ITO 6(1)(3), MUMBAI V. INDUSTRIAL ESTATE P. LTD, MUMBAI

ITA 4171/MUM/2009

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 70907 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 1 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-08-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: I
• Next Hearing Date: 28-08-2013
• Assessment Year: 2005-2006
• Appeal Filed On: 07-07-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: O P SINGH
• Assessee Lawyers: VIPUL B JOSHI
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL I BENCH, M UMBAI . . '# '# '# '# , $ $ $ $ % % % % BEFORE SHRI VIJAY PAL RAO, JM, AND SHRI N. K. BILLA IYA, AM /. I.T.A. NO. 4171 /MUM/2009 ( & & & & '& '& '& '& / ASSESSMENT YEAR: 2005-06) /. I.T.A. NO. 4920 /MUM/2009 ( & & & & '& '& '& '& / ASSESSMENT YEAR: 2006-07) /. I.T.A. NO. 4671 /MUM/2010 ( & & & & '& '& '& '& / ASSESSMENT YEAR: 2007-08) INCOME TAX OFFICER- 6(1) (3), MUMBAI / VS. M/S. INDUSTRIAL ESTATES PVT. LTD. ESTATE BUILDING 41, DR. B.A. ROAD, LALBAUG, MUMBAI-4000 12 ( $ /. ) /. PAN/GIR NO. AAACT1324K ( (* / APPELLANT ) : ( +,(* / RESPONDENT ) (* - / APPELLANT BY : SHRI O.P. SINGH +,(* - / RESPONDENT BY : SHRI VIPUL B. JOSHI /$ / DATE OF HEARING : 28 .08. 2013 12' /$ /DATE OF PRONOUNCEMENT : 30.08. 2013 3 3 3 3 / O R D E R PER : N.K. BILLAIYA (AM) THESE THREE SEPARATE APPEALS BY THE REVENUE ARE DIRECTED AGAINST THE THREE SEPARATE ORDERS OF THE CIT(A)-VI, MUMBAI, DATED 06. 07.2009, PERTAINING TO ASSESSMENT YEAR 2005-06, 2006-07 AND 2007-08 RESPEC TIVELY. AS COMMON ISSUES ARE 2 ITA 4171,4920,4671(AY-2005 TO 2008) ITO V/S IND USTRIAL ESTATE PVT. LTD. INVOLVED IN ALL THESE THREE APPEALS THEY WERE HEARD AND DISPOSED OF BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE AND BREVITY. 2. IN ALL THESE THREE APPEALS PERTAINING TO THREE D IFFERENT ASSESSMENT YEARS, THE IMPUGNED ADDITIONS HAVE BEEN MADE UNDER THE FOLLOWI NG HEAD OF INCOME; (A) INCOME FROM HOUSE PROPERTY; (B) INCOME FROM CAPITAL GAINS; (C) INCOME FROM OTHER SOURCES; 3. BRIEFLY STATED THE FACTS OF THE CASE ARE THAT TH E ASSESSEE IS A PRIVATE LIMITED COMPANY ENGAGED IN THE BUSINESS OF MAINTENANCE AND MANAGEMENT OF THE INDUSTRIAL STATE PROPERTIES. THE TRUSTEES OF THE N.M. PETIT CH ARITY FUND ENTERED INTO A LEASE AGREEMENT DATED 14.04.1950, BY WHICH LEASED OUT A P IECE OF LAND ADMEASURING ABOUT 1,02,242 SQ. YARDS SITUATED AT LALBAUG, PAREL, MUMB AI ALONG WITH VARIOUS ESTABLISHMENTS THEREON TO: (I) THE NATIONAL ELECTRICAL INDUSTRIES LTD. (II) THE BOMBAY SILK MILLS LTD. (III) NEW INDIA MOSAIC & MARBLE CO. PVT. LTD. (IV) SHRI CHANDULAL KOTHARI & MANILAL PAREKH REPRE SENTING CALICO DYEING & PRINTING WORKS (V) SHRI M.J. VAIDYA & OTHERS REPRESENTING M/S. AN ANDJI NARANJI & CO. (VI) DR. L.C. JARIWALA (VII) SHRI SAKALCHAND G. SHAH & OTHERS REPRESENTIN G M/S. SAKALCHAND G. SHAH & CO. ALL COLLECTIVELY CALLED THE JOINT LESSEES. THE LE ASE WAS FOR A PERIOD OF 99 YEARS W.E.F. 03.01.1948 TO 02.01.2047 ON THE BASIS OF LEA SE RENT @ RS. 11,666.67 P.M. LATER ON, THE PARTY NO. 6 AND 7 ABOVE TERMINATED TH EMSELVES FROM THE AGREEMENT AND ASSIGNED THEIR RIGHTS IN LEASE TO THE OTHER JOINT L ESSEES AND THE PARTY NO. 1 MERGED INTO VOLTAS LTD. ACCORDINGLY, THE JOINT LESSEES COMPRISE D OF THE FOLLOWING MEMBERS: (I) VOLTAS LIMITED (II) THE BOMBAY SILK MILLS LTD. (III) NEW INDIA MOSAIC MARBLE CO. PVT. LTD. 3 ITA 4171,4920,4671(AY-2005 TO 2008) ITO V/S IND USTRIAL ESTATE PVT. LTD. (IV) CALICO DYEING & PRINTING WORKS (V) M/S. ANANDJI NARANJI & CO. THE AFOREMENTIONED JOINT LESSEES UNDER THE INTER SE AGREEMENT DATED 20.04.1950, ASCERTAINED THEIR RIGHTS, TITLE AND INTEREST IN THE LAND. AS SUCH, THE JOINT LESSEES COLLECTIVELY FORMED AN ASSOCIATION OF PERSONS [THE A.O.P.]. BY VIRTUE OF THIS INTER SE AGREEMENT, THEY FORMED A COMPANY INDUSTRIAL ESTATE S LIMITED WHICH IS THE ASSESSEE IN THE PRESENT CASE WITH THE SOLE PURPOSE OF MANAGEMENT OF THE SAID PIECE OF PLOTS ON BEHALF OF THE JOINT LESSEES. THE JOINT LES SEES GAVE A POWER OF ATTORNEY TO THE ASSESSEE COMPANY BY WHICH THE ASSESSEE WAS AUTHORIZ ED TO COLLECT RENT ON BEHALF OF THE JOINT LESSEES. THE ASSESSEE WAS ALSO AUTHORIZED TO MAKE INVESTMENTS ON BEHALF OF THE JOINT LESSEES. ALL THE TRANSACTIONS DONE BY THE ASS ESSEE ON BEHALF OF THE JOINT LESSEES WERE ROUTED THROUGH THE BANK ACCOUNT OF THE ASSESSE E COMPANY. IT WAS ALSO AGREED BY THE JOINT LESSEES AND THE ASSESSEE COMPANY THAT THE ASSESSEE COMPANY SHALL CHARGE SERVICE CHARGES / MANAGEMENT CHARGES TO THE LESSEES . THESE CHARGES WERE CREDITED BY THE ASSESSEE TO ITS PROFIT AND LOSS ACCOUNT. 4. WHILE SCRUTINIZING THE RETURN OF INCOME FOR THE ASSESSMENT YEAR 2005-06. THE AO OBSERVED THAT, AS PER AIR INFORMATION. IT IS SEE N THAT AN INVESTMENT OF RS. 38,25,000/- IN MUTUAL FUND HAS BEEN MADE IN THE NAM E OF ASSESSEE COMPANY. THE AO FURTHER OBSERVED THAT THESE INVESTMENTS WERE NOT RE FLECTED IN THE BALANCE SHEET OF THE ASSESSEE COMPANY. IT WAS FOUND THAT THE INVESTMENTS HAVE BEEN MADE FROM THE FUNDS AVAILABLE IN THE BANK ACCOUNT WITH PANJAB NATIONAL BANK, WHICH WAS IN THE NAME OF THE ASSESSEE COMPANY. THE AO FURTHER OBSERVED THAT THE ASSESSEE HAS ALSO RECEIVED INCOME FROM OTHER SOURCES, INCOME ON TRANSFER OF TE NANCY RIGHT, SHORT TERM CAPITAL GAINS IN ADDITION TO RENTAL INCOME FROM THE TENANTS . THE AO FOUND THAT THE ASSESSEE HAS SHOWN ONLY THE MANAGEMENT CHARGES AS ITS INCOME AND NONE OF THE INCOME MENTIONED HEREIN ABOVE WERE DECLARED IN ITS RETURN OF INCOME. 4 ITA 4171,4920,4671(AY-2005 TO 2008) ITO V/S IND USTRIAL ESTATE PVT. LTD. 5. THE ASSESSEE WAS ASKED TO EXPLAIN THE SOURCE OF INVESTMENTS, WHY THE RENT HAS NOT BEEN SHOWN AS ITS INCOME THE ASSESSEE WAS ALSO ASKED TO EXPLAIN THE TAXABILITY OF OTHER INCOME LIKE CAPITAL GAINS AND DIVIDENDS DERIV ED BY THE ASSESSEE COMPANY AND WHETHER ANY RETURN OF INCOME IS BEING FILED BY THE JOINT LESSEES AS (AOP). 6. THE ASSESSEE FILED DETAILED REPLY AND EXPLAINED THAT THE RENTAL INCOME IS TO BE TAXED IN THE HANDS OF THE JOINT LESSEES AS PER THE AGREEMENT WITH THEM. IT WAS FURTHER EXPLAINED THAT THE INVESTMENTS HAVE BEEN MADE ON BE HALF OF THE JOINT LESSEES AND THEREFORE THE SAME ARE DEBITED TO THE ACCOUNT OF TH E JOINT LESSEES IN THE BOOKS OF THE ASSESSEE COMPANY AS THE BANK ACCOUNT WAS OPERATED O N BEHALF OF THE JOINT LESSEES, THEREFORE, THE INVESTMENTS HAVE BEEN MADE FROM THE BANK ACCOUNT OF THE ASSESSEE. IT WAS FURTHER EXPLAINED THAT EACH OF THE JOINT LESSEE S ARE FILING THEIR RETURN OF INCOME SEPARATELY. 7. THE AO REJECTED THESE SUBMISSIONS MADE BY THE A SSESSEE ON THE GROUND THAT RETURN OF INCOME OF THE JOINT LESSEES COULD NOT BE VERIFIED. THE AO FURTHER OBSERVED THAT THE ASSESSEE ITSELF IS UTILIZING THE FUNDS NO PART OF THESE FUNDS HAVE BEEN TRANSFERED TO THE JOINT LESSEES. THEREAFTER, THE AO ADDED THE ENTIRE RENTAL INCOME, CAPITAL GAINS AND INVESTMENTS MADE UNDER THE HEAD INCOME FROM OTH ER SOURCES AND COMPLETED THE ASSESSMENT. 8. THE ASSESSEE CARRIED THE MATTER BEFORE THE CIT(A ) AND REITERATED WHAT HAS BEEN SUBMITTED BEFORE THE AO. 9. AFTER CONSIDERING THE FACTS AND SUBMISSIONS OF T HE ASSESSEE THE CIT(A) WAS CONVINCED THAT THE INVESTMENT CANNOT BE TREATED AS INVESTMENT OF THE ASSESSEE, THE ASSESSEE IS ONLY ENTITLED FOR MANAGEMENT CHARGES. T HE ASSESSEE IS NEITHER THE LEGAL NOR 5 ITA 4171,4920,4671(AY-2005 TO 2008) ITO V/S IND USTRIAL ESTATE PVT. LTD. THE BENEFICIAL OWNER OF THE PROPERTY, THEREFORE, IN VESTMENT MADE ON BEHALF OF THE JOINT LESSEES CANNOT BE TAXED IN THE HAND OF THE ASSESSEE . THE CIT(A) ALSO DELETED THE ADDITION MADE UNDER THE HEAD INCOME FROM THE HOUSE PROPERTY. BY OBSERVING THAT THE RENTAL INCOME BELONGS TO THE JOINT LESSEES AND NOT THE ASSESSEE. FOR SIMILAR REASONS THE ADDITIONS MADE UNDER THE HEAD CAPITAL GAINS WERE AL SO DELETED. 10. AGGRIEVED BY THE FINDING OF THE CIT(A) REVENUE IS BEFORE US. 11. THE DR STRONGLY SUPPORTED THE FINDINGS OF THE A SSESSING OFFICER. IT IS THE SAY OF THE DR THAT THE ASSESSEE HAS GROSSLY FAILED IN SUBS TANTIATING ITS CLAIM THAT THE IMPUGNED INCOME BELONGS TO THE JOINT LESSEE. THE DR STRONGLY SUBMITTED THAT NO EVIDENCE HAVE BEEN BROUGHT ON RECORD FOR THESE THREE ASSESSMENT Y EARS THAT THE JOINT LESSEES HAD DECLARED THESE INCOME IN THEIR RETURN OF INCOME. 12. PER CONTRA THE COUNSEL FOR THE ASSESSEE REITERA TED WHAT HAS BEEN SUBMITTED BEFORE THE LOWER AUTHORITIES. IT IS THE SAY OF THE COUNSEL THAT THE ASSESSEE CANNOT BE HELD RESPONSIBLE FOR THE FAILURE ON THE PART OF THE JOINT LESSEES. THE COUNSEL FURTHER POINTED OUT THAT IN SUBSEQUENT ASSESSMENT YEARS I.E . ASSESSMENY YEAR 2008-09 & 2009-10. THE JOINT LESSEES HAVE SHOWN THESE INCOMES BY FILING RETURN IN THE STATUS OF AOP. THE COUNSEL SUPPLIED THE COPIES OF THE RETURN OF INCOME. THE COUNSEL CONCLUDED THAT SINCE THESE INCOME HAVE BEEN TAXED IN THE HAND S OF THE AOP, IN SUBSEQUENT ASSESSMENT YEARS, FOR EARLIER ASSESSMENT YEARS WHIC H ARE UNDER CONSIDERATION, THE ASSESSEE CANNOT BE TAXED FOR THE SAME. 13. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND CA REFULLY PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND THE MATERIAL EVIDENCES BR OUGHT ON RECORD IN THE FORM OF PAPER BOOK. IT IS NOT IN DISPUTE THAT THE ASSESSEE IS MANAGING THE SAID PIECE OF LAND ON 6 ITA 4171,4920,4671(AY-2005 TO 2008) ITO V/S IND USTRIAL ESTATE PVT. LTD. BEHALF OF THE JOINT LESSEES. IT IS ALSO NOT IN DISP UTE THAT THE JOINT LESSEES CAME INTO POSSESSION OF THE SAID PIECE OF LAND BY VIRTUE OF L EASE AGREEMENT WITH THE TRUSTEES OF THE N.M. PETIT CHARITY FUND. IT IS ALSO NOT IN DISP UTE THAT THE ASSESSEE WAS HOLDING A POWER OF ATTORNEY FOR COLLECTING RENT ON BEHALF OF THE JOINT LESSEES. IT IS ALSO NOT IN DISPUTE THAT THE ASSESSEE WAS OPERATING THE BANK AC COUNT BY VIRTUE OF THIS POWER OF ATTORNEY ON BEHALF OF THE JOINT LESSEES. FOR ALL TH E SERVICES PROVIDED BY THE ASSESSEE TO THE JOINT LESSEES, THE ASSESSEE WAS RECEIVING MANAG EMENT CHARGES WHICH HAVE RIGHTLY BEEN DECLARED IN ITS RETURN OF INCOME. WE FIND FOR CE IN THE CONTENTION OF THE COUNSEL THAT THE ASSESSEE CANNOT BE HELD RESPONSIBLE FOR TH E FAILURE OF RETURNING INCOME BY THE JOINT LESSEES. 14. HOWEVER, AT THE SAME TIME WE FIND THAT IN THE ASSESSMENT YEARS 2008-09 IN THE CASE OF THE ASSESSEE WHILE MAKING THE ASSESSMENT U/ S 143(3) OF THE ACT. THE AO HAS MADE THE FOLLOWING OBSERVATIONS AT PARA-4 OF FRESH ORDER. IN THIS CASE, IN THE ASSESSMENT YEARS 2005-06, 2006 -07 & 2007-08 ADDITIONS WERE MADE IN THE HANDS OF THE ASSESSEE CO MPANY AS THE JOINT LESSEES OF INDUSTRIAL ESTATES WAS NOT FILING THEIR RETURNS OF INCOME FOR THESE ASSESSMENT YEARS. HOWEVER, THE JOINT LESSEES OF IND USTRIAL ESTATES HAS FILED ITS RETURN OF INCOME FOR A.Y.2008-09 AND SHOWN THE INVESTMENTS AND OTHER INCOME IN THEIR RETURN. THEREFORE, NO ADDITION ON T HE ISSUES INVOLVED IN THE EARLIER YEARS IS MADE IN THE HANDS OF THE ASSESSEE- COMPANY. 15. A PERUSAL OF THE ABOVE FINDINGS MADE BY THE AO IN ASSESSEES OWN CASE CLEARLY SHOW THAT THE LIABILITY OF FILING THE RETUR N CLEARLY LAID UPON THE JOINT LESSEES. WE ALSO FIND THAT THE JOINT LESSEES HAVE F ILED THE RETURN AS JOINT LESSEES OF INDUSTRIAL ESTATES IN THE STATUS OF AOP FOR ASS ESSMENT YEAR 2008-09 AND 2009-2010. IF THE JOINT LESSEES DID NOT FILE RETUR N FOR ASSESSMENT YEAR 2005-06, 2006-07 & 2007-08, IT WAS FOR THE REVENUE AUTHORITI ES TO EXPLORE OTHER POSSIBLE WAYS AS PER THE PROVISIONS OF LAW TO ASSESS THE INC OME IN THE HANDS OF THE JOINT 7 ITA 4171,4920,4671(AY-2005 TO 2008) ITO V/S IND USTRIAL ESTATE PVT. LTD. LESSEES. BE THAT AS IT MAY, THESE INCOMES CANNOT BE TAXED IN THE HANDS OF THE ASSESSEE BY ANY STRETCH OF IMAGINATION. THE CIT(A) HAS RIGHTLY DELETED THE ADDITION FROM THE HANDS OF THE ASSESSEE AND WE DO N OT FIND ANY REASON TO INTERFERE WITH THE FINDING OF THE CIT(A). THE ORDER OF THE CI T(A) FOR ALL THESE THREE ASSESSMENT YEARS I.E. 2005-06, 2006-07 & 2007-08 AR E CONFIRMED. /5 $ / 6' 16. IN THE RESULT, ALL THESE THREE APPEALS FILED BY THE REVENUE ARE DISMISSED. 3 12' 5 30.08.2013 2 8 ORDER PRONOUNCED ON 30 TH DAY OF AUGUST, 2013. SD/- SD/- ( VIJAY PAL RAO ) ( N. K. BILLAIYA ) / JUDICIAL MEMBER $ / ACCOUNTANT MEMBER MUMBAI: DATED : 30.08.2013 . /. PRAMOD KUMAR, PS 3 3 3 3 +/ +/ +/ +/ 9'/ 9'/ 9'/ 9'/ / COPY OF THE ORDER FORWARDED TO : 1. (* / THE APPELLANT 2. +,(* / THE RESPONDENT 3. : ) ( / THE CIT(A); 4. : / THE CIT CONCERNED; 5. ;8 +/ , , / DR, ITAT, MUMBAI; 6. 8<& = / GUARD FILE 3 3 3 3 / BY ORDER, > >> > / 6 6 6 6 (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI