DCIT, Jaipur V. PARAS PRATEEK REAL ESTATE P LTD., Jaipur

ITA 415/JPR/2011

• Counselvise Citation: 41523114 RSA 2011
• Duration Of Justice: 3 year(s) 4 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-09-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2006-2007
• Appeal Filed On: 04-05-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: G G MUNDRA
• Keywords: Opportunity of being heard; Valuation report
• Section: 56(2)

Judgement Text

IN THE INCOMETAX APPELLATE TRIBUNAL JAIPUR BENCH: JAIPUR (BEFORE SHRI R.P. TOLANI AND SHRI T.R. MEENA) I.T.A. NO. 415/JP/2011 ASSTT. YEAR- 2006-07 PAN NO. AACCP 9340 D THE D.C.I.T. M/S PARAS PRATEEK REAL ESTATE (P) LTD . CIRCLE-2, JAIPUR. VRS. 351, 3 RD FLOOR, GANPATI PLAZA, JAIPUR. (APPELLANT) (RESPONDENT) DEPARTMENT BY :- SHRI RAJESH OJHA ASSESSEE BY :- SHRI G.G. MUNDRA DATE OF HEARING : 10/09/2014 DATE OF PRONOUNCEMENT : 19/09/2014 O R D E R PER: T.R. MEENA, A.M. THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER DATED 15/02/2011 OF THE LEARNED C.I.T.(A)-I, JAIPUR FOR TH E A.Y. 2006-07. THE SOLE GROUND OF APPEAL IS AGAINST THE LEARNED CIT( A) IS JUSTIFIED IN SEPARATING THE HEADS OF INCOMES AND TREATING THE RE NTAL INCOME AS INCOME FROM HOUSE PROPERTY AND ALSO HOLDING THAT RE NTAL INCOME FROM FURNITURE AND FIXTURES IS ASSESSABLE U/S 56(2)(II) INSTEAD OF 56(2)(III) OF THE IT ACT. THE ASSESSEE COMPANY HAD ACQUIRED A PROPE RTY LOCATED AT UNIT NO. 903, IXTH FLOOR, PENINSULA TOWER-I, PENINSUL A CORPORATE PARK, ITA 415/JP/2011 DCIT VS. PARAS PRATEEK REAL ESTATE 2 GANPATRAO KADAM MARG, OFF -SENAPATI BAPAT MARG, LOW ER PATEL, MUMBAI. THE SALEABLE AREA OF THIS PROPERTY WAS 6406 S Q. FT AS PER DETAILS AVAILABLE IN THE VALUATION REPORT. THE ACQUI SITION OF PROPERTY HAD BEEN FUNDED BY UNSECURED AND SECURED LOANS. W.E.F. 1/5/2005, THIS PROPERTY HAD BEEN LET OUT TO M/S PARAS KUHAD & ASSO CIATES, MUMBAI, WHO HAPPENS TO BE A PERSON SPECIFIED U/S 40A(2)(B) O F THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED AS THE ACT). IN ITS COMPUTATION OF INCOME, THE ASSESSEE HAS SHOWN INCOME FROM HOUSE PR OPERTY AS WELL AS INCOME FROM OTHER SOURCES. THE ASSESSEE HAD SHOWN ANNUAL RENTAL VALUE AT RS. 41,25,000/- IN RESPECT OF INCOME FROM HOUSE PROPERTY, RS. 13,75,000/- IN RESPECT OF RENTAL INCOME FROM FURNIT URE, ELECTRICAL FITTINGS AND AIR CONDITIONER ETC. THE LEARNED ASSESSING OFFIC ER ASKED TO FILE COPY OF AGREEMENT DURING THE COURSE OF ASSESSMENT PROCEE DINGS, WHICH HAS BEEN SUBMITTED BY THE ASSESSEE. AFTER GOING THROUGH THE LEASE DEED, THE LEARNED ASSESSING OFFICER FOUND THAT THE LEASE DEED WAS A COMPOSITE LEASE DEED OF BUILDING AS WELL AS FITTINGS IN THE BUILDING WHEREIN THE RENTAL AMOUNT OF RS. 5 LACS PER MONTH HA D BEEN SPLIT AS RS. 3,75,000/- TOWARDS PROPERTY AND BALANCE RS. 1,25 ,000/- WAS FOR FURNITURE AND FIXTURES, AC ETC. WHICH HAS BEEN AGAIN TAKEN SEPARATELY IN COMPUTATION OF INCOME AS INCOME FROM HOUSE PROPE RTY FOR GETTING ITA 415/JP/2011 DCIT VS. PARAS PRATEEK REAL ESTATE 3 RENT FROM BUILDING AND INCOME OTHER SOURCE GETTING RENT FROM FURNITURE AND FIXTURES. ON THIS ISSUE, THE LEARNED ASSESSING OFFICER GAVE REASONABLE OPPORTUNITY OF BEING HEARD, WHICH WAS AVAI LED BY THE ASSESSEE. AFTER CONSIDERING THE ASSESSEES REPLY, T HE LEARNED ASSESSING OFFICER MADE DETAILED DISCUSSION ON PAGES 2 TO 7 AN D ALSO RELIED UPON VARIOUS CASE LAWS. PARTICULAR HON'BLE SUPREME COURT DECISION IN THE CASE OF SULTAN BROTHERS (1964) 51 ITR 353 WHEREIN TH E ASSESSEE LETS ON HIRE MACHINERY, PLANT OR FURNITURE WAS INSEPARABL E FROM THE LETTING OUT OF THE BUILDING, HAD BEEN CONSIDERED BY THE HON BLE APEX COURT. HE FINALLY CONCLUDED THAT BUILDING AND FURNITURE FIXTU RES ARE NOT SEPARABLE. THE PROVISIONS OF SECTION 56(2)(III) OF THE ACT ARE APPLICABLE AND THE ENTIRE INCOME OF THE ASSESSEE IS CHARGEABLE TO INCO ME TAX UNDER THE HEAD INCOME FROM OTHER SOURCES. 2. BEING AGGRIEVED BY THE ORDER OF THE LEARNED ASSE SSING OFFICER, THE ASSESSEE CARRIED THE MATTER TO THE LEARNED CIT(A ), WHO HAD ALLOWED THE APPEAL BY OBSERVING AS UNDER:- CONTENTION OF THE AR IS CONSIDERED. INCOME FROM LE TTING OUT THE PROPERTY IS CERTAINLY TAXABLE UNDER THE HEAD INCOME FROM HOUSE PROPERTY. IN THE PRESENT CASE THERE ARE SEPARATE LE ASE DEEDS FOR THE BUILDING AND THE FACILITIES PROVIDED LIKE-A IR CONDITIONER PLANT ETC.. AS HELD IN THE CASE OF K. BHASKARAN NAI R VS. CIT 177 ITA 415/JP/2011 DCIT VS. PARAS PRATEEK REAL ESTATE 4 TAXMAN 478 (KER.), THE RENTAL INCOME CANNOT BE TAXED UNDER THE HEAD INCOME FROM OTHER SOURCE SIMPLY BECAUSE A FURNISHED ACCOMMODATION HAS BEEN LET OUT. THE INCOME OF EVERY KIND WHICH IS TAXABLE BUT IS NOT CHARGEABLE TO INCOME TAX UNDER ANY OF THE HEAD SPECIFIED IN SECTION 14 IS CHARGEABLE U /S 56(1) UNDER THE HEAD INCOME FROM OTHER SOURCES AS THIS IS A GENERAL PROVISION. THE APPELLANTS CASE IS NOT A CASE OF HOT EL AS WAS THE CASE IN SULTAN BROTHERS PVT. LTD. VS CIT RELIED UPON BY THE A.O.. IN A HOTEL BUILDING AND FURNITURE AND FIXTURE S ARE INSEPARABLE AS BUILDING AND FIXTURES WERE INTENDED T O BE USED TOGETHER FOR A SINGLE PURPOSE OF RUNNING A HOTEL. I N THE PRESENT CASE AS PER THE LEASE DEED, RENT FOR OFFICE PREMISE S SHALL BE RS. 3,75,000/- PER MONTH WHEREAS RENT FOR FIXTURES AND F URNITURE WILL BE RS. 1,25,000/-. LETTING OUT OF THE FACILITY IS NOT COVERED UNDER THE HEAD INCOME FROM HOUSE PROPERTY AND, THER EFORE, RENT FOR FURNITURE AND FIXTURES SHOULD BE RIGHTLY T AXED UNDER THE HEAD INCOME FROM OTHER SOURCES. AS ALREADY HELD THA T IN THE PRESENT CASE FURNITURE AND FIXTURES ARE NOT INSEPAR ABLE FROM THE LETTING OF THE BUILDING, THE RENTAL INCOME FROM FUR NITURE AND FIXTURES IS NOT COVERED BY CLAUSE (III) OF SECTION 56(2) BUT IS COVERED UNDER CLAUSE (II) OF SECTION 56(2). THE A.O . IS, THEREFORE, DIRECTED TO ASSESS RS. 3,75,000/- PER MO NTH RENTAL INCOME OF OFFICE PREMISES UNDER THE HEAD INCOME FRO M HOUSE PROPERTY AND RS. 1,25,000/- PER MONTH BEING RENT FO R FURNITURE AND FIXTURES U/S 56(2)(II) UNDER THE HEAD INCOME FR OM OTHER SOURCES. ALL NECESSARY DEDUCTIONS, ALLOWANCES MAY B E GIVEN ITA 415/JP/2011 DCIT VS. PARAS PRATEEK REAL ESTATE 5 ACCORDINGLY. AS A RESULT, THE GROUNDS OF APPEAL ARE DECIDED PARTLY IN FAVOUR OF THE APPELLANT. 3. NOW THE REVENUE IS IN APPEAL BEFORE US AND VEHEME NTLY SUPPORTED THE ORDER OF THE ASSESSING OFFICER. 4. AT THE OUTSET, THE LEARNED AR FOR THE ASSESSEE A RGUED THAT IN LEASE DEED THE RENT FOR BUILDING AND RENT FOR FURNI TURE AND FIXTURES HAVE BEEN PROVIDED SEPARATELY. IT IS NOT A COMPOSITE LEA SE DEED. HE FURTHER ARGUED THAT HON'BLE SUPREME COURT DECISION IN THE C ASE OF SULTAN BROTHERS (SUPRA) IS NOT SQUARELY APPLICABLE ON THE ASSESSEES CASE. IN THE ASSESSEES CASE, THE COMPANY HAS PURCHASED OFFI CE PREMISES FOR LETTING IT OUT. LATER ON, FACILITY OF AC AND OTHER FITTINGS WERE PROVIDED, WHICH ARE EASILY BE SEPARABLE FROM OFFICE PREMISES. THE LEASE DEED CLEARLY SHOWS THAT INTENTION OF TWO LETTINGS SEPARATE LY AND FIXES SEPARATE LEASE RENT. HE RELIED UPON THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF SHAMBHU INVESTMENT P. LTD. VS. CIT (2003) 263 ITR 143 (S.C.). THEREFORE, THERE IS NO INFIRMITY IN T HE ORDER OF THE LEARNED CIT(A), THE SAME DESERVES TO BE UPHELD. 5. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON THE RECORD. SPECI FIC AMOUNT FOR RENT FOR BUILDING AS WELL AS FURNITURE FIXTURES AND AC AR E PROVIDED IN THE ITA 415/JP/2011 DCIT VS. PARAS PRATEEK REAL ESTATE 6 LEASE AGREEMENT. FITTINGS ARE SEPARABLE, WHICH CAN B E USED ANYWHERE ELSE ALSO. THE BUILDING CAN BE LET OUT WITHOUT FURNIT URE, WHICH WAS INTENTION OF THE APPELLANT. THE HON'BLE SUPREME COUR T DECISION CITED BY THE LEARNED A.R. IS SQUARELY APPLICABLE, THEREFORE, WE DO NOT FIND ANY REASON TO INTERFERE IN THE ORDER OF THE LEARNED CIT( A). ACCORDINGLY, WE DISMISS THE APPEAL OF THE REVENUE. 6. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSE D. ORDER PRONOUNCED IN THE OPEN COURT ON 19/09/2014. SD/- SD/- (R.P. TOLANI) (T.R. MEENA) JUDICIAL MEMBER ACCOUNTANT MEMBER JAIPUR, DATED : 19 TH SEPTEMBER, 2014 * RANJAN COPY FORWARDED TO :- 1. THE DCIT, CIRCLE-2, JAIPUR. 2. M/S PARAS PRATEEK REAL ESTATE (P) LTD., JAIPUR. 3. THE CIT (A) 4. THE CIT 5. THE D/R GUARD FILE (I.T.A. NO. 415/JP/2011) BY ORDER, AR ITAT JAIPUR.