A.C.I.T.-20(1), MUMBAI V. SHRI. HARVINDERPAL MEHTA HUF, MUMBAI

ITA 4551/MUM/2008

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 8491 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 7 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-02-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: H
• Next Hearing Date: 02-02-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 04-07-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R S SRIVASTAV
• Keywords: Business income; Depreciation

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL H BENCH: MUMBAI BEFORE SHRI T.R.SOOD, ACCOUNTANT MEMBER AND SHRI R.S. PADVEKAR, JUDICIAL MEMBER ITA NO.4551/MUM/2008 (ASSESSMENT YEAR: 2005-06) ACIT-20(1), ROOM NO.603, 6 TH FLOOR, PIRMAL CHAMBER, PAREL, MUMBAI-400 012 REVENUE VS HARVINDERPAL MEHTA HUF, ASSESSEE SHOP NO.11, BLDG. NO.1, TAKSHILA APTS, MAHAKALI CAVES ROAD, ANDHERI (E), MUMBAI -400 093 PAN: AABHH 1643 B ASSESSEE BY: SHRI RAKESH JOSHI REVENUE BY: SHRI R.S. SRIVASTAV O R D E R PER R.S. PADVEKAR, JM THIS APPEAL IS FILED BY THE REVENUE CHALLENGING THE IMPUGNED ORDER OF THE LD. CIT (A) XXIV, MUMBAI DATED 10.12.2009 F OR THE A.Y. 2005-06. THE REVENUE HAS TAKEN FOLLOWING EFFECTIVE GROUNDS:- 1. THE LEARNED CIT(A) HAS ERRED ON FACTS AND IN LA W IN THE CIRCUMSTANCES OF THE CASE IN DIRECTING THE ASSESSIN G OFFICER TO TREAT THE INCOME FROM LETTING OUT OF THE PREMISES A S BUSINESS ITA 4551/M/2008 HARVINDERPAL MEHTA HUF 2 INCOME, INSTEAD OF INCOME FROM HOUSE PROPERTY AS AD OPTED BY THE ASSESSING OFFICER. 2. THE LEARNED CIT(A) HAS ERRED ON FACTS AND IN LAW IN THE CIRCUMSTANCES OF THE CASE IN NOT APPRECIATING THE F ACT THAT THIS ISSUE HAS BEEN SETTLED BY THE APEX COURT IN FAVOUR OF THE REVENUE IN ITS LAND MARK JUDGMENT RENDERED IN THE C ASE OF M/S. SHAMBHU INVESTMENTS LTD. VS. CIT 263 ITR 243. 3. THE LEARNED CIT(A) HAS ERRED ON FACTS AND IN LAW IN THE CIRCUMSTANCES OF THE CASE IN NOT APPRECIATING THE F ACT THAT THE PREMISES UNDER DISPUTE HAVE BEEN LET OUT AS BUSINES S CENTERS WHICH HAVE BEEN OWNED BY THE ASSESSEE AND HENCE THE INCOME ARISING THEREFROM IS ASSESSABLE UNDER SEC 24 OF THE IT ACT. 2. WE HAVE HEARD THE PARTIES. THE LD. COUNSEL SUBM ITTED THAT THE ISSUE ARISING FROM THE GROUNDS TAKEN BY THE REVENUE IS COVERED IN FAVOUR OF THE ASSESSEE IN THE ASSESSEES OWN CASE BY THE D ECISION OF THE ITAT FOR THE A.Y. 02-03 REPORTED IN 122 ITD 93. THE LD. COU NSEL FILED THE COPY OF THE ORDER OF THE TRIBUNAL, WHICH IS PLACED ON RECOR D. THE ASSESSEE IS RUNNING A HUF AND RUNNING A BUSINESS CENTERS UNDER THE NAME AND STYLE OF M/S. MEHTA BUSINESS CENTRE AND M/S. PRAVHA R BUSINESS CENTRE. THE ASSESSEE SHOWS THE INCOME FROM THOSE BUSINESS C ENTERS AS THE SERVICE CHARGES IN HIS PROFIT AND LOSS ACCOUNT TR EATING THE SAME AS BUSINESS INCOME. THE ASSESSEE ALSO CLAIM THE EXPEN DITURE TOWARDS THE ELECTRICITY, TELEPHONE CHARGES, SALARIES, BANK CHAR GES, REPAIRS, STAFF WELFARE EXPENSES, DEPRECIATION, BROKERAGE ETC. THE A.O. TREATED THE INCOME FROM SERVICE CENTRE AS A RENTAL INCOME DERIV ED FROM LETTING OUT OF THE HOUSE PROPERTY. THE A.O. ALSO REFERRED TO THE ASSESSMENT YEAR 2004- 05 IN WHICH IT WAS TREATED AS RENTAL INCOME. THE A .O. ALSO REFERRED TO THE ITA 4551/M/2008 HARVINDERPAL MEHTA HUF 3 DECISION OF THE HONBLE SUPREME COURT IN THE CASE O F M/S. SHAMBHU INVESTMENTS LTD. VS. CIT 263 ITR 243 AND FINALLY AS SESSED THE ENTIRE INCOME UNDER THE HEAD INCOME FROM HOUSE PROPERTY. THE ASSESSEE CHALLENGED THE ASSESSMENT ORDER BEFORE THE LD. CIT (A) AND FOUND FAVOUR. NOW, THE REVENUE IS IN APPEAL BEFORE US. 3. IT IS SEEN THAT IN THE ASSESSMENT YEAR 2002-03, IN THE ASSESSEES OWN CASE, THE ISSUE HAS REACHED BEFORE THE TRIBUNAL AND THE PLEA OF THE ASSESSEE WAS ACCEPTED. THE OPERATIVE PART OF THE O RDER OF THE TRIBUNAL IS AS UNDER:- 9. THE LEGAL POSITION LAID DOWN IN THE ABOVE CASE IS BINDING ON US. HOWEVER, ON FACTS, WE FIND THAT THE FACTS OF THE PRESENT CASE ARE DIFFERENT FROM THE FACTS BEFORE TH E HONBLE SUPREME COURT IN THE CASE OF M/S. SHAMBHU INVESTMEN TS (P) LTD. (SUPRA) IN THE CASE BEFORE THE HONBLE SUPREME COURT, THE ASSESSEE HAD LET OUT THE FURNISHED ACCOMMODATIO N WITHOUT ANY OTHER FACILITIES. HOWEVER, IN THE PRES ENT CASE, VARIOUS FACILITIES ARE PROVIDED AS NOTED BY THE CIT (A) AS WELL AS BY US IN THIS ORDER SUCH AS, RECEPTIONIST AND A TELEPHONE OPERATOR TO ATTEND THE CUSTOMERS AND THEIR TELEPHON E CALLS, USE OF COMMON WAITING/GUEST ROOM WITH ATTACHED TOILETS ETC., FOR USE OF THE CUSTOMERS AND GUESTS OF THE CUSTOMERS, U SE OF CENTRAL AIR CONDITIONING, SERVICES OF ATTENDANTS, S WEEPERS, ETC., USE OF TELEPHONE AND FAX MACHINE AND FURNITURE, ETC . FURTHER, ULTIMATE CONTROL OVER THE PREMISES IS WITH THE ASSE SSEE. FURTHER, THERE IS NO INTENTION OF MERE LETTING OUT OF THE PROPERTY AND EARN THE RENTAL INCOME SINCE CUSTOMERS KEEP ON CHINING FROM TIME-TO-TIME. THE SPACE IS PROVIDED TO THE CU STOMERS ON WEEKLY/MONTHLY BASIS FOR CARRYING OUT THEIR WORK OF ASSIGNMENT OR FOR COMPLETING THE SPECIFIC WORK. A BUSINESS ITA 4551/M/2008 HARVINDERPAL MEHTA HUF 4 CENTRE HAS A PECULIAR CHARACTERISTIC. IN BIG CITIE S, THERE IS ALWAYS SHORTAGE OF SPACE. EVEN BUSINESSMAN FOR CAR RYING OUT SOME SPECIFIC WORK REQUIRES TEMPORARY SPACE WHERE B USINESS LIKE FACILITIES ARE PROVIDED. EVEN HOTELS ARE USED FOR SUCH PURPOSES. TO MEET OUT SUCH REQUIREMENT, SOME BUSIN ESSMEN OPEN BUSINESS CENTRES WHERE SPACE IS PROVIDED FOR T EMPORARY PERIOD ALONG WITH BUSINESS LIKE FACILITIES. FOR E XAMPLE, SPACE IS PROVIDED FOR HOLDING CONFERENCES, EXHIBITIONS, S EMINARS, ETC. SOMETIMES, SPACE IS PROVIDED FOR WEEKS/MONTHS SO TH AT THE CUSTOMERS MAY COMPLETE THEIR ASSIGNMENT DURING THAT PERIOD. FOR EXAMPLE A FOREIGN ENTERPRISE MAY HIRE SUCH PREM ISES FOR PROVIDING TRAINING TO ITS CONSTITUENTS OR CERTAIN O THER PERSONS. SOMETIMES, A BUSINESSMAN MAY REQUIRE THE SPACE FOR CARRYING OUT SOME PROJECT WHICH MAY BE COMPLETED IN FEW MONT HS. THESE ARE ONLY ILLUSTRATIONS TO PROVE THE POINT THA T TEMPORARY SPACE IS PROVIDED BY BUSINESS CENTRES TO SUIT THE S UCH CASES, THE ACTIVITY IS TO RUN BUSINESS CENTRE AS A COMMERC IAL ACTIVITY LIKE HOTELS AND HOSPITALS AND USE OF THE PROPERTY IS INCIDENTAL TO CARRYING ON SUCH BUSINESS ACTIVITY. SEC. 22 OF THE ACT SPECIFICALLY EXCLUDES THOSE CASES WHERE PROPERTY IS USED FOR BUSINESS PURPOSES. THEREFORE, CONSIDERING THE FACT S OF THE CASE, WE ARE OF THE VIEW THAT THE OBJECT OF THE ASS ESSEE IS TO RUN THE BUSINESS CENTRE BY EXPLOITING THE PROPERTY AND NOT MERE LETTING OUT THE PROPERTY. CONSEQUENTLY, THE R ECEIPTS FROM SUCH ACTIVITY MUST BE CONSIDERED AS BUSINESS RECEIP TS. ACCORDINGLY, WE HOLD SO. 4. AS THE FACTS ARE IDENTICAL IN THIS YEAR. WE, TH EREFORE FOLLOWING THE ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE (122 I TD 93) UPHOLD THE ORDER OF THE LD. CIT (A). ITA 4551/M/2008 HARVINDERPAL MEHTA HUF 5 5. IN THE RESULT, REVENUES APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS DAY OF 1 5TH FEBRUARY 2011. SD/- SD/- ( T.R.SOOD ) ACCOUNTANT MEMBER ( R.S. PADVEKAR ) JUDICIAL MEMBER MUMBAI, DATE: 15TH FEBRUARY 2011 COPY TO:- 1) THE APPELLANT. 2) THE RESPONDENT. 3) THE CIT (A) XX, MUMBAI. 4) THE CIT 20, MUMBAI. 5) THE D.R. H BENCH, MUMBAI. BY ORDER / / TRUE COPY / / ASSTT. REGISTRAR I.T.A.T., MUMBAI *CHAVAN ITA 4551/M/2008 HARVINDERPAL MEHTA HUF 6 SR.N. EPISODE OF AN ORDER DATE INITIALS CONCERNED 1 DRAFT DICTATED ON 02.02.2011 SR.PS 2 DRAFT PLACED BEFORE AUTHOR 03.02.2011 SR.PS 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER JM/AM 5 APPROVED DRAFT COMES TO THE SR.PS/PS SR.PS/PS 6 KEPT FOR PRONOUNCEMENT ON SR.PS/PS 7 FILE SENT TO THE BENCH CLERK SR.PS/PS 8 DATE ON WHICH FILE GOES TO THE HEAD CLERK 9 DATE OF DISPATCH OF ORDER