ACIT, New Delhi V. M/s AB Hotels Ltd. (Radission Hotels), New Delhi

ITA 5451/DEL/2013

• Counselvise Citation: 545120114 RSA 2013
• Duration Of Justice: 1 year(s) 5 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-03-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 20-01-2015
• Assessment Year: 2010-2011
• Appeal Filed On: 04-10-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: Y KAKKAR ASSESSING OFFICER
• Assessee Lawyers: DR RAKESH GUPTA; ADESH ANAND
• Keywords: Business income; Revenue expenditure
• Section: 143(3)

Judgement Text

I.T.A. NO.: 5048 AND 5451/DEL/13 ASSESSMENT YEAR 2010-11 PAGE 1 OF 10 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI A BENCH, NEW DELHI [CORAM: PRAMOD KUMAR AM AND C. M. GARG JM] I.T.A. NO.: 5048/DEL/13 ASSESSMENT YEAR 2010-11 A. B. HOTELS LIMITED .APPELLANT RADISSON HOTEL NATIONAL HIGHWAY- 8 NEW DELHI 110 037 [PAN: AAACA2729B] VS. ASSISTANT COMMISSIONER OF INCOME TAX CENTRAL CIRCLE 3, NEW DELHI .R ESPONDENT I.T.A. NO.: 5451/DEL/13 ASSESSMENT YEAR 2010-11 ASSISTANT COMMISSIONER OF INCOME TAX CENTRAL CIRCLE 3, NEW DELHI .APPELLANT VS A. B. HOTELS LIMITED .. .RESPONDENT RADISSON HOTEL NATIONAL HIGHWAY- 8 NEW DELHI 110 037 [PAN: AAACA2729B] APPEARANCES BY: DR RAKESH GUPTA AND ADESH ANAND, FOR THE ASSESSEE Y KAKKAR, FOR THE ASSESSING OFFICER O R D E R PER PRAMOD KUMAR, AM: 1. THESE CROSS APPEALS CALL INTO QUESTION CORRECTNE SS OF LEARNED CIT(A)S ORDER DATED 4 TH JULY 2013, IN THE MATTER OF ASSESSMENT UNDER SECTI ON 143(3) OF THE INCOME TAX ACT, 1961, FOR THE ASSESSMENT YEAR 2 010-11. WE WILL TAKE UP THESE CROSS APPEALS TOGETHER, FOR DISPOSAL BY WAY O F THIS CONSOLIDATED ORDER. I.T.A. NO.: 5048 AND 5451/DEL/13 ASSESSMENT YEAR 2010-11 PAGE 2 OF 10 2. IN THE APPEAL FILED BY THE ASSESSE, THE FOLLOWIN G GRIEVANCE IS RAISED: THE LEARNED CIT(A)-II NEW DELHI HAS ERRED ON FACT I N CONFIRMING THE ACTION OF ACIT, CC -3, NEW DELHI UNDER SECTION 143 (3) WITH REGARD TO ASSESSING THE TAXABLE INCOME FROM HOUSE PROPERTY, A S BUSINESS INCOME, AMOUNTING TO RS 5,62,11,777 . 3. LEARNED REPRESENTATIVE FAIRLY AGREE THAT WHATEVE R WE DECIDE IN THE APPEALS FOR THE ASSESSMENT YEAR 2009-10, WHICH WERE HEARD ALONGWITH THESE CROSS APPEALS, WILL APPLY MUTATIS MUTANDIS FOR THIS ASSESSMENT YEAR AS WELL. 4. VIDE OUR ORDER OF EVEN DATE, FOR THE ASSESSMENT YEAR 2009-10, WE HAVE HELD AS FOLLOWS: 3. IN PLAIN WORDS, THE ASSESSE IS AGGRIEVED OF THE CIT(A) HOLDING THAT THE INCOME OF RS 6,59,36,930, WHICH HAS BEEN OFFERED TO TAX BY THE ASSESSE AS AN INCOME UNDER THE HEAD INCOME FROM HOUSE PROPERTY, HAS RIGHTLY BEEN TAXED BY THE ASSESSING OFFICER UNDER THE HEAD PROFITS AN D GAINS OF BUSINESS AND PROFESSION. THE DISPUTE IS, THUS, CONFINED TO THE HEAD UNDER WHICH THE INCOME IN QUESTION IS TO BE TAXED. 4. THE RELEVANT MATERIAL FACTS, AS CULLED OUT FROM THE MATERIAL PRODUCED BEFORE US, ARE AS FOLLOWS. DURING THE COURSE OF THE SCRUTINY ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTICED THAT THE ASSESSE HAD SHOWN AN INCOME OF RS 6,85,30,860 AS AN INCOME FROM HOUSE PR OPERTY AND CLAIMED DEDUCTIONS, INTER ALIA, IN RESPECT OF MUNICIPAL TAX ES OF RS 31,96,341 AND STANDARD DEDUCTION UNDER SECTION 24 AT 30% WHICH WO RKED OUT TO RS 1,97,81,079. IN RESPONSE TO THE ASSESSING OFFICERS REQUISITION FOR DETAILS, INTER ALIA, OF RENTAL INCOME, IT WAS SUBMITTED THAT THE RENTAL INCOME OF THE ASSESSE COMPRISES OF THE RENT FROM LETTING OUT OF THE SPACE IN THE COMMERCIAL PLAZA TO DIFFERENT PARTIES. WHEN ASSESS ING OFFICER REQUIRED THE ASSESSE TO SHOW CAUSE AS TO WHY THIS INCOME NOT BE TAXED AS A BUSINESS INCOME, IT WAS SUBMITTED BY THE ASSESSE THAT RENT ING OF COMMERCIAL COMPLEX IS ONE OF THE MAIN OBJECTS OF THE COMPANY AND THAT THIS ISSUE WAS RAISED IN EARLIER YEARS ALSO AND FINALLY SETTLED BY THE ITAT BENCH A IN WHICH IT WAS HELD THAT INCOME FROM COMMERCIAL COMPL EX IS TO BE ASSESSED AS PROPERTY INCOME ONLY. A COPY OF THE ORDER PASSED B Y THE TRIBUNAL WAS ALSO SUBMITTED TO THE ASSESSING OFFICER. THE AO TOOK NO TE OF THE SAME BUT POINTED OUT THAT THE DISPUTE BEFORE THE TRIBUNAL WA S WHETHER THE INCOME WAS TAXABLE AS INCOME FROM OTHER SOURCES OR AS I NCOME FROM HOUSE PROPERTY AND IT WAS IN THIS CONTEXT THAT THE TRIBU NAL HELD THAT THE INCOME I.T.A. NO.: 5048 AND 5451/DEL/13 ASSESSMENT YEAR 2010-11 PAGE 3 OF 10 WAS TAXABLE AS INCOME FROM HOUSE PROPERTY. THIS DEC ISION, ACCORDING TO THE ASSESSING OFFICER, HAD NO RELEVANCE IN THE PRESENT CONTEXT WHERE THE DISPUTE IS WITH RESPECT TO TAXABILITY UNDER THE HEAD PROFI TS AND GAINS FROM BUSINESS AND PROFESSION VIS--VIS TAXABILITY UNDER THE HEAD INCOME FROM HOUSE PROPERTY. AS REGARDS THE REFERENCE TO THE MAIN OB JECTS OF THE ASSESSE COMPANY, THE AO WAS OF THE VIEW THAT THIS FACT SHOW S THAT RENTAL INCOME FROM COMMERCIAL PLAZA IS TO BE TAXED AS BUSINESS IN COME MORE SO IN VIEW OF BUSINESS OBJECTS FOR WHICH COMPANY IS ESTABLISHED. THE AO THEN PROCEEDED TO DRAW PARITY BETWEEN RENTING OUT THE SPACE IN COM MERCIAL PLAZA AND IN RENTING OUT THE HOTEL ROOMS AND OBSERVED THAT THER E IS NO DIFFERENCE BETWEEN LETTING OUT OF THE HOTEL ROOMS AND THE RENT ING OUT OF THE SHOPS IN THE HOTEL PREMISES ESPECIALLY WHEN HOTEL PREMISES, INTER ALIA, INCLUDES COMMERCIAL COMPLEX ALSO. HE FURTHER NOTED THAT THE COMMERCIAL COMPLEX HAS NO SEPARATE IDENTITY AND IS JUST A PART OF THE HOTEL BUILDING. THE AO WAS OF THE VIEW THAT JUST BECAUSE THE SHOPS ARE LE T OUT FOR A LONGER DURATION, THERE CANNOT BE A TREATMENT DIFFERENT FRO M WHAT IS GIVEN TO THE RENTALS FROM LETTING OF ROOMS. THE AO ALSO REFERRED TO, AND RELIED UPON, HONBLE AP HIGH COURTS JUDGMENT IN THE CASE OF CIT VS A P SMALL SCALE INDUSTRIAL DEVELOPMENT CORP (175 ITR 352) AND HE AL SO BRIEFLY REFERRED TO HONBLE KARNATAKA HIGH COURTS DECISION IN THE CASE OF BALAJI ENTERPRISES VS CIT (225 ITR 471). IT WAS IN THIS BACKDROP THAT THE ASSESSING OFFICER REJECTED THE STAND OF THE ASSESSE AND PROCEEDED TO BRING TO TAX INCOME FROM RENTING THE COMMERCIAL PREMISES AS AN INCOME UNDER THE HEAD PROFITS AND GAINS FROM BUSINESS AND PROFESSION. AGGRIEVED BY THE STAND SO TAKEN BY THE ASSESSING OFFICER, ASSESSE CARRIED THE MATTER IN AP PEAL BEFORE THE CIT(A) BUT WITHOUT ANY SUCCESS. LEARNED CIT(A) NOTED THAT AS PER THE NOTES TO ACCOUNTS, THE PROJECT, WHICH ESSENTIALLY INCLUDE S COMMERCIAL PREMISES SO GIVEN ON RENT AS WELL, IS CONSTRUCTED ON THE LAND T AKEN ON LEASE FROM THE AIRPORT AUTHORITY OF INDIA. IT WAS ALSO NOTED THAT THE TAX AUDIT REPORT DESCRIBES THE BUSINESS OF THE ASSESSE AS HOTEL WIT H COMMERCIAL COMPLEX. HE WAS ALSO OF THE VIEW THAT, AS EVIDENT FROM THE BALA NCE SHEET AND PROFIT AND LOSS ACCOUNT OF THE ASSESSE, ACCOUNTS OF THE ASSESS E ARE SINGLE AND COMPOSITE. IT WAS ALSO NOTED THAT ALL THE FIXED AS SETS OF THE HOTEL AS ALSO THE COMMERCIAL COMPLEX ARE REPORTED TOGETHER AND WITHOU T ANY SEGREGATION. IN THE LIGHT OF THESE OBSERVATIONS, THE CIT(A) HELD TH AT THE ENTIRE ACTIVITY OF THE APPELLANT IN AN ORGANIZED MANNER WAS TO EARN PR OFITS OUT OF INVESTMENTS MADE BY IT IN ITS PROJECT OF HOTEL WITH COMMERCIAL SPACE, AS A COMMERCIAL VENTURE. LEARNED CIT(A) ALSO NOTED THA T ITS ONLY INCOME FROM A PROPERTY, OTHER THAN A PROPERTY USED FOR PLANNED BUSINESS ACTIVITY, WHICH CAN BE TAXED AS INCOME FROM HOUSE PROPERTY, AND S INCE THE INCOME IN QUESTION WAS BY WAY OF AN ORGANIZED BUSINESS ACTIVI TY, THE ASSESSING OFFICER RIGHTLY TAXED IT UNDER THE HEAD PROFITS AND GAINS FROM BUSINESS AND PROFESSION. THE ASSESSE IS NOT SATISFIED BY THE S TAND SO TAKEN BY THE CIT(A) AS WELL, AND IS IN FURTHER APPEAL BEFORE US. I.T.A. NO.: 5048 AND 5451/DEL/13 ASSESSMENT YEAR 2010-11 PAGE 4 OF 10 5. WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED THE MATERIAL ON RECORD AND DULY CONSIDERED FACTS OF THE CASE IN THE LIGHT OF THE APPLICABLE LEGAL POSITION. 6. THE TRUE TEST FOR AS TO WHETHER INCOME FROM LETT ING OF A PROPERTY IS TO BE TAXED UNDER THE HEAD INCOME FROM HOUSE PROPERTY OR AS A BUSINESS INCOME IS AS TO WHAT IS THE PRIMARY OBJECT OF THE A SSESSE, RATHER THAN WHETHER THE ASSESSE IS LETTING OUT THE PROPERTY AS PART OF ITS MAIN BUSINESS. AS HELD BY HONBLE CALCUTTA HIGH COURT IN THE CASE OF CIT VS SHAMBHU INVESTMENTS PVT LTD (249 ITR 47), WHICH HAS BEEN AP PROVED BY HONBLE SUPREME COURT IN THE CASE OF SHAMBHU INVESTMENTS PV T LTD VS CIT (263 ITR 143), I F IT IS FOUND APPLYING SUCH TEST THAT THE MAIN INTE NTION IS FOR LETTING OUT THE PROPERTY OR ANY PORTION THEREOF THE SAME MU ST BE CONSIDERED AS RENTAL INCOME OR INCOME FROM PROPERTY AND IN CASE IT IS FOUND THAT THE MAIN INTENTION IS TO EXPLOIT THE IMMOVABLE PROPERTY BY WAY OF COMPLEX COMMERCIAL ACTIVITIES IN THAT EVENT IT MUST BE HELD AS BUSINESS INCOME. THERE CAN BE SITUATIONS IN WHICH THE ASSESSEES MAI N BUSINESS MAY BE TO LET OUT A PROPERTY BUT WHEN, IN THE COURSE OF SUCH A BU SINESS, THE ASSESSEE LETS OUT SIMPLICTOR, WITHOUT COMPLEX COMMERCIAL ACTIVITI ES, THE INCOME FROM SUCH LETTING OUT WILL STILL BE TAXABLE UNDER THE HE AD INCOME FROM A HOUSE PROPERTY. ON THE OTHER HAND, THERE CAN BE SITUATIO NS WHEN ASSESSE MAY NOT HAVE LETTING OUT OF PROPERTIES AS ITS MAIN OBJECT, BUT WHEN, EVEN IN SUCH A SITUATION, THE ASSESSE EXPLOITS THE PROPERTY BY WAY OF A COMPLEX COMMERCIAL ACTIVITY, INCOME FROM SUCH A LETTING OUT COULD STIL L BE TAXABLE AS A BUSINESS INCOME. CLEARLY, THEREFORE, IT IS NOT THE BUSINESS AS AN OBJECT BUT COMPLEXITY OF THE BUSINESS ACTIVITY, IN THE COURSE OF LETTING OUT THE PROPERTY, WHICH IS DETERMINATIVE OF THE HEAD UNDER WHICH RENTAL INCOME IS TO BE BROUGHT TO TAX. HONBLE AP HIGH COURTS JUDGMENT IN THE CASE OF AP STATE SMALL SCALE DEVELOPMENT CORP (SUPRA), WHICH HAS BEEN RELIED UPO N BY THE AO AS WELL, ALSO HAS EXPRESSED SIMILAR VIEWS WHEN THEIR LORDSHI PS OBSERVED AS FOLLOWS: ..WE ARE IN ENTIRE AGREEMENT WITH THE OBSERVATIONS OF THE TRIBUNAL: 'BUT THE POSITION IS DIFFERENT WHERE THE INCOME REC EIVED IS NOT FROM THE LETTING OF THE TENEMENTS OR FROM THE L ETTING ACCOMPANIED BY INCIDENTAL SERVICES OR FACILITIES BU T THE SUBJECT HIRED' IS A COMPLEX ONE AND THE INCOME OBT AINED IS NOT SO MUCH BECAUSE OF THE BARE LETTING OF THE TENE MENTS BUT BECAUSE OF THE FACILITIES AND SERVICES RENDERED , AND THE OPERATIONS INVOLVED IN EACH LETTING OF THE PROPERTY MAY BE OF THE NATURE OF BUSINESS OR TRADING OPERATIONS. IN SUCH A CASE, THE INCOME DERIVED IS LIABLE TO BE ASSESSED U NDER THE HEAD BUSINESS'. THE ABOVE PROPOSITIONS EMERGE FROM THE DECISION OF THE SUPREME COURT IN CIT VS. NATIONAL S TORAGE (P) LTD. (SUPRA), AFFIRMING THE DECISION OF THE BOM BAY HIGH COURT IN THE SAME CASE (1963) 48 ITR 577.' I.T.A. NO.: 5048 AND 5451/DEL/13 ASSESSMENT YEAR 2010-11 PAGE 5 OF 10 11. IN CIT VS. NATIONAL STORAGE (P) LTD. (SUPRA), THE ASSESSEE PURCHASED A PLOT OF LAND AND CONSTRUCTED GODOWNS FO R STORAGE OF FILMS. THERE WERE 13 UNITS AND EACH UNIT WAS DIVIDE D INTO FOUR VAULTS HAVING A GROUND FLOOR FOR REWINDING OF FILMS . THE UNITS WERE CONSTRUCTED IN CONFORMITY WITH THE REQUIREMENT S AND SPECIFICATIONS LAID DOWN IN THE CINEMATOGRAPH FILM RULES, 1948. THE VAULTS WERE LICENSED TO FILM DISTRIBUTORS. UNDE R THE LICENCE, THE VAULT COULD NOT BE USED FOR ANY PURPOSE OTHER T HAN STORING CINEMA FILMS. THE ASSESSEE INSTALLED A FIRE ALARM A ND PAID AN ANNUAL AMOUNT TO THE MUNICIPALITY TOWARDS FIRE SERV ICES. IT MAINTAINED A REGULAR STAFF AND ALSO PAID FOR THE EN TIRE STAFF OF THE INDIAN MOTION PICTURE DISTRIBUTORS ASSOCIATION FOR SERVICES RENDERED TO THE LICENSEES. IT WAS HELD THAT THE ASS ESSEE WAS CARRYING ON AN ADVENTURE OR CONCERN IN THE NATURE O F TRADE AND THE SUBJECT WHICH WAS HIRED OUT WAS A COMPLEX ONE. DEALING WITH THE ACTIVITIES CARRIED ON BY THE ASSESSEE IN THAT C ASE AND AGREEING WITH THE VIEW TAKEN BY THE BOMBAY HIGH COU RT, THE SUPREME COURT HELD : 'THE ASSESSEE KEPT THE KEY OF THE ENTRANCE WHICH PERMITTED ACCESS TO THE VAULTS IN ITS OWN EXCLUSIVE POSSESSION. THE ASSESSEE WAS THUS IN OCCUPATION OF ALL THE PREMISES FOR THE PURPOSE OF ITS OWN CONCERN, THE CO NCERN BEING THE HIRING OUT OF SPECIALLY BUILD VAULTS AND PROVIDING SPECIAL SERVICES TO THE LICENSEES. AS OBS ERVED BY VISCOUNT FINLAY IN GOVERNORS OF THE ROTUNDA HOSPITA L, DUBLIN VS. COMAN (1920) 7 TC 517; (1921) AC 1, THE SUBJECT WHICH IS HIRED OUT IS A COMPLEX ONE' AND TH E RETURN RECEIVED BY THE ASSESSEE IS NOT THE INCOME DERIVED FROM THE EXERCISE OF PROPERTY RIGHTS ONLY BUT IS DERIVED FROM CARRYING ON AN ADVENTURE OR CONCERN IN THE NATURE O F TRADE.' 7. IT IS, THEREFORE, QUITE CLEAR THAT AN INCOME FRO M LETTING OUT CAN BE BROUGHT TO TAX UNDER THE HEAD PROFITS AND GAINS OF BUSINESS AND PROFESSION ONLY WHEN INCOME RECEIVED IS NOT ONLY FOR LETTING ACCOMPANIED BY INCIDENTAL SERVICES OR FACILITIES BUT THE SUBJECT HIRED' IS A COMPLEX ONE AND THE INCOME OBTAINED IS NOT SO MUCH BECAUSE OF THE B ARE LETTING OF THE TENEMENTS BUT BECAUSE OF THE FACILITIES AND SERVICE S RENDERED. THE TRUE TEST FOR DECIDING WHETHER INCOME IS TO BE TAXED UNDER TH E HEAD PROPERTY INCOME OR BUSINESS INCOME, THEREFORE, LIES IN EXAMINING CO MPLEXITY OF THE ACTIVITY WHICH SHIFTS THE CORE AND PROXIMATE REASON OF EARNI NG FROM PROPERTY LET OUT TO THE EARNING FROM BUSINESS ACTIVITY CARRIED OUT. TAKE THE CASE OF HIRING OUT A HOTEL ROOM WHICH HAS ADDED VALUE FOR EARNING NOT BECAUSE OF THE ROOM SIMPLICTOR BUT BECAUSE OF THE INTEGRATED COMPL EX ACTIVITIES SUCH AS I.T.A. NO.: 5048 AND 5451/DEL/13 ASSESSMENT YEAR 2010-11 PAGE 6 OF 10 ROOM MAINTENANCE AND UPKEEP, HOUSE KEEPING SUPPORT, AMENITIES INSIDE AND OUTSIDE THE ROOM, ROOM SERVICE AND SUPPORT, LOBBY A ND COMMON SPACE, RECREATIONAL FACILITIES, HEALTH CLUB AND SWIMMING P OOL, TELEPHONE, FAX AND MESSAGE SERVICES, BUTLER AND ENDLESS OTHER SERVICES . THESE SERVICES, AND COMPLEX BUSINESS ACTIVITY IN RESPECT THERETO, ARE S O VITAL THAT THE IMPORTANCE OF THESE SERVICES IS AS MUCH AS THE PROP ERTY ITSELF EVEN WHEN SUCH SERVICES DONOT RELEGATE THE PROPERTY LET OUT I NTO RELATIVE INSIGNIFICANCE. ON THE OTHER HAND, EVEN WHEN PROP ERTY IS LET OUT IN THE COURSE OF THE BUSINESS OR AS A PART OF THE CORE BUS INESS, IN A SITUATION IN WHICH CONSIDERATION FOR SUCH LETTING OUT IS PREDOMI NANTLY FOR THE USE OF PROPERTY ITSELF, RATHER THAN THE INCIDENTAL FACILIT IES AND SERVICES, THE INCOME WILL NEVERTHELESS BE TAXABLE AS INCOME FROM HOUSE PROPERTY. 8. IN THE SITUATION THAT WE ARE DEALING WITH, IT IS NOT EVEN THE CASE OF THE ASSESSING OFFICER THAT THE LETTING IS ACCOMPANIED B Y INCIDENTAL SERVICES AND FACILITIES WHICH HAVE A DOMINANT ROLE TO PLAY IN TH E EARNING FROM THE PROPERTY LET OUT. WE HAVE ALSO PERUSED THE LEASE AG REEMENTS FILED BEFORE US AND WE FIND THAT THE PROPERTY IS LET OUT, WITHOUT A NY DOMINANT INCIDENTAL SERVICES AS PART OF THIS ARRANGEMENT, FOR THE PURPO SES OF RUNNING OFFICES AND COMMERCIAL ESTABLISHMENTS. WE DONOT FIND IT A CASE OF ANYTHING MORE THAN SIMPLE LETTING OUT OF PROPERTY WHERE THE EMPHASIS I S ON THE PROPERTY ITSELF RATHER THAN THE SERVICES. IT IS TRUE THAT THE COMME RCIAL OR OFFICE COMPLEX IS ON THE SAME PLOT ON WHICH THE HOTEL IS SITUATED BUT IT IS UNDISPUTEDLY DISTINCT FROM, EVEN IF SOMEWHAT ATTACHED TO, THE HO TEL ITSELF, AND, THEREFORE, THE FACT OF THE COMMERCIAL COMPLEX BEING ON THE SAM E PLOT DOES NOT HELP THE CASE OF THE REVENUE. THE PHYSICAL PROXIMITY OF THE HOTEL AND THE COMMERCIAL COMPLEX DOES NOT REALLY MATTER AS LONG AS THE CHARA CTER OF ARRANGEMENT HAS DISTINCT CHARACTER, AND THERE IS NO DISPUTE ON THAT ASPECT. IT IS A CASE OF RENTING SIMPLICTOR AND THE SERVICES INCIDENTAL TO L ETTING OUT DO NOT CONSTITUTE SUCH COMPLEX CHARACTER SO AS TO BE RENDE R IT AS A BUSINESS BY ITSELF. 9. WE HAVE ALSO NOTED THAT UNDISPUTEDLY IN THE EARL IER ASSESSMENT YEARS, COORDINATE BENCHES HAVE HELD THAT THE INCOME FROM L ETTING OUT IS IN THE NATURE OF INCOME FROM HOUSE PROPERTY. ONCE THERE AR E CATEGORICAL FINDINGS TO THIS EFFECT, AND THERE IS NO DISPUTE ON THAT FAC T, IT IS NOT OPEN TO THE LOWER AUTHORITIES TO STILL HOLD THAT THE INCOME CAN BE TA XED AS BUSINESS INCOME BECAUSE THAT ASPECT OF THE MATTER WAS NOT EXAMINED. WE ARE UNABLE TO SEE ANY MERITS IN THIS APPROACH. AS LAID DOWN BY THE AP EX COURT IN THE CASE OF AMBIKA PRASAD MISHRA VS. STATE OF UP AIR 1980 SC 17 62 : (1980) 3 SCC 719 (P. 1764 OF AIR 1980 SC) 'EVERY NEW DISCOVERY NOR A RGUMENTATIVE NOVELTY CANNOT UNDO OR COMPEL RECONSIDERATION OF A BINDING PRECEDENT... A DECISION DOES NOT LOSE ITS AUTHORITY MERELY BECAUSE IT WAS B ADLY ARGUED, INADEQUATELY CONSIDERED OR FALLACIOUSLY REASONED... .'. LEARNED CIT(A) WAS THUS IN ERROR IN NOT FOLLOWING A BINDING JUDICIAL P RECEDENT. HIS ADVENTURISM WAS NEITHER JUDICIALLY APPROPRIATE NOR LEGALLY PERM ISSIBLE. IN THIS VIEW OF THE MATTER, FOR THE REASON OF CONSISTENCY IN APPROA CH AND BOUND BY THE I.T.A. NO.: 5048 AND 5451/DEL/13 ASSESSMENT YEAR 2010-11 PAGE 7 OF 10 JUDICIAL PRECEDENT BY THE COORDINATE BENCH ALSO, WE HOLD THAT THE INCOME FROM LETTING OUT THE PROPERTY OUGHT TO HAVE BEEN TA XED UNDER THE HEAD INCOME FROM HOUSE PROPERTY. 10. IN VIEW OF THE ABOVE DISCUSSIONS, AS ALSO BEARI NG IN MIND ENTIRETY OF THE CASE, WE UPHOLD THE PLEA OF THE ASSESSE AND DIR ECT THE ASSESSING OFFICER TO TAX THE RENTAL INCOME OF RS 6,59,36,930 UNDER TH E HEAD INCOME FROM HOUSE PROPERTY AND ALLOW THE DEDUCTION UNDER THE S CHEME OF TAXABILITY OF INCOME UNDER THIS HEAD. 11. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED. 5. WE SEE NO REASONS TO TAKE ANY OTHER VIEW OF THE MATTER THAN THE VIEW SO TAKEN BY US FOR THE ASSESSMENT YEAR 2009-10. RESPEC TFULLY FOLLOWING THE SAID ORDER, WE UPHOLD THE PLEA OF THE ASSESSE AND DIRECT THE ASSESSING OFFICER TO TAX THE IMPUGNED RENTAL INCOME UNDER THE HEAD INCOME F ROM HOUSE PROPERTY. THE ASSESSE THUS SUCCEEDS IN HIS APPEAL. 6. IN THE RESULT, THE APPEAL OF THE ASSESSE IS ALLO WED. 7. IN THE APPEAL FILED BY THE ASSESSING OFFICER, TH E ONLY GRIEVANCE IS AS FOLLOWS: THAT THE LEARNED CIT(A) ERRED IN LAW AND ON FACTS O F THE CASE IN DELETING THE ADDITION OF RS 16,72,367 MADE BY THE A SSESSING OFFICER ON ACCOUNT OF DISALLOWANCE OF BRAND BUILDING EXPENS ES. 8. LEARNED REPRESENTATIVE FAIRLY AGREE THAT WHATEVE R WE DECIDE IN THE APPEALS FOR THE ASSESSMENT YEAR 2009-10, WHICH WERE HEARD ALONGWITH THESE CROSS APPEALS, WILL APPLY MUTATIS MUTANDIS FOR THIS ASSESSMENT YEAR AS WELL. I.T.A. NO.: 5048 AND 5451/DEL/13 ASSESSMENT YEAR 2010-11 PAGE 8 OF 10 9. VIDE OUR ORDER OF EVEN DATE, FOR THE ASSESSMENT YEAR 2009-10, WE HAVE HELD AS FOLLOWS: 14. SO FAR AS THIS GRIEVANCE OF THE ASSESSING OFFIC ER IS CONCERNED, THE RELEVANT MATERIAL FACTS ARE AS FOLLOWS. DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTED THAT THE A SSESSE HAD DEBITED A SUM OF RS 51,90,502 ON ACCOUNT OF CONTRIBUTION FOR BRAN D BUILDING EXPENSES PAYMENT TO CARLSON HOSPITAL MARKETING PVT LTD. IT W AS NOTED THAT THE ASSESSE WAS PAYING RS 56,000 PER MONTH IN THIS REGA RD, AND A FURTHER BILL OF RS 12,00,128 WAS RAISED ON THE BASIS OF GROSS ROOM REVENUE. IT WAS ALSO NOTICED THAT THE ASSESSE WAS ASKED TO CONTRIBUTE 0. 50% OF GROSS ROOM REVENUE, IN ADDITION TO 0.25% OF GRR AND RESERVATIO N FEES OF 0.25%. ON THESE FACTS, THE AO DISALLOWED THE 50% OF THE EXPEN SES AS RELATABLE TO THE SUBSEQUENT ASSESSMENT YEAR, BY OBSERVING AS FOLLOWS : THE EXPENSES WHICH HAVE BEEN ENHANCED THIS WAY WILL HELP THE COMPANY IN FUTURE YEARS AND, THEREFORE, CANNOT BE S AID TO BE EXPENSES HELD FOR BUSINESS DURING THE YEAR UNDER CO NSIDERATION. THE ASSESSE COMPANY HAS BEEN FOLLOWING THE MERCANTI LE METHOD OF ACCOUNTING, AND, THEREFORE, OUT OF TOTAL EXPENSE S DEBITED, A SUM OF 50% (BEING THE ADDITIONAL BRAND BUILDING EXP ENSES CHARGED) IS RELATED TO THE PROFITS OF THE SUBSEQUEN T YEARS AND CANNOT BE ALLOWED. THEREFORE, DISALLOWED AND ADDED BACK TO THE INCOME OF THE ASSESSE COMPANY. THIS WILL RESULT IN DISALLOWANCE OF RS 25,95,251 AND THE INCOME OF THE COMPANY IS EN HANCED BY THIS MUCH OF AMOUNT. 15. AGGRIEVED BY THE STAND SO TAKEN BY THE AO, ASSE SSE CARRIED THE MATTER IN APPEAL BEFORE THE CIT(A) WHO DELETED THE DISALLO WANCE AND OBSERVED AS FOLLOWS: THE SUBMISSIONS OF THE APPELLANT ARE CONSIDERED. IT IS APPARENT THAT FROM FY 07-08, RELEVANT TO AY 08-09, THE APPEL LANT IS PAYING A HIGHER SUM TOWARDS ITS CONTRIBUTION FOR BRAND BUI LDING, AND THE PAYMENTS FOR BRAND BUILDING HAVE BEEN ALLOWED B Y THE AO IN THE EARLIER YEARS, INCLUDING THE PRECEDING YEAR WHE N PAYMENTS WERE ENHANCED. IN THE YEAR UNDER CONSIDERATION, ADH OC DISALLOWANCE TO THE EXTENT OF 50% HAS BEEN MADE WIT HOUT ANY CLEAR AND COGENT BASIS OR FINDINGS TO DEMONSTRATE T HAT IT IS RELATABLE TO FUTURE YEARS. THE ARBITRARY DISALLOWAN CE OUT OF THE TOTAL EXPENSES DEBITED UNDER THE BRAND BUILDING EXP ENSES IS DEVOID OF LOGIC AND, THEREFORE, CANNOT BE SUSTAINED . I.T.A. NO.: 5048 AND 5451/DEL/13 ASSESSMENT YEAR 2010-11 PAGE 9 OF 10 16. THE ASSESSING OFFICER IS AGGRIEVED OF THE RELIE F SO GIVEN BY THE CIT(A) AND IS IN APPEAL BEFORE US. 17. WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED TH E MATERIAL ON RECORD AND DULY CONSIDERED FACTS OF THE CASE IN THE LIGHT OF THE APPLICABLE LEGAL POSITION. 18. WE FIND THAT THE ASSESSING OFFICER HAS MADE THE IMPUGNED DISALLOWANCE ON THE SHORT GROUND THAT THE BENEFITS OF THIS EXPENDITURE WILL ALSO BE AVAILABLE IN THE SUBSEQUENT YEARS AND SINCE THE ASSESSE IS ADMITTEDLY FOLLOWING THE MERCANTILE METHOD OF ACCOUNTING, THE EXPENDITURE SHOULD BE ALLOWED IN THE YEAR TO WHICH IT PERTAINS. IN DOING SO, HOWEVER, WHAT THE ASSESSING OFFICER HAS OVERLOOKED IS THAT EVEN UNDER THE MERCANTILE METHOD OF ACCOUNTING, THE EXPENSES ARE BOOKED AT THE POINT OF TIME WHEN THE LIABILITY TO PAY CRYSTALLIZES AND IRRESPECTIVE OF W HETHER THE BENEFIT ARE WHOLLY IN THE CURRENT YEAR, OR PARTLY IN FUTURE YEA R AS WELL, A REVENUE EXPENDITURE IS ALLOWED AS A DEDUCTION IN THE YEAR I N WHICH IT IS INCURRED. THE CONTRIBUTION PERTAINS TO THE CURRENT YEAR AND I S BASED ON THE REVENUES OF THE CURRENT YEAR. IT IS UNDISPUTED THAT THAT IT COVERS THE PERIOD RELATED TO THE RELEVANT PREVIOUS YEAR. THERE IS NO DISPUTE THA T EXPENDITURE IS A REVENUE EXPENDITURE, THERE IS NO DISPUTE THAT THE EXPENDITU RE IS INCURRED IN THE PRESENT YEAR, THERE IS NO DISPUTE THAT ALL ALONG EV EN THE INCREASED CONTRIBUTIONS HAVE BEEN ALLOWED AS REVENUE EXPENSES IN THE YEAR IN WHICH THE CONTRIBUTIONS HAVE BEEN MADE AND TO WHICH CONTR IBUTIONS PERTAIN. IN SUCH CIRCUMSTANCES, A PURELY ADHOCK DISALLOWANCE ON THE BASIS THAT THE BENEFITS OF THIS CONTRIBUTION WILL ALSO BE AVAILABL E IN A SUBSEQUENT PERIOD, IS WHOLLY UNCALLED FOR. WE ARE UNABLE TO SEE ANY MERIT S IN THIS SAME. 19. WE HAVE ALSO NOTED THAT THE EXPENSES ARE PARTLY ALLOWED AS DEDUCTION. THEREFORE, GENUINENESS, REVENUE NATURE A ND BUSINESS EXPEDIENCY OF THESE EXPENSES IS ACCEPTED BY THE ASSESSING OFFI CER HIMSELF. IT IS NOT REALLY NECESSARY, THEREFORE, TO DEAL WITH THAT ASPECT OF T HE MATTER. SUFFICE TO SAY THAT WE DISAPPROVE THE ACTION OF THE AO AND CONFIRM THE RELIEF GRANTED BY THE CIT(A). IN OUR CONSIDERED VIEW, NO INTERFERENCE IS CALLED FOR. 20. THE APPEAL FILED BY THE ASSESSING OFFICER IS TH US DISMISSED. 10. WE SEE NO REASONS TO TAKE ANY OTHER VIEW OF THE MATTER THAN THE VIEW SO TAKEN BY US FOR THE ASSESSMENT YEAR 2009-10. RESPEC TFULLY FOLLOWING THE SAID I.T.A. NO.: 5048 AND 5451/DEL/13 ASSESSMENT YEAR 2010-11 PAGE 10 OF 10 ORDER, WE UPHOLD THE STAND OF THE CIT(A), HOLD THAT HE RIGHTLY DELETED THE IMPUGNED DISALLOWANCE AND DECLINE TO INTERFERE IN T HE MATTER. IN THE RESULT, THE APPEAL OF THE ASSESSING OFFICER IS THUS DISMISSED. 21. TO SUM UP, THE APPEAL FILED BY THE ASSESSE IS A LLOWED AND THE APPEAL FILED BY THE ASSESSING OFFICER IS DISMISSED. PRONOUNCED I N THE OPEN COURT TODAY ON 31 ST DAY OF MARCH, 2015. SD/- SD/- C M GARG PRAMOD KUMAR (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) NEW DELHI, THE 31 ST DAY OF MARCH, 2015. COPIES TO: (1) THE APPELLANT (2) THE RESPON DENT (3) COMMISSIONER (4) CIT(A) (5) DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE BY ORDER ETC ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES, NEW DELHI