AIRLINES HOTE P. LTD, MUMBAI V. ITO 1(10(1), MUMBAI

ITA 5917/MUM/2009

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 1088 (ITAT-MUMBAI)
• Duration Of Justice: 8 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-07-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Assessment Year: 2005-2006
• Appeal Filed On: 06-11-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: JI TENDRA YADAV
• Keywords: Business income; Depreciation; Revised return
• Section: 37(1); 139(5); 154; 139

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL 'D' BENCH, MUMBAI BEFORE SHRI R.S. PADVEKAR, JUDICIAL MEMBER AND SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER ITA NO. 5917/MUM/2009 (ASSESSMENT YEAR: 2005-06) THE AIRLINES HOTEL PVT. LTD. INCOME TAX OFFICER - 1(1)(1) 199, CHURCHGATE RECLAMATION AAYAKAR BHAVAN, M.K. RO AD MUMBAI 400020 VS. MUMBAI 400020 PAN - AAACT 0178 N APPELLANT RESPONDENT APPELLANT BY: SHRI MADHUR AGRAWAL RESPONDENT BY: SHRI JITENDRA YADAV O R D E R PER B. RAMAKOTAIAH, A.M. THIS APPEAL BY THE ASSESSEE IS AGAINST THE ORDER OF THE CIT(A)- I, MUMBAI DATED 25.08.2009. 2. ASSESSEE HAS RAISED THE FOLLOWING GROUNDS: - THE COMMISSIONER OF INCOME TAX (APPEALS) I, MUMBAI ERRED ON FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW ON THE FOLLOWING GROUNDS: 1) BY NOT CONSIDERING THE REVISED RETURN. 2) BY NOT ALLOWING THE CORRECTION OF THE ERRONEOUS FIG URE OF DEPRECIATION ADDED BACK OF RS.1791469/- INSTEAD OF RS.1203447/- RESULTING IN BUSINESS INCOME TAKEN AT RS.248306/- INSTEAD OF BUSINESS LOSS OF RS.339716/- AND LOSS UNDER INCOME FROM HOUSE PROPERTY RS.50630/- TO TALLING TO RS.390346/- (RS.339716+50630). 3) BY NOT ALLOWING INDEXATION OF COST FOR DETERMINING LONG TERM CAPITAL GAINS. 4) A) BY NOT ALLOWING DEDUCTION OF RS.477702/- BEING M UNICIPAL TAX PAID UNDER THE HEAD INCOME FROM HOUSE PROPERTY B) WITHOUT PREJUDICE TO THE ABOVE AND IN THE ALTERN ATIVE RS.477702/- SHOULD HAVE BEEN ALLOWED UNDER INCOME F ROM BUSINESS OR PROFESSION. 3. AT THE TIME OF ARGUMENT THE LEARNED COUNSEL DID NOT PRESS FOR GROUND NO. 2 AS THE A.O. GAVE RELIEF IN AN ORDER UNDER SEC TION 154 WITH REFERENCE TO ITA NO. 5917/MUM/2009 THE AIRLINES HOTEL PVT. LTD. 2 THE ARITHMETIC ERRORS POINTED OUT. ACCORDINGLY GROU ND NO. 2 IS TREATED AS WITHDRAWN. 4. WITH REFERENCE TO GROUND NOS. 1 & 3 IT WAS THE SUBM ISSION THAT THE ASSESSEE HAS FILED ITS REVISED RETURN ON 29.03.2007 AND THE A.O. HAS NOT CONSIDERED THE REVISED RETURN AT ALL. THE CIT(A), V IDE PARA 9 OF THE ORDER, HAS REJECTED THE CONTENTION STATING THAT THE REVISED RE TURN WAS FILED BEYOND THE TIME LIMIT PERMISSIBLE FOR FILING REVISED RETURN. 5. IT WAS LEARNED COUNSELS SUBMISSION THAT THE ORIGIN AL DATE OF FILING THE RETURN WAS 31.10.2005 FOR THE ASSESSMENT YEAR AND T HE ASSESSEE HAD FILED THE ORIGINAL RETURN IN TIME, I.E. ON 30.10.2005. AS PER THE PROVISIONS OF SECTION 139(5) REVISED RETURN CAN BE FILED AT ANY T IME BEFORE THE EXPIRY OF ONE YEAR FROM THE END OF THE RELEVANT ASSESSMENT YEAR O R COMPLETION OF THE ASSESSMENT, WHICHEVER IS EARLIER. IN THIS CASE THE DUE DATE FOR FILING REVISED RETURN WAS AVAILABLE UP TO 31.03.2007 WHEREAS THE A SSESSEE HAS FILED THE REVISED RETURN ON 29.03.2007, WHICH WAS WITHIN THE TIME. ASSESSMENT WAS COMPLETED ON 28.12.2007, THEREFORE, ASSESSEES REVI SED RETURN SHOULD HAVE BEEN CONSIDERED UNDER THE PROVISIONS OF THE ACT. TH E ONLY ISSUE CLAIMED IN THE REVISED RETURN IS WITH REFERENCE TO INDEXATION OF LONG TERM CAPITAL GAINS AS THE ORIGINAL RETURN WAS FILED WITHOUT THE CLAIM OF INDEXATION. THIS CLAIM IS LEGALLY ALLOWABLE AND THE A.O. SHOULD HAVE CONSIDER ED THE REVISED RETURN AT THE TIME OF ASSESSMENT AND THE CIT(A) ALSO HAS NOT CONSIDERED THE FACTS CORRECTLY AND REJECTED ASSESSEES CONTENTION. IT WA S HIS SUBMISSION THAT THE ASSESSEES REVISED RETURN SHOULD BE CONSIDERED AND ACCEPTED. 6. THE LEARNED D.R., HOWEVER, SUBMITTED THAT THERE IS NO MENTION OF THE SAME IN THE ASSESSMENT ORDER AND THE CIT(A) HAS COR RECTLY DECIDED THE ISSUE. 7. WE HAVE CONSIDERED THE ISSUE. AS SEEN FROM THE COPI ES OF THE ORIGINAL RETURN AND REVISED RETURN PLACED ON RECORD, THE ASS ESSEE HAS FILED THE ORIGINAL RETURN ON 31.10.2005 VIDE ACKNOWLEDGEMENT NO. 0110000424 WHEREAS THE REVISED RETURN WAS FILED ON 29.03.2007 ON WHICH NO ACKNOWLEDGEMENT NO. WAS PLACED. WHETHER THIS REVISE D RETURN FILED WAS ON THE RECORD OF THE A.O. OR NOT WAS NOT AVAILABLE AS THERE IS NO MENTION OF THE SAME IN THE ORIGINAL ASSESSMENT ORDER. WE ARE ALSO NOT PLACED WITH ANY ITA NO. 5917/MUM/2009 THE AIRLINES HOTEL PVT. LTD. 3 EVIDENCE THAT THE ASSESSEE HAS BROUGHT TO THE NOTIC E OF THE A.O. AT THE TIME OF ASSESSMENT. THE CIT(A), HOWEVER, HAS CONSIDERED THE GROUND AND REJECTED THE CONTENTIONS STATING THAT THE RETURN WAS FILED B EYOND THE TIME LIMIT PERMISSIBLE WITHOUT EXAMINING THE FACTS. AS PER THE PROVISIONS OF SECTION 139 ASSESSEE CAN FILE REVISED RETURN IF THERE ARE O MISSIONS OR MISTAKES ON OR BEFORE 31.03.2007 FOR A.Y. 2005-06. SINCE THE REVIS ED RETURN WAS FILED WITHIN THE TIME LIMIT UNDER THE STATUETTE, THE CONTENTIONS OF THE ASSESSEE ARE TO BE ACCEPTED. SINCE THE A.O. HAD NO OCCASION TO EXAMINE THE ISSUES IN THE REVISED RETURN, IN THE INTEREST OF JUSTICE, WE ARE OF THE OPINION THAT THE ISSUE OF INDEXATION OF LONG TERM CAPITAL GAINS MADE IN TH E REVISED RETURN IS TO BE RESTORED TO THE FILE OF THE A.O. FOR FRESH CONSIDER ATION. THIS ISSUE REQUIRES EXAMINATION OF THE A.O. AND ACCORDINGLY GROUND NOS. 1 & 3 PERTAINING TO THE ISSUE OF INDEXATION COST WHILE COMPUTING LONG TERM CAPITAL GAINS IS RESTORED TO THE FILE OF THE A.O. WITH THE DIRECTION TO CONSI DER THE CLAIMS AFTER GIVING DUE OPPORTUNITY TO THE ASSESSEE IN THIS REGARD. GRO UNDS ARE CONSIDERED ALLOWED FOR STATISTICAL PURPOSES. 8. GROUND NO. 4 PERTAINS TO THE ISSUE OF CLAIM OF MUNI CIPAL TAXES PAID UNDER THE HEAD INCOME FROM HOUSE PROPERTY. THE FA CTS PERTAINING TO THIS ISSUE ARE THAT THE ASSESSEE IS OWNER OF A BUILDING IN WHICH THE ASSESSEE WAS OCCUPYING 20% OF THE BUILDING AND 80% WAS RENTED OU T IN EARLIER YEARS TO VARIOUS TENANTS. CONSEQUENT TO THE DECLARATION BY T HE MUNICIPAL CORPORATION OF GREATER MUMBAI THAT THE BUILDING WAS DANGEROUS AND STRUCTURALLY UNFