ASHOKA ROOF GARDNES P.LTD, MUMBAI V. CIT 2, MUMBAI

ITA 3684/MUM/2013

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 3798 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 11 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-05-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 16-02-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 09-05-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: AMAR GAHLOT SHRI S SRIRAM
• Keywords: Business income; Business expenditure
• Section: 143(3); 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH A , MUMBAI , , BEFORE SHRI R C SHARMA , ACCOUNTANT MEMBER AND SHRI AMIT SHUKLA , JUDICIAL MEMBER ITA NO. 3684 /MUM/201 3 (ASSESSMENT YEAR 200 8 - 0 9 ) ASHOKA ROOF GARDENS P LTD. , 173 ASHOKA SHOPPING CENTRE, LT ROAD, G T HOSPITAL COMPOUND, MUMBAI - 400 001 PAN: AAECA 9035 H VS COMMISSIONER OF INCOME TAX - 2, R.NO.344, AAYAKAR BHAVAN, M K ROAD, MUMBAI - 400 020 (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI AMAR GAHLOT SHRI S SRIRAM RESPONDENT BY : SHRI RAJESH KUMAR /DATE OF HEARING : 18 - 0 2 - 201 6 /DATE OF PRONOUNCEMENT : 06 - 0 5 - 2016 ORDER , . : - PER AMIT SHUKLA, J. M. : T HE AFORESAID APPEAL HA S BEEN FILED BY THE ASSESSEE AGAINST IMPUGNED ORDER DATED 1 4 . 03 .201 3 , PASSED BY CIT - II , MUMBAI UNDER SECTION 263 FOR THE ASSESSMENT YEAR 2008 - 09. IN THE VARIOUS GROUNDS OF APPEAL, THE ASSESSEE HAS CHALLENGED THE INVOKING O F JURISDICTION UNDER SECTION 263 AND CANCELLING THE ASSESSMENT ORDER DATED 26.11.2010 BY THE ASSESSING OFFICER FOR PASSING A FRESH ASSESSMENT. 2. BRIEF FACTS ARE THAT, THE ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF PROVIDING SITE S FOR ADVERTISEMENTS AND ALL RELATED SERVICES TO THE CELLULAR CO MPANIES. THE ASSESSEE COMPANY OWNS PREMISES AT ASHOKA SHOPPING CENTRE, MUMBAI. IT HAS FILED ITS 2 ASHOKA ROOF GARDENS P LTD. ITA NO. 3684 /M UM /201 3 RETURN OF INCOME ON 25.09.2008 DECLARING A T OTAL INCOME OF RS.2,76,450/ - . THE SAID RETURN WAS DULY PROCESSED UNDER SECTION 143(1) ON 20.07.2009. THEREAFTER, ASSESSEES CASE WAS SELECTED FOR SCRUTINY WHEREIN, THE ASSESSEE WAS REQUIRED TO JUSTIFY THE PAYMENT RECEIVED FROM VARIOUS CELLULAR COMPANIES FO R INSTALLING THEIR I NSTRUMENTS ON THE T ERRACE OWNED BY THE ASSESSEE. THE AO SPECIFICALLY REQUIRED THE ASSESSEE TO EXPLAIN AS TO WHY THE INCOME EARNED SHOULD NOT BE TREATED AS INCOME FROM HOUSE PROPERTY INSTEAD OF BUSINESS INCOME. IN RESPONSE, THE ASSES SEE SUBMITTED DETAILED EXPLANATION WHICH HAS BEEN INCORPORATED BY THE AO AT PAGE 2 OF HIS ORDER. THE AO AFTER EXAMINING THE DETAILS AND SUBMISSIONS OF THE ASSESSEE ALONG WITH AGREEMENTS ENTERED BY THE ASSESSEE WITH THE CELLULAR COMPANIES ACCEPTED THE NATUR E OF COMPENSATION TO BE ASSESSED UNDER THE HEAD BUSINESS INCOME AND ACCORDINGLY, THE RETURNED INCOME WAS ACCEPTED. THE RELEVANT EXPLANATION OF THE ASSESSEE AS WELL AS AOS FINDING IN THIS REGARD IN THE ASSESSMENT ORDER IS REPRODUCED HEREUNDER: - IN RESPO NSE TO THE SAME, THE ASSESSEE REPRESENTATIVE VIDE LETTER DATED 23.11.2010 HAS SUBMITTED THAT : - THE ABOVE MENTIONED ASSESSEE COMPANY IS IN THE BUSINESS OF PROVIDING SITE AND RELATED SERVICE TO CELLULAR COMPANIES. THE COMPANY IS IN THE BUSINESS SINCE 2005 A ND REGULARLY ASSESSED. THE INCOME RECEIVED FROM CELLULAR COMPANIES IS ACCOUNTED AS BUSINESS INCOME. THE PAYMENT RECEIVED FROM 3 CELLULAR COMPANIES FOR INSTALLING THEIR INSTRUMENTS IN THE TERRACE PREMISES SHOULD NOT BE TREATED AS INCOME FROM HOUSE PROPERTY FOR THE FOLLOWING REASONS: 1 . THE ASSESSEE COMPANYS MAIN BUSINESS IS PROVIDING SITE AND ALL RELATED SERVICE TO THE CELLULAR COMPANIES, WITH THIS OBJECT, THE COMPANY HAD PURCHASED TERRACE PREMISES. 3 ASHOKA ROOF GARDENS P LTD. ITA NO. 3684 /M UM /201 3 2 . TERRACE PREMISES ARE OPEN AND DO NOT HAVE ANY COVERINGS. THE ASSESSEE COMPANYS MAJOR SOURCE OF INCOME IS PAYMENTS RECEIVED FROM THIS CELLULAR COMPANIES. 3 . THE ASSESSEE COMPANY HAS NOT JUST PROVIDED SPACE TO CELLULAR COMPANIES. IT IS GIVING ALL SERVICES IN THE FORM OF MANPOWER, ELECTRICITY, SECURITY SERVICE, MAINTENAN CE ETC.. THE AMOUNT RECEIVED FROM CELLULAR COMPANIES IS ON ACCOUNT OF ALL THE FACILITIES UTILIZED BY THEM FROM ASSESSEE COMPANY . THE SUBMISSIONS OF THE ASSESSEE IS PLACED ON RECORD, AND SINCE THE ASSESSEE COMPANY HAS ENTERED INTO AGREEMENTS WITH THESE CELL ULAR COMPANIES AND THE ASSESSEE HAS RECEIVED COMPENSATION FOR USE OF FACILITIES PROVIDED TO CELLULAR COMPANIES, THE SAME IS ACCEPTED. AFTER GOING THROUGH SUBMISSIONS THE TOTAL INCOME IS ASSESSED AT RS.2,76,450/ - AS RETURNED. 3. AFTER COMPLETION OF THE ASSESSMENT SPECIFICALLY ON THE ISSUE OF ASSESS A BILITY OF INCOME , WHETHER TO BE TAXED AS BUSINESS INCOME OR INCOME FROM HOUSE PROPERTY I N THE AFORESAID MANNER, THE LD. CIT ISSUED A SHOW CAUSE NOTICE UNDER SECTION 263 FOR REVISION OF THE ASSESSMENT ORDER. TH E ISSUE RAISED IN THE SAID NOTICE READS AS UNDER: - IN THE P&L ACCOUNT, YOU HAVE SHOWN RECEIPT OF COMPENSATION AT RS.18,30,000/ - AND INTEREST ON FIXED DEPOSIT AT RS.4,14,207/ - . IT IS SEEN THAT YOU HAVE SHOWN COMPENSATION RECEIVED AS BUSINESS INCOME AND CLA IMED HUGE BUSINESS EXPENSES. THE COMPENSATION HAS BEEN RECEIVED BY YOU FOR LETTING OUT THE TERRACE SPACE AND SHOULD BE ASSESSED UNDER THE HEAD INCOME FROM HOUSE PROPERTY AS AGAINST BUSINESS INCOME SHOWN BY YOU. IT IS ALSO SEEN THAT YOU HAVE NOT CARRIED ON ANY BUSINESS ACTIVITY DURING THE PREVIOUS YEAR OR 4 ASHOKA ROOF GARDENS P LTD. ITA NO. 3684 /M UM /201 3 PRECEDING PREVIOUS YEAR AND HENCE NO BUSINESS EXPENSES ARE ALLOWABLE EXCEPT STATUTORY EXPENSES ALLOWABLE IN RESPECT OF INCOME ASSESSED UNDER THE HEAD INCOME FORM HOUSE PROPERTY. ACCORDINGLY THE TOTAL INCOME SHOULD HAVE BEEN ASSESSED AS UNDER: RENTAL INCOME RS.18,30,001/ - LESS: DEDUCTION U/S 24 RS. 5,49,000/ - INCOME FROM HOUSE PROPERTY RS.12,81,001/ - INCOME FROM OTHER SOURCES INTEREST ON FIXED DEPOSIT RS. 4,14,207/ - TOTAL INCOME RS.16,95,20 8/ - THE REFORE, THE TOTAL INCOME WAS REQUIRED TO BE ASSESSED AT RS.16,95,208/ - INSTEAD OF RS.2,76,450/ - AS DETERMINED IN THE ASSESSMENT ORDER. THUS THERE IS UNDER ASSESSMENT OF INCOME TO THE TUNE OF RS.14,18,758/ - . FROM THE ABOVE, IT IS CLEAR THAT THE ASS ESSMENT ORDER PASSED UNDER SECTION 143(3) ON 26.11.2010 IS ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTEREST OF THE REVENUE. 4. IN RESPONSE, THE ASSESSEE SUBMITTED THAT , IT HAS RECEIVED SUM OF RS.18,30,000/ - FR OM CELLULAR COMPANIES LIKE , (I) HUTCHISON ESS A R; (II) BHARTI TELE VENTURES LTD.; AND (III)MAHANAGAR TELEPHONE NIGAM LTD.(MTNL) , IN THE FORM OF SERVICE CHARGES FOR THE FACILITIES PROVIDED TO THEM. IT WAS SUBMITTED THAT THESE AMOUNTS WERE RECEIVED IN THE REGULAR COURSE OF BUSINESS ACTIVI TY AND, THEREFORE, THE INCOME AS WELL AS THE EXPENSES CLAIMED DIRECTLY RELATED TO THE EARNING OF SUCH INCOME ONLY. T HE AO IN THE COURSE OF THE ASSESSMENT PROCEEDINGS HAD SPECIFICALLY ENQUIRED UPON THE NATURE OF INCOME AND ALSO ABOUT THE HEAD OF THE INCOME IN WHICH IT WAS LIABLE TO BE ASSESSED. AFTER CALLING FOR THE DETAILS AND THE ASSESSEES REPLY, THE LD. AO HAS TAKEN A POSSIBLE VIEW AND CATEGORICALLY ACCEPTED THE AMOUNT RECEIVED FROM THE CELLULAR COMPANIES TO BE 5 ASHOKA ROOF GARDENS P LTD. ITA NO. 3684 /M UM /201 3 ASSESSABLE UNDER THE HEAD BUSINESS INCOME . IN SUPPORT , VARIOUS CASE LAWS WAS ALSO RELIED UPON BY THE ASSESSEE THAT , IF A POSSIBLE VIEWS HAS BEEN TAKEN BY THE AO, THEN CIT CANNOT EXERCISE REVISIONARY JURISDICTION TO CANCEL OR SET - ASIDE THE ASSESSMENT O N A DIFFERENT VIEW. HOWEVER, THE LD. CIT H E L D THAT, THOUGH THE AO HAD MADE ENQUIRIES, HOWEVER, HE HAS NOT APPLIED HIS MIND TO CHECK , W HETHER THE INCOME RECEIVED FROM RESPECTIVE CELLULAR COMPANIES WAS ASSESSABLE UNDER THE HEAD INCOME FROM HOUSE PROPERTY OR UNDER THE HEAD BUSINESS INCOME OR PROFESSIO N . A FTER REFERRING TO THE FOLLOWING DECISIONS: (I) HOME BUILDERS VS JCIT - 131 ITD 91 (MUM) ; (II) MATRU ASHISH CO - OP HOUSING SOC. LTD. VS ITO - 144 TTJ 446(MUM) ; AND ; (III) SOHAN SINGH VS ITO - 16 ITD 272 (DEL). HE HELD THAT THERE IS NO APPLICATION OF MIND BY THE AO ON THIS ISSUE AND ACCORDINGLY, HE DIRECTED THE AO TO COMPLETE THE ASSESSMENT BY ASSESSING THE INCOME AS INCOME FROM HOUSE PROPERTY. 5. BEFORE US, LD. COUNSEL SUBMITTED THAT AO HAD ISSUED A SHOW CAUSE NOTICE SPECIFICALLY TO EXAMINE THIS ISSUE OF INCOME RECEIVED FROM CELLULAR COMPANIES , COPY OF WHICH IS PLACED IN THE PAPER BOOK AT PAGE 18. THE ASSESSEES REPLY IN RESPONSE HAS ALSO BEEN PLACED AT PAGE 19 & 20, THE RELEVANT EXTRACT OF WHICH HAVE BEEN INCORPORATED BY THE AO ALSO IN HIS ORDER . BESIDES THIS, HE HAS AGAIN ENQUIRED UPON THE DETAILS OF THE COMPENSATION RECEIVED FROM THE THREE CELLULAR COMPANIES ALONG WITH THE AGREEMENTS ENTERED BY THE ASSESSEE WITH THEM. THAT APART, HE ALSO SCRUTINIZED UPON THE OBJECTS AS GIVEN IN THE MOU OF THE ASSESSEE COMPANY WHILE EXAMINING THE ACTIVITY OF THE ASSESSEE VIS - A - VI S THE PAYMENT RECEIVED FROM THE THREE COMPANIES. THUS, WHEN SPECIFIC ENQUIRY HAS BEEN MADE ON THE SAME ISSUE WHICH IS A SUBJECT MATTER OF REVISION AND ASSESSEE HAS GIVEN SPECIFIC REPLY THEN, LD. CIT CANNOT ACQUIRE A JURISDICTION UNDER SECTION 263 TO CANCEL OR REVISE THE ASSESSMENT ORDER . I N SUPPORT HE RELIED UPON THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF MALABAR INDUSTRIAL 6 ASHOKA ROOF GARDENS P LTD. ITA NO. 3684 /M UM /201 3 DEVELOPMENT CORP., REPORTED IN 243 ITR 82 AND IN CASE OF CIT V M AX INDIA LTD., REPORTED IN 295 ITR 282. 6 . ON THE OTHER HAND, LD. DR STRONGLY RELIED UPON THE ORDER OF THE CIT AND SUBMITTED THAT FROM THE NATURE OF PAYMENT AND THE FACT THAT ASSESSEE HAS MERELY LET O UT THE TERRACE FOR INSTALLATION, THE INCOME EARNED SHOU LD HAVE BEEN TREATED AS ASSESSABLE UNDER THE HEAD INCOME FROM HOUSE PROPERTY AND NOT AS BUSINESS INCOME . 7 . WE HAVE HEARD THE RIVAL CONTENTIONS AND CONSIDERED THE MATERIAL PLACED ON RECORD. FROM THE PERUSAL OF THE IMPUGNED ORDER WE FIND THAT, NOWHERE TH E LD. CIT HAS POINTED OUT AS TO HOW THE ORDER OF THE AO IS EITHER ERRONEOUS IN LAW OR ON FACTS AND HAS ALSO NOT BROUGHT ON RECORD WHAT PREJUDICE IS CAUSE TO THE INTEREST OF THE REVENUE. THE LD. CIT WHILE EXERCISING REVISIONARY JURISDICTION UNDER SECTION 26 3 H AS TO GIVE A VERY DEFINITE FINDING ABOUT THE ASSESSMENT ORDER BEING ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTEREST OF THE REVENUE . O NCE HE HAS ACCEPTED THAT THE AO HAS CARRIED OUT THE ENQUIRY AND TAKEN A DEFINITE STAND, THEN THE SAME CANNOT BE HELD TO BE ERRONEOUS EITHER ON THE GROUND THAT THERE IS AN INADEQUATE ENQUIRY OR VIEW TAKEN IS NOT CORRECT, THEN, UNLESS IT IS SHOWN THAT THE VIEW TAKEN BY THE AO WAS ERRONEOUS IN LAW OR ON FACTS , HE CANNOT EXERCISE REVISIONARY JURISDICTION U/S 263 . H ERE IN THIS CASE THERE WAS A PROPER EXAMINATION AND ENQUIRY BY THE AO PRECISELY ON THE SAME ISSUE OF ASSESSABILITY OF INCOME RECEIVED FROM CELLULAR COMPANIES WHICH HAVE BEEN RAKED UP BY THE LD. CIT IN HIS NOTICE . ONCE THE AO HAS SPECIFICALLY RAISED THE QUE RY AND ASSESSEE IN RESPONSE HAS FURNISHED THE REPLY ALONG WITH DETAILS AND EVIDENCES WHICH HAS BEEN EXAMINED BY THE AO AND THE REAFTER HAS ACCEPTED THE CLAIM OF THE ASSESSEE AND HELD THAT THE INCOME IS ASSESSABLE UNDER THE HEAD INCOME FROM HOUSE PROPERTY , THEN THE LD. CIT CANNOT HOLD THAT THE VIEW TAKEN BY THE AO IS NOT CORRECT AND INCOME SHOULD HAVE BEEN ASSESSED UNDER THE HEAD BUSINESS 7 ASHOKA ROOF GARDENS P LTD. ITA NO. 3684 /M UM /201 3 INCOME, THAT IS, SOME OTHER POSSIBLE VIEW SHOULD BE TAKEN. THIS PRECISELY HAS BEEN RULED AGAINST THE DEPARTMENT BY THE H ONBLE SUPREME COURT IN THE CASE OF MALABAR INDUSTRIAL DEV. ( SUPRA ). THE RELEVANT OBSERVATION AND THE FINDING OF THE HONBLE APEX COURT IS AS UNDER: THE PHRASE PREJUDICIAL TO THE INTEREST OF THE REVENUE HAS TO BE READ IN CONJUNCTION WITH AN ERRONEO US ORDER PASSED BY THE ASSESSING OFFICER. EVERY LOSS OF REVENUE AS A CONSEQUENCE OF AN ORDER OF THE ASSESSING OFFICER CANNOT BE TREATED AS PREJUDICIAL TO THE INTERESTS OF THE REVENUE, FOR EXAMPLE, WHEN AN ITO ADOPTED ONE OF THE COURSES PERMISSIBLE IN LAW A ND IT HAS RESULTED IN LOSS OF REVENUE; OR WHERE TWO VIEWS ARE POSSIBLE AND THE ITO HAS TAKEN ONE VIEW WITH WHICH THE COMMISSIONER DOES NOT AGREE, IT CANNOT BE TREATED AS AN ERRONEOUS ORDER PREJUDICIAL TO THE INTERESTS OF THE REVENUE UNLESS THE VIEW TAKEN B Y THE ITO IS UNSUSTAINABLE IN LAW. IT HAS BEEN HELD BY THIS COURT THAT WHERE A SUM NOT EARNED BY A PERSON IS ASSESSED AS INCOME IN HIS HANDS ON HIS SO OFFERING, THE ORDER PASSED BY THE ASSESSING OFFICER ACCEPTING THE SAME AS SUCH WILL BE ERRONEOUS AND PREJ UDICIAL TO THE INTERESTS OF THE REVENUE. FURTHER, THIS PRINCIPLE HAS BEEN REITERATED BY HONBLE SUPREME COURT IN THE CASE OF CIT V M AX INDIA LTD. ( SUPRA ) ALSO . IN THIS CASE ALSO, THE HONBLE APEX COURT HAS HELD THAT WHERE THE AO HAS ADOPTED ONE OF THE COURSES PERMISSIBLE IN LAW AND WHERE TWO VIEWS ARE POSSIBLE AND THE AO HAS TAKEN ONE OF THE VIEW WITH WHICH COMMISSIONER DOES NOT AGREE, IT CANNOT BE TREATED AS ERRONEOUS ORDER PREJUDICIAL TO THE INTEREST OF THE REVENUE, UNLESS THE VIEW TAKEN BY THE A O IS UNSUSTAINABLE IN LAW. HERE IN THIS CASE, IT CANNOT BE HELD THAT VIEW TAKEN BY THE AO IS NOT A POSSIBLE VIEW OR UNSUSTAINABLE IN LAW . THUS, IN OUR CONSIDERED OPINION, T HE IMPUGNED ORDER U/S 263 CANCELLING/REVISING THE ASSESSMENT ORDER 8 ASHOKA ROOF GARDENS P LTD. ITA NO. 3684 /M UM /201 3 DATED 26.09.2010 CANNOT BE SUSTAINED AND SAME IS ACCORDINGLY QUASHED. RESULTANTLY, GROUND S RAISED BY THE ASSESSEE ARE ALLOWED. 8 . IN THE RESULT, APPEAL OF THE ASSESSEE STANDS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 6TH MAY, 2016 SD/ - SD/ - ( ) ( ) ( R C SHARMA ) ( AMIT SHUKLA ) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATE: 6TH MAY, 2016 /COPY TO: - 1 ) / THE APPELLANT. 2 ) / THE RESPONDENT. 3) THE CIT - 2 , MUMBAI. 4 ) THE COMMISSIONER OF INCOME TAX - CONCERNED/ADDLCIT - 2(1), MUMBAI. 5 ) , , / THE D.R. A BENCH, MUMBAI. 6 ) \ COPY TO GUARD FILE. BY ORDER / / TRUE COPY / / , ASSTT. REGISTRAR I.T.A.T., MUMBAI *CHAVAN, SR.PS