Atma Mater Agencies (P) Ltd, V. DCIT Co. Circle 1 (1),

ITA 4352/DEL/2007

• Counselvise Citation: 435220114 RSA 2007
• Duration Of Justice: 3 year(s) 9 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-08-2011
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 22-07-2011
• Assessment Year: 2001-2002
• Appeal Filed On: 01-11-2007
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: R S NEGI
• Assessee Lawyers: SUNIL GOEL
• Keywords: Business income; Depreciation
• Section: 32

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH A NEW DELHI) BEFORE SHRI R.P. TOLANI, JUDICIAL MEMBER AND SHRI B.K. HALDAR, ACCOUNTANT MEMBER I.T.A. NO.4352/DEL/2007 ASSESSMENT YEAR : 2001-02 ALMA MATER AGENCIES ITO, (P) LTD., 12-SHIVAJI MARG, CIRCLE-1(1), RANGPURI, NEW DELHI. V. NEW DELHI. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI SUNIL GOEL, C.A. RESPONDENT BY : SHRI R.S. NEGI, SR. DR. ORDER PER B.K. HALDAR, AM: THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDE R OF LD CIT(A) IV, NEW DELHI DATED 20.8.2007 FOR ASSESSMENT YEAR 2001 -02. THE ASSESSEE HAS TAKEN FOLLOWING GROUNDS OF APPEALS:- 1. THE ORDER OF THE LD CIT(A)-IV, AND THE ASSESSMENT MADE BY THE LD DCIT ARE BAD IN LAW, ARBITRARY AND CONTRARY TO THE FACTS OF THE CASE AND THEREFORE, LIABLE TO BE SET ASIDE. 2. THE LD CIT(A) IS WRONG IN DIRECTING THE ASSESSING OFFIC ER TO RE- COMPUTE THE INCOME OF THE ASSESSEE BY TREATING RENT/REC EIPTS OF `.9,00,000/- AND SERVICE CHARGES ETC,. REIMBURSED TO T HE EXTENT OF `.13,80,000/- AS RENT AND TREATING THE WHOLE RECE IPTS BY THE ASSESSEE AS INCOME UNDER THE HEAD INCOME FROM HOUSE ITA NO4352./DEL/2007 2 PROPERTY AS AGAINST UNDER THE HEAD INCOME FROM OTHE R SOURCES AS HELD IN EARLIER YEARS. 3. THAT WITHOUT PREJUDICE TO ABOVE, THE LD CIT(A) OUGH T TO HAVE ALLOWED EXPENSES INCURRED IN CONNECTION WITH PROVISION OF SERVICE INCLUDING DEPRECIATION AS CLAIMED BY THE ASSESSEE COMPAN Y. 4. THAT WITHOUT PREJUDICE TO ABOVE, THE LD CIT(A) AS W ELL AS THE LD ASSESSING OFFICER SHOULD HAVE ALLOWED NORMAL EXPENSES FOR RUNNING OF A COMPANY INCLUDING THAT ON ESTABLISHMENT, AUDIT FEES, FILING FEES ETC. 5. THAT THE LD CIT(A) IS WRONG IN LAW AND ON FACTS OF TH E CASE TO INITIATE PENALTY PROCEEDINGS U/S 271(1)( C) OF THE IN COME TAX ACT, 1961. 6. THE ASSESSEE CRAVES LEAVE TO ADD, AMEND ALTER OR FOREGO ANY OF THE ABOVE GROUNDS OF APPEAL AT ANY TIME HEREAFTER. 2. GROUND NO.1 & 6 TAKEN BY THE APPELLANT ARE GENER AL IN NATURE AND DO NOT REQUIRE ANY ADJUDICATION. 3. GROUND NO.5 IS ON THE ISSUE OF INITIATION OF PENAL TY PROCEEDINGS U/S 2371(1)( C) OF THE ACT, THE SAME IS OUTSIDE THE PUR VIEW OF THE TRIBUNAL IN THE PRESENT APPEAL AND THAT THE SAME IS AL SO NOT ADJUDICATED UPON. IN THE PRESENT APPEAL, THEREFORE, GROUND NO.2, 3 & 4 TAKEN BY THE APPELLANT WILL BE ADJUDICATED UPON. 4. DURING THE RELEVANT ASSESSMENT YEAR, THE ASSESSEE FILED RETURN OF INCOME DECLARING LOSS OF `.22,63,910/-. THE ASSESSEE DISCL OSED AN INCOME FROM RENT/SERVICE CHARGES AMOUNTING TO `.9 LAK HS AND INCOME FROM OTHER SOURCES AMOUNTING TO `.59,155/- AGAINST WHI CH TOTAL EXPENDITURE OF `.30,64,793/- WAS CLAIMED. THE ASSESSING OFFICER, THEREFORE, ASKED THE ASSESSEE TO SHOW CAUSE AS TO WHY THE INCOME ITA NO4352./DEL/2007 3 FROM LETTING OUT SHOULD NOT BE TREATED AS INCOME UND ER THE HEAD INCOME FROM OTHER SOURCES INSTEAD OF BUSINESS INCOME A S CLAIMED BY THE ASSESSEE. THE REPLY OF THE ASSESSEE WAS AS UNDER:- THE COMPANY DURING THE YEAR RECEIVED A SUM OF `.9 L AKHS TOWARDS RENT AND SERVICE CHARGES FROM ITS DIRECTOR FOR USE OF FULLY FURNISHED AIR CONDITIONED SPACE ALONG WITH FURNITURE AND FIXTURES, EQUIPMENTS, MACHINERY AND RECREATION FACILITIES, WATE R AND ELECTRICITY, COMPLETE GENERATOR, REASONABLE USE OF TE LEPHONES. ANOTHER `.13.80 LAKHS WAS RECOVERED FROM THE DIRECTOR FOR THE SERVICES/FACILITIES PROVIDED ON ACCOUNT OF SECURITY SERV ICES. THE ASSESSEE HAS FURTHER TOOK THE ARGUMENT THAT IT HAS BEEN T REATING AND SHOWING RENT/SERVICE CHARGES AS BUSINESS INCOME SINCE T HE BEGINNING BASED ON FACTS OF THE CASE AND VARIOUS JUDGM ENT INCLUDING THAT BY THE HON'BLE SUPREME COURT IN THE CASE OF CIT V. NATIONAL STORAGE P. LTD. (1967) 66 ITR 596. THE SERVICES PROVIDED BY THE COMPANY WERE MORE IN NAT URE OF PROVIDING FULLY FURNISHED ACCOMMODATION ALONG WIT H VARIOUS ANCILLARY AND SUPPORT SERVICES AND FACILITIES SIMILAR TO THAT PROVIDED BY A 5 STARE DELUXE HOTEL OR A BUSINESS CENTR E CUM- HOTEL. THUS, THE ASSESSEE COMPANY HAS RIGHTLY TREATED A ND SHOWN SUCH INCOME UNDER THE HEAD INCOME FROM BUSINESS O R PROFESSION. 5. THE ASSESSEE FURTHER RELIED ON THE ORDERS OF LD CIT(A ) FOR ASSESSMENT YEAR 1997-98 IN ASSESSEES OWN CASE WHERE THE LD CIT(A) HELD THAT INCOME WAS CHARGEABLE UNDER THE HEAD INCO ME FROM OTHER SOURCES AND ALSO DIRECTED TO ALLOW THE ADMISSIBLE EXPEN SES AND DEDUCTIONS INCLUDING DEPRECIATION AND ALSO DIRECTED T O ALLOW EXPENSES ITA NO4352./DEL/2007 4 ON ACTUAL BASIS. IT WAS FURTHER CONTENDED THAT WHETHE R THE INCOME WAS ASSESSED UNDER THE HEAD INCOME FROM OTHER SOURCES OR INCO ME UNDER THE HEAD BUSINESS, THE NET EFFECT WOULD BE THE SAME. 6. THE ASSESSING OFFICER THEREAFTER ISSUED SHOW CAUSE NOTIC E DATED 1.3.2004 AND AFTER CONSIDERING THE REPLY OF THE ASSESSEE VIDE ITS LETTER DATED 15.3.2004 HELD AS UNDER:- 1. THE COMPANY DID NOT UNDERTAKE THE ACTIVITY RELATED TO THE MAIN OBJECTS OF THE COMPANY. THE ASSESSEE IS ALSO NOT ENGAGED I N SYSTEMATIC ACTIVITY OF LETTING OUT THE SPACE FOR USE OF THE PERSON AS IN THE CASE OF HOTEL OR A GUEST HOUSE. EVEN IN EARL IER YEARS, THE ASSESSEE COULD NOT SHOW THAT IT HAS STARTED ANY BUSINE SS ACTIVITY IN THE NATURE OF PROVIDING ACCOMMODATION T O OTHERS ON A PAYMENT BASIS OR ON A REGULAR AND SYSTEMATIC MANNER. THE RECEIPT, THEREFORE, CANNOT BE CONSIDERED UNDER THE H EAD BUSINESS INCOME. 2. THE ASSESSEE IS ALSO NOT PROVIDING FACILITY IN THE NATURE OF BUSINESS CENTRE-CUM-HOTEL AS SUCH FACILITIES ARE NOT PRO VIDED TO ANY PERSON AGAINST PAYMENT. 3. THE FACTS OF THE RELEVANT PREVIOUS YEAR ARE DIFFERENT AS COMPARED TO THE FACTS FOR ASSESSMENT YEAR 1997-98. IN ASSESSMENT YE AR 1997-98, THE ASSESSEE HAD PROVIDED THE SO-CALLED ACCOMMODATION FOR THE PURPOSE OF RESIDENCE OF DIRECTO RS ONLY. IT WAS NOT ACCEPTED THAT HE WAS DOING ANY ACTIVITY OTHER THAN PROVIDING RESIDENCE TO THE TWO DIRECTORS WHO WERE NON RESIDENTS. THE SERVICES PROVIDED WERE IN THE NATURE OF PERSONAL SE RVICES TO THE DIRECTORS AND IT HAD NOTHING TO DO WITH THE ACTI VITY OF THE COMPANY. THE EMPLOYEES WERE PROVIDING PERSONAL SERVICE S TO THE DIRECTORS. THUS, THE EXPENDITURE INCURRED ON TH E STAFF IS NOT ITA NO4352./DEL/2007 5 THE EXPENDITURE OF THE COMPANY. THE ASSESSEE ALSO DID NO T GIVE ANY BASIS FOR REIMBURSEMENT OF EXPENSES BY THE DIRECTOR S. THUS, NO SUCH EXPENDITURE CAN BE ALLOWED IN THE HANDS OF TH E COMPANY. 4. AS THE PARTIES ARE ENTERING INTO AGREEMENT ARE THE DI RECTORS OF THE ASSESSEE COMPANY AND ASSESSEE COMPANY ITSELF, THERE IS NO SANCTITY OF SUCH AN AGREEMENT AND THEREFORE IT CANNO T BE SAID THAT THE SERVICES WERE PROVIDED UNDER A CONTRACTUAL O BLIGATION. 5. THE COMPANY HAS TWO DIRECTORS WHO ARE NON RESIDENTS AND THEY ARE RELATED TO EACH OTHER BEING HUSBAND & WIFE. THE RENT OF `.9 LAKHS HAS BEEN CHARGED ARBITRARILY AND FURTHER WITH T HE PURPOSE OF PROVING THAT THE ASSESSEE COMPANY WAS CARRYING ON SOME ACTIVITIES AGAINST WHICH IT COULD CLAIM EXPENSES. 6. THE DEPRECIATION U/S 57 OF THE ACT CANNOT BE ALLOWED AS UNDER THE PROVISIONS OF SECTION 57(II). DEPRECIATION AS PER SECTION 32 AND ONLY BE ALLOWED IN A CASE OF HIRING OF MACHINERY , PLANT, FURNITURE AND OF BUILDING, IN A PARTICULAR CASE WHER E THE BUILDING IS INSEPARABLE FROM SUCH ASSETS. HOWEVER, AS THERE WAS NO RECEIPTS AND EXPENDITURE RELATING TO THE ASSESSEE COMPAN Y, THERE IS NO QUESTION OF ALLOWING DEPRECIATION. 7. THE ASSESSING OFFICER, THEREFORE, DISREGARDED THE CLA IM OF THE ASSESSEE WITH REFERENCE TO THE IMPUGNED PROPERTY AND ASSE SSED INCOME UNDER THE HEAD OTHER SOURCES AT `.59,155/-. A GGRIEVED, THE ASSESSEE FILED APPEAL BEFORE THE LD CIT(A). 8. BEFORE THE LD CIT(A), IT WAS SUBMITTED BY THE ASSESSEE THAT DURING THE YEAR IT HAD RECEIVED A SUM OF `.9 LAKHS TO WARDS RENT AND SERVICE CHARGES FROM ITS DIRECTORS FOR USING THE FULLY F URNISHED AIR- CONDITIONED SPACE COMPRISING PART OF THE BUILDING AT 12-SHIVAJI MARG, ITA NO4352./DEL/2007 6 RANGPURI, NEW DELHI ALONG WITH VARIOUS FACILITIES AVA ILABLE AT THE PREMISE WHICH INCLUDES FURNITURE, FIXTURE, EQUIPMENTS, MACHINERY, RECREATION FACILITY, WATER & ELECTRICITY AT ALL TIM ES, COMPLETE GENERATOR BACK UP AND REASONABLE USE OF TELEPHONES AS AND WHEN REQUIRED BY THE DIRECTORS AND HIS FAMILY MEMBERS. FURTHER THE ASSESSEE R ECEIVED `.13.80 LAKHS AND `.1,50,000/- PER MONTH FROM THE DI RECTORS FOR THE SERVICES/FACILITIES PROVIDED ON ACCOUNT OF SECURITY SERV ICES FOR GENERAL UP-KEEP OF THE BUILDING AND OTHER PLACES, MAINTENANC E OF LAWS AND LAND SCAPING, REPAIRS AND MAINTENANCE OF THE BUILDING , VEHICLES, INSURANCE OF BUILDING AND STAFF SERVICES. IN ADDITION TO THE ABOVE CHARGES A SUM OF `.9,50,520/- WAS ALSO RECOVERED FROM THE DIRECTORS. ALL THESE WERE IN ADDITION TO INTEREST AND SECURITY D EPOSIT OF `.1.25 CRORES AND ADVANCING RENT OF `.20 LAKHS RECEIVED FROM THE DIRECTORS. IN ADDITION IT RECEIVED AN AMOUNT OF `.59,155/- FROM D ELHI VIDYUT BOARD WHICH WAS PAID TO THEM IN AN EARLIER YEAR UNDER PROT EST AGAINST SOME CLAIMS MADE IN THE NAME OF THE COMPANY. 9. DURING THE YEAR, THE ASSESSEE COMPANY HAD ALSO INCURR ED VARIOUS EXPENDITURE AS UNDER:- 1. PERSONAL/ADMINISTRATIVE EXPENSES `.6,50,174/- 2. FINANCE LEGAL AND PERSONAL EXPENDITURE. `.1,15, 527/- 3. DEPRECIATION ON ASSETS OWNED AND USED BY THE `.23,57,886/- COMPANY. OUT OF THE ABOVE REDUCING `.13.80 LAKH S AND `.9,60,520/- RECOVERED FROM THE DIRECTORS AN D AND AMOUNT OF `.8,66,178/- WAS CLAIMED WAS EXPENDITURE OF THE COMPANY IN THE P&L A/C ALONG WITH THE DEPRECIATION ON VARIOUS ASSETS AMOUNTING TO `.21,98,621/- 10. IT WAS CONTENDED THAT THE ASSESSEE WAS USING THE PROPE RTY WITH ALL ITS AMENITIES IN A SYSTEMATIC MANNER. THE SERVICES PR OVIDED WERE ITA NO4352./DEL/2007 7 MERE IN NATURE OF PROVIDING FULLY FURNISHED ACCOMMO DATION ALONG WITH ANCILLARY SUPPORT SERVICES WHICH HAS SIMILAR TO THAT PRO VIDED BY 5-STATE HOTEL OR BUSINESS CENTRE CUM-HOTEL. THUS, INCOME FROM THE SAME WAS ASSESSABLE AS INCOME UNDER THE HEAD BUSINESS AND PROFESSION I NCOME. THE EXPENSES INCURRED AND DEBITED TO P&L A/C WERE ON ACCOUNT OF PROVIDING THE SERVICES FOR WHICH THE COMPANY HAD RECE IVED RENT/SERVICE CHARGES. THE EXPENSES WERE ALSO NECESSARY TO MAINTAIN THE STATUS OF THE COMPANY AND WERE INCURRED FULLY AND EXCLUSIVELY FOR THE PURPOSE OF EARNING INCOME THAT WAS REQUIRED TO BE TAXED UNDER THE HEAD INCOME FROM BUSINESS OR PROFESSION OR INCOME FR OM OTHER SOURCES. THE ASSESSEE BEING A PRIVATE LIMITED COMPANY IT IS IMMATERIAL WHETHER THE BUSINESS CARRIED OUT IS UNDER THE MAIN OBJE CTS OR UNDER THE OTHER OBJECTS OF THE COMPANY. NO SEPARATE CERTIF ICATE OF COMMENCEMENT OF BUSINESS IS REQUIRED. THE EXPENSE DEBITE D TO P&L A/C WERE NOT PERSONAL EXPENSES OF THE DIRECTORS BUT THE EXPENSES INCURRED BY THE COMPANY IS UNDER CONTRACTUAL OBLIGAT ION. WHEN COMPROMISING THE ABOVE STAND, THE ASSESSEE COMPANY HAD OF FERED THAT THE INCOME MAY BE TAXED AS INCOME FROM OTHER SO URCES. THE COMPANY WAS THUS OF THE VIEW THAT THE PROVISION OF SE RVICES WAS INSEPARABLE FROM LETTING OUT THE PREMISES AND THUS IT W AS ENTITLED TO DEPRECIATION AS PER PROVISIONS OF SECTION 56(2)(III) OF THE ACT. THUS, IT WAS CONTENDED THAT THE INCOME BE ASSESSED UNDER THE HEA D BUSINESS AND PROFESSION OR IN THE ALTERNATIVE UNDER THE HEAD I NCOME FROM OTHER SOURCES WITH THE RIDER THAT ALL EXPENSES INCLUDING DEPR ECIATION BE ALLOWED AS HELD BY THE LD CIT(A) IN EARLIER YEARS. T HE LD CIT(A) CALLED OUT THE FACTS OBTAIN IN THE PRESENT CASE, THE ASSESSEE COM PANY PURCHASED LAND AND CONSTRUCTED A HOUSE ON THE SAID LAN D AND PROVIDED VARIOUS AMENITIES WHICH INCLUDED AIR CONDITIONER, GEN ERATOR BACK UP, OFFICE EQUIPMENTS AND OTHER MACHINERIES FOR THE PURPO SE OF RECREATION ETC. THE SAID PROPERTY WAS LET OUT TO THE TWO DIRECT ORS OF THE COMPANY ITA NO4352./DEL/2007 8 WHO ARE HUSBAND AND WIFE. THESE TWO DIRECTORS ARE AL SO SOLE SHARE HOLDERS OF THE COMPANY VIDE AGREEMENT DATED 5.4.1996 . THE ASSESSEE COMPANY LET OUT THE PROPERTY OWNED BY IT TO THE TWO DIRECTORS FOR A MONTHLY CONSIDERATION OF `.50,000/- PER MONTH AS PER AGREEMENT THE DIRECTOR HAD AGREED TO MAKE A REFUNDABLE INTEREST FR EE DEPOSIT OF `.1.25 CRORES TO THE COMPANY. THE MONTHLY FEES WAS PA YABLE WHETHER OR NOT, THE PROPERTY WAS USED BY THE DIRECTORS AND HIS FAMILY. THE DIRECTORS WERE ALSO ENTITLED TO USE THE VARIOUS FACILIT IES AVAILABLE IN THE PREMISES INCLUDING FURNITURE, FIXTURE, EQUIPMENTS, MAC HINERIES AND RECREATION FACILITIES. THE ABOVE FEES WAS INCLUSIVE OF ELECTRICITY AND WATER CHARGES WITH FULL GENERATOR BACK UP AT ALL TIM ES AND REASONABLE USE OF TELEPHONES. IT WAS THE DUTY OF THE COMPANY TO E NSURE THAT THE ENTIRE BUILDING IS WELL MAINTAINED. THE COMPANY WAS ALSO TO PROVIDE SECURITY SERVICES, GENERAL UP-KEEP OF THE BUILDING AND OTHER FACILITIES PROVIDED INCLUDING LAND SCAPING, LAWNS, REPAIRS AND MA INTENANCE OF BUILDING, VEHICLES, INSURANCE, WAGES TO EMPLOYEES ALONG WITH STAFF WELFARE EXPENSES ETC. FOR THE ABOVE SERVICES, THE COMP ANY WAS ENTITLED TO REIMBURSE WITH AN OVERALL LIMIT OF `.75 ,000/- PER MONTH ON AN ANNUAL AVERAGE BASIS IRRESPECTIVE OF THE PERIOD OF USE. THE TENURE OF THIS AGREEMENT WAS INITIALLY FOR A PERIOD OF ONE Y EAR WITH AN OBJECT TO TERMINATE THE SAME AFTER GIVING TWO MONTHS NOTICE BY EITHER OF THE TWO PARTIES. THERE WAS A CLAUSE IN THE AGREEMENT WHEREIN THE ASSESSEE HAD THE RIGHT TO ALLOW USE OF THE PROPERTY BY ANY OT HER ENTITY OR PERSON FOR SUCH TERMS AND USE AS IT MAY DECIDE IN ITS ABSOLUTE DISCRETION. A COPY OF THIS AGREEMENT WAS FILED DURING THE COURSE OF APPELLATE PROCEEDINGS AND IT WAS CONTENDED THAT THE MONTHLY FEE WAS INCREASED TO `.75,000/- P.M. AND SERVICE CHARGES WERE ENHANCED TO `.1,15,000/- P.M. FOR THE RELEVANT PERIOD. IT WAS CONTENDED THAT NO SEPARATE AGREEMENT WAS EXECUTED AND THE OLD AGREEMENT WAS CONT INUED. ITA NO4352./DEL/2007 9 11. ON THE BASIS OF ABOVE FACTS, IT WAS CONTENDED THAT EVEN THOUGH NO INCOME WAS RECEIVED IN THE YEAR UNDER CONSIDERATIO N FROM EXPLOITATION OF THE SAID PROPERTY OTHER THAN AS PER T HE AGREEMENT ENTERED INTO WITH THE DIRECTORS. IN THE EARLIER YEAR S, THERE WAS SOME INCOME RECEIVED ON ACCOUNT OF SERVICE PROVIDED TO SOM E PRIVATE PARTIES. THUS, THE ASSESSING OFFICER WAS NOT RIGHT IN HIS O BSERVATION THAT BUSINESS OF THE ASSESSEE DID NOT COMMENCE. AS ONE OF THE OBJECTS OF THE COMPANY WAS TO PURCHASE OR OTHERWISE ACQUIRE LA ND, DEVELOP IT AND EXPLOIT FARMS, GARDENS, HORTICULTURE, AGRICULTURE , ANIMAL HUSBANDRY, DAIRY, POULTRY AND ALLIED FARMING LINES AN D TO CARRY ON THE BUSINESS OF FARMING AND AERIAL SPRAYING. IT WAS SUBMITTED THAT HAVING A FARM HOUSE AND EXPLOIT THE SAME FOR THE PURPOSE OF BUSI NESS WAS PERMISSIBLE. 12. THE LD CIT(A) HELD THAT EVEN THOUGH THE COMPANY IS FORMED WITH THE OBJECT OF PURCHASING LAND, CONSTRUCTING BUILDING ON IT AND LET OUT THE SAME, THE SAME WOULD NOT CONSTITUTE BUSINESS. THE INC OME IN SUCH CASE WAS GENERATED OUT OF OWNERSHIP OF PROPERTY AND NO T OUT OF ANY VENTURE OR BUSINESS ACTIVITY. IN THE PRESENT CASE, THE MAIN INTENTION OF THE ASSESSEE WAS TO CONSTRUCT THE PROPERTY FOR PROVIDING RESIDENTIAL ACCOMMODATION TO THE DIRECTORS. THIS IS CLEAR FROM THE RECEIPT OF INTEREST BEARING REFUNDABLE DEPOSIT OF `.1.20 CRORES A S WELL AS ADVANCE RENT OF `.20 LAKHS FROM THE DIRECTORS, THE ASSESSEE NOT ONLY PROVIDED OTHER FACILITIES BUT ALSO ACQUIRED VEHICLES AND ALLOW THE DIRECTORS TO USE THE SAME. NO EVIDENCE WAS FORTH COMING FROM THE ASSESSEE IN SUPPORT OF ITS CLAIM THAT THE PARTICULAR PROPERTY AND ATTACH ED ASSETS WERE EXPLOITED BY THE ASSESSEE COMMERCIALLY. 13. EVEN IF THE ASSESSEE DISCLOSED SOME ISOLATED INCOME FRO M OTHER PERSONS IN EARLIER YEARS, THE SAME WOULD NOT CONSTITUTE ACTIVITY ON THE ITA NO4352./DEL/2007 10 BASIS OF WHICH THE INCOME OF THE ASSESSEE COULD BE ASSESSED A S BUSINESS INCOME. THE LD CIT(A), THEREFORE, ISSUED A SHOW CAUSE NOTICE AS TO WHY THE INCOME OF `.75,000/- AND `.1,15,000/- PER MONTH SHOULD NOT BE ASSESSED AS INCOME FROM HOUSE PROPERTY BECAUSE SUCH RECEIPTS WERE ATTRIBUTABLE TO OWNERSHIP RIGHTS OF THE ASSESSEE ONL Y AND NOT FOR ANY COMMERCIAL EXPLOITATION ASSETS. THE ASSESSEE VIDE ITS L ETTER DATED 20.8.2007 REITERATED THAT IT WAS A CASE OF INSEPARABL E LETTING OUT OF BUILDING AND ASSETS AND IT SHOULD BE ASSESSED UNDER THE HE AD INCOME FROM OTHER SOURCES AND NOT UNDER THE HEAD HOUSE PROPER TY. RELIANCE WAS PLACED ON THE FOLLOWING CASE LAWS:- 1. SULTAN BROTHERS PVT. LTD. 51 ITR 353 (SC). 2. KANAK INVESTMENT PVT. LTD. V. CIT 95 ITR 419 (CAL.). 14. THE LD CIT(A) THEREAFTER DISCUSSED THE IMPUGNED ISSU ES IN PAGES 6 TO 10 OF HIS ORDER WHEREIN HE HELD THAT THE ASSESSEE E XPLOITED THE BUILDING AS OWNER AND NOT AS BUSINESSMAN AND THE RESULTA NT RENTAL INCOME WAS ACCORDINGLY ASSESSABLE UNDER THE HEAD INCOME FROM HOUSE PROPERTY AND NOT UNDER ANY OTHER HEAD. HE, THEREFOR E, DIRECTED THE ASSESSING OFFICER TO RE-COMPUTE THE INCOME UNDER THE HE AD HOUSE PROPERTY BY TAKING THE RENTAL INCOME OF `.9 LAKHS + `.13.80 LAKHS. WHILE ARRIVING AT THE ABOVE DECISION, THE LD CIT(A) RELIED ON THE FOLLOWING CASE LAWS:- 1. 42 ITR 49 (SC). 2. CHENNAI PROPERTIES & INVESTMENT LTD, 266 ITR 685 (MAD .). 3. CIT V. TV SUNDARAM IYANGAR & SONS LTD. 271 ITR 79 (MA D.). 4. CIT V. VEERBJHADRA INDUSTRIES 240 ITR 5 (AP). 5. CIT V. PHABIOMAL & SONS. 158 ITR 733 (AP). 6. M/S SHAMBU INVESTMNT PVT. LTD. 263 ITR 143 & 249 ITR 47 (SC). 7. M/S BHAGYANAGAR CONSTRUCTION PVT. LTD. ITAT HYDERABAD IN ITA NO4352./DEL/2007 11 I.T.A. NO.747 & 748/HYD/2004 DATED 25.,1.2005. 8. HOTEL ARTI DELUXE PVT. LTD. V. ACIT 96 ITD 147 ( THIRD MEMBER), ITAT LUCKNOW. 15. AGGRIEVED, THE ASSESSEE HAS FILED APPEAL BEFORE THE TRIBUNAL. 16. WE HAVE HEARD THE PARTIES AND PERUSED THE RECORD. WE HAVE ALSO GONE THROUGH THE CASE LAWS RELIED ON BY BOTH THE PART IES. WE FIND THAT THE ORIGINAL ASSESSMENT ORDER FOR ASSESSMENT YEAR 1997-98 IN ASSESSEES OWN CASE AND THE APPELLATE ORDER OF THE LD CIT (A) THEREON WERE SET ASIDE BY THE TRIBUNAL AND THE MATTER WAS REM ANDED BACK TO THE FILE OF THE ASSESSING OFFICER FOR PASSING A FRESH ORDE R. FROM SUCH FRESH ASSESSMENT ORDER PASSED BY THE ASSESSING OFFICER, THE MA TER MOVED TO THE TRIBUNAL. THE HON'BLE TRIBUNAL HAS PASSED A DETAILED ORDER VIDE THEIR ORDER DATED 30 TH SEPTEMBER, 2010 IN I.T.A. NO. 2152/DEL/2009. ALL THE PLEAS RAISED BY THE ASSESSEE ARE SQUARELY COVERED BY THE SAID DECISION OF THE HON'BLE TRIBUNAL AS SUCH THE ISSUES RAISED BY THE ASSESSEE ARE SQUARELY COVERED AGAINST IT BY THIS ORDER OF THE TRIBUNAL. FOR THE REASONS MENTIONED THEREIN, WE DISMISS THE GROUND NO.2, 3 & 4 RAISED BY THE ASSESSEE. 17. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS DI SMISSED. 18. ORDER PRONOUNCED IN THE OPEN COURT ON THE 26 TH DAY OF AUGUST,2011. SD/- SD/- (R.P.TOLANI) (B.K. HALD AR) JUDICIAL MEMBER ACCOUNTANT MEMBER DT.26.8.2011. HMS ITA NO4352./DEL/2007 12 COPY FORWARDED TO:- 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT (A)-, NEW DELHI. 5. THE DR, ITAT, LOKNAYAK BHAWAN, KHAN MARKET, NEW DEL HI. TRUE COPY. BY ORDER (ITAT, NEW DELHI). DATE OF HEARING 22.7.2011 DATE OF DICTATION 25.8.2011 DATE OF ORDER SIGNED BY THE HON'BLE MEMBER. .8.2011 DATE OF ORDER SENT TO THE CONCERNED BENCH .8.2011 ITA NO4352./DEL/2007 13