SHUBHAN PROPERTIES LTD, MUMBAI V. ASST CIT 1(3), MUMBAI

ITA 5193/MUM/2013

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 2892 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 11 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-06-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Assessment Year: 2007-2008
• Appeal Filed On: 22-07-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: S VENKATRAMA N

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI E BENCH, MUMBAI BEFORE SHRI SHAILENDRA KUMAR YADAV, JUDICIAL MEMBER, AND SHRI RAJESH KUMAR, ACCOUNTANT MEMBER. ITA. NOS. 5256 & 5193/MUM/2013 (ASSESSMENT YEAR: 2007-08) DY. COMMISSIONER OF INCOME-TAX 1(3), CENTRE-1, 28 TH FLOOR, WORLD TRADE CENTRE, CUFFE PARADE, MUMBAI 400005 APP ELLANT VS. M/S. SHUBHAM PROPERTIES LTD., THE TIME OF INDIA BUILDING, D. N. ROAD, MUMBAI 400021 RESPONDENT & M/S. SHUBHAM PROPERTIES LTD., THE TIME OF INDIA BUILDING, D. N. ROAD, MUMBAI 400021 APPELLANT VS. ASST. COMMISSIONER OF INCOME-TAX 1(3), CENTRE-1, 28 TH FLOOR, WORLD TRADE CENTRE, CUFFE PARADE, MUMBAI 400005 RESPONDENT PAN: AAJCS7870E / BY REVENUE : SHRI VINOD KUMAR, D.R. / BY ASSESSEE : SHRI S. VENKATRAMAN, A.R. /DATE OF HEARING : 13.06.2016 /DATE OF PRONOUNCEMENT : 24.06.2016 ITA NOS.5256 & 5193/MUM/13 A.YS. 07-08 [DCIT VS. M/S. SHUBHAM PROPERTIES LTD.] PAGE 2 ORDER PER SHAILENDRA KUMAR YADAV, J.M: THESE CROSS APPEALS HAVE BEEN FILED BY REVENUE AND ASSESSEE AGAINST THE ORDER OF COMMISSIONER OF INCOM E-TAX (APPEALS)-7, MUMBAI, DATED 25.03.2013 FOR A.Y. 2007 -08. 2. IN ITA NO.5256/MUM/2013, REVENUE HAS FILED THE A PPEAL ON THE FOLLOWING GROUND: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD. CIT (A) ERRED IN ALLOWING CARRY FOR WARD OF LOSSES U/S.71B OF THE I.T. ACT WITHOUT APPRECIAT ING THE FACT THAT THE LD. CIT(A) HIMSELF HAS CONFIRMED THE EXPENSES AS PRE-OPERATIVE EXPENSES AND SUCH EXPENSE CAN BE CLAIMED U/S.35D OF THE I.T. ACT ONLY. 3. IN ITA NO.5193/MUM/2013, ASSESSEE HAS FILED THE APPEAL ON THE FOLLOWING GROUNDS: 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED COMMISSIONER (APPEALS) ERRED IN UPHOLDING THE VIEW OF THE ASSESSING OFFICER (AO') THAT THE ASSESSEES INCOME (LOSS), IS TO BE COMPUTED UND ER THE HEAD PROFITS AND GAINS OF BUSINESS AND PROFESSION. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, THE ASSESSEE SUBMITS THAT THE INCOME (LOSS) IS TO B E COMPUTED UNDER THE HEAD INCOME FROM HOUSE PROPERTY. 4. ASSESSEE PURCHASED AN IMMOVABLE PROPERTY ON 6 TH FLOOR OF THE BUILDING TIMES TOWER AT KAMALA MILLS COMPOUND , LOWER PAREL, MUMBAI, THAT WAS REGISTERED IN THE NAME OF A SSESSEE IN MAY 2006. PROPERTY WAS PURCHASED OUT OF UNSECURED LOANS TAKEN BY ASSESSEE FROM ITS HOLDING COMPANY ON WHICH INTEREST ITA NOS.5256 & 5193/MUM/13 A.YS. 07-08 [DCIT VS. M/S. SHUBHAM PROPERTIES LTD.] PAGE 3 @ 8% PER ANNUM AMOUNTING TO RS.85,15,695/- WAS PAID BY ASSESSEE DURING THE YEAR. THOUGH PROPERTY WAS REGI STERED IN THE MONTH OF MAY 2006, THE OCCUPATION CERTIFICATE W AS OBTAINED BY BUILDER FROM THE MUNICIPAL CORPORATION OF GREATER BOMBAY ON 28 TH DECEMBER 2006 FOR OCCUPYING THE BUILDING AND FORWARDED SAME TO ASSESSEE IN JANUARY 2007. 4.1 ASSESSEES BOARD OF DIRECTORS, AT THEIR MEETING HELD ON 15 TH FEBRUARY, 2007, RESOLVED THAT ATTEMPTS BE MADE TO LET OUT THE PROPERTY AS A BARE-SHELL WITHOUT MAKING ANY FUR THER RENOVATION/FURNISHING. ASSESSEE APPROACHED AN ESTA TE AGENT FOR IDENTIFYING POTENTIAL TENANTS THEREAFTER BUT TH E PROPERTY WAS ONLY LET OUT IN THE SUBSEQUENT FINANCIAL YEAR AND H ENCE NO RENT WAS RECEIVED OR RECEIVABLE IN RESPECT OF THE SAID P ROPERTY. WHILE FILING ITS RETURN OF INCOME, ASSESSEE COMPUTE D THE ANNUAL VALUE OF THE SAID PROPERTY UNDER THE HEAD I NCOME FROM HOUSE PROPERTY AT RS.NIL AND CLAIMED A DEDUCTION O F INTEREST PAID ON LOAN U/S.24 OF THE ACT. ACCORDINGLY, A LOS S OF RS.85,15,655/- WAS COMPUTED BY ASSESSEE UNDER THE H EAD INCOME FROM HOUSE PROPERTY AND ASSESSEE CLAIMED T HAT THE SAME BE CARRIED FORWARD U/S.71B OF THE ACT. 4.2 ASSESSING OFFICER WAS OF THE OPINION THAT SINCE ASSESSEE WAS FORMED WITH THE OBJECT OF ACQUIRING IMMOVABLE P ROPERTY TO BE LET OUT, AND THE SAID PROPERTY HAD NOT BEEN LET OUT, ASSESSEE HAD NOT COMMENCED BUSINESS AND CONSEQUENTLY ALL THE EXPENDITURES INCLUDING INTEREST IS TO BE TREATED AS PRE- OPERATIVE EXPENDITURE. HE, THEREFORE, DID NOT ACCE PT THE ASSESSEES CONTENTION THAT THE INCOME IS TO BE COMP UTED UNDER ITA NOS.5256 & 5193/MUM/13 A.YS. 07-08 [DCIT VS. M/S. SHUBHAM PROPERTIES LTD.] PAGE 4 THE HEAD INCOME FROM HOUSE PROPERTY AND CONSEQUEN TLY DISALLOWED THE INTEREST AS A PRE-OPERATIVE EXPENDIT URE AND THEREBY ALSO DISALLOWED THE CLAIM OF ASSESSEE FOR C ARRY FORWARD OF LOSS UNDER THE HEAD INCOME FROM HOUSE PROPERTY AS PROVIDED FOR IN SECTION 71B OF THE ACT. 5. MATTER WAS CARRIED BEFORE THE FIRST APPELLATE AU THORITY, WHEREIN VARIOUS CONTENTIONS WERE RAISED ON BEHALF O F ASSESSEE AND HAVING CONSIDERED THE SAME, CIT(A) OBSERVED THA T ASSESSEE WAS INCORPORATED WITH THE SOLE OBJECTIVE OF ACQUIRI NG THE IMMOVABLE PROPERTY FOR THE PURPOSE OF LETTING IT OU T. IT IS NOT IS DISPUTE THAT ASSESSEE IS A SUBSIDIARY OF BENNETT, C OLEMAN & CO. LTD. AND THE ENTIRE PROPERTY WAS PURCHASED BY T AKING UNSECURED LOAN FROM M/S. BENNETT, COLEMAN & CO. LTD . THE ASSESSEE HAS SHOWN INTEREST LOAN OF RS.85,15,695/- IN ITS PROFIT AND LOSS ACCOUNT AND OTHER EXPENSES INCLUDING DEPRE CIATION AMOUNTING TO RS.30,47,420/-. CORRESPONDINGLY, NO BU SINESS RECEIPT HAS BEEN SHOWN IN ITS PROFIT AND LOSS ACCOU NT. THE STAND OF ASSESSEE HAS BEEN THAT THE PROPERTY WAS TO BE TREATED AS INCOME FROM RENTALS AND THE ANNUAL VALUE OF THE PROPERTY MAY BE CONSIDERED AS NIL. THEREFORE, THESE NEED TO BE ALLOWED AGAINST 'INCOME FROM HOUSE PROPERTY'. CIT(A) OBSERV ED THAT ASSESSEE HAD ITSELF STATED THAT IT IS INCOME FROM B USINESS AND NOT INCOME FROM HOUSE PROPERTY. WITHOUT PREJUDICE T O THE FOREGOING, EVEN IF THE CONTENTION OF ASSESSEE WAS A CCEPTED WHICH WAS NOT ACCEPTABLE, THE PROPERTY COULDNOT BE SAID TO BE LETTABLE AS ASSESSEE HAD ACQUIRED THE PROPERTY ONLY IN THE MONTH OF JANUARY, 2007 WHEREIN ONLY THE OCCUPATION ITA NOS.5256 & 5193/MUM/13 A.YS. 07-08 [DCIT VS. M/S. SHUBHAM PROPERTIES LTD.] PAGE 5 CERTIFICATE WAS RECEIVED. HE DID NOT AGREE TO ACCE PT THE CONTENTION OF ASSESSEE THAT PROPERTY WAS LETTABLE F ROM THE DATE OF ACQUIRING OCCUPATION CERTIFICATE, SINCE AFTER OC CUPATION CERTIFICATE A LOT OF WORK NEEDS TO BE DONE, SUCH AS , ELECTRICITY CONNECTION, WATER CONNECTION AND SO MANY OTHER THIN GS. ACCORDING TO CIT(A), PROPERTY WAS NOT LETTABLE FOR THE YEAR UNDER CONSIDERATION AND THE ENTIRE EXPENSES AT BEST CAN BE CALLED AS PRE-OPERATIVE EXPENSES AND CANNOT BE ALLO WED IN THE YEAR UNDER CONSIDERATION. THE ALY OF THE PROPERTY C OULD NOT BE TAKEN AS NIL AS THE PROPERTY CANNOT BE REASONABLY E XPECTED TO LET OUT IN THE YEAR UNDER CONSIDERATION. THEREFORE, THE SUBMISSIONS OF ASSESSEE WAS REJECTED AND ADDITION M ADE BY ASSESSING OFFICER WAS UPHELD. IN CASE OF PRE-OPERA TIVE EXPENSES, IF THE INCOME IS HELD AS INCOME FROM BUSI NESS, THE BUSINESS OF ASSESSEE WAS NOT SET OFF IN THE YEAR UN DER CONSIDERATION, THE SAME COULD NOT BE ALLOWED U/S.37 OF THE ACT. THUS, THIS GROUND OF ASSESSEE WAS DISMISSED. 5.1 IN ALTERNATIVE, ASSESSEE SUBMITTED THAT SINCE O CCUPATION CERTIFICATE WAS ONLY RECEIVED IN JANUARY 2007, BASE D ON THE MUNICIPAL TAXES DETERMINED AS PAYABLE BY THE MUNICI PALITY, THE ANNUAL VALUE FOR 3 MONTHS, NAMELY, JANUARY 2007 TO MARCH 2007, MAY BE CONSIDERED AT RS.5,52,000/- IN COMPUTI NG INCOME UNDER THE HEAD INCOME FROM HOUSE PROPERTY, WHICH WAS DISMISSED BY ASSESSING OFFICER AND CONFIRMED BY CIT(A). 5.2 REGARDING DEDUCTION OF INTEREST OF RS.85,15,695 /- IN COMPUTING THE INCOME OF ASSESSEE. ACCORDING TO ASS ESSEE, ITA NOS.5256 & 5193/MUM/13 A.YS. 07-08 [DCIT VS. M/S. SHUBHAM PROPERTIES LTD.] PAGE 6 SINCE IMMOVABLE PROPERTY WAS ACQUIRED OUT OF BORROW ED FUNDS, INTEREST OUGHT TO BE ALLOWED AS A DEDUCTION U/S.24( B) OF THE ACT. SAME WAS DISMISSED BY CIT(A). 5.2 ASSESSING OFFICER DID NOT COMPUTE THE LOSS UNDE R THE HEAD INCOME FROM HOUSE PROPERTY AND DID NOT ALLOW THE SAID LOSS TO BE CARRIED FORWARD U/S.71B OF THE ACT. CIT(A) AGRE ED WITH THE ASSESSEES CONTENTION THAT ASSESSING OFFICER OUGHT TO HAVE ALLOWED CARRY FORWARD OF LOSS UNDER THE HEAD INCOM E FROM HOUSE PROPERTY. SINCE ASSESSEE HAS NO OTHER INCOM E UNDER ANY OTHER HEAD, CONSEQUENTLY, THE LOSS UNDER THE HE AD INCOME FROM HOUSE PROPERTY QUALIFIES U/S.71B OF THE ACT T O BE CARRIED FORWARD TO THE FOLLOWING ASSESSMENT YEAR TO BE SET OFF AGAINST THE INCOME UNDER THE SAME HEAD. ACCORDINGLY, ASSES SING OFFICER WAS DIRECTED TO ALLOW THE CARRY FORWARD OF LOSS TO BE CAPITALIZED AND ALLOWED AS PER THE PROVISIONS OF SE CTION 71B OF THE ACT. 6. LD. AUTHORIZED REPRESENTATIVE BEFORE US, POINTED OUT THAT ITAT F BENCH IN CASE OF VAIDEHI ESTATES LTD. VS. DCIT (OSD) IN ITA NOS. 5134 & 5255/MUM/2013 ON SIMILAR ISSUE D ECIDED THE SAME IN FAVOUR OF ASSESSEE. NOTHING CONTRARY W AS BROUGHT TO OUR KNOWLEDGE ON BEHALF OF REVENUE. FACTS BEING SIMILAR, SO FOLLOWING SAME REASONING, WE HOLD THAT INCOME ASSES SEE IS TO BE COMPUTED AS INCOME FROM HOUSE PROPERTY. ACCOR DINGLY, ASSESSEES CLAIM IN THIS REGARD IS ALLOWED. ITA NOS.5256 & 5193/MUM/13 A.YS. 07-08 [DCIT VS. M/S. SHUBHAM PROPERTIES LTD.] PAGE 7 6.1 REGARDING DEPARTMENTAL GRIEVANCE, ONCE WE HAVE HELD THAT INCOME IS TO BE ASSESSED AS INCOME FROM HOUSE PROP ERTY AS ABOVE, ON THE BASIS OF ORDER OF CIT(A) THIS ISSUE I S UPHELD. 7. IN THE RESULT, THE APPEAL OF REVENUE IS DISMISSE D AND THAT OF ASSESSEE IS ALLOWED. PRONOUNCED IN THE OPEN COURT ON THIS THE 24 TH DAY OF JUNE, 2016. SD/- SD/- ( RAJESH KUMAR ) (SHAILENDRA KUMAR YADAV) ACCOUNTANT MEMBER JUDICIAL MEMBE R MUMBAI: DATED 24/06/2016 TRUE COPY S.K.SINHA / COPY OF ORDER FORWARDED TO:- 1. / REVENUE 2. / ASSESSEE 3. ! / CONCERNED CIT 4. !- / CIT (A) 5. )*+ ,--, , / DR, ITAT, MUMBAI 6. +12 34 / GUARD FILE. BY ORDER / , / , ,