SULAKSHANA SECURITIES LTD, MUMBAI V. ASST CIT 1(3), MUMBAI

ITA 3797/MUM/2011

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 71149 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 4 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-09-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Next Hearing Date: 12-09-2013
• Assessment Year: 2007-2008
• Appeal Filed On: 10-05-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: C SRINIVAS REDDY
• Keywords: Sale consideration of property below Jantri Value; Business income
• Section: 50C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH E, MUMBAI BEFORE SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER AND SHRI SANJAY GARG, JUDICIAL MEMBER ITA NO. 3797/MUM/2011 ASSESSMENT YEAR : 2007-08 SULAKSHANA SECURITIES LTD. 4 TH FLOOR, MAFATLAL HOUSE BACKBAY RECLAMATION MUMBAI-400 020. PAN NO.AABCS 1783 L VS. THE ACIT 1(3) AAYAKAR BHAVAN, M.K. ROAD MUMBAI-400 020. (APPELLANT) (RESPONDENT) ASSESSEE BY : MS. AARTI VISSANJI REVENUE BY : SHRI C. SRINIVAS REDDY DATE OF HEARING : 12/09/2013 DATE OF PRONOUNCEMENT : 17 / 0 9 /2013 O R D E R PER B. RAMAKOTAIAH, AM: THIS IS AN APPEAL BY ASSESSEE AGAINST THE ORDER OF LD. CIT(A)-2, MUMBAI DATED 21/02/2011. ASSESSEE RAISED TWO GROUN DS. WE HAVE HEARD LD. COUNSEL AND LD. DR. 2. ISSUE NUMBER I (GROUND NO.1 AND 2) RAISED BY THE ASSESSEE IS AS UNDER: 1.THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN CONFIRMING THE ASSESSMENT MADE BY ASSESSING OFFICE R OF RECEIPT FROM AIR CONDITIONING AD OTHER CHARGES OF RS. 14,18,585/ - REFERABLE TO OWNED PROPERTY LET OUT BY THE APPELLANT AS INCOME FROM HOUSE PROPERTY AND. CONSEQUENT DISALLOWANCE OF EXPENDITU RE INCURRED OF RS. 12,94,274/- IN EARNING SUCH RECEIPT. ITA NO.3797/M/11 A.Y.07-08 2 2. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) OUGHT TO HAVE HELD THAT RECEIPT FROM AIR CONDITIONING AND OTHER C HARGES OF RS. 14,18,585/- REFERABLE TO OWNED PROPERTY LET OUT BY THE APPELLANT IS ASSESSABLE UNDER THE HEAD INCOME FROM OTHER SOURCE S AND ACCORDINGLY EXPENDITURE INCURRED OF RS. 12,94,274/- IN EARNING SUCH INCOME IS TO BE GRANTED DEDUCTION IN ASSESSING THE SAID RECEIPT OF THE APPELLANT. 2.1 THE FACTS RELATING TO THE ISSUE ARE THAT THE AS SESSEE RECEIVED RENT FROM LETTING OUT OF MAFATLAL CENTER. ASSESSEE ALSO RECEIVES SUMS ON ACCOUNT OF AIR CONDITIONING, ELECTRICITY AND WATER CHARGES. THE ASSESSEE DECLARED RENTAL INCOME UNDER THE HEAD HOUSE PROPER TY AND THE AIR CONDITIONING CHARGES AND OTHERS UNDER THE HEAD OTH ER SOURCES. IT CLAIMED VARIOUS EXPENDITURE AGAINST THE SUMS RECEIV ED. THE AO TREATED ALL RECEIPTS AS PART OF HOUSE PROPERTY INCOME. LD. CIT(A), FOLLOWING HIS EX-PARTE ORDER IN EARLIER YEAR, CONFIRMED THE SAME. 2.2 AT THE OUTSET IT WAS FAIRLY ADMITTED THAT THIS GROUND IS ALLOWED IN FAVOUR OF ASSESSEE BY THE ORDER OF ITAT IN ITA NO.2 028/MUM/07 DATED 6/6/2013 FOR A.Y 2003-04, WHEREIN IT WAS HELD: 5. WE HAVE PERUSED THE RECORDS AND CONSIDERED THE R IVAL CONTENTIONS CAREFULLY. THE DISPUTE RAISED IS REGARDING ASSESSME NT OF INCOME FROM PROVIDING AIR CONDITIONING SERVICES AS WELL AS WATER AND ELECTRICITY SERVICES BY THE ASSESSEE TO THE TENANTS OF MAFATLAL CENTRE. THE SAID CHARGES HAD BEEN RECEIVED BY THE ASSESSEE IN ADDITION TO RENTAL VALUE OF LETTING OUT THE SAID MAFATLAL CENTR E. THE RENTAL INCOME HAS ALREADY BEEN ASSESSED BY AO AS INCOME FROM HOUS E PROPERTY. IN ADDITION THE AO HAS ASSESSED THE OTHER CHARGES A S INCOME FROM HOUSE PROPERTY. CIT (A) HAS CONFIRMED THE ORDER OF AO. IN OUR VIEW THE ORDER OF CIT (A) CANNOT BE UPHELD. THE INCOME T AX UNDER THE HEAD INCOME FROM HOUSE PROPERTY IS REQUIRED TO BE CHAR GED ON THE BONAFIDE ANNUAL LETTING VALUE OF LAND AND BUILDING. IN CASE THE LAND LORD IN ADDITION TO LETTING OUT THE BUILDING HAS AL SO PROVIDED SOME SERVICES, THE INCOME FROM SUCH SERVICES HAS TO BE A SSESSED AS INCOME FROM BUSINESS OR INCOME FROM OTHER SOURCES D EPENDING UPON THE NATURE OF SERVICES RENDERED. THIS VIEW HAS BEEN UPHELD BY THE HONBIE HIGH COURT OF KOLKATA IN CASE OF KANAK INVES TMENT PVT. LTD. (95 ITR 419). IN THE SAID CASE HONBLE HIGH COURT O F KOLKATA HELD THAT IN CASE THERE WAS COMPOSITE RENT CHARGED FOR L ETTING OUT THE PROPERTY AS WELL AS THE SERVICES RENDERED, IT HAS T O BE SPLIT UP AND THE AMOUNT WHICH IS ATTRIBUTABLE TO THE PROPERTY BE ASSESSED AS ITA NO.3797/M/11 A.Y.07-08 3 INCOME FROM HOUSE PROPERTY AND THE AMOUNT RETABLE T O THE RENDERING OF SERVICES SHOULD BE ASSESSED AS INCOME FROM OTHE R SOURCES. 5.1 5.2 THE LD. DR HAS ALSO RELIED ON THE JUDGMENT OF H ONBLE SUPREME COURT IN CASE OF SHAMBHU INVESTMENT PVT. LTD. (263 ITR 143). IN THAT CASE THE ASSESSEE HAD LET OUT FURNISHED OFFICE ON M ONTHLY RENT WHICH INCLUDED CHARGES FOR FURNITURE AND FITTING AND OTHE R AMENITIES. THE ISSUE WAS WHETHER THE ENTIRE INCOME SHOULD BE ASSES SED AS INCOME FROM HOUSE PROPERTY OR FROM BUSINESS INCOME. THE HO NBLE HIGH COURT OF KOLKATA NOTED THAT WHEN THE MAIN INTENTIO N WAS TO LET OUT THE PROPERTY TO ENJOY THE RENT, THE INCOME SHOULD B E ASSESSED AS INCOME FROM HOUSE PROPERTY BUT IN CASE THE PRIMARY OBJECT WAS TO EXPLOIT THE IMMOVABLE PROPERTY BY WAY OF COMPLEX CO MMERCIAL OPERATIONS, THE INCOME HAD TO BE ASSESSED AS INCOME FROM BUSINESS. IN THIS CASE THE ASSESSEE HAD TAKEN ALMOST THE ENTI RE COST OF THE BUILDING AS ADVANCE. THEREFORE I COULD NOT BE SAID THAT THE ASSESSEE WANTED TO COMMERCIALLY EXPLOIT THE PROPERTY. THE IN TENTION WAS, THEREFORE, TO ENJOY THE RENTAL VALUE. THE HIGH COUR T ACCORDINGLY HELD THAT THE ENTIRE INCOME HAD TO BE ASSESSED AS INCOME FROM HOUSE PROPERTY. THE JUDGMENT OF HONBLE HIGH COURT WAS UP HELD BY THE HONBLE SUPREME COURT. THE CASE IS OBVIOUSLY DISTIN GUISHABLE AS IN THAT CASE THE ISSUE WAS NOT WHETHER THE RENTAL INCO ME OF THE PROPERTY SHOULD BE ASSESSED AS HOUSE PROPERTY AND I NCOME FROM SERVICES AND AMENITIES AS INCOME FROM OTHER SOURCES . THE ISSUE AS POINTED OUT EARLIER WAS WHETHER THE ENTIRE INCOME S HOULD BE ASSESSED AS HOUSE PROPERTY INCOME OR AS BUSINESS I NCOME. SINCE, IT WAS NOT FOUND ASSESSABLE AS BUSINESS INCOME, IT WAS HELD ASSESSABLE AS HOUSE PROPERTY INCOME. THEREFORE, THE SAID JUDGMENT CAN ALSO NOT APPLY TO THE FACTS OF THE PRESENT CASE IN WHICH THE ISSUE IS WHETHER THE INCOME FROM OTHER CHARGES SHOULD BE ASSESSED AS INCOME FROM HOUSE PROPERTY OR INCOME FROM OTHER SOU RCES. THIS ASPECT AS MENTIONED EARLIER HAD BEEN CONSIDERED BY THE HONBLE HIGH COURT OF KOLKATA IN CASE OF KANAK INVESTMENTS PVT. LTD ( SUPRA) AND, THEREFORE RESPECTIVELY FOLLOWING THE SAID JUDG MENT WE HOLD THAT INCOME FROM AIR CONDITIONING AND OTHER CHARGES HAS TO BE ASSESSED AS INCOME FROM OTHER SOURCES. WE ALSO HOLD THAT WHI LE COMPUTING THE INCOME FROM OTHER SOURCES THE ASSESSEE WILL BE ENTI TLED FOR DEDUCTION OF EXPENSES U/S 57. THIS ASPECT OF ALLOWABILITY OF EXPENSES U/S 57 IS REQUIRED TO BE EXAMINED AT THE LEVEL OF AO. WE, THEREFORE, SET ASIDE THE ISSUE OF COMPUTATION OF INCOME FROM OTHER SOURCES TO THE FILE OF AO FOR FRESH ORDER AFTER NECESSARY EXAMINAT ION AND AFTER ALLOWING THE OPPORTUNITY OF HEARING TO THE ASSESSEE . ITA NO.3797/M/11 A.Y.07-08 4 2.3 RESPECTFULLY FOLLOWING THE SAME, WE HOLD THAT T HE RECEIPTS ARE TO BE CONSIDERED AS INCOME FROM OTHER SOURCES. REGARDING ALLOWABILITY OF EXPENDITURE UNDER SECTION 57, WE SET ASIDE THE ISSU E OF COMPUTATION TO THE FILE OF AO FOR FRESH ORDER AFTER NECESSARY EXA MINATION OF EXPENDITURE. ASSESSEE SHOULD BE GIVEN ADEQUATE OPPORTUNITY OF HE ARING. THESE GROUNDS ARE ALLOWED. 3. ISSUE NUMBER II (GROUND NO.1 AND 2) IS AS UNDER : II. RE: DEFICIT SUSTAINED ON SALE OF PART OF THE OW NED IMMOVABLE PROPERTY . THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ER RED IN NOT. DIRECTING THE ASSESSING OFFICER TO COMPUTE THE LONG TERM LOSS SUSTAINED ON SALE OF PART OF IMMOVABLE PROPERTY DUR ING THE YEAR AND CONSQ4ENTIA1 CARRY FORWARD OF THE LOSS SO COMPUTED FOR FUTURE ET OFF IN TERMS OF APPLICABLE PROVISIONS OF THE INCOME TAX CT, 1961. 2. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) OUGHT TO HAVE DIRECTED THE ASSESSING OFFICER TO COMPUTE LONG TERM LOSS SUSTAINED ON SALE OF PART OF IMMOVABLE PROPERTY DURING THE YEAR AND CONSEQUENTIAL CARRY FORWARD OF THE LOSS SO COMPUTED FOR FUTURE SET OFF IN ACCORDANCE WITH THE APPLICABLE PROVISIONS OF THE INCOME TAX ACT, 1961. 