M/S. SHREE RAM MILLS LTD., MUMBAI V. THE ACIT CIR 7(2), MUMBAI

ITA 565/MUM/2008

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 2254 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 2 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-04-2010
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: J
• Next Hearing Date: 29-03-2010
• Assessment Year: 2004-2005
• Appeal Filed On: 24-01-2008
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: L K AGRAWAL
• Assessee Lawyers: RAHUL K HAKANI
• Keywords: Business income; Opportunity of being heard; Rule of consistency; Set aside

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH J : MUMBAI BEFORE SHRI D.K. AGARWAL, (JM) AND SHRI PRAMOD KU MAR ,(AM) ITA NO.565/MUM/2008 ASSESSMENT YEAR : 2004-05 M/S. SHREE RAM MILLS LTD. GANPATRAO KADAM MARG LOWER PAREL MUMBAI-400 013. ..( APPELLANT ) P.A. NO. (AACCS 0454 P) VS. ASSTT. COMMISSIONER OF INCOME TAX CIRCLE -7(2), INCOME TAX OFFICE AAYAKAR BHAVAN MUMBAI. ..( RESPONDENT ) APPELLANT BY : SHRI RAHUL K. HAKANI RESPONDENT BY : SHRI L. K. AGRAWAL O R D E R PER D.K. AGARWAL (JM). THIS APPEAL PREFERRED BY THE ASSESSEE IS DIRECTED AGAINST T HE ORDER DATED 15.10.2007 PASSED BY THE LD. CIT(A) FOR T HE ASSESSMENT YEAR 2004-05. 2. BRIEFLY STATED FACTS OF THE CASE ARE THAT THE ASSESSEE CO MPANY IS ENGAGED IN THE BUSINESS OF TEXTILES. THE RETURN WAS FIL ED DECLARING TOTAL INCOME AT RS.NIL. DURING THE COURSE OF ASSESSMENT IT WAS INTERALIA OBSERVED BY THE AO THAT THE ASSESSEE COMPANY HAS OWNED PR OPERTY AND RENTAL INCOME FROM THE SAID PROPERTY WAS SHOWN BY A SSESSEE ITA NO.565/M/08 A.Y:04-05 2 COMPANY AS INCOME FROM BUSINESS INSTEAD OF INCOME FROM HOUSE PROPERTY. ON BEING ASKED, IT WAS EXPLAINED BY THE A SSESSEE THAT THE TOTAL RECEIPT OF RS.667.73 LACS AN AMOUNT OF RS.267.02/- LACS IS SPECIFICALLY RECEIVED TOWARDS REIMBURSEMENT OF POWER CHARG ES AND BALANCE OF RS.400.71 LACS ARE RECEIVED ON ACCOUNT OF BUSIN ESS CENTRE CHARGES. HOWEVER, THE AO RELYING ON DECISION OF HONBLE APEX COURT IN KARANPURA DEVELOPMENT CO. LTD. VS. CIT(1962) 44 ITR 362, EAST INDIA HOUSING AND LAND DEVELOPMENT TRUST LTD. VS. CIT(1961) 42 ITR 49; TUTICORIN ALKALI CHEMICALS AND FERTILIZERS LTD. VS. CIT 227 ITR 173 AND SHAMBHU INVESTMENT LTD. VS. CIT 263 ITR 143(SC) TREA TED THE RECEIPT OF RS.400.71 LACS ON ACCOUNT OF BUSINESS CENTRE CHARGES AS INCOM E FROM HOUSE PROPERTY AND THEREBY COMPLETED THE ASSESSMENT AT AN INCOME OF RS.1,83,89,130/- UNDER NORMAL PROVISIONS OF T HE ACT VIDE ORDER 14.12.2006 PASSED U/S.143(3) OF THE IT ACT, 1961 (THE ACT). ON APPEAL, THE LD. CIT(A) WHILE OBSERVING THAT THE PREM ISES WERE LET OUT BY THE ASSESSEE TO EIGHT TENANTS AGAINST A FIXED MONTHLY RENT AFTER RECEIVING A SUBSTANTIAL INTEREST FREE SECURITY DEPOSITS AN D AS SUCH, THE RENTAL INCOME RECEIVED BY THE ASSESSEE CAN ONLY BE TREATE D AS INCOME FROM HOUSE PROPERTY, CONFIRMED THE VIEW OF THE AO AN D DISMISSED THE APPEAL. ITA NO.565/M/08 A.Y:04-05 3 3. BEING AGGRIEVED BY THE ORDER OF THE LD. CIT(A) T HE ASSESSEE IS IN APPEAL BEFORE US CHALLENGING IN ALL THE GROUNDS IN TRE ATING INCOME FROM BUSINESS CENTRE OF RS.400.71 LACS AS INCOME UNDER THE HEAD INCOME FROM HOUSE PROPERTY AS AGAINST BUSINESS INCOME SHOWN BY T HE ASSESSEE. 4. AT THE TIME OF HEARING BOTH PARTIES HAVE AGREED T HAT THE TRIBUNAL IN ASSESSEE'S OWN CASE IN ACIT VS. SHREE RAM MILLS LTD. IN ITA NO.5847/MUM/2006 FOR ASSESSMENT YEAR 2003-04 DATED 10 TH SEPTEMBER, 2009 HAS SET ASIDE THE ISSUE TO THE FILE OF T HE AO TO DECIDE THE MATTER IN VIEW OF THE DECISION OF SPECIAL BENCH OF THE TRIBUNAL IN ATMARAM PROPERTIES PVT. LTD. VS. JOINT CIT REPORTED I N 102 TTJ 345(DEL.) , THEREFORE, THE ISSUE MAY BE SET ASIDE TO TH E FILE OF THE AO. 5. HAVING CAREFULLY CONSIDERED THE SUBMISSIONS OF THE RIVAL PARTIES AND PERUSING THE MATERIAL AVAILABLE ON RECORD WE FIND THAT THERE IS NO DISPUTE THAT THE TRIBUNAL IN ASSESSEE'S OWN CASE ON THE SIM ILAR FACTS AND CIRCUMSTANCES OF THE CASE HAS SET ASIDE THE ISSUE TO THE FI LE OF THE AO WITH A DIRECTION TO DECIDE THE SAME AFRESH BY APPLYI NG THE PRINCIPALS SUMMARISED BY THE SPECIAL BENCH SUPRA, TO TH E FACTS OF THE PRESENT CASE VIDE PARA-5 AND 6 OF ITS ORDER DATED 10. 9.2009 AS UNDER: ITA NO.565/M/08 A.Y:04-05 4 5. IT IS OBSERVED THAT THE SPECIAL BENCH OF I.T.A. T. AT DELHI HAD AN OCCASION TO CONSIDER THE SIMILAR ISSUE IN THE CASE OF ATMARAM PROPERTIES PVT. LTD. VS. JOINT CIT REPORTED IN 102 TTJ 345. IN THE SAID CASE, VARIOUS JUDICIAL PRONOUNCEMENTS WERE CITED ON BEHALF OF BOTH THE SID ES INCLUDING THOSE CITED BEFORE US AND AFTER DISCUSSIN G AND ANALYZING THE SAME, THE PRINCIPLES WHICH EMERGED WE RE SUMMARIZED BY THE SPECIAL BENCH OF I.T.A.T. IN PARA NO.25 OF ITS ORDER. IT WAS HELD IN THIS CONTEXT TH AT IF, IN THE GIVEN CASE, THE ASSESSEE IS FOUND TO BE THE OWN ER OF THE PROPERTY AND RENTAL INCOME IS EARNED BY HIM BY LETTING OUT PREDOMINANTLY TO THE SAID PROPERTY, SU CH RENTAL INCOME WILL BE ASSESSABLE UNDER THE HEAD IN COME FROM HOUSE PROPERTY AND NOT PROFITS AND GAINS OF BUSINESS OR PROFESSION. WHAT IS LET OUT SHOULD BE PREDOMINANTLY THE SAID PROPERTY IS AS MUCH AS THE R ENTAL INCOME SHOULD BE FROM THE FARE LETTING OF THE TENEM ENTS OR FROM LETTING ACCOMPANIED BY INCIDENTAL SERVICES OR FACILITIES. THE SUBJECT HIRED OUT SHOULD NOT BE A COMPLEX ONE AND INCOME OBTAINED SHOULD NOT BE SO MUCH BECAU SE OF THESE FACILITIES AND SERVICES RENDERED THAN BECA USE OF THEIR LETTING OF THE TENEMENTS. IT WAS HELD THAT I F A SUCH SITUATION IS FOUND TO BE OBTAINED, THE OTHER ASPECT S MUCH AS NATURE OF THE PROPERTY BEING COMMERCIAL/BUSINESS ASSET ETC., IN THE HANDS OF THE ASSESSEE AS WELL AS THE NATURE OF THE BUSINESS OF THE ASSESSEE DO NOT CHANG E THE CHARACTER OF THE INCOME AND THE RENTAL INCOME DOES NOT BECAME INCOME FROM TRADE OR BUSINESS. 6. KEEPING IN VIEW THE DECISION OF SPECIAL BENCH OF ITAT IN THE CASE OF ATMARAM PROPERTIES PVT. LTD. (S UPRA), WE SET ASIDE THE IMPUGNED ORDER OF THE LEARNED CIT( A) ON THE ISSUE UNDER CONSIDERATION AND RESTORE THE MATTE R TO THE FILE OF THE A.O. WITH A DIRECTION TO DECIDE THE SAME AFRESH BY APPLYING THE PRINCIPLES SUMMARISED BY THE SPECIAL BENCH TO THE FACTS OF THE PRESENT CASE. RESPECTFULLY FOLLOWING THE ABOVE AND KEEPING IN VIEW THE RULE OF CONSISTENCY WE ARE OF THE VIEW THAT THE MATTER SHOULD GO BACK TO THE FILE OF AO AND ACCORDINGLY WE SET ASIDE THE ORDERS PAS SED BY THE REVENUE AUTHORITIES ON THIS ACCOUNT AND SEND BACK THE M ATTER TO THE FILE OF THE AO TO DECIDE THE SAME AFRESH IN THE LIGHT OF DIRECTIONS GIVEN ITA NO.565/M/08 A.Y:04-05 5 BY THE TRIBUNAL IN THE ORDER DATED 10.9.2009 SUPRA A ND ACCORDING TO LAW AFTER PROVIDING REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. THE GROUNDS TAKEN BY THE ASSESSEE ARE THEREFORE, PARTLY ALLOWED FOR STATISTICAL PURPOSES. 6. IN THE RESULT, THE ASSESSEE'S APPEAL STANDS PARTLY ALLO WED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 5.4.2010. SD/- SD/- (PRAMOD KUMAR) ( D.K. AGARWAL ) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED: 5.4.2010. JV. COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT(A) CONCERNED, MUMBAI THE DR BENCH TRUE COPY BY ORDER DY/ASSTT. REGISTRAR, ITAT, MUMBAI. ITA NO.565/M/08 A.Y:04-05 6 DETAILS DATE INITIALS DESIGNATION 1 DRAFT DICTATED ON 29.3.10 SR.PS/PS 2 DRAFT PLACED BEFORE AUTHOR 29.3.10 SR.PS/PS 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS SR.PS/PS 6. KEPT FOR PRONOUNCEMENT ON 5.4.10 SR.PS/PS 7. FILE SENT TO THE BENCH CLERK 12.4.10 SR.PS/PS 8 DATE ON WHICH THE FILE GOES TO THE HEAD CLERK 9 DATE OF DISPATCH OF ORDER