ITO 2(3)(2), MUMBAI V. STRATEGIC CAPITAL CORPORATION P.LTD, MUMBAI

ITA 587/MUM/2014

• Counselvise Citation: [2015] 121 COUNSELVISE.COM (IT) 0985 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 5 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-07-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Assessment Year: 2010-2011
• Appeal Filed On: 24-01-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NEIL PHILIP
• Keywords: Business income; Business expenditure; Rule of consistency
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL E BENC H, MUMBAI BEFORE SHRI R.C. SHARMA, ACCOUNTANT MEMBER AND SHRI SANJAY GARG, JUDICIAL MEMBER I.T.A. NO. 587/M/2014 (AY 2010-2011 ) ITO-2(3)(2), R.NO.581A, AAYAKARBHAVAN, MUMBAI 400 020. / VS. M/S. STRATEGIC CAPITAL CORPORATION PVT LTD, 44, STRATEGIC HOUSE, MINT ROAD, FORT, MUMBAI-400001. ./PAN: AAACS 5283Q ( /APPELLANT) .. ( / RESPONDENT) / APPELLANT BY : SHRI NEIL PHILIP, DR / RESPONDENTBY : MS.VIMALPUNMIYA /DATE OF HEARING : 02.07.2015 /DATE OF PRONOUNCEMENT : 02.07.2015 !' !' !' !' / O R D E R PER SANJAY GARG, JM: THIS APPEAL FILED BY THE REVENUE ON 24.1.2014 IS A GAINST THE ORDER OF THE CIT (A)-6, MUMBAI DATED 29.10.2013. IN THIS APPEAL, RE VENUE HAS RAISED THE FOLLOWING GROUNDS: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD CIT (A) ERRED IN HOLDING THE LEASE RENTAL INCOME RECEIVED BY THE ASSESSEE AS BUSINESS INCOME AS AGAINST INCOME FROM HOUSE PROPERTY HELD BY THE AO WITHOUT APPRECIATING THAT DURING THE YEAR THE AS SESSEE HAS NOT CARRIED OUT ANY BUSINESS ACTIVITY. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD CIT (A) ERRED IN ALLOWING EXPENSES TO THE TUNE OF RS. 1,13, 37,086/- AS BUSINESS EXPENSES WITHOUT APPRECIATING THAT DURING THE YEAR ASSESSEE HAS NOT CARRIED OUT ANY BUSINESS ACTIVITY. 3. FOR THESE AND OTHER GROUNDS THAT MAY BE URGED AT THE TIME OF HEARING, THE DECISION OF THE CIT (A) MAY BE SET ASIDE AND THAT O F THE AO RESTORED. 2. BRIEFLY STATED RELEVANT FACTS OF THE CASE ARE TH AT THE ASSESSEE FILED THE RETURN OF INCOME ON 4.10.2010 DECLARING THE TOTAL INCOME A T RS. NIL AND THE SAME WAS SUBJECTED TO SCRUTINY UNDER CASS. ASSESSMENT WAS C OMPLETED U/S 143(3) OF THE ACT AND THE ASSESSED INCOME WAS DETERMINED AT RS. 84,87 ,597/-. IN THE ASSESSMENT, AO 2 TREATED THE LEASE RENTAL INCOMEOF RS. 14,40,000/-A S INCOME FROM HOUSE PROPERTY AS AGAINST THE ASSESSEES CLAIM OF BUSINESS INCOME. HE ACCORDINGLY PROCEEDED TO MAKE AN ADDITION OF RS. 10,08,000/- AFTER ALLOWING STATU TORY DEDUCTION OF 30% IN RESPECT OF REPAIRS TO THE SAID PROPERTY. FURTHER, THE INTERES T INCOME OF RS. 79,69,213/- AND OTHER INCOME OF RS. 1,11,593/- HAVE BEEN ASSESSED U NDER THE HEAD INCOME FROM OTHER SOURCES. OUT OF THE TOTAL EXPENSES OF RS. 1 ,69,49,421/- CLAIMED BY THE ASSESSEE, AO DISALLOWED A SUM OF RS. 1,35,02,758/-. AGGRIEVED WITH THE ABOVE DECISION OF THE AO, ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY. 3. DURING THE PROCEEDINGS BEFORE THE FIRST APPELLAT E AUTHORITY, IT HAS BEEN CONTENDED THAT THERE WAS A TEMPORARY LULL IN THE BU SINESS OF THE ASSESSEE. TILL THE REVIVAL OF THE BUSINESS, THE OFFICE OF THE COMPANY WAS LET OUT AS BUSINESS CENTRE FOR A TEMPORARY PERIOD, THEREFORE, IT CANNOT BE CONSIDERE D AS INCOME FROM HOUSE PROPERTY AND THE SAME SHOULD BE ASSESSED AS BUSINESS INCOME . FOR THE ABOVE PROPOSITION, ASSESSEE RELIED ON VARIOUS PRECEDENTS VIZ., (I) JUD GMENT OF THE HONBLE GUJARAT HIGH COURT IN THE CASE OF ACIT VS. SAPTARSHI SERVICES LT D [2004] 265 ITR 379 (GUJ.); (II) DECISION OF THE TRIBUNAL IN THE CASE OFHARVINDARPAL MEHTA (HUF) VS. DCIT [2010] 122 ITD 93 (MUM. TRIB); (III) SHRILAKSHI SILK MILLS LTD (20 ITR 451); (IV) NARAINSWADESHI WEAVING MILLS AND OTHERS. AFTER CONSIDERING THE SU BMISSIONS OF THE ASSESSEE, CIT (A) HELD THAT THE INCOME OF THE ASSESSEE FROM LETTING O UT OF THE OFFICE PREMISES WAS LIABLE TO BE ASSESSED UNDER THE HEAD BUSINESS INCO ME AND DIRECTED THE AO TO COMPUTE THE SAME ACCORDINGLY AND PARTLY ALLOWED THE ASSESSEES APPEAL FOR STATISTICAL PURPOSES. AGGRIEVED WITH THE SAID DECISION OF THE CIT (A), REVENUE IS IN APPEAL BEFORE THE TRIBUNAL BY RAISING THE ABOVE MENTIONED GROUNDS. 4. DURING THE PROCEEDINGS BEFORE US, LD COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE LOWER AUTHORITIES AND H EAVILY RELIED ON THE ORDER OF THE CIT (A). FURTHER, BRINGING OUR ATTENTION TO THE AS SESSMENT ORDERS FOR EARLIER YEARS FILED BEFORE US, LD COUNSEL FOR THE ASSESSEE SUBMIT TED THAT ON IDENTICAL FACTS, IN THE EARLIER ASSESSMENT YEARS, THE LEASE RENTAL INCOME C LAIMED BY THE ASSESSEE HAS BEEN CONSISTENTLY ASSESSED AS BUSINESS INCOME AND ONLY T HIS YEAR THE AO DEVIATED FROM THE DECISION OF HIS PREDECESSORS AND TREATED IT AS INCOME FROM HOUSE PROPERTY. IT IS 3 THE SUBMISSION OF THE LD COUNSEL THAT FOLLOWING THE PRINCIPLE OF CONSISTENCY THE DECISION TAKEN BY THE CIT (A) IS FAIR AND REASONABL E AND IT SHOULD NOT BE DISTURBED. 5. ON THE OTHER HAND LD DR FOR THE REVENUE RELIED O N THE ORDER OF THE ASSESSING OFFICER. 6. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE O RDERS OF THE REVENUE AUTHORITIES AS WELL AS THE RELEVANT MATERIAL PLACED BEFORE US. ON PERUSAL OF THE CIT (A)S ORDER IN GENERAL AND PARAS 3.3 AND 3.4 IN PAR TICULAR, WE FIND THE SAME ARE RELEVANT IN THIS REGARD. CONSIDERING THE SIGNIFICA NCE OF THE SAID PARAS AND ALSO FOR THE SAKE OF COMPLETENESS OF THIS ORDER, WE FIND IT RELEVANT TO EXTRACT THE SAID PARAS 3.3 AND 3.4 OF THE CIT (A)S ORDER AND THE SAME REA D AS UNDER: 3.3. I HAVE CONSIDERED THE ABOVE SUBMISSIONS OF TH E APPELLANT AS WELL AS THE FACTS OF THE CASE. I HAVE ALSO GONE THROUGH THE RELEVANT DOCUMENTS SUBMITTED BY THE APPELLANT. IT IS SEEN THAT PROPERTY UNDER CONSIDER ATION HAS BEEN OWNED AND USED BY THE APPELLANT SINCE INCEPTION. THE APPELLANT IS A REGISTERED NBFC AND WAS CARRYING OUT BUSINESS OF FINANCING IN EARLIER YEARS. HOWEVE R, IN 2008, THE APPELLANTS MAJOR BUSINESS SUBSIDIARY WAS TAKEN OVER BY A SWISS BANK AND HENCE, THE FINANCING BUSINESS HAS ALMOST STOPPED. IT IS THE CONTENTION OF THE AP PELLANT THAT AFTER THE TAKEOVER OF THE FINANCING BUSINESS BY A SWISS BANK, THE DIRECTO RS AND PROMOTERS OF THE APPELLANT HAVE BEEN TRYING TO FIND FURTHER BUSINESS AVENUES F OR THE APPELLANT COMPANY. SINCE, THE BUSINESS WAS TEMPORARILY DISCONTINUED AND THE R ECURRING EXPENSES LIKE SALARIES OF STAFF, TRAVELLING EXPENSES ETC WERE TO BE MET, IN T HE INTERVENING PERIOD, THE OFFICE HAS BEEN GIVEN ON LEAVE AND LICENSE BASIS TO GROWELL CO NSULTANTS PVT LTD. THE OFFICE PREMISES WHICH HAVE BEEN LET OUT CONSIST OF FURNISH ED EXECUTIVE CABINS, TABLE SPACES, AIR-CONDITIONERS, SECURITY (24 HOURS). 20 KVA UPS BACKUP SUPPORT, OFFICE CLEANING ASSISTANTS, HIGH END PRINTERS, COMPUTERS & OFFICE E QUIPMENT, PHOTO COPYING, TELEPHONES, MAIL HANDLING AND OTHER ADMINISTRATIVE SERVICES ON A PAY-BY-USE BASIS. THE OFFICE PREMISES, INCLUDING THE SERVICE UNITS (A LLOWED TO BE USED BY THE TENANTS) ARE ALWAYS DEEMED TO BE IN FULL AND ABSOLUTE POSSES SION AND CONTROL OF THE APPELLANT. 3.4. THEREFORE, IT IS CONTENDED BY THE APPELLANT TH AT ITS INCOME FROM LETTING OF OFFICE PREMISES FOR A TEMPORARY PERIOD CANNOT BE CO NSIDERED TO BE INCOME FROM HOUSE PROPERTY AND THE SAME SHOULD BE ASSESSE D AS BUSINESS INCOME, AS DECLARED BY THE APPELLANT. FOR THE ABOVE PROPOS ITION, THE APPELLANT HAS RELIED UPON A NUMBER OF JUDGMENTS VIZ (I) NARAINSWA DESHI WEAVING MILLS (SUPRA); (II) SHRI LAKSHMI SILK MILLS LTD (SUPRA); (III) SAPTARSH I SERVICES LTD (SUPRA) AND (IV) HARVINDARPAL MEHTA (HUF) (SUPRA). 7. FROM THE ABOVE, WE FIND THAT WHILE ADJUDICATING THE ISSUE UNDER CONSIDERATION, CIT (A) DISCUSSED THE MATTER AT LENGTH AND CAME TO A CONCLUSION VIDE PARA NO. 3.11 AS UNDER: 3.11 FROM THE ABOVE DISCUSSION, IT IS AMPLY CLEAR THAT THE APPELLANT WAS LIABLE TO BE ASSESSED UNDER THE HEAD OF BUSINESS IN COME IN RESPECT OF THE LEASE CHARGES RECEIVED BY IT FOR THE OFFICE PREMISE S ALONG WITH ATTENDANT 4 SERVICES GIVEN ON LEASE TO A THIRD PARTY ON ACCOUNT OF APPELLANTS OWN BUSINESS HAVING COME TO A HALT OR SLOWED DOWN. IT HOLD ACCO RDINGLY. CONSIDERING THE ABOVE FINDINGS OF THE CIT(A), WE A RE OF THE OPINION THAT BY FOLLOWING THE PRINCIPLE OF CONSISTENCY, THE DECISION TAKEN BY THE CIT (A)IS FAIR AND REASONABLE AND IT DOES NOT CALL FOR ANY INTERFERENCE. ACCORDI NGLY, GROUNDS RAISES BY THE REVENUE ARE DISMISSED. 8. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED . ORDER WAS PRONOUNCED IN THE OPEN COURT ON 02.07.201 5. SD/- SD/- (R.C. SHARMA) (SANJAY GARG) ACCOUNTANT MEMBER JUDICIAL MEMB ER MUMBAI; #! $%& .10.2015 . ' . ./ OKK , SR. PS !''()*) !''()*) !''()*) !''()*) / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. + ( ) / THE CIT(A)- 4. + / CIT 5. ),-''./ , ./ , / DR, ITAT, MUMBAI 6. -012 / GUARD FILE. )' //TRUE COPY// !' !' !' !' / BY ORDER, 3 33 3 / 4 5 4 5 4 5 4 5 (DY./ASSTT.REGISTRAR) ./ ./ ./ ./ , / ITAT, MUMBAI