DCIT 5(1)(2), MUMBAI V. ESSAR PROPERTIES LTD, MUMBAI

ITA 58/MUM/2015

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 2544 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 6 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-07-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 18-07-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 05-01-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: SARAD DESAI
• Keywords: Business income; Depreciation; Unabsorbed depreciation
• Section: 260A

Judgement Text

, , , IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES A, MUMBAI , , , BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER, AND SHRI RAJESH KUMAR, ACCOUNTANT MEMBER ITA NO.58/MUM/2015 ASSESSMENT YEAR: 2009-10 D C I T 5(1)(2) ROOM NO. 568, 5 TH FLOOR AAYAKAR BHAVAN MUMBAI 400020 / VS. M/S. ESSAR PROPERTIES LTD. ESSAR HOUSE, 11, K.K. MARG MAHALAXMI, MUMBAI 400034 ( / REVENUE) ( !'# $ /ASSESSEE) PAN. NO. AAACE0893Q / REVENUE BY SHRI KAILASH KANOJIYA !'# $ / ASSESSEE BY SHRI SARAD DESAI % & $ ' / DATE OF HEARING : 18/07/2016 & $ ' / DATE OF ORDER: 18/07/2016 ITA NO. 58/MUM/2015 M/S. ESSAR PROPERTIES LTD. 2 / O R D E R PER JOGINDER SINGH (JUDICIAL MEMBER) THE REVENUE IS AGGRIEVED BY THE IMPUGNED ORDER DATED 28/10/2014 OF LD. COMMISSIONER OF INCOME TAX, WITH REGARD TO THE DIRECTION OF THE CIT(A) TO TREAT THE RENTAL INCOME AS BUSINESS INCOME INSTEAD OF INCOME FROM HO USE PROPERTY. 2. DURING HEARING, AT THE OUTSET, THE LEARNED COUNS EL FOR THE ASSESSEE, SHRI SHARAD DESAI CLAIMED THAT THE IMPUGNED ISSUE IS COVERED BY THE DECISION OF THE TR IBUNAL IN THE CASE OF ASSESSEE ITSELF (ITA NO.1166/MUM/201 1) ASSESSMENT YEAR 2007-08 ORDER DATED 02.04.2014 AND ITA NO. 5852/MUM/2009 FOR ASSESSMENT YEAR 2005-06 ORDER DATED 03.06.2011. THIS FACTUAL MATRIX WAS NOT CONTROVERTED BY THE LEARNED D.R., SHRI KAILASH KONO JIYA. 2.1 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PE RUSED THE MATERIAL AVAILABLE ON RECORD. IN VIEW OF THE AB OVE WE REPRODUCING HEREUNDER THE RELEVANT PORTION FROM THE AFORESAID ORDER OF THE TRIBUNAL DATED 02.04.2014 (I TA NO. 1166/MUM/2011 FOR ASSESSMENT YEAR 2007-08) FOR READ Y REFERENCE AND ANALYSIS: - CHALLENGING THE ORDER DT. 30.11 .20 10 OF THE CIT( A)-9,MUMBAI, ASSESSING OFFICER (AO) HAS RAISED FOLLOWING GROUNDS OF APPEAL: '1. WHETHER ON FACTS AND IN THE CIRCUMSTANCES OF TH E CASE AND IN LAW THE LD. CIT(A) HAS ERRED IN HOLDING THE RENTAL INCOME OF RS.2,20,33,7591- SHOULD BE TREATED AS BUSINESS INCOME ITA NO. 58/MUM/2015 M/S. ESSAR PROPERTIES LTD. 3 2. ON FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LD. CIT(A) ERRED IN HOLDING THAT RENTAL EXPENSES OF RS.2,20,33, 795/- AND DEPRECIATION OF R S. 18,48,995/- ON BUILDING AND RS.28,65,3791- SHOULD B E ALLOWED SINCE THE INCOME HAS BEEN HELD TO BE TAXABL E UNDER BUSINESS INCOME 2. ASSESSEE-COMPANY, ENGAGED IN THE BUSINESS OF SERVICES, LEASING AND BUSINESS CENTRE FACILITIES, M AINTENANCE & RUNNING OF GUEST HOUSE, FILED ITS RETURN OF INCOME ON 31.10.2007 DECLARING TOTAL INCOME OF RS. NIL. EFFEC TIVE GROUND OF APPEAL IS ABOUT HOLDING RENTAL INCOME AS BUSINESS I NCOME. DURING THE ASSESSMENT PROCEEDINGS AU FOUND THAT THE ASSESSEE WAS ENGAGED IN THE BUSINESS OF LEASING, PROPERTY-MA NAGEMENT- SERVICES AND BUSINESS CENTRE FACILITIES, THAT IT HA D SHOWN LEASE INCOME ON ACCOUNT OF LEASE RENT OF ITS PREMISES AT RS.1,49,67,056/- AND LEASE INCOME OF PLANT & MACHIN ERY AT RS.72,00,000/-,THAT IT HAD CLAIMED ADMINISTRATIVE E XPENSES OF RS.16,95,993/-, THAT NET PROFIT HAD BEEN ARRIVED AT RS. 81,67,346/-,THAT THE ASSESSEE COMPANY HAD CLAIMED L EASE RENT AS BUSINESS INCOME. HE ASKED THE ASSESSEE, VIDE QUE STIONNAIRE DATED 17.09.2008,TO EXPLAIN AS TO WHY THE RENTAL IN COME FROM PROPERTY SHOULD NOT BE TREATED AS 'INCOME FROM HOUS E PROPERTY'. IN RESPONSE, IT WAS SUBMITTED THAT THE LEASING OF P ROPERTY ITSELF WAS THE BUSINESS OF THE ASSESSEE-COMPANY AND WAS CO NGRUENT WITH THE OBJECT CLAUSE IN THE MEMORANDUM OF ASSOCIA TION OF THE COMPANY, THAT INCOME SHOULD BE CHARGED UNDER THE HE AD INCOME FROM BUSINESS, THAT THE TRIBUNAL IN THE ASSE SSEE'S OWN CASE HAD DECIDED THE ISSUE IN FAVOUR OF THE ASSESSE E IN ITA NO.2328/ MUNI/2004 FOR AY. 1997-98 AND IN 1TA NO.3464/M/05 FOR AY.2001-02, VIDE ORDER DATED 29.02 .2008. HOWEVER, THE AO RELYING UPON THE DECISION OF THE HO N'BLE SUPREME COURT DELIVERED IN THE CASE OF SHAMBOO INVE STMENT PVT. LTD.(263ITR143),HELD THAT INCOME IN RESPECT OF THE PREMISES ITA NO. 58/MUM/2015 M/S. ESSAR PROPERTIES LTD. 4 OWNED BY THE ASSESSEE, WAS TO BE ASSESSED UNDER THE HEAD 'INCOME FROM HOUSE PROPERTY'. AFTER ALLOWING DEDUCT ION U/S. 24 IN RESPECT OF REPAIRS AND FINANCE CHARGES, HE COMPU TED THE INCOME FROM HOUSE PROPERTY AT RS.61,21,511/-.VIDE H IS ORDER DATED 18.12.2008 PASSED U/S.143(3) OF THE ACT, HE C OMPLETED THE ASSESSMENT ON A TOTAL INCOME OF NIL AFTER ALLOW ING SET OFF OF UNABSORBED DEPRECIATION OF RS. 1,66,97,023/-. 3. AGAINST THE ORDER OF THE AO, ASSESSEE-COMPANY PREFERRED AN APPEAL BEFORE THE FIRST APPEAL AUTHORI TY(FAA).AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE AND THE ASSESSMENT ORDER HE HELD AS UNDER: 2.3 THIS ISSUE IS COVERED IN FAVOUR OF THE APPELLAN T, BY THE EARLIER ORDERS OF CIT(A) AS WELL AS BY THE MUMBAI I TAT, THE FINDINGS OF MY PREDECESSOR, CIT(A) IN ASSESSMEN T YEAR 2006-07 ON THIS ISSUE ARE AS UNDER: 'IN THE APPELLATE PROCEEDINGS, THE AUTHORISED REPRESENTATIVE OF THE APPELLANT BROUGHT TO MY KNOWL EDGE THE DECISION OF ITAT MUMBAI BENCH IN THE CASE OF ASSESSMENT YEAR 2001- 02 AND ALSO IN ASSESSMENT YEA R 1997-98 DATED 29.02.2008 IN ITA NO. 2328/MUM12004 HEREIN ITAT ALLOWED THE APPEAL OF THE APPELLANT AND DISMISSED APPEAL OF THE DEPARTMENT HOLDING THAT REN TAL RECEIPTS BY LEASING ACTIVITY IS REQUIRED TO BE TAXE D UNDER THE HEAD BUSINESS INCOME. FOLLOWING THE DECISION OF ITAT I HOLD THAT THE RENTAL RECEIPTS OF THE APPELLANT AR E REQUIRED TO BE TAXED UNDER THE HEAD BUSINESS INCOME. IN THE ASSESSMENT ORDER THE ASSESSING OFFICER HAS N OT ALLOWED EXPENSES OF RS. 49,06,358/- AND DEPRECIATIO N OF RS. 68,81,881/- ON BUILDING AND DEPRECIATION ON FUR NITURE AMOUNTING TO RS.2,92,390/-. THE ASSESSING OFFICER H AS NOT ALLOWED DEPRECIATION AND OTHER EXPENSES SINCE H E HELD THAT RENTAL RECEIPTS FROM THE BUILDING ARE REQ UIRED TO ITA NO. 58/MUM/2015 M/S. ESSAR PROPERTIES LTD. 5 BE TAXED UNDER THE HEAD 'INCOME FROM HOUSE PROPERTY '. SINCE, I HELD THAT RENT RECEIPTS ARE REQUIRED TO BE TAXED UNDER THE HEAD BUSINESS INCOME THESE EXPENSES AS WE LL AS DEPRECIATION IS REQUIRED TO ALLOWED. ACCORDINGLY , THESE GROUNDS OF APPEAL ARE ALLOWED.' 2.4 SINCE THE ISSUE INVOLVED IS COVERED BY THE ORDE R OF CIT(A) AND JURISDICTIONAL ITAT IN FAVOUR OF THE APP ELLANT AND THE FACTS OF THIS YEAR ARE SIMILAR TO THE FACTS OF THE EARLIER YEARS. THEREFORE, THE ASSESSING OFFICER IS DIRECTED TO ASSESS THE RENTAL INCOME AS INCOME UNDER THE HEA D BUSINESS INCOME AND ALLOW THE EXPENSES AS WELL AS DEPRECIATION AS PER PAST HISTORY OF THE CASE.' 4. DURING THE COURSE OF HEARING BEFORE US, REPRESEN TATIVES OF BOTH THE SIDES AGREED THAT THE ISSUE WAS COVERED BY THE ORDERS OF THE TRIBUNAL IN FAVOUR OF THE ASSESSEE. W E FIND THAT DECIDING THE APPEALS FILED BY THE ASSESSEE, TRIBUNA L HAS CONSISTENTLY HELD THAT INCOME OF THE ASSESSEE SHOUL D BE ASSESSED UNDER THE HEAD INCOME FROM BUSINESS AND IT SHOULD BE ALLOWED EXPENSES INCURRED BY IT IN CARRYING OUT ITS BUSINESS. DEPRECIATION CLAIMED BY THE ASSESSEE HAS ALSO BEEN ALLOWED BY THE TRIBUNAL.FAA HAS GRANTED RELIEF TO THE ASSESSEE , IN PURSUANCE OF THE ORDERS OF THE TRIBUNAL. THUS, THER E IS NO LEGAL INFIRMITY IN HIS ORDER. THEREFORE, RESPECTFULLY FOL LOWING THE ORDERS OF THE TRIBUNAL FOR EARLIER YEARS AND CONFIR MING THE ORDER OF THE FAA, WE DECIDE EFFECTIVE GROUND OF APPEAL AG AINST THE AO. AS A RESULT, APPEAL FILED BY THE AO STANDS DISMISS ED. 2.2 WE FIND THAT THE ISSUE BEFORE US IS WITH RESPEC T TO DIRECTION TO TREAT THE RENTAL INCOME AS BUSINESS I NCOME INSTEAD OF INCOME FROM HOUSE PROPERTY. IT IS NOTE D THAT THE TRIBUNAL IN THE CASE OF ASSESSEE ITSELF FOR ASS ESSMENT ITA NO. 58/MUM/2015 M/S. ESSAR PROPERTIES LTD. 6 YEAR 2007-08, FOLLOWING THE DECISION OF ASSESSMENT YEAR 2006-07 DECIDED THE ISSUE IN HAND TO TREAT THE REN TAL INCOME AS BUSINESS INCOME. BEFORE US THE LEARNED REPRESENTATIVES FROM BOTH SIDES FAIRLY AGREED THAT THE IMPUGNED ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE . THE TRIBUNAL IN THE AFORESAID ORDERS HAS CONSISTENTLY H ELD THAT INCOME OF THE ASSESSEE SHOULD BE ASSESSED UNDER THE HEAD INCOME FROM BUSINESS AND IT SHOULD BE ALLOWED EXP ENSES, INCURRED BY THE ASSESSEE, IN CARRYING OUT ITS BUSIN ESS. EVEN THE DEPRECIATION CLAIMED BY THE ASSESSEE HAS B EEN ALLOWED BY THE TRIBUNAL. THUS WE FIND NO INFIRMITY IN THE CONCLUSION OF THE LEARNED CIT(A) AS NO CONTRARY FAC TS/ DECISION WERE BROUGHT TO OUR NOTICE BY EITHER SIDE AND MORE SPECIFICALLY THE REVENUE. IT IS ALSO NOTED THA T THE TRIBUNAL VIDE ORDER IN ITA NO. 1432 OF 2011 ORDER D ATED 28.02.2012 WHILE ADJUDICATING THE APPEAL FILED BY T HE REVENUE UNDER SECTION 260A OF THE ACT CONSIDERING T HE DECISION IN SHAMBU INVESTMENT P. LTD. VS. CIT (2003 ) 263 ITR 143 AFFIRMED THE STAND OF THE TRIBUNAL. THUS TH E STAND OF THE LEARNED CIT(A) IS AFFIRMED. RESULTANTLY THE APPEAL OF THE REVENUE IS DISMISSED . THIS ORDER WAS PRONOUNCED IN THE OPEN COURT IN THE PRESENCE OF LD. REPRESENTATIVE FROM BOTH SIDES AT T HE CONCLUSION OF THE HEARING ON 18/07/2016. SD/- SD/- ( RAJESH KUMAR ) (JOGINDER SINGH) '# / ACCOUNTANT MEMBER $# / JUDICIAL MEMBER % MUMBAI; ) DATED : 18/07/2016 ITA NO. 58/MUM/2015 M/S. ESSAR PROPERTIES LTD. 7 AA P.S/. . . %$&'()(*& / COPY OF THE ORDER FORWARDED TO : 1. +,-. / THE APPELLANT 2. /0-. / THE RESPONDENT. 3. 1 1 2$ ( +, ) / THE CIT-5, MUMBAI. 4. 1 1 2$ / CIT(A)-9, MUMBAI 5. 45 /$ ! , 1 +,' +! 6 , % / DR, ITAT, MUMBAI 6. 7' 8% / GUARD FILE. / BY ORDER, 04,$ /$ //TRUE COPY// / (DY./ASSTT. REGISTRAR) , % / ITAT, MUMBAI