ACIT 13(2)(1), MUMBAI V. SMRUTA ENGINEERING INDUSRIES P.LTD, MUMBAI

ITA 4951/MUM/2016

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 8927 (ITAT-MUMBAI)
• Duration Of Justice: 5 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-01-2017
• Appeal Filed By: Department
• Bench Allotted: SMC
• Assessment Year: 2011-2012
• Appeal Filed On: 03-08-2016
• Court: TRIBUNAL
• Department Lawyers: TUFAIL AHMAD KHAN
• Keywords: Business income; Depreciation; Opportunity of being heard; Principle of natural justice

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL J BENCH, MUMBAI BEFORE SHRI D. KARUNAKARA RAO, ACCOUNTANT MEMBER AND SHRI AMARJIT SINGH, JUDICIAL MEMBER ITA NO.4951/M/2016 (AY 2011 - 2012) ACIT 13(2)(1), R.NO. 146A, 1 ST FLOOR, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI 20. / VS. M/S. SMRUTA ENGINEERING INDUSTRIES PVT LTD., 501, SEVEN STAR APARTMENT, JAIRAJ NAGAR, BORIVALI, MUMBAI 400 092. ./ PAN : AADCS8541G ( / APPELLANT) .. ( / RESPONDENT ) / APPELLANT BY : SHRI TUFAIL AHMAD KHAN, DR / RESPONDENT BY : SHRI VIMAL PUNMIYA / DATE OF HEARING : 12.01.2017 / DATE OF PRONOUNCEMENT : 12 .01.2017 / O R D E R PER D. KARUNAKARA RAO, AM: THIS APPEAL FILED BY THE REVENUE ON 03.08.2016 IS AGAINST THE ORDER OF THE CIT (A) - 21, MUMBAI DATED 16.05.2016 FOR THE ASSESSMENT YEAR 2011 - 2012. IN THIS APPEAL, REVENUE RAISED THE FOLLOWING GROUND WHICH READS AS UNDER: - WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD CIT (A) WAS JUSTIFIED IN ASSESSING THE RENTAL INCOME OF RS. 1,08,00,000/ - UNDER THE HEAD OF INCOME FROM BUSINESS AND THUS ALLOWING THE CLAIM OF DEPRECIATION AND OTHER EXPENSES AGAINST THE SAME WITHOUT APPRECIATING THE FACT THAT THE RENT AGREEMENT IS FOR LETTING OUT THE LAND AND FACTORY SHED ONLY. 2. BEFORE US, LD COUNSEL FOR THE ASSESSEE BROUGHT OUR ATTENTION TO THE ABOVE GROUND AND SUBMITTED THA T THE ASSESSEE EARNED INCOME OUT OF THE BUSINESS ACTIVITY OF RENTING OUT THE FACTORY PREMISES, PLANT AND MACHINERY ETC AS A GOING CONCERN AND THE SAME WAS BECAUSE OF TAX UNDER THE HEAD PROFITS AND GAINS FROM THE BUSINESS OR PROFESSION. THE SAID CLAIM OF THE ASSESSEE WAS ACCEPTED IN THE PAST AND THE LATER ASSESSMENT YEARS. HOWEVER, ASSESSING OFFICER THRUST ON THE ASSESSEE THE HEAD OF INCOME FROM HOUSE PROPERTY AND ALTERED THE CLAIM OF THE ASSESSEE IN THIS ASSESSMENT YEAR. ON APPEAL, CIT (A) GRANTED RE LIEF AND RESTORED THE CLAIM OF THE ASSESSEE. AGGRIEVED WITH THE SAME, REVENUE IS IN APPEAL BEFORE THE TRIBUNAL. 2 BRINGING OUR ATTENTION TO THE OBJECTS OF THE COMPANY, LD COUNSEL FOR THE ASSESSEE READ OUT THAT THE ASSESSEES MAIN OBJECT IS TO CARRY ON THE BUSINESS OF RENTING, LEASING OR HIRING BY ANY MANNER AND JUSTIFIED THE CLAIM OF THE ASSESSEE IN THE RETURN OF INCOME. FURTHER, BRINGING OUR ATTENTION TO THE BINDING JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF CHENNAI PROPERTIES & INVESTMENTS LTD VS. CIT [2015] 56 TAXMANN.COM 456 (SC) AND ANOTHER JUDGMENT OF THE APEX COURT IN THE CASE OF RAYALA CORPORATION (P.) LTD VS. ACIT [2016] 72 TAXMANN.COM 149 (SC). LD COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE SAID JUDGMENTS ARE RELEVANT FOR THE FOLLOWING LEGAL PROPOSITION WHERE IN TERMS OF MEMORANDUM OF ASSOCIATION, MAIN OBJECT OF ASSESSEE - COMPANY WAS TO ACQUIRE PROPERTIES AND EARN INCOME BY LETTING OUT SAME, SAID INCOME WAS TO BE BROUGHT TO TAX AS BUSINESS INCOME AND NOT AS INCOME FROM HOUSE PROPERTY . FURTHER, IT IS ALSO HELD THAT WHERE THE ASSESSEE - COMPANY WAS ENGAGED IN THE BUSINESS OF LEASING OUT ITS HOUSE PROPERTIES TO EARN RENT INCOME SO EARNED AS RENT SHOULD BE TREATED AS BUSINESS INCOME AND NOT AS INCOME FROM HOUSE PROPERTY. RELYING ON THE ABOVE, LD COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE CIT (A) DID NOT APPRECIATE THE ABOVE BINDING LEGAL PROPOSITIONS. THE REASON FOR CIT (A)S SUCH DECISION MIGHT BE DUE TO THE FACT THAT THE SAID JUDGMENTS WERE PRONOUNCED SLIGHTLY LATER IN TIME AND IN ANY CASE, CIT (A) DID NOT GIVE THE BENEFIT OF THE SAID JUDGMENTS. 3. AFTER HEARING BOTH THE PARTIES, WE FIND, IT IS APPROPRIATE TO REMAND THIS ISSUE TO THE FILE OF THE CIT (A) FOR FRESH ADJUDICATION INTO THE MATTER AFTER EXAMINING THE MAIN OBJECTS OF TH E COMPANY AND THE CIRCUMSTANCES THAT LEAD TO THE RENTING OUT OF THE FACTORY PREMISES AND ASSETS FOR EARNING OF THE RENTAL INCOME. CIT (A) SHALL PASS AN APPROPRIATE ORDER AFTER ALLOWING A REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE AS PER THE SET PRINCIPLES OF NATURAL JUSTICE. T H E C I T ( A ) S H A L L A L S O C O N S I D E R T H E C I T E D J U D G M E N T S ( S U P R A ) . ACCORDINGLY WE ORDER. THUS, THE SOLITARY GROUND RAISED BY THE REVENUE IS ALLOWED FOR STATISTICAL PURPOSES. 4. IN THE RESULT, APPEAL OF THE REVENUE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 1 2 T H JANUARY, 2017. S D / - S D / - ( AMARJIT SINGH ) (D. KARUNAKARA RAO) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; 12.01.2017 3 . . ./ OKK , SR. PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE . //TRUE COPY// / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI