ACIT, New Delhi V. Maharaja Manabendra Shah (HUF), New Delhi

ITA 4617/DEL/2010

• Counselvise Citation: 461720114 RSA 2010
• Duration Of Justice: 11 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-09-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 22-09-2011
• Assessment Year: 2001-2002
• Appeal Filed On: 19-10-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R S NEGI
• Assessee Lawyers: P N MONGA
• Keywords: Depreciation
• Section: 27

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL DELHI DELHI DELHI DELHI BENCH E BENCH E BENCH E BENCH E : NEW DELHI : NEW DELHI : NEW DELHI : NEW DELHI BEFORE SHRI R.P.TOLANI, JM AND SHRI SHAMIM YAHYA, A M BEFORE SHRI R.P.TOLANI, JM AND SHRI SHAMIM YAHYA, A M BEFORE SHRI R.P.TOLANI, JM AND SHRI SHAMIM YAHYA, A M BEFORE SHRI R.P.TOLANI, JM AND SHRI SHAMIM YAHYA, A M ITA NO ITA NO ITA NO ITA NOS SS S. .. .4617/DEL/2010 TO 4619/DEL/2010 4617/DEL/2010 TO 4619/DEL/2010 4617/DEL/2010 TO 4619/DEL/2010 4617/DEL/2010 TO 4619/DEL/2010 ASSESSMENT YEAR ASSESSMENT YEAR ASSESSMENT YEAR ASSESSMENT YEARS SS S : : : : 2001 2001 2001 2001- -- -02 TO 2003 02 TO 2003 02 TO 2003 02 TO 2003- -- -04 0404 04 ASSISTANT COMMISSIONER OF ASSISTANT COMMISSIONER OF ASSISTANT COMMISSIONER OF ASSISTANT COMMISSIONER OF INCOME TAX, INCOME TAX, INCOME TAX, INCOME TAX, CIRCLE CIRCLE CIRCLE CIRCLE- -- -31(1), 31(1), 31(1), 31(1), N NN NEW DELHI. EW DELHI. EW DELHI. EW DELHI. VS. VS. VS. VS. MAHARAJA MANABENDRA SHAH (HUF), MAHARAJA MANABENDRA SHAH (HUF), MAHARAJA MANABENDRA SHAH (HUF), MAHARAJA MANABENDRA SHAH (HUF), 5, BHAGWAN DASS ROAD, 5, BHAGWAN DASS ROAD, 5, BHAGWAN DASS ROAD, 5, BHAGWAN DASS ROAD, NEW DELHI. NEW DELHI. NEW DELHI. NEW DELHI. PAN : PAN : PAN : PAN : AAAHM4586K. AAAHM4586K. AAAHM4586K. AAAHM4586K. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI R.S.NEGI, SR.DR RESPONDENT BY : SHRI P.N.MONGA AND SHRI MANU MONGA, ADVOCATES. ORDER ORDER ORDER ORDER PER PER PER PER R.P.TOLANI, JM R.P.TOLANI, JM R.P.TOLANI, JM R.P.TOLANI, JM : : : : THESE ARE THREE APPEALS FILED BY THE REVENUE. FOL LOWING GROUNDS ARE RAISED:- 1. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE C ASE, LD.CIT(A) HAS ERRED IN HOLDING THAT THE ENTIRE LEAS E MONEY RECEIVED/RECEIVABLE FROM IHHR IN RESPECT OF PROPERT Y AT NARENDER NAGAR LEASED TO THEM WAS ASSESSABLE IN THE HANDS OF THE APPELLANT HUF AS AGAINST 60% THEREOF INCLUDED IN ITS RETURN OF INCOME, THE OTHER 40% HA VING BEEN INCLUDED IN HIS RETURN OF INCOME BY TIKA MANUJ ENDRA SHAH IN RESPECT OF PART OF THE PROPERTY BELONGING T O HIM? 2. WHETHER LD.CIT(A) HAS ERRED IN HOLDING THAT ONLY RS.50,000/- OF THE LEASE MONEY RECEIVED WAS ASSESSA BLE ITA-4617 TO 4619/D/2010 2 UNDER THE HEAD INCOME FROM HOUSE PROPERTY AND THE REMAINING AMOUNT THEREOF WAS ASSESSABLE UNDER THE H EAD INCOME FROM OTHER SOURCES. 3. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CA SE LD.CIT(A) HAS ERRED IN IGNORING THE FACT THAT HUF P ROPERTY CANNOT BE ALIENATED OTHER THAN BY WAY OF PARTIAL OR TOTAL PARTITION AMONGST THE MEMBERS OF THE HUF AND IN THE INSTANT CASE NO SUCH PARTITION TOOK PLACE. HENCE, THE AGREEMENT DT. 25.8.1997 BETWEEN THE ASSESSEE AND TI KA MANUJENDRA SHAH WAS TO LESS THE TAX BURDEN ON HUF A ND WAS SHAM AND NOT PERMISSIBLE AS PER THE PROVISIONS OF IT ACT AND THE SAME IS NOTHING BUT A CASE OF APPLICATI ON OF MONEY. 4. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CA SE LD.CIT(A) HAS ERRED IN LAW IN IGNORING THE FACT THA T AS PER PROVISIONS OF SEC. 22, THE PRE-REQUISITE CONDITION FOR CLAIMING INCOME UNDER THE HEAD HOUSE PROPERTY IS TH AT ASSESSEE SHOULD OWN A HOUSE WHEREAS IN THIS CASE ASSESSEE HAS LEASED OUT THE PROPERTY FOR 36 YEARS A ND AS PER PROVISIONS OF SEC. 27 OF THE IT ACT, M/S IHHR I S THE DEEMED OWNER OF THE PROPERTY AND DEPRECIATION IS ALSO BEING CLAIMED U/S 32(1) BY M/S IHHR WHICH CLEARLY I NDICATES THAT M/S IHHR IS OWNING THE SUBJECT PROPERTY TILL T HE EXPIRY OF LEASE AND INCOME FROM SUCH AN ARRANGEMENT CANNOT BE TERMED AS INCOME FROM HOUSE PROPERTY. 2. LEARNED COUNSEL FOR THE ASSESSEE, AT THE OUTSET, CONTENDS THAT THESE REVENUES APPEALS GAVE RISE TO TWO ISSUES O NE, ABOUT THE TREATMENT OF LEASE MONEY AS HOUSE PROPERTY INCOME A ND THE OTHER ITA-4617 TO 4619/D/2010 3 ONE, BEING DIVISION OF RENT BETWEEN ASSESSEE HUF AN D THE OTHER CO- PARCENER TIKA MANUJENDRA SHAH. THE LEARNED COUNSEL CONTENDS THAT THE FIRST ISSUE IS COVERED IN FAVOUR OF THE ASSESSE E BY VARIOUS ITAT ORDERS IN ASSESSEES OWN CASE, THE LATEST ONE BEING ORDER DATED 23 RD APRIL, 2010 IN ITA NO.4592/DEL/2009 FOR AY 2004-05. THE TRIBUNAL, AFTER CONSIDERING ALL THE ASPECTS, FACTS AND CIRCUM STANCES, HELD THE LEASE INCOME AS INCOME FROM HOUSE PROPERTY BY FOLLO WING OBSERVATIONS:- 7.2 IN THE LIGHT OF ABOVE DISCUSSION, WE SET ASIDE IMPUGNED ORDER OF CIT (APPEALS) AND DIRECT THE ASSE SSING OFFICER TO ASSESS RENTAL INCOME UNDER THE HEAD INC OME FROM HOUSE PROPERTY AND ALLOW CONSEQUENTIAL BENEFI TS TO THE ASSESSEE. 3. APROPOS SECOND ISSUE, THE ISSUE WAS DECIDED BY T HE CIT(A) IN AY 2004-05 BY HOLDING THAT THE ASSESSEE HUF WAS LIABLE TO BE TAXED FOR ONLY 60% OF THE LEASE MONEY RECEIVED FROM IHHR BY F OLLOWING OBSERVATIONS:- 6.3 FROM 1949 ONWARDS, THE ANCESTRAL PROPERTIES WE RE SHOWN IN THE NAME OF MAHARAJA MANABENDRA SHAH, WHO LATER REALIZED THE ERROR IN THIS REGARD AND FROM 19 71 ONWARDS THREW BACK THE ANCESTRAL PROPERTIES IN THE COMMON HOTCHPOTS OF THE HUF. IN HIS OWN RETURN OF WEALTH FOR ASSESSMENT YEAR 1971-72 ONWARDS, MAHARAJA MANABENDRA SHAH HAD SPECIFICALLY EXCLUDED THE ANCES TRAL PROPERTIES FROM HIS INDIVIDUAL STATUS AND SHIFTED T HEM TO HUF STATUS. HOWEVER, THIS DID NOT INCLUDE THE PROP ERTY NAMED AS RIDGE HOUSE, WHICH TIKA MANUJENDRA SHAH HAD DISCLOSED IN HIS RETURN OF WEALTH FOR THE ASSESSMEN T YEAR ITA-4617 TO 4619/D/2010 4 1972-73 ONWARDS. SINCE THEN THE POSITION HAS REMAI NED SAME I.E., THE RIDGE HOUSE HAS BEEN SHOWN IN THE STATEMENT OF ASSET OF MR.TIKA MANUJENDRA SHAH AND N OT SHOWN IN THE STATEMENT OF ASSET OF THE APPELLANT HU F FOR WEALTH-TAX PURPOSES. THE DEPARTMENT HAS FILED REFE RENCE TO THE JURISDICTIONAL HIGH COURT ON A DIFFERENT ISS UE, I.E. AGAINST THE CHANGE OF STATUS BY MAHARAJA MANABENDRA SHAH OF HIS ANCESTRAL PROPERTIES FROM INDIVIDUAL TO HUF STATUS, WHICH IS STILL PENDING, HOWEVER, DEPARTMENT DID NEVER CONTEST THE TRANSFER OF RIDGE HOUSE BY MAHA RAJA MANABENDRA SHAH TO HIS SON TIKA MANUNJENDRA SHAH. THESE FACTS CLEARLY SHOW THAT THERE HAS BEEN NO OBJ ECTION BY THE DEPARTMENT SO FAR ON THE OWNERSHIP OF THE SA ID PROPERTY RIDGE HOUSE BY TIKA MANUJENDRA SHAH IS CONCERNED. IN VIEW OF THE ABOVE, IT IS FACTUALLY I NCORRECT THAT THE RAJ AGYAN DATED 26/5/1948 WAS AN AFTERTH OUGHT, A SHAM AND WAS DEVISED ONLY TO REDUCE THE TAX LIABI LITY OF APPELLANT HUF. 4. THE LEARNED COUNSEL FOR THE ASSESSEE CONTENDS TH AT THIS ORDER OF THE CIT(A) WAS ACCEPTED BY THE DEPARTMENT, THAT IS WHY IN AY 2004-05, ONLY THE ASSESSEE CAME IN APPEAL BEFORE THE TRIBUNA L. ONCE THE DEPARTMENT HAS ACCEPTED THE LEGAL POSITION ABOUT TH E PROPERTY BEING PARTIALLY OWNED BY TIKA MANUJENDRA SHAH, THEREFORE, THE CIT(A) HAS RIGHTLY CONSIDERED THESE ISSUES IN FAVOUR OF THE AS SESSEE. HE FURTHER CONTENDED THAT IN SUBSEQUENT YEARS, THE AO HAS ACCE PTED ASSESSEES RETURN AT 60% OF LEASE RENTAL. 5. THE LEARNED DR SUPPORTED THE ORDER OF THE ASSESS ING OFFICER. ITA-4617 TO 4619/D/2010 5 6. WE HAVE HEARD THE RIVAL CONTENTIONS AND HAVE GON E THROUGH THE MATERIAL ON RECORD. FROM THE ORDER OF THE CIT(A) F OR AY 2004-05, TWO ISSUES WERE DECIDED IN FAVOUR OF THE ASSESSEE ONE ABOUT THE HEAD OF RENTAL INCOME WHICH WAS HELD TO BE INCOME FROM OTHE R SOURCES AND, OTHER ABOUT40% OWNERSHIP OF TIKA MANUJENDRA SHAH. THE FIRST ISSUE WAS DECIDED AGAINST THE ASSESSEE WHO CAME UP IN APP EAL AND ITAT, BY THE ABOVE ORDER, DECIDED THE RENTAL INCOME TO BE TA XED UNDER THE HEAD INCOME FROM HOUSE PROPERTY. THUS, THIS ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE. THE ORDER OF CIT(A) ON THIS ISSUE IN THESE THREE YEARS IS UPHELD. 7. COMING TO THE OTHER ISSUE, LEARNED CIT(A) IN AY 2004-05 DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE HOLDING THAT TI KA MANUJENDRA SHAH HELD 40% OWNERSHIP AND ASSESSEE HUF WAS TO BE TAXED AT 60% OF THE LEASE INCOME. REVENUE HAS ACCEPTED THIS ORDER. B ESIDES IN SUBSEQUENT YEARS THE CLAIM OF THE ASSESSEE HAS BEEN ALLOWED. IN VIEW OF THESE FACTS AND CIRCUMSTANCES, IT IS CLEAR THAT DEPARTMENT HAS ACCEPTED THIS PROPOSITION. THEREFORE, WE FIND NO M ERIT IN THE REVENUES GROUND THAT THE ENTIRE LEASE INCOME SHALL BE TAXED IN THE HANDS OF THE HUF. IN THESE CIRCUMSTANCES, ON THIS ISSUE ALSO, WE UPHOLD THE ORDER OF THE CIT(A). 8. IN THE RESULT, THE APPEALS OF THE REVENUE ARE DI SMISSED. DECISION PRONOUNCED IN THE OPEN COURT ON 30 TH SEPTEMBER, 2011. SD/- SD/- (SHAMIM YAHYA (SHAMIM YAHYA (SHAMIM YAHYA (SHAMIM YAHYA) )) ) ( (( (R.P.TOLANI R.P.TOLANI R.P.TOLANI R.P.TOLANI) )) ) ACCOUNTANT ACCOUNTANT ACCOUNTANT ACCOUNTANT MEMBER MEMBER MEMBER MEMBER JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER DATED : 30.09.2011 VK. ITA-4617 TO 4619/D/2010 6 COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT ASSISTANT REGISTRAR