DCIT 8(2), MUMBAI V. PLAZA HOTELS P.LTD, MUMBAI

ITA 4606/MUM/2014

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 4534 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 6 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-01-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2010-2011
• Appeal Filed On: 04-07-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: ARUN G VERMA
• Keywords: Business income; Rule of consistency
• 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. 4606/MUM/2014 (ASSESSMENT YEAR : 20 1 0 - 11) DY. COMMISSIONER OF INCOME - TAX - 8(2), MUMBAI. ( APPELLANT ) VS M/S. PLAZA HOTELS PVT. LTD., 70 - C, NEHRU ROAD, VILE PARLE (E), MUMBAI 400 099. (RESPONDENT) PAN : AAACP 2117 N APPELLANT BY : SHRI RAJESH OJHA ( D R) RESPONDENT BY : SHRI ARUN G. VERMA ( A R) DATE OF HEARING : 12/01/2016 DATE OF PRONOUNCEMENT : 12 /01/2016 O R D E R PER AMIT SHUKLA, JM : THE AFORESAID APPEAL HAS BEEN FILED BY THE REVENUE AGAINST THE IMPUGNED ORDER DT. 16.4.2014 PASSED BY THE CIT(A) - 17, MUMBAI FOR THE QUANTUM OF ASSESSMENT PASSED U/S 143(3) FOR A.Y 2010 - 11 , ON THE FOLLOWING GROUNDS OF APPEAL : 1. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) ERRED IN UPHOLDING THE ACTION OF THE ASSESSEE OF TREATING THE RECEIPTS RECEIVED FROM THE HOTEL BUSINESS AS BUSINESS INCOME WITHOUT APPRECIATING THAT THE ASSESSEE HAS G IVEN HOTEL PROPERTY OWNED BY IT TO KAMAT HOTELS (INDIA) LTD ON A BUSINESS CONTRACT AGREEMENT WHEREBY THE ASSESSEE IS TO RECEIVE 1 % OF THE TOTAL REVENUE AND ALSO THE INTEREST FREE 2 M/S. PLAZA HOTELS PVT. LTD. ITA NO. 4606/MUM/2014 DEPOSIT, WHICH IS NOTHING BUT A RENT ON THE PROPERTY AND THE SAME IS TAXABLE U/S 22 OF THE I T ACT? 2. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) ERRED IN UPHOLDING THE ACTION OF THE ASSESSEE OF TREATING THE RECEIPTS RECEIVED FROM THE HOTEL BUSINESS AS BUSINESS INCOME AND THEREBY NOT DETERMINING THE ALV AS PER THE PROVISIONS OF S 23(1)(A) OF THE ACT WITHOUT APPRECIATING THAT IF THE RATEABLE VALUE UNDER MUNICIPAL LAWS DOES NOT REPRESENT THE CORRECT FAIR RENT, THEN AS PER SECTION 23(1)(A) OF THE ACT, THE ASSESSING OFFICER MAY DETERMINE THE SAME ON THE BASIS OF MATERIAL/EVIDENCE ON RECORD, WHICH THE ASSESSING OFFICER HAS CORRECTLY DONE? 2. AT THE OUTSET, THE L D. C OUNSEL FOR THE ASSESSEE SUBMITTED THAT SO FAR AS THE ISSUE RAISED IN GROUND NO. 1 IS CONCERNED, THE SAME IS COVERED IN FAVOUR OF THE ASSESSEE BY THE TRIBUNAL ORDER IN ASSESSEES OWN CASE FOR A.YS 2006 - 07, 2007 - 08, 2008 - 09 AND 2009 - 10, THEREFORE, THE GROUND RAISED BY THE REVENUE SHOULD BE DECIDED IN FAVOUR OF THE ASSESSEE. IN SUPPORT, HE FILED THE RELEVANT COPY OF THE DECISION S OF THE TRIBUNAL. 3. REGARDING GROUND NO. 2, THE L D. COUNSEL FOR THE ASSESSEE SUBMITTED THAT IN CASE GROUND NO. 1 IS DECIDED IN FAVOUR OF THE ASSESSEE, THEN, THIS ISSUE WILL BECOME INFRUCTUOUS. THE LD. DR ALSO ADMITTED THAT THE ISSUE INVOLVED IS COVERED B Y THE DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE RIGHT FROM A.Y 2009 - 10. 4. AFTER CONSIDERING THE RELEVANT FINDING GIVEN IN THE IMPUGNED ORDER AS WELL AS THE ORDERS OF THE TRIBUNAL IN ASSESSEES OWN CASE, WE FIND THAT THE ISSUE , WHETHER THE ASSESSEE S RECEIPTS FROM HOTEL BUSINESS IS TO BE ASSESSED AS BUSINESS INCOME OR INCOME FROM HOUSE PROPERTY STANDS SETTLED IN FAVOUR OF THE ASSESSEE BY THE ORDERS OF THE TRIBUNAL FOR THE EARLIER YEARS. THE BRIEF FACTS ARE THAT THE ASSESSEE HAS A HOTEL PROPERTY WHIC H HAS BEEN RATED AS 4 - STAR 3 M/S. PLAZA HOTELS PVT. LTD. ITA NO. 4606/MUM/2014 HOTEL HAVING AS MANY AS 80 GUEST ROOMS. THE ASSESSEE HAS GIVEN THIS HOTEL TO M/S. KAMAT HOTELS ( INDIA ) LTD. UNDER BUSINESS CONTRACT AGREEMENT DT. 1.4.1994. AS PER THE TERMS AND CONDITIONS OF THE AGREEMENT, ASSESSEE IS ENTITLED FOR 1% OF THE REVENUE FROM THE HOTEL OPERATIONS. THAT APART, ASSESSEE IS ALSO RECEIVING INTEREST FROM DEPOSIT FROM M/S. KAMAT HOTELS (INDIA) LTD. AMOUNTING TO RS. 80 CRORES. IN PURSUANCE OF THE SAID ARRANGEMENT, THE ASSESSEE HAS RECEIVED AN AMOUNT OF RS. 62,59,647/ - . THE SOLE ISSUE WHICH IS PERMEATING THROUGH ALL THE YEARS IS , WHETHER THE ASSESSEE, WHO IS THE OWNER OF THE HOTEL AND EARNING THE RECEIPT IN PURSUANCE OF AN AGREEMENT, IS TO BE ASSESSED UNDER THE HEAD INCOME FROM HOUSE PROPERTY BEING IN THE NATURE OF RENT OR UNDER THE HEAD BUSINESS INCOME ARISING OUT OF THE BUSINESS CONTRACT. THE AO IN ALL THE YEARS HAS HELD THAT ALL THE CONDITIONS STIPULATED U/S 23(1) STANDS SATISFIED AND, THEREFORE, THE INCOME HAS TO BE ASSESSED UNDER THE HEAD INCOME F ROM HOUSE PROPERTY. IN SUPPORT OF HIS CONCLUSION, HE REFERRED TO VARIOUS DECISIONS INCLUDING THAT OF THE HONBLE SUPREME COURT IN THE CASE OF SHAMBHU INVESTMENT (P) LTD. REPORTED IN 263 ITR 143 (SC). THE LD. CIT(A) FOLLOWING ITAT ORDER FOR THE A.Y 2006 - 07 HAS HELD THAT THE SAME IS TO BE ASSESSED AS BUSINESS INCOME. WE FIND THAT IN THE LATEST ORDER FOR THE A.Y 2009 - 10 THE TRIBUNAL HAS DECIDED THIS ISSUE IN THE FOLLOWING MANNER : 3. BEFORE US, IT WAS A COMMON POINT BETWEEN THE PARTIES THAT THE AFORESAID DISPUTE CAME UP FOR THE FIRST TIME IN A.Y 2006 - 07, WHEREIN BY WAY OF ITS ORDER IN ITA NOS. 6676 & 6636/MUM/2011 DATED 13/9/2013, THE TRIBUNAL UPHELD THE STAND OF THE ASSESSEE THAT INCO ME RECEIVED FROM KAMAT HOTELS (I) LTD. WAS TO BE CONSIDERED AS A BUSINESS INCOME . THE FOLLOWING DISCUSSION IN THE ORDER OF THE TRIBUNAL DATED 13/9/2013(SUPRA) IS RELEVANT: - 14. AFTER CONSIDERING THE SUBMISSION AND PERUSING THE MATERIAL ON RECORD , WE ARE OF THE VIEW THAT THERE IS NO DISPUTE THAT THE ASSESSEE WAS RUNNING THE HOTEL ITSELF BEFORE GIVING TO KHIL UNDER AGREEMENT ENTERED IN THE YEAR OF 1994. THE ENTIRE ACTIVITIES OF HOTEL CARRIED OUT BY THE ASSESSEE ITSELF BEFORE ENTERING THE AGREEM ENT WAS 4 M/S. PLAZA HOTELS PVT. LTD. ITA NO. 4606/MUM/2014 GIVEN TO KHIL, AN INTEREST FREE SECURITY WAS ALSO OBTAINED FROM KHIL, WHICH WAS REFUNDABLE AFTER COMPLETION OF PERIOD ENTERED INTO BETWEEN THE PARTIES. THE ASSESSEE WAS SHARING A REVENUE AT THE RATE OF 1 % OF THE REVENUE EARNED BY THE KHIL ON A CCOUNT OF RUNNING OF HOTEL OWNED BY THE ASSESSEE. THOUGH THE CIT(A) HAS RECORDED THE FACTS IN HIS ORDER THAT M/S.KHIL WAS ALLOWED TO RENOVATE THE HOTEL OR RECONSTRUCT THE SAME FROM HIS OWN FUNDS, BUT IT DOES NOT MEAN THAT THE CHARACTER OF ASSET, OWNED B Y THE ASSESSEE HAS BEEN CHANGED. THE FACT IS THAT THE ASSESSEE OWNED HOTEL, WHICH WAS RUN BY THE ASSESSEE BEFORE ENTERING, INTO THE AGREEMENT. WHATEVER THE REQUIREMENT OF THE HOTEL WAS THERE, I THE SAME WAS MADE BY KHIL WITH ITS OWN FUND AS AGREED UPON. THE CHARACTER OF THE ASSET WAS THAT THE ENTIRE HOTEL WHICH WAS RUN BY THE ASSESSEE ITSELF EARLIER WAS GIVEN UNDER THE AGREEMENT TO M/S. KHIL TO RUN THE HOTEL. THEREFORE, IN OUR CONSIDERED VIEW, THIS WAS AN I EXPLOITATION OF COMMERCIAL ASSET FOR BUSINES S PURPOSE AND WHATEVER THE RECEIPTS ARE RECEIVED FROM EXPLOITING OF COMMERCIAL ASSET FOR BUSINESS USE ARE TO BE TREATED AS BUSINESS RECEIPTS. WHEN THE ASSESSEE WAS RUNNING THIS HOTEL, THE RECEIPTS FROM THE HOTEL WERE SHOWN AS BUSINESS RECEIPTS AND THE Y WERE ACCEPTED. AFTER GIVING TO KHIL I.E. IN THE YEAR 1994, THE RETURN WAS FILED FOR ASSESSMENT YEAR 1995 - 96 SHOWING THE REVENUE RECEIPT FROM KHIL AS BUSINESS INCOME AND THE SAME WAS ACCEPTED. THE ASSESSMENT WAS COMPLETED UNDER SECTION 143(3). UP TO ASSESSMENT YEAR 2005 - 06, THE ASSESSMENT HAS BEEN COMPLETED BY THE AO AND THE CONTENTION OF THE ASSESSEE THAT THE REVENUE RECEIVED FROM KHIL ARE BUSINESS ASSET, WERE ACCEPTED. FOR ASSESSMENT YEAR 2005 - 06 & 2003 - 04 THE ASSESSMENT WAS COMPLETED UNDER SECTION 143(3). THE MATTER REACHED TO THE STAGE OF THE TRIBUNAL, HOWEVER, THIS ISSUE WAS NEVER DISPUTED BY THE AO THAT THE REVENUE RECEIPT RECEIVED FROM M/S. KHIL UNDER THE AGREEMENT ARE BUSINESS RECEIPT AS THEY WERE ACCEPTED. THEREFORE, IT CANNOT BE SAID THAT ANY CHARACTER OF THE REVENUE RECEIPT HAS BEEN CHANGED IN THE YEAR UNDER CONSIDERATION. IN OUR CONSIDERED VIEW, THE PRINCIPLE OF CONSISTENCY IN THE CASE IN HAND IS APPLICABLE. ACCORDINGLY, THE AO SHOULD HAVE ACCEPTED THE RECEIPT UNDER THE HEAD BUSINESS IN COME SHOWN BY THE ASSESSEE. 4. SUBSEQUENTLY, IN ASSESSMENT YEARS 2007 - 08 AND 2008 - 09 ALSO, THE TRIBUNAL IN ITS COMMON ORDER IN CROSS - APPEALS OF THE ASSESSEE AND THE REVENUE VIDE ITA NOS. 3191/MUM/2012 AND 3192/MUM/2012 DATED 25/7/2014 FOLLOWED ITS EA RLIER DECISION FOR A.Y 2006 - 07(SUPRA) AND HELD THAT THE MANAGEMENT FEE (ROYALTY) RECEIVED BY THE ASSESSEE FROM KAMAT HOTELS (I) PVT. LTD. WAS LIABLE TO BE ASSESSED AS BUSINESS INCOME. AT THE TIME OF HEARING, THERE IS NO ASSERTION BY THE REVENUE THAT THE AFORESAID PRECEDENTS HAVE BEEN ALTERED BY ANY HIGHER AUTHORITY. THEREFORE, FOLLOWING THE AFORESAID PRECEDENTS, WE ALLOW THE CLAIM OF THE ASSESSEE THAT THE MANAGEMENT FEE (ROYALTY) RECEIVED FROM KAMAT HOTELS (I) LTD. IS LIABLE TO 5 M/S. PLAZA HOTELS PVT. LTD. ITA NO. 4606/MUM/2014 BE ASSESSED AS BUSINESS I NCOME. AS A CONSEQUENCE, THE GROUND OF APPEAL NO.1 RAISED BY THE ASSESSEE STANDS ALLOWED. CONSISTENT WITH THE VIEW TAKEN IN THE EARLIER YEARS, WE HOLD THAT THE RECEIPTS RECEIVED FROM M/S. KAMAT HOTELS (INDIA) LTD. IS TO BE ASSESSED AS BUSINESS INCOME. ACCORDINGLY, GROUND NO. 1 RAISED BY THE REVENUE STANDS DISMISSED. 5. AS REGARDS GROUND NO. 2, IT WOULD BECOME INFRUCTUOUS IN VIEW OF THE FINDING GIVEN ABOVE. ACCORDINGLY, REVENUES APPEAL IS TREATED AS DISMISSED. 6. IN THE RESULT, REVENUES APPEAL IS TREATED AS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 12 TH JANUARY, 2016. SD/ - SD/ - ( RAJESH KUMAR ) ACCOUNTANT MEMBER (AMIT SHUKLA) JUDICIAL MEMBER MUMBAI, DATE : 12 TH JANUARY, 2016 COPY TO : 1) THE APPELLANT/APPLICANT 2) THE RESPONDENT 3) THE CIT(A) - 1 7 , MUMBAI 4) THE DCIT - 8(2) , MUMBAI 5) THE D.R, C BENCH, MUMBAI 6) GUARD FILE BY ORDER DY./ASSTT. REGISTRAR I.T.A.T, MUMBAI *SSL*