ACIT-9(2)(2), MUMBAI V. M/S-E-CITY PROJECTS CONSTRUCTION PVT LTD., MUMBAI

ITA 4151/MUM/2019

• Counselvise Citation: [2021] 109 COUNSELVISE.COM (IT) 4943 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 7 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-02-2021
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Assessment Year: 2015-2016
• Appeal Filed On: 10-06-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business income; Business expenditure; Set aside

Judgement Text

THE INCOME TAX APPELLATE TRIBUNAL E BENCH, MUMBAI SHRI SHAMIM YAHYA (AM) & SHRI PAVANKUMAR GADALE ( JM) I.T.A. NO. 4151/MUM/2019 (ASSESSMENT YEAR 2015-16 ) ACIT-9(3)(2) ROOM NO. 259A 2 ND FLOOR AAYAKAR BHAVAN M.K. ROAD MUMBAI-400 020. VS . M/S. E-CITY PROJECTS CONSTRUCTION PVT. LTD. 844/4, FUND REPUBLIC SHAH INDUSTRIAL ESTATE OFF NEW LINK ROAD ANDHERI-W, MUMBAI 400 053. PAN : AABCE5486E (APPELLANT) (RESPONDENT) ASSESSEE BY SHRI JAY BHANSALI DEPARTMENT BY SHRI SUSHIL KUMAR MISHRA DATE OF HEARING 24.12.2020 DATE OF PRONOUNCEMENT 03.02.2021 O R D E R PER SHAMIM YAHYA (AM) :- THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST ORDE R OF LEARNED COMMISSIONER OF INCOME TAX (APPEALS) [IN SHORT LEAR NED CIT(A)] DATED 29.3.2019 AND PERTAINS TO ASSESSMENT YEAR 2015-16. 2. THE GROUNDS OF APPEAL READ AS UNDER :- I) 'WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED ON FACTS AND IN LAW IN NOT U PHOLDING THE ACTION TAKEN BY THE AO IN TREATING THE RENTAL INCOME FROM OP ERATING FAMILY ENTERTAINMENT CENTER CUM MALL AND MAINTENANCE CHARGE S AMOUNTING TO RS 11,96,62,440/- AND RS 4,32,51,472/- RESPECTIVELY AS 'INCOME FROM HOUSE PROPERTY ' AGAINST THE ASSESSEE'S CLAIM OF 'PROFIT AND GAINS FROM BUSINESS OR PROFESSION' II) 'WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE AND IN LAW, THE LD.CIT(A) HAS ERRED ON FACTS AND IN LAW IN COMPL ETELY IGNORING THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF SHAMBHU INVESTMENT (P) LTD VS CIT(2003) 184CTR (SC) 91: (2003) 263 ITR 143(SC) WHEREIN IT IS HELD THAT INCOME DERIVED BY AN ASSESSEE BY LETTING OU T FURNISHED PREMISES ON M/S. E-CITY PROJECTS CONSTRUCTION PVT. LTD. 2 MONTHLY RENT BASIS TO VARIOUS PARTIES ALONGWITH VARIO US SERVICES, IS ASSESSABLE AS INCOME FROM PROPERTY AND NOT BUSINESS INCOME' III) 'WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN ALLOWING THE INTEREST EXPE NDITURE OF RS 1,26,85,361/- U/S 24(B) OF THE ACT BY TREATING THE IN COME FROM HOUSE PROPERTY AS BUSINESS INCOME IGNORING THE FACT THAT THE REVENUE HAS NOT ACCEPTED THE CLAIM OF THE ASSESSEE IN THE PRESENT A.Y. A ND EARLIER YEARS AND THE REVENUE HAS FILED SLP FOR A.Y. 2007-08, 2009-10 AND 2010-11' THE APPELLANT PRAYS THAT THE ORDER OF THE CIT(A) ON THE ABOVE GROUNDS BE SET ASIDE AND THAT OF THE ACIT-9(2)(2) BE RESTORED. 3. BRIEF FACTS OF THE CASE ARE THE ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF ACQUISITION OF IMMOVABLE PROPERTIES AND CONSTRUCTING, DEVELOPING AND BUILDING 'FAMILY ENTERTAINMENT CENTRE CUM MALLS ' ACROSS INDIA AND LEASING (SHORT TERM & LONG TERM), LICENSING, RENTIN G AND MANAGING, OPERATING AND RUNNING THE SAME FOR COMMERCIAL USE AND SETTING UP NECESSARY INFRASTRUCTURE. 4. DURING THE COURSE OF ASSESSMENT ASSESSING OFFICER NOTED THAT THE ASSESSEE HAS SHOWN INCOME UNDER THE HEAD 'OPERATING INCOME' OF RS. 11,96,62,440/-, MAINTENANCE CHARGES RECOVERED OF RS .4,32,51,472/-. THE ASSESSING OFFICER WAS OF THE OPINION THAT IT IS IND IRECTLY RENT RECEIVED BY THE LESSOR IN RESPECT OF SOME FACILITIES PROVIDED BY IT TO THE LESSEES AS PER THE AGREEMENT AND OTHER INCOME OF RS.43,59,861/- TOTALI NG TO INCOME OF RS. 166,72,73,773/-. THE ASSESSING OFFICER WAS OF THE O PINION THAT THE ABOVE INCOME WAS TO BE TREATED AS INCOME FROM HOUSE PROPE RTY AND NOT FROM INCOME FROM BUSINESS DESPITE NOTING THAT THE ISSUE HAS BEE N DECIDED IN FAVOUR OF ASSESSEE BY THE HONOURABLE JURISDICTIONAL HIGH COUR T. HE ALSO DISALLOWED A SUM OF RS. 5,97,63,427/- UNDER SECTION 24(B) OF THE ACT. 5. THE ASSESSING OFFICER HAS CONCLUDED AS UNDER :- 5.7 FURTHER, AS REGARDS THE CONTENTION OF THE ASSESS EE THAT THE HON'BLE BOMBAY HIGH COURT HAS TREATED THE RENTAL RECEIPTS AS BUSI NESS INCOME, IT IS STATED THAT THE DECISION OF THE HON'BLE BOMBAY HIGH CO URT HAS NOT BEEN ACCEPTED AND THE DEPARTMENT HAS FILED SLP BEFORE THE HO N'BLE SUPREME M/S. E-CITY PROJECTS CONSTRUCTION PVT. LTD. 3 COURT WHICH IS PENDING. HENCE, TO MAINTAIN A CONSISTE NT STAND TAKEN BY THE DEPARTMENT ON THIS ISSUE, THE RENTAL RECEIPTS ARE TAXED UNDER THE HEAD 'INCOME FROM HOUSE PROPERTY' AND NOT UNDER THE HEAD 'IN COME FROM BUSINESS'. 5.8 IN VIEW OF THE ELABORATE DISCUSSIONS AND JUDICIA L PRONOUNCEMENTS AND RELYING IN THE ASSESSMENT ORDERS FOR A.YS. 2007-08 TO 2014-15, THE INCOME EARNED BY THE ASSESSEE FROM LETTING OUT OF PROPERTY TAX ED UNDER THE HEAD 'INCOME FROM HOUSE PROPERTY' AND NOT UNDER THE HEAD 'IN COME FROM BUSINESS'. ACCORDINGLY, THE RENTAL RECEIPTS ARE TAXED U NDER THE HEAD 'INCOME FROM HOUSE PROPERTY' AND NOT UNDER THE HEAD 'INCOME FROM BUSINESS' WHICH IS WRONGLY CLAIMED BY THE ASSESSEE WITH THE SOLE INT ENTION TO AVOID, LEGITIMATE AND DUE TAX LIABILITY. THIS INCOME OF THE ASSESSEE I S TAXED UNDER THE HEAD INCOME FROM HOUSE PROPERTY AND INCOME FROM OTHER SOU RCES. 5.9 FURTHER IN THE ASSESSMENT ORDER PASSED U/S 143(3 ) FOR A.Y. 2013-14, IT WAS HELD THAT THE LOAN AVAILED FROM HDFC IN RESPECT TO PROPERTY LOCATED IN CHANDIGARH IS FOR THE LEASE/RENTAL RECEIVABLE AND IT C ANNOT BE ALLOWED U/S. 24(B) OF THE IT. ACT. ACCORDINGLY THE ASSESSEE WAS A SKED TO EXPLAIN AS TO WHY THE SAME SHOULD NOT BE DISALLOWED AS IN EARLIER YEAR. IN RESPONSE, THE LD. AR OF THE ASSESSEE HAS STATED THAT THE ASSESSEE COMPANY IS TREATING THE RENTAL INCOME AS THE BUSINESS INCOME AND NOT AS THE INCOME F ROM HOUSE PROPERTY, THE ADJUSTMENT U/S. 24(B) IS NOT ADMITTED. 5.10 THE CONTENTION OF THE ASSESSEE IS FOUND TO BE NO T ACCEPTABLE. AS HAS BEEN HELD IN EARLIER YEARS, THE LOAN IS AVAILED FROM HDFC IS IN RESPECT OF PROPERTY LOCATED IN CHANDIGARH IS FOR THE LEASE/REN TAL RECEIVABLE, HENCE THE ADJUSTMENT ON ACCOUNT OF THIS LOAN IS NOT ALLOWED U/S. 2 4(B) OF THE ACT. FOR THE CURRENT YEAR THE INTEREST PAID IN RESPECT OF CHANDIG ARH PROPERTY IS RS.1,26,85,361/-, THUS THE SAME IS DISALLOWED AS HAS BEEN DONE IN EARLIER YEARS. THUS THE ASSESSEE IS ELIGIBLE FOR DEDUCTION UNDER SECTION 24(B) OF THE ACT AT RS.5,97,63,427/-(7,24,48 , 788-1,26,85,361). 6. AGAINST THE ORDER ASSESSEE APPEAL BEFORE THE LEA RNED CIT(A) . 7. LEARNED CIT(A) DECIDED THE ISSUE IN FAVOUR OF AS SESSEE BY REFERRING TO HONOURABLE JURISDICTIONAL HIGH COURT DECISION IN AS SESSEE'S OWN CASE AS UNDER:- IN ASSESSEE'S OWN CASE FOR AY 2007-08, 2009-10 AND 2010-11, THE SAME ISSUE WAS BOUGHT UP BEFORE THE HON'BLE HIGH COURT, MU MBAI. HON'BLE HIGH COURT VIDE ITS ORDER DATED 18.07.2017 HAS HELD THAT : - 'THE RENTAL INCOME AND THE SERVICES THUS RECEIVED B Y THE ASSESSEE COMPANY AS BUSINESS INCOME DURING THE COURSE OF BUS INESS CARRIED OUT BY THEM OF OPERATING AND RUNNING A MALL AS A COMMER CIAL ACTIVITY. THE FACTS OF THE CASE ARE MUCH SIMILAR TO THE CASE OF C HENNAI PROPERTIES AND INVESTMENTS LIMITED, CHENNAI (REFERRED TO SUPRA). 1 6. WE FIND THAT THE M/S. E-CITY PROJECTS CONSTRUCTION PVT. LTD. 4 APPRECIATION OF EVIDENCE BY THE COMMISSIONER (APPEA LS) AND TRIBUNAL IS NOT PERVERSE AND THE FINDING ARRIVED BY THEM IS PLA USIBLE ONE. 17. IN THE LIGHT OF ABOVE, NO SUBSTANTIAL QUESTION IF LAW ARIS ES. THE APPEAL STAND DISMISSED, HOWEVER, WITH NO ORDER AS TO COSTS.' ASSESSING OFFICER HAS STATED THAT SINCE DECISION OF BO MBAY HIGH COURT HAS NOT BEEN ACCEPTED AND DEPARTMENT HAS FILED SLP BEFORE THE HON'BLE SUPREME COURT WHICH IS PENDING AND TO MAINTAIN CONSISTENT STAND TAKEN BY DEPARTMENT ON THIS ISSUE THE INCOME IS TAXED AS INCOME FROM HOUSE PROPERTY. THIS STAND OF THE ASSESSING OFFICER IS NOT ACCEPTABLE. WHEN THE CASE IS COVERED BY ASSESSEE'S OWN CASE AND THE FACTS OF T HE CASE BEING THE SAME, THE ORDER OF THE JURISDICTIONAL HIGH COURT IS TO BE FO LLOWED. IN THIS YEAR, THE FACTS ARE SAME AS IN EARLIER, YEARS WHICH HAS BEEN DECIDED BY THE HIGHER AUTHORITIES. HENCE, RESPECTFULLY FOLLO WING THE DECISION OF HIGHER AUTHORITIES THE INCOME RECEIVED BY THE APPELLANT FROM THE OPERATING INCOME AND MAINTENANCE CHARGES RECOVERED IS HELD TO BE BUS INESS INCOME. BUSINESS EXPENSES CLAIMED ARE ALSO TO BE ALLOWED AGAINST THE S AME. 8. SIMILARLY HE DECIDED THE OTHER ISSUE IN FAVOUR O F ASSESSEE AS UNDER :- GROUND NO. 3 IS REGARDING DISALLOWANCE OF INTEREST EXPENSES OF RS. 1,26,85,361/-. ASSESSING OFFICER ON THE BASIS OF EAR LIER YEARS HELD THAT THE INTEREST EXPENSE IS NOT ALLOWABLE U/S. 24(B). SINCE, I HAVE ALREADY HELD ABOVE THAT THE RENTAL INCOME OF THE ASSESSEE IS A BUSINESS IN COME, THE INTEREST EXPENSES IS THEREFORE ALLOWABLE AS BUSINESS EXPENSE. THUS, GROUND NO. 3 IS ALLOWED. 9. AGAINST THE ORDER ASSESSEE IS IN APPEAL BEFORE U S. 10. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE RECORDS. LEARNED COUNSEL OF THE ASSESSEE REITERATED THAT THE ISSUE T HAT RENTAL INCOME SHOULD BE ASSESSED AS BUSINESS INCOME IS COVERED IN FAVOUR OF THE ASSESSEE BY THE FOLLOWING DECISIONS. HON'BLE BOMBAY HIGH COURT'S ORDER DATED 18.07.2017 IN ASSESSEE'S OWN CASE FOR AY 2007-08, 2009-10 & 2010-11 [ITA 149/2015 , 323/2015, 1082/2016] HON'BLE BOMBAY HIGH COURT'S ORDER DATED 05.11.2019 IN ASSESSEE'S OWN CASE FOR AY 2008-09 [ITA NO. 1130/2017] HON'BLE MUMBAI TRIBUNAL'S ORDER DATED 28.03.2018 IN ASSESSEE'S OWN CASE FOR AY 2011-12 [1TA NO. 3352/M/2016] HON'BLE MUMBAI TRIBUNAL'S ORDER DATED 30.10.2017 IN ASSESSEE'S OWN CASE FOR AY 2012-13 [ITA NO. 5097/M/2016] M/S. E-CITY PROJECTS CONSTRUCTION PVT. LTD. 5 HON'BLE MUMBAI TRIBUNAL'S ORDER DATED 04.02.2019 IN ASSESSEE'S OWN CASE FOR AY 2013-14 AND 2014-15 [ITA NO. 4988 & 4989/M/2017] 11. RESPECTFULLY FOLLOWING THE AFORESAID PRECEDENCE WE HOLD ORDER OF LEARNED CIT(A). 12. AS REGARDS THE ISSUE OF INTEREST THE SAME IS CO NSEQUENTIAL. MOREOVER ONCE IT IS DECIDED THAT THE ASSESSEES INCOME IS FR OM BUSINESS ITS INTEREST EXPENDITURE HAS TO BE ALLOWED AS BUSINESS EXPENDITU RE. THE LEARNED CIT(A)S ORDER IS HENCE UPHELD. 13. IN THE RESULT THIS APPEAL FILED BY THE REVENUE STADS DISMISSED. ORDER PRONOUNCED UNDER RULE 34(4) OF THE ITAT RULE S BY PLACING THE RESULT ON NOTICE BOARD ON 3.2.2021. SD/- SD/- (PAVANKUMAR GADALE) (SHAMIM YAHYA) JUDICIAL MEMBER ACCOU NTANT MEMBER MUMBAI; DATED : 03/02/2021 COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. BY ORDER, //TRUE COPY// ( ASSISTANT REGISTRAR) PS ITAT, MUMBAI