IOL INFOTECH INDIA LIMITED , THANE V. INCOME TAX OFFICER, WARD 1(4), THANE

ITA 5026/MUM/2017

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 6148 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 5 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-01-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: I
• Assessment Year: 2012-2013
• Appeal Filed On: 24-07-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ABHIRAMA KARTIKEYAN
• Keywords: Business income; Depreciation; Rule of consistency; Unabsorbed depreciation; Set aside
• Section: 143(3)

Judgement Text

, ,, , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, MUM BAI BEFORE SHRI RAJESH KUMAR, ACCOUNTANT MEMBER & SHRI RAM LAL NEGI, JUDICIAL MEMBER ./ ITA NO.5026/MUM/2017 ( / ASSESSMENT YEAR :2012-2013) IOL INFOTECH INDIA LIMITED, PLOT NO.1, MOHAN MILL COMPOUND, G.B.ROAD, THANE(WEST), THANE VS. ITO, WARD-1(4), THANE ./PAN NO. : AAACI 7726 G ( /APPELLANT ) .. ( / RESPONDENT ) /ASSESSEE BY : SHRI NEEL KHANDELWAL, AR /REVENUE BY : SHRI ABHIRAMA KARTIKEYAN, DR / DATE OF HEARING : 07/01/2019 /DATE OF PRONOUNCEMENT 15/01/2019 / O R D E R PER RAJESH KUMAR, AM : THIS APPEAL BY REVENUE ARISES OUT OF THE ORDER OF T HE CIT(A) 1, MUMBAI, DATED 17.03.2017, WHICH IN TURN HAS ARISEN OUT OF THE ORDER PASSED BY THE ASSESSING OFFICER U/S. 143(3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) RELATING TO A.Y. 2012-2013. 2. THE ONLY ISSUE RAISED BY THE ASSESSEE IS AGAINST THE ORDER OF CIT(A) IN CONFIRMING AND UPHOLDING THE ACTION OF AO IN TRE ATING LEASE RENTALS RECEIVED FROM LEASING OF PROPERTY (PREMISES) AMOUNT ING TO RS.1,09,57,208/- AS INCOME FROM HOUSE PROPERTY ON T HE GROUND THAT ASSESSEE HAS NOT CARRIED ON ANY BUSINESS DURING THE YEAR. 3. FACTS IN BRIEF ARE THAT THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY UNDER CASS AND NOTICE U/S.143(2) OF THE AC T WAS ISSUED ON ITA NO.5026/17 2 13.08.2013 AND DULY SERVED ON THE ASSESSEE. THEREAF TER DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO NOTICED TH AT ASSESSEE HAS SHOWN GROSS RECEIPTS TOWARDS HIRE CHARGES RECEIVED FROM M/S STERLING INFORMATION RESOURCES (INDIA) PVT. LTD. OF RS.1,09, 57,208/-, WHICH WAS TREATED AS BUSINESS INCOME BY THE ASSESSEE. BESIDES , ASSESSEE HAS SHOWN INTEREST INCOME OF RS.16,844/-. THE AO FURTH ER NOTED THAT IN THE COMPUTATION OF INCOME, ASSESSEE HAS SHOWN GROSS INC OME AT RS.3,57,680/-, WHICH HAS BEEN ENTIRELY SET OFF AGAI NST BROUGHT FORWARD UNABSORBED DEPRECIATION OF PREVIOUS YEARS AND THE N ET TAXABLE INCOME HAS BEEN SHOWN AT NIL. ACCORDINGLY, THE AO ISSUED S HOW CAUSE NOTICE TO THE ASSESSEE WHICH WAS REPLIED BY THE ASSESSEE VIDE LETTER DATED 21.03.2015 STATING THEREIN THAT DUE TO CONTINUOUS B USINESS LOSS IN THE CALL CENTRE BUSINESS FOR THE LAST SEVERAL YEARS, THE COM PANY HAS DECIDED TO CLOSE DOWN ITS BUSINESS ON TEMPORARY BASIS AND LEAS E OUT AND EXPLOIT ALL ITS COMMERCIAL ASSETS TILL THE RECESSION IN THE IND USTRY GETS OVER SO THAT IT CAN MAKE PAYMENTS OF BORROWINGS AND CREDITORS AS WE LL AS ACCRUED INTEREST THEREON. FINALLY, THE AO CONSIDERING THE R EPLY OF THE ASSESSEE TREATED THE ENTIRE INCOME AS RECEIPT FROM HOUSE PRO PERTY AND AFTER ALLOWING 30% AS STANDARD DEDUCTION ASSESSED TAX T HE NET INCOME AT RS.75,26,330/- VIDE ORDER DATED 27.03.2015, PASSED U/S.143(3) OF THE ACT. 4. IN THE APPELLATE PROCEEDINGS, THE ORDER OF AO WA S CONFIRMED BY THE CIT(A) AND DISMISSED THE APPEAL OF THE ASSESSEE BY HOLDING THAT THE ASSESSEE HAS NOT REPLIED THE SPECIFIC QUERY RAISED VIDE LETTER DATED 06.03.2017 AND, THUS, CAME TO THE CONCLUSION THAT T HE AO HAS RIGHTLY ITA NO.5026/17 3 TREATED THE ASSESSEES INCOME AS INCOME FROM HOUSE PROPERTY. THE CIT(A) HAS RELIED UPON THE DECISION OF HONBLE SUPR EME COURT IN THE CASE OF M/S UNIVERSAL PLAST LTD., 237 ITR 454 (SC). 5. LD. AR VEHEMENTLY SUBMITTED BEFORE US THAT ASSES SEE HAS BEEN FILING THE RETURN OF INCOME RETURNING THE RENTAL IN COME RECEIVED FROM BUSINESS PROFIT UNDER THE HEAD BUSINESS INCOME WHIC H HAS BEEN ACCEPTED EVEN IN THE ASSESSMENT PROCEEDINGS WHICH CULMINATED U/S.143(3) OF THE ACT. LD.AR FURTHER SUBMITTED THAT IN THE A.Y.2007-2 008 THE SAID INCOME WAS ACCEPTED AS BUSINESS INCOME IN THE ASSESSMENT P ROCEEDINGS WHICH WAS FINALIZED U/S.143(3) OF THE ACT. SIMILARLY, IN A.Y.2008-2009 THE ASSESSEES INCOME WAS ACCEPTED, HOWEVER, SOME EXPEN SES WERE ONLY DISALLOWED IN THE ASSESSMENT PROCEEDINGS AND FINALL Y THE ITAT ALLOWED THE SAID EXPENSES. IN A.Y.2009-2010, 2010-2011 & 20 11-2012 ALSO THE BUSINESS OF THE ASSESSEE HAS BEEN ACCEPTED AS SUCH. EVEN IN A.Y.2011- 2012 THE ASSESSMENT ORDER WAS FRAMED U/S.143(3) OF THE ACT AND ASSESSEES CONTENTION WAS ACCEPTED. THUS, LD.AR FIN ALLY HARPED ON THE PRINCIPLE OF CONSISTENCY AS THERE IS NO CHANGE OF F ACTS AND CIRCUMSTANCES DURING THE YEAR AND THE ASSESSEE IS CONTINUING TO R ECEIVE THE SAME RENTAL INCOME AS IT WAS RECEIVABLE IN THE EARLIER YEARS. L D. AR EVEN SUBMITTED THAT IT WAS ONE OF THE OBJECTS CLAUSE IN THE MEMORA NDUM OF ASSOCIATION OF THE ASSESSEE COMPANY THAT THE ASSESSEE CAN LEASE OU T THE PREMISES AND, THEREFORE, THE INCOME OF THE ASSESSEE SHOULD BE ASS ESSED AS BUSINESS INCOME AND NOT INCOME FROM HOUSE PROPERTY. LD.AR RE LIED HEAVILY ON THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF C IT VS. VIKRAM COTTON ITA NO.5026/17 4 MILLS LTD. [1988] 169 ITR 597 (SC). THE LD.AR FINAL LY SUBMITTED THAT SINCE THERE WAS NO CHANGE OF FACTS AS COMPARED TO THE EAR LIER YEARS, THEREFORE, THE INCOME SHOULD BE ASSESSED IN THE SAME MANNER AS HAS BEEN DONE IN THE EARLIER YEARS BY RELYING ON THE DECISION OF PR. CIT VS. QUEST INVESTMENT ADVISORS PVT. LTD. IN ITA NO.280 OF 2016 DATED 28.06.2018 BOMBAY HIGH COURT. THE ASSESSEE AALSO RELIED UPON THE DECISION IN THE CASE OF CHENNAI PROPERTIES & I NVESTMENTS LTD. VS. CIT, [2015] 373 ITR 673 (SC) AS ONE OF THE OBJECT C LAUSE IS TO RENT OUT THE PROPERTIES OF THE ASSESSEE. 6. LD. DR, ON THE OTHER HAND, RELIED ON THE ORDER O F AO AND CIT(A) HEAVILY. LD.DR WHILE REFERRING TO THE PROFIT AND LO SS ACCOUNT OF THE ASSESSEE AS FILED AT PAGE NO.5 OF THE PAPER BOOK, D REW OUR ATTENTION TO THE REVENUE FROM OPERATIONS WHICH WAS SHOWN AT RS.1 0,957,208/- WHICH REPRESENTS RENTAL INCOME FROM PROPERTY. LD.DR ALSO RAISED OBJECTION THAT THIS IS NOT THE OBJECT OF THE ASSESSEE AS PER THE O BJECT CLAUSE, AND, THEREFORE, DECISION IN THE CASE OF CHENNAI PROPERT IES & INVESTMENTS LTD. VS. CIT, [2015] 373 ITR 673 (SC) IS NOT APPLICABLE . LD. DR RELIED ON THE DECISION IN THE CASE OF UNIVERSAL PLAST LTD. VS . CIT, 237 ITR 454 (SC), WHEREIN IT HAS BEEN HELD THAT IF THE ASSESSEE HAS P ERMANENTLY CLOSED DOWN THE BUSINESS AND DISMANTLED HIS MACHINERY AND LET OUT THE GODOWN THEN THE RENTAL INCOME DERIVED THEREFROM CANNOT BE ASSESSED AS BUSINESS INCOME. LD. DR FINALLY PRAYED BEFORE THE BENCH THAT INCOME OF THE ASSESSEE IS IN THE NATURE OF INCOME FROM HOUSE PROP ERTY AND NOT BUSINESS INCOME, THEREFORE, THE ORDER OF CIT(A) SHOULD BE CO NFIRMED. ITA NO.5026/17 5 7. WE HAVE HEARD RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD INCLUDING THE IMPUGNED ORDER. W E FIND THAT IN THE CASE OF THE ASSESSEE, THE BUSINESS IS TEMPORARILY CLOSE D DOWN DUE TO INCURRING OF CONTINUOUS LOSSES AND DECIDED TO EXPLO IT ITS ASSETS TO REPAY THE BORROWINGS AND CREDITORS ETC. BY LETTING OUT T HE COMMERCIAL ASSETS(BUILDING) TO M/S STERLING INFORMATION RESOUR CES INDIA PVT. LTD. AND HAS BEEN RECEIVING RS.1,09,57,208/- AS LEASE RENT. THE SAID TREATMENT OF SUCH LEASE RENT AS INCOME FROM BUSINESS HAS BEEN AC CEPTED BY THE DEPARTMENT RIGHT FROM THE ASSESSMENT YEARS 2007-200 8 TO 2011-2012 OUT OF WHICH IN THE A.Y.2007-2008 AND 2011-2012, THE AS SESSMENTS WERE FRAMED U/S.143(3) OF THE ACT AND THE CLAIM WAS ACCE PTED. THEREFORE ON THE PRINCIPLE OF CONSISTENCY ALSO THE CASE OF THE A SSESSEE IS SUPPORTED BY THE DECISION OF PR. CIT VS. QUEST INVESTMENT ADVISORS PVT. LTD. IN ITA NO.280 OF 2016 DATED 28.06.2018 OF BOMBAY HIGH COURT. SINCE THERE IS NO CHANGE IN THE FACTS AND CIRCUMSTA NCES AS COMPARED TO THE EARLIER YEARS , THEREFORE, WE ARE OF THE VIEW T HAT AS PER THE PRINCIPLE OF CONSISTENCY, THE INCOME OF THE ASSESSEE HAS TO BE A SSESSED AS INCOME FROM BUSINESS AND NOT FROM THE HOUSE PROPERTY. THE CASE LAW RELIED UPON BY THE REVENUE IN THE CASE OF UNIVERSAL PLAST (SUPR A), WE FIND THAT THE FACTS ARE DISTINGUISHABLE ON THE GROUND THAT IN THA T CASE THE BUSINESS SET UP WAS COMPLETELY DISMANTLED AND THE PROPERTIES WER E LET OUT WITH A VIEW TO EARN INCOME PERMANENTLY WHEREAS IN THE PRESENT C ASE, THE ASSESSEE HAS TEMPORARILY LET OUT THE PROPERTY AFTER INCURRIN G HEAVY LOSSES IN THE BUSINESS. IN THE DECISION RELIED UPON BY THE ASSESS EE IN THE CASE OF CIT ITA NO.5026/17 6 VS. VIKRAM COTTON MILLS LTD.(SUPRA), THE BUSINESS O FFICE OF THE ASSESSEE WAS LET OUT AFTER THE HONBLE HIGH COURT EVOLVED A SCHEME WHEREUNDER THE BUSINESS ASSETS WERE LET ON A LEASE RENTAL AND THE SAME WAS TREATED AS BUSINESS INCOME AND BROUGHT FORWARD BUSINESS LOS SES WERE ALLOWED TO BE SET OFF. IN THE CASE OF THE ASSESSEE, THERE ARE NO WINDING UP PROCEEDINGS OR DIRECTIONS OF A COURT. BUT IN THE PR ESENT CASE BEFORE US THERE IS TEMPORARY LULL IN THE BUSINESS OF THE ASSE SSEE AND THE ASSESSEE PLANS TO RE-START ITS BUSINESS AFTER NORMALIZATION IN THE CONDITION OF THE INDUSTRY. MOREOVER, THE FACT REMAINS THAT THE REVEN UE HAS ACCEPTED THE RENTAL INCOME AS ASSESSEES BUSINESS INCOME IN THE EARLIER YEARS. MOREOVER THE CASE OF THE ASSESSEE IS COVERED SQUARE LY BY THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF CHENNAI PROPER TIES & INVESTMENTS LTD. (SPURA), AS THIS IS ONE OF THE OBJECT CLAUSE T HAT ASSESSEE BUSINESS INCLUDES LEASING OUT OF PROPERTY ALSO. WE, THEREFOR E, NOT IN A POSITION TO AGREE WITH THE FINDINGS OF CIT(A) AND ACCORDINGLY, WE SET ASIDE THE ORDER OF CIT(A) AND DIRECT THE AO TO TREAT THE RENTAL INC OME OF THE ASSESSEE AS BUSINESS INCOME. 10. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWE D. ORDER PRONOUNCED IN THE OPEN COURT ON 15/01/2019. SD/- (RAM LAL NEGI) SD/- (RAJESH KUMAR) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI ; DATED 15/01/2019 . . /PRAKASH KUMAR MISHRA , SR.PS. / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT- 2. / THE RESPONDENT- 3. ( ) / THE CIT(A), MUMBAI ITA NO.5026/17 7 / BY ORDER, ( ASSISTANT REGISTRAR ) , / ITAT, MUMBAI 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE. //TRUE COPY//