ITO 1(3)(4), MUMBAI V. WOODPECKER INVESTMENT P. LTD, MUMBAI

ITA 2879/MUM/2009

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 2333 (ITAT-MUMBAI)
• Duration Of Justice: 11 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-04-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: G
• Next Hearing Date: 06-04-2010
• Assessment Year: 2005-2006
• Appeal Filed On: 05-05-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K M KESHKAMAT
• Keywords: Business income

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, G BENCH, MUMBAI. BEFORE S/SHRI S.V.MEHROTRA, AM & V.DURGA RAO,JM I.T.A. NO.2878 & 2879/MUM/2009 ASSESSMENT YEARS: 2004-05 & 2005-06 THE I.T.O. 1(3)(4), V. WOODPECKER INVESTMENTS P. LTD., AAYAKAR BHAVAN, M.K. ROAD, 21/24, KHETAN BHAVAN, 198, JAMSHED MUMBAI. JI TATA ROAD, MUMBAI-20. PA NO.AAACW 4048 E (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI K.M.KESHKAMAT RESPONDENT BY : SHRI K.P.DEWANI O R D E R PER S.V.MEHROTRA, AM BOTH THE APPEALS FILED BY THE REVENUE ARE DIRECTE D AGAINST A CONSOLIDATED ORDER DATED 13.2.2009 OF LD CIT (A)-XXI, MUMBAI FOR T HE ASSESSMENT YEARS 2004-05 & 2005-06, RESPECTIVELY. FACTS IN BOTH THE ASSESSME NT YEARS ARE IDENTICAL AND A COMMON ISSUE IS INVOLVED IN BOTH THE APPEALS, WHICH READS AS UNDER: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD CIT (A) ERRED IN TREATING THE HIRE CHARGES AS BUSINESS INCOME AS AGAINST RENTAL INCOME. 2. FACTS IN BRIEF ARE THAT THE ASSESSEE COMPANY HAD FILED ITS RETURN OF INCOME DECLARING TOTAL LOSS AT (-) RS.3,29,347/- FOR THE A SSESSMENT YEAR 2004-05, WHICH WAS PROCESSED U/S 143(1). SUBSEQUENTLY, THE CASE WAS R EOPENED BY ISSUING NOTICE U/S.148 DATED 27.6.2006. FOR THE ASSESSMENT YEAR 2005-06, THE ASSESSEE HAD DECLARED TOTAL INCOME AT RS.1,36,471/- AND THE ASSESSMENTS FOR BOT H THE ASSESSMENT YEARS WERE COMPLETED AS UNDER:- ITA NO.2878 & 2879/M/2009 M/S. WOODKECKER INVESTMENTS P.LTD. 2 INCOME FROM BUSINESS OR PROFESSION : NIL INCOME FROM HOUSE PROPERTY : RS.18,00,000/- LESS: DEDUCTION U/S.24(@ 30%) : RS. 5,40,000/- TOTAL INCOME : RS.12,60,000/- 3. THE ASSESSEE COMPANY HAD RECEIVED REGULAR MONTHL Y PAYMENT OF RS.1,50,000/- FROM M/S. CHHABRIA MARKETING LTD., FOR LETTING OUT THE BUNGLOW AT KHANDLA OWNED BY IT. THE ASSESSEE COMPANY HAD TREATED THIS INCOME UNDER THE HEAD BUSINESS INCOME. HOWEVER, THE AO OBSERVED THAT THE INCOME EARNED BY THE ASSESSEE WAS NOT OUT OF BUSINESS ACTIVITIES AS THE ASSESSEE COMPANY HAD NOT CARRIED OUT ANY ACTIVITIES SUCH AS TRADING AND MANUFACTURING. HE ALSO OBSERVED THAT THE ASSESSEE COMPANY HAD NOT PROVIDED ANY PROFESSIONAL SERVICES TO EARN THIS INC OME. FURTHER, HE OBSERVED THAT THE ASSESSEE COMPANY WAS ALSO NOT ENGAGED IN ANY CONTIN UOUS PROCESS OF ANY OCCUPATION WITH A VIEW TO EARN PROFIT. HE, ACCORDINGLY, TREATE D THIS INCOME UNDER THE HEAD INCOME FROM HOUSE PROPERTY. HE FURTHER OBSERVED THAT SIM ILAR ISSUE WAS INVOLVED IN ASSESSMENT YEAR 2003-04 AND THE ASSESSEES PLEA HAS BEEN ACCEP TED BY LD CIT (A) BUT AN APPEAL HAS BEEN PREFERRED BEFORE THE TRIBUNAL. LD CIT (A) FOL LOWING THE ORDER OF THE TRIBUNAL FOR THE ASSESSMENT YEAR 2003-04 IN ASSESSEES OWN CASE HELD THAT THE IMPUGNED AMOUNT WAS ASSESSABLE AS INCOME FROM BUSINESS AND NOT INCOME F ROM HOUSE PROPERTY. 4. HAVING HEARD BOTH THE SIDES, WE FIND THAT IN ASS ESSEES OWN CASE FOR THE ASSESSMENT YEAR 2003-04 IN ITA NO.4897/M/06, UNDER THE IDENTICAL FACTS, THE TRIBUNAL HAS HELD AS UNDER: THE FACTS IN THE CASE OF THE ASSESSEE ARE AS FOLLOW S. THE ASSESSEE CONSTRUCTED THE BUILDING AT KHANDALA WHICH IS A TOURIST DESTINATION WITH THE OBJECT OF CARRYING ON BUSINESS OF PROVIDING PROPERTY TO TOURISTS. THE AS SESSEE FOUND THAT THERE WAS AN OPPORTUNITY TO LET OUT THE BUILDING TOGETHER WITH A IR CONDITIONING PLANT, FIXTURES AND FURNITURE TO M/S. CHHABRIA MARKETING LTD,., TO BE USED AS A TRANSIT ACCOMMODATION. THE MEMORANDUM OF UNDERSTANDING BET WEEN THE PARTIES WAS THAT M/S. CHHABRIA MARKETING LTD., WILL PAY A DAILY ROOM CHARGE OF RS.2000 PER ROOM SUBJECT TO MINIMUM GUARANTEE CHARGE OF RS.1,50 ,000/- PER MONTH. THE ASSESSEE WAS BOUND TO PROVIDE SERVICES LIKE HOUSE K EEPING, MAINTENANCE, HOSPITALITY AND ROOM SERVICES. DEPENDING ON THE RO OM OCCUPANCY THE EXPENSES OF THE ASSESSEE IN PROVIDING THESE FACILITIES WILL INC REASE. THE ASSESSEE WAS BOUND TO KEEP THE FURNITURE, FIXTURES, OTHER AMENITIES, AIR CONDITIONERS ETC., IN GOOD ITA NO.2878 & 2879/M/2009 M/S. WOODKECKER INVESTMENTS P.LTD. 3 CONDITION INCLUDING EFFECTING REPAIRS TO THEM AS AN D WHEN REQUIRED, SO AS TO ENSURE THEIR AVAILABILITY AT ALL TIME. THE ASSESSE E BY THE AFORESAID ARRANGEMENT WAS ONLY ENSURING ITS OCCUPANCY BUT OTHERWISE WAS D OING ALL ACTIVITIES OF RUNNING A LODGE/HOTEL. THE EXPENSES DEBITED IN THE PROFIT AND LOSS ACCOUNT ALSO INDICATE THAT EXPENSES WERE OF SUCH A NATURE AS A PERSON RUN NING A HOTEL WOULD NORMALLY INCUR. THE ASSEESSEE WAS THEREFORE, EXPLOITING A C OMMERCIALLY ASSET AND DERIVING INCOME THEREFROM AND THE INCOME HAS RIGHTLY BEEN DI RECTED TO BE ASSESSED UNDER THE HAD BUSINESS. IT IS NOT A CASE OF BARE LETTING AND IS ACCOMPANIED BY INCIDENTAL SERVICES OR FACILITIES. THE OPERATIONS INVOLVED IN SUCH LETTING WERE IN THE NATURE OF BUSINESS OR TRADING OPERATIONS. IT IS NOT A CASE O F BETTER EXPLOITATION OF THE PROPERTY VIZ; THE BUILDING. CARRYING ON OF THE ACT IVITIES BY THE ASSESSEE AMOUNTED TO CARRYING ON BUSINESS AND THE INCOME HAS TO BE AS SESSED AS BUSINESS INCOME. THE FACTS IN THE CASE OF THE ASSESSEE ARE THEREFORE , DIFFERENT FROM THE FACTS IN THE CASE OF SHAMBU INVESTMENTS (SUPRA). ON THE FACTS O F THE CASE OF THE ASSESSEE, WE ARE OF THE VIEW THAT THE CONCLUSION OF THE CIT (A) THAT INCOME IN QUESTION HAS TO BE ASSESSEE AS INCOME FROM BUSINESS ARE CORRECT. THEREFORE, RESPECTFULLY FOLLOWING THE DECISION OF T HE TRIBUNAL FOR THE ASSESSMENT YEAR 2003-04 (SUPRA), WE DISMISS THE APPEALS OF THE REVE NUE FOR BOTH THE ASSESSMENT YEARS. 5. IN THE RESULT, BOTH THE APPEALS ARE DISMISSED. PRONOUNCED ON 9 TH APRIL, 2010 SD/- (V. DURGA RAO) (JUDICIAL MEMBER) SD/- (S.V. MEHROTRA) (ACCOUNTANTMEMBER) MUMBAI, DATED 9 TH APRIL, 2010 PARIDA COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. COMMISSIONER OF INCOME TAX (APPEALS)-, MUMBAI 4. COMMISSIONER OF INCOME TAX, CITY-, MUMBAI 5. DEPARTMENTAL REPRESENTATIVE, BENCH G, MUMBAI //TRUE COPY// BY ORDER ASSTT. REGISTRAR, ITAT, MUMBAI ITA NO.2878 & 2879/M/2009 M/S. WOODKECKER INVESTMENTS P.LTD. 4 DATE INITIALS 1. DRAFT DICTATED ON 6.4.2010 PS 2. DRAFT PLACED BEFORE AUTHOR 6.4.2010 PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER AM/JM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER AM/J M 5. APPROVED DRAFT COMES TO THE SR. PS PS 6. KEPT FOR PRONOUNCEMENT ON PS 7. FILE SENT TO THE BENCH CLERK PS 8. DATE ON WHICH FILE GOES TO THE HEAD CLERK 9. DATE OF DISPATCH OF ORDER ITA NO.2878 & 2879/M/2009 M/S. WOODKECKER INVESTMENTS P.LTD. 5