Mrs Suguna Kapur, New Delhi V. ACIT, New Delhi

ITA 4117/DEL/2012

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 65703 (ITAT-DELHI)
• Duration Of Justice: 2 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-10-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Next Hearing Date: 04-10-2012
• Assessment Year: 2009-2010
• Appeal Filed On: 01-08-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SATPAL SINGH

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: G NEW DELHI BEFORE SHRI R.K.GUPTA, JUDICIAL MEMBER AND SHRI S.V.MEHROTRA, ACCOUNTANT MEMBER I.T.A .NO.-4117/DEL/2012 ASSESSMENT YEAR-2009-10 SUGUNA KAPUR, VS. ACIT, B-61, G.K.PART-I, CIRCLE-37(1), NEW DELHI-48 NEW DELHI. PAN-AAAPK5525C (APPELLANT) (RESPONDENT) APPELLANT BY: SH. M.P.RASTOGI, ADV. RESPONDENT BY: SH. SATPAL SINGH, SR. DR DATE OF HEARING:-04.10.2012 DATE OF PRONOUNCEMENT:-10.10.2012 ORDER PER R.K.GUPTA, JM THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST TH E ORDER OF LD. CIT(A)- XXVIII, NEW DELHI DATED 31.05.2012 RELATING ASSESS MENT YEAR 2009-10. 2. THE ASSESSEE IS OBJECTING THE ASSESSED AMOUNT OF RS .86,93,333/-, BEING THE AMOUNT RECEIVED FROM TENANT WHICH IS ASSESSED AS IN COME FROM OTHER SOURCES AGAINST THE CLAIM OF THE ASSESSEE AS INCOME FROM HO USE PROPERTY. 3. DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSING OF FICER NOTED THAT ASSESSEE HAS SHOWN RENTAL INCOME OF RS. 1,56,48,000 /-. ASSESSEE HAS PURCHASED THE PROPERTY UNIT 1 & 2, GROUND FLOOR, LOWER PAREL, MUMBAI IN MAY, 2008 AND LET IT OUT TO THE ICICI PRUDENTIAL LIFE INSURANCE C OMPANY LTD. ASSESSEE HAS MADE TWO SEPARATE AGREEMENTS FOR LEASING OUT OF THE PROPERTY. FIRST AGREEMENT IS I.T.A .NO.-4117/DEL/2012 2 FOR THE LEASING OUT OF THE HOUSE AND SECOND AGREEME NT IS FOR PROVISION OF AMENITIES AND SERVICES. THE COMPANY HAS TO PAY TO THE ASSESSEE A SUM OF RS.4,50,000/- PER MONTH FOR THE PROVISIONS OF AMENI TIES AND SERVICES AND A SUM OF RS.3,20,000/- @ PER MONTH FOR THE RENT OF THE PROPE RTY. ORIGINAL COMPUTATION OF INCOME FROM MUMBAI PROPERTY AS SUBMITTED BY THE ASS ESSEE IS AS BELOW :- INCOME FROM LETTING OUT OF MUMBAI PROPERTY RS. 69 ,54,667/- INCOME FROM SERVICES RS. 86,93,333/- -------------------- TOTAL RS.1,56,48,000/- -------------------- LESS: 30% DEDUCTION RS. 46,94,400/- INTEREST U/S 24 RS. 97,13,931/- -------------------- ASSESSED HOUSE PROPERTY INCOME RS. 12,39,668/- FROM MUMBAI PROPERTY -------------------- ASSESSEE IS EARNING INCOME FROM PROVISIONS OF SERV ICES AND AMENITIES. AS THIS IS A SERVICE AGREEMENT AND NOT RELATED TO LETTING OUT OF THE PROPERTY, THIS INCOME SHOULD BE INCOME FROM OTHER SOURCES AND 30% STATUTORY DEDUCTION CLAIMED U/S 24(A) SHOULD NO T BE ALLOWED FROM INCOME FROM PROVISION OF AMENITIES AND SERVICES. T HEREFORE, VIDE ORDER SHEET ENTRY DATED 01.12.2011, COUNSEL WAS ASK ED TO EXPLAIN:- EXPLAIN WHY THE INCOME FROM SERVICE AGREEMENT FO R MUMBAI PROPERTY SHOULD NOT BE TREATED AS INCOME FROM OTHER SOURCES AND THEREFORE 30% STATUTORY DEDUCTION SHOULD BE DISALLO WED. 4. IT WAS REPLIED THAT THOUGH TWO SEPARATE AGREEMEN TS HAD ENTERED BY ASSESSEE I.E ONE FOR RENT AND OTHER FOR AMENITIES SERVICES. HOWEVER, BOTH ARE INTER-RELATED AND INEXTRICABLY, THEREFORE, ENTIRE RENTAL INCOME I S TO BE TREATED AS INCOME FROM HOUSE PROPERTY AND SECOND AGREEMENT IS FOR PROVIDIN G AMENITIES, ASSESSING OFFICER WAS NOT SATISFIED. ACCORDINGLY, HE ASSESSE D THE INCOME FROM HOUSE I.T.A .NO.-4117/DEL/2012 3 PROPERTY AS PER SEPARATE AGREEMENT AND INCOME SHOWN ON ACCOUNT OF AMENITIES BY ANOTHER AGREEMENT, WAS TAKEN AS INCOME FROM OTHER S OURCES. IN THIS WAY, THE ASSESSING OFFICER ASSESSED INCOME FROM HOUSE PROPER TY AT RS.69,54,667/- AND THE OTHER AMOUNT WHICH WAS AT RS. 86,93,333/- WHICH WAS AS PER AGREEMENT OF SERVICES OF AMENITIES, WAS TREATED AS INCOME FROM O THER SOURCES. WHILE DOING SO, THE ASSESSING OFFICER HAS RELIED ON THE DECISION IN CASE OF CIT VS KANAK INVESTMENT PVT. LTD 95 ITR 419 (CAL) AND IN CASE OF ATTUKAL SHOPPING COMPLEX PVT. LTD. VS CIT (2002) 125 TAXMAN 881 (KER.). THE ASSESSEE PREFERRED AN APPEAL BEFORE LD. CIT(A). SIMILAR CONTENTIONS WERE RAISED BEFORE LD. CIT(A) WHICH WERE RAISED BEFORE ASSESSING OFFICER. FURTHE R, RELIANCE WAS PLACED ON THE DECISION OF HON'BLE SUPREME COURT IN CASE OF CIT VS SHAMBHU INVESTMENT PVT. LTD. 263 ITR 143 (SC). LD. CIT(A) WAS ALSO IN AGRE EMENT WITH THE FINDING OF THE ASSESSING OFFICER. ACCORDINGLY, HE CONFIRMED T HE ACTION OF THE ASSESSING OFFICER. NOW THE ASSESSEE IS IN APPEAL HERE BEFORE TRIBUNAL. 5. LD. AR FILED COPIES OF AGREEMENT AND THEY WERE E XPLAINED ALSO. IT WAS EXPLAINED THAT THERE ARE NO AMENITIES SERVICES HAS BEEN PROVIDED BY THE ASSESSEE, HOWEVER, FOR THE PURPOSE OF CONVINCE, TWO SEPARATE AGREEMENTS WERE ENTERED. THE ENTIRE INCOME IS INEXTRICABLE LINKS WITH THE PR OPERTY INCOME, THEREFORE, ENTIRE INCOME SHOWN BY ASSESSEE IS TO BE TREATED AS INCOME FROM HOUSE PROPERTY. THE DECISION RELIED UPON BY LD. ASSESSING OFFICER, WERE EXPLAINED THAT THEY ARE DISTINGUISHABLE AS IN THOSE CASES, THERE WERE SEPAR ATE AMENITIES PROVIDED LIKE FURNITURE, AIR-CONDITIONER ETC. ETC. AND ON THAT AC COUNT WHATEVER THE AMOUNT WAS I.T.A .NO.-4117/DEL/2012 4 RECEIVED THAT WAS TREATED AS INCOME FROM OTHER SOUR CES BY THE HON'BLE CALCUTTA HIGH COURT AS WELL AS HON'BLE KERALA HIGH COURT . HOWEVER, IN THE PRESENT CASE, SINCE NO AMENITIES HAVE BEEN PROVIDED, THEREFORE, C HARACTER OF INCOME CANNOT BE CHANGED. RELIANCE WAS PLACED ON THE DECISION IN CA SE OF SHAMBHU INVESTMENT 266 ITR 147(SC), 162 ITR 452 (BOMBAY) AND 214 ITR 4 24. ON THE OTHER HAND, LD. DR FIRSTLY PLACED RELIANCE ON THE ORDER OF ASSE SSING OFFICER AND CIT(A). IT WAS FURTHER ARGUED THAT THERE ARE TWO SEPARATE AGRE EMENTS- ONE IS FOR RENT AND OTHER IS FOR SERVICES FOR AMENITIES. THESE TWO SEP ARATE AGREEMENTS WERE PREPARED BY THE ASSESSEE FOR THE REASON THAT HE WANTS TO SAV E THE HOUSE TAX. NOW HE WANTS TO SAVE INCOME-TAX ALSO BY CLAIMING HIGHER DEDUCTIO N U/S 24, WHICH SHOULD NOT BE PERMITTED. 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND CONSIDER ED THEM CAREFULLY. AFTER CONSIDERING THE SUBMISSIONS AND PERUSING THE MATERI AL ON RECORD, WE FIND THAT ASSESSEE DESERVES TO SUCCEED ON THE ISSUE INVOLVED. COPY OF AGREEMENTS ARE PLACED ON RECORD. AT LAST PAGE OF THE AGREEMENT LI ST OF AMENITIES IS MENTIONED. FIRST IS ELECTRICITY CONNECTION. IT IS PROVIDED TH AT ASSESSEE WILL PROVIDE ELECTRICITY CONNECTION HOWEVER CHARGES WILL BE PAID BY THE LICE NSEE. IN SECOND AMENITIES, IT IS SHOWN THAT THE LICENSOR I.E ASSESSEE ALSO PERMIT THE LICENSEE TO PUT SIGNAGE AT ALL THE LOCATIONS AT NO EXTRA COST AND IF ANY PERMISSIO N IS REQUIRED THAT WOULD BE OBTAINED BY THE LICENSEE. FROM THIS LIST OF AMEN ITIES, WE DONOT UNDERSTAND WHAT SERVICE HAS BEEN PROVIDED BY THE ASSESSEE. HOWEVER , TWO SEPARATE AGREEMENTS HAVE BEEN MADE BY THE ASSESSEE: ONE FOR RENT I.E MO NTHLY LICENSE FEE AND ANOTHER I.T.A .NO.-4117/DEL/2012 5 FOR SERVICES OF AMENITIES. BUT AS STATED ABOVE, IN FACT NO AMENITIES HAVE BEEN PROVIDED BY THE ASSESSEE FOR WHICH IT CAN BE SAID T HAT THE ASSESSEE IS CHARGING ANY LICENSE FEE. THE CONTENTION OF LD. DR MAY BE CORRE CT THAT THESE TWO AGREEMENTS MAY BE ENTERED FOR THE PURPOSE OF SAVING HOUSE TAX. IN OUR CONSIDERED VIEW, CHARACTER OF INCOME CANNOT BE CHANGED EITHER BY ENT ERING TWO AGREEMENTS OR BY MAKING OTHER EVIDENCE. THE AMOUNT OF LICENSE FEE E ARNED BY ASSESSEE ON ACCOUNT OF TWO AGREEMENTS INFACT IS ON ACCOUNT OF PROPERTY GIVEN ON LICENSE AND THE ENTIRE INCOME OF THE PROPERTY, IN OUR CONSIDERED VIEW, HAS TO BE TREATED AS INCOME FROM HOUSE PROPERTY AND NOT INCOME FROM OTHER SOURCES WH ICH IS TREATED BY ASSESSING OFFICER FOR THE REASON THAT A SEPARATE AGREEMENT HA S BEEN ENTERED ON ACCOUNT OF AMENITIES PROVIDED BY ASSESSEE. 7. THE CASE LAWS RELIED UPON BY ASSESSING OFFICER, ARE DISTINGUISHABLE AS IN BOTH OF THE CASE SEPARATE SERVICES WERE PROVIDED BY THE ASSESSEE. ONE HOUSE WAS GIVEN ON RENT AND THERE WERE OTHER AMENITIES LIKE F URNITURE AND AIR-CONDITIONING ETC. FOR WHICH SEPARATE RENT WAS TAKEN AND, THEREFO RE, THAT AMOUNT WAS TREATED AS INCOME FROM OTHER SOURCES. HON'BLE CALCUTTA HIGH C OURT AS WELL AS KERALA HIGH COURT HAS UPHELD THESE CONTENTIONS. 8. HOWEVER, IN THE PRESENT CASE, IT IS SEEN THAT BO TH THE AGREEMENTS RELATE TO ONE PROPERTY WITHOUT PROVIDING ANY AMENITIES. PRO VIDING AN ELECTRICITY CONNECTION, IT CANNOT BE SAID THAT IN REGULAR SERVI CES, HAS BEEN PROVIDED BY THE ASSESSEE. CHARGES OF ELECTRICITY HAS BEEN PAID BY LICENSEE AND NOT BY ASSESSEE. I.T.A .NO.-4117/DEL/2012 6 9. BEFORE, THE HON'BLE SUPREME COURT IN CASE OF SHA MBHU INVESTMENT, THE FACTS WERE THAT THE ASSESSEE OWNED A MOVABLE PROPER TY. IT OCCUPIED A PROPORTION OF PROPERTY AND LET OUT THE REST TO BE USED AS TABL E SPACE TO OCCUPANTS WITH FURNITURE, LIGHTS AND AIR-CONDITIONERS. THE ASSESS EE PROVIDES SERVICES LIKE WATCH AND WARD STAFF, ELECTRICITY AND WATER AND OTHER COM MON AMENITIES. THE MONTHLY RENT WAS PAYABLE INCLUSIVE OF ALL CHARGES. THE ASS ESSEE HAD ALSO RECOVERED BY WAY OF SECURITY FROM THE OCCUPANTS. THE HON'BLE HI GH COURT HELD THAT INCOME FROM THE PROPERTY WAS ASSESSABLE IN THE HANDS OF TH E ASSESSEES INCOME FROM HOUSE PROPERTY. THE ASSESSEE PREFERRED APPEAL TO T HE HON'BLE SUPREME COURT. THE HON'BLE SUPREME COURT ALSO DISMISSED THE APPEAL HOLDING THAT THERE IS NO REASON TO INTERFERE WITH THE CONCLUSION ARRIVED AT BY THE HON'BLE HIGH COURT. WHATEVER THE COMMON SERVICES AND AMENITIES WERE PRO VIDED THAT WERE TREATED AS LINKED WITH THE RENTAL INCOME AND ACCORDINGLY ENTIR E INCOME WAS TREATED AS INCOME FROM HOUSE PROPERTY. 10. IN THE CASE, IN HAND ALSO THE ASSESSEE THOUGH H AS ENTERED TWO AGREEMENTS BUT THEY RELATED TO THE SAME PROPERTY AND WHATEVER THE AMOUNT IS RECEIVED, IN OUR CONSIDERED VIEW IS TO BE TREATED AS INCOME FROM HOU SE PROPERTY AND NOT INCOME FROM OTHER SOURCES. 11. IN CASE OF BAKHTAWAR CONSTRUCTION PVT. LTD. 162 ITR 452, THE HON'BLE BOMBAY HIGH COURT HAS DECIDED SIMILAR ISSUE IN WHIC H IT WAS HELD AS UNDER:- THAT THE TRUE PURPORT OF THE AGREEMENTS, GLEANED F ROM A READING OF ALL PARTS THEREOF, WAS THAT THE TENANTS WERE GIVEN THEREBY ONLY THE FACILITY OF UTILIZING THE PRODUCT OF THE I NSTALLATION, VIZ., THE I.T.A .NO.-4117/DEL/2012 7 COLD OR CONDITIONED AIR. THERE WAS NO LETTING OF T HE INSTALLATION TO THE TENANTS. THERE BEING NO LETTING OF THE INSTALL ATION, THE REQUIREMENTS OF SECTION 56(2)(III) HAD NOT BEEN MET . ACCORDINGLY, THE INCOME DERIVED BY THE ASSESSEE FROM THE PREMISE S UNDER THE LEASES COULD NOT BE TAXED UNDER THE HEAD OF INCOME FROM OTHER SOURCES BUT MUST BE TAXED AS INCOME FROM PROPERTY. 12. THE RATIO OF THE HON'BLE SUPREME COURT, AND HON 'BLE BOMBAY HIGH COURT SQUARELY APPLICABLE ON THE FACTS OF PRESENT CASE. SIMILAR VIEWS HAVE BEEN EXPRESSED BY THE HON'BLE MADRAS HIGH COURT IN CASE OF CIT VS A.S.JAYA KUMAR 215 ITR 422. 13. IN VIEW OF THE ABOVE FACTS AND CIRCUMSTANCES AN D IN VIEW OF THE DECISIONS OF THE HON'BLE SUPREME COURT AND BOMBAY HIGH COURT AND ALSO MADRAS HIGH COURT, WE ARE OF THE CONSIDERED VIEW THAT ENTIRE AM OUNT RECEIVED BY ASSESSEE ON ACCOUNT OF TWO SEPARATE AGREEMENTS IS TO BE TREATED AS INCOME FROM HOUSE PROPERTY. ACCORDINGLY, WE DIRECT THE ASSESSING OFF ICER TO TREAT THE ENTIRE CONSIDERATION, AS INCOME FROM HOUSE PROPERTY. WE O RDER ACCORDINGLY. 14. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 10.10.2012. SD/- SD/- (S.V.MEHROTRA) (R.K.GUPTA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 10/10/2012 *AMIT KUMAR* I.T.A .NO.-4117/DEL/2012 8 COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI