ITO 12(1)(3), MUMBAI V. BALWAS REALTY INFRASTRUCTURE P.LTD, MUMBAI

ITA 261/MUM/2016

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 1936 (ITAT-MUMBAI)
• Duration Of Justice: 9 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-11-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2010-2011
• Appeal Filed On: 15-01-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SIVAJI GODE
• Keywords: Business income
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH , MUMBAI BEFORE SRI MAHAVIR SINGH, J M AND SRI RAJESH KUMAR, AM ITA NO. 261 /MUM/201 6 (A.Y: 2010 - 11 ) INCOME TAX OFFICER 12 (1) (3) ROM NO. 145A, 1 ST FLOOR, AAYAKAR BHAVAN, M.K ROAD, MUMBAI - 400020. VS. M/S BA LWAS REALTY INFRASTRUCTURE P LTD. 4 TH FLOOR, TECHNIPLEX - 1, TECHNIPLEX COMPLEX, VEER SAVARKAR FLYOVER, S.V. ROAD, GOREGOAN (W), MIMBAI - 400062 PAN NO. AAACB2165L APPELLANT .. RESPONDENT REVENUE BY .. SIVAJI GODE , SR. DR ASSESSEE BY .. RAJESH S. SHAH , A R DATE OF HEARING .. 08 - 1 1 - 2016 DATE OF PRONOUNCEMENT .. 08 - 1 1 - 2016 O R D E R PER MAHAVIR SINGH , JM : THIS APPEAL BY THE REVENUE IS ARISING OU T OF THE ORDER OF CIT (A) - 2 0 , MUMBAI IN APPEAL NO . CIT (A) - 20/DCIT - 9(1)(2)/IT - 56/2013 - 14 DATED 2 6 - 0 3 - 1 3 . THE ASSESSMENT WAS FRAMED BY ITO WARD - 9(1)(2), MUMBAI FOR THE AY 20 10 - 1 1 VIDE ORDER DATED 28 - 03 - 201 3 UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER THE ACT) . 2. THE ONLY ISSUE IN THIS APPEAL OF REVENUE IS AGAINST THE ORDER OF CIT (A) IN DELETI NG THE ADDITION MADE BY ASSESSING OFFICER UNDER THE HEAD INCOME FROM BUSINESS AS AGAINST DECLARED BY ASSESSEE AS INCOME FROM BUSINESS. F OR THIS REVENUE HAS RAISED FOLLOWING TWO EFFECTIVE GROUNDS NO. 1 & 2 AS UNDER : - 1. WHETHER ON THE FACTS AND IN THE CI RCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT (A) HAS ERRED IN DELETING THE ADDITION OF HOUSE PROPERTY INCOME DETERMINED BY THE ASSESSING OFFICER OF R S. 40,07,894/ - AGAINST THE INCOME/LOSS SHOWN AS BUSINESS INCOME BY THE ASSESSEE. 2. WHETHER ON THE FACT S AND IN CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT (A) RELYING UPON THE DECISION OF APEX COURT IN THE CASE OF M/S. CHENNAI PROPERTIES AND INVESTMENTS HAS FAILED TO APPRECIATE THAT THE FACTS OF THE ASSESSEE COMPANY IS QUITE DISTINGUISHABLE FROM THE FACTS OF THE ITA NO. 261 / MUM/2016 2 ASSESSEE COMPANY IS QUITE DISTINGUISHABLE FROM THE FACTS OF M/S. CHENNAI PROPERTIES AND INVESTMENT LTD. 3. WE HAVE HEARD RIVAL CONTENTIONS AND GONE THROUGH THE FACTS AND CIRCUMSTANCES OF THE CASE. WE FIND THAT THE ASSESSEE ENTERED INTO LEAVE AND LICENSE AGREEMENT AND SERVICE AGREEMENT SEPARATELY IN RESPECT OF LEASING OUT OF INDUSTRIAL PREMISES AND FOR PROVIDING SERVICES. THE ASSESSEE COMPANY HAS GIVEN ITS TWO INDUSTRIAL BUILDINGS I.E. INDIPLEX - I AND INDIPLEX - II ON LEASE AND RECEIVED LICENSE F EE OF RS. 25 , 82,016 / - AND SERVICE CHARGES OF RS. 21 , 24,766 / - , WHICH WAS SHOWN AS BUSINESS INCOME. WE FIND FROM THE OBJECTS OF THE COMPANY AS MENTIONED IN THE MEMORANDUM OF ASSOCIATION , THE MAIN OBJECTS OF THE COMPANY WAS TO ACQUIRE PROPERTIES AND CONSTR UCT AND HOLD THE PROPERTY. DURING THIS PROCESS ASSESSEE EARNED THESE LEAVE AND LICENSE CHARGES AS WELL AS SERVICE CHARGES. THE ASSESSEE FILED FOLLOWING DETAILS IN RESPECT OF THESE TWO PROPERTIES: - INCOME FROM HOUSE PROPERTY : ON PERUSAL OF DETAILS FILED , IT IS NOTICED THAT THE KASHIMIRA PROJECT CONSISTS OF TWO INDUSTRIAL BUILDINGS VIZ. LNDIPLEX - I AND IDIPLEX - LL. IN RESPECT OF INDIPLEX - L. THE ASSESSES HAVE ENTERED INTO LEAVE AND LICENSE AGREEMENT ON 02 MAY 2009 WITH WE EAGLE BURGMANN INDIA PVT. LTD FOR GR ANTING LICENSE TO THE LICENSEE TO CONDUCT AND OPERATE ITS BUSINESS FROM THE SAID INDUSTRIAL BUILDING. FURTHER, THE ASSESSES HAS ENTERED INTO SERVICE AGREEMENT WITH THIS EAGLE BURGMANN INDIA PVT. LTD FOR MAINTENANCE AND SECURITY OF THE INDIPLEX - L. IN THE P& L NO THE ASSESSEE HAS CREDITED LEAVE & LICENSE FEE RECEIVED OF R S. 5.82.016 LAND SERVICE CHARGES OF RS. 21,24,776 UNDER THE HEAD BUSINESS INCOME. FOR THE INDUSTRIAL BUILDING INDIPLEX - IL THE ASSESSEE HAS ENTERED INTO LEAVE AND LICENSE AGREEMENT WITH M/S MIC ROTACT HYDRALIC (INDIA) P. LTD ON 18 DECEMBER. 2009 . THE ASSESSEE ALSO FILED SUBMISSIONS BEFORE US, WHICH READS AS UNDER: - THE ENTIRE PREMISES WERE DEVELOPED A ND CONSTRUCTED BY OUR CLIENT TO BE USED AS INDUSTRIAL ESTATE. THE STRUCTURES OF THE BUILDING WERE DESIGNED AND CONSTRUCTED WITH THE INTENTION OF ALWAYS USING THEM AS INDUSTRIAL UNITS. OUR CLIENT HAS ALSO INSTALLED CRANE AND PULLEY IN THE INDUSTRIAL PREMISES TO FACILITATE LOADING AND UNLOADING OF GOODS IN A CONVENIENT MANNER DIRECTLY IN TO THE UNIT S OF THE LICENSEE. OUT CLIENT IN ADDITION TO THE PASSENGER LIFTS HAS ALSO INSTALLED INDUSTRIAL LIFTS FOR TAKING THE GOODS FROM ONE FLOOR TO OTHER FLOORS OF THE BUILDING. OUR CLIENT SUBMITS THAT THEY HAVE DEVELOPED AND CONSTRUCTED THE PREMISES WITH THE INTE NTION OF USING THEM AS INDUSTRIAL UNITS BY GIVING THE LICENSEES NOT ONLY THE PREMISES BUT ALSO THE SUPPORTING ITA NO. 261 / MUM/2016 3 INFRASTRUCTURE REQUIRED FOR SMOOTH FUNCTIONING OF AN INDUSTRIAL UNIT. IN ADDITION TO THE LEAVE & LICENSE AGREEMENT, OUT CLIENT HAS ALSO ENTERED IN TO SERVICE AGREEMENT IN RESPECT OF VARIOUS SERVICES RENDERED BY THEM. COPY OF THE SAID AGREEMENT IS ANNEXED HEREWITH AS ANNEXUE - C. IT CAN BE SEEN FROM THE ANNEXED AGREEMENT THAT IN ADDITION TO LETTING OUT OF PREMISES OUR CLIENT PROVIDES VARIOUS KINDS OF SE RVICES SUCH AS SECURITY, MAINTENANCE OF PREMISES, OPERATING AND MAINTENANCE OF ELEVATORS, REPAIRS AND MAINTENANCE OF THE BUILDING AND FIRE ALARM AND OTHER SAFETY FEATURES. IN ADDITION TO THE AFORESAID SERVICES, THE AGREEMENT ALSO CONTAINS A RESIDUAL CLAUSE WHEREBY OUT CLIENT IS TO PROVIDE VARIOUS ASSISTANCE AS MAY BE REQUESTED BY THE LICENSEE. FURTHER OUT CLIENT SUBMITS THAT THEY HAVE DEVELOPED THE ENTIRE PROPERTY IN TO INDUSTRIAL COMPLEX WITH THE REQUISITE INFRASTRUCTURE FACILITIES AND THEY ALSO PROVIDE VA RIOUS SERVICES TO THE LICENSES. IN VIEW OF THE ABOVE OUR CLIENT SUBMITS THAT THEY HAVE LET OUT THE INDUSTRIAL UNITS ALONG WITH VENOUS INFRASTRUCTURE FACILITIES AND THEY ALSO PROVIDE VARIOUS OTHER SERVICES TO THE LICENSEES. IN ADDITION TO THE AFORESAID, OUT CLIENT WOULD ALSO LIKE TO STATE THAT THE DIRECTORS OF OUR CLIENT ARE ALSO EMPLOYED FULLTIME TO ENABLE THE SMOOTH FUNCTIONING AND OPERATION OF THE INDUSTRIAL COMPLEX AND TO LOOK AFTER THE DAY TO DAY ACTIVITIES WHICH ARE INVOLVED IN MAINTENANCE OF THE INDUS TRIAL UNITS AND ALSO TO CATER THE VARIOUS REQUIREMENTS OF THE LICENSEES. DIRECTORS REMUNERATION AMOUNTING TO RS 15, 55, 000 IS PAID TO THE DIRECTORS DURING THE YEAR AND THE SAME CAN BE VERIFIED FROM NOTE 9 OF THE SCHEDULE 16. NOTED TO ACCOUNTS . IN VIEW OF THE ABOVE FACTS, W E FIND THAT THIS ISSUE IS COVERED IN FAVOUR OF ASSESSEE AND AGAINST REVENUE BY THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF CHENNAI PROPERTIES AND INVESTMENTS LTD. VS. CIT (2015) 56 TAXMEN.COM 456 (SC). THE CIT (A) ALSO ALLOWE D IN FAVOUR OF ASSESSEE BY OBSERVING AS UNDER: - 7. I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE, THE SUBMISSIONS OF THE APPELLANT AND ORDER OF THE ASSESSING OFFICER. IN THIS CONNECTION IT IS NOTED THAT THE ASSESSEE COMPANY HAD GIVEN ITS TWO INDUSTRI AL BUILDINGS INDIPLEX - I AND INDIPLEX - II ON LEASE AND HAD RECEIVED LICENCE FEEL OF RS . - 25,82,016/AND SERVICE CHARGES OF . RS. 21,24,776/ - WHICH WERE SHOWN AS BUSINESS INCOME. DURING THE CURSE OF ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER HAD MADE ADDITIO NS BY TREATING THE BUSINESS INCOME DECLARED BY THE ASSESSEE TO BE IN THE NATURE OF INCOME FROM HOUSE PROPERTY. THE COUNSEL OF THE ASSESSEE HAS VEHEMENTLY OPPOSED THE ADDITIONS MADE THE ASSESSING OFFICER AND SUBMITTED THAT THESE BE DELETED . IT IS NOTED THAT ASSESSEE COMPANY IS IN THE BUSINESS OF BUILDING AND LEASING PREMISES OF SPECIAL NATURE AS PER THE REQUIREMENTS OF THE CLIENTS. THE COMPANY HAS INSTALLED SPECIAL EQUIPMENT AND PREMISES IS DESIGNED TO SUIT CLIENTS NEEDS. IT IS NOT SIMPLY LETTING OUT A STRUC TURE TO EARN RENTAL INCOME OUT OF IT. IT IS NOTED THAT ON SIMILAR FACTS HONBLE SUPREME COURT IN THE CASE OF CHENNAI PROPERTIES ITA NO. 261 / MUM/2016 4 AND INVESTMENTS LTD. VS CIT [2015] 56 TAXMANN . COM 456 (SC) HAS HELD THAT WHERE IN TERMS OF MEMORANDUM OF ASSOCIATION, MAIN OBJEC T OF THE ASSESSEE COMPANY WAS TO ACQUIRE PROPERTIES AND EARN INCOME BY LETTING THE SAME, SAID INCOME WAS TO BE BROUGHT TO TAX AS BUSINESS INCOME AND NOT AS INCOME FROM HOUSE PROPERTY. IT IS NOTED THAT FACTS OF THE PRESENT CASE ARE IDENTICAL TO THE FACTS OF THE CASE OF CHENNAI PROPERTIES AND INVESTMENTS LTD. AS DISCUSSED AND THE RATIO AS LAID OUT BY THE APEX COURT IS APPLICABLE ON THE FACTS OF THE CASE: RESPECTFULLY FOLLOWING THE JUDGMENT OF THE APEX COURT IN THE CASE OF CHENNAI PROPERTIES AND INVESTMENTS LTD. AND ON THE FACTS OF THE CASE IT IS HELD THAT THE INCOME EARNED BY THE APPELLANT COMPANY DURING THE YEAR WAS IN THE NATURE OF BUSINESS INCOME AND NOT IN THE NATURE OF INCOME FROM HOUSE PROPERTY AS TAKEN BY THE LEARNED ASSESSING OFFICER. THE ADDITIONS M ADE BY THE ASSESSING OFFICER IN THIS REGARD CANNOT BE SUSTAINED IN APPEAL AND ARE DIRECTED TO BE DELETED. ACCORDINGLY THE GROUNDS OF APPEAL OF THE APPELLANT ARE ALLOWED. 4. WE FIND FROM THE ABOVE FACTS AND CIRCUMSTANCES OF THE CASE THAT THE CIT (A) HAS RIGHT LY ALLOWED THE CLAIM OF THE ASSESSEE THAT OF THE LEAVE AND LICENSE CHARGES AND SERVICE CHARGES AS INCOME FROM BUSINESS AND WE UPHOLD THE SAME. THIS ISSUE OF REVENUES APPEAL IS DISMISSED. 5. IN THE RESULT, THE APPEAL OF REVENUE IS DISMISSED . ORDER PRONOUNCED IN THE OPEN COURT ON 08 - 1 1 - 2016 . SD/ SD/ (RAJESH KUMAR) (MAHAVIR SINGH) ACCONTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED 08 - 11 - 2016 SUDIP SARKAR/SR.PS COPY OF THE ORDER FORWARDED TO : BY ORDER, ASSISTANT REGISTRAR ITAT, M UMBAI 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT (A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY//