M/S. ISMAIL ABDULKARIM BALWA, MUMBAI V. THE DCIT RG 24(3), MUMBAI

ITA 2680/MUM/2008

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 1629 (ITAT-MUMBAI)
• Duration Of Justice: 8 year(s) 7 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-11-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: I
• Next Hearing Date: 31-08-2015
• Assessment Year: 2005-2006
• Appeal Filed On: 17-04-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: M DAYASAGAR
• Assessee Lawyers: R R SHAH
• Keywords: Capital asset; Business income; Depreciation; Cost of acquisition; Difference of opinion; Assessment record; Unabsorbed depreciation
• Section: 143(3); 260A; 32

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH C, MUMBAI BEFORE SHRI G.S. PANNU, ACCOUNTANT MEMBER AND SHRI PAWAN SINGH, JUDICIAL MEMBER ITA NO. 2680/MUM/2008 : (A.Y : 2005-06) MR. ISMAIL ABDULKARIM BALWA A.K. INDUSTRIAL ESTATE, OPP. A.K. TOWER, S.V. ROAD, GOREGAON (WEST), MUMBAI - 62 PAN : AABPB7570M (APPELLANT) VS. DCIT, RANGE-24(3), MUMBAI (RESPONDENT) ITA NO. 2681/MUM/2008 : (A.Y : 2005-06) MR. HUSSEIN ABDULKARIM BALWA A.K. INDUSTRIAL ESTATE, OPP. A.K. TOWER, S.V. ROAD, GOREGAON (WEST), MUMBAI - 62 PAN : AABPB7572K (APPELLANT) VS. DCIT, RANGE-24(3), MUMBAI (RESPONDENT) ASSESSEES BY : SHRI R.R. SHAH REVENUE BY : SHRI M. DAYASAGAR (CIT-DR) DATE OF HEARING : 28/06/2016 DATE OF PRONOUNCEMENT : 30/11/2016 O R D E R PER G.S. PANNU, AM : THE CAPTIONED APPEALS BY THE TWO ASSESSEES ARE DIR ECTED AGAINST A COMMON ORDER OF CIT(A)-24, MUMBAI DATED 27.03.200 8, PERTAINING TO THE ASSESSMENT YEAR 2005-06, WHICH IN TURN HAS ARIS EN FROM SEPARATE 2 MR. ISMAIL ABDULKARIM BALWA & ANR. ITA NOS. 2680 & 2681/MUM/2008 ORDERS PASSED BY THE ASSESSING OFFICER DATED 28.09. 2007 UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961 (IN SHORT THE A CT). 2. INITIALLY, THE SAID APPEALS WERE DECIDED BY THE TRIBUNAL VIDE ITS ORDER DATED 6.7.2012, AND GIVING EFFECT TO THE ORDE RS OF THE DIVISION BENCH AND THE THIRD MEMBER, THE APPEALS OF THE ASSE SSEES WERE PARTLY ALLOWED. AGGRIEVED, THE ASSESSEES PREFERRED APPEAL S BEFORE THE HONBLE BOMBAY HIGH COURT U/S 260A OF THE ACT. THE HONBLE COURT VIDE ORDER DATED 29.1.2013 HAS SET-ASIDE THE ORDER OF THE TRIB UNAL DATED 6.7.2012 INCLUDING THE THIRD MEMBERS ORDER DATED 11.6.2012 AND REMANDED THE MATTER TO THE TRIBUNAL FOR FRESH CONSIDERATION BY O BSERVING AS UNDER :- IN THESE APPEALS BY THE ASSESSEE VARIOUS QUESTIONS HAVE BEEN FORMULATED. HOWEVER, THE BASIC CONTROVERSY IS BROUGHT OUT IN QUESTION (1) AS FORMULATED WHICH READS AS UNDER : WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE AND IN LAW THE TRIBUNAL WAS RIGHT IN TAKING THE VIEW IN THE ORDER DATED 6/7/2012 PASSED TO GIVE EFFECT TO THE ORDE R OF THE THIRD MEMBER THAT THE RENTAL INCOME FROM THE BUILDING W AS ASSESSABLE AS PROFITS & GAINS OF BUSINESS AND NOT AS INCOME FROM HOUSE PROPERTY EVEN THOUGH THE JUDICIAL MEMBER AN D ACCOUNTANT MEMBER HAD DISSENTED FROM EACH OTHER ON THE POINT AND THE THIRD MEMBER HAD OMITTED TO DECIDE THE POINT IN THE GROSS MISCONCEPTION THAT THE APPELLANT HAD NOT RAISED ANY GROUND ON THE ISSUE ? 2) IN VIEW OF DIFFERENCE OF OPINION BETWEEN TWO MEMB ERS OF THE TRIBUNAL ON WHETHER THE RENTAL INCOME IS TAXABLE UNDER THE HEAD PROFIT AND GAINS OF BUSINESS OR AS INCOME FROM HOU SE PROPERTY THE MATTER WAS REFERRED TO A THIRD MEMBER OF THE TRIBUNAL. THE THIRD MEMBER OF THE TRIBUNAL PROCEEDED ON THE BASIS THAT NO GROUND WITH REGARD TO ASSESSING RENT INCOME UNDER THE HEAD INCOME FROM HOUSE 3 MR. ISMAIL ABDULKARIM BALWA & ANR. ITA NOS. 2680 & 2681/MUM/2008 PROPERTY WAS TAKEN BY THE ASSESSEE BEFORE THE TRIBUNAL . THIS IS FACTUALLY INCORRECT. IN ITS APPEAL MEMO BEFORE THE TRI BUNAL AT GROUND 2 THEREOF THE ASSESSEE SPECIFICALLY URGES THE AFORESAI D GROUND. IN VIEW OF THE ABOVE, BY CONSENT, THE ORDER OF THE TRIBU NAL DATED 6/7/2012 INCLUDING THE THIRD MEMBERS ORDER DATED 11/6/ 2012 ARE SET ASIDE AND THE MATTER IS REMANDED TO THE TRIBUNAL FOR FRE SH CONSIDERATION. 3) ALL THE CONTENTIONS OF THE PARTIES ARE LEFT OPEN T O BE URGED BEFORE THE TRIBUNAL 4) BOTH THE APPEALS ARE DISPOSED OF IN THE ABOVE TER MS WITH NO ORDER AS TO COSTS. 3. THUS, IN VIEW OF THE DIRECTIONS OF THE HON'BLE B OMBAY HIGH COURT, THE CAPTIONED APPEALS HAVE BEEN POSTED FOR HEARING BEFORE US. AT THE TIME OF HEARING, THE LEARNED REPRESENTATIVE FOR THE ASSESSEE POINTED OUT THAT THE FACTS AND CIRCUMSTANCES OF THE DISPUTE IN BOTH THE APPEALS ARE SIMILAR. ACCORDINGLY, THE APPEAL IN ITA NO. 2680/M UM/2008 IN THE CASE OF MR. ISMAIL ABDULKARIM BALWA IS TAKEN UP AS THE L EAD CASE. ELABORATING ON THE APPEALS FILED AGAINST THE ORIGINAL ORDER OF THE TRIBUNAL DATED 6.7.2012, THE LEARNED REPRESENTATIVE FOR THE ASSESS EE POINTED OUT THAT ASSESSEE HAD PREFERRED APPEALS BEFORE THE HONBLE H IGH COURT QUA THE GROUND OF APPEAL NOS. 2 TO 7 RAISED IN THE MEMO OF APPEAL BEFORE THE TRIBUNAL. SUCH GROUNDS OF APPEAL READ AS UNDER :- 2. THE LEARNED CIT(A) ERRED IN HOLDING THAT LETTING O UT OF IMMOVEABLE PROPERTY BELONGING TO AOP M/S. ORNATE ENTERPRISES WAS C OMMERCIAL IN NATURE AND THEREBY HOLDING THAT THE RENT INCOME IN RESPECT TH EREOF IS ASSESSABLE AS BUSINESS INCOME. 4 MR. ISMAIL ABDULKARIM BALWA & ANR. ITA NOS. 2680 & 2681/MUM/2008 YOUR APPELLANT SUBMITS THAT THE RENT INCOME IN RESPECT OF LETTING OF IMMOVEABLE PROPERTY OUGHT TO HAVE BEEN TAXED UNDER THE HEAD INCOME FROM HOUSE PROPERTY. 3. THE LEARNED CIT(A) ERRED IN HOLDING THAT THE ASSESS ING OFFICER WAS JUSTIFIED IN INVOKING EXPLANATION 5 TO SECTION 32 A ND THEREBY THRUSTING UPON THE APPELLANT THE DEPRECIATION ON THE BUILDING BELO NGING TO AOP M/S. ORNATE ENTERPRISES FROM A.Y 2002-03. YOUR APPELLANT SUBMITS THAT THE LETTING OUT OF BUILD ING WAS NOT ASSESSABLE AS PROFITS AND GAINS OF BUSINESS OR PROFESSION AND THER EFORE THE ACTION OF THE ASSESSING OFFICER IN THRUSTING UPON THE DEPRECIATION ON BUILDING IS INCORRECT IN LAW AND THE SAME OUGHT TO BE REVERSED. 4. THE LEARNED CIT(A) ERRED IN CONFIRMING THE ACTION OF ASSESSING OFFICER IN TAXING THE CAPITAL GAIN DERIVED BY THE APPELLANT ON SALE OF BUILDING BELONGING TO AOP M/S. ORNATE ENTERPRISES AS SHORT TERM CAPITAL GA IN APPLYING THE PROVISIONS OF SECTION 50. YOUR APPELLANT SUBMITS THAT UNDER THE FACTS AND IN TH E CIRCUMSTANCES OF YOUR APPELLANTS CASE THE LEARNED CIT(A) OUGHT NOT TO HAV E APPLIED THE PROVISIONS OF SECTION 50 IN RESPECT OF THE BUILDING. 5. THE LEARNED CIT(A) ERRED IN NOT HOLDING THAT THERE IS NO BLOCK OF ASSETS NAMELY BUILDINGS AS THE BUILDING UNDER CONSIDERATIO N ONLY CONSISTED OF ONE BUILDING AND NOT MORE THAN ONE BUILDING. YOUR APPELLANT SUBMITS THAT THE BUILDING BELONGING T O AOP M/S. ORNATE ENTERPRISES DOES NOT CONSTITUTE BLOCK OF ASSETS AN D THEREFORE THE PROVISIONS OF SECTION 50 ARE NOT APPLICABLE IN RESPECT OF SALE O F BUILDING BELONGING TO AOP M/S. ORNATE ENTERPRISES. 6. THE LEARNED CIT(A) ERRED IN DIRECTING THE ASSESSING OFFICER TO APPORTION THE SALE PROCEEDS OF RS.3,40,00,000 BETWEEN LAND AND BUILDING ON A REASONABLE BASIS AND THEREBY DIRECTED TO COMPUTE SHORT TERM CAPITAL GAIN IN RESPECT OF BUILDING AND LONG TERM CAPITAL GAIN IN RES PECT OF LAND. 5 MR. ISMAIL ABDULKARIM BALWA & ANR. ITA NOS. 2680 & 2681/MUM/2008 YOUR APPELLANT SUBMITS THAT UNDER THE FACTS AND IN TH E CIRCUMSTANCES OF YOUR APPELLANTS CASE THE LEARNED CIT(A) OUGHT TO HAVE HE LD THAT THE ENTIRE SALE CONSIDERATION OF RS.3,40,00,000 WAS ASSESSABLE IN CO MPUTING THE LONG TERM CAPITAL GAIN INSTEAD OF BIFURCATING THE SAME AND ATT RIBUTING CONSIDERATION TO BUILDING AND COMPUTING THE SHORT TERM CAPITAL GAIN U /S 50. YOUR APPELLANT FURTHER SUBMITS THAT THE CIT(A) OUGHT T O HAVE CATEGORICALLY APPORTIONED THE SALE CONSIDERATION BETWEEN LAND AND BUILDING INSTEAD OF DIRECTING THE ASSESSING OFFICER TO APPORTION THE SAME ON REASONABLE BASIS. 7. THE LEARNED CIT(A) ERRED IN DIRECTING THE ASSESSING OFFICER TO SET OFF THE UNABSORBED DEPRECIATION AGAINST THE CAPITAL GAIN ON S ALE OF LAND AND BUILDING AS PER THE PROVISIONS OF THE ACT INSTEAD OF SPECIFICA LLY DIRECTING HIM TO ALLOW THE SAME AS PROVIDED IN SECTION 32(2) OF THE ACT. YOUR APPELLANT SUBMITS THAT THE CIT(A) OUGHT TO HAVE CATEGORICALLY HELD THAT THE UNABSORBED DEPRECIATION IS ALLOWABLE UNDER THE ACT INSTEAD OF GIVING GENERAL DIRECTION TO ALLOW THE SAME AS PER THE PROVISIO NS OF THE ACT. 4. THE LEARNED REPRESENTATIVE FOR THE ASSESSEE FURT HER EXPLAINED THAT THE MOOT QUESTION THAT HAS A BEARING ON THE AF ORESAID GROUNDS WAS AS TO WHETHER THE RENTAL INCOME EARNED BY THE ASSES SEE OUT OF THE IMMOVEABLE PROPERTY BELONGING TO THE ASSOCIATION OF PERSON (AOP), M/S. ORNATE ENTERPRISES WAS ASSESSABLE UNDER THE HE AD INCOME FROM HOUSE PROPERTY OR AS PROFIT AND GAINS OF BUSINESS . INSOFAR AS THE CRYSTALLISATION OF SAID POINT OF DISPUTE IS CONCERN ED, THE LD. CIT-DR HAS NOT DIFFERED WITH THE LEARNED REPRESENTATIVE FOR TH E ASSESSEE. 5. BE THAT AS IT MAY, THE DIRECTIONS OF THE HON'BLE HIGH COURT REQUIRE US TO CONSIDER THE MATTER AFRESH BECAUSE NOT ONLY T HE EARLIER ORDER PASSED BY THE DIVISION BENCH OF THE TRIBUNAL DATED 6.7.2012 HAS BEEN SET-ASIDE, BUT ALSO THE ORDER PASSED BY THE THIRD M EMBER DATED 6 MR. ISMAIL ABDULKARIM BALWA & ANR. ITA NOS. 2680 & 2681/MUM/2008 11.6.2012. ACCORDINGLY, WE MAY REFER TO THE FACT-S ITUATION WHICH HAS A BEARING ON THE CONTROVERSY TO BE ADJUDICATED. 6. IN BRIEF, THE RELEVANT FACTS ARE THAT THE ASSESS EE UNDER CONSIDERATION, I.E., MR. ISMAIL ABDULKARIM BALWA FI LED A RETURN OF INCOME FOR ASSESSMENT YEAR 2005-06 ON 16.8.2005 DECLARING A TOTAL INCOME OF RS.23,19,140/- WHICH, INTER-ALIA , INCLUDED LONG TERM CAPITAL GAIN ON SALE OF IMMOVEABLE PROPERTY OF M/S. ORNATE ENTERPRI SES AT RS.66,01,513/-. IN CONTEXT OF SUCH LONG TERM CAPIT AL GAIN, THE RELEVANT FACTS CAN BE SUMMARIZED AS FOLLOWS. THE ASSESSEE A LONGWITH TWO OTHERS, NAMELY MR. ABDULKARIM EBRAHIM BALWA AND MR. HUSSEIN ABDULKARIM BALWA ACQUIRED A PLOT OF LAND AT VILLAGE MALAD (W), MUMBAI ADMEASURING 6250.60 SQ. MTRS. AS PER A CONSENT TERM S DATED 15.12.1987, A COPY OF WHICH HAS BEEN PLACED IN THE PAPER BOOK AT PAGES 90 TO 91. THE THREE CO-OWNERS JOINTLY CONSTRUCTED A BUILDING ON THE LAND, NAMED ORNATE ENTERPRISES AND ALSO OPENED A J OINT BANK ACCOUNT IN THE SAID NAME. THE CONSTRUCTION WAS CARRIED OUT BETWEEN 1996 TO 1999 AND THE SHARE IN THE PROPERTY WAS AS FOLLOWS MR. ISMAIL ABDULKARIM BALWA (I.E. ASSESSEE) 45%; MR. HUSSEI N ABDULKARIM BALWA 45%; AND, MR. ABDULKARIM EBRAHIM BALWA 10%. TH US, THE TWO ASSESSEES BEFORE US HAVE SHARES OF 45% EACH IN THE SAID PROPERTY. THE SAID PROPERTY WAS GIVEN ON A MONTHLY TENANCY BASIS AS PER TENANCY AGREEMENT DATED 15.3.1999 FROM 1.4.1999 ONWARDS. T HE LEARNED REPRESENTATIVE FOR THE ASSESSEE HAS PROVIDED A HIST ORY OF TREATMENT OF RENTAL INCOME FOR THE LAST 5 ASSESSMENT YEARS IN A TABULAR FORM, WHICH IS AS UNDER :- 7 MR. ISMAIL ABDULKARIM BALWA & ANR. ITA NOS. 2680 & 2681/MUM/2008 ASSESSMENT YEARS 2001-02 2002-03 2003-04 2004-05 2005-06 RENT 1,44,000 2,04,000 2,76,000 2,16,000 1,44,000 LESS : EXPENSES INCURRED ELECTRICITY CHARGES 4,797 6,310 10,480 9,710 11,530 BANK CHARGES 300 50 271 422 485 INSURANCE/MISC. EXP 0 0 5,650 3,240 0 INCOME DECLARED 1,38,903 1,97,640 2,59,599 2,02,628 1,31,985 7. THE LEARNED REPRESENTATIVE POINTED OUT THAT IN N ONE OF THE ASSESSMENT YEARS, ANY DEPRECIATION WAS CLAIMED OR ALLOWED IN THE HANDS OF ANY OF THE CO-OWNERS. NOW, ON 24.9.2004 T HE SAID PROPERTY BEING LAND AND BUILDING ALONGWITH SMALL FURNITURE A ND WATER PUMP WAS SOLD FOR A CONSIDERATION OF RS.3,40,00,000/- TO M/S . MODI MOTORS AGENCIES PVT. LTD. IN TERMS OF A SALE DEED, A COPY OF WHICH HAS BEEN PLACED IN THE PAPER BOOK AT PAGES 100 TO 117. ACCO RDINGLY, IN THE RETURN OF INCOME FILED, ASSESSEE DECLARED LONG TERM CAPITAL GAIN ON SUCH SALE AT RS.66,01,513/- AFTER CONSIDERING THE I NDEXED COST OF ACQUISITION. 8. THE ASSESSING OFFICER, HOWEVER, HAS DIFFERED WIT H THE ASSESSEE WITH REGARD TO THE NATURE OF THE GAIN EARNED BY THE ASSESSEE ON THE SALE OF THE PROPERTY IN QUESTION. THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE HAS CONSISTENTLY DECLARED INCOME EARNED FR OM IMMOVEABLE PROPERTY BY WAY OF RENT AS INCOME FROM BUSINESS B ECAUSE ASSESSEE WAS DEBITING VARIOUS EXPENSES PERTAINING TO SUCH IN COME IN THE PROFIT & LOSS ACCOUNT. FOR THE SAID REASON, THE ASSESSING O FFICER OBSERVED THAT 8 MR. ISMAIL ABDULKARIM BALWA & ANR. ITA NOS. 2680 & 2681/MUM/2008 THE BUILDING IN QUESTION WAS A DEPRECIABLE ASSET AN D, THEREFORE, DEPRECIATION ON IT WAS ALLOWABLE EVEN THOUGH THE AS SESSEE HAD NOT CLAIMED IT. IN THIS CONTEXT, THE ASSESSING OFFICER HAS REFERRED TO EXPLANATION-5 TO SEC. 32 OF THE ACT, WHICH CAME INT O FORCE W.E.F. ASSESSMENT YEAR 2002-03, WHICH PRESCRIBES THAT DEPR ECIATION IS TO BE ALLOWED IN RESPECT OF AN ASSET OWNED BY THE ASSESSE E WHETHER OR NOT ASSESSEE HAS CLAIMED IT. THEREFORE, THE ASSESSING OFFICER CALCULATED DEPRECIATION IN RESPECT OF THE BUILDING, FURNITURE AND WATER PUMP ALLOWABLE FOR THE ASSESSMENT YEARS 2002-03, 2003-04 AND 2004-05 AND COMPUTED THE WRITTEN DOWN VALUE (WDV) AS ON THE BEG INNING OF THE INSTANT ASSESSMENT YEAR, I.E., 1.4.2005 AT RS.1,07, 77,294/-. CONSIDERING THAT DEPRECIATION STOOD ALLOWED BECAUSE OF THE OPER ATION OF LAW, ASSESSING OFFICER TREATED THE CAPITAL GAIN ARISIN G FROM SALE OF SUCH DEPRECIABLE ASSET AS SHORT TERM CAPITAL GAIN IN V IEW OF THE PROVISIONS OF SEC. 50 OF THE ACT. AS A CONSEQUENCE, THE ASSES SING OFFICER REWORKED AND RE-CHARACTERISED THE GAIN ON SALE OF THE PROPER TY AS SHORT TERM CAPITAL GAIN. IT MAY ALSO BE STATED AT THIS STAGE THAT WHILE COMPUTING THE CAPITAL GAIN, THE ASSESSING OFFICER HAS NOT ALL OWED ANY BENEFIT FOR THE COST OF ACQUISITION OF LAND STATED TO BE RS.9,0 0,277/-. BE THAT AS IT MAY, THE ASSESSING OFFICER HAS REWORKED THE SHORT T ERM CAPITAL GAIN ASSESSABLE IN THE HANDS OF THE ASSESSEE AT RS.1,04, 50,218/- AGAINST THE LONG TERM CAPITAL GAIN OF RS.66,01,513/- DECLARED B Y THE ASSESSEE IN HIS RETURN OF INCOME. 9. AGAINST THE AFORESAID FACTUAL MATRIX, IT IS QUIT E CLEAR THAT THE PERTINENT DISPUTE WHICH NEEDS TO BE THRASHED OUT IS AS TO WHETHER THE RENTAL INCOME IN QUESTION IS ASSESSABLE AS PROFITS FROM BUSINESS OR AS 9 MR. ISMAIL ABDULKARIM BALWA & ANR. ITA NOS. 2680 & 2681/MUM/2008 INCOME UNDER THE HEAD HOUSE PROPERTY BECAUSE THE ASSESSING OFFICER HAS TREATED THE PROPERTY AS A DEPRECIABLE ASSET FUN DAMENTALLY ON THE GROUND THAT THE RENTAL INCOME EARNED THEREFROM IS T O BE TAXED AS BUSINESS INCOME. IN THIS CONTEXT, THE RIVAL COUN SELS HAVE MADE THEIR SUBMISSIONS. 10. THE PLEA OF THE LEARNED REPRESENTATIVE FOR THE ASSESSEE IS THAT THE INCOME FROM PROPERTY IS LIABLE TO BE TREATED AS INC OME ASSESSABLE UNDER THE HEAD HOUSE PROPERTY BECAUSE THE ASSESSEE IS N OT IN THE BUSINESS OF DEVELOPER OR BUILDER OR RENTING OF PROPERTIES. IT IS POINTED OUT THAT THOUGH THE BUILDING IN QUESTION WAS A COMMERCIAL PR OPERTY, BUT IT WAS NOT A BUSINESS ASSET SO AS TO TREAT THE RENTAL INCO ME THEREFROM AS BUSINESS INCOME. THE LEARNED REPRESENTATIVE EXPL AINED THAT THOUGH THE ASSESSEE HAD SHOWN THE INCOME RECEIVED FROM THE CO-OWNERSHIP PROPERTY AS BUSINESS INCOME, SO HOWEVER, THE SAME WOULD NOT IPSO FACTO BE DETERMINATIVE OF THE QUESTION INVOLVED BECAUSE THE CHARACTER AND NATURE OF THE INCOME FROM PROPERTY WOULD NOT CH ANGE DUE TO A PARTICULAR STAND OF THE ASSESSEE. IN THIS CONTEXT, THE LEARNED REPRESENTATIVE VEHEMENTLY ARGUED THAT IF THE INTENT OF THE ASSESSEE WAS TO HAVE CONSIDERED IT AS A BUSINESS VENTURE OF THE CO-OWNERSHIP, THEN ASSESSEE WOULD HAVE CLAIMED DEPRECIATION IN EACH OF THE YEARS, WHICH HE HAS NOT DONE. THEREFORE, IT CANNOT BE REGARDED AS A BUSINESS OR A DEPRECIABLE ASSET. FOR ALL INTENTS AND PURPOSES, T HE CO-OWNERSHIP PROPERTY WAS A CAPITAL ASSET WHICH HAS BEEN EXPLOIT ED FOR EARNING RENTAL INCOME AND, THEREFORE, THE MISTAKEN DECLARATION IN THE RETURN OF INCOME WOULD NOT CHANGE THE CORRECT HEAD OF INCOME UNDER WHICH THE RENTAL INCOME HAS TO BE ASSESSED, I.E., INCOME FROM HOUSE PROPERTY. AT 10 MR. ISMAIL ABDULKARIM BALWA & ANR. ITA NOS. 2680 & 2681/MUM/2008 THIS POINT, THE LEARNED REPRESENTATIVE VEHEMENTLY P OINTED OUT THAT THE MISTAKE IN DECLARING THE INCOME UNDER A WRONG HEAD OF INCOME BY THE ASSESSEE DOES NOT ENTITLE THE INCOME-TAX AUTHORITIE S TO HOLD IT AGAINST THE ASSESSEE INSPITE OF THE LEGAL POSITION BEING OT HERWISE. IN THIS CONTEXT, HE HAS REFERRED TO THE JUDGMENT OF THE HON 'BLE GUJARAT HIGH COURT IN THE CASE OF CHOKSHI METAL REFINERY, 107 ITR 63 (GUJ) AND ALSO THE JUDGMENT OF THE HON'BLE BOMBAY HIGH COURT IN TH E CASE OF DATTATRAYA GOPAL SHETTE, 150 ITR 460 (BOM) WHEREIN HAVING REGARD TO THE CBDT CIRCULAR NO. 14(XL-35) OF 1955 DATED 11.4. 1955 IT HAS BEEN HELD THAT THE REVENUE IS NOT TO TAKE ADVANTAGE OF A N ASSESSEES IGNORANCE IN ORDER TO COLLECT MORE TAX OUT OF HIM T HAN WHAT IS LEGITIMATE. 11. FURTHER, THE LEARNED REPRESENTATIVE FOR THE ASS ESSEE HAS REFERRED TO THE TERMS AND CONDITIONS OF THE TENANCY AGREEMEN T TO POINT OUT THAT NO SPECIAL SERVICES OR AMENITIES WERE TO BE PROVIDE D TO THE TENANT AND, THEREFORE, IT IS A CASE OF TENANCY SIMPLICITOR . THUS, THE RENTAL INCOME IS RIGHTLY TO BE TAXED AS INCOME FROM HOUSE PROPERTY . 12. ON THE OTHER HAND, THE LD. CIT-DR APPEARING FOR THE REVENUE HAS RELIED UPON THE ORDERS OF AUTHORITIES BELOW AND POI NTED OUT THAT THE ACTION OF ASSESSEE BY SHOWING INCOME EARNED FROM TH E SAID IMMOVEABLE PROPERTY AS BUSINESS INCOME PROVES THA T IT WAS A BUSINESS ASSET AND CONSEQUENTLY, THE ASSESSING OFFICER MADE NO MISTAKE IN TREATING IT AS A DEPRECIABLE ASSET AND ON SALE OF S UCH AN ASSET, CAPITAL GAIN IS REQUIRED TO BE DETERMINED IN TERMS OF SEC. 50 OF THE ACT AS SHORT TERM CAPITAL GAIN. 11 MR. ISMAIL ABDULKARIM BALWA & ANR. ITA NOS. 2680 & 2681/MUM/2008 13. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSI ONS. THERE IS A PLETHORA OF JUDICIAL PRONOUNCEMENTS ON THE ISSUE WH ETHER RENTAL INCOME FROM A PROPERTY IS ASSESSABLE AS BUSINESS I NCOME OR AS INCOME FROM HOUSE PROPERTY. SO HOWEVER, IT IS A TRITE LA W THAT THE ISSUE WOULD HAVE TO BE DECIDED IN THE LIGHT OF THE PREVAILING F ACTS AND CIRCUMSTANCES OF EACH CASE. IN THE INSTANT CASE, THE PROPERTY IN QUESTION WAS LET OUT IN TERMS OF A TENANCY AGREEMENT DATED 15.3.1999, A COPY OF WHICH HAS BEEN PLACED IN THE PAPER BOOK AT PAGES 52 TO 59. W E HAVE PERUSED THE SAID TENANCY AGREEMENT. SOME OF THE SALIENT FEATUR ES OF THE PROPERTY AND THE TERMS OF TENANCY AGREEMENT ARE AS FOLLOWS. THE PROPERTY IN QUESTION IS A CO-OWNERSHIP PROPERTY AND THE SAME HA S BEEN LET OUT TO THE TENANT, M/S. AUTOLAND INDIA PVT. LTD. WHO IS US ING IT FOR CARRYING OUT DAY TO DAY BUSINESS OF AUTOMOBILE WORKSHOP, ETC. I T IS ALSO QUITE CLEAR THAT APART FROM PROVIDING OF RIGHT TO USE THE PROPE RTY AS A TENANT, NO OTHER COMPLEX OR SPECIFIC SERVICES ARE BEING PROVID ED BY THE ASSESSEE- LANDLORD. IN FACT, THE AGREEMENT DOES NOT CONTAIN REFERENCE TO ANY OTHER SERVICES OR AMENITIES THAT ARE LINKED TO THE RENTAL INCOME WHICH PRIMARILY RELATES TO THE USAGE OF PROPERTY BY THE T ENANT. UNDER THESE CIRCUMSTANCES, IN OUR VIEW, IT IS A CASE WHERE THE ASSESSEE HAS EARNED RENTAL INCOME BY EXPLOITING THE PROPERTY AS A CAPIT AL ASSET AND IT IS NOT A CASE WHERE THE LETTING OUT IS TO BE PERCEIVED AS AN ADVENTURE IN THE NATURE OF TRADE OR BUSINESS. EVEN OTHERWISE, IT I S WELL ESTABLISHED THAT ONE IS EXPECTED TO LOOK AT THE LETTING-OUT FROM THE POINT OF A BUSINESSMAN TO FIND OUT WHETHER THE SAME IS BEING C ARRIED OUT AS AN ACT OF BUSINESS OR IT IS A MERE EXPLOITATION OF THE OWN ERSHIP OF THE PROPERTY. IT IS ALSO A FACT IN THE PRESENT CASE THAT THE ASSE SSEE OR THE OTHER TWO 12 MR. ISMAIL ABDULKARIM BALWA & ANR. ITA NOS. 2680 & 2681/MUM/2008 CO-OWNERS OR EVEN THE CO-OWNERSHIP AOP ARE NOT INVO LVED IN ANY BUSINESS ACTIVITY OF RENTING OF PROPERTIES OR EVEN AS DEVELOPERS OR BUILDERS. THEREFORE, IT IS A CASE WHERE THE INCOME BY WAY OF RENT HAS BEEN EARNED IN THE COURSE OF EXPLOITATION OF THE OW NERSHIP OF PROPERTY WHICH QUITE CLEARLY IS LIABLE TO BE ASSESSED AS IN COME FROM HOUSE PROPERTY. THEREFORE, WE FIND ENOUGH WEIGHT IN THE PLEA OF THE ASSESSEE THAT RENTAL INCOME DERIVED FROM SUCH PROPERTY IS LI ABLE TO BE CONSIDERED UNDER THE HEAD INCOME FROM HOUSE PROPERTY. 14. NOW, WE MAY TAKE UP THE OBJECTIONS OF ASSESSING OFFICER IN THIS REGARD. FIRSTLY, ACCORDING TO THE ASSESSING OFFICE R, ASSESSEE HAS DECLARED THE INCOME FROM CO-OWNERSHIP OF THE PROPER TY AS BUSINESS INCOME. SUCH A COMPUTATION FOR THE LAST 5 YEARS H AS BEEN TABULATED IN THE EARLIER PART OF THIS ORDER. THE YEAR-WISE TABU LATION ALSO SHOWS THAT AGAINST THE RENTAL INCOME, THE CO-OWNERSHIP HAS CLA IMED CERTAIN SMALL EXPENSES ON ACCOUNT OF ELECTRICITY CHARGES, BANK CH ARGES AND INSURANCE, ETC. AT THE TIME OF HEARING, THE LEARNED REPRESENT ATIVE FOR THE ASSESSEE HAD EXPLAINED THAT INSURANCE EXPENSES WERE RELATABL E TO THE PROPERTY INSURANCE AND THE ELECTRICITY EXPENSES WERE WITH RE SPECT TO THE ELECTRIC POLES PROVIDED IN THE COMPOUND AND SMALL BANK CHARG ES WERE CLAIMED AGAINST THE RENTAL INCOME. THE LEARNED REPRESENTAT IVE POINTED OUT THAT THE SAID EXPENSES WERE VERY SMALL, BUT INDEED HE CO NCEDED THAT THE CLAIM WAS WRONG BECAUSE WHILE COMPUTING INCOME FRO M HOUSE PROPERTY, THE SAID EXPENSES WERE NOT ALLOWABLE. BU T THE IMPORTANT POINT IS THAT THE SAID MISTAKE BY THE ASSESSEE IS NOT FATAL SO AS TO PREVENT THE INCOME-TAX AUTHORITIES FROM REVISITING THE ISSUE TO FIND OUT THE TRUE NATURE AND CHARACTER OF THE INCOME. ON T HIS ASPECT, IT IS A 13 MR. ISMAIL ABDULKARIM BALWA & ANR. ITA NOS. 2680 & 2681/MUM/2008 WELL-SETTLED PROPOSITION THAT THE INCOME-TAX AUTHOR ITIES CANNOT MERELY GO BY THE POSITION TAKEN BY THE ASSESSEE, HOWSOEVER ERRONEOUS IT MAY BE, WITHOUT TAKING INTO CONSIDERATION THE APPLICABL E LEGAL POSITION. IN THE CONTEXT OF THE SAID PROPOSITION, THE LEARNED RE PRESENTATIVE FOR THE ASSESSEE HAS CORRECTLY PLACED RELIANCE ON THE JUDGM ENTS OF THE HON'BLE GUJARAT HIGH COURT IN THE CASE OF CHOKSHI METAL REFINERY (SUPRA) AND ALSO THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF DATTATRAYA GOPAL SHETTE (SUPRA). IN FACT, THE JUDGMENT OF THE HON'BLE SUPREME COURT IN THE CASE OF MAHALAXMI SUGAR MILLS CO. LTD., 160 ITR 920 (SC) GOES TO SAY THAT EVEN IN CASE WHERE ASSESSEE FAILED TO CLAIM A BENEFIT, THE SAME WOULD NOT RELIEVE THE INCOME-TAX AUTHORITIES OF THE DUTY TO ALLOW A PARTICULAR BENEFIT WHICH IS OTHERWISE AVAILABLE TO THE ASSESSEE IN LAW. THEREFORE, THE MERE FACTUM OF ASSESSEE DECLARING INCOME FROM THE CO- OWNERSHIP PROPERTY AS BUSINESS INCOME IS NOT CONC LUSIVE OF THE HEAD UNDER WHICH SUCH INCOME IS ASSESSABLE. EVEN OTHERW ISE, ON FACTS ALSO, WE FIND THAT THE CLAIM OF ASSESSEE FOR DEDUCTION OF SMALL AMOUNTS OF EXPENSES, VIZ., ELECTRICITY CHARGES, INSURANCE AND BANK CHARGES IS NOT PREJUDICIAL TO THE INTEREST OF THE REVENUE BECAUSE IF THE COMPUTATION WAS TO BE MADE UNDER THE HEAD INCOME FROM HOUSE PR OPERTY, ASSESSEE WOULD HAVE BEEN ENTITLED TO STATUTORY ALLO WANCES AGAINST THE RENTAL INCOME PERMISSIBLE U/S 24(A) OF THE ACT @ 30 %, IMPLYING THAT THE INCOME FORMING PART OF THE TOTAL INCOME WOULD HAVE BEEN EVEN LOWER THAN WHAT HAS BEEN RETURNED BY THE ASSESSEE. THERE FORE, EVEN ON THIS ASPECT, WE DO NOT FIND ANY JUSTIFIABLE REASON WITH THE INCOME-TAX AUTHORITIES TO SHUT OUT THE CASE OF ASSESSEE TO EVA LUATE THE NATURE OF RENTAL INCOME AS BEING ASSESSABLE UNDER THE HEAD I NCOME FROM HOUSE PROPERTY. 14 MR. ISMAIL ABDULKARIM BALWA & ANR. ITA NOS. 2680 & 2681/MUM/2008 15. ANOTHER SIGNIFICANT ASPECT, WHICH HAS BEEN VEHE MENTLY BROUGHT OUT BY THE REVENUE, IS THAT THE DEPRECIATION IS DEE MED TO HAVE BEEN ALLOWED AND, THEREFORE, THE PROPERTY IS TO BE CONSI DERED AS A BUSINESS ASSET. IN FACT, IT HAS BEEN REPEATEDLY ASSERTED BY THE ASSESSEE THAT NO DEPRECIATION CLAIM HAS BEEN MADE BY THE ASSESSEE AN D NOR IT HAS BEEN ALLOWED IN ANY OF THE ASSESSMENT YEARS EITHER IN TH E HANDS OF THE ASSESSEE OR EVEN THE OTHER CO-OWNERS. ON THIS ISSU E, OUR ATTENTION WAS SPECIFICALLY DRAWN BY THE LEARNED REPRESENTATIVE FO R THE ASSESSEE TO THE DISCUSSION IN THE ASSESSMENT ORDER WHEREBY THE ASSE SSING OFFICER OBSERVES THAT THE DEPRECIATION HAS BEEN ALLOWED IN RESPECT OF THE AFOREMENTIONED ASSETS, THEREFORE, THE CAPITAL GAIN ARISING FROM THE SALE OF THESE ASSETS HAVE TO BE TREATED AS SHORT TERM CA PITAL GAIN IN VIEW OF THE PROVISIONS OF SECTION 50 OF THE INCOME TAX ACT . IT HAS BEEN VEHEMENTLY ASSERTED THAT THE ASSESSMENT RECORDS DO NOT SHOW THAT ANY DEPRECIATION HAS BEEN ACTUALLY ALLOWED IN RESPE CT OF THE ASSET IN QUESTION. THE AFORESAID ASSERTIONS OF THE ASSESSEE HAVE NOT BEEN NEGATED BEFORE US ON THE BASIS OF ANY COGENT MATERI AL. IN FACT, AT THIS STAGE, IT WOULD ALSO BE PERTINENT TO REFER TO THE S TATUS OF ASSESSMENT IN THE CASE OF ANOTHER CO-OWNER, MR. ABDULKARIM EBRAHI M BALWA, WHEREIN THE GAIN ON SALE OF THE PROPERTY HAS BEEN ACCEPTED BY THE ASSESSING OFFICER AS DECLARED BY THE ASSESSEE, I.E. AS LONG T ERM CAPITAL GAIN IN AN ASSESSMENT FINALISED U/S 143(3) OF THE ACT DATED 7. 12.2007 FOR THE VERY SAME ASSESSMENT YEAR OF 2005-06. A COPY OF THE SAI D ASSESSMENT ORDER IN THE CASE OF MR. ABDULKARIM EBRAHIM BALWA HAS BEE N PLACED IN THE PAPER BOOK AT PAGES 129 TO 130. AT PAGES 123-128 O F THE PAPER BOOK ARE PLACED THE COPIES OF CORRESPONDENCE WITH THE A SSESSING OFFICER IN 15 MR. ISMAIL ABDULKARIM BALWA & ANR. ITA NOS. 2680 & 2681/MUM/2008 THE CASE OF MR. ABDULKARIM EBRAHIM BALWA, WHICH CLE ARLY SHOW THAT THE ASSESSING OFFICER WAS AWARE ABOUT THE SALE OF PROPE RTY IN QUESTION, AS ALSO THE STAND OF THE ASSESSEE BEFORE HIM THAT SUCH INCOME WAS LONG TERM CAPITAL GAIN. IN FACT, AT PAGE 127 OF THE PAP ER BOOK IS PLACED A QUERY LETTER DATED 27.11.2007 ISSUED BY THE ASSESSI NG OFFICER IN THE CASE OF MR. ABDULKARIM EBRAHIM BALWA, WHEREIN THE A SSESSEE WAS CALLED UPON TO EXPLAIN THE LONG TERM CAPITAL GAIN ON THE S ALE OF THE IMPUGNED PROPERTY AND ITS ASSESSABILITY IN THE HANDS OF THE ASSESSEE CO-OWNER. THUS, IT IS A CASE WHERE SIMILAR INCOME IN THE HAND S OF A CO-OWNER OF THE PROPERTY HAS BEEN ACCEPTED AS TO BE ASSESSABLE AS L ONG TERM CAPITAL GAIN. UNDER THESE CIRCUMSTANCES, THE MOOT POINT IS WHETHER THE REVENUE IS PERMITTED TO ADOPT A CONTRARY POSITION, WHERE UNDER IDENTICAL CIRCUMSTANCES IN THE CASE OF A CO-OWNER, THE STAND SIMILAR TO THAT OF ASSESSEE HAS BEEN ACCEPTED? THE ANSWER IS QUITE OBVIOUS AND THE NEED FOR UNIFORMITY IN APPROACH ON SIMILAR ISSU ES ARISING IN THE CASE OF DIFFERENT ASSESSEES BY THE INCOME-TAX AUTHORITIE S CANNOT BE OVEREMPHASISED. THERE ARE SEVERAL JUDICIAL PRONOUN CEMENTS IN SUPPORT OF THE AFORESAID PROPOSITION. FOR INSTANCE, IN THE CASE BEFORE THE HON'BLE PUNJAB HIGH COURT IN THE CASE OF JASWANT RAI, 107 ITR 477 (PUN & HAR) WHERE VALUATION OF PROPERTY IN THE HANDS OF ONE CO-SHARE R FOR THE SAME ASSESSMENT YEAR HAD BEEN VALUED AT A PARTI CULAR FIGURE, IT WAS RULED THAT A HIGHER FIGURE COULD NOT BE ADOPTED BY THE INCOME-TAX AUTHORITIES IN THE CASE OF OTHER CO-SHARER. SIMILA RLY, IN THE CASE OF S. MUTHUKARUPAN, 163 TAXMAN 45 (MAD) BEFORE THE HON'BLE MADRAS HIGH COURT, A CO-SHARER HAD DECLARED LEASE RENTAL ON ACC OUNT OF A THEATRE. THE ASSESSING OFFICER HELD THAT THE LEASE RENT DECL ARED BY THE TENANT WAS LOW VIS-A-VIS THE PREVAILING MARKET RENT AND AC CORDINGLY, ESTIMATED 16 MR. ISMAIL ABDULKARIM BALWA & ANR. ITA NOS. 2680 & 2681/MUM/2008 ASSESSEES SHARE IN LEASE RENTALS AND MADE ADDITION TO THE TOTAL INCOME. THE TRIBUNAL NOTED THAT IN THE CASE OF OTHER 5 CO-O WNERS, RETURNED INCOME FROM THE SAME PROPERTY HAD NOT BEEN DISTURBE D BY THE INCOME- TAX AUTHORITIES AND HELD THE ACTION OF ASSESSING OF FICER UNREASONABLE FOR PICKING OUT AND ENHANCING THE INCOME OF ONE OF THE CO-OWNERS ONLY. THE AFORESAID DECISION OF THE TRIBUNAL WAS APPROVED BY THE HON'BLE MADRAS HIGH COURT BY NOTICING THAT THE SAME WAS BAS ED ON CORRECT APPRECIATION OF EVIDENCE. THEREFORE, EVEN ON THE P RINCIPLE OF MAINTAINING UNIFORMITY OF APPROACH UNDER IDENTICAL CIRCUMSTANCES, WE FIND THAT THE IMPUGNED ACTION OF ASSESSING OFFICER IS UNTENABLE. 16. IN CONCLUSION, WE THEREFORE HOLD THAT THE STAND OF ASSESSEE TO THE EFFECT THAT THE RENTAL INCOME IN QUESTION WAS TO BE TREATED OF THE NATURE ASSESSABLE UNDER THE HEAD INCOME FROM HOUSE PROPERTY AND NOT AS BUSINESS INCOME DESERVES TO BE ACCEPTED. AS A CONSEQUENCE, WE FIND NO REASON FOR THE ASSESSING OFFICER TO HAVE RE-CHARACTERISED AND RECOMPUTED THE INCOME FROM SALE OF CO-OWNERSHIP PROPERTY AS SHORT TERM CAPITAL GAIN BY INVOKING THE PROVISIONS OF SEC. 50 OF THE ACT. THUS, WE UPHOLD THE STAND OF ASSESSEE AND SET-ASIDE THE ORDER OF CIT(A) AND DIRECT THE ASSESSING OFFICER TO RECOMPUTE THE I NCOME OF ASSESSEE IN VIEW OF OUR AFORESAID DECISION. 17. APART FROM THE AFORESAID, NO OTHER POINTS HAVE BEEN RAISED BY THE ASSESSEE AT THE TIME OF HEARING. ACCORDINGLY, THE APPEAL OF THE ASSESSEE IS ALLOWED, AS ABOVE. 17 MR. ISMAIL ABDULKARIM BALWA & ANR. ITA NOS. 2680 & 2681/MUM/2008 18. INSOFAR AS APPEAL IN ITA NO. 2681/MUM/2008 IN T HE CASE OF ANOTHER CO-OWNER, MR. HUSSEIN ABDULKARIM BALWA IS C ONCERNED, AS THE FACTS AND CIRCUMSTANCES IN THE SAID APPEAL ARE PARI MATERIA TO THOSE CONSIDERED BY US IN ITA NO. 2680/MUM/2008, FOR ASSE SSMENT YEAR 2005-06, OUR DECISION THEREIN SHALL APPLY MUTATIS MUTANDIS IN THIS APPEAL ALSO. 19. RESULTANTLY, THE APPEALS OF THE ASSESSEES ARE A LLOWED, AS ABOVE. ORDER PRONOUNCED IN THE OPEN COURT ON 30 TH NOVEMBER, 2016. SD/- SD/- D/- - (PAWAN SINGH) JUDICIAL MEMBER (G.S. PANNU) ACCOUNTANT MEMBER MUMBAI, DATE : 30 TH NOVEMBER, 2016 * SSL * COPY TO : 1) THE APPELLANT 2) THE RESPONDENT 3) THE CIT(A) CONCERNED 4) THE CIT CONCERNED 5) THE D.R, I BENCH, MUMBAI 6) GUARD FILE BY ORDER DY./ASSTT. REGISTRAR I.T.A.T, MUMBAI