ITO, CHENNAI V. M/s. R K Investments, CHENNAI

ITA 298/CHNY/2012

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 0785 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-02-2013
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 18-02-2013
• Assessment Year: 2008-2009
• Appeal Filed On: 13-02-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: R VIJAYARAGHAVAN
• Keywords: Business income
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, CHENNAI BEFORE SHRI ABRAHAM P. GEORGE, ACCOUNTANT MEMBER AND SHRI VIKAS AWASTHY, JUDICIAL MEMBER I.T.A. NOS. 297 & 298/MDS/2012 (ASSESSMENT YEARS : 2006-07 & 2008-09) THE INCOME TAX OFFICER, WARD XV(2), CHENNAI - 600 034. (APPELLANT) V. M/S R.K. INVESTMENTS, NO.28/21, DE MONTE COLONY, ALWARPET, CHENNAI - 600 018. PAN : AAAFR 3413 Q (RESPONDENT) APPELLANT BY : SHRI SHAJI P. JACOB, ADDL. CIT RESPONDENT BY : SHRI R. VIJAYARAGHAVAN, ADVOCATE DATE OF HEARING : 18.02.2013 DATE OF PRONOUNCEMENT : 18.02.2013 O R D E R PER ABRAHAM P. GEORGE, ACCOUNTANT MEMBER : IN THESE APPEALS OF THE REVENUE, ITS GRIEVANCE IS THAT CIT(APPEALS) HELD THE RENTAL INCOME RECEIVED BY THE ASSESSEE AS INCOME FROM BUSINESS, WHEREAS, ASSESSING OFFICER CO NSIDERED SUCH INCOME UNDER THE HEAD INCOME FROM HOUSE PROPERTY. 2 I.T.A. NOS. 297 & 298/MDS/12 2. FACTS APROPOS ARE THAT ASSESSEE, ENGAGED IN CONS TRUCTION BUSINESS AND PROPERTY DEVELOPMENT, HAD A PROJECT CA LLED TEMPLE STEPS AT 184-187, ANNA SALAI, LITTLE MOUNT, CHENNAI - 600 015. THE SAID PROJECT, WHICH WAS STARTED IN 1999, WAS COMPLETED D URING THE PREVIOUS YEAR ON 31.3.2006. MAJORITY OF THE UNITS WERE SOLD , BUT THERE WERE SOME UNSOLD UNITS LEFT OUT. ASSESSEE HAD ALSO RECEIVED APPROVAL FROM CENTRAL BOARD OF DIRECT TAXES (CBDT) ON 12.9.2006, WHEREBY TEMPLE STEPS WAS RECOGNIZED AS AN INDUSTRIAL PARK. THIS ENTITLE D THE ASSESSEE TO CLAIM DEDUCTION UNDER SECTION 80-IA(4)(III) OF INCO ME-TAX ACT, 1961 (IN SHORT 'THE ACT'). CLAIM OF THE ASSESSEE FOR SUCH D EDUCTION WAS ALLOWED FOR BOTH THE IMPUGNED ASSESSMENT YEARS IN THE ORIGI NAL ASSESSMENTS COMPLETED UNDER SECTION 143(3) OF THE ACT. HOWEVER , THE ASSESSMENTS WERE REOPENED AND IN THE RE-ASSESSMENTS DONE, RENTA L INCOME OF ` 2,10,43,069/- FOR ASSESSMENT YEAR 2006-07 AND ` 50,21,230/- FOR ASSESSMENT YEAR 2008-09, WHICH WERE EARLIER INCLUDE D AS PART OF BUSINESS INCOME, WERE TAKEN OUT FROM SUCH HEAD OF I NCOME AND ASSESSED UNDER THE HEAD INCOME FROM HOUSE PROPERTY . RESULTANTLY, THESE AMOUNTS WERE EXCLUDED FROM DEDUCTION ALLOWED TO ASSESSEE UNDER SECTION 80-IA(4)(III) OF THE ACT. ASSESSING OFFICER RELIED ON THE DECISION OF HON'BLE JURISDICTIONAL HIGH COURT IN TH E CASE OF CIT V. CHENNAI PROPERTIES AND INVESTMENTS LTD. (266 ITR 68 5) FOR THIS. 3 I.T.A. NOS. 297 & 298/MDS/12 3. ASSESSEE MOVED IN APPEAL BEFORE CIT(APPEALS) FOR BOTH THE YEARS. ACCORDING TO ASSESSEE, MAJORITY OF THE UNITS WERE S OLD BUT, TWO UNITS, WHICH WERE NOT SOLD FOR WANT OF BUYERS, WERE TEMPOR ARILY RENTED OUT. AS PER THE ASSESSEE, IT WAS NOTHING BUT EXPLOITATION O F ITS STOCK-IN-TRADE, AS A STOP GAP ARRANGEMENT AND RENTAL INCOME CONSTITUTE D NOTHING BUT BUSINESS INCOME. CIT(APPEALS) WAS IMPRESSED BY SUC H ARGUMENT. ACCORDING TO HIM, UNSOLD UNITS, WHICH WERE RENTED O UT, WERE FINALLY SOLD BY THE ASSESSEE AND THEREFORE, IT WAS ONLY TEMPORAR Y UTILIZATION OF STOCK- IN-TRADE. WHEN STOCK-IN-HAND WAS LET OUT, INCOME A RISING COULD BE CONSIDERED ONLY AS BUSINESS INCOME. FURTHER, ACCOR DING TO LD. CIT(APPEALS), WHEN THE INCOME WAS INCIDENTAL TO THE BUSINESS OF THE ASSESSEE, IT COULD ALSO BE CONSIDERED ONLY AS BUSIN ESS INCOME. FURTHER, ACCORDING TO HIM, UNITS WHICH WERE RENTED OUT WERE FULLY FURNISHED WITH FACILITIES AS REQUIRED FOR AN INDUSTRIAL PARK AND T HEREFORE, FOR THIS REASON ALSO SUCH RENTALS WERE BUSINESS INCOME. HE THUS HE LD IN FAVOUR OF ASSESSEE. 4. NOW BEFORE US, LEARNED D.R., STRONGLY ASSAILING THE ORDER OF CIT(APPEALS), SUBMITTED THAT THERE WAS NOTHING ON R ECORD TO SHOW THAT ASSESSEE HAD RENTED OUT THE BUILDING WITH FACILITIE S THAT COULD BRING THE INCOME UNDER THE HEAD INCOME FROM BUSINESS. ACCO RDING TO HIM, AN ANALYSIS OF THE FACILITIES WAS REQUIRED TO ASCERTAI N WHETHER THESE WERE 4 I.T.A. NOS. 297 & 298/MDS/12 USUAL FACILITIES GIVEN WHILE RENTING OUT PREMISES, OR THERE WERE ANY SPECIALIZED FACILITIES FOR A PARTICULAR PURPOSE, WH ICH COULD TAKE IT OUT FROM THE AMBIT OF INCOME FROM HOUSE PROPERTY. 5. PER CONTRA, LEARNED A.R., SUPPORTING THE ORDER O F CIT(APPEALS), SUBMITTED THAT THE FINDING OF CIT(APPEALS) WITH REG ARD TO FACILITIES WAS THAT THE PREMISES RENTED OUT WERE WITH FACILITIES. THIS HAS NOT BEEN REBUTTED BY THE REVENUE. 6. WE HAVE PERUSED THE ORDERS AND HEARD THE RIVAL SUBMISSIONS. NO DOUBT, ASSESSEE WAS IN THE BUSINESS OF PROPERTY DEV ELOPMENT AND CONSTRUCTION. ASSESSEE WAS HAVING WITH IT AN APPRO VAL FROM CENTRAL GOVERNMENT FOR ITS PROJECT AS AN INDUSTRIAL PARK, B Y VIRTUE OF NOTIFICATION NO.256/2006 DATED 12.9.2006 ISSUED BY DEPARTMENT OF INDUSTRIAL POLICY AND PROMOTION. ASSESSEE HAD DEVELOPED THE PROJECT AS AN INDUSTRIAL PARK SO AS TO INCLUDE WATER SUPPLY, SEWERAGE, COMMO N EFFLUENT TREATMENT FACILITY, TELECOM NETWORK, GENERATION AND DISTRIBUTION OF POWER, AIR-CONDITIONING AND SUCH OTHER FACILITIES, WHICH W ERE COMMON FOR ALL THE INDUSTRIAL USERS OF THE PARK. IT IS ALSO CULLED OU T FROM THE ORDERS OF THE LOWER AUTHORITIES THAT ASSESSEE HAD SOLD ALMOST ALL UNITS WHICH WERE DEVELOPED AND ONLY FEW OF THE UNITS WERE RENTED OUT . NEVERTHELESS, IN OUR OPINION, EVEN IF THE ASSESSEE IS IN THE BUSINES S OF DEVELOPMENT OF PROPERTY, RENTING OUT OF BUILT-UP AREAS, WHICH WERE NOT SOLD, WOULD 5 I.T.A. NOS. 297 & 298/MDS/12 ORDINARILY RESULT IN INCOME WHICH WILL FALL UNDER T HE HEAD INCOME FROM HOUSE PROPERTY, UNLESS IT IS SHOWN THAT SUCH RENTI NG WAS ALONG WITH FACILITIES WHICH WERE SPECIALIZED. THE PROVISION F OR FACILITIES SHOULD BE SPECIALIZED AND PREDOMINANT ENOUGH TO TAKE IT OUT F ROM THE AMBIT OF INCOME FROM HOUSE PROPERTY. TO DECIDE THIS, IT IS ESSENTIAL TO HAVE A LOOK AT THE FACILITIES, WHICH WERE MADE AVAILABLE B Y THE ASSESSEE TO VARIOUS CLIENTS TO WHOM THE UNITS WERE RENTED OUT. NEITHER THE ASSESSING OFFICER, NOR LD. CIT(APPEALS) HAVE VERIFI ED THE LEASE DEEDS OR AGREEMENTS SO AS TO ASCERTAIN WHAT WAS THE NATURE O F THE PROPERTY LEASED OUT. IN THE ABSENCE OF SUCH LEASE DEED / AG REEMENT, IT WILL NOT BE POSSIBLE TO COME TO A FACTUAL CONCLUSION WHETHER RE NTAL INCOME WOULD FALL UNDER THE HEAD INCOME FROM HOUSE PROPERTY OR INCOME FROM BUSINESS. IN OUR OPINION, THE NOTIFICATION DATED 12.9.2006 RELIED ON BY THE ASSESSEE WILL HAVE LITTLE RELEVANCE WHILE DECID ING THE NATURE OF INCOME. THIS HAS TO BE DECIDED IN ACCORDANCE WITH THE LAW LAID DOWN BY HON'BLE APEX COURT IN THE CASE OF SHAMBU INVESTMENT S (P) LTD. V. CIT (263 ITR 143). WE ARE, THEREFORE, OF THE OPINION T HAT THE MATTER REQUIRES A RE-VISIT BY THE ASSESSING OFFICER. WE SET ASIDE THE ORDERS OF AUTHORITIES BELOW AND REMIT THE ISSUE BACK TO THE F ILE OF THE ASSESSING OFFICER FOR CONSIDERATION AFRESH IN ACCORDANCE WITH LAW. 6 I.T.A. NOS. 297 & 298/MDS/12 7. IN THE RESULT, APPEAL FILED BY THE REVENUE IS AL LOWED FOR STATISTICAL PURPOSES. ORDER WAS PRONOUNCED IN THE COURT ON MONDAY, THE 18 TH OF FEBRUARY, 2013, AT CHENNAI. SD/- SD/- (VIKAS AWASTHY) (ABRAHAM P. GEORGE) JUDICIAL MEMBER ACCOUNTANT MEMBER CHENNAI, DATED THE 18 TH FEBRUARY, 2013. KRI. COPY TO: (1) APPELLANT (2) RESPONDENT (3) CIT(A)-XII, CHENNAI-34 (4) CIT-X, CHENNAI (5) D.R. (6) GUARD FILE