NANAVATI CONSTRUCTIONS, MUMBAI V. DCIT 20(2), MUMBAI

ITA 2631/MUM/2017

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 3008 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 11 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-03-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2011-2012
• Appeal Filed On: 11-04-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: KAVITA P KAUSHIKLD
• Assessee Lawyers: B V JHAVERI LD
• Keywords: Business income; Rule of consistency
• Section: 143(3); 13

Judgement Text

ITA NOS.2631-33/MUM/2017 NANAVATI CONSTRUCTIONS ASSESSMENT YEARS: 2011-12 TO 2013-14 1 IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, MUMBAI , , BEFORE HONBLE SHRI MAHAVIR SINGH, VP AND HONBLE SHRI MANOJ KUMAR AGGARWAL, AM ./ I.T.A. NO.2631/MUM/2017 ( / ASSESSMENT YEAR : 2011-12 ) & ./ I.T.A. NO.2632/MUM/2017 ( / ASSESSMENT YEAR : 2012-13 ) & ./ I.T.A. NO.2633/MUM/2017 ( / ASSESSMENT YEAR : 2013-14 ) NANAVATI CONSTRUCTIONS 52, SARVODAYA INDUSTRIAL ESTATE MAHAKALI CAVES ROAD ANDHERI(E), MUMBAI-400 093. / VS. D CIT - 24(3) PIRAMAL CHAMBERS, LALBAUGH PAREL MUMBAI- 400 012. &' ./ ./PAN/GIR NO. AAFFN-9695-M ( ') /APPELLANT ) : ( *+') / RESPONDENT ) ASSESSEE BY : SHRI B.V. JHAVERI-LD.AR REVENUE BY : MS. KAVITA P. KAUSHIK-LD. DR / DATE OF HEARING : 29/01/2020 / DATE OF PRONOUNCEMENT : 13/03/2020 / O R D E R MANOJ KUMAR AGGARWAL (ACCOUNTANT MEMBER) 1.1 AFORESAID APPEALS BY ASSESSEE FOR ASSESSMENT YE ARS [IN SHORT REFERRED TO AS AY] 2011-12 TO 2013-14 CONTEST COM MON ORDER OF LD. COMMISSIONER OF INCOME TAX (APPEALS)-51, MUMBAI [CI T(A)], ORDER ITA NOS.2631-33/MUM/2017 NANAVATI CONSTRUCTIONS ASSESSMENT YEARS: 2011-12 TO 2013-14 2 DATED 09/01/2017 ON CERTAIN COMMON GROUNDS OF APPEA L. THE GROUND RAISED IN ALL THE YEARS ARE IDENTICAL AND IT IS ADM ITTED POSITION THAT ADJUDICATION IN ANY OF THE YEAR WOULD APPLY TO OTHE R YEARS ALSO. ITA NO.2631/MUM/2017, AY 2011-12 1.2 WE TAKE UP APPEAL FOR AY 2011-12 AS THE LEAD YE AR WHEREIN THE GROUND RAISED BY THE ASSESSEE READ AS UNDER:- 1. ON THE FACTS AND THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LEARNED CIT(A) ERRED IN TREATING THE RENT AND AMENITIES CHARGES AM OUNTING TO RS.81,90,000/- (BEING RS.50,40,000/- ON ACCOUNT OF RENT AND RS.31, 50,000/- TOWARDS AMENITIES) RECEIVED BY SIX OTHERS FROM M/S DIESEL FASHION INDI A RELIANCE PVT. LTD. AS RENT INCOME OF THE APPELLANT DISREGARDING THE TRIPARTITE LEAVE & LICENSE AGREEMENT (REGISTERED) EXECUTED BETWEEN THE APPELLANT (LICENS OR), OTHER CO-LICENSORS AND M/S DIESEL FASHION INDIA RELIANCE PVT. LTD. (LICENSEE), WHICH ENTITLED THE LICENSORS TO ONLY A PART OF THE RENT RECEIVED FROM M/S DIESEL FA SHION INDIA RELIANCE PVT. LTD. FOR PART OF THE PROPERTY OWNED AND LICENSED OUT BY THEM . 2. ON THE FACTS AND THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LEARNED CIT(A) ERRED IN ASSERTING ON PARA 5.13 OF PAGE 13 THAT, '. ...RENT FROM ENTIRE PROPERTY OUGHT TO BE OFFERED FOR TAXATION IN THE HANDS OF THE APPELLA NT FIRM ONLY' DISREGARDING THE LEASE AGREEMENT ENTERED IN TO BETWEEN THE APPELLANT FIRM AND SIX OTHER PERSONS (COINCIDENTALLY FAMILY MEMBERS OF THE PARTNERS OF T HE FIRM) FOR LEASING OUT PART OF THE PROPERTY TO SIX OTHER PERSONS, PRIOR TO THE TRIPART ITE LEAVE AND LICENSE AGREEMENT EXECUTED AND REGISTERED WITH M/S DIESEL FASHION IND IA RELIANCE PVT. LTD. 3. ON THE FACTS AND THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LEARNED CIT(A) ERRED IN UPHOLDING THE FINDINGS OF THE ASSESSING OF FICER THAT APPELLANT HAS DIVERTED DIFFERENTIAL AMOUNT OF RENT AMOUNTING TO RS.47,92,5 00/- TO THE FAMILY MEMBERS DISREGARDING THE LEASE AGREEMENT BETWEEN THE APPELL ANT AND THE CO-LICENSORS (COINCIDENTALLY FAMILY MEMBERS OF THE PARTNERS OF T HE FIRM) AND ALSO THE TRIPARTITE LEAVE & LICENSE AGREEMENT (REGISTERED) EXECUTED BET WEEN THE APPELLANT (LICENSOR), OTHER CO-LICENSORS AND M/S DIESEL FASHI ON INDIA RELIANCE PVT. LTD. (LICENSEE). 4. ON THE FACTS AND THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LEARNED CIT(A) FAILED TO APPRECIATE THAT THE PROPERTY, WHICH WAS L ET OUT / LICENSED TO M/S DIESEL FASHION INDIA RELIANCE PVT. LTD. CONSTITUTED A PART OF THE PROPERTY, ALREADY LEASED OUT TO SIX OTHER PERSONS ON ACCOUNT OF WHICH THE MO NEY RECEIVED UNDER A JOINT TRIPARTITE AGREEMENT WAS NOT ENTIRELY BELONGING TO THE APPELLANT AND CANNOT BE TAXED AS SUCH ENTIRELY IN THE HANDS OF THE APPELLANT. 5. ON THE FACTS AND THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LEARNED CIT(A) FAILED TO APPRECIATE THAT A PART OF RENT INCOME FRO M M/S DIESEL FASHION INDIA RELIANCE PVT. LTD., BELONGED TO THE SIX OTHER PERSO NS (OTHER THAN THE APPELLANT FIRM) AND WAS SEPARATELY OFFERED TO TAX BY THEM AND THERE FORE CANNOT BE TAXED AGAIN IN THE HANDS OF THE APPELLANT AS THIS WOULD AMOUNT TO DOUBLE TAXATION. ITA NOS.2631-33/MUM/2017 NANAVATI CONSTRUCTIONS ASSESSMENT YEARS: 2011-12 TO 2013-14 3 IT IS NOTED THAT THE FIGURES AS MENTIONED IN GROUND NO.1 ARE ERRONEOUS SINCE THE PERUSAL OF ASSESSMENT ORDER WOULD REVEAL THAT CORRECT AMOUNT OF RENT AND AMENITIES CHARGES IS RS.78 LACS WHICH C OMPRISE-OFF OF RENT OF RS.48.75 LACS AND AMENITIES CHARGES OF RS.29.25 LAC S. THEREFORE, THE CORRECT AMOUNT UNDER DISPUTE MAY BE READ AS RS.78 L ACS. 2. WE HAVE CAREFULLY HEARD THE ARGUMENTS ADVANCED B Y RESPECTIVE REPRESENTATIVES AND PERUSED RELEVANT MATERIAL ON RE CORD INCLUDING DOCUMENTS PLACED IN THE PAPER-BOOK. WE HAVE ALSO DELIBERATED ON VARIOUS JUDICIAL PRONOUNCEMENTS AS CITED BEFORE US. OUR ADJUDICATION TO THE SUBJECT MATTER OF APPEAL WOULD BE AS GIVEN IN S UCCEEDING PARAGRAPHS. 3.1 FACTS ON RECORD REVEAL THAT ASSESSEE BEING RESI DENT CORPORATE ASSESSEE STATED TO BE ENGAGED AS BUILDER AND DEVELO PER WAS ASSESSED FOR YEAR UNDER CONSIDERATION U/S. 143(3) ON 20/03/2 014 WHEREIN THE INCOME OF THE ASSESSEE WAS DETERMINED AT RS.169.67 LACS AFTER CERTAIN ADDITIONS / ADJUSTMENTS AS AGAINST RETURNED INCOME OF RS.78.60 LACS FILED BY THE ASSESSEE ON 29/07/2011 WHICH WAS LATER ON REVISED TO RS.76.45 LACS TO CLAIM DEDUCTION OF SERVICE TAX FOR RS.3.07 LACS. 3.2 DURING ASSESSMENT PROCEEDINGS, IT TRANSPIRED TH AT THE ASSESSEE HAD ENTERED INTO TWO AGREEMENTS WITH M/S DIESEL FASHION INDIA RELIANCE PVT. LTD. (DFIRPL). ONE AGREEMENT WAS FOR LEAVE AND LICENSE AGREEMENT WHEREAS THE OTHER AGREEMENT PERTAINED TO AMENITIES CHARGES IN RESPECT OF SAME PROPERTY. AS PER LEAVE AND LICENSE AGREEMENT DATED 28/08/2009, THE ASSESSEE WAS ENTITLED FOR RENT OF R S.10 LACS PER MONTH WHEREAS AS PER AMENITIES AGREEMENT DATED 28/08/2009 , THE ASSESSEE ITA NOS.2631-33/MUM/2017 NANAVATI CONSTRUCTIONS ASSESSMENT YEARS: 2011-12 TO 2013-14 4 WAS ENTITLED FOR AMENITIES CHARGES OF RS.6 LACS PER MONTH. THE DETAILS OF THE AGREEMENT HAVE BEEN ELABORATED IN SUBSEQUENT PA RAGRAPHS. 3.3 THE DOCUMENTS ON RECORD WOULD REVEAL THAT THE A SSESSEE BEING OWNER OF A COMMERCIAL PREMISES COMPRISING-OFF OF BA SEMENT, GROUND FLOOR & FIRST FLOOR ADMEASURING ABOUT 7043 SQUARE F EET SITUATED IN A BUILDING KNOWN AS WESTERN WIND, PLOT NO.22A TPS SANTACRUZ NO.-II, CTS NO. 1029/1, JUHU TARA ROAD, MUMBAI (HEREINAFTER REFERRED TO AS LICENSED PREMISES), ENTERED INTO LEAVE & LICENSE AGREEMENT ON 20/04/2009 WITH 6 PERSONS NAMELY MR. SHACHIN JAGDISH NANAVATI, MRS. HIMADRI SHACHIN NANAVATI, SHACHIN JAGDISH NANAVATI HUF, MR. APURVA J.NANAVATI, MRS. USHA A.NANAVATI & APURVA NANAVATI HUF. ALL THE PERSONS HAPPEN TO BE PARTNER & RELATIVE OF PARTNERS OF THE ASSESSEE FIRM. AS PER THE TERMS OF THE AGREEMENT, THE ASSESSEE GAV E EXCLUSIVE LICENSE TO AFORESAID 6 PERSONS WITH RESPECT TO 60% OF LICEN SED PREMISES FOR A PERIOD OF 108 MONTHS AGAINST LICENSE FEES OF RS.2.1 0 LACS PER MONTH STARTING FROM 01/04/2009. AS PER CLAUSE-15 OF THE A GREEMENT, THE LICENSEES HAD A RIGHT TO ASSIGN, SUB-LICENSE OR TO GRANT ON LEAVE AND LICENSE BASIS, THE LICENSED PREMISED TO THIRD PARTI ES WITHOUT PRIOR CONSENT OF LICENSORS. 3.4 SUBSEQUENTLY, THE AFORESAID 6 PERSONS AND THE A SSESSEE ENTERED INTO LEAVE AND LICENSE AGREEMENT DATED 28/08/2009 WITH AN ENTITY NAMELY M/S DIESEL FASHION INDIA RELIANCE PVT. LTD. (DFIRPL ) WITH RESPECT TO WHOLE OF THE PREMISES FOR A PERIOD OF 60 MONTHS AGAINST LICENSE FEES OF RS.10 LACS PER MONTH (FOR INITIAL 3 6 MONTHS). THE LICENSEE WAS REQUIRED TO PAY THE MONTHLY LICENSE FEES TO THE EXTENT OF 10% TO ITA NOS.2631-33/MUM/2017 NANAVATI CONSTRUCTIONS ASSESSMENT YEARS: 2011-12 TO 2013-14 5 EACH OF THE SIX PERSONS AND THE BALANCE 40% TO THE ASSESSEE. THIS AGREEMENT IS A REGISTERED AGREEMENT. 3.5 THE ASSESSEE & OTHER 6 PERSONS ALSO ENTERED INT O AMENITIES AGREEMENT DATED 28/08/2009, IN SIMILAR MANNER, TO PROVIDE CER TAIN AMENITIES AND FACILITIES IN THE LICENSED PREMISES T O THE LICENSEE AGAINST AMENITIES CHARGES OF RS.6 LACS PER MONTH FOR FIRST YEAR AND RS.7 LACS PER MONTH FOR 2 ND AND 3 RD YEAR. THE PERIOD OF THE AGREEMENT WAS AGREED TO BE CO-EXISTING AND CO-TERMINUS WITH THE PERIOD O F THE LICENSE AGREEMENT. THE AMENITIES CHARGES WERE PAYABLE TO 7 LICENSORS, IN SIMILAR MANNER. 3.6 ACCORDINGLY, THE ASSESSEE HAS REFLECTED FOLLOWI NG CREDIT TO PROFIT & LOSS ACCOUNT DURING THE YEAR UNDER CONSIDERATION ON ACCOUNT OF RENT AND AMENITIES CHARGES: - NO. PARTI CULARS AM OUNT (RS.) 1. RENTALS FROM M/S DFIRPL 48.75 LACS 2. AMENITIES FROM M/S DFIRPL 29.25 LACS 3. RENTALS FROM 6 PERSONS 25.20 LACS T OTAL 103.20 LACS THE SAID AMOUNT OF RS.103.20 LACS HAS BEEN OFFERED TO TAX UNDER THE HEAD INCOME FROM HOUSE PROPERTY AFTER CLAIMING DEDUCTION OF MUNICIPAL TAXES AND STATUTORY DEDUCTION OF 30% U/S 24. THE NE T TAXABLE INCOME, THUS, OFFERED IS RS.66.52 LACS. LATER ON, THE ASSES SEE HAS REVISED ITS RETURN OF INCOME TO CLAIM THE DEDUCTION OF SERVICE TAX ALSO. THE COMPUTATION OF INCOME OF OTHER 6 PERSONS, AS PLACED ON RECORD, WOULD REVEAL THAT THOSE PERSONS HAVE ALSO OFFERED THEIR R ESPECTIVE SHARE IN THE RENT AND AMENITIES CHARGES TO TAX WHILE FILING THEI R RESPECTIVE RETURNS OF INCOME FOR THE YEAR UNDER CONSIDERATION. ITA NOS.2631-33/MUM/2017 NANAVATI CONSTRUCTIONS ASSESSMENT YEARS: 2011-12 TO 2013-14 6 3.7 IN THE ABOVE BACKGROUND, LD. AO OBSERVED THAT T HE ASSESSEE BEFORE LETTING OUT SAID PREMISES TO M/S DFIRPL, GAV E THE PREMISES ON RENT TO VARIOUS FAMILY MEMBERS FOR A RENT OF RS.2.1 0 LACS PER MONTH. WHEN DFIRPL APPROACHED THE ASSESSEE TO TAKE THE PRE MISES ON RENT, THE PREVIOUS LESSEES WERE OCCUPYING THE SAID PREMIS ES AND THEREFORE, THE ASSESSEE FIRM HAD APPORTIONED RENT TO THE FAMIL Y MEMBERS AND TOOK NET RENT TO THE PROFIT & LOSS ACCOUNT. ON THE BASIS OF STATED FACTUAL MATRIX, LD. AO OBSERVED THAT IN TERMS OF SEC.23 OF THE INCO ME TAX ACT, IF THE RENT RECEIVED OR RECEIVABLE WAS HIGHER THAN THE SUM FOR WHICH THE PROPERTY MIGHT REASONABLY BE EXPECTED TO LET OUT, T HE RENT RECEIVED OR RECEIVABLE WOULD BE THE ANNUAL VALUE OF THE PROPERT Y, THEREFORE, THE TOTAL RENT RECEIVED FROM M/S DFIRPL WAS TO BE TAKEN AS RE NT IN THE HANDS OF THE ASSESSEE. IT WAS ALSO OBSERVED THAT WHEN THE AS SESSEE WAS THE OWNER OF THE PREMISES THEN HOW THE RENT COULD BE AP PORTIONED BETWEEN FAMILY MEMBERS OF THE PARTNERS WHEN THEY WERE NOT T HE OWNERS OF THE PROPERTY. ACCORDINGLY, THE LEAVE AND LICENSE AGREEMENT DATED 20/04/2009 ENTERED INTO BY THE ASSESSEE WITH 6 FAMI LY MEMBERS WAS TERMED AS ARTIFICIAL STRUCTURE IN WHICH RENT RIGHTF ULLY PERTAINING TO THE ASSESSEE WAS TRANSFERRED WITHOUT PAYMENT OF TAXES I N THE HANDS OF THE ASSESSEE. 3.8 AS TABULATED EARLIER, THE ASSESSEE HAD, AGAINST ITS SHARE OF 40%, REFLECTED RENT OF RS.48.75 LACS FROM M/S DFIRPL. TH E ASSESSEE ALSO REFLECTED RENT OF RS.25.20 LACS RECEIVED FROM 6 FAM ILY MEMBERS. THE RENTAL RECEIVED BY OTHER 6 MEMBERS TOWARDS BALANCE SHARE OF 60% WAS RS.73.12 LACS. THEREFORE, A CONCLUSION WAS DRAWN TH AT THE ASSESSEE ITA NOS.2631-33/MUM/2017 NANAVATI CONSTRUCTIONS ASSESSMENT YEARS: 2011-12 TO 2013-14 7 DIVERTED DIFFERENTIAL AMOUNT OF RENT OF RS.47.92 LA CS (RS.73.12 LACS LESS RS.25.20 LACS) TO OTHER PERSONS. 3.9 THEREFORE, DISREGARDING THE COMPUTATIONS AS OFF ERED BY THE ASSESSEE, LD. AO OPINED THAT THE RENT OF RS.73.12 L ACS RECEIVED BY OTHER 6 FAMILY MEMBERS WAS TO BE BROUGHT TO TAX IN THE HANDS OF THE ASSESSEE. THEREFORE, THE RENTAL INCOME, IN THE HAND S OF THE ASSESSEE, WAS DETERMINED AT RS.121.87 LACS (RS.48.75 LACS + R S.73.12 LACS). AFTER PROVIDING FOR DEDUCTION OF MUNICIPAL TAXES AN D STATUTORY DEDUCTION U/S 24, THE TAXABLE RENTAL INCOME, THUS, WORKED OUT TO BE RS.79.59 LACS. THE RENTAL INCOME OF RS.25.20 LACS STATED TO BE REC EIVED FROM 6 PERSONS WAS DISREGARDED. 4. PROCEEDING FURTHER, LD.AO OPINED THAT AMENITIES PROVIDED BY THE ASSESSEE WOULD NOT FALL UNDER HOUSE PROPERTY INCOME SINCE THE AMENITIES WOULD NOT FLOW FROM LETTING OF THE PROPER TY BUT AROSE ON ACCOUNT OF OTHER SERVICES PROVIDED IN ADDITION TO T HE LET OUT OF PROPERTY. FORMING SUCH A BELIEF, THE AMOUNT OF RS.78 LACS STA TED TO BE RECEIVED ON ACCOUNT OF AMENITIES CHARGES WAS SEPARATELY BROU GHT TO TAX AS INCOME FROM OTHER SOURCE. FINALLY, THE INCOME OF THE ASSESSEE WAS DETERMINED AT RS.169.67 LACS. IN OTHER WORDS, THE A MENITIES CHARGES, ON GROSS BASIS, INCLUDING THE SHARE OF 6 PERSONS, WAS BROUGHT TO TAX UNDER THE HEAD INCOME FROM OTHER SOURCES WHICH WOULD PREJUDICE THE ASSESSEE IN TWO WAYS I) THE SHARE OF 6 PERSONS, IN AMENITI ES CHARGES, WAS BROUGHT TO TAX IN THE HANDS OF THE ASSESSEE; II) TH E ASSESSEE WOULD BE DENIED STATUTORY DEDUCTION OF 30% AGAINST THE SAME. 5.1 AGGRIEVED, THE ASSESSEE ASSAILED THE COMPUTATIO NS MADE BY LD. AO BEFORE LEARNED FIRST APPELLATE AUTHORITY, BY WAY OF ELABORATE ITA NOS.2631-33/MUM/2017 NANAVATI CONSTRUCTIONS ASSESSMENT YEARS: 2011-12 TO 2013-14 8 SUBMISSIONS, WHICH HAVE ALREADY BEEN EXTRACTED IN T HE IMPUGNED ORDER. 5.2 REGARDING CLUBBING OF RENTAL INCOME IN THE HAND S OF THE ASSESSEE, THE ASSESSEE, INTER-ALIA, RELIED UPON THE DECISION OF BOMBAY HIGH COURT RENDERED IN AKSHAY TEXTILES TRADING AGENCIES PVT LTD. (304 ITR 401) AND ALSO ON THE DECISION OF HONBLE CALCUTTA HIGH C OURT IN CIT V/S INDRA & CO. (268 ITR 240) FOR THE SUBMISSIONS THAT ONLY THE ACTUAL RENT RECEIVED BY THE ASSESSEE WAS TO BE BROUGHT TO TAX . THE ATTENTION WAS DRAWN TO THE FACT THE LEAVE AND LICENSE AGREEMENT W AS ENTERED WITH 6 PERSONS ON 20/04/2009 WHICH WAS MUCH BEFORE SUBSEQU ENT LEAVE AND LICENSE AGREEMENT ENTERED INTO BY THE ASSESSEE AND OTHER 6 PERSONS WITH M/S DFIRPL. IT WAS SUBMITTED THAT THE LICENSORS HAD TO SPEND HU GE AMOUNT IN MAKING STRUCTURAL CHANGES IN THE BUILDING IN ORDER TO LEASE IT TO M/S DFIRPL WHICH WAS EVIDENT FROM THE TERMS OF THE AGREEMENT. THE SAID FACT WOULD MATERIALLY ALTER THE MARKET VALUE / RENTAL VALUE OF THE PROPERTY. THE ASSESSEE ALSO BROUGHT ON RECORD DIFFE RENCE BETWEEN THE TWO AGREEMENTS ENTERED INTO ON 20/04/2009 & 28/08/2 009. A PLEA WAS ALSO RAISED THAT THE INCOME COULD NOT BE TAXED TWICE SINCE THE RESPECTIVE SHARE IN THE INCOME WAS ALREADY OFFE RED BY 6 PERSONS TO TAX IN THEIR OWN TAX RETURNS. THE DETAILS OF ASSESS MENT PARTICULARS OF ALL THE 6 PERSONS WAS PLACED ON RECORD. THE ASSESSEE ALSO RAISED A PLEA THAT THE AFORESAID METHOD OF ALLOCATION WAS ACCEPTED IN AY 2010-11. 5.3 REGARDING TAXABILITY OF AMENITIES CHARGES, THE ASSESSEE SUBMITTED THAT AMENITIES WERE NOTHING BUT FIXED AMENITIES TO THE BUILDING AND THERE WERE NO SEPARATE SERVICES PROVIDED TO THE TENANTS A ND THE RECEIPTS WERE IN THE NATURE OF RENT. THE AMENITIES AGREEMENT WAS INCIDENTAL TO LEAVE ITA NOS.2631-33/MUM/2017 NANAVATI CONSTRUCTIONS ASSESSMENT YEARS: 2011-12 TO 2013-14 9 AND LICENSE AGREEMENT AND THE INCOME COULD NOT BE S EPARATED PARTLY AS INCOME FROM OTHER SOURCES. THE NATURE OF SERVICE W AS STATED TO BE IN THE NATURE OF SECURITY, FAADE CLEANING SYSTEM, LAN DSCAPING, DECORATION AND BEAUTIFICATION OF COMMON AREAS, CLEANING AND MA INTENANCE OF COMMON AREAS AND HOUSING-KEEPING ETC. THEREFORE, TH E ENTIRE INCOME WAS TO BE TREATED AS INCOME FROM HOUSE PROPERTY. TH E ATTENTION WAS ALSO DRAWN TO THE FACT THAT THE AMENITIES AGREEMENT WAS DEPENDENT ON LEASE AND LICENSE AGREEMENT. THERE WOULD BE NO PROV ISION OF AMENITIES IF THE LEAVE AND LICENSE AGREEMENT WAS NOT IN SUBSI STENCE. THE AMENITIES AGREEMENT WAS CO-TERMINUS AND DEPENDENT O N AND SUBSERVIENT TO LEAVE AND LICENSE AGREEMENT. THEREFO RE, IRRESPECTIVE OF THE NOMENCLATURE OF THE CHARGES, REAL SUBSTANCE OF SUCH CHARGES NEEDS TO BE LOOKED AT. THE PRIMARY NATURE OF SOURCE OF IN COME WAS THE OWNERSHIP OF THE PROPERTY. THE AFORESAID SUBMISSION S FOUND FAVOR WITH LD. CIT(A), WHO IN TERMS OF VARIOUS JUDICIAL PRONOU NCEMENTS, HELD THAT THE RENT FOR USE OF BUILDING AS WELL AS MAINTENANCE /AMENITIES CHARGES WERE TO BE CONSIDER AS INCOME FROM HOUSE PROPERTY. 5.4 HOWEVER, ASSESSEES SUBMISSIONS AS TO CLUBBING OF RENTAL INCOME COULD NOT FIND FAVOR WITH LD. CIT(A) WHO OPINED THA T RENTAL INCOME WAS TO BE CHARGED TO TAX UNDER THE HEAD INCOME FROM HOUSE PROPERTY IN THE HANDS OF OWNER OF THE PROPERTY. IF A PERSON RECEIVI NG THE RENT IS NOT THE OWNER THEN INCOME IS NOT BE CHARGED AS INCOME FROM HOUSE PROPERTY BUT AS INCOME FROM OTHER SOURCES. INCOME FROM A HOU SE PROPERTY IS TAXABLE IN THE HANDS OF ITS LEGAL OWNER IN WHOSE NA ME THE PROPERTY STANDS. OWNER WOULD MEAN A PERSON ENTITLED TO RECEI VE INCOME FROM A PROPERTY IN HIS OWN RIGHT EVEN IF NO REGISTERED DOC UMENT WAS EXECUTED IN ITA NOS.2631-33/MUM/2017 NANAVATI CONSTRUCTIONS ASSESSMENT YEARS: 2011-12 TO 2013-14 10 HIS FAVOR. RENTAL INCOME OF A PERSON OTHER THAN THE OWNER COULD NOT BE CHARGED TO TAX UNDER THE HEAD INCOME FROM HOUSE PRO PERTY. THEREFORE, RENTAL INCOME RECEIVED BY TENANT FROM SUB-LETTING C OULD NOT BE CHARGED TO TAX UNDER THE HEAD INCOME FROM HOUSE PROPERTY. W HEN THE ASSESSEE WAS THE SOLE OWNER OF THE PROPERTY, THE ENTIRE INCO ME WAS TO BE OFFERED TO TAX BY THE ASSESSEE. THE PLEA THAT OTHER PERSON OFFERED THE SAME TO TAX WOULD BE OF NO RELEVANCE. THE RENTAL INCOME EAR NED BY OTHER PERSONS BY SUB-LETTING WAS CHARGEABLE UNDER THE HEA D INCOME FROM OTHER SOURCES OR AS BUSINESS INCOME AND IT WAS ILLE GAL ON THE PART OF THE FAMILY MEMBERS TO OFFER THE INCOME UNDER THE HEAD I NCOME FROM HOUSE PROPERTY. THEREFORE, LD. AO SHOULD HAVE TAKEN CORRE CTIVE MEASURES ABOUT INCOME SHOWN AS INCOME FROM HOUSE PROPERTY BY THE FAMILY MEMBERS. FINALLY, THE PLEA RAISED BY THE ASSESSEE W AS REJECTED AND IT WAS HELD THAT THE ENTIRE RENTAL INCOME WAS TO BE TR EATED AS INCOME FROM HOUSE PROPERTY IN THE HANDS OF THE ASSESSEE. AGGRIE VED, THE ASSESSEE IS UNDER FURTHER APPEAL BEFORE US. 6. UPON DUE CONSIDERATION OF FACTUAL MATRIX AS ENUM ERATED IN PRECEDING PARAGRAPHS, THE UNDISPUTED POSITION THAT EMERGES IS THAT BEFORE LEAVE AND LICENSE AGREEMENT DATED 28/08/2009 ENTERED INTO BY THE 7 LICENSORS WITH M/S DFIRPL, THERE WAS A PRE-EX ISTING AGREEMENT DATED 20/04/2009 BETWEEN THE ASSESSEE AND OTHER 6 P ERSONS. AS PER TERMS OF THIS AGREEMENT, CERTAIN LICENSE WAS GRANTE D TO THESE PERSONS AGAINST LICENSE FEES FOR VALUABLE CONSIDERATION OF RS.2.10 LACS WITH RESPECT TO 60% OF THE LICENSED PREMISES. AS PER CLA USE-15 OF THE AGREEMENT, THE LICENSEES HAD A RIGHT TO ASSIGN, SUB -LICENSE OR TO GRANT ON LEAVE AND LICENSE BASIS, THE LICENSED PREMISED TO T HIRD PARTIES WITHOUT ITA NOS.2631-33/MUM/2017 NANAVATI CONSTRUCTIONS ASSESSMENT YEARS: 2011-12 TO 2013-14 11 PRIOR CONSENT OF LICENSORS. PURSUANT TO SAID AGREEM ENT, THE ASSESSEE AS WELL AS OTHER 6 PERSONS, ENTERED INTO SUBSEQUENT LE AVE AND LICENSE AGREEMENT WITH M/S DFIRPL. THE TERMS OF THE SAID AG REEMENT HAVE DULY BEEN RECOGNIZED IN LEAVE AND LICENSE AGREEMENT DATE D 28/08/2009 AND THE SHARE OF THE ASSESSEE AND OTHER 6 PERSONS FIND SPECIFIC MENTION IN THIS AGREEMENT. THE AFORESAID AGREEMENT HAS BEEN EX ECUTED BY THE 7 LICENSORS AND LICENSEE AND THE SAME IS A REGISTERED DOCUMENT. PURSUANT TO THE TERMS OF BOTH THE AGREEMENTS, THE TRANSACTIO NS HAVE BEEN CARRIED OUT AND ASSESSEE AS WELL AS OTHER 6 PERSONS HAVE OF FERED THEIR RESPECTIVE SHARE OF INCOME IN THEIR OWN TAX RETURNS . THERE IS NOTHING ILLEGAL IN BOTH THE AGREEMENTS. THIS BEING THE CASE , THE AGREEMENT DATED 20/04/2009 COULD NOT BE TERMED AS SHAM AGREEMENT OR AN ARTIFICIAL STRUCTURE WITH A VIEW TO EVADE TAX LIABILITY. THE S AID ARGUMENT WOULD BE FURTHER WEAKENED BY THE FACT THAT PROPORTIONATE INC OME HAS ALREADY BEEN OFFERED TO TAX BY THE ASSESSEE AS WELL AS OTHER 6 L ICENSORS. THE OBSERVATIONS OF LD. CIT(A) THAT THE SAID INCOME SHO ULD HAVE BEEN OFFERED AS INCOME FROM HOUSE PROPERTY BY THE 6 PERS ONS COULD NOT BE A GROUND TO MAKE IMPUGNED ADDITIONS IN THE HANDS OF T HE ASSESSEE. IT IS ALSO FORTIFIED BY THE FACT THAT LEARNED FIRST APPEL LATE AUTHORITY, HIMSELF, OBSERVED THAT LD. AO SHOULD HAVE TAKEN CORRECTIVE M EASURES ABOUT INCOME SHOWN AS INCOME FROM HOUSE PROPERTY BY THE F AMILY MEMBERS. HOWEVER, THE SAID ERROR, IN OUR CONSIDERED OPINION, COULD NOT EMPOWER LD. CIT(A) TO CONFIRM THE ADDITIONS IN THE HANDS OF THE ASSESSEE. IT IS TRITE LAW THAT TAX PLANNING IS LEGITIMATE PROVIDED IT IS WITHIN FOUR CORNERS OF LAW AND DONE WITHOUT ANY FRAUDULENT INTENTION. COLORAB LE DEVICES COULD NOT BE A PART OF TAX PLANNING AND IT IS WRONG TO ENCOUR AGE OR ENTERTAIN THE ITA NOS.2631-33/MUM/2017 NANAVATI CONSTRUCTIONS ASSESSMENT YEARS: 2011-12 TO 2013-14 12 BELIEF THAT IT IS HONOURABLE TO AVOID PAYMENT OF TA X BY RESORTING TO DUBIOUS METHODS. IF THE TAX PAYER WAS IN A POSITION TO CARRY A TRANSACTION IN TWO ALTERNATIVE WAYS, ONE OF WHICH WOULD RESULT IN LOWER TAX LIABILITY, THE ASSESSEE WOULD BE AT LIBERTY TO CHOOSE THAT PAR TICULAR METHOD. IN THE PRESENT CASE, WE FIND NOTHING ILLEGALITY IN BOTH TH E LEAVE AND LICENSE AGREEMENT ENTERED INTO BY THE ASSESSEE. THE TERMS O F THE AGREEMENT WERE DULY HONOURED BY THE RESPECTIVE PARTIES AND IT COULD NOT BE SAID THAT THE EARLIER AGREEMENT WAS A SHAM AGREEMENT. TH E RULE OF CONSISTENCY WOULD ALSO FAVOR ASSESSEES CASE SINCE SIMILAR APPORTIONMENT DONE IN AY 2010-11 HAS BEEN ACCEPTED BY THE REVENUE. THE CASE LAWS REFERRED TO IN PARA 5.2 WOULD ALSO SU PPORT THE CAUSE OF THE ASSESSEE THAT ANNUAL VALUE OF THE PROPERTY WOULD BE THE ANNUAL VALUE RECEIVED OR RECEIVABLE BY THE ASSESSEE FROM THE TEN ANT IRRESPECTIVE OF THE FACT THAT TENANT ON FURTHER SUB-LETTING HAD REC EIVED HIGHER RENTS. 7. THEREFORE, KEEPING IN VIEW THE ENTIRETY OF FACTS AND CIRCUMSTANCES, WE HOLD THAT THE CLUBBING OF RENTAL & AMENITIES INC OME OF 6 PERSONS, IN THE HANDS OF THE ASSESSEE, WOULD NOT BE SUSTAINABLE IN THE EYES OF LAW. THE LD. AO IS DIRECTED TO RECOMPUTE THE INCOME BY T AKING ASSESSEES SHARE OF RENTAL INCOME AND AMENITIES CHARGES UNDER THE HEAD INCOME FROM HOUSE PROPERTY. THE RENTAL INCOME OF RS.25.20 LACS EARNED BY THE ASSESSEE FROM 6 PERSONS WOULD ALSO BE TAXABLE UNDER THE HEAD INCOME FROM HOUSE PROPERTY. THE STATUTORY DEDUCTIONS, AS AVAILABLE AS PER LAW, SHALL BE PROVIDED TO THE ASSESSEE. ACCORDINGLY, THE APPEAL STANDS ALLOWED. ITA NOS.2631-33/MUM/2017 NANAVATI CONSTRUCTIONS ASSESSMENT YEARS: 2011-12 TO 2013-14 13 ITA NOS.2632-33/MUM/2017, AYS 2012-13 & 2013-14 8. FACTS ARE PARI-MATERIA THE SAME IN THESE YEARS. THE IMPUGNED ORDER IS COMMON ORDER FOR ALL THE THREE YEARS. THE ASSESSEE IS BEFORE US WITH SIMILAR GROUNDS OF APPEAL. THEREFORE, OUR ADJU DICATION AS FOR AY 2011-12 SHALL MUTATIS-MUTANDIS APPLY TO BOTH THESE YEARS. ACCORDINGLY, BOTH THE APPEALS STAND ALLOWED. CONCLUSION 9. ALL THE APPEALS STAND ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 13TH MARCH, 2 020 SD/- SD/- (MAHAVIR SINGH) (MANOJ K UMAR AGGARWAL) / VICE PRESIDENT / ACCOUNTANT MEMBER MUMBAI; DATED : 13/03/2020 SR.PS, JAISY VARGHESE !'! / COPY OF THE ORDER FORWARDED TO : 1. ') / THE APPELLANT 2. *+') / THE RESPONDENT 3. 2 ( ) / THE CIT(A) 4. 2 / CIT CONCERNED 5. 34*- , , / DR, ITAT, MUMBAI 6. 4678 / GUARD FILE / BY ORDER, / (DY./ASSTT.REGISTRAR) , / ITAT, MUMBAI.