BAKUL INVESTMENT P. LTD, MUMBAI V. ITO WD 2(1)(1), MUMBAI

ITA 4512/MUM/2011

• Counselvise Citation: [2015] 134 COUNSELVISE.COM (IT) 2238 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 5 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-12-2015
• Appeal Filed By: Assessee
• Bench Allotted: B
• Next Hearing Date: 18-05-2015
• Assessment Year: 2001-2002
• Appeal Filed On: 06-06-2011
• Court: TRIBUNAL
• Department Lawyers: SUMIT KUMAR
• Assessee Lawyers: SURESH KOTHARI
• Keywords: Business income; Opportunity of being heard; Principle of natural justice

Judgement Text

IN THE INCO ME TAX APPELLATE TRIBUNAL B BENCH, MUMBAI BEFORE SHRI D. KARUNAKARA RAO, ACCOUNTANT MEMBER AND SHRI AMARJIT SINGH, JUDICIAL MEMBER I.T.A. NO.4512/M/2011 (ASSESSMENT YEAR: 2001 - 2002 ) I.T.A. NO.4513/M/2011 (ASSESSMENT YEAR: 2002 - 2003 ) I.T.A. NO.4514/M/2011 (ASSESSMENT YEAR: 2003 - 2004 ) I.T.A. NO.4515/M/2011 (ASSESSMENT YEAR: 2004 - 2005 ) I.T.A. NO.4373/M/2011 (ASSESSMENT YEAR: 2005 - 2006 ) I.T.A. NO.4837/M/2011 (ASSESSMENT YEAR: 2006 - 2007 ) I.T.A. NO.5866/M/2011 (ASSESSMENT YE AR: 2007 - 2008 ) I.T.A. NO.2224/M/2012 (ASSESSMENT YEAR: 2008 - 2009 ) I.T.A. NO.7357/M/2012 (ASSESSMENT YEAR: 2009 - 2010 ) I.T.A. NO.2048/M/2014 (ASSESSMENT YEAR: 2010 - 2011 ) BAKUL INVESTMENTS PRIVATE LIMITED, 63, BOMBAY SAMACHAR MARG, FORT, MUMBAI - 400 001. / VS. INCOME TAX OFFICER, WARD 2(1)(1), AAYAKAR BHAVAN, MUMBAI - 400 020. ./ PAN : AAACB2438C ( / APPELLANT) .. ( / RESPONDENT ) ITA NO.6002/M/2011 (ASSESSMENT YEAR: 2007 - 2008 ) ITA NO.2098/M/2012 (ASSESSMENT YEAR: 2008 - 2009 ) ITA NO.7258/M/2012 (ASSESSMENT YEAR: 2009 - 2010 ) ITA NO.2264/M/2014 (ASSESSMENT YEAR: 2010 - 2011 ) INCOME TAX OFFICER, WARD 2(1)(1), AAYAKAR BHAVAN, MUMBAI - 400 020. / VS. BAKUL INVESTMENTS PRIVATE LIMITED, 63, BOMBAY SAMACHAR MARG, FORT, MUMBAI - 400 001. ./ PAN : AAACB2438C ( / APPELLANT) .. ( / RESPONDENT ) / ASSESSEE BY : SHRI KIRIT KAMDAR & MR. SURESH KOTHARI / REVENUE BY : SHRI SUMIT KUMAR, DR / DATE OF HEARING : 26.11.2015 / DATE OF PRONOUNCEMENT : 02 .12.2015 / O R D E R PER BENCH : THERE ARE 14 APPEALS UNDER CONSIDERATION. OUT OF THESE APPEALS, 4 APPEALS ARE FILED BY THE REVENUE AND REST 10 APPEALS ARE FILED BY THE ASSESSEE. THE APPEALS 2 FOR THE AY 2007 - 08 TO 2010 - 11 ARE THE CROSS APPEALS. SINCE, THE ISSUES RAISED IN ALL THESE APPEALS ARE CONN ECTED AS WELL AS IDENTICAL, THEREFORE, FOR THE SAKE OF CONVENIENCE, THEY ARE CLUBBED, HEARD TOGETHER AND DISPOSED OF IN THIS CONSOLIDATED ORDER. APPEAL WISE ADJUDICATION IS GIVEN IN THE FOLLOWING PARAGRAPHS OF THIS ORDER. 2. THE CORE ISSUE RAISED BY THE R EVENUE AS WELL AS THE ASSESSEE IN ALL THEIR RESPECTIVE APPEALS RELATES TO THE CHARGEABILITY OF THE INCOME EARNED FROM THE LEASED PROPERTIES FOR SUB - LETTING AND ALSO THE INCOME EARNED OUT OF THE LEASED FURNITURE AND FIXTURES UNDER THE HEAD INCOME FROM PROF ITS AND GAINS FROM BUSINESS OR PROFESSION OR INCOME FROM HOUSE PROPERTY. FURTHER, ANOTHER ISSUE IS ALSO RAISED RELATING TO THE TAXABILITY OF INCOME EARNED OUT THE FIXED DEPOSITS (FDS) FROM THE BANK. APART FROM OTHER DISALLOWANCE RELATED ISSUES, ASSESSEE ALSO RAISED GROUNDS RELATING TO THE LEVYING OF INTEREST U/S 234D OF THE AC T WHEN THE SAID PROVISIONS ARE INAPPLICABLE TO THE AY 2001 - 02; 2002 - 03 AND 2003 - 04. GROUNDS RAISED BY THE REVENUE RELATE TO THE CONSIDERATION OF PENAL INTEREST CLAUSES OF THE RENTAL DEED FOR THE PURPOSE OF COMPUTING THE ALV OF THE PROPERTIES. 3. AT THE OUTSET, LD COUNSEL FOR THE ASSESSEE BROUGHT OUR ATTENTION TO THE COPY OF THE MEMORANDUM OF ASSOCIATION (MOA) AND READ OUT THE FOLLOWING CORE OBJECTIVE OF THE COMPANY AND THE SAME READS AS UNDER: (1) TO PURCHASE FOR INVESTMENT LAND AND HOUSE AND OTH ER PROPERTIES OF ANY TENURE AND ANY INTEREST THEREIN AND TO CREATE AND SELL FREEHOLD AND LEASEHOLD GROUND RENTS AND TO MAKE ADVANCES UPON THE SECURITY OF LAND OR HOUSE OR OTHER PROPERTY OR ANY INTEREST THEREIN AND GENERALLY TO SELL, LEASE, EXCHANGE, OR OTH ERWISE LAND AND HOUSE PROPERTY AND ANY OTHER PROPERTY WHETHER MOVEABLE OR IMMOVABLE; 4. EXPLAINING THE CORE OBJECTIVE OF THE COMPANY, LD COUNSEL FOR THE ASSESSEE DEMONSTRATED THAT THE CORE BUSINESS ACTIVITY OF THE ASSESSEE IS TO TAKE PROPERTIES ON LEASE AND EARN LEASE INCOME OUT OF THE EXPLOITATION OF SUCH PROPERTIES. RELYING ON THE ABOVE MANDATES, ASSESSEE TOOK COUPLE OF PROPERTIES ON LEASE AND LEASED OUT THE SAME TO VARIOUS COMPANIES AND EARNED LEASE INCOME. FURTHER, ASSESSEE PURCHASED FURNITURE AND F IXTURES AND EARNED LEASE INCOME ON THE SAME TOO. THE SAID INCOME WAS REFLECTED IN THE BOOKS OF ACCOUNT OF THE ASSESSEE AS BUSINESS INCOME. IN THIS REGARD, ASSESSING OFFICER AND THE CIT (A) HELD THAT THE SAID INCOME IS REQUIRED TO BE TAXED UNDER THE HEA D INCOME FROM HOUSE PROPERTY. THEREFORE, THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 3 5. DURING THE PROCEEDINGS BEFORE US, RELYING ON THE RECENTLY PRONOUNCED JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF CHENNAI PROPERTIES AND INVESTMENTS LTD V S. CIT [2015] 373 ITR 673 (SC), DATED 9 TH APRIL, 2015, LD COUNSEL FOR THE ASSESSEE SUBMITTED THAT WHEN THE COMPANY IS INCORPORATED FOR THE PURPOSE OF EARNING BUSINESS INCOME OUT OF THE PROPERTIES , THE SAME WOULD BE TAXABLE UNDER THE HEAD PROFITS AND GAINS FROM THE BUSINESS OR PROFESSION AND NOT UNDER THE HEAD INCOME FROM THE HOUSE PROPERTY. HE FURTHER SUBMITTED THAT THE HONBLE SUPREME COURT REVERSED THE JUDGMENT OF THE HONBLE HIGH COURT IN THE SAID CASE. FURTHER, LD COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE SAID JUDGMENT BEING PRONOUNCED RECENTLY WAS NOT AVAILABLE TO THE AUTHORITIES BELOW AT THE RELEVANT POINT OF TIME. IN THESE CIRCUMSTANCES, LD COUNSEL FOR THE ASSESSEE PLEADED FOR REMAN DING THE FIRST ISSUE IE THE PROPER HEAD OF INCOME FOR TAXING THE INCOME EARNED FROM LEAVE AND LICENSE FEES, WHICH IS RAISED IN ALL THE AYS UNDER CONSIDERATION, TO THE FILE OF THE AO FOR APPLYING THE SAID JUDGMENT OF THE HONBLE SUPREME COURT (SUPRA) TO THE FACTS OF THE PRESENT CASE. FURTHER, E XPLAINING THE SAME REASONING, LD COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE THIRD ISSUE , WHICH RELATES TO THE PROPER HEAD OF INCOME FOR TAXING THE INCOME EARNED FROM PURE LEASING TO PTI CREDIT RISK CONSULTANCY PRIVAT E LIMITED, RAISED IN THE ASSESSEES APPEAL S FOR THE AYS 2005 - 06 TO 2008 - 2009 SHOULD ALSO BE REMANDED TO THE FILE OF THE AO FOR COORDINATED ADJUDICATION OF THE ISSUE IN THE LIGHT OF THE RATIO LAID DOWN BY THE APEX COURT IN THE ABOVE MENTIONED JUDGMENT IN TH E CASE OF PROPERTIES AND INVESTMENTS LTD (SUPRA). THE ONLY DIFFERENCE, ON FACTS, BETWEEN THE FIRST AND THE THIRD ISSUE RELATES TO EARNING OF RENTAL / LEASE INCOME OUT OF LEASED FURNITURE / HOME APPLIANCES ETC. , TO PTI CREDIT RISK CONSULTANCY SERVICES PVT LTD. ASSESSEE PROVIDED THE ABOVE FURNITURE AT FLAT C OF MADHU KUNJ, WHICH BELONGS TO A LESSEE , WHO IS ALSO NOT A OWNER. 6. AFTER HEARING BOTH THE PARTIES AND ON PERUSAL OF THE ORDERS OF THE REVENUE AUTHORITIES AS WELL AS THE CITED PRECEDENTS AS WELL AS THE RELEVANT MATERIAL PLACED BEFORE US. ON HEARING BOTH THE PARTIES AND THE ARGUMENTS PUT FORTH BY BOTH THE LD REPRESENTATIVES ON BOTH THE ABOVE MENTIONED ISSUES (FIRST AND THIRD ISSUES) IN THE ASSESSEES APPEALS FOR THE AYS UNDER CONSIDERATIO N , WE ARE OF THE OPINION THAT THE FIRST AND THE THIRD ISSUES RELATING TO THE CORRECT HEAD OF INCOME SHOULD BE REMANDED TO THE FILE OF THE AO TO DECIDE THEM AFRESH IN THE LIGHT OF THE ABOVE 4 MENTIONED JUDGMENT OF THE APEX COURT (SUPRA) . WE ORDER ACCORDINGLY. AO SHALL GRANT A REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE AS PER THE SET PRINCIPLES OF NATURAL JUSTICE. ACCOR DINGLY, RELEVANT GROUNDS RAISED IN THE ASSESSEES APPEALS ARE ALLOWED FOR STATISTICAL PURPOSES. 7. REFERRING TO SECOND ISSUE RELATIN G TO THE PROPER HEAD OF INCOME FOR TAXING THE INTEREST INCOME EARNED FROM THE FDS KEPT WITH THE BANKS, LD COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE SAME IS NOT PRESSED . HOWEVER, IT IS THE PRAYER OF THE LD COUNSEL FOR THE ASSESSEE THAT THE INTEREST INCOME INCLUDES AN INTEREST EARNED FROM THE TAX FREE BONDS AND THE SAME IS EXEMPTED U/S 10(15) OF THE ACT. ASSESSEE WANTS RELIEF ON THIS ISSUE. AFTER HEARING LD REPRESENTA TIVES OF BOTH THE PARTIES, WE DIRECT THE AO TO GRANT RELIEF TO THE ASSESSEE AFTER EXAMINING THE EXEMPT NATURE OF THE SAID INTEREST INCOME UNDER THE PROVISIONS OF SECTION 10(15) OF THE ACT. THUS, THE SECOND ISSUE RAISED IN THE AYS 2001 - 02 TO 2004 - 05; 2006 - 07 AND 2008 - 09 IS PARTLY ALLOWED. 8. REFERRING TO FOURTH ISSUE RELATING TO THE DISALLOWANCE OF EXPENSES , LD COUNSEL FOR THE ASSESSEE DEMONSTRATED THAT IT RELATES TO THE DISALLOWANCE OF EXPENSES, WHICH IS CONSEQUENTIAL IN NATURE TO THE FINDING OF THE AO O N THE PROPER HEAD OF INCOME WHICH IS THE SUBJECT MATTER OF FIRST AND THIRD ISSUES . CONSIDERING THE CONSEQUENTIAL NATURE OF THE PRESENT ISSUE WITH THE OUTCOME OF THE ABOVE DISCUSSED ISSUES , THE SAME IS REMANDED TO THE FILE OF THE AO WITH IDENTICAL DIRECTIO NS AS MENTIONED ABOVE. ACCORDINGLY, FOURTH ISSUE IS ALLOWED FOR STATISTICAL PURPOSES. 9. REFERRING TO FIFTH ISSUE WHICH RELATES TO THE APPLICABILITY OF THE AMENDED PROVISIONS OF SECTION 234D OF THE ACT (IE INTEREST ON EXCESS REFUNDS), LD COUNSEL FOR THE ASSESSEE SUBMITTED THAT THIS ISSUE IS REQUIRED TO BE ADJUDICATED IN TH E LIGHT OF THE ITAT, SPECIAL BENCH DECISION IN THE CASE OF ITO V/S. EKTA PROMOTERS (P) LTD. REPORTED IN [(2008) 305 ITR (AT)1] , WHER EIN IT WAS HELD THAT SINCE SECTION 234D WAS INTRODUCED WITH EFFECT FROM 1 ST JUNE, 2003 THE SAID PROVISION WOULD NOT APPLY ................... WHERE THE ASSESSMENTS ARE FOR THE PERIOD PRIOR TO 1ST JUNE 2003 . HE FURTHER MENTIONED THAT THE HONBLE BOMBAY HI GH COURT IN THE CASE OF CIT VS. BAJAJ HINDUSTAN LTD IN INCOME TAX APPEAL NO.198 OF 2009 HAS REITERATED THE SAID RATIO LAID DOWN BY THE ITAT, SPECIAL BENCH (SUPRA). WE HAVE HEARD BOTH THE PARTIES ON THIS 5 ISSUE AND PERUSED THE ORDERS OF THE REVENUE AUTHORIT IES AS WELL AS THE CITED JUDGMENT OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF BAJAJ HINDUSTAN LTD (SUPRA) AND THE DECISION OF THE ITAT, SPECIAL BENCH IN THE CASE OF EKTA PROMOTERS (P) LTD (SUPRA). AFTER HEARING THE LD REPR ESENTATIVES OF BOTH THE PARTIE S AND ON PERUSAL OF THE CITED PRECEDENTS, WE FIND THAT THE SAID SECTION 234D, RELATES TO THE EXCESS REFUND, COME INTO STATUTE BY THE FINANCE ACT W.E.F 1.6.2003. THE SAID AMENDMENT IS OF PROSPECTIVE IN NATURE AND NOT APPLICABLE TO THE AYS 2001 - 02 TO 2003 - 0 4. IT IS SO HELD BY THE ABOVE CITED JUDGMENT OF THE HONBLE BOMBAY HIGH COURT (SUPRA). CONSIDERING THE SAME, WE FIND, THE ASSESSEE SHOULD GET RELIEF ON THIS ISSUE AND ACCORDINGLY, THE FIFTH ISSUE RAISED IN ALL THE THREE AYS 2001 - 02 TO 2003 - 04 IS ALLOWED IN FAVOUR OF THE ASSESSEE. 10. IN THE RESULT, ALL THE TEN APPEALS FILED BY THE ASSESSEE ARE PARTLY ALLOWED FOR STATISTICAL PURPOSES. II ITA NO.6002/M/2011 (AY 2007 - 08) (BY REVENUE) ITA NO.2098/M/2012 (AY 2008 - 09) (BY REVENUE) ITA NO.7258/M/2012 (AY 2009 - 10) (BY REVENUE) ITA NO.2264/M/2014 (AY 2010 - 11) (BY REVENUE) 11. THESE FOUR APPEALS ARE FILED BY THE REVENUE AND THE ISSUES RAISED IN THESE APPEALS RELATES IN ONE FORM OR OTHER TO THE ISSUE OF CONSIDERATION OF PENAL CLAUSES OF THE RENTAL DEED F OR COMPUTING THE ALV OF THE PROPERTIES FOR WHICH THE ASSESSEE IS A DEEMED OWNER FOR THE PURPOSE OF SECTION 22 OF THE ACT. BEFORE US, LD REPRESENTATIVES OF BOTH THE PARTIES SUBMITTED THAT THIS ISSUE AGAIN RELATES TO THE FIRST ISSUE RAISED BY THE ASSESSEE IN THEIR APPEALS IE PROPER HEAD OF INCOME FOR TAXING THE INCOME FROM LEAVE AND LICENSE FEES. CONSIDERING OUR DECISION ON THE SAID FIRST ISSUE RAISED BY THE ASSESSEE IN THEIR APPEALS, WHICH IS ADJUDICATED IN THE ABOVE PARAGRAPHS OF THIS ORDER, WHEREIN THE SAID FIRST ISSUE IS REMANDED TO THE FILE OF THE AO, THE PRESENT ISSUE INVOLVED IN ALL THE INSTANT APPEALS SHOULD ALSO BE REMANDED TO THE FILE OF THE AO FOR THE CONSIDERATION OF THE AO WHILE ADJUDICATING THE SAID FIRST ISSUE OF THE ASSESSEES APPEALS. WE ORDER ACCORDINGLY. THUS, ALL THE GROUNDS RAISED BY THE REVENUE IN THE PRESENT 4 APPEALS ARE ALLOWED FOR STATISTICAL PURPOSES. 6 12. IN THE RESULT, ALL THE 4 APPEALS OF THE REVENUE ARE ALLOWED FOR STATISTICAL PURPOSES. 13. CONCLUSIVELY, ALL THE 10 APPEALS OF THE ASSESSEE ARE PARTLY ALLOWED FOR STATISTICAL PURPOSES AND 4 APPEALS OF THE REVENUE ARE ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 2 ND DECEMBER, 2015. SD/ - SD/ - ( AMARJIT SINGH ) (D. KARUNAKARA RAO) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; 2 /12/2015 . . ./ OKK , SR. PS / 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 . //TRUE COPY// / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI