DCIT CIR 7(1), MUMBAI V. PRISTINE DEVELOPERS P.LTD, MUMBAI

ITA 3379/MUM/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 83594 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 3 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-08-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2009-2010
• Appeal Filed On: 01-05-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PARMINDER
• Assessee Lawyers: VIJAY MEHTAGOVIND JA VERI
• Keywords: Business income; Revised return
• Section: 115JB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, MUMBAI BEFORE SHRI D. KARUNAKARA RAO, ACCOUNTANT MEMBER AND SHRI AMIT SHUKLA, JUDICIAL MEMBER ./I.T.A. NO.3379/M/2013 ( AY: 2009 - 2010 ) DCIT CIR 7(1), R.NO.622, AAYAKAR BHAVAN, M.K. ROAD, CHURCHGATE, MUMBAI 400 020. / VS. PRISTINE DEVELOPERS P. LTD., 3 NARYAN BLDG - 23, L.N. ROAD, DADAR (E), MUMBAI - 14. ./ PAN : AACP2795G ( / APPELLANT) .. ( / RESPONDENT ) / APPELLANT BY : SMT. PARMINDER, DR / RESPONDENT BY : SHRI VIJAY MEHTA, GOVIND JAVERI / DATE OF HEARING :13.8.2014 / DATE OF PRONOUNCEMENT :27 .8.2014 / O R D E R PER D. KARUNAKARA RAO, AM: THIS APPEAL FILED BY THE REVENUE ON 1.5.2013 IS AGAINST THE ORDER OF THE CIT (A) - 13, MUMBAI DATED 7.2.2013 FOR THE ASSESSMENT YEAR 2009 - 2010. 2. IN THIS APPEAL, REVENUE RAISED THE FOLLOWING GROUNDS WHICH READ AS UNDER: I) THE LD CIT (A) HAS ERRED ON FACTS AND IN LAW IN DIRECTING THE ASSESSING OFFICER TO TREAT RENTAL INCOME AND SERVICE CHARGES RECEIVED AS INCOME FROM HOUSE PROPERTY INSTEAD OF BUSINESS INCOME A TREATED BY THE ASSESSING OFFICER WITHOUT APPRECIATING THE LEG AL AND FACTUAL MATRIX AS CLEARLY BROUGHT OUT BY THE ASSESSING OFFICER. II) THE LD CIT (A) HAS ERRED ON FACTS AND IN LAW IN NOT APPRECIATING THE FACT THAT THE ASSESSEE IS DEVELOPER AND IT HAS DEVELOPED THE SAID PROPERTY FOR SALE OF COMMERCIAL UNITS. THEREF ORE, THE RENTAL INCOME EARED AND SERVICE CHARGES RECEIVED ARE REQUIRED TO BE TREATED AS BUSINESS INCOME. III) THE LD CIT (A) HAS ERRED ON FACTS AND IN LAW IN NOT APPRECIATING THE FACT THAT THE ASSESSEE HAS ITSELF OFFERED THE INCOME UNDER THE HEAD BUSINESS INCOME IN THE ORIGINAL RETURN OF INCOME AND THE ASSESSEE HAS CHANGED THE HEAD OF INCOME TO HOUSE PROPERTY WITH THE INTENTION TO REDUCE THE TAX LIABILITY. IV) THE LD CIT (A) HAS ERRED ON FACTS AND IN LAW IN NOT APPRECIATING THE FACT THAT THE BAS IC INTENTION OF THE ASSESSEE TO OFFER THE INCOME UNDER THE HEAD I NCOME FROM HOUSE PROPERTY I S TO REDUCE TAX LIABILITY ON SALE OF COMMERCIAL UNIT BY OFFERING THE SAME UNDER THE HEAD CAPITAL GAINS. 2 3. BRIEFLY STATED RELEVANT FACTS OF THE CASE ARE THAT T HE ASSESSEE IS ENGAGED IN THE BUSINESS OF PROPERTY DEVELOPERS. ASSESSEE ORIGINALLY FILED THE RETURN OF INCOME DECLARING THE TOTAL INCOME OF RS.36,66,398/ - , WHEREIN THE ASSESSEE OFFERED BOTH RENTAL AS WELL AS SERVICES CHARGES RECEIVED UNDER THE HEAD BUSINESS INCOME . SUBSEQUENTLY, ASSESSEE FILED THE REVISED RETURN OF INCOME DECLARING TOTAL LOSS OF RS. 1,83,68,059/ - UNDER THE NORMAL PROVISIONS OF THE ACT AND DECLARED BOOK PROFIT OF RS. 3,66,63,983/ - U/S 115JB OF THE ACT AND RENTAL AND SERVICES WERE O FFERED UNDER THE HEAD INCOME FROM HOUSE PROPERTY . IN THIS REGARD, ASSESSEE WAS ASKED SUBSTANTIATE ITS TREATMENT OF RENTAL RECEIPTS AND SERVICE CHARGES UNDER THE HEAD INCOME FROM HOUSE PROPERTY. AO DID NOT ACCEPT THE ASSESSEES CONTENTION THAT THE ASS ESSEE - COMPANY IS LETTING OUT THE PROPERTY AND THEREFORE , THE ENTIRE RECEIPTS SHOULD BE TREATED UNDER THE HEAD INCOME FROM HOUSE PROPERTY AND TAXED SAME UNDER BUSINESS INCOME BY HOLDING THAT THE ASSESSEES BUSINESS IS IN THE NATURE OF COMMERCIAL ACTIVIT Y AND ACCORDINGLY, THE ENTIRE RECEIPTS SHOULD BE TREATED AS BUSINESS RECEIPTS. AGGRIEVED, WITH THE DECISION OF THE AO, ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY. 4. DURING THE PROCEEDINGS BEFORE THE FIRST APPELLATE AUTHORITY, AFTER CONSIDERING THE SUBMISSIONS MADE BY THE ASSESSEE, CIT (A) DISCUSSED THE ISSUE AT LENGTH VIDE PARA 2.3 OF HIS ORDER AND DIRECTED THE AO TO ASSESS THE RENTAL INCOME AS WELL AS THE SERVICE CHARGES RECEIPTS UNDER THE HEAD INCOME FROM HOUS E PROPERTY AND PARTLY ALLOWED THE ASSESSEES APPEAL. AGGRIEVED WITH THE DECISION OF THE CIT (A), REVENUE FILED THE PRESENT APPEAL BEFORE THE TRIBUNAL BY RAISING THE ABOVE MENTIONED GROUNDS. 5. DURING THE PROCEEDINGS BEFORE US, SMT. PARMINDER, LD DR RELIE D ON THE ORDER OF THE AO AND REITERATED DECISIONS RELIED ON BY HIM TO SUPPORT THE VIEW THAT THE TOTAL RECEIPTS RECEIVED BY THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION ARE IN THE NATURE OF BUSINESS RECE IPTS LIABLE TO BE TAXED AS PROFIT AND GAINS OF BUSINESS OR PROFESSION INSTEAD OF HOUSE PROPERTY. 6. ON THE OTHER HAND, SHRI VIJAY MEHTA, LD COUNSEL FOR THE ASSESSEE HEAVILY RELIED ON THE ORDER OF THE CIT (A) AND REITERATED THE SUBMISSIONS MADE BEFORE THE LOWER AUTHORITIES. 3 7. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE ORDERS OF THE REVENUE AUTHORITIES AS WELL AS THE RELEVANT MATERIAL PLACED BEFORE US. ON PERUSAL OF THE SAID ORDER OF THE CIT (A) IN GENERAL AND PARA 2.3 IN PARTICULAR, WE FIND THE SAME IS RELEVANT IN THIS REGARD. FOR THE SAKE OF C OMPLETENESS OF THIS ORDER, RELEVANT CONTENTS OF THE SAID PARA 2.3 OF THE CIT (A)S ORDER ARE REPRODUCED HERE WHICH READ AS UNDER: 2.3.THE APPELLANT FILED ORIGINAL RETURN OF INCOME DECLARING TOTAL BUSINESS INCOME AT RS. 4,54,26,491/ - . THEREAFTER, THE APPELLANT FILED REVISED RETURN OF INCOME DECLARING RENTAL INCOME AND SERVICE CHARGES INCOME UNDER THE HEAD INCOME FROM HOUSE PROPERTY SHOWING LOSS OF RS. 1,83,68,059/ - . IN THE ORIGINAL RETURN OF INCOME, THE APPELLANT DID NOT CLAIM INTEREST EXPENDITURE OF RS. 7,82,37,859/ - PERTAINING TO THE YEAR UNDER CONSIDERATION AND INTEREST OF RS. 1,53,67,625/ - BEING 1/5 TH OF THE INTEREST PERTAINING TO PRE - CONSTRUCTION PERIOD. THESE INTEREST EXPENSES WERE CLAIMED BY THE APPELLANT IN THE REVISED RETURN OF INCOME UNDE R THE HEAD INCOME FROM HOUSE PROPERTY. IT IS BECAUSE OF CLAIM OF INTEREST, POSITIVE INCOME OF ORIGINAL RETURN BECAME THE LOSS IN THE REVISED RETURN OF INCOME. IN THE P & L A/C, THIS INTEREST EXPENDITURE IS NOT APPEARING. THE APPELLANT HAS EXPLAINED TH AT THIS INTEREST EXPENDITURE WAS APPEARING IN THE WORK - IN - PROGRESS ACCOUNT. THE VALUE OF BUILDING OF 52.47 CRORE AND LAND AT RS. 13,47 CRORE HAS BEEN CAPITALIZED DURING THE YEAR AND THE INTEREST PERTAINING TO THE YEAR UNDER CONSIDERATION AND THE INTEREST PERTAINING TO PRE - CONSTRUCTION PERIOD HAS BEEN CLAIMED IN THE REVISED RETURN OF INCOME. IN MY CONSIDERED VIEW, THE APPELLANT WAS ENTITLED TO CLAIM THIS INTEREST EXPENDITURE EVEN IF THE RENTAL INCOME AND SERVICE CHARGES INCOME WAS ASSESSABLE UNDER THE HEAD BUSINESS INCOME. WITHOUT PREJUDICE, THE FILING OF REVISED RETURN OF INCOME, THE APPELLANT WOULD HAVE CLAIMED THIS INTEREST EXPENDITURE DURING ASSESSMENT PROCEEDINGS ITSELF WHICH WOULD HAVE BEEN RESULTED IN ASSESSED LOSS. IN VIEW OF THE ABOVE FACTS THE AO IS DIRECTED TO ASSESS THE RENTAL INCOME AS WELL AS SERVICE CHARGES RECEIPTS UNDER THE HEAD INCOME FROM HOUSE PROPERTY . 8. CONSIDERING THE ABOVE, WE ARE OF THE OPINION THAT THE CIT (A) HAS RIGHTLY ADJUDICATED THE ISSUE WHILE ALLOWING THE ASSESSEES APPEAL. THEREFORE, IN OUR VIEW THE ORDER OF THE CIT (A) IS FAIR AND REASONABLE AND IT DOES NOT CALL FOR ANY INTERFERENCE. ACCORDINGLY, GROUNDS RAISED BY THE REVENUE ARE DISMISSED. 9. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISS ED. ORDER PRON OUNCED IN THE OPEN COURT ON 2 7 T H AUGUST, 2014. S D / - S D / - (AMIT SHUKLA ) (D. KARUNAKARA RAO ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI ; 2 7 /08/2014 . . ./ OKK , SR. PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 4 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE . //TRUE COPY// / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI