CAMORON FINANCE AND INVESTMENTS, MUMBAI V. ASST CIT 21(1), MUMBAI

ITA 4227/MUM/2014

• Counselvise Citation: [2016] 121 COUNSELVISE.COM (IT) 3324 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 7 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-01-2016
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2010-2011
• Appeal Filed On: 12-06-2014
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: HARESH G BUCH
• Keywords: Business income; Business expenditure; Capital expenditure
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH C , MUMBAI BEFORE SHRI AMIT SHUKLA , JUDICIAL MEMBER AND SHRI RAJESH KUMAR, ACCOUNTANT MEMBER ITA NO. 4227/MUM/2014 : (ASSESSMENT YEAR : 20 10 - 11 ) M/S. CAMORON FINANCE AND INVESTMENTS, 139 - 140B SHIV, CROSSING OF SAHAR ROAD AND W.E. HIGHWAY, VILE PARLE (E), MUMBAI 400 057 (APPELLANT) PAN : AAAFC5210A VS ACIT - 21(1) MUMBAI (RESPONDENT) ITA NO. 4583/MUM/2014 : (ASSESSMENT YEAR : 20 10 - 11 ) ACIT - 21(1) MUMBAI ( APPELLANT ) M/S. CAMORON FINANCE AND INVESTMENTS, 139 - 140B SHIV, CROSSING OF SAHAR ROAD AND W.E. HIGHWAY, VILE PARLE (E), MUMBAI 400 057 ( RESPONDENT ) PAN : AAAFC5210A ASSESSEE BY : SHRI HARESH G. BUCH & MS. MONIKA AGARWAL REVENUE BY : SHRI RAJESH OJHA (DR) DATE OF HEARING : 12/01/2016 DATE OF PRONOUNCEMENT : 20 /01/2016 O R D E R PER AMIT SHUKLA, JM : THE AFORESAID CROSS APPEALS HAVE BEEN FILED BY THE ASSESSEE AS WELL AS BY THE REVENUE AGAINST THE IMPUGNED ORDER DT. 23.4.2014 , PASSED BY THE CIT(A) - 32, MUMBAI FOR THE QUANTUM OF ASSESSMENT PASSED U/S 143(3) FOR THE A.Y 2010 - 11. 2 M/S. CAMORON FINANCE & INVESTMENTS ITA NOS. 4227 & 4583/MUM/2014 2. WE WILL FIRST TAKE UP THE ASSESSEES APPEAL VIDE WHICH THE FOLLOWING GROUNDS HAVE BEEN RAISED : 1. THE COMMISSIONER OF INCOME - TAX ( APPEALS) - 32 ('CIT ( A)') ERRED IN CONFIRMING THE ACTION OF THE ASSISTANT COMMISSIONER OF INCOME - TAX - 21(1) ('A.O') IN TREATING INCOME RECEIVED IN RESPECT OF THE AMENITIES AGREEMENT WITH THE LESSEE OF THE PREMISES UNDER THE HEAD 'INCOME FROM OTHER SOURCES' INSTEAD OF 'INCOME FROM HOUSE PROPERTY', AS CLAIMED BY THE APPELLANT. 2. IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT (A) OUGHT TO HAVE HELD THAT SUCH INCOME RECEIVED UNDER THE AMENITIES AGREEMENT WAS ASSESSABLE UNDER THE HEAD 'INCOME FROM HOUSE PROPERTY' ONLY, ALONG WITH THE RENTAL INCOME RECEIVED UNDER THE LEASE AGREEMENT WITH THE LESSEE FOR THE SAME PREMISES. 3. THE APPELLANT THEREFORE, PRAYS THAT THE SAID INCOME RECEIVED UNDER AMENITIES AGREEMENT BE ASSESSED AS INCOME FROM HOUSE PROPERTY. 3. AT T HE OUTSET, THE LD. COUNSEL POINTED OUT THAT A DEFECT NOTICE WAS ISSUED THAT THE APPEAL OF THE ASSESSEE IS BARRED BY LIMITATION. HOWEVER, THE SAID NOTICE WAS MIS - CONCEIVED AS, IN THE MEMO OF APPEAL, THE DATE OF COMMUNICATION OF THE CIT(A) ORDER DT. 23.4.20 14 WAS MENTIONED AS 9.4.2013 WHICH WAS BY MISTAKE AND LATER ON , IT WAS RECTIFIED AND REVISED FORM NO. 36 WAS FILED , WHEREIN THE DATE OF COMMUNICATION HAS BEEN CORRECTLY MENTIONED AS 2.5.2014. THUS, THE APPEAL FILED ON JUNE, 2014 IS WELL WITHIN THE STIPULA TE D TIME LIMIT. ON VERIFICATION, WE FIND MERITS IN THE CONTENTION OF THE LD. COUNSEL AND NO ADVERSE INFERENCE IS DRAWN. 4. ON MERITS, THE LD. COUNSEL SUBMITTED THAT THE ISSUE S INVOLVED IN BOTH THE GROUNDS ARE COVERED AGAINST THE ASSESSEE BY THE ORDER OF THE TRIBUNAL FOR THE A.Y 2009 - 10, WHEREIN ON SIMILAR FACTS THIS ISSUE HAS BEEN DECIDED AGAINST THE ASSESSEE. HE SUBMITTED THAT THE ONLY ISSUE INVOLVED HERE IS , WHETHER THE 3 M/S. CAMORON FINANCE & INVESTMENTS ITA NOS. 4227 & 4583/MUM/2014 INCO ME RECEIVED BY WAY OF COMPENSATION FOR AMENITIES RECEIVED BY THE ASSESSEE IS TO BE TAXED UNDER THE HEAD INCOME FROM HOUSE PROPERTY OR INCOME FROM OTHER SOURCES. THE ASSESSEE HAS OFFERED IT AS INCOME FROM HOUSE PROPERTY , WHEREAS THE ASSESSING OFFICER HAS TREATED IT AS INCOME FROM OTHER SOURCES . THE ASSESSEE HAD SHOWN GROSS RENT OF RS. 14,68,63,122/ - AS INCOME FROM LEASE AND FROM AMENITIES CHARGES ON THE LETTING OUT ITS PROPERTY. IT HAD DEVELOPED A PROPERTY IN VILE PARLE (EAST), MUMBAI COMPRISING O F 6 FLOORS OF OFFICE SPACE AND HAD ENTERED INTO TWO SEPARATE AGREEMENTS , ONE BEING INDENTURE OF LEASE AND OTHER BEING AMENITIES AGREEMENT WITH THE LESSEE, HSBC BANK. AS PER THE AMENITIES AGREEMENT, MONTHLY CHARGES OF RS.53,16,700/ - FOR EACH OF THE 36 M ONTHS WAS TO BE RECEIVED BY THE ASSESSEE . THE ASSESSEE HAD NOT BIFURCATED THE RENTAL INCOME AND THE RECEIPTS FROM AMENITIES CHARGES AS SEPARATE SOURCE, BUT HAD TREATED THE ENTIRE INCOME UNDER THE HEAD INCOME FROM HOUSE PROPERTY. THE ASSESSING OFFICER HE LD THAT THE AMENITIES CHARGES RECEIVED WOULD BE TAXED AS INCOME FROM OTHER SOURCES . BEFORE THE LD. CIT(A) THE ASSESSEE HAD MADE A VERY DETAILED SUBMISSION RELYING UPON THE VARIOUS DECISIONS INCLUDING THAT OF THE HONBLE SUPREME COURT IN THE CASE OF CI T V. SHAMBHU INVESTMENT (P) LTD. REPORTED IN 263 ITR 143 (SC) AND THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT V. J.K. INVESTORS LTD. REPORTED I N (2012) 211 TAXMAN 383 (BOM) . HOWEVER, CIT(A) FOLLOWING THE APPELLATE ORDER FOR THE A.Y 2009 - 10 HELD THAT THE AMENITIES CHARGES RECEIVED AS PER THE AMENITIES AGREEMENT WOULD BE TAXED AS INCOME FROM OTHER SOURCES. IN THE A.Y 2009 - 10, THE TRIBUNAL HAS ALSO UPHELD THE STAND OF THE REVENUE THAT THE SAID RECEIPT IS TO BE TAXED UNDER THE HEAD INCOME FROM OTHER SOURCES. 5. T HE LD. COUNSEL FOR THE ASSESSEE, HOWEVER, SUBMITTED THAT THE TRIBUNAL HAS NOT PROPERLY APPRECIATED THE VARIOUS DECISIONS AS WAS REFERRED 4 M/S. CAMORON FINANCE & INVESTMENTS ITA NOS. 4227 & 4583/MUM/2014 AND RELIED UPON, ESPECIALLY HONBLE SUPREME COURT DECISION IN THE CASE OF CIT V. SHAMBHU INVESTMENT (P) LTD. (SUPRA) AND HONBLE BOMBAY HIGH COURT DECISION IN THE CASE OF CIT V. J.K. INVESTORS LTD. ( SUPRA ) , WHEREIN THE HONBLE SUPREME COURT AND HONBLE HIGH COURT HA VE HELD THAT THE DECISIVE TEST TO BE APPLIED IN SUCH CASES IS THAT, WHETHER THE SERVICE AGREEM ENT IS DEPENDENT ON RENT AGREEMENT OR NOT. THEREFORE, THE DECISION SHOULD BE TAKEN IN VIEW OF THE PRINCIPLES LAID DOWN BY THE COURT IN THESE TWO CASES , SANS THE DECISION ARRIVED AT BY THE TRIBUNAL IN ASSESSEES OWN CASE. 6. ON THE OTHER HAND, THE LD. DR SUBMITTED THAT THIS ISSUE IS SQUARELY COVERED BY THE DECISION OF THE TRIBUNAL WHICH IS BASED ON SAME AGREEMENT AND ON THE SAME FACTS, THEREFORE, THE SAME DECISION SHOULD BE FOLLOWED IN THIS YEAR ALSO. 7. AFTER CONSIDERING THE RIVAL CONTENTIONS AND ON PERUSAL OF THE IMPUGNED ORDER, WE FIND THAT THE ONLY ISSUE INVOLVED QUA GROUND NO. 1 IS , WHETHER THE RECEIPTS FROM AMENITIES AGREEMENT FROM HSBC BANK IS TO BE ASSESSED AS INCOME FROM OTHER SOURCES OR AS INCOME FROM HOUSE PROP ERTY . AS ADMITTED BY THE LD. COUNSEL , THIS ISSUE HAD COME UP FOR CONSIDERATION BEFORE THE TRIBUNAL IN ITA NOS. 7497/MUM/2012 AND 170/MUM/2013 FOR THE A.Y 2009 - 10, WHEREIN THE TRIBUNAL VIDE ORDER DT. 29.5.2015 HAS DECIDED THIS ISSUE AFTER CONSIDERING THE DECISIONS RELIED UPON BY THE LD. COUNSEL IN THE FOLLOWING MANNER : 5. PER CONTRA, THE LD. DR STRONGLY SUPPORTED THE ORDERS OF THE REVENUE AUTHORITIES. AFTER GIVING A THOUGHTFUL CONSIDERATION TO THE RIVAL SUBMISSIONS, WE HAVE CAREFULLY PERUSED THE ORDERS OF THE AUTHORITIES BELOW. IT IS NOT IN DISPUTE THAT THE ASSESSEE HAS ENTERED INTO TWO SEPARATE AGREEMENTS, ONE FOR LEASE RENTAL AND THE OTHER FOR AMENITIES. ON GOING THROUGH THE AMENITIES AGREEMENT, THE ONLY AMENITY TO BE PROVIDED BY THE LESSOR TO THE LESS EE WAS 5 M/S. CAMORON FINANCE & INVESTMENTS ITA NOS. 4227 & 4583/MUM/2014 IN RESPECT OF STRUCTURAL REPAIRS TO THE BUILDING LET OUT AND TO PAY MUNICIPAL AND PROPERTY TAXES IN RESPECT OF THE LET OUT PROPERTY. WE FAIL TO UNDERSTAND HOW THESE CAN BE TERMED AS AMENITIES IN RESPECT OF THE LETTING OUT PROPERTY. EVEN IF THE PROPE RTY IS NOT LET OUT, THE ASSESSEE HAS TO INCUR EXPENDITURE TOWARDS REPAIRS AND MAINTENANCE OF THE SAID PROPERTY AND ALSO TO PAY MUNICIPAL TAXES. IT APPEARS THAT BY SEPARATELY CHARGING IN THE GUISE OF AMENITIES CHARGES, THE ASSESSEE WANTED TO REDUCE THE LIAB ILITY TO PROPERTY TAX WHICH IS BASED ON THE RENTAL INCOME OF THE PROPERTY. THE CASES RELIED UPON BY THE LD. COUNSEL ARE TOTALLY MISPLACED AND NOT MATCHING THE FACTS OF THE CASE IN HAND. CONSIDERING THE FACT IN TOTALITY, WE DO NOT FIND ANY ERROR IN TREATING THE AMENITY CHARGES UNDER THE HEAD INCOME FROM OTHER SOURCES. GROUND NO. 1 IS ACCORDINGLY DISMISSED. SINCE SIMILAR FACTS ARE PERMEATING IN THIS YEAR ALSO , ARISING OUT OF THE SAME AGREEMENT, THEREFORE, NO DIFFERENT VIEW CAN BE TAKEN AND FOLLOWING THE R ULE OF CONSISTENCY AND JUDICIAL PRECEDENT, WE DECIDE THIS ISSUE AGAINST THE ASSESSEE BY HOLDING THAT THE AMENITIES CHARGES RECEIVED BY THE ASSESSEE IS TO BE ASSESSED UNDER THE HEAD INCOME FROM OTHER SOURCES. ACCORDINGLY, GROUND NO. 1 RAISED BY THE ASSES SEE IS TREATED AS DISMISSED. 8. AS REGARDS GROUND NO. 2, WHEREIN THE ASSESSEE HAS RAISED THE ALTERNATIVE PLEA THAT THE MUNICIPAL TAXES PAID SHOULD BE ALLOWED AGAINST INCOME FROM OTHER SOURCES INSTEAD OF INCOME FROM HOUSE PROPERTY, IT HAS BEEN AGAIN AD MITTED BY BOTH THE PARTIES THAT THIS ISSUE TOO HAS BEEN DECIDED AGAINST THE ASSESSEE BY THE TRIBUNAL VIDE SAME ORDER. THE RELEVANT FINDING OF THE TRIBUNAL IN PARAGRAPHS 6 & 7 ARE REPRODUCED HEREUNDER : 6. GROUND NO. 2 IS AN ALTERNATE PLEA BY WHICH THE A SSESSEE HAS CLAIMED THAT THE AMENITIES CHARGES RECEIVED BY IT SHOULD BE TREATED AS ADVANCE. IT IS THE CLAIM OF THE ASSESSEE THAT AMENITY CHARGES SHOULD BE TREATED AS ADVANCE, AS IT RUNS THROUGH THE PERIOD OF LEASE. THEREFORE FOR THE YEAR UNDER CONSIDERATIO N, THE AMENITY CHARGES SHOULD BE TREATED AS ADVANCE. 7. WE DO NOT SUBSCRIBE TO THIS CLAIM OF THE LD. COUNSEL. THE AMENITY CHARGES HAVE BEEN RECEIVED BY THE ASSESSEE AS PER THE AGREEMENT AND THE 6 M/S. CAMORON FINANCE & INVESTMENTS ITA NOS. 4227 & 4583/MUM/2014 SAME HAS TO BE TAXED UNDER THE HEAD INCOME FROM OTHER SOURCES AS HELD HEREINABOVE. THE ALTERNATE CLAIM OF THE ASSESSEE IS ACCORDINGLY DISMISSED. ACCORDINGLY, IN THIS YEAR ALSO , BEING SIMILAR GROUND RAISED BY THE ASSESSEE THE SAME IS TREATED AS DISMISSED. 9. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS DIS MISSED. 10. NOW, WE TAKE UP THE REVENUES APPEAL VIDE WHICH THE FOLLOWING GROUNDS HAVE BEEN RAISED : 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE L D. CIT(A) HAS ERRED IN ALLOWING MUNICIPAL TAXES AGAINST 'INCOME FROM OTHER SOURCES' U/S. 57(III) INSTEAD OF INCOME FROM HOUSE PROPERTY IGNORING THAT THE MUNICIPAL TAXES ARE PAID IN RESPECT OF HOUSE PROPERTY AND THUS ARE DIRECTLY RELATED TO THE HOUSE PROPERTY ON WHICH INCOME IS EARNED. 2. ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE AND IN LAW, THE L D. CIT(A) HAS ERRED IN IGNORING THAT THE MUNICIPAL TAXES ARE TO BE DEDUCTED FROM 'INCOME FROM HOUSE PROPERTY' U/S. 23 AND NOT FROM 'OTHER SOURCES' AND HENCE NOT COVERED U/S. 57(III) OF THE 1. T. ACT. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE L D. C I T(A) HAS ERRE D IN NOT CONSIDERING THAT THE ASSESSEE HAD SHOWN INCOME FROM SPACE UTILIZATION OF THEATER PROPERTY BUT NOT FROM CONDUCTING OF CINEMA BUSINESS AND THAT THE EXPENSES CLAIMED DOES NOT RELATE TO THE ATER BUSINESS. 11. AS REGARDS GROUND NOS. 1 & 2, IT HAS BEEN ADMITTED BY BOTH THE PARTIES THAT THE SAME IS COVERED IN FAVOUR OF THE DEPARTMENT BY THE TRIBUNAL ORDER FOR A.Y 2009 - 10 ( SUPRA ), WHEREBY THE TRIBUNAL HAS DECIDED THIS ISSUE IN PARA 13 AFTER OBSERVING AND HOLDING AS UNDER : 1 3. WE HAVE GIVEN A THOUGHTFUL CONSIDERATION TO THE RIVAL SUBMISSION AND HAVE CAREFULLY PERUSED THE ORDERS OF THE AUTHORITIES BELOW. AS DISCUSSED ELSEWHERE, WE HAVE HELD THAT THE AMENITIES CHARGES HAVE TO BE TAXED UNDER T HE HEAD OF INCOME FROM OTHER SOURCES'. SECTION 57(III) SHOWS THAT ANY 7 M/S. CAMORON FINANCE & INVESTMENTS ITA NOS. 4227 & 4583/MUM/2014 OTHER EXPENDITURE NOT BEEN IN THE NATURE OF CAPITAL EXPENDITURE LEAD OUT OF EXPANDED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF MAKING OR EARNING INCOME WHICH IS TAXED UNDER THE HEAD IN COME FROM OTHER SOURCES'. IN OUR CONSIDERED OPINION, PAYMENT OF MUNICIPAL TAXES CANNOT BE SAID TO BE L ET OUT OR EXPANDED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF EARNING AMENITY CHARGES, AS THESE MUNICIPAL TAXES ARE DIRECTLY RELATED TO THE LETTING OUT OF THE PROPERTY , THE RENTAL INCOME FROM WHICH IS TAXED IS UNDER THE HEAD INCOME FROM HOUSE PROPERTY . WE, THEREFORE , FIND THAT THE FINDING OF THE L D. CIT(A), IN ALLOWING THE MUNICIPAL TAXES DEDUC T ABLE AS ERRONEOUS. WE SET ASIDE THE FINDINGS OF THE L D.CIT(A) AND CONFIRM THAT OF THE A.O. GROUND NOS. 1 AND 2 ARE ACCORDINGLY ALLOWED. THUS, CONSISTENT WITH THE VIEW TAKEN BY THE TRIBUNAL IN THE ASSESSEES OWN CASE FOR THE EARLIER YEARS, WE HOLD THAT THE MUNICIPAL TAXES CANNOT BE ALLOWED FROM INCOME FROM OTHER SOU RCES. ACCORDINGLY, GROUND NOS. 1 & 2 RAISED BY THE DEPARTMENT STANDS ALLOWED. 12. AS REGARDS GROUND NO. 3 RELATING TO ALLOWING OF CERTAIN BUSINESS EXPENSES, AGAIN IT HAS BEEN ADMITTED THAT THE SAID ISSUE HAD COME UP FOR CONSIDERATION BEFORE THE TRIBUNAL IN A.Y 2009 - 10, WHEREIN THIS MATTER HAS BEEN RESTORED BACK TO THE FILE OF THE ASSESSING OFFICER TO BE DECIDED AFRESH. THE ASSESSEE HAS CLAIMED VARIOUS EXPENSES UNDER THE HEAD ADMINISTRATIVE EXPENSES WHICH HAS BEEN CLAIMED OUT OF THE INCOME RECEIVED FROM PROVIDING SPACE AND FACILITIES FOR HOSTING FUNCTIONS FOR HSBC BANK. THE ASSESSING OFFICER HELD THAT THE ASSESSEE HAD RECEIVED HIRE CHARGES FROM CINEMA HALL WHICH CANNOT BE TREATED AS BUSINESS INCOME, THEREFORE, SUCH AN EXPENDITURE CANNOT BE ALLOWED. ON THIS ISSUE, WE FIND THAT THE TRIBUNAL HAS SET ASIDE THIS ISSUE TO THE FILE OF THE ASSESSING OFFICER WITH CERTAIN DIRECTIONS AS GIVEN IN PARA 17, WHICH FOR THE SAKE OF READY REFERENCE IS REPRODUCED HEREINBELOW. 17. WE HAVE CAREFULLY PERUSED THE DOCUMENTARY EVIDENCES BROUGHT ON RECORD BEFORE US AND REFERRED TO. IN OUR CONSIDERED OPINION, THERE APPEARS TO BE CONFLICT IN THESE DOCUMENTARY EVIDENCES, THEREFORE, IN THE INTEREST OF JUSTICE, WE RESTORE THIS ISSUE TO THE FIL E OF THE A.O. THE A.O. IS DIRECTED TO 8 M/S. CAMORON FINANCE & INVESTMENTS ITA NOS. 4227 & 4583/MUM/2014 VERIFY WHETHER THE CINEMA THEATRE WAS F IT FOR USE AFTER CONSIDERING THE REPORT FROM THE OFFICE OF COMMISSIONER OF POLICE, MUMBAI AS BROUGHT ON RECORD BY THE L D. AR. THE A.O. IS DIRECTED TO DECIDE THE ISSUE AFRESH AFTER GIVING REASONABLE AND FAIR OPPORTUNITY TO THE ASSESSEE. THUS, CONSISTENT WITH THE VIEW TAKEN IN THE EARLIER YEAR, WE ALSO DIRECT THE ASSESSING OFFICER TO DECIDE THIS ISSUE AFRESH IN LINE WITH THE DIRECTIONS GIVEN BY THE TRIBUNAL IN THE EARLIER YEAR AFTE R GIVING REASONABLE OPPORTUNITY TO THE ASSESSEE. THUS, GROUND NO. 3 IS TREATED AS ALLOWED FOR STATISTICAL PURPOSE. 13. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS DISMISSED , WHEREAS THE APPEAL OF THE REVENUE IS TREATED AS PARTLY ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT ON 20 TH JANUARY, 2016. SD/ - SD/ - ( RAJESH KUMAR ) ACCOUNTANT MEMBER (AMIT SHUKLA) JUDICIAL MEMBER MUMBAI, DATE : 20 TH JANUARY, 2016 COPY TO : 1) THE APPELLANT S 2) THE RESPONDENT S 3) THE CIT(A) - 32 , MUMBAI 4) THE ACIT - 21(1) , MUMBAI 5) THE D.R, C BENCH, MUMBAI 6) GUARD FILE BY ORDER DY./ASSTT. REGISTRAR I.T.A.T, MUMBAI *SSL*