ADDL CIT 24(3), MUMBAI V. SEA PRINCESS REALTY, MUMBAI

ITA 5006/MUM/2011

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 75255 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 6 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-01-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 06-01-2014
• Assessment Year: misc
• Appeal Filed On: 24-06-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ASHOK SURI
• Assessee Lawyers: HIMANSHU GANDHI
• Keywords: Business income

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL E BENCH, MUM BAI . . , , BEFORE SHRI R. C. SHARMA, ACCOUNTANT MEMBER AND SHRI VIVEK VARMA, JUDICIAL MEMBER ./ I.T.A. NO. 5006/MUM/2011 ( / ASSESSMENT YEAR: 2008-09) DY. CIT-24(3), ROOM NO.701, C-11, 7 TH FLOOR, B. K. C., BANDRA (E), MUMBAI-51 / VS. M/S. SEA PRINCESS REALTY H-WING, ASHOKRAJ, S. V. ROAD, GOREGAON (W), MUMBAI-400 062 ./ ! ./PAN/GIR NO. AAFFM 0605 C ( ' /APPELLANT ) : ( #$' / RESPONDENT ) ' % & / APPELLANT BY : SHRI ASHOK SURI #$' % & / RESPONDENT BY : SHRI HIMANSHU GANDHI ' ( % ) * / DATE OF HEARING : 08.01.2014 +,-. % ) * / DATE OF PRONOUNCEMENT : 08.01.2014 / O R D E R PER R. C. SHARMA, A. M.: THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER BY THE LD. CIT(A)-34, MUMBAI DATED 08.04.2011, IN THE MATTER OF ORDER PAS SED U/S.143(3) OF THE INCOME TAX ACT, 1961 FOR THE ASSESSMENT YEAR (A.Y.) 2008-09. 2. FOLLOWING TWO GROUNDS HAVE BEEN TAKEN BY THE REV ENUE: 1. ON THE FACTS & IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN DIRECTING THE A.O. TO TREAT THE INTEREST I NCOME AS INCOME FROM BUSINESS INSTEAD OF INCOME FROM OTHER SOURCES WITHOUT APPREC IATING THE FACT THAT INTEREST INCOME EARNED BY THE ASSESSEE HAS NO NEXUS WITH THE BUSINESS ACTIVITIES OF THE ASSESSEE. 2 ITA NO. 5006/MUM/2011 (A.Y. 2008-09) DY. CIT VS. M/S. SEA PRINCESS REALTY 2. ON THE FACTS & IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN DIRECTING THE A.O. TO TREAT THE SERVICE CH ARGES AS BUSINESS INCOME INSTEAD OF INCOME FROM HOUSE PROPERTY WITHOUT CONSIDERING T HAT THE SERVICE CHARGES RECEIVED BY THE ASSESSEE FIRM WAS RENTAL INCOME FRO M HOUSE PROPERTY OWNED BY THE ASSESSEE AND IN NO WAY CONNECTED WITH THE ASSESSEE S BUSINESS ACTIVITIES. WITHOUT PREJUDICE TO ABOVE, SERVICE CHARGES CAN BE ALLOWED TO BE TAXED AS INCOME FROM OTHER SOURCES. 3. RIVAL CONTENTIONS HAVING HEARD ON RECORD AND PER USED. FACTS IN BRIEF ARE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF DEVELOPING O F THE LAND, BUSINESS SITES, THAT OF EXECUTION OF BUILDING CONSTRUCTION WORK AND CARRYIN G ON BUSINESS AS BUILDING DEVELOPERS, CONSTRUCTION AND DEALING IN FLATS. AS THE CONSTRUCT ION AND THE DEVELOPMENT WORK NEEDS A HUGE AMOUNT OF THE MONEY THE ASSESSEE HAD RECEIVED MONEY FROM THE PARTNERS FOR THE DEVELOPMENT OF THE PROPERTIES. SINCE THE CONSTRUCTI ON WORK IS CARRIED ON STAGE BY STAGE, THE AMOUNT WAS WITHDRAWN AS AND WHEN IT IS REQUIRED FOR CONSTRUCTION OF BUILDING. SUCH A FUNDS WERE GIVEN AS LOANS TO VARIOUS PARTIES TILL I T IS USED FOR DEVELOPMENT OF PROPERTIES. THE ASSESSEE HAD RECEIVED INTEREST ON SUCH LOANS GI VEN. SUCH INCOME RECEIVED BY THE ASSESSEE WAS OFFERED AS INCOME FROM BUSINESS AND P ROFESSION. 4. THE A.O. TREATED THE INTEREST INCOME AS INCOME FROM OTHER SOURCES IN PLACE OF BUSINESS INCOME. BY THE IMPUGNED ORDER, THE LD. C IT(A) ALLOWED THE ASSESSEES CLAIM OF BUSINESS INCOME AFTER HAVING THE FOLLOWING OBSERVAT IONS: 2.3 I HAVE GONE THROUGH THE CONTENTS OF THE IMPUGN ED ASSESSMENT ORDER AS WELL AS ARGUMENTS & SUBMISSIONS OF THE APPELLANT ALONG W ITH THE MATERIAL AVAILABLE ON RECORD. I FIND THAT THIS ISSUE HAD ALSO COME UP BEF ORE ME IN THE CASE OF M/S. MINAI ENTERPRISES FOR AY. 2006-07 & 07- 08 AND MIS. MAMTA ENTERPRISES FOR AY. 2004- 05 IN THE CASE OF M/S. MAMTA ENTERPRISES BEFORE MY LD. PREDECESSOR FOR A Y. 2005-06 & 2006-07. THE RELEVANT PORTION OF THE OPER ATIVE PART OF MY DECISION IN APPEAL NO. CIT(A)/34/IT-73/08-09 DATED 18/08/2010 O N THE SAME ISSUE IN THE CASE OF M/S. MINAI ENTERPRISES FOR AY. 2006-07 IS REPROD UCED HEREUNDER FOR THE PURPOSES OF CLARITY:- '4 I HAVE GONE THROUGH THE CONTENTS OF THE IMPUGNE D ASSESSMENT ORDER AND THE ASSESSMENT ORDER IN THE CASE OF SISTER CONC ERN M/S. MAMTA ENTERPRISES FOR THE SAME ASSESSMENT YEAR 2006-07 AN D ALSO THE CONTENTS OF 3 ITA NO. 5006/MUM/2011 (A.Y. 2008-09) DY. CIT VS. M/S. SEA PRINCESS REALTY THE ORDER OF MY PREDECESSOR DATED 23/03/2010 (SUPRA ) ALONG WITH THE SUBMISSIONS OF LD. AUTHORIZED REPRESENTATIVE PLACED ON RECORD. I FIND THAT THE SAME ASSESSING OFFICER HAS PASSED THE ORDERS FO R M/S. MAMTA ENTERPRISES FOR AYRS. 2005-06 & 2006-07 AS WELL AS M/S. MINAI ENTERPRISES AND HAS TAKEN THE SAME STAND. I FIND NO MATERIAL DI FFERENCE IN EITHER THE ACTION OF THE LD. ASSESSING OFFICER OR THE FACTS AN D CIRCUMSTANCES IN BOTH THE CASES. THEREFORE, THERE APPEARS NO REASON FOR W HICH SHOULD MAKE A DEPARTURE FROM THE DECISION MY LD. PREDECESSOR IN T HE CASE OF M/S. MAMTA ENTERPRISES. FOR THE SAKE OF CLARITY, PARA 5 OF THE SAID APPELLATE ORDER IS REPRODUCED HEREUNDER:- 'I HAVE CAREFULLY CONSIDERED THE FINDINGS OF THE AS SESSING OFFICER AND SUBMISSIONS OF THE APPELLANT FOR BOTH THE YEARS. AF TER CONSIDERING THE SUBMISSIONS OF THE APPELLANT AND VARIOUS CASE LAWS, SPECIALLY DECISION OF KARNATAKA HIGH COURT IN THE CASE OF SATISH CHANDRA & CO. VS. CIT 234 ITR 70 (KAR) AND DECISION OF BOMBAY HIGH COURT IN T HE CASE OF CIT VS. LOK HOLDINGS 308 ITR 356 (BOM) WHICH ARE FULLY APPL ICABLE ON THE FACTS OF THIS CASE. I AM OF THE VIEW THAT INTEREST EARNED ON SURPLUS FUNDS OF BUSINESS SHOULD BE ASSESSED AS BUSINESS INCOME AND NOT AS IN COME FROM OTHER SOURCES. FURTHER, THE SET OFF SHOULD BE ALLOWED ACC ORDING TO THE PROVISIONS OF THE ACT. THUS APPEALS FOR BOTH THE YEARS ARE ALL OWED'. 2.3.1 IN VIEW OF THE ABOVE DISCUSSION, THE ACTION OF THE LD. ASSESSING OFFICER IN THIS CASE ALSO IS NOT UPHELD AND THE ASSESSING OFFI CER IS DIRECTED TO TREAT THE INTEREST EARNED ON SURPLUS FUNDS OF BUSINESS TO BE THE BUSINESS INCOME AND ALLOW THE INTEREST PAID AGAINST THE SAME ACCORDINGLY AS P ER THE P PROVISIONS OF I.T. ACT, 1961. 5. WE FOUND THAT THE ORDER OF THE LD. CIT(A) IN THE CASE OF M/S. MINAL ENTERPRISES (SUPRA) WAS APPEALED BY THE DEPARTMENT BEFORE THE T RIBUNAL AND THE TRIBUNAL VIDE ITS ORDER DATED 16.04.2013 IN ITA NO.8185/M/2010 UPHELD THE ORDER OF THE LD. CIT(A). AS THE FACTS AND CIRCUMSTANCES IN THE INSTANT APPEAL A RE PARAMATERIA TO THE FACTS CONSIDERED BY THE TRIBUNAL IN THIS ORDER, RESPECTFULLY FOLLOWI NG THE ORDER OF THE TRIBUNAL WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LD. CIT(A) F OR TREATING THE INTEREST INCOME AS INCOME FROM BUSINESS. 6. THE ASSESSING OFFICER HAS ALSO TREATED THE SERVI CE CHARGES OF RS.4,48,330/- AS INCOME FROM 'HOUSE PROPERTY' AND DEDUCTED 30% THERE OF FROM HOUSE PROPERTY AND 4 ITA NO. 5006/MUM/2011 (A.Y. 2008-09) DY. CIT VS. M/S. SEA PRINCESS REALTY THEREBY DISALLOWED THE EXPENDITURE OF RS.34,04,089/ - AGAINST THE ASSESSEES OFFERING THE SAID INCOME AS BUSINESS INCOME. 7. BY THE IMPUGNED ORDER, THE LD. CIT(A) TREATED TH E INCOME AS INCOME FROM BUSINESS AFTER HAVING THE FOLLOWING OBSERVATIONS: 3.3 I HAVE GONE THROUGH THE CONTENTS OF THE IMPUGN ED ASSESSMENT ORDER AS WELL AS ARGUMENTS & SUBMISSIONS OF THE APPELLANT ALONG W ITH THE MATERIAL AVAILABLE ON RECORD. I FIND FORCE IN THE ARGUMENTS & SUBMISSIONS OF LD. AUTHORIZED REPRESENTATIVE THAT THERE WAS NO OCCASION TO TREAT THE RENTAL INCOME TO BE HOUSE PROPERTY IN THE FACTS & CIRCUMSTANCES OF THE INSTA NT CASE AS THE FACTS AND CIRCUMSTANCES OF THE INSTANT CASE ARE SIMILAR TO TH E CASE OF HIRANANDANI DEVELOPERS (P) LTD. VS. JCIT 35 SOT 430 (MUM) RELIE D UPON BY THE LD. AUTHORIZED REPRESENTATIVE BEFORE ME. THEREFORE, BY RESPECTFULLY FOLLOWING THE DECISION IN THE CASE OF HIRANANDANI DEVELOPERS (P) LTD. (SUPRA) AND CIT VS. SALES MAGNASITE (P) LTD. 214 ITR 1 (BOM), THE ASSESSING O FFICER IS DIRECTED TO TREAT THE IMPUGNED RENTAL INCOME TO BE BUSINESS INCOME AND ALLOW THE RESPECTIVE IMPUGNED EXPENSES THEREWITH. THUS, APPEAL IS ALLOWE D ON GROUND NO.2 &3 ACCORDINGLY. 8. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND FOU ND THAT THE LD.CIT(A) HAS FOLLOWED THE DECISION OF THE CO-ORDINATE BENCH IN T HE CASE OF HIRANANDANI DEVELOPERS (P) LTD. VS. JCIT 35 SOT 430 (MUM). AS THE FACTS OF HIRANANDANI DEVELOPERS (P) LTD. (SUPRA) ARE PARAMATERIA TO THE FACTS OF THE ASSESSE E, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LD. CIT(A) FOR TREATING THE RENTAL INC OME AS INCOME FROM BUSINESS. 9. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. /. )0 % / % ) 12 ORDER PRONOUNCED IN THE OPEN COURT ON JANUARY 08, 2 014 SD/- SD/- (VIVEK VARMA) (R. C. SHARMA) / JUDICIAL MEMBER / ACCOUNTANT MEMBER ' 3/ MUMBAI; 4( / DATED : 08.01.2014 .(../ ROSHANI , SR. PS 5 ITA NO. 5006/MUM/2011 (A.Y. 2008-09) DY. CIT VS. M/S. SEA PRINCESS REALTY ! ' #$%& ' &$ / COPY OF THE ORDER FORWARDED TO : 1. ' / THE APPELLANT 2. #$' / THE RESPONDENT 3. ' 5) ( ) / THE CIT(A) 4. ' 5) / CIT - CONCERNED 5. 8 9 #)(:; , * :;. , ' 3 / DR, ITAT, MUMBAI 6. 9 < = / GUARD FILE ! ( / BY ORDER, )/(* + (DY./ASSTT. REGISTRAR) , ' 3 / ITAT, MUMBAI