DCIT, New Delhi V. M/s Minda Corporation Ltd., Delhi

ITA 4705/DEL/2009

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 3481 (ITAT-DELHI)
• Duration Of Justice: 7 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-07-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 21-07-2010
• Assessment Year: 2005-2006
• Appeal Filed On: 14-12-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MONA MOHANTHY
• Assessee Lawyers: ROHIT JAIN; AVDHESH BANSAL ACA
• Keywords: Business income; Depreciation

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH E NEW DELHI BEFORE SHRI R.P. TOLANI AND SHRI B.C. MEENA ITA NO. 4705/DEL/2009 A.YR. 2005-06 DCIT, CIR. 6(1), VS. M/S MINDA CORPORATION. LTD. NEW DELHI. (FORMERLY KNOWN AS MINDA HUF LTD.) 36A, RAJASTHAN UDYOG NAGAR, DELHI-110033. ( APPELLANT ) ( RESPONDENT ) APPELLANT BY : MS. MONA MOHANTHY DR RESPONDENT BY : SHRI ROHIT JAIN CA & SH. AVDHESH BANSAL ACA O R D E R PER R.P. TOLANI , J.M : THIS IS REVENUES APPEAL AGAINST THE ORDER OF CIT(A )-IX, NEW DELHI DATED 1-9-2009 FOR A.Y. 2005-06. FOLLOWING GROUNDS ARE RA ISED: 1. THE ORDER OF THE LEARNED CIT(APPEALS) IS ERRON EOUS & CONTRARY TO FACTS AND LAW. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW , THE LEARNED . CIT(APPEALS ) HAS ERRED IN DELETING T HE ADDITION OF RS. 7,35,000/- MADE BY ASSESSING OFFICER. DISALLOWING T HE PROVISION FOR WARRANTY. 2.1. THE LEARNED . CIT(A) IGNORED THE FACT THAT THE I.T. ACT DOES NOT RECOGNIZE THE LIABILITY DE FUTURO, CLAIMED BY T HE ASSESSEE AS EXPENDITURE. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW , THE LEARNED . CIT(APPEALS ) HAS ERRED IN DIRECTING THE ASSESSING OFFICER TO TREAT RENT RECEIVED AS INCOME FROM HOUSE PROPERTY AS AGAINST THE BUSINESS INCOME TREATED BY THE ASSESSEE . ITA 4705/DEL/09 DCIT VS. M/S MINDA CORPN. LTD. 2 3.1. THE LEARNED . CIT(A) HAD IGNORED THE FACT THAT THE ASSESSEE IS USING THE PREMISE IN QUESTION AS ITS BUSINESS PREMI SE AND HAD CLAIMED DEPRECIATION ON IT. 2. LEARNED DR RELIED ON THE ORDER OF AO. 3. LEARNED COUNSEL FOR THE ASSESSEE, ON THE OTHER H AND, CONTENDS THAT THE ISSUE ABOUT ALLOWABILITY OF PROVISION OF WARRANTEE IS COV ERED BY EARLIER ORDERS OF THE TRIBUNAL IN ASSESSEES OWN FOR A.Y. 2001-02 TO 2004 -05. THE ITAT VIDE ITS ORDER DATED 28-7-2006 IN ITA NO. 3560/DEL/04 FOR A.Y. 200 1-02, A COPY OF WHICH IS PLACED IN PAPER BOOK, WHILE ALLOWING THE CLAIM HAS HELD AS UNDER: 4. LEARNED DR FOR THE REVENUE EXCEPT PLACING RELIA NCE ON THE REASONING GIVEN IN THE ORDER OF THE CIT(A) WAS NOT ABLE TO CONTROVERT THE ABOVE SUBMISSIONS OF LEARNED AR FOR THE ASSESSE E. IN THIS VIEW OF THE MATTER AND RESPECTFULLY FOLLOWING THE DECISIONS (SUPRA) IT IS HELD THAT THE PROVISIONS TOWARDS WARRANTY CLAUSE OF RS. 26,72,412/- MADE BY THE ASSESSEE ON ACCRUAL BASIS IS NOT CONTINGENT AND UNASCERTAINED LIABILITY AND SO THE SAME IS ALLOWABLE AS DEDUCTION TO THE ASSESSEE. 3.1. APROPOS THE SECOND GROUND ALSO IT WAS CONTENDE D BY THE LEARNED COUNSEL THAT THE ASSESSEE HAD LET OUT SOME PROPERTY ON RENT , THE RENT RECEIVED THEREFROM WAS CLAIMED UNDER THE HEAD INCOME FROM HOUSE PROPE RTY, THE EXPENSES DEBITED TO P&L A/C IN RESPECT OF PROPERTY HAS BEEN ADDED BA CK BY THE ASSESSEE TO ITS INCOME. AO, HOWEVER, HELD THE HOUSE PROPERTY INCOME TO BE BUSINESS INCOME AND DISALLOWED THE STANDARD DEDUCTION. CIT(A) HAS C ONSIDERED THESE ASPECTS AND RELYING ON VARIOUS JUDGMENTS HAS HELD IT TO BE INC OME FROM HOUSE PROPERTY BY FOLLOWING OBSERVATIONS: 4.1. THE COUNSEL FOR THE ASSESSEE HAS ARGUED THAT THE COURTS HAVE IN VARIOUS CASES HELD THAT IN VIEW OF THE SPECIFIC MAN DATE OF SECTION 14 READ WITH SECTION 22 OF THE ACT, RENTAL INCOME FROM HOUSE PROPERTY IS ITA 4705/DEL/09 DCIT VS. M/S MINDA CORPN. LTD. 3 TAXABLE ONLY UNDER THE HEAD INCOME FROM HOUSE PROP ERTY, WHICH IS A SPECIFIC HEAD FOR TAXATION OF RENTAL INCOME FROM PROPERTY OF WHICH THE ASSESSEE IS THE OWNER OR DEEMED OWNER. THE LD. COUNSEL OF THE ASSESSEE HAS QUOTED THE FOLLOWING CASE LAWS:- - EAST INDIA HOUSING & LAND DEVELOPMENT TRUST LTD. VS . CIT 42 ITR 49 - S.G. MERCANTILE CORPN. P./ LTD. VS. CIT 83 ITR 700 - SHAMBHU INVESTMENT P. LTD. VS. CIT 263 ITR 143 - KEYARAM HOTELS (P) LTD. VS. ACIT 300 ITR 118(MAD.) - PAREKH TRADERS VS. CIT 150 ITR 310 - CIT VS. NEW INDIA INDUSTRIES LTD. 201 ITR 208 - ATMA RAM PROPERTIES (P) LTD. VS. JCIT 8 SOT 741 (DE L). 4.2. I HAVE CONSIDERED THE SUBMISSIONS MADE BY THE LD. AR AND THE JUDGMENTS OF THE VARIOUS CASE LAWS BROUGHT TO M Y NOTICE BY THE LD. COUNSEL. I AM OF THE VIEW THAT IF THE INTENTION OF THE ASSESSEE IS TO LET OUT THE PROPERTY, IT HAS TO BE CONSIDERED AS RENTAL INCOME OR INCOME FROM PROPERTY AND IF THE PURPOSE IS TO EXPLO IT THE IMMOVABLE PROPERTY FOR COMMERCIAL ACTIVITY, IT SHOULD BE TREA TED AS BUSINESS INCOME. INCOME DERIVED AS RENT HAS TO BE COMPUTED U NDER THE SPECIFIC HEAD REGARDLESS OF WHETHER PROPERTY HAD AT ONE TIME BEEN UTILIZED FOR BUSINESS PURPOSES. 4.3. IN THIS CASE, THE APPELLANT HAD ACQUIRED THE P REMISES ON LEASE FOR 90 YEARS FROM NEW OKHLA INDUSTRIAL DEVELOPMENT AUTHORITY NOIDA, SO HE BECOME THE DEEMED OWNER FOR THE PURPOS E OF SECTION 27(IIIB) OF THE I.T. ACT. FURTHER SINCE THIS PROPER TY IS OWNED BY THE ASSESSEE AND NOT BEING USED FOR BUSINESS AND AHS BE EN LET OUT TO ENJOY RENTAL INCOME, THERE IS NO CASE FOR THE SAME BEING TREATED AS INCOME FROM BUSINESS. THE 2 ND GROUND OF APPEAL IS THEREFORE ALLOWED. 4. WE HAVE HEARD RIVAL CONTENTIONS AND GONE THROUGH THE ENTIRE MATERIAL AVAILABLE ON RECORD. APROPOS PROVISION FOR WARRANTY , RESPECTFULLY FOLLOWING EARLIER ORDERS OF THE TRIBUNAL IN ASSESSEES OWN CASE WE UP HOLD THE ORDER OF CIT(A) ALLOWING THE CLAIM. ITA 4705/DEL/09 DCIT VS. M/S MINDA CORPN. LTD. 4 4.1. APROPOS SECOND GROUND, WE SEE NO INFIRMITY IN THE ORDER OF CIT(A) HOLDING THAT RENTAL INCOME DERIVED FROM HOUSE PROPERTY UNDE R THE HEAD INCOME FROM HOUSE PROPERTY RELYING ON VARIOUS JUDGMENTS (SUPRA). BESI DES, HEAD OF INCOME DECLARED BY ASSESSEE HAVE BEEN ACCEPTED IN EARLIER YEARS, WH ICH IS NOT DISPUTED. IN VIEW THEREOF, WE UPHOLD THE ORDER OF CIT(A) ON THIS ISSU E. 5. IN THE RESULT, REVENUES APPEAL IS DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON 22 ND JULY, 2010. (B.C. MEENA ) ( R.P. TOLANI ) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 22 ND JULY 2010. MP COPY TO : 1. ASSESSEE 2. AO 3. CIT 4. CIT(A) 5. DR ITA 4705/DEL/09 DCIT VS. M/S MINDA CORPN. LTD. 5