ITO 3(1)(2), MUMBAI V. BRINDABAN BUILDERS P. LTD., MUMBAI

ITA 2953/MUM/2016

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 0053 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 10 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-02-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2005-2006
• Appeal Filed On: 22-04-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUMAN KUMAR
• Keywords: Business income
• Section: 143(3); 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH B, MUMBAI BEFORE SHRI G.S.PANNU, ACCOUNTANT MEMBER AND SHRI SANDEEP GOSAIN, JUDICIAL MEMBER ITA NO. 2953/MUM/2016 (ASSESSMENT YEAR 2005-06) ITA NO. 2954/MUM/2016 (ASSESSMENT YEAR 2006-07) THE INCOME TAX OFFICER 3(1)(2), ROOM NO.666, 6 TH FLOOR, AAYKAR BHAVAN,M.K.ROAD, MUMBAI 400 020 ...... APPELLANT VS. M/S.BRINDABAN BUILDERS P.LTD., 4 TH FLOOR, RAHEJAS CORNER OF MAIN- AVENUE OF N.P.ROAD, SANTACRUZ (W), MUMBAI 400 054 PAN:AAACB1815B .... RESPONDENT C.O.NO.201&202/MUM/2017 (ARISING OUT OF ITA NO.2953 &2954/MUM/2016, A.Y.2005-06 & 2006-07) M/S.BRINDABAN BUILDERS P.LTD., MUMBAI. ... CROSS OBJECTOR VS. THE INCOME TAX OFFICER 3(1)(2), MUMBAI. ..... APPELLANT IN APPEAL REVENUE BY : SHRI SUMAN KUMAR ASSESSEE BY : SHRI MAYUR KISNADW ALA DATE OF HEARING : 26/02/2018 DATE OF PRONOUNCEMENT : 28/02/2018 2 ITA NOS. 2953&2954/MUM/2016& C.O.NOS.201&202/MUM/2017 (ASSESSMENT YEAR 2005-06& 2006-07) ORDER PER G.S.PANNU,A.M: THE CAPTIONED APPEALS FILED BY THE REVENUE AND CR OSS OBJECTIONS BY THE ASSESSEE PERTAINING TO ASSESSMENT YEARS 2005-0 6AND 2006-07 ARE DIRECTED AGAINST SEPARATE ORDERS PASSED BY CIT(A)-20, MUMB AI DATED 22/01/2016, WHICH IN TURN, ARISE OUT OF ORDERS PASSED BY TH E ASSESSING OFFICER UNDER SECTION 143(3) R.W.S. 147 OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT) DATED 19/03/2013. 2. THE GROUNDS OF APPEAL RAISED BY THE REVENUE IN I TA NO.2953/MUM/2016 FOR ASSESSMENT YEAR 2005-06 READ AS UNDER:- 1. 'WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LD. CIT(A) IS RIGHT IN DELETING THE ADDITION OF RS. 50,33,280/- M ADE BY ASSESSING OFFICER ON ACCOUNT OF 'INCOME FROM HOUSE PROPERTY' BY DETERMINING THE ANNUAL VALUE OF THE OFFICE PREMISES SITUATED AT RAHEJA CENTRE, NARIMAN POINT A T RS.71,90,400/- U/S, 23(L)(A) OF THE I.T.ACT, 1961.?' 2. 'WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LD. CIT(A) IS RIGHT IN DELETING ADDITION OF RS.50,33,280/-FOLLOWI NG THE DECISION OF THE HON'BLE 1TAT IN ASSESSEE'S OWN CASE FOR A.Y. 2008-09 WITHOUT APP RECIATING THE FACT THAT ISSUE OF DETERMINATION OF ANNUAL VALUE OF THE PROPERTY U/S. 23(1)(A) WAS NOT THE SUBJECT MATTER OF APPEAL BEFORE THE HON'BLE IT AT FOR THE A.Y. 2008-09? 3. 'ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. C1T(A) ERRED IN NOT CONSIDERING THE ELABORATE REASONS MENTIONED BY A.O. IN THE ASSESSMENT ORDER AT PARA 5.5., WHEREIN IT WAS CLEARLY BROUGHT OUT THAT THE F ACTS INVOLVED FOR THE A.Y. 2008-09 ARE CLEARLY DISTINGUISHABLE AND THEREFORE DECISION OF THE HON'BLE 1TAT FOR A.Y. 2008- 09 CANNOT BE APPLIED FOR THE YEAR UNDER CONSIDERATI ON?'. 4. 'THE APPELLANT PRAYS THAT THE ORDER OF THE CIT(A PPEALS) ON THE ABOVE GROUNDS BE SET ASIDE AND THAT OF THE ASSESSING OFFICER RESTORE D.' 3. IN SO FAR AS THE APPEALS OF THE REVENUE ARE CONC ERNED, THE COMMON ISSUE RELATES TO THE NATURE OF INCOME EARNED BY THE ASSESSEE FROM ITS PROPERTY 3 ITA NOS. 2953&2954/MUM/2016& C.O.NOS.201&202/MUM/2017 (ASSESSMENT YEAR 2005-06& 2006-07) SITUATED AT RAHEJA CENTER, NARIMAN POINT, MUMBAI. AS PER THE REVENUE, THE COMPENSATION EARNED BY THE ASSESSEE FOR ALLOWING TH E USE OF ITS OFFICE PREMISES IN RAHEJA CHAMBERS IS AN INCOME ASSESSABLE UNDER THE HEAD HOUSE PROPERTY WHEREAS THE ASSESSEE HAD DECLARED SUCH IN COME TO BE ASSESSABLE AS BUSINESS INCOME. 4. IN BOTH THE ASSESSMENT YEARS, THE CIT(A) HAS UPH ELD THE STAND OF THE ASSESSEE FOLLOWING THE DECISION OF THE TRIBUNAL IN THE ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2008-09 IN ITA NO.6902/MUM/2011 DA TED 03/10/2012. 5. IN THIS BACKGROUND, THE LD. DEPARTMENTAL REPRESE NTATIVE HAS NOT DISPUTED THAT THE FACTUAL MATRIX IN THE INSTANT YEA R IS SIMILAR TO THAT CONSIDERED BY THE TRIBUNAL IN ASSESSMENT YEAR 2008-09 BUT HAS REFERRED TO THE DISCUSSION CONTAINED IN THE ASSESSMENT ORDER. 5.1 NOTABLY, IN THE ASSESSMENT ORDER AS PER PARAS 5 .1 AND 5.2, THE ASSESSING OFFICER HAS HIMSELF NOTED THAT ASSESSEE IS PROVIDIN G VARIED NATURE OF SERVICES AND AMENITIES, SUCH AS ELECTRICITY, TELEPHONE, SECU RITY, GARDEN MAINTENANCE, OFFICE MAINTENANCE, STAFF SERVICES, ETC. IN RESPECT OF THE USE OF OFFICE PREMISES ALLOWED TO THREE OF ITS GROUP CONCERNS NAMELY M/S. SEA VIEW DEVELOPERS, M/S. OUTLOOK PUBLISHING(I) P LTD. AND M/S. GOKUL CONSTRU CTION CO. PVT. LTD. THE SAID FACTUAL OBSERVATION BY THE ASSESSING OFFICER, CLEA RLY SHOWS THAT THE USE OF THE PREMISES HAVE BEEN ALLOWED BY THE ASSESSEE NOT AS A TENANCY SIMPLICITER BUT FOR COMPOSITE SERVICES, WHICH INCLUDED USE OF PREMI SES. BE THAT AS IT MAY, THE DECISION OF THE TRIBUNAL DATED 03/10/2012(SUPRA), W HICH HAS BEEN RELIED UPON BY THE CIT(A), CONTINUES TO HOLD THE FIELD, INASMUC H AS, THE SAME HAS NOT BEEN ALTERED BY ANY HIGHER AUTHORITY. THE SAID DECISION OF THE TRIBUNAL HAS MADE THE FOLLOWING DISCUSSION, WHICH IS RELEVANT:- 4 ITA NOS. 2953&2954/MUM/2016& C.O.NOS.201&202/MUM/2017 (ASSESSMENT YEAR 2005-06& 2006-07) 5.WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED T HE MATERIAL BEFORE US. IN ORDER TO BE TAXED UNDER SECTION 22 OF THE ACT, THE CONDIT IONS TO BE SATISFIED ARE (A) THE PROPERTY SHOULD CONSIST OF BUILDINGS OR LANDS APPUR TENANT THERETO; (B) THE ASSESSEE SHOULD BE THE OWNER; (C) THE PROPERTY SHOULD NOT BE USED BY THE OWNER FOR THE PURPOSE OF ANY BUSINESS CARRIED ON BY HIM THE PROFI TS OF WHICH ARE CHARGEABLE TO INCOME-TAX. IN ORDER TO DETERMINE WHETHER RENT IS A SSESSABLE AS INCOME FROM PROPERTY OR BUSINESS INCOME, WHAT HAS TO BE SEEN IS WHETHER THE ASSET IS BEING EXPLOITED COMMERCIALLY BY THE LETTING OUT OR WHETHE R IT IS BEING LET OUT FOR THE PURPOSE OF ENJOYING THE RENT. THE DISTINCTION BETWE EN THE TWO IS A NARROW ONE AND HAS TO DEPEND ON CERTAIN FACTS PECULIAR TO EACH CAS E.THE QUESTION WHETHER A PARTICULAR LETTING IS BUSINESS HAS TO BE DECIDED IN THE CIRCUMSTANCES OF EACH CASE AND IN THE SETTING AND BACKGROUND OF FACTS. THERE IS NO SUCH THING AS A NATURAL COMMERCIAL ASSET,BECAUSE AN ASSET BECOMES A COMMERC IAL ASSET BY THE USE TO WHICH IT IS PUT IN BUSINESS AND NOT BECAUSE OF ANY INHERE NT QUALITIES.IN THE CASE UNDER CONSIDERATION INCOME FROM THE PROPERTY IN QUESTION WAS BEING ASSESSED UNDER THE HEAD BUSINESS INCOME FOR LAST SO MANY YEARS. PROPER TY-IN-QUESTION, RENTED AMINITIES- LIKE OFFICE EQUIPMENT & AIR CONDITIONER AND FOR PRO VIDING CLEANING & SECURITY SERVICES- TERMS AND CONDITIONS OF LETTING OUT WERE THE SAME A S OF THE EARLIER AYS.AO HAS NOT BROUGHT ANYTHING NEW ON RECORD TO PROVE THAT THERE WAS SOMETHING SUBSTANTIALLY DIFFERENT FROM THE EARLIER YEARS. 5.1.IN OUR OPINION, WHERE THE INCOME RECEIVED IS NO T FROM THE BARE LETTING OF THE TENEMENT OR FROM THE LETTING ACCOMPANIED BY INCIDEN TAL SERVICES OR FACILITIES,BUT THE SUBJECT HIRED OUT IS A COMPLEX ONE AND THE INCOME O BTAINED IS NOT SO MUCH BECAUSE OF THE BARE LETTING OF THE TENEMENT BUT BECAUSE OF THE FACILITIES AND SERVICES RENDERED, THE OPERATIONS INVOLVED IN SUCH LETTING O F THE PROPERTY IS OF THE NATURE OF BUSINESS OR TRADING OPERATIONS AND THE INCOME DERIV ED IS OF THE NATURE OF BUSINESS OR TRADING OPERATIONS.AS THE INCOME RECEIVED BY THE AS SESSEE-COMPANY IS NOT ONLY FROM LETTING OUT,BUT IT IS BECAUSE OF FACILITIES AND SER VICES RENDERED,AS DISCUSSED IN PARAGRAPH 5,SO IN OUR OPINION SAME SHOULD BE ASSESS ED UNDER THE HEAD BUSINESS INCOME. FOLLWING THE DECISIONS OF KARNANI PROPERTIE S(SUPRA),GROUNDS NO.1-8 ARE DECIDED IN FAVOUR OF THE ASSESSEE-COMPANY 6. QUITE CLEARLY, THE TRIBUNAL CAME TO A FINDING TH AT THE INCOME RECEIVED BY THE ASSESSEE WAS NOT FROM LETTING OF THE TENEMENT OR FROM THE LETTING ACCOMPANIED BY INCIDENTAL SERVICES OR FACILITIES, B UT THE SUBJECT HIRING WAS A COMPLEX ONE AND THE INCOME OBTAINED WAS MORE FOR FACILITIES AND SERVICES PROVIDED, THEREFORE, IT WENT ON TO HOLD THAT THE IN COME DERIVED THERE-FROM IS IN THE NATURE OF BUSINESS INCOME. AT THE TIME OF H EARING, THE LD. REPRESENTATIVE FOR THE ASSESSEE POINTED OUT THAT S UBSEQUENTLY FOR ASSESSMENT YEAR 2007-08 ALSO THE TRIBUNAL VIDE ITS ORDER IN I TA NO. 3453/MUM/2017 & 5 ITA NOS. 2953&2954/MUM/2016& C.O.NOS.201&202/MUM/2017 (ASSESSMENT YEAR 2005-06& 2006-07) CO.NO.203/MUM/2017 DATED 09/10/2017 HAS UPHELD THE ASSESSMENT OF HIRING INCOME AS INCOME FROM BUSINESS, FOLLOWING THE DECIS ION OF THE TRIBUNAL DATED 03/10/2012(SUPRA). 7. AT THE TIME OF HEARING, A STATEMENT WAS ALSO MAD E AT BAR THAT RIGHT FROM ASSESSMENT YEARS 1985-86 AND UPTO 2004-05, SIMILAR INCOME HAS BEEN ACCEPTED BY THE DEPARTMENT TO BE ASSESSABLE AS BUSI NESS INCOME. FOR THE SAID REASON AND ALSO IN VIEW OF THE PRECEDENTS NOTED A BOVE, WHICH CONTINUE TO HOLD THE FIELD, IN OUR VIEW, THE CIT(A) MADE NO MIS TAKE IN TREATING THE HIRING INCOME EARNED FROM THE OFFICE PREMISES SITUATED AT RAHEJA CHAMBERS, NARIMAN POINT, MUMBAI AS BUSINESS INCOME. THUS, ON THIS ASPECT REVENUE HAS TO FAIL. 8. BEFORE PARTING, WE MAY REFER TO SOME OF THE POIN TS AGITATED BY THE REVENUE IN THE AFORE-NOTED GROUNDS OF APPEAL. FIRS TLY, IT IS CANVASSED THAT THE FACTS INVOLVED FOR 2008-09 ARE DISTINGUISHABLE FROM THE FACTS IN THE INSTANT ASSESSMENT YEAR, AND A REFERENCE IS MADE TO THE DI SCUSSION IN PARA 5.5 OF THE ASSESSMENT ORDER. WE HAVE PERUSED THE SAME AND FIN D THAT THERE ARE NO DISTINGUISHABLE FEATURES, INASMUCH AS, IT IS NOT IN DISPUTE THAT THE TRANSACTION INVOLVING THE USE OF PROPERTY AT RAHEJA CHAMBERS IS ONE AND THE SAME IN BOTH THE YEARS. IN ASSESSMENT YEAR 2008-09 ALSO, WHAT WAS THE SUBJECT MATTER OF ASSESSMENT WAS THE INCOME DERIVED BY THE ASSESSEE F ROM LEASING OF THE OFFICE PREMISES IN RAHEJA CHAMBERS, NARIMAN POINT, WHICH I S THE POSITION IN THIS YEAR TOO. AS IN THE ASSESSMENT YEAR 2008-09, IN THIS YEAR TOO THE ASSESSEE DECLARED INCOME FROM THE LEASING AS BUSINESS INCOME , AND THE ASSESSING OFFICER DIFFERED AND ASSESSED IT AS INCOME FROM HO USE PROPERTY. THEREFORE, 6 ITA NOS. 2953&2954/MUM/2016& C.O.NOS.201&202/MUM/2017 (ASSESSMENT YEAR 2005-06& 2006-07) WE FIND NO REASON TO UPHOLD THE STAND OF THE REVENU E AS MANIFESTED IN THE GROUNDS OF APPEAL. 8.1 CONSIDERING THE AFORESAID, IN OUR VIEW, THE CIT (A) MADE NO MISTAKE IN DIRECTING THE ASSESSMENT OF SUCH INCOME AS BUSINES S INCOME, WHICH IS HEREBY AFFIRMED. IN THE RESULT, APPEAL OF THE REVENUE IS D ISMISSED. ITA NO.2954/MUM/2016: 9. AT THE TIME OF HEARING, IT WAS A COMMON POINT B ETWEEN THE PARTIES THAT SO FAR AS APPEAL FOR THE ASSESSMENT YEAR 2006-07 IS CONCERNED, THE ISSUE RAISED IS SIMILAR TO THE GROUNDS OF APPEAL DEALT WITH BY US IN THE APPEAL FOR ASSESSMENT YEAR 2005-06. AS A CONSEQUENCE, OUR DEC ISION IN APPEAL FOR ASSESSMENT YEAR 2005-06 SHALL APPLY MUTATIS MUTANDIS IN THE APPEAL FOR ASSESSMENT YEAR 2006-07 ALSO. 10. THE ASSESSEES CROSS OBJECTIONS ARE PRIMARILY I N SUPPORT OF THE ORDER OF THE CIT(A) AS WELL AS ON THE ISSUE OF VALIDITY OF REOPENING UNDER SECTION 147/ 148 OF THE ACT, WHICH IS RENDERED INFRUCTUOUS SINCE THE CORRESPONDING APPEALS OF THE REVENUE HAVE BEEN DISMISSED BY US IN THE EAR LIER PARAGRAPH. 11. IN THE RESULT, APPEALS OF THE REVENUE AS WELL AS CROSS OBJECTIONS OF THE ASSESSEE ARE DISMISSED, AS ABOVE. ORDER PRONOUNCED IN THE OPEN COURT ON 28/02/2018 SD/- SD/- (SANDEEP GOSAIN) (G.S. PANNU) JUDICIAL MEMBER ACCOCUNTANT MEMBER MUMBAI, DATED 28/02/2018 VM , SR. PS 7 ITA NOS. 2953&2954/MUM/2016& C.O.NOS.201&202/MUM/2017 (ASSESSMENT YEAR 2005-06& 2006-07) COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT , 2. THE RESPONDENT. 3. THE CIT(A)- 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. BY ORDER, //TRUE COPY// (DY./ASSTT. REGISTRAR) ITAT, MUMBAI