DCIT 1(3), MUMBAI V. SUSHENA PROPERTIES LTD, MUMBAI

ITA 5257/MUM/2013

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 3934 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-08-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 01-06-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 29-07-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: J SARAVARAN
• Assessee Lawyers: VENKATRAMAN
• Keywords: Business income; Depreciation; Wholly owned subsidiary
• Section: 142(1); 115JB

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL E BENCH, MUMBAI BEFORE SHRI SHAILENDRA KUMAR YADAV , JM AND SHRI RAJESH KUMAR, AM ./ I.T.A. NO. 5130 /MUM/ 201 3 ( / ASSESSMENT YEAR : 200 7 - 08 ) SUSHENA PROPERTIES LTD., THE TIMES OF INDIA BUILDING, 2 ND FLOOR, DR D N ROAD, FORT, MUMBAI - 400001 / VS. ASSTT. COMMISSIONER OF INCOME TAX - 1(3), MUMBAI . ./ I.T.A. NO. 5257 /MUM/201 3 ( / ASSESSMENT YEAR : 2 007 - 08 ) DY. COMMISSIONER OF INCOME TAX - 1(3), 564, 5 TH FLOOR, AAYAKAR BHAVAN, M K ROAD, MUMBAI - 400020 . / VS. SUSHENA PROPERTIES LTD., THE TIMES OF INDIA BUILDING, 2 ND FLOOR, DR D N ROAD, FORT, MUMBAI - 400001 ./ PAN : AA JCS7872G / ASSESSEE BY S HRI VENKATRAMAN / REVENUE BY SHRI J SARAVARAN / DATE OF HEARING : 2 7 .06 . 2016 / DATE OF PRONOUNCEMENT : 04. 0 8 . 2016 / O R D E R PER RAJESH KUMAR, A. M: THE CROSS - APPEALS ARE FILED BY THE RESPECTIVE PARTIES AGAINST THE ORDER PASSED BY THE LD.CIT(A) - 7 , MUMBAI DATED 25.3.2013 FOR THE ASSESSMENT YEAR 200 7 - 08 . SINCE THESE APPEALS PERTAIN TO THE SAME 2 513 0 /MUM/201 3 5257/MUM/2013 ASSESSEE AND ARE BEING DECIDED BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE AND BREVITY . 2. NOW FIRST WE SHALL TAKE UP THE APPEAL BEARING ITA NO.5130/M/13 . THE ISSUE RAISED IN THE GROUNDS OF APPEAL IS AGAINST THE CONFIRMATION AND UPHOLDING THE VIEW OF T HE AO THAT THE ASSESSEES LOSS WAS ASSESSABLE UNDER THE HEAD PROFIT AND GAINS FROM BUSINESS OR PROFESSION AS AGAINST T HE ASSESSEES CONTENTION THAT THE SAID INCOME (LOSS) WAS TO BE COMPUTED AND ASSESSED UNDER THE HE A D INCOME FROM HOUSE PROPERTY . 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE FILED ITS RETURN OF INCOME ON 23.10.2007 DECLARING TOTAL INCOME AT RS. NIL, WHICH WAS PROCESSED UNDER SECTION 143(1) OF THE INCOME TAX ACT, 1961. THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY AND STATUTORY NOTICES U/S 143(2) AND 142(1) WERE ISSUED AND SERVED UPON THE ASSESSEE. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO FOUND THAT THE ASSESSEE H A S CLAIMED LOSS OF RS.85,15,655 / - UNDER THE HE A D INCOME FROM HOUSE PROPERTY AS UNDER : INCOME FROM HOUSE PROPE RTY: RENT : NIL LESS EXEMPT U/S 24(A) @ 30% : NIL ------ NIL LESS : INTEREST PAID RS.85,15,655/ - INCOME FROM HOUSE PROPERTY RS.(85,15,655) THE AO ISSUED SHOW CAUSE NOTICE TO THE ASSESSEE WHICH WAS REPLIED VIDE ITS SUBMISSIONS DATED 27.10.2009 AND 7.12.2009 WHICH ARE INCORPORATED IN 3 513 0 /MUM/201 3 5257/MUM/2013 ASSESSMENT ORDER AT PARA 6.3. THE ASSESSE E COMPANY WAS INCORPORATED ON 31.3.2006 AS A WHOLLY OWNED SUBSIDIARY OF M/S BENNETT COLEMAN AND CO LTD WHICH PURCHASED PROPERT IES AND BUILDING UNDER THE NAME TIMES TOWER FOR A TOTAL CONSIDERATION OF RS.15,15,71,514/ - AND THE ASSESSEES BORROWED FUND S TO THE EXTENT OF RS.9,35,00,000/ - FROM I T S HOLDING COMPANY WHICH AT THE END OF T HE YEAR ST OOD AT RS.9,79,39,292/ - . DURING THE YEAR THE ASSESSEES PROFIT AND LOSS ACCOUNT SHOW ED LOSS OF RS.1,15,63,115/ - . THE ASSESSEE CLAIMED INTEREST LIABILITY OF R S.85,15,655/ - IN THE PROFIT AND LOSS ACCOUNT BESIDES THE CLAIM ING THAT EXPENSES INCLUDING DEPRECIATION TO THE EXTENT OF RS.30,47,420/ - WHILE THERE WERE NO REVENUE S /RECEIPT S IN THE PROFIT AND LOSS ACCOUNT. THE ASSESSEE THEREAFTER SHOWED NIL INCOME UNDER THE HEAD GAINS/PROFIT BY ADDING THE EXPENDITURE IN THE PROFIT AND LOSS ACCOUNT AND CALCULATED THE INCOME FROM PROPERTY AT ( - 8515,655) BY STATING THAT THE SUM FOR WHICH THE PROPERTY CAN REASONABLY BE EXPECTED TO LET WAS RS.NIL AND AFTER CLAIMING THE INTEREST AS DEDUCTION U/S 24 OF THE ACT LOSS OF RS.85,15,655/ - WAS ARRIVED AT. THEREAFTER THE AO REJECTED THE SUBMISSION S OF THE ASSESSEE AND ASSESSED T HE SAID INCOME UNDER THE HEAD BUSINESS AND PROFESSION AT NIL UNDER THE NORMAL PROVISIONS OF ACT AS WELL AS UNDER THE SPECIAL PROVISIONS U/S 115JB OF THE ACT . AGGRIEVED BY THE ORDER OF AO, THE ASSESSEE PREFERRED AN APPEAL 4 513 0 /MUM/201 3 5257/MUM/2013 BEFORE THE LD.CIT(A) WHO ALSO DISMISSED THE APPEAL OF THE ASSESSEE BY OBSERVING AND HOLDING AS UNDER : 3 .5 I HAVE CONSIDERE D THE A.O.'S ORDER AS WELL AS APPELLANT AR'S SUBMISSION. I DO NOT AGREE WITH THE SUBMISSION MADE BY THE APPELLANT. THE FACT OF THE MATTER IS THAT THE APPELLANT COMPANY IS INCORPORATED WITH THE SOLE OBJECTIVE OF ACQUIRING THE IMMOVABLE PROPERTY FOR THE PURP OSE OF LETTING IT OUT. IT IS ALSO A MATTER OF FACT THAT THE APPELLANT IS A SUBSIDIARY OF BENNETT, COLEMAN & CO. LTD. AND THE ENTIRE PROPERTY WAS PURCHASED BY TAKING UNSECURED LOAN FROM M / S.BENNETT, COLEMAN & CO. LTD. THE APPELLANT HAS SHOWN INTEREST LOAN O F RS.85,15,695/ - IN ITS PROFIT AND LOSS ACCOUNT AND OTHER EXPENSES INCLUDING DEPRECIATION AMOUNTING TO RS.30,47,420/ - . CORRESPONDINGLY, NO BUSINESS RECEIPT HAS BEEN SHOWN IN ITS PROFIT AND LOSS ACCOUNT. FURTHER, IT IS SEEN THAT THE APPELLANT IN ITS OWN SUB MISSION BEFORE THE LD. A.O. HAS STATED THAT THE APPELLANT COMPANY ACQUIRED RESIDENTIAL ACCOMMODATION AND THERE WAS NO ELECTRICITY OR WATER CONNECTION, THEREFORE, THE PROPERTY COULD NOT REASONABLY BE EXPECTED TO BE LET OUT. THE APPELLANT IS NOW CONTESTING T HAT THE PROPERTY IS 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'. THE APPELLANT, IS THEREFORE, CONTESTING THAT DESPITE TH E OBJEC TIONS, THE INCOME IS TO BE TREATED AS 'INCOME FROM HOUSE PROPERTY'. HOWEVER, THE APPELLANT HAD ITSELF STATED THAT IT IS INCOME FROM BUSINESS AND NOT INCOME FROM HOUSE PROPERTY. WITHOUT PREJUDICE TO THE FOREGOING, EVEN IF THE CONTENTION OF THE APPELLANT IS ACCEPTED WHICH IS NOT ACCEPTABLE, THE PROPERTY CANNOT BE SAID TO BE LETTABLE AS THE APPELLANT HAD ACQUIRED THE PROPERTY ONLY IN THE MONTH OF JANUARY, 2007 WHEREIN ONLY THE OCCUPATION CERTIFICATE IS RECEIVED. THE CONTENTION OF THE APPELLANT THAT THE PROPER TY WAS LETTABLE FROM THE DATE OF ACQUIRING OCCUPATION CERTIFICATE CANNOT BE A CCEPTED AS IT IS COMMON KNOWLEDGE THAT AFTER OCCUPATION CERTIFICATE A LOT MANY WORK NEEDS TO BE DONE. THE FIRST THING IS TO APPLY FOR AN ELECTRICITY CONNECTION AND WATER CONNECTIO N, THEN THE OTHER MINOR THINGS WHICH ARE REQUIRED TO BE DONE IN A RESIDENTIAL ACCOMMODATION IS A MATTER OF COMMON KNOWLEDGE WHICH CANNOT BE DONE IN TWO MONTHS. THEREFORE, THE PROPERTY WAS NOT LETTABLE FOR THE YEAR UNDER CONSIDERATION AND THE ENTIRE EXPENSE S AT BEST CAN BE CALLED AS PRE - OPERATIVE EXPENSES AND CANNOT BE ALLOWED IN THE YEAR UNDER CONSIDERATION. THE ALV OF THE PROPERTY CANNOT BE TAKEN AS NIL AS THE PROPERTY CANNOT BE 5 513 0 /MUM/201 3 5257/MUM/2013 REASONABLY EXPECTED TO LET OUT IN THE YEAR UNDER CONSIDERATION. THEREFORE, THE SUBMISSIONS OF THE APPELLANT ARE REJECTED AND THE ADDITION SO MADE BY THE LEARNED A.O. IS ACCORDINGLY UPHELD. IN CASE OF PRE-OPERATIVE EXPENSES, IF THE INCOME IS HELD AS INCOME FROM BUSINESS, THE BUSINESS OF THE APPELLANT IS NOT SET OFF IN THE YEAR UNDER CONSIDERATION; THE SAME CANNOT BE ALLOWED U / S.37 OF THE INCOME - TAX ACT. THUS, APPELLANT'S THESE GROUNDS OF APPEAL ARE ACCORDINGLY DISMISSED. 4. IN SUPPORT OF HIS CONTENTION S , THE LD.AR PLACED STRONG RELIANCE IN ASSESSEES CASE IN ITA NO.5256 AND 5193/MU M/2013 (AY - 2007 - 08) DATED 24.6.2016. 5 . ON THE OTHER HAND, THE LD. DR STRONGLY OBJECTED TO THE ARGUMENTS OF THE LD. AR AND SUBMITTED THAT IN THE ASSESSEES CASE , THE RENT RECEIVED WAS TREATED AS INCOME FROM HOUSE PROPERTY BUT IN FACT, THE RENT RECEIVED BY THE ASSESSEE AS INCOME FROM BUSINESS OR PROFESSION AND HENCE, THE ORDER PASSED BY THE LD.CIT(A) BE UPHOLD AND THE APPEAL OF THE ASSESSEE BE DISMISSED. IN SUPPORT OF HIS CONTENTION, THE LD. DR PLACED RELIANCE ON THE FOLLOWING CASE LAW: A) CIVIL APPEA L NO.4494 OF 2004 IN M/S CHENNAI PROPERTIES AND INVESTMENTS LTD V/S CIT ORDER DATED 9.4.2015 (2015 ITR (373) ITR 673 (SC) 6 . WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL PLACED BEFORE US INCLUDING THE ORDERS OF AUTHORITIES BELOW AND JUDI CIAL DECISIONS RELIED UPON BY THE PARTIES. AT THE OUTSET, THE LD.AR VEHEMENTLY SUBMITTED THAT THE CASE OF THE ASSESSEE IS FULLY COVERED IN ITS FAVOUR BY THE DECISION OF CO - ORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF VAIDEHI ESTATES LTD V/S 6 513 0 /MUM/201 3 5257/MUM/2013 DCIT(OSD) (A Y - 2007 - 08) DATED 31.7.2015 WHICH WAS PASSED IN THE GROUP CASES OF THE ASSESSEE. ON PERUSAL OF THE ORDER OF THE TRIBUNAL, WE FIND THAT THE IDENTICAL ISSUE WAS DECIDED BY THE CO - ORDINATE BENCH OF THE TRIBUNAL IN FAVOUR OF THE ASSESSEE. THE RELEVANT PORTI ON OF THE ORDER, FOR THE SAKE OF CLARITY IS REPRODUCED BELOW : 8. APROPOS THE ISSUE AS TO WHETHER THE ASSESSEES INCOME IS TO BE COMPUTED AS INCOME FROM HOUSE PROPERTY AS CLAIMED BY THE ASSESSEE, OR UNDER THE HEAD PROFITS AND GAINS OF BUSINESS OR PROFE SSION, AS HELD BY THE LD. CIT(A), SECTION 22 OF THE ACT PROVIDES THAT THE ANNUAL VALUE OF THE PROPERTY CONSISTING OF ANY BUILDING OR LAND APPURTENANT THERETO, OF WHICH, THE ASSESSEE IS THE OWNER, SHALL BE CHARGEABLE TO TAX UNDER THE HEAD INCOME FROM HOUS E PROPERTY. IN THIS REGARD, IT IS OF LITTLE MOMENT THAT THE ASSESSEE OWNER IS A COMPANY FORMED WITH THE OBJECT OF ACQUIRING IMMOVABLE PROPERTY TO BE LET OUT, AS IS THE CASE HEREIN. IT HAS BEEN HELD TO THIS 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 700 (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 A NY DECISION TO THE CONTRARY. IN VIEW OF THESE DECISIONS, THE OBSERVATION 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 FOR THE TAXING AUTHORITY TO DECI DE SUCH ISSUES CORRECTLY AND THE CLAIM OF THE ASSESSEE, EITHER WAY, IS NOT DECIDED. ALSO, IT IS NOT OF ANY DETRIMENT TO THE ASSESSEE THAT AS OBSERVED BY THE LD. CIT(A), WHILE ACQUIRING THE PROPERTY, ONLY OCCUPATION CERTIFICATE WAS RECEIVED BY THE ASSESSEE AND ELECTRICITY OR WATER CONNECTION, INTER ALIA, HAVING BEEN APPLIED FOR, THE PROPERTY WAS NOT RENDERED LETTABLE. THIS IS ALSO IN VIEW OF THE FACT THAT IN ITS MEETING ON 15 - 7 - 2007, THE BOARD OF DIRECTORS OF THE ASSESSEE COMPANY RESOLVED THAT ATTEMPT BE MAD E TO LET OUT THE PROPERTY AS A BARE - SHELL, WITHOUT MAKING ANY RENOVATION OR FURNISHING. 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 ASSESSEE IS FOUND TO B E JUSTIFIED AND IS ACCEPTED AS SUCH. THE ORDER OF THE LD. CIT(A) IN 7 513 0 /MUM/201 3 5257/MUM/2013 THIS REGARD IS CANCELLED AND IT IS HELD THAT THE INCOME OF THE ASSESSEE IS TO BE COMPUTED AS INCOME FROM HOUSE PROPERTY. THE ASSESSEES CLAIM IN THIS REGARD IS, THUS, ALLOWED. 7 . IN TH E CASE OF M/S SHUBHAM PROPERTIES LTD (SUPRA), THE TRIBUNAL HAS HELD AS UNDER : 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 DEC IDED THE SAME IN FAVOUR OF ASSESSEE. NOTHING CONTRARY WAS BROUGHT TO OUR KNOWLEDGE ON BEHALF OF REVENUE. FACTS BEING SIMILAR, SO FOLLOWING SAME REASONING, WE HOLD THAT INCOME ASSESSEE IS TO BE COMPUTED AS INCOME FROM HOUSE PROPERTY. ACCORDINGLY, ASSESSEE S CLAIM IN THIS REGARD IS ALLOWED. 8. THE DECISION RELIED BY THE LD.DR IS DISTINGUISHABLE AND THEREFORE NOT APPLICABLE TO THE PRESENT CASE. IN VIEW OF THE DECISION OF THE TRIBUNAL IN GROUP CASES OF THE ASSESSEE, WE ARE OF THE CONSIDERED VIEW THAT T HE FACTS OF THE ASSESSEES CASE IS FULLY COVERED BY THE DECISION OF THE TRIBUNAL AND THEREFORE, RESPECTFULLY FOLLOWING T HE DECISION OF THE SAME ALLOW THE APPEAL OF THE ASSESSEE BY SETTING ASIDE THE ORDER OF LD.CIT(A) AND DIRECT T HE AO TO TREAT THE INCO ME OF THE ASSESSEE AS INCOME FROM HOUSE PROPERTY . APPEAL FILED BY THE ASSESSEE IS ALLOWED. 9 . NOW , WE SHALL TAKE UP THE APPEAL OF THE REVENUE BEING ITA NO.5257/MUM/2013 10 . GROUND OF APPEAL RAISED BY THE REVENUE IS AS UNDER : 1. ON THE FACTS AND IN TH E CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN ALLOWING CARRY FORWARD OF LOSSES U/S 71B OF THE IT ACT WITHO UT APPRECIATING THE FACT THE LD.CIT(A) HIMSELF HAS CONFIRMED THE EXPENS ES AS PRE - OPERATIVE EXPENSES AND SUCH EXPENSE CAN BE CLAI MED U/S 35D OF THE IT ACT ONLY . 8 513 0 /MUM/201 3 5257/MUM/2013 1 1 . WE FIND THAT THE INCOME IN QUESTION IS TREATED AS INCOME FROM HOUSE PROPERTY. THE LD. CIT(A) WHILE DECI DING THE ISSUE OF DEDUCTION U/S 71B IS DECIDED THIS ISSUE VIDE PARA 3.5 OF APPELLATE ORDER IN FAVOUR OF THE ASSE SSEE BY HOLDING AS UNDER : 3.5. IN CASE OF PRE-OPERATIVE EXPENSES, IF THE INCOME IS HELD AS INCOME FROM BUSINESS, THE BUSINESS OF THE APPELLANT IS NOT SET OFF IN THE YEAR UNDER CONSIDERATION; THE SAME CANNOT BE ALLOWED U/S.37 OF THE INCOME - TAX ACT. THUS , APPELLANT'S THESE GROUNDS OF APPEAL ARE ACCORDINGLY DISMISSED. 1 2 . AT THE TIME OF HEARING, THE LD.AR INVITED OUR ATTENTION TO THE DECISION OF CO - ORDINATE BENCH OF THE TRIBUNAL IN ASSESSEES OWN CASE IN ITA NO.. 5256/MUM/2013 (ASSESSMENT YEAR: 2007 - 08) DATED 24.6.2016 BY WHICH THE TRIBUNAL HAS DEALT WITH SIMILAR ISSUE AND DECIDED THE SAME IN FAVOUR OF THE ASSESSEE . THE LD. AR PRAYED THAT SIMILAR VIEW BE TAKEN IN THIS YEAR ALSO, FOR WHICH THE LD. DR DID NOT OBJECT. 1 3 . ON PERUSAL OF THE ORDER OF TRIBU NAL (COMPRISING OF SAME BENCH) IN ITA NO.5256/MUM/2013 VIDE PARA 6.1, THE ISSUE HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE. THE PARA 6.1 FOR THE SAKE OF READY REPRODUCED BELOW AS UNDER : 6.1 REGARDING DEPARTMENTAL GRIEVANCE, ONCE WE HAVE HELD THAT INCOME IS TO BE ASSESSED AS INCOME FROM HOUSE PROPERTY AS ABOVE, ON THE BASIS OF ORDER OF CIT(A) THIS ISSUE IS UPHELD 9 513 0 /MUM/201 3 5257/MUM/2013 1 4 . RESPECTFULLY FOLLOWING THE TRIBUNAL ORDER IN ASSESSEES OWN CASE, WE DISMISS THE APPEAL OF THE REVENUE. 1 5 . IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED AND THAT OF REVENUE STANDS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 04. 0 8 . 2016. SD SD ( SHAILENDRA KUMAR YADAV ) (RAJESH KUMAR) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI ; DATED : 04 . 8 .2016 SR.PS:SRL: / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELL ANT 2. / THE RESPONDENT 3. ( ) / THE CIT(A) 4. / CIT CONCERNED 5. , , / DR, ITAT, MUMBAI 6. / GUARD F ILE / BY ORDER, TRUE COPY / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI