A.R. BUILDERS, MUMBAI V. ITO 18(2)(2), MUMBAI

ITA 3223/MUM/2013

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 3314 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 10 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-03-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 09-03-2016
• Assessment Year: 2008-2009
• Appeal Filed On: 26-04-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business income; Revised return
• Section: 27; 56

Judgement Text

, , , , INCOME-TAX APPELLATE TRIBUNAL -ABENCH MUMBAI , BEFORE S/SH.RAJENDRA,ACCOUNTANT MEMBER AND AMIT SHUKLA,JUDICIAL MEMBER ./I.T.A./3223/MUM/2013 , / ASSESSMENT YEAR: 2008-09 M/S. A.R. BUILDERS C/O., ASHOK CHITNIS, D-5, MANOJ SOCIETY SHANKAR GHANEKAR MARG, PRABHADEVI,MUMBAI-400 025. PAN: AAAFA 5769 N VS. INCOME TAX OFFICER WARD-18(2)(2) MUMBAI. ( /APPELLANT ) ( / RESPONDENT ) REVENUE BY: SHRI SANDEEP GOEL ASSESSEE BY: SHRI ANIL SATHE / DATE OF HEARING: 09.03.2016 / DATE OF PRONOUNCEMENT: 16.03.2016 ,1961 254(1) ORDER U/S.254(1)OF THE INCOME-TAX ACT,1961(ACT) PER RAJENDRA, AM - CHALLENGING THE ORDER OF THE CIT (A)-16, MUMBAI, DA TED 04/01/2013, THE ASSESSEE HAS FILED THE PRESENT APPEAL. 2. ASSESSEE-AN INDIVIDUAL, FILED ITS RETURN OF INCOME ON 6/05/2009, DECLARING TOTAL INCOME AT RS.1,85,160/-.LATER ON A REVISED RETURN WAS FILED O N 12/05/209, SHOWING INCOME AT RS.2,84, 046/-.ON 29/07/2009,ONE MORE RETURN WAS FILED DECLA RING INCOME AT RS.3,11720/-. THE ASSESSING OFFICER (AO)COMPLETED THE ASSESSMENT ON 2 9/11/2010, UNDER SECTION 143 (3) OF THE ACT,DETERMINING THE INCOME OF THE ASSESSEE AT RS.9, 58,080/-. 2.1. DURING THE ASSESSMENT PROCEEDINGS,THE AO FOUND THAT THE ASSESSEE HAD SHOWN INCOME FROM HOUSE PROPERTY AT RS.2,30,733/-,THAT AS PER TH E TDS CERTIFICATE,ISSUED BY THE STATE BANK OF INDIA MUMBAI,THE ASSESSEE HAD RECEIVED RENT OF R S.9.58 LAKHS, THAT THE BANK HAD DEDUCTED TDS OF RS.2 LAKHS.HE DIRECTED THE ASSESSEE TO FURNI SH A COPY OF LEAVE AND LICENCE AGREEMENT MADE WITH THE BANK. ON PERUSAL OF THE AGREEMENT AND THE LETTER ISSUED BY THE BANK, THE AO FOUND THAT THE ASSESSEE WAS A TENANT OF THE PROPERT Y AND HAD SUB-LETTED IT TO THE STATE BANK OF INDIA WITH FURNITURE AND FIXTURES AND ALSO WITH A P EDESTRIAN BRIDGE, THAT THE BRIDGE WAS CONSTRUCTED BY THE ASSESSEE AT THE REQUEST OF THE B ANK BY WAY OF AN IMMUNITY PROVIDING SPECIAL APPROACH TO THE PREMISES,THAT IN THE ORIGIN AL RETURN HE HAD SHOWN GROSS RENT AT RS.4.70 LAKHS AND COMPENSATION AT RS.3.60 LACS.THE AO ASKED THE ASSESSEE AS TO WHY THE RENT OF RS.9.58 LAKHS SHOULD NOT BE TREATED UNDER THE HEAD INCOME FROM OTHER SOURCES. AFTER CONSIDERING THE SUBMISSION OF THE ASSESSEE IN THAT REGARD,THE AO HELD THAT IT WAS CLEAR FROM THE LEASE AGREEMENT THAT THE ASSESSEE WAS NOT ONLY LETTING OUT THE PROPERTY BUT ALSO PROVIDING AMENITIES WHICH WAS INSEPARABLE FROM THE BUILDING, THAT THE BRIDGE WAS CONSTRUCTED ONLY FOR THE PURPOSE OF LETTING OUT THE PROPERTY,THAT IT WAS INSEPARABLE FROM THE PROPERTY, THAT THE INTENTION OF THE ASSESSEE WAS NOT ONLY A RENT INCOM E FROM THE PROPERTY BUT ALSO TO ENJOY OTHER INCOME BY PROVIDING AMENITIES/FACILITIES AS PER THE REQUIREMENT OF THE BANK. FINALLY, THE AO HELD THAT RENT RECEIVED FROM THE BANK, AMOUNTING TO RS.9.58 LAKHS, WAS TO BE ASSESSED UNDER THE HEAD INCOME FROM OTHER SOURCES AS THE SAME WAS INSEPARABLE LETTING UNDER SECTION 56 (2) (III) OF THE ACT. 3223/M/13-ARBUILDERS 2 3. AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE FILE D AN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY(FAA).BEFORE HIM, IT WAS ARGUED THAT THE P REMISES WAS TAKEN ON LEASE IN THE YEAR 1973,THAT SUBLEASE WAS ENTERED INTO BY THE ASSESSEE WITH SBI ON 09/10/1973,THAT SUBSEQUENTLY THE LEASE WAS RENEWED FROM TIME TO TIME, THAT THE L EASE CLEARLY MENTION THAT THE LEASE RENT OF THE PREMISES AND THE SERVICE CHARGES WERE SEPARATE, THAT THE LEASE RENT WAS OFFERED UNDER THE HEAD INCOME FROM HOUSE PROPERTY,THAT CHARGES FOR AM ENITIES WERE TAKEN UNDER THE HEAD INCOME FROM BUSINESS, THAT THE AO HAD DISTORTED THE TERMS OF SUBLEASE AND HELD THAT ASSESSEE WAS NOT ONLY LETTING OUT THE PROPERTY BUT WAS ALSO PROVIDING THE AMENITIES WHICH WERE INSEPARABLE FROM THE BUILDING, THAT THE SUBLEASE CL EARLY MENTIONS THE RENT OF THE PREMISES AND THE RENT OF THE SERVICE CHARGES SEPARATELY, THAT TH E ASSESSEE HAD CORRECTLY FILED THE RETURN TAKING THE RENT OF THE PREMISES UNDER THE HEAD PROP ERTY INCOME AND THE COMPENSATION FOR SERVICE CHARGES UNDER THE HEAD BUSINESS INCOME, THA T THE ORDER OF THE AO TREATING ALL INCOME WITHOUT CONSIDERING THE DISTINCTION AS INCOME FROM PROPERTY AND BUSINESS INCOME AND TREATING ALL INCOME AS INCOME FROM OTHER SOURCES WAS PATENTL Y WRONG.AFTER CONSIDERING THE SUBMISSION OF THE ASSESSEE AND THE ASSESSMENT ORDER ,THE FAA REFERRED TO THE LEASE AGREEMENT AND HELD THAT THE AO HAD RIGHTLY ASSESSED THE ENTIR E RECEIPT UNDER THE HEAD INCOME FROM OTHER SOURCES. 4 .DURING THE COURSE OF HEARING BEFORE US THE AUTHORI SED REPRESENTATIVE(AR) CONTENDED THAT THE PERIOD OF AGREEMENT WAS FOR A PERIOD OF MORE TH AN 12 YEARS, THAT IT WAS A CASE OF DEEMED OWNERSHIP OF PROPERTY AND WAS COVERED U/S.27(IIIB) OF THE ACT, THAT THE ASSESSEE HAD SHOWN THE HOUSE PROPERTY INCOME AND BUSINESS INCOME SEP ARATELY, THAT THERE WAS NO JUSTIFICATION FOR ASSESSING THE INCOME UNDER THE HEAD INCOME FRO M OTHER SOURCES, THAT SECTION 56(III) DEALT WITH PLANT AND MACHINERY,THAT IN THE CASE UNDER CON SIDERATION BUILDING PREMISES WAS LET OUT WITH SOME FACILITIES.THE DEPARTMENTAL REPRESENTATIV E (DR) SUPPORTED THE ORDER OF THE FAA AND STATED THAT AMENITIES PROVIDED BY THE ASSESSEE WERE INSEPARABLE. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIALS BEFORE US. WE FIND THAT THE ASSESSEE IS A LESSEE IN RESPECT OF THE SAID PREMISE S AS PER THE LEASE AGREEMENT DATED 15/2/1973 ENTERED INTO BETWEEN THE ORIGINAL LANDLORD AND THE ASSESSEE, THAT THE LEASE DEED WAS REGISTERED IN THE YEAR 1973, THAT IN THE SAME YEAR THE ASSESSE E HAD ENTERED INTO AN AGREEMENT OF SUBLEASE WITH THE STATE BANK OF INDIA, THAT VIDE THEIR LETTE R DATED 11/6/1992 THE BANK INCREASE THE LEASE RENT TO RS.12 PER SQUARE FEET ON ACCOUNT OF RENT AN D TO RUPEES FOR ON ACCOUNT OF SERVICE CHARGES MAKING A TOTAL OF RUPEES 16 PER SQ.FT. PER MONTH WITH EFFECT FROM 01/02/1992, THAT THE BANK HAD PAID RS.9.58 LAKHS TO THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION AND HAD DEDUCTED TAX OF RS.2,00, 340/-, THAT ASSESSEE HAD S HOWN THE AMOUNT RECEIVED FROM THE BANK IN TWO PARTS, THAT RS.7.18 LAKHS WERE SHOWN UNDER THE HEAD INCOME FROM HOUSE PROPERTY, THAT THE ASSESSEE HAD SHOWN INCOME OF RS. 2.39 LAKHS AS BUSINESS INCOME, THAT THE AO HAD ASSESSED THE ENTIRE AMOUNT I.E. RS. 9.58 LAKHS AS I NCOME FROM OTHER SOURCES UNDER SECTION 56 (2)(III) OF THE ACT WITHOUT ALLOWING ANY DEDUCTION THEREFROM. WE FIND THAT WHILE DECIDING THE APPEAL,THE FAA HAD NOT DECIDED THE ISSUE OF DEEMED OWNERSHIP OF THE PREMISES AND HAD NOT MADE ANY COMM ENT ABOUT APPLICABILITY OF THE PROVISIONS OF SECTION 27(IIIB).IN OUR OPINION,IT WA S THE VITAL ISSUE THAT HAD TO BE ADJUDICATED BECAUSE THE LEASE IN QUESTION WAS FOR A PERIOD MORE THAN 12 YEARS.AS PER THE SETTLED PRINCIPLES OF TAXATION,GOVERNING THE HOUSE PROPERTY INCOME,A L ESSEE CAN BE TAXED AS DEEMED OWNER OF THE PROPERTY AS PER THE SECTION 27(IIIB).WE FIND TH AT WHILE PROVIDING THE ARTIFICIAL DEFINITION OF THE TERM OWNER,THE LEGISLATURE HAS REFERRED TO THE PROVISIONS OF SECTION 269UA(F).NO DOUBT,THE PROVISIONS OF CHAPTER XX-C ARE NOT APPLIC ABLE TO THE TRANSACTIONS EFFECTED ON OR AFTER 01.04.2002. HOWEVER,VIS A VIS THE PROVISIONS OF SECTION 27(IIIB),IT HAS TO BE ASSUMED THAT THE DEFINITION OF THE EXPRESSION TRANSFER UNDE R SECTION 269UA(F)HAS TO BE CONSIDERED TO 3223/M/13-ARBUILDERS 3 BE IN EXISTENCE.IN SUCH AN EVENT,LEASE FOR A TERM O F NOT LESS THAN 12 YEARS MAKE THE LESSEE A DEEMED OWNER AND CONSEQUENTLY THE INCOME EARNED BY THE DEEMED OWNER IS ASSESSABLE TO TAX UNDER THE HEAD INCOME FROM HOUSE PROPERTY.THEREFORE ,IN OUR OPINION THE ASSESSEE HAD RIGHTLY OFFERED THE RENTAL INCOME UNDER THE PROVISIONS OF S ECTION 22 OF THE ACT. THERE WAS NO JUSTIFICATION FOR ASSESSING THE INCOME UNDER THE HE AD INCOME FROM OTHER SOURCES AND DENYING THE ASSESSEE ANY DEDUCTION. HERE WE WOULD LIKE TO R EFER TO THE CASE OF YAGYAWATI JAISWAL FAMILY TRUST(89 ITD199).IN THAT CASE THE TRIBUNAL H AS HELD THAT BY VIRTUE OF INSERTION OF SECTION 27 (IIIB) BY THE FINANCE ACT,1987 WITH EFFE CT FROM 1 ST APRIL, 1988 R/WS. 269 UA (F), INCOME FROM SUBLEASE OF PROPERTY HELD UNDER LEASE E XCEEDING A PERIOD OF 12 YEARS IS CHARGEABLE UNDER THE HEAD INCOME FROM HOUSE PROPERT Y AND NOT INCOME FROM OTHER SOURCES. CONSIDERING THE ABOVE DISCUSSION,WE ARE OF THE OPIN ION THAT THE ORDER OF THE FAA CANNOT BE SUSTAINED.THEREFORE REVERSING HER ORDER,WE DECIDE T HE EFFECTIVE GROUND OF APPEAL IN FAVOUR OF THE ASSESSEE. AS A RESULT, APPEAL FILED BY THE ASSESSEE STANDS AL LOWED. . ORDER PRONOUNCED IN THE OPEN COURT ON 16 TH MARCH, 2016. 16 , 2016 SD/- SD/- ( / AMIT SHUKLA ) ( / RAJENDRA ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; DATED : 16.03.2016. JV.SR.PS. / COPY OF THE ORDER FORWARDED TO : 1. APPELLANT / 2. RESPONDENT / 3. THE CONCERNED CIT(A)/ , 4. THE CONCERNED CIT / 5. DR A BENCH, ITAT, MUMBAI / , , . . . 6. GUARD FILE/ //TRUE COPY// / BY ORDER, / DY./ASST. REGISTRAR , /ITAT, MUMBAI.