Asst. Commissioner of Income Tax, Circle-2 (1), Panaji V. M/s Goan Horitage Leisure House (P) Ltd., Goa

ITA 382/PAN/2014

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 93544 (ITAT-PANAJI)
• Duration Of Justice: 8 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-07-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 09-07-2015
• Assessment Year: 2011-2012
• Appeal Filed On: 03-11-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B BALAKRISHNA
• Assessee Lawyers: V SRINIVASAN
• Keywords: Business income; Depreciation
• Section: 143(3); 28; 15

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PANAJI BENCH, PANAJI BEFORE SHRI N.S. SAINI , HONBLE ACCOUNTANT MEMBER AND SHRI GEORGE MATHAN, HONBLE JUDICIAL MEMBER ITA NO. 382 /PNJ/201 4 (ASST. YEAR : 20 11 - 1 2 ) ACIT, CIRCLE - 2(1), PANAJI. VS. M/S. GOAN HERIT A G E LEISURE HOUSE (P) LTD., H.NO. 63/3, VOIL L O VADDO, ARPORA, BARDEZ - GOA . PAN NO. AACCG 5154 C (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI V. SRINIVASAN CA . DEPARTMENT BY : SHRI B. BALAKRISHNA - DR DATE OF HEARING : 09 / 0 7 /2015 . DATE OF PRONOUNCEMENT : 09 / 0 7 /201 5 . O R D E R PER N.S. SAINI , ACCOUNTANT MEMBER : THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX(APPEALS) , PANAJI, DATED 06 /0 8 /201 4 . 2. GROUND NOS. 1 AND 2 OF THE APPEAL READS AS UNDER: - 1. UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE, THE CIT(A) HAS FAILED TO APPRECIATE THE FACT THAT THE ASSESSEE HAD NEVER STARTED THE BUSINESS AND THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. MOHIDDIN HOTELS PVT. LTD AND ANR. HAS CLEARLY HELD THAT IF THE ASSESSEE HAD NEVER STARTED THE BUSINESS, AN INFERENCE IS TO BE DRAWN THAT THE ASSESSEE INTENDED TO EXPLOIT THE PROPERTY AND NOT THE BUSINESS ASSET? 2. WHETHER THE CIT(A) WAS RIGHT IN CONCLUDING THAT THE ASSESSE E HAD INTENTION TO RUN THE BUSINESS OF HOTEL AND IN 2 ITA NO. 382 /PNJ/2014 ALLOWING THE BENEFITS OF DEPRECIATION TO THE ASSESSEE UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE? 3. BRIEF FACTS OF THE CASE ARE THAT T HE COMPANY IS MANAGED BY THREE DIRECTORS NAMELY MR. MATTHIAS HELMUT SCHWAIGHOFER, MR. VIKRAM SUNDARJI AND MR. VIVEKANAND PEDNEKAR. 99% OF THE SHARES ARE HELD BY MR.MATTHIAS HELMUT SCHWAIGHOFER PROMOTER OF THE COMPANY. THE PROJECT IS TOTALLY FINANCED OUT OF SHARE CAPITAL AMOUNTING TO RS. 3,72,46,000 / - . THE RESORT CONSISTS OF BUILDINGS OF RS. 198.00 LACS, FURNITURE, FIXTURES & FITTINGS OF RS. 36.06 LACS AND PLANT & MACHINERY OF RS. 36.85 LACS. THE COST OF PLANT & MACHINERY AND FIXTURES & FITTINGS IS 25% OF THE COST OF PROJECT. THE COST OF FURNISHING IS VE R Y HIGH SO AS TO CATER TO INTERNATIONAL TOURISTS. SINCE THE PROMOTER OF THE PROJECT MR. MATTHIAS HELMUT SCHWAIGHOFER IS A FOREIGN NATIONAL, HE CANNOT STAY IN INDIA FOR MANAGING SUCH A SMALL PROJECT. HE HIRED THE SERVICES OF SHUNYA PROJECT CONSULTANCY PVT . LTD. THE SHUNYA PROJECT CONSULTANCY PVT . LTD IS MANAGED BY MR. VIKRAM SUNDARJI AND MR.VIVEKANAND PEDNEKAR WHO HAVE A VAST EXPERIENCE IN MANAGING THE RESORTS. THERE IS A MANAGEMENT AGREEMENT DATED 01.12.2008 WHEREIN THE SHUNYA PROJECT CONSULTANCY PVT . LTD HAV E BEEN APPOINTED AS 'MANGERS' AND HAVE TAKEN THE RESPONSIBILITY OF MARKETING THE HOTEL ROOMS AND THEY ARE ENTITLED TO 40% OF THE NET PROFITS AS THEIR REMUNERATION ON A REVENUE SHARING BASIS. THE AGREEMENT SP ELLS OUT ALL THE BUSINESS TERMS. 4 . THE ASSESSING OFFICER OBSERVED THAT THE AGREEMENT ENTERED INTO BY THE ASSESSEE WITH SHUNYA PROJECT CONSULTANCY PVT . LTD. SPECIFIES THAT THE HOTEL GIVEN FOR OPERATING THE SAME FOR A PERIOD O F 10 YEARS . THE PROMOTER OF THE ASSESSEES COMPANY WHO IS HOLDING AROUND 99% OF THE SHARES IS A FOREIGNER WHO DOES NOT RESIDE IN INDIA AND THEREFORE, THE ABOVE PROPERTIES ARE GIVEN ON RENTAL BASIS FOR RUNNING THE HOTEL. THE FACTS AND CIRCUMSTANCES OF THE CASE ARE VERY CLEAR THAT THE ASSESSEE HAD NEVER STARTED THE BUSINE SS AND THE ASSESSEE WAS LEFT WITH NO CONCERN IN THE 3 ITA NO. 382 /PNJ/2014 BUSINESS OF HOTEL AND , THEREFORE , AN INFERENCE IS TO BE DRAWN THAT THE ASSESSEE INTENDED TO EXPLOIT THE PROPERTY AND NOT THE BUSINESS ASSET AS HELD BY THE BOMBAY HIGH COURT IN THE CASE OF CIT V S. MOHIDDIN HOTELS PVT. LTD . AND ANOTHER . ACCORDINGLY, HE TREATED THE INCOME FROM HOTELS AS INCOME FROM HOUSE PROPERTY IN PLACE OF BUSINESS INCOME SHOWN BY THE ASSESSEE. 5. ON APPEAL , COMMISSIONER OF INCOME TAX(APPEALS) OBSERVED THAT THE ASSESSING OFFICER IN THE ASSESSMENT ORDER HA S STATED THAT THE HOTEL BUILDING HAS BEEN GIVEN FOR A PERIOD OF 10 YEARS AND THAT 99% SHARES OF THE ASSESSEE COMPANY ARE HELD BY A FOREIGNER, WHO DOES NOT RESIDE IN INDIA . THUS, THE ASSESSING OFFICER HAS TRIED TO PROVE THAT THE ASSESSEE DOES NOT INTEND TO DO BUSINESS AND THAT HE IS ONLY INTERESTED IN EARNING RENTAL INCOME ON A LONG TERM BASIS . COMMISSIONER OF INCOME TAX (APPEALS) FURTHER OBSERVED THAT AS PER THE TERMS OF AGREEMENT BETWEEN THE ASSESSEE COMPANY AND M/S. SHUNYA PROJECT CONSULTANCY PVT . LTD. , ALL THE ROOMS IN THE HOTELS WERE FURNISHED BY THE ASSESSEE COMPANY WHICH INCLUDED AIR CONDITIONERS, GENERATORS, CROCKERY, COMPUTERS, TELEPHONES, BED - SHEETS, BLANKETS, FACE TOWELS ETC. EVEN THE INCIDENTAL EXPENSES LIKE INSURANCE, REPAIRS AND MAINTENANCE ETC. WERE BORNE BY THE ASSESSEE COMPANY . FURTHER, THERE ARE COMMON DIRECTORS IN THE ASSESSEE S COMPANY AS WELL AS M/S. SHUNYA PROJECT S CONSULTANCY PVT . LTD. , WHO ACTUALLY MANAGE THE BUSINESS OF THE HOTEL . THE ASSESSEE S INTENTION BECOMES CLEAR FROM THE MEMORANDUM OF ASSOCIATION , WHEREIN THE MAIN OBJECTIVE OF THE ASSESSEE IS TO ORGANIZE , MAINTAIN, OPERATE AND RUN HERITAGE , LEISURE HOUSE, HOLIDAY HOMES, RESORTS AND BOARDING AND LODGING HOUSE . 6 . HE, THEREFORE , OPINED THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THERE WAS NOT EVEN AN IOTA OF A DOUBT THAT THE ASSESSEE COMPANY ALWAYS INTENDED TO DO BUSINESS OF HOTELS , WHICH IS ALSO CLEAR FROM ITS CONDU C T . ITS INCOME DEPENDS ON THE PROFITABILITY OF THE HOTELS AS HE IS A 4 ITA NO. 382 /PNJ/2014 SHARER OF THE PROFITS. SINCE THE HOTEL DID NOT MAKE ANY PROFITS, THE ASSESSEE DID NOT RECEIVE ANY MONEY . THERE IS ALSO NO DOUBT ABOUT THE USAGE OF THE HOTEL BU I L DING AS THE SAME IS ADMITTEDLY BEING USED FOR RUNNING OF THE HOTEL AND DEPRECIATION IS AN ALLOWABLE EXPENSE ON THE HOTE L BUILDINGS. FURTHER, THE GENERAL MANDATE UNDER THE INCOME TAX ACT IS TO TAX REAL INCOME AND WHEN THE REAL INCOME WAS WORKABLE, IN HIS OPINION, THE ASSESSING OFFICER WAS NOT JUSTIFIED IN COMPLETING ASSESSMENT ON NOTIONAL BASIS. ACCORDINGLY, HE DIRECTED THE ASSESSING OFFICER TO TREAT THE INCOME OF THE ASSESSEE AS BUSINESS INCOME AND NOT INCOME FROM HOUSE PROPERTY AND ALLOW THE BENEFIT OF DEPRECIATION ACCORDINGLY . 7 . BEING AGGRIEVED BY THIS ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) , THE REVENUE IS IN APPEAL BEFORE US. 8 . THE DEPARTMENTAL REPRESENTATIVE FULLY JUSTIFIED THE ORDER OF THE ASSESSING OFFICER WHEREAS THE A U T H O R I Z E D REPRESENTATIVE O F T H E ASSESSEE RELIED ON THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF CHENNAI PROPERTIES AND INVESTMENTS LTD. VS. CIT REPORTED IN 373 ITR 673 (SC) AND SUBMITTED THAT THE HONBLE SUPREME COURT HAS HELD AS UNDER: - THE MAIN OBJECT OF THE ASSESSEE - COMPANY, AS STATED IN ITS MEMORANDUM OF ASSOCIATION, WAS TO ACQUIRE AND HOLD THE PROPERTIES KNO W N AS 'CHENNAI HOUSE' AND 'FIRHAVIN ESTATE' BOTH IN CHENNAI AND TO LET OUT THOSE PROPERTIES AS WELL AS MAKE ADVANCES UPON THE SECURITY OF LANDS AND BUILDINGS OR OTHER PROPERTIES OR ANY INTEREST THEREIN. THE ENTIRE INCOME WHICH ACCRUED AND WAS ASSESSED WAS FROM LETTING OUT OF THESE PROPERTIES AND THERE WAS NO OTHER INCOME OF THE ASSESSE E EXCEPT THE INCOME FROM LETTING OUT OF THESE TWO PROPERT IES. THE ASSESSEE SHOWED THE RENTAL INCOME RECEIVED AS INCOME FROM BUSINESS IN ITS RETURN. THE ASSESSING OFFICER, HOWEVER, REFUSED TO TAX IT AS BUSINESS INCOME AND INSTEAD TREATED IT AS INCOME FROM HOUSE PROPERTY AND TAXED IT ACCORDINGLY UNDER THAT HEAD. T HE ASSESSEE APPEALED BEFORE 5 ITA NO. 382 /PNJ/2014 THE COMMISSIONER (APPEALS) WHO HELD IT TO BE INCOME FROM BUSINESS AND THE APPELLATE TRIBUNAL DECLINED TO INTERFERE WITH THE ORDER OF THE COMMISSIONER (APPEALS). THE DEPARTMENT APPEALED TO THE HIGH COURT WHICH HELD THAT THE INCOM E DERIVED BY LETTING OUT OF THE PROPERTIES WOULD NOT BE INCOME FROM BUSINESS BUT COULD BE ASSESSED ONLY AS INCOME FROM HOUSE PROP ERTY. ON APPEAL BY THE ASSESSEE : HELD, ALLOWING THE APPEALS, THAT LETTING OF THE PROPERTIES WAS IN FACT THE BUSINESS OF THE ASSESS E E. THE ASSESSEE, THEREFORE, RIGHTLY DISCLOSED THE INCOME UNDER THE HEAD 'INCOME FROM BUSINESS'. IT COULD NOT BE TREATED AS 'INCOME FROM HOUSE PROPERTY'. 9 . FURTHER , RELIED ON THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. MOHI DDIN HOTELS P. LTD. AND ANOTHER REPORTED IN (2006) 284 ITR 229 (BOM.) , WHEREIN IT WAS HELD AS UNDER: - AN AGREEMENT DATED FEBRUARY 1, 1987, WAS ENTERED INTO BETWEEN THE ASSES - SEE AND A COMPANY, S. THE AGREEMENT RECITED THAT THE ASSESSEE HAD RECENTLY COMPLETED CONSTRUCTION OF A BUILDING COMPRISED OF A GROUND FLOOR AND THREE UPPER FLOORS ON A PLOT OF LAND SITUATED IN THE TOWN OF VASCO DA G AMA WITH A VIEW TO RUNNING A HOTEL THEREIN. THE HOTEL AT THE TIME OF THE EXECUTION OF THE AGREEMENT WAS READY FOR THE PURPOSE OF COMMISSIONING THE HOTEL BUSINESS. S POSSESSED THE NECESSARY KNOW - HOW AND TRAINED STAFF FOR CARRYING ON THE BUSINESS OF RUNNING A HOTEL. THERE WAS AN EARLIER AGREEMENT BETWEEN THE ASSESSEE AND S DATED FEBRUARY 23, 1984, SUBSEQUENTLY MODIFIED BY AGREEMENT DATED JANUARY 2, 1985, WHEREBY S WERE TO BE APPOINTED AS MANAGERS TO MANAGE, RUN AND CARRY ON THE BUSINESS OF HOTEL THEN UNDER CO NSTRUCTION ON THE TERMS AND CONDITIONS SET OUT THEREIN. THE AGREEMENT INTER ALIA RECORDED THAT S WERE APPOINTED AS MANAGERS TO MANAGE, RUN AND CARRY ON THE BUSINESS OF HOTEL FOR A PERIOD OF 20 YEARS COMMENCING FROM FEBRUARY 1, 1987; THAT S ALONE SHALL BE E NTITLED TO TERMINATE THE AGREEMENT AFTER THE EXPIRY OF A PERIOD OF 10 YEARS BY GIVING ONE YEAR'S PRIOR NOTICE IN WRITING TO THE ASSESSEE; THAT S SHALL PAY A FIXED AMOUNT OF RS. 7,80,000 PER ANNUM FOR THE FIRST 10 YEARS AND RS. 10,20,000 PER ANNUM FOR THE N EXT FIVE YEARS AND RS. 12,00,000 PER ANNUM FOR THE NEXT FIVE YEARS; THAT S SHALL BE IN CHARGE OF THE ENTIRE MANAGE MENT, RUNNING AND WORKING OF THE HOTEL WITHOUT ANY INTERFERENCE 6 ITA NO. 382 /PNJ/2014 FROM THE ASSESSEE ; THAT S SHALL BE ENTITLED TO MAKE ADDITIONS, ALTERATIONS AN D/OR IMPROVEMENTS TO THE HOTEL SO AS TO RUN IT PROFITABLY AND EFFICIENTLY; THAT ALL LICENCES, PERMITS AND NO OBJECTION CERTIFICATES RELATING TO THE SAID HOTEL SHALL BE OBTAINED IN THE NAME OF THE ASSESSEE; THAT THE ASSESSEE SHALL NOT ALIENATE OR DISPOSE OF THE HOTEL OR BUILDING HOUSING THE HOTEL OR ANY PART THEREOF AND/OR PART WITH POSSESSION THEREOF DURING THE CURRENCY OF THE AGREEMENT; THAT S SHALL BRING IN THEIR OWN STAFF FOR RUNNING THE HOTEL AND ALSO FOR KEEPING AND MAINTAINING THE SAID HOTEL IN GOOD C ONDITION, S UBJECT TO NATURAL WEAR AND TEAR ; THAT THE ASSESSEE SHALL PAY PROPERTY TAX, HOUSE TAX OR ANY OTHER TAXES, LEVIES AND PUBLIC CHARGES; THAT S SHALL HAVE THE RIGHT TO REPLACE THE FITTINGS, FIXTURES AND ANY INSTALLATIONS IN THE HOTEL IN THE EVENT OF THEIR BECOMING UNSERVICEABLE OR UNFIT FOR USE DUE TO NORMAL WEAR AND TEAR; THAT THE ASSESSEE DID NOT HAVE ANY EMPLOYEE, WORKER AND /OR STAFF AS OF THE DATE AND THAT S SHALL NOT BE LIABLE TO TAKE IN SERVICE OR EMPLOYMENT THE EMPLOYEES, WORKERS AND THE STA FF EMPLOYED BY THE ASSESSEE; THAT S SHALL NOT MAKE ANY STRUCTURAL ALTERA - TIONS OR ADDITIONS WITHOUT PRIOR PERMISSION FROM THE ASSESSEE; THAT UPON AN EXPIRY OF THE AGREEMENT OR SOONER DETERMINATION, S SHALL SURRENDER VACANT POSSESSION OF THE HOTEL AND HAND OVER THE BUSINESS TO THE ASSESSEE; THAT S SHALL BE AT LIBERTY TO REPLACE ANY FIXTURES OR FITTINGS AND ITEMS OF MACHINERY AND OTHER EQUIPMENT AFFIXED TO AND/OR EXISTING IN THE SAID BUILDING AFTER INTIMA TION TO THE ASSESSEE; THAT S SHALL NOT BE LIABLE TO RE NDER ACCOUNTS TO THE ASSESSEE AND THAT THE AGREEMENT WAS NOT INTENDED TO TRANSFER THE HOTEL TO S, BUT TO IMPROVE THE MANAGEMENT THEREOF, SO AS TO RUN IT EFFICIENTLY AND PROFITABLY. THE ASSESSING OFFICER TREATED THE INCOME RECEIVED BY THE ASSESSEE IN THE PR EVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR 1990 - 91 FROM S IN THE FORM OF GUARANTEE INCOME AS INCOME FROM 'HOUSE PROPERTY'. THE TRIBUNAL HOWEVER HELD THAT IT WAS BUSINESS INCOME. ON APPEAL TO THE HIGH COURT: HELD, THAT FROM THE FACTS FOUND BY THE TRIBUNAL AS WELL AS THE AGREEMENT DATED FEBRUARY 1, 1987, IT WAS MORE THAN CLEAR THAT THE AGREEMENT BETWEEN THE ASSESSEE AND S RELATED TO THE BUILDING THAT WAS READY FOR THE PURPOSES OF COMMENCING THE HOTEL BUSINESS. THE AGREEMENT DID NOT RELATE TO A BARE TENE MENT BUT WAS IN RESPECT OF THE HOTEL. THAT THE SAID HOTEL WAS COMPLETE WITH FITTINGS AND FIXTURES AND READY FOR COMMENCING THE BUSINESS WAS APPARENT FROM THE AGREEMENT. THE FACT THAT ALL LICENCES, PERMISSIONS AND NO OBJECTION CERTIFICATES REQUIRED FOR RUNNING HOTEL WERE TO BE OBTAINED IN THE NAME OF THE ASSESSEE WAS A POINTER TO 7 ITA NO. 382 /PNJ/2014 THE ASPECT THAT THE ASSESSEE INTENDED TO EXPLOIT THE BUSINESS ASSET (THE HOTEL). THE INCOME OF RS. 7,80,000 RECEIVED FROM S IN THE HANDS OF THE ASSESSEE WAS INCOME FROM BUSINESS UNDER S ECTION 28 OF THE INCOME - TAX ACT, 1961. 10 . RELYING ON THE DECISIONS, IT WAS THE SUBMISSION OF THE A U T H O R I Z E D REPRESENTATIVE O F T H E ASSESSEE THAT THE ASSESSEE WAS IN THE BUSINESS OF RUNNING A HOTEL, THE MANAGEMENT OF WHICH WAS GIVEN TO M/S. SHUNYA PROJECT S CONSULTANCY PVT . LTD. ON PROFIT SHAR I N G BASIS OF 60% AND 40% AS PER THE AGREEMENT DATED 01/12/2008 . HE FURTHER SUBMITTED THAT IN THE ASSESSMENT YEAR 2006 - 07 , AN ASSESSMENT WAS MADE U/S. 143(3) OF THE ACT , THE INCOME FROM THE SAME HOTEL S WAS ASSESSED AS BUSINESS INCOME OF THE ASSESSEE. THEREFORE, IT WAS HIS CONTENTION THAT IN THE SUBSEQUENT YEARS, THE ASSESSING OFFICER WAS NOT JUSTIFIED IN TREATING THE INCOME FROM THE SAID HOTELS AS INCOME FROM HOUSE PROPERTY. 11 . AFTER CONSIDERING THE RIVAL SUBMISSION S AND PERUSING THE MATERIAL ON RECORD, WE FIND THAT IN THE INSTANT CASE, THE ASSESSEE IS THE OWNER OF MANDREM HOTEL AT KAJUVARO AND SIOLIM HOTEL AT NOIVARO . ALL THE ROOMS OF THE HOTELS ARE FULLY FURNISHED BY THE ASSESSEE COMPANY . THE ASSESSEE BY ENTERING INTO AN AGREEMENT DATED 01/12/2008 WITH M/S. SHUNYA PROJECT S CONSULTANCY PVT . LTD. , THE ASSESSEE APPOINTED M/S. SHUNYA PROJECT S CONSULTANCY PVT . LTD. AS MANAGERS TO RUN/OPERATE AND MAINTAIN THE SAID PROPERTIES , AS THE ASSESSEE WAS UNABLE TO OPERATE AND RUN BY THEMSELVES THE SAID HOTELS. THE AGREEMENT WAS FOR A PERIOD OF 10 YEARS BEGINNING FROM 01/12/2008 . AS PER THE AGREEMENT, M/S. SHUNYA PROJECT S CONSULTANCY PVT . LTD. , WAS TO PAY AN AMOUNT OF 60% OF THE NET PROFITS ACCRUED AFTER EACH FINANCIAL YEAR TO THE ASSESSEE AS REVENUE SHARING IN RESPECT OF EACH HOTEL . THE ASSESSEE WAS TO INCUR THE EXPENSES FOR INSURING THE PROPERT IES AGAINST ALL LIABILITIES . ACCORDING TO THE ASSESSEE , NO INCOME WAS EARNED BY RUNNING THESE TWO HOTELS BY M/S. SHUNYA 8 ITA NO. 382 /PNJ/2014 PROJECT S CONSULTANCY PVT . LTD. AS MANAGERS . N O INCOME WAS PAID TO THE ASSESSEE AND T HEREFORE , NO INCOME WAS DECLARED IN THE RETURN OF INCOME FILED BY IT. HOWEVER, DEPRECIATION ON THESE TWO HOTELS WAS CLAIMED BY THE ASSESSEE. THE ASSESSING OFFICER HAD TREATED THE INCOME OF THE ASSESSEE FROM THE SAID TWO PROPERTIES UNDER THE HEAD INCOME FROM HOUSE PROPERTY BY PLACING RELIANCE ON THE DECISION OF THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF MOHIDDIN HOTELS P. LTD . (SUPRA) ON THE GROUND THAT THE HON'BLE HIGH COUR T HAS HELD THAT IF THE ASSESSEE HAD NEVER STARTED THE BUSINESS , AN INFERENCE MAY BE DRAWN THAT THE ASSESSEE INTENDED TO EXPLOIT THE PROPERTY AND NOT THE BUSINESS ASSETS . ACCORDING TO THE ASSESSING OFFICER, THE ASSESSEE HAD NOT STARTED THE BUSINESS AND THEREFORE, THE INTENTION OF THE ASSESSEE WAS NOT TO EXPLOIT THE ASSETS AS BUSINESS ASSETS BUT TO EARN RENTAL INCOME, AND THEREFORE, ASSESSED THE INCOME FROM THESE PROPERTIES UNDER THE HEAD INCOME FROM THE HOUSE PROPERTY. WE FIND FROM THE READING OF THE ORDER OF THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF MOHIDDIN HOTELS P. LTD. (SUPRA) THAT THE HON'BLE HIGH COURT HAS OBSERVED THAT THE PERIOD FOR WHICH THE BUSINESS ASSETS ARE LET OUT IS ALWAYS A RELEVANT FACTOR IN FINDING OUT WHETHER THE INTENTION OF THE ASSESSEE IS TO LET OUT THE BUSINESS ASSETS PERMANENTLY AND IF THE ASSESSEE HAD NEVER STARTED THE BUSINESS , AN INFERENCE MAY BE DRAWN THAT THE ASSESSEE INTENDED TO EXP LOIT THE PROPERTY AND NOT THE BUSINESS ASSETS BUT THE IN TENTION OF THE PARTIES HAS TO BE GATHERED FROM THE OVERALL FACTS AND NOT THE ISOLATED CIRCUMSTANCES. WE FIND THAT TH E A U T H O R I Z E D REPRESENTATIVE O F T H E ASSESSEE HAS SUBMITTED THAT PRIOR TO ENTERING INTO THE AGREEMENT DATED 01/12/2008 , THE ASSESSEE WAS ALREADY USING THESE PROPERTIES AS HOTELS AND THE INCOME SHOWN FROM THESE HOTELS WAS ASSESSED IN THE ASSESSMENT YEAR 2006 - 07 IN THE ASSESSMENT MADE U/S. 143(3) OF THE ACT BY THE ASSESSING OFFICER AS THE BUSINESS INCOME OF THE ASSESSEE. FURTHER, WE FIND FROM THE READING OF THE AGREEMENT DATED 01/12/2008 THAT IT DOES NOT PROVIDE FOR ANY RENTAL INCOME FOR THE YEAR, BUT PROVIDES FOR SHARING OF PROFIT IN THE RATIO OF 60% AND 40%. FURTHER, THE HOTELS WHICH WERE GIVEN FOR MANAGEMENT FOR A PERIOD OF 10 YEARS TO M/S. SHUNYA PROJECT S 9 ITA NO. 382 /PNJ/2014 CONSULTANCY PVT . LTD. WERE FULLY FURNISHED BY THE ASSESSEE WITH A I R C O N D I T I O N E R S , GENERATORS, CROCKERY, COMPUTERS, TELEPHONE ETC. AND ALSO ALL INCIDENTAL EXPENSES SUCH AS INSURANCE, REPAIRS AND MAINTENANCE WERE ALSO BORNE BY THE ASSESSEE. 12 IN THE ABOVE FACTS AND CIRCUMSTANCES OF THE CASE , IN OUR CONSIDERED VIEW THE INFERENCE DRAWN BY THE ASSESSING OFFICER THAT THE ASSESSEE INTENDED TO LET OUT THE HOTELS ON RENT AND EARN RENTAL THEREFROM IS NOT JUSTIFIED . OUR THIS VIEW ALSO FINDS SUPPORT FROM THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF MOHIDDIN HOTELS P. LTD. (SUPRA), WHEREIN THE HON'BLE HIGH COURT IN THE SIMILAR FACTS AND CIRCUMSTANCES OF THE CASE H A S H E L D THAT W H E N THE AGREEMENT DID NOT RELATE TO A BARE TENEMENT BUT WAS IN RESPECT OF THE HOTEL , T HE HOTEL WAS COMPLETE WITH FITTINGS AND FIXTURES AND READY FOR COMMENCING THE BUSINESS , A LL LICENCES , PERMISSIONS AND NO OBJECTION CERTIFICATES REQUIRED FOR RUNNING HOTEL S WERE TO BE OBTAINED IN THE NAME OF THE ASSESSEE WAS A POINTER TO THE ASPECT THAT THE ASSESSEE INTENDED TO EXPLOIT THE H O T E L P R O P E R T I E S A S BUSINESS ASSET , AND THEREFORE, THE INCOME WAS INCOME FROM BUSINESS U/S. 28 OF THE ACT. HENCE, WE FIND NO INFIRMITY IN THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) , WHICH IS HE REBY CONFIRMED AND THE GROUND S OF APPEAL OF THE REVENUE ARE DISMISSED. 13 T H E G R O U N D N O . 3 O F T H E A P P E A L R E A D S A S U N D E R : - 3. WHETHER ON FACTS AND CIRCUMSTANCES OF THE CASE LD CIT(A) WAS CORRECT IN HOLDING THAT ONLY 60% OF LONG TERM CAPITAL GAINS (LTC G ) AROSE TO THE ASSESSEE AND REMAINING 40% OF LTCG AROSE TO M/S. SHUNYA PROJECTS CONSULTANCY (P) LTD WHERE AS ON DATE OF ACQUISITION OF THE ASSETS IN 2007, THE ASSESSEE WAS THE SOLE OWNER AND IT ENTERED INTO AGREEMENT WITH M/S. SHUNYA PROJECT CONSULTANCY (P) LTD ONLY FROM FY 2008 - 09 RELEVANT TO AY 2009 - 10 I.E. WHERE IT IS ONLY THE ASSESSEE WHO HAS PURCHASED THE LAND AND BUILDING IN FY 2007 - 08, WAS THE CIT(A) CORRECT IN DIRECTING TO APPORTION THE LTCG BETWEEN THE ASSESSEE AND THE SHUNYA PROJECT CONSULTANCY (P) LTD? 10 ITA NO. 382 /PNJ/2014 1 4 . A T T H E T I M E O F H E A R I N G , T H E A U T H O R I Z E D R E P R E S E N T A T I V E O F T H E ASSESSEE S U B M I T T E D T H A T T H I S G R O U N D O F A P P E A L O F T H E R E V E N U E D O E S N O T A R I S E O U T O F T H E O R D E R O F T H E COMMISSIONER OF INCOME TAX (APPEALS) , W H I C H W A S F A I R L Y CONCEDED T O B Y T H E DEPARTMENTAL REPRESENTATIVE . T HEREFORE , T H I S G R O U N D O F A P P E A L O F T H E R E V E N U E I S D I S M I S S E D . 1 5 . IN THE RESULT , APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE COURT AT THE CLOSE OF THE HEARING ON THURSDAY , THE 0 9 TH DAY OF JULY , 201 5 AT GOA . S D / - S D / - (GEORGE MATHAN) (N.S.SAINI) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 09 TH JU LY , 201 5 . VR/ - COPY TO: 1 . THE APPELLANT 2 . THE RESPONDENT 3 . THE CIT 4 . THE CIT(A) 5 . THE D.R 6 . GUARD FILE. BY ORDER ASSISTANT REGISTRAR I.T.A.T., PANAJI 11 ITA NO. 382 /PNJ/2014 DATE INITIAL ORIGINAL DICTATION PAD IS ENCLOSED IN THE FILE 1. DRAFT DICTATED ON 1 0 .0 7 .2015 SR.PS 2. DRAFT PLACED BEFORE AUTHOR 1 0 .07 .2015 SR.PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER 1 0 /07 /2015 JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER 1 0 /0 7 /2015 JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS 1 0 /07 /2015 SR.PS 6. DATE OF PRONOUNCEMENT 09 /0 7 /2015 SR.PS 7. FILE SENT TO THE BENCH CLERK 1 0 /07 /2015 SR.PS 8. DATE ON WHICH FILE GOES TO THE HEAD CLERK 9. DATE OF DISPATCH OF ORDER