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

ITA 5852/MUM/2009

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 49081 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 6 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-06-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 31-05-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 04-11-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: C G K NAIR
• Keywords: Business income; Depreciation

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH E, MUMBAI BEFORE SHRI P.M. JAGTAP, AM AND SHRI V. DURGA RAO , JM I.T.A.NO.5852/MUM/2009 ASSESSMENT YEAR 2005-05 THE ASST. COMMISSIONER OF INCOME - TAX -5(1), MUMBAI VS. M/S. ESSAR PROPERTIES LTD., ESSAR HOUSE, 11, K.K. MARG, MAHALAXMI, MUMBAI 400 034. PAN: AAACE 0893 Q (APP ELLANT ) (RESPONDENT) APPELLANT BY : SMT. C.G.K. NAIR RESPONDENT BY : SHRI VIJAY MEHTA O R D E R PER P.M. JAGTAP, AM: THIS APPEAL IS PREFERRED BY THE RE VENUE AGAINST THE ORDER OF THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS)-V, MUM BAI, DATED 28.08.2009 AND THE GRIEVANCE OF THE REVENUE IS PROJECTED IN THE FO LLOWING GROUNDS RAISED THEREIN: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND AS PER LAW, THE LD.CIT(A) HAS ERRED IN HOLDING THAT RENTAL RECEIPTS OF OWNERSHIP PROPERTIES ARE TO BE TAXED UNDER THE HEAD BUSINESS INCOME DISREGARDING THE DECISION OF APEX COURT IN THE CASE OF M/S. SHAMBU INVESTMENT, 263 ITR 143. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND AS PER LAW, THE LD.CIT(A) HAS ERRED IN DIRECTING TO ALLOW EXPENSES AND DEPRECIATION CLAIMED UNDER THE HEAD BUSINESS INCOME THOUGH THE R ENTAL INCOME AS STATED IN GROUND NO.2 IS TO BE ASSESSED UNDER THE H EAD INCOME FROM HOUSE PROPERTY WHEREIN THE QUESTION OF ALLOWING EXP ENSES AND DEPRECIATION WOULD NOT ARISE. 2. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AN D ALSO PERUSED THE RELEVANT MATERIAL ON RECORD. THE LEARNED REPRESENTA TIVES OF BOTH THE SIDES HAVE AGREED THAT THE ISSUES INVOLVED IN THE PRESENT APPE AL ARE SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE CO-OR DINATE BENCH OF THIS TRIBUNAL RENDERED IN ASSESSEES OWN CASE FOR EARLIER YEARS, I.E. ASSESSMENT YEARS 1997- 98AND 2001-02 VIDE ITS ORDER DATED 29.2.2008 PASSED IN ITA NOS.2328/M/04 AND ITA NO.5852/M/2009 ESSAR PROPERTIES LTD. 2 NO. 3464/MUM/2005, A COPY OF THE SAID ORDER IS ALS O PLACED ON RECORD BEFORE US AND ON PERUSAL OF THE SAME SHOWS THAT SIMILAR ISSUE S HAVE BEEN DECIDED BY THE TRIBUNAL IN FAVOUR OF THE ASSESSEE VIDE PARAGRAPH N O. 7 OF ITS ORDER WHICH READS AS UNDER: WE HAVE DULY CONSIDERED THE RIVAL CONTENTIONS AND GONE THROUGH THE RECORD CAREFULLY. EXCEPT AY 1997-98 IN ALL OTHER AS SESSMENT YEARS RENTAL INCOME RECEIVED BY THE ASSESSEE HAS BEEN ASSESSED A S BUSINESS INCOME. THE HONBLE SUPREME COURT IN THE CASE OF RADHASOAMI SATSANG V. CIT (SUPRA) HAS HELD THAT NO DOUBT PRINCIPLE OF RESJUD ICATA IS STRICTLY NOT APPLICABLE TO THE INCOME TAX PROCEEDINGS, EACH ASSE SSMENT YEAR IS AN INDEPENDENT UNIT, WHAT IS DECIDED IN ONE YEAR MAY N OT APPLY IN THE SUBSEQUENT YEAR. HOWEVER, HONBLE COURT OBSERVED T HAT WHERE FUNDAMENTAL ASPECT PERMEATING THROUGH THE DIFFERENT ASSESSMENT YEARS HAS BEEN FUND AS A FACTS ONE WAY OR THE OTHER WAY A ND THE PARTIES HAVE ALLOWED THAT POSITION TO BE SUSTAINED BY NOT CHALLE NGING THE ORDER IT WOULD NOT BE APPROPRIATE TO ALLOW THE PROPOSITION TO BE C HANGED IN SUBSEQUENT YEAR. THE HONBLE SUPREME COURT WHILE HOLDING SO M ADE A REFERENCE OF THE FULL BENCH DECISION OF THE MADRAS HIGH COURT WH EREIN THE FUNDAMENTAL REASONS HAVE BEEN GIVEN FOR NOT DEVIATING THE STAND IN DIFFERENT ASSESSMENT YEARS. THE OBSERVATION EXTRACTED BY THE HONBLE SUPREME COURT IN THIS JUDGMENT AND APPEARING AT PAGE 328 OF THE JOURNAL READS AS UNDER: A FULL BENCH OF THE MADRAS HIGH COURT CONSIDERED T HIS QUESTION IN T.M.M. SANKARALINGA NADAR AND BROS. V. CIT (1929) 4 ITC 22 6. DEALING WITH THE CONTENTION THE FULL BENCH EXPRESSED THE FOLLOWING O PINION (P.242) THE PRINCIPLE TO BE DEDUCED FROM THESE TWO CASES IS THAT WHERE THE QUESTION RELATING TO ASSESSMENT DOES NOT VARY W ITH THE INCOME EVERY YEAR BUT DEPEND ON THE NATURE OF THE PROPERTY OR AN Y OTHER QUESTION ON WHICH THE RIGHTS OF THE PARTIES TO BE TAXED ARE BAS ED, E.G. WHETHER A CERTAIN PROPERTY IS TRUST PROPERTY OR NOT, IT HAS N OTHING TO DO WITH THE FLUCTUATIONS IN THE INCOME, SUCH QUESTIONS, IF DECI DED BY A COURT ON A REFERENCE MADE TO IT WOULD BE RES JUDICATA IN THAT THE SAME QUESTION CANNOT BE SUBSEQUENTLY AGITATED. ONE OF THE DECISIONS REFERRED TO BY THE FULL BENCH WAS THE CASE OF HOYSTEAD V. COMMISSIONER OF TAXATION [1926] AC 155 (PC) SPEAKING FOR THE JUDICIAL COMMITTEE, LORD SHAW STATED (P.165) PARTIES ARE NOT PERMITTED TO BEGIN FRESH LITIGATIO NS BECAUSE OF NEW VIEWS THEY MAY ENTERTAIN OF THE LAW OF THE CASE OR NEW VE RSIONS WHICH THEY PRESENT AS TO WHAT SHOULD BE A PROPER APPREHENSION BY THE COURT OF THE LEGAL RESULT EITHER OF THE CONSTRUCTION OF THE DOCU MENTS OR THE WEIGHT OF CERTAIN CIRCUMSTANCES. IF THIS WERE PERMITTED LITIG ATION WOULD HAVE NO END, EXCEPT WHEN LEGAL INGENUITY IS EXHAUSTED,. IT IS A PRINCIPLE OF LAW THAT THIS CANNOT BE PERMITTED AND THERE IS ABUNDANT AUTHORITY REITERATING THAT PRINCIPLE. THIRDLY, THE SAME PRINCIPLE NAMELY THAT OF A SETTING TO REST RIGHTS OF LITIGANTS, APPLIES TO THE CASE WHERE A POINT FUN DAMENTAL TO THE DECISION, ITA NO.5852/M/2009 ESSAR PROPERTIES LTD. 3 TAKEN OR ASSUMED BY THE PLAINTIFF AND TRAVERSABLE B Y THE DEFENDANT HAS NOT BEEN TRAVERSED IN THAT CASE ALSO A DEFENDANT IS BOUND BY THE JUDGMENT, ALTHOUGH IT MAY BE TRUE ENOUGH THAT SUBSE QUENT LIGHT OR INGENUITY MIGHT SUGGEST SOME TRAVERSE WHICH HAD NOT BEEN TAKEN. SIMILARLY THE HONBLE DELHI HIGH COURT IN 245 ITR 4 92 FUND THAT IF RENTAL INCOME FROM THE FACTORY BUILDING ASSESSED AS BUSINE SS INCOME FOR EARLIER ASSESSMENT YEARS CONSISTENTLY AND THERE IS NO MATER IAL CHANGE IN FACTS THEN AO IS NOT SUPPOSED TO ASSESS SUCH INCOME ALL O F A SUDDEN AS INCOME FROM HOUSE PROPERTY IN ONE OF THE YEAR IN ISOLATION . THE OTHER DECISIONS CITED BY THE ASSESSEE SUPRA ARE ALSO ON THE SAME LI NE. THE LD. COUNSEL FOR THE ASSESSEE HAS DEMONSTRATED THAT THIS IS THE ONLY ASSESSMENT YEAR IN WHICH RENTAL INCOME HAS BEEN ASSESSED AS INCOME FRO M HOUSE PROPERTY, OTHERWISE IN EARLIER ASSESSMENT YEARS AS WELL AS IN SUBSEQUENT ASSESSMENT YEARS I.E. A.Y. 1998-99 TO 2000-01 SUCH INCOME HAS BEEN ASSESSED AS BUSINESS INCOME. HE DEMONSTRATED THAT A FTER A GAP OF 3-4 YEARS THEN AGAIN A.Y. 2001-02 THE A.O. HAS ASSESSED THE INCOME UNDER THE HEAD HOUSE PROPERTY. WE FIND THAT IN THIS ASSE SSMENT YEAR I.E. 01-02 THERE IS NO CHANGE OF FACTS AND CIRCUMSTANCES BUT S IMPLY FOR THE REASON THAT A.Y. 1997-98 SUCH INCOME WAS ASSESSED UNDE4 TH E HEAD HOUSE PROPERTY INCOME, THE LD. CIT(A) UPHELD THE ORDER OF THE AO. IN VIEW OF THE ABOVE AUTHORITATIVE PRONOUNCEMENT OF HONBLE SUPREM E COURT AS WELL AS HONBLE SUPREME COURT THE AO IS SUPPOSED TO MAINTAI N CONSISTENCY ON HIS STAND UPTO AND UNLESS THERE IS MATERIAL CHANGE EITH ER IN THE FACTS OR ON THE LAW. NO SUCH THING IS DISCERNIBLE FROM THE ASSE SSMENT ORDER. MORE SO, THE A.O. HAS NOT DOUBTED THE LEASING BUSINESS OF TH E ASSESSEE BECAUSE HE HAS ACCEPTED THE ASSESSEES VERSION AS FAR AS TH E RENTAL INCOME RECEIVED BY THE ASSESSEE ON THE PROPERTIES TAKEN ON LEASE AND THEREAFTER SUBLEASED BY IT TO THE SISTER CONCERNS. IN VIEW OF THE ABOVE DISCUSSION, WE ALLOW THE APPEALS OF THE ASSESSEE AND DIRECT THE A. O. TO ASSESS THE RENTAL INCOME FROM LEASING ACTIVITY UNDER THE HEAD BUSINES S INCOME. CONSISTENTLY, WE ALSO ALLOW THE DEPRECIATION ON THE BUILDING AS WELL AS EQUIPMENT PROVIDED BY THE ASSESSEE. SINCE WE UPHELD THE LEASING ACTIVITY OF THE ASSESSEE AS A BUSINESS ACTIVITY, THEREFORE, THE AO IS DIRECTED TO ALLOW THE OTHER INCIDENTAL EXPENSES SUCH AS ELECTRI CITY CHARGES, SECURITY CHARGES AND REPAIRS OF THE BUILDING. AS THE ISSUES INVOLVED IN THE YEAR UNDER CONSIDERA TION AS WELL AS ALL THE MATERIAL FACTS RELEVANT THERETO ARE SIMILAR TO THAT OF ASSESSMENT YEAR 1997-98 AND 2001-02, WE RESPECTFULLY FOLLOW THE ORDER OF THE TR IBUNAL FOR THE ASSESSMENT YEAR 1997-98 & 2001-02 AND UPHOLD THE IMPUGNED ORDER OF THE LEARNED CIT(A) GIVING RELIEF TO THE ASSESSEE ON THE SAID ISSUES. ITA NO.5852/M/2009 ESSAR PROPERTIES LTD. 4 3. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 3 RD DAY OF JUNE, 2011. SD. SD. (V. DURGA RAO) (P.M. JAGTAP) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED THE 3 RD JUNE, 2011. KN COPY TO: 1. THE ASSESSEE 2. THE REVENUE 3. THE CIT, MC V, MUMBAI 4. THE CIT(A)-V, MUMBAI 5. THE DR E BENCH, MUMBAI BY ORDER /TRUE COPY/ ASST. REGISTRAR, ITAT, MUMBAI