M/s Deepak Towers (P) Ltd., Chandigarh V. ITO, Chandigarh

ITA 465/CHANDI/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 90149 (ITAT-CHANDIGARH)
• Duration Of Justice: 2 year(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-05-2015
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 06-05-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 29-04-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: S K MITTAL
• Keywords: Business income; Business expenditure
• Section: 147; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCHES B CHANDIGARH BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND SHRI T.R. SOOD, ACCOUNTANT MEMBER ITA NO.464, 465 & 466/CHD/2013 ASSESSMENT YEAR: 2006 TO 2009 DEEPAK TOWERS (P)LTD., VS. THE ITO #577-B, SECTOR 38 WEST WARD 4(1) CHANDIGARH CHANDIGARH PAN NO.AABCD7257Q (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI PARIKSHIT AGGARWAL RESPONDENT BY : SHRI S.K.MITTAL DATE OF HEARING : 06/05/2015 DATE OF PRONOUNCEMENT : 21/05/2015 ORDER PER T.R.SOOD, A.M. THE APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 22.03.2013 PASSED BY THE CIT(A) CHANDIGARH. ITA NO. 464/CHD/2013 2. IN THIS APPEAL ASSESSEE HAS RAISED VARIOUS GROUN DS WHICH ARE AS UNDER: 1. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE AND IN LAW THE WORTHY CIT(APPEALS) THROUGH HIS ORDER DATED 22.03.2 013 HAS ERRED IN PASSING THAT ORDER IN CONTRAVENTION OF PROVISIONS O F SECTION 250(6) OF THE INCOME TAX ACT, 1961. 2. THAT ON FACTS, CIRCUMSTANCES AND LEGAL POSITION OF THE CASE, THE WORTHY CIT(A) HAS ERRED IN CONFIRMING THE ACTION OF LD. AO OF INITIATING AND THEN CONCLUDING THE IMPUGNED ASSESSMENT U/S 147 R.W.S 14 8 OF THE ACT. 3. THAT ON FACTS, CIRCUMSTANCES AND LEGAL POSITION OF THE CASE, THE WORTHY CIT(A) HAS ERRED IN CONFIRMING THE ACTION OF LD. AO OF TREATING THE GENUINE BUSINESS RECEIPTS OF THE APPELLANT TO BE INCOME UND ER THE HEAD HOUSE PROPERTY AND THEREBY RESTRICTING THE CLAIM OF EXPEN SES TO ONLY 30% BY ERRONEOUSLY APPLYING THE PROVISIONS OF SEC 24 OF TH E INCOME TAX ACT. THIS WAY, HE HAS ERRED IN NOT ALLOWING THE CLAIM OF GENU INE BUSINESS EXPENSES OF RS. 9,98,095/- AND RESTRICTING THEM TO RS. 95,88 7/- ONLY BEING FLAT 30% OF THE BUSINESS RECEIPTS OF RS. 3,19,624/-. 2 3. OUT OF THE ABOVE GROUND NO. 2 WAS NOT PRESSED AN D THEREFORE SAME IS DISMISSED AS NOT PRESSED. 4. GROUND NO. 1 IS OF GENERAL NATURE AND THEREFORE THIS NOT REQUIRED SEPARATE ADJUDICATION. GROUND NO. 3 5. AFTER HEARING BOTH THE PARTIES WE FIND THAT ORI GINALLY RETURN WAS FILED BY THE ASSESSEE DECLARING LOSS OF RS. 5,18,853/- WHICH WAS PROCESSED UNDER SECTION 143(1) RAISING DEMAND OF RS. 36,590/- INSTEAD OF RE FUND AMOUNTING TO RS. 3,66,458/. SINCE ASSESSEE HAD MADE CLAIM FOR REFUND AMOUNTING TO RS. 3,66,458/- AND FRESH LETTER REQUESTING TO DEPARTMENT TO ISSUE A REFUND WAS WRITTEN AND WHILE CONSIDERING THIS LETTER IT CAME TO THE NOTICE OF THE AO THAT ASSESSEE HAS CLAIMED VARIOUS ADMINISTRATIVE AND OTHER EXPENSES. THERE CASE WAS RE-OPENED AND NOTICE UNDER SECTION 148 WAS ISSUED. SINCE THE GROUND FOR RE-OPENING OF THE ASSESSMENT HAS NOT BEEN PRESSED BEFORE US THEREFORE WE ARE NOT GOING IN FURTHER DETAILS. THE AO ISSUED A SHOW CAUSE NOTICE TO THE A SSESSEE AND POINTED OUT THAT VARIOUS EXPENSES CLAIMED BY THE ASSESSEE ARE NOT AL LOWABLE BECAUSE ASSESSEE HAS ONLY HOUSE PROPERTY INCOME SO WHY SUCH EXPENSES SHOULD NOT BE DISALLOWED. IN RESPONSE IT WAS MAINLY STATED THAT A SSESSEE WAS PROVIDING VARIOUS COMMON SERVICES TO THE TENANTS LIKE ELECTRICITY, WA TER, MAINTENANCE, LIFT ETC. AND THEREFORE EXPENSES INCURRED SHOULD BE ALLOWED. IT W AS ALSO POINTED OUT THAT RENT PORTION HAS BEEN SEPARATELY DECLARED AND UNDER THE HEAD BUSINESS INCOME ONLY EXPENSES RELATING TO PROVISIONS OF COMMON SERVICES WAS CLAIMED. THE AO EXAMINED THESE SUBMISSIONS AND DID NOT FIND ANY FOR CE IN THE SAME. FIRST OF ALL HE NOTED THAT ASSESSEE COULD NOT SHOW ANY THING IN THE FIXED ASSETS BY WAY OF ELECTRICAL FITTINGS, FURNITURE ETC. FOR OPERATION O F AN OFFICE BY THE ASSESSEE. SECONDLY PROVISION OF ELECTRICITY AND WATER IS AUTO MATIC AND IS NECESSARILY TO BE PROVIDED TO THE TENANT. AS FAR AS REPAIR AND MAINTE NANCE IS CONCERNED A SEPARATE DEDUCTION @ 30% IS ALLOWED IN THE ACT ITSE LF. THEREFORE, THERE WAS NO JUSTIFICATION IN SHOWING THESE EXPENSES AND ULTIMAT ELY AO INCLUDED MISCELLANEOUS RECEIPTS ALSO IN THE RENTAL INCOME AN D COMPUTED INCOME ACCORDINGLY. 6. ON APPEAL IT WAS MAINLY STATED THAT RENT AGREEME NT WERE MAINLY FOR LETTING OUT OF PROPERTY AND IN RESPECT OF COMMON SE RVICES THE TENANT WERE 3 BEING CHARGED SEPARATELY AND THEREFORE THESE SERVIC ES SHOULD BE CONSTRUED AS BUSINESS INCOME AND IN THIS REGARD FOLLOWING CASES WERE RELIED : DECISION OF KARNATAKA HIGH COURT IN CASES OF M/S SH ANKARNARAYAN HOTELS (P) LTD. (201 ITR 138), M/S MYSORE INTERCONTINENTAL HOTELS ( P) LTD. (322 ITR 116) AND OF HONBLE SUPREME COURT IN THE CASE OF M/S INVESTMEN T LTD. (77 ITR 533). 7. THE LD. CIT AFTER EXAMINING THESE SUBMISSIONS DI D NOT FIND ANY FORCE AND REJECTED THE CLAIM OF ASSESSEE BY FOLLOWING THE DEC ISION OF HONBLE CALCUTTA HIGH COURT IN CASE OF CIT VS. M/S SHAMBHU INVESTMEN T PVT. LTD. 249 ITR 47 WHICH WAS LATER CONFIRMED BY THE HONBLE SUPREME COURT AL SO. 8. BEFORE US LD. COUNSEL FOR THE ASSESSEE REITERATE D THE SUBMISSIONS MADE BEFORE AO AND LD. CIT(A). HE FURTHER REFERRED TO TH E BILLS ISSUED TO VARIOUS TENANTS REGARDING CHARGES FOR COMMON SERVICES. HIS MAIN CON TENTION REMAINS THAT SINCE ASSESSEE WAS PROVIDING SEPARATE SERVICES FOR WHICH SEPARATE CHARGES WERE RECEIVED AND THE SAME SHOULD BE TREATED AS BUSINESS INCOME. HOWEVER, ON ENQUIRY BY THE BENCH HE COULD NOT SHOW IN THE LEASE AGREEMENT WITH VARIOUS TENANTS EVEN SINGLE CLAUSE WHERE THERE IS A REQUIRE MENT FOR ASSESSEE TO PROVIDE COMMON SERVICES SEPARATELY. HE ALSO RELIED ON THE D ECISION OF HONBLE MADRAS HIGH COUT IN CASE OF CIT VS. CHENNAI PROPERTIES AND INVESTMENTS LTD.303 ITR 33. 9. ON THE OTHER HAND LD. DR STRONGLY SUPPORTED THE ORDER OF LD. CIT(A). 10. AFTER CONSIDERING THE RIVAL SUBMISSIONS CAREFUL LY WE FIND THAT LD. CIT(A) HAS DECIDED THIS ISSUE VIDE PARA 5.3 WHICH IS AS UNDER: 5.3 I HAVE CONSIDERED THE SUBMISSION OF THE LD. CO UNSEL. THERE IS NO SUBSTANCE IN THE ARGUMENT OF THE LD. COUNSEL THAT THE INCOME RECEIVED FROM COMMON SERVICES PROVIDED TO THE TENANTS SHOULD NOT BE TAXE D AS INCOME FROM HOUSE PROPERTY ONLY BECAUSE IT WAS NOT PART OF RENT AGREE MENT. IN THE INSTANT CASE, THE COMMON SERVICES PROVIDED BY THE APPELLANT WERE LIMI TED TO THE TENANTS ONLY AND SO THE INCOME FROM THE SAME IS TO BE TAXED AS INCO ME FROM HOUSE PROPERTY. THE RATIO OF THE DECISIONS QUOTED BY THE LD. LD. COUNSE L FOR THE ASSESSEE DOES NOT APPLY TO THE FACTS OF THE PRESENT CASE. IN FACT, TH E CASE OF THE APPELLANT IS SQUARELY COVERED BY THE DECISION OF HONBLE CALCUTT A HIGH COURT IN THE CASE OF M/S SHAMBHU INVESTMENT(P) LTD. (249 ITR 47), IN WHI CH THEIR LORDSHIPS HAD HELD THAT WHERE THE PRIME OBJECT WAS TO LET OUT THE PROP ERTY TO VARIOUS TENANTS AND COMMON FACILITIES HAD BEEN PROVIDED, THE INCOME DER IVED FROM THAT PROPERTY WAS TO BE ASSESSED AS INCOME FROM HOUSE PROPERTY. IN THIS CASE, HONBLE CALCUTTA HIGH COURT HAD APPLIED THE GUIDELINES ENU MERATED BY HONBLE SUPREME COURT IN THE CASE OF SULTAN BROS. (P) LTD. (SUPRA). THIS DECISION OF HONBLE CALCUTTA HIGH COURT HAS BEEN UPHELD BY HONBLE SUPR EME COURT IN 263 OTR 143. HENCE, THE DISALLOWANCE MADE BY THE ASSESSING OFFIC ER IS CONFIRMED. GROUNDS OF APPEAL NOS. 4 AND 5 ARE DISMISSED. 11. IN OUR OPINION THE LD. CIT(A) HAS CORRECTLY DEC IDED THE ISSUE. FIRST OF ALL THERE IS NO SEPARATE CLAUSE IN ANY OF THE LEASE AGR EEMENT ENCLOSED IN THE PAPER 4 BOOK WHICH SHOWS THAT ASSESSEE AGREED TO PROVIDE AN Y SERVICES TO ANY OF THE TENANTS. SECONDLY THE PERUSAL OF DETAILS FILED IN T HE PAPER BOOK MAINLY RELATED TO ELECTRIC CHARGES AND PROVISION OF COMMON SERVICES. ELECTRICITY IS GENERALLY PROVIDED BY THE STATE ELECTRICITY BOARD AND THEREFO RE ASSESSEE CANNOT HAVE ANY ROLE TO PLAY IN FACT THE RELEVANT TERMS AND CONDITI ONS AGREED WITH M/S AVENTIS PHARMA LIMITED ONE OF THE TENANT OF ASSESSEE WHICH WE HAVE TAKEN FROM THE COPY OF THE AGREEMENT FILED AT PAGE 39 TO 42 OF THE PAPER BOOK WHICH READS AS UNDER. THE LESSEE HEREBY CONVENANTS WITH THE LESSOR AS F OLLOWS: (A) TO PAY THE RENT HEREBY RESERVED IN ADVANCE BY T HE 5 TH DAY OF EVERY ENGLISH CALENDAR MONTH. (B) TO PAY THE CHARGES FOR ELECTRICITY CONSUMED IN THE SAID PREMISES AS PER THE ACTUAL METER READINGS, ON RECEIPT OF THE BILLS THEREOF. (C) TO REIMBURSE TO THE LESSOR THE MAINTENANCE CHAR GES LEVIED BY THE SOCIETY IN RESPECT OF THE SAID PREMISES. CURRENTLY, THE MAINTE NANCE CHARGES ARE RS. 2000/- AND MUNICIPAL TAXES ARE RS. 500/- PER MONTH. (D) . THE ABOVE CLEARLY SHOWS THAT TENANT WAS REQUIRED TO PAY SEPARATELY FOR ELECTRICAL CHARGES AND MAINTENANCE CHARGES BEING LE VIED BY THE SOCIETY WHICH MEANS SERVICES MUST HAVE BEEN PROVIDED BY THE SOCIE TY. WE FURTHER FIND THAT IN CASE OF CIT VS. M/S SHAMBHU INVESTMENT PVT. LTD. AS SESSEE WAS OWNING A BUILDING AT RAHEJA CHAMBERS, NARIMAN POINT, MUMBAI. THE SAID PREMISES WERE FURNISHED BY THE ASSESSEE AND LET OUT TO VARIOUS PE RSONS AND/OR FIRMS WITH ALL FURNITURE, FIXTURES, LIGHT, AIR-CONDITIONERS FOR BE ING USED AS TABLE SPACE. THE SAID ASSESSEE UNDER THE AGREEMENT WITH THOSE OCCUPIERS I S TO PROVIDE SERVICES LIKE WATCH AND WARD STAFF, ELECTRICITY, WATER AND OTHER COMMON AMENITIES. A COPY OF ONE OF SUCH AGREEMENT WAS FILED IN THE COURT IN THE COURSE OF HEARING. THE INCOME DERIVED BY THE ASSESSEE FROM THE SAID OFFICE PREMISES WAS OFFERED FOR TAXATION AS BUSINESS INCOME AND THE SAME WAS ASSESS ED ACCORDINGLY BY THE ASSESSING OFFICER. THE COMMISSIONER OF INCOME-TAX P ERUSED THE SAME IN DETAIL AND HELD THAT THE INCOME DERIVED FROM THE SAID PROP ERTY WAS ACTUALLY RENT RECEIVED FROM THE OCCUPIERS AND NOT TO BE REGARDED AS SERVICE CHARGES AND MAINTENANCE AND CANNOT BE TERMED AS BUSINESS INCOME . ACCORDING TO THE COMMISSIONER, THE ASSESSMENT MADE UNDER SECTION 143 (3) WAS ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF THE REVENUE. ACCOR DINGLY, A NOTICE WAS ISSUED TO THE ASSESSEE UNDER SECTION 263 OF THE SAID ACT AS T O WHY THE ASSESSMENT SHOULD 5 NOT BE SET ASIDE AND FRESH ASSESSMENT SHOULD NOT BE MADE BY ASSESSING THE SAID INCOME AS RENTAL INCOME. THE COMMISSIONER OF INCOME-TAX AFTER GIVING HEARING TO THE ASSESSEE REMANDED THE MATTER BACK TO THE ASSESSING OFFICER WITH A DIRECTION TO ASSESS THE SAID INCOME AS PROPERTY INC OME. 12. ON THE ABOVE FACTS THE HONBLE HIGH COURT HELD AS UNDER: HELD, THAT IT WAS EVIDENT FROM THE AGREEMENT THAT THE ASSESSEE HAD LET OUT THE FURNISHED OFFICE TO THE OCCUPANTS O N A MONTHLY RENTAL WHICH WAS INCLUSIVE OF ALL CHARGES TO THE ASSESSEE. THE ENTIRE COST OF THE PROPERTY LET OUT TO THE OCCUPANTS HAD BEEN RECOVERE D AS AND BY WAY OF INTEREST-FREE ADVANCE BY THE ASSESSEE. THEREFORE, I T COULD NOT BE SAID THAT THE ASSESSEE WAS EXPLORING THE PROPERTY FOR ITS COM MERCIAL BUSINESS ACTIVITIES. THE ABOVE DECISION HAS BEEN CONFIRMED BY THE HONBL E SUPREME COURT AS REPORTED IN 263 ITR 143 AND BY DOCTRINE OF MERGER T HIS DECISION HAS BECOME DECISION OF THE HONBLE SUPREME COURT AND THEREFORE SAME IS BINDING ON US AND AS WELL AS LD. CIT(A). IN VIEW OF THE DISCUSSIONS W E FIND NOTHING WRONG WITH THE ORDER OF LD. CIT(A) AND CONFIRM THE SAME. IN THE RESULT APPEAL OF THE ASSESSEE IS DISMISSED. ITA NO. 465 & 466/CHD/2013 13. IN BOTH THESE APPEALS ASSESSEE HAS RAISED THE I SSUE REGARDING RE-OPENING OF THE ASSESSMENT WHICH WAS NOT PRESSED BEFORE US A ND THEREFORE SAME IS DISMISSED AS NOT PRESSED. THE OTHER ISSUE REGARDING DISALLOWANCE OF EXPENDITURE ON ACCOUNT OF SERVICES PROVIDED TO THE TENANT HAS A LREADY BEEN ADJUDICATED BY US IN THE ABOVE NOTED PARAS WHILE ADJUDICATION T HE ASSESSEES OWN CASE FOR AY 2006-07 IN ITA NO. 464/CHD/2013. THEREFORE FOLLO WING THE ABOVE ORDER WE DECIDE THIS ISSUE AGAINST THE ASSESSEE. 14. IN THE RESULT BOTH THE APPEALS ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 21/05/2015 SD/- SD/- (BHAVNESH SAINI) (T.R. SOOD) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 21/05/2015 AG COPY TO: THE APPELLANT, THE RESPONDENT, THE CIT, TH E CIT(A), THE DR