DCIT 1(3), MUMBAI V. VAIDEHI ESTATES LTD, MUMBAI

ITA 5255/MUM/2013

• Counselvise Citation: [2015] 121 COUNSELVISE.COM (IT) 0852 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-07-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: F
• Assessment Year: 2007-2008
• Appeal Filed On: 29-07-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PAWAN KUMAR BEE S LA
• Assessee Lawyers: S VENKATARAMAN
• Keywords: Business income

Judgement Text

F IN THE INCOME TAX APPELLATE TRIBUNAL F BENCH, M UMBAI BEFORE SHRI A.D. JAIN, JM AND SHRI N.K. BILLAIYA, A M .. , . . , ./ I.T.A. NO. 5134/MUM/2013 ( / ASSESSMENT YEAR : 2007-08 VAIDEHI ESTATES LTD., THE TIMES OF INDIA BUILDING, 2 ND FLOOR, DR. DN. ROAD, FORT, MUMBAI 400 001. / VS. DEPUTY CIT (OSD) 1(1), MUMBAI. ./ PAN : AACCV 2264J ( ! / APPELLANT ) .. ( '# ! / RESPONDENT ) ./ I.T.A. NO. 5255/MUM/2013 ( / ASSESSMENT YEAR : 2007-08 DEPUTY CIT 1(3), 564, 5 TH FLOOR, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI 400 020. / VS. VAIDEHI ESTATES LT D., THE TIMES OF INDIA BUILDING, 2 ND FLOOR, DR. DN. ROAD, FORT, MUMBAI 400 001. ./ PAN : AACCV 2264J ( ! / APPELLANT ) .. ( '# ! / RESPONDENT ) A SSESSEE BY SHRI S. VENKATARAMAN REVENUE BY : SHRI PAWAN KUMAR BEE S LA $ % & ' ( ) / DATE OF HEARING : 8-7-2015 *+,- ' ( ) / DATE OF PRONOUNCEMENT : 31-7-2015 [ ITA 5134/M/13 & ITA 5255/M/13 2 . / O R D E R PER A.D. JAIN, J.M . : .. , THESE ARE CROSS APPEALS FOR A.Y. 2007-08. ITA NO. 5134/MUM/2013 HAS BEEN FILED BY THE ASSESSEE AND ITA NO. 5255/MUM /2013 HAS BEEN PREFERRED BY THE REVENUE. 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS:- 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED COMMISSIONER (APPEALS) ERRED IN UPHOLDING T HE VIEW OF THE ASSESSING OFFICER ('AO') THAT THE ASSESSEE'S INCOME (LOSS), IS TO BE COMPUTED UNDER THE HEAD 'PROFITS AND GAINS OF BUSIN ESS AND PROFESSION. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, THE ASSESSEE SUBMITS THAT THE INCOME (LOSS) IS TO BE CO MPUTED UNDER THE HEAD INCOME FROM HOUSE PROPERTY'. 3. THE DEPARTMENT HAS TAKEN THE FOLLOWING SOLE GROU ND OF APPEAL:- ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN ALLOWING CARRY FORWARD OF LOSSES U/ S 71B OF THE I.T. ACT WITHOUT APPRECIATING THE FACT THAT THE LD. CIT(A) H IMSELF HAS CONFIRMED THE EXPENSES AS PRE-OPERATIVE EXPENSES AND SUCH E XPENSES CAN BE CLAIMED U/S 35D OF THE I.T. ACT ONLY. 4. THE ASSESSEE COMPANY WAS FORMED WITH THE OBJECT OF ACQUIRING IMMOVABLE PROPERTY TO LET IT OUT. IT PURCHASED AN I MMOVABLE PROPERTY OUT OF UNSECURED LOAN TAKEN FROM ITS HOLDING COMPANY. IT A PPROACHED AN ESTATE AGENT FOR IDENTIFYING THE POTENTIAL TENANT. HOWEVER , THE PROPERTY COULD BE LET OUT ONLY IN THE SUBSEQUENT YEAR. THE ASSESSEE CLAIM ED THAT DURING THE YEAR UNDER CONSIDERATION, NO RENT WAS RECEIVABLE IN RESP ECT OF THE SAID PROPERTY. THE ANNUAL VALUE OF THE PROPERTY WAS COMPUTED UNDER THE HEAD INCOME FROM HOUSE PROPERTY IN THE RETURN OF INCOME FILED AT RS . NIL. THE DEDUCTION OF INTEREST PAID ON THE LOAN, U/S 24 OF THE ACT, WAS C LAIMED. THUS, A LOSS OF RS. ITA 5134/M/13 & ITA 5255/M/13 3 1,08,77,689/- WAS COMPUTED BY THE ASSESSEE UNDER TH E HEAD INCOME FROM HOUSE PROPERTY AND THE ASSESSEE CLAIMED THAT THE S AME BE ALLOWED TO BE CARRY FORWARD U/S 71B OF THE ACT. 5. THE A.O. OBSERVED THAT SINCE THE ASSESSEE WAS FO UNDED WITH THE OBJECT OF ACQUIRING IMMOVABLE PROPERTIES TO BE LET OUT AND THE PROPERTY ACQUIRED HAD NOT BEEN LET OUT, THE ASSESSEE HAD NOT COMMENCED IT S BUSINESS AND THAT THE CONSEQUENTIAL OF THE EXPENDITURE, INCLUDING THE INT EREST, WAS TO BE TREATED AS PRE-OPERATIVE EXPENDITURE. THE A.O. ALSO DISALLOWED THE ASSESSEES CLAIM FOR CARRY FORWARD OF LOSS U/S 7I B OF THE ACT. 6. BY VIRTUE OF THE IMPUGNED ORDER, THE LD. CIT(A) HELD THAT THE ASSESSEES INCOME WAS TO BE COMPUTED AS PROFITS AND GAINS OF B USINESS OR PROFESSION. ACCORDINGLY, THE A.O.S ORDER IN THIS REGARD WAS UP HELD. AGGRIEVED, THE ASSESSEE IS IN FURTHER APPEAL BEFORE US. 7. HOWEVER, THE LD. CIT(A), DESPITE HOLDING THE INC OME TO BE BUSINESS INCOME, HELD THAT THE A.O. OUGHT TO HAVE ALLOWED CA RRY FORWARD OF LOSS UNDER THE HEAD INCOME FROM HOUSE PROPERTY. HE DIRECTED THE A.O. TO ALLOW THE CARRY FORWARD LOSS TO BE CAPITALIZED AND TO BE ALLO WED AS PER THE PROVISIONS OF SECTION 71B OF THE ACT. THIS HAS GRIEVANCED THE DEP ARTMENT, WHICH HAS FILED ITS SEPARATE APPEAL BEFORE US. 8. APROPOS THE ISSUE AS TO WHETHER THE ASSESSEES I NCOME IS TO BE COMPUTED AS INCOME FROM HOUSE PROPERTY AS CLAIMED BY THE ASSESSEE, OR UNDER THE HEAD PROFITS AND GAINS OF BUSINESS OR PR OFESSION, AS HELD BY THE LD. CIT(A), SECTION 22 OF THE ACT PROVIDES THAT THE ANN UAL VALUE OF THE PROPERTY CONSISTING OF ANY BUILDING OR LAND APPURTENANT THER ETO, OF WHICH, THE ASSESSEE IS THE OWNER, SHALL BE CHARGEABLE TO TAX UNDER THE HEAD INCOME FROM HOUSE PROPERTY. IN THIS REGARD, IT IS OF LITTLE MOMENT THAT THE ASSESSEE OWNER IS A ITA 5134/M/13 & ITA 5255/M/13 4 COMPANY FORMED WITH THE OBJECT OF ACQUIRING IMMOVAB LE PROPERTY TO BE LET OUT, AS IS THE CASE HEREIN. IT HAS BEEN HELD TO TH IS EFFECT IN EAST INDIA HOUSING & LAND DEVELOPMENT TRUST LTD. VS. CIT, 42 ITR 49 (SC) AND IN S.G. MERCANTILE CORPORATION PVT. LTD. VS. CIT, 83 ITR 7 00 (SC). BOTH THESE DECISIONS WERE CITED BY THE ASSESSEE BEFORE THE LD. CIT(A). HOWEVER, THE LD. CIT(A) HAS NEITHER DEALT WITH THESE DECISIONS, NOR QUOTED ANY DECISION TO THE CONTRARY. IN VIEW OF THESE DECISIONS, THE OBSERVAT ION OF THE LD. CIT(A) THAT THE ASSESSEE HAD ITSELF STATED THAT THE INCOME WAS FROM BUSINESS AND NOT FROM HOUSE PROPERTY IS OF NO CONSEQUENCE AT ALL. IT IS F OR THE TAXING AUTHORITY TO DECIDE SUCH ISSUES CORRECTLY AND THE CLAIM OF THE A SSESSEE, EITHER WAY, IS NOT DECIDED. ALSO, IT IS NOT OF ANY DETRIMENT TO THE AS SESSEE THAT AS OBSERVED BY THE LD. CIT(A), WHILE ACQUIRING THE PROPERTY, ONLY OCCUPATION CERTIFICATE WAS RECEIVED BY THE ASSESSEE AND ELECTRICITY OR WATER C ONNECTION, INTER ALIA, HAVING BEEN APPLIED FOR, THE PROPERTY WAS NOT RENDERED LET TABLE. THIS IS ALSO IN VIEW OF THE FACT THAT IN ITS MEETING ON 15-7-2007, THE BOAR D OF DIRECTORS OF THE ASSESSEE COMPANY RESOLVED THAT ATTEMPT BE MADE TO L ET OUT THE PROPERTY AS A BARE-SHELL, WITHOUT MAKING ANY RENOVATION OR FURNIS HING. THIS FACT HAS BEEN TAKEN NOTE OF BY THE LD. CIT(A) AT PAGE 4, PARA (D) OF THE IMPUGNED ORDER. 9. FOR THE ABOVE DISCUSSION, THE GRIEVANCE OF THE A SSESSEE IS FOUND TO BE JUSTIFIED AND IS ACCEPTED AS SUCH. THE ORDER OF TH E LD. CIT(A) IN THIS REGARD IS CANCELLED AND IT IS HELD THAT THE INCOME OF THE ASS ESSEE IS TO BE COMPUTED AS INCOME FROM HOUSE PROPERTY. THE ASSESSEES CLAIM IN THIS REGARD IS, THUS, ALLOWED. 10. COMING TO THE DEPARTMENTS GRIEVANCE, ONCE WE H AVE HELD THAT THE INCOME IS TO BE ASSESSED AS INCOME FROM HOUSE PROP ERTY AS ABOVE, ON THIS VERY BASIS, THE ORDER OF THE LD. CIT(A) ON THIS ISS UE IS UPHELD, REJECTING THE GRIEVANCE OF THE DEPARTMENT AS SHORN OF MERIT. ITA 5134/M/13 & ITA 5255/M/13 5 11. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWE D AND THAT OF THE APPEAL FILED BY THE DEPARTMENT IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 31 ST JULY, 2015 . ' *+,- $ /0 1 2 31-07-2015 + ' 3& SD/- SD/- (N.K. BILLAIYA) (A.D. JAIN ) ACCOUNTANT MEMBER /J UDICIAL MEMBER / $ & MUMBAI ; 1 DATED 31-07-2015 [ %.../ R.K. R.K. R.K. R.K. , SR. PS ! ' #$%& ' &$ / COPY OF THE ORDER FORWARDED TO : 1. ! / THE APPELLANT 2. '# ! / THE RESPONDENT. 3. $ ?( () / THE CIT(A)- 7,MUMBAI 4. $ ?( / CIT, 1,MUMBAI 5. B%C 3 '(DE , ) DE- , / $ & / DR, ITAT, MUMBAI F BENCH 6. 3 F G & / GUARD FILE. ! ( / BY ORDER, # B( '( //TRUE COPY// )/(* + ( DY./ASSTT. REGISTRAR) , / $ & / ITAT, MUMBAI