS RELATABLE TO INC OME FROM MAINTENANCE, HOUSE KEEPING AND MAINTENANCE RELATED TO PROPERTY OWNED BY THE ASSESSEE. AO WORKED OUT FOLLOWING DI SALLOWANCE:- EXPENSES ALLOWED RS. 1,12,61,952/- LESS: 30% STANDARD DEDUCTION ALLOWED ON TREATING MAINTENANCE INCOME OF RS. 1,12,59,458/-, AS RENTAL INCOME RS. 33,77,837/- NET DISALLOWANCE RS. 78,84,115/- ITA NOS. 3482/DEL/2011 & 2609/DEL/2012 13 21. FROM THE ABOVE, WE NOTE THAT AO HAS NOT SPECIFIC ALLY IDENTIFIED THE EXPENSES WHICH IS BEING DISALLOWED. HE HAS CALC ULATED 34.72% OF MAINTENANCE RECEIPT (OF RS. 324,29,316) AMOUNTING TO RS. 11261952 AS THE EXPENSES DISALLOWED. FROM THE ABOVE HE HAS ALL OWED 30% AS STANDARD DEDUCTION AND HAS THEREAFTER ARRIVED AT DI SALLOWANCE OF RS. 78,84,115/-. 22. WE FIND THAT THE ABOVE WORKING OUT OF DISALL OWANCE BY THE AO IS NOT COMPREHENDIBLE. AO HAS DONE SOME THEORETICAL EXE RCISE BY BIFURCATING MAINTENANCE RECEIPTS IN THE RATIO OF PR OPERTY OWNED VIS-A- VIS THE TOTAL PROPERTY AND ACCORDINGLY, OUT OF THE INCOME IN THIS REGARD ASSESSEE HAS MADE DISALLOWANCE AMOUNTING TO 70% OF INCOME THEREOF. WE FIND THAT THE ABOVE DISALLOWANCE BY THE AO IS D EVOID OF COGENCY AND THE SAME IS NOT SUSTAINABLE. 23. WE FIND THAT THE ASSESSEE HAS ENTERED INTO THE MAINTENANCE AGREEMENT WITH VARIOUS PARTIES. THESE PARTIES INCLU DED THOSE WHICH ARE ASSESSEES TENANTS AS WELL AS THOSE TO WHOM THE FLATS HAD BEEN SOLD OUT. AS PER THE MAINTENANCE AGREEMENT IN THIS REGARD, THE ASSESSEE IS RECEIVING MAINTENANCE CHARGES FOR BUILDI NG, REIMBURSEMENT OF A/C MAINTENANCE AND HOUSE KEEPING ETC. THE ASSESSEE IS ALSO PROVIDING SERVICES LIKE RUNNING AND OPERATION OF LIFTS, CLEANING OF FLOORS, WINDOW PANES, WHITE WASHING ETC . NOW THE ABOVE CONTRACTS ARE SEPARATE CONTRACTS, THEY ARE OVER AND ABOVE THE TENANCY CONTRACTS. THESE CONTRACTS ARE IN EXISTENCE FROM PRECEDING MANY YEARS. IN OUR CONSIDERED OPINION, THESE SERVICES BEING PROVIDED BY THE ASSESSEE ARE QUITE DISTINCT FROM THE RENT (TEN ANCY) AGREEMENT. THESE SERVICES CANNOT BE TREATED AS PART OF THE HOU SE RENT RECEIPTS AND HENCE, THEY CANNOT BE TAKEN AS INCOME FROM HOUSE PROPERTY. HENCE, ANY DISALLOWANCE IN THIS REGARD IS TOTALLY U NCALLED FOR. ITA NOS. 3482/DEL/2011 & 2609/DEL/2012 14 24. FURTHERMORE, WE NOTE THAT ASSESSEE HAS BEEN MAKIN G SIMILAR RETURNS OF THE ABOVE INCOME FROM A NUMBER OF PRECEDIN G ASSESSMENT YEARS. IN ASSESSEES OWN CASE FOR ASSTT. YEAR 2001- 02 ITAT VIDE ORDER DATED 30.5.2008 (SUPRA) HAS NOTED THAT ASSESSEE W AS RECEIVING RENT OVER AND ABOVE INCOME WAS RECEIVED FROM MAINTENANCE AND FURNISHING CHARGES. THE TRIBUNAL HAD NOTED THAT A SSESSEE HAD ENTERED INTO AGREEMENT WITH TENANTS AS PER WHICH IN ADDITION TO THE RENT PAYABLE FOR THE USE OF THE PROPERTY, THE TENANTS WERE ALSO REQUIRED TO PAY SEPARATELY FOR THE MAINTENANCE AND FURNISHING OF PROPERTY. THE TRIBUNAL HAS ALSO NOTED THAT THE INCOME RECEIVED F ROM MAINTENANCE AND FURNISHING WAS ASSESSED AS BUSINESS INCOME OF T HE ASSESSEE AND THERE WAS NO DISPUTE ABOUT THAT FACT. 25. THUS, WE NOTE THAT ASSESSEES INCOME FROM BUS INESS IN RELATIONSHIP TO THE MAINTENANCE AND OTHER SERVICE R ECEIPTS AS DETAILED ABOVE HAS NOT BEEN DISPUTED BY THE REVENUE IN EAR LIER PERIODS. THE CONTRACTS ARE SAME WHICH WERE THERE FOR EARLIER ASS ESSMENT YEARS AS WELL AS FOR THE IMPUGNED ASSESSMENT YEAR. IN SU CH CIRCUMSTANCES, IN OUR CONSIDERED OPINION, THERE IS NO CHANGE IN TH E FACTS AND LAW AND HENCE, DEPARTURE FROM EARLIER PRACTICE BY THE REVE NUE IS NOT SUSTAINABLE. THIS PROPOSITION IS SUPPORTED BY T HE DECISION OF HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. DA LMIA PROMOTERS & DEVELOPERS P LTD. 281 ITR 346. IN THIS CASE IT WAS EXPOUNDED THAT FOR REJECTING THE VIEW TAKEN FOR EARLIER YEARS, THERE MUST BE CHANGE IN FACTS, SITUATION OR LAW. ITA NOS. 3482/DEL/2011 & 2609/DEL/2012 15 26. IN THIS REGARD, WE FURTHER PLACE RELIANCE UPO N THE DECISION IN THE CASE OF CIT VS. EXCEL INDUSTRIES LTD. 358 ITR 2 95. IN THIS CASE THE HONBLE APEX COURT HAS INTER-ALIA HELD THAT WHEN TH E DEPARTMENT HAS ACCEPTED THE VERDICT OF THE TRIBUNAL IN SOME YEARS, IT CANNOT BE ALLOWED TO CHALLENGE THE VERDICT IN OTHER YEARS. TH US, IN OUR CONSIDERED OPINION IN THE BACKGROUND OF THE AFORESAID DISCUSSI ON AND PRECEDENTS, THERE IS NO INFIRMITY IN THE ORDER OF THE LD. CIT(A ). ACCORDINGLY, WE UPHOLD THE SAME. 27. IN THE RESULT, BOTH THE APPEALS FILED BY THE RE VENUE STAND DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 31/1/2014. SD/- SD/- [ [[ [A.T. VARKEY A.T. VARKEY A.T. VARKEY A.T. VARKEY] ]] ] [SHAMIM YAHYA] [SHAMIM YAHYA] [SHAMIM YAHYA] [SHAMIM YAHYA] JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER DATE:- 31/1/2014 SRBHATNAGAR SRBHATNAGAR SRBHATNAGAR SRBHATNAGAR COPY FORWARDED TO: COPY FORWARDED TO: COPY FORWARDED TO: COPY FORWARDED TO: - -- - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR, ITAT TRUE COPY BY ORDER, ASSISTANT REGISTRAR, ITAT, DELHI BENCHES ITA NOS. 3482/DEL/2011 & 2609/DEL/2012 16