3.1 BRIEF FACTS RELEVANT FOR THE ISSUE ARE THAT THE ASSESSEE SOLD FIXED ASSETS ACQUIRED AS A PART OF BIFR ORDER FROM M/S. M AFATLAL INDUSTRIES IN AN EARLIER YEAR AND SOLD THE SAME DURING THE YEAR. THE TRANSACTION RESULTED IN LOSS OF RS.56,60,803/- MAINLY CONSISTIN G OF COMMISSION AND BROKERAGE. THE SAID TRANSACTION OF SALE WAS AT BOO K VALUE ONLY. ASSESSEE CHARGED THE SAME IN P&L ACCOUNT AND SIMILA RLY CLAIMED AGAINST INCOME FROM OTHER SOURCES. AO DISALLOWED THE SAME ON THE REASON THAT THE SAME CANNOT BE ALLOWED UNDER SECTION 57. ASSES SEE MODIFIED THE CLAIM BEFORE THE LD. CIT(A) TO SUBMIT THAT THE SAME MAY BE ALLOWED UNDER THE HEAD CAPITAL GAIN. LD. CIT(A) WHILE CONFIRMING THE ACTION OF AO HELD THAT THE SAME CANNOT BE ALLOWED AS DEDUC TION UNDER THE HEAD OTHER SOURCES, HOWEVER, REFUSED TO CONSIDER THE A LTERNATE CLAIM UNDER THE HEAD CAPITAL GAINS. ITA NO.3797/M/11 A.Y.07-08 5 3.2 AFTER CONSIDERING THE RIVAL CONTENTIONS AND PER USING THE ORDERS AND PAPER BOOK ON RECORD, WE ARE OF THE OPINION THAT TH E ISSUE HAS NOT BEEN PROPERLY EXAMINED BY EITHER OF THE AUTHORITIES. TH ERE IS NO DISPUTE TO THE FACT THAT THERE IS SALE OF FIXED ASSETS AND THE GRO SS BLOCK HAS BEEN REDUCED FROM RS.44.76 CRORES TO RS.17.85 CRORES IN THE BALANCE SHEET. WHETHER THE ASSETS ARE DEPRECIABLE ASSETS OR NOT HA S NOT BEEN EXAMINED. PROVISIONS OF SECTION 43(6), 50 & 50C MAY APPLY TO THE TRANSACTION. PAYMENT OF BROKERAGE/COMMISSION ALSO HAS NOT BEEN E XAMINED AT ALL. IN FACT, ASSESSEE LEFT NOTE NO.4 IN THE COMPUTATION OF INCOME AND AO WITHOUT EXAMINING ANY OF THE ISSUES, REJECTED THE L OSS CLAIM ON THE REASON THAT THE SAME CAN NOT BE ALLOWED UNDER THE H EAD OTHER SOURCES. THE LD. CIT(A) REFUSED TO ENTERTAIN THE ALTERNATE CLAIM. WE ARE OF THE OPINION THAT THE ENTIRE TRANSACTION HAS TO BE EXAMI NED AFRESH TO CONSIDER THE EXTENT OF GAIN/LOSS KEEPING IN MIND THE RELEVA NT PROVISIONS OF THE I T ACT AS APPLICABLE. NO DETAILS ARE EXAMINED BY AO OR PLACED ON RECORD TO BE EXAMINED BY US. THEREFORE, IN THE INTEREST O F JUSTICE, WE RESTORE THE ISSUE TO THE FILE OF AO TO EXAMINE THE LOSS CLAIM BOTH ON FACTS AND LAW AND TO DETERMINE THE SAME ACCORDINGLY. ASSESSEE SH OULD BE GIVEN DUE OPPORTUNITY. 4. IN THE RESULT, ASSESSEES APPEAL IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 17 TH SEPTEMBER, 2013. SD/- SD/- (SANJAY GARG) JUDICIAL MEMBER (B. RAMAKOTAIAH ) ACCOUNTANT MEMBER MUMBAI, DATED: 17/09/2013. JV. ITA NO.3797/M/11 A.Y.07-08 6 COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT(A) CONCERNED, MUMBAI THE DR BENCH TRUE COPY BY ORDER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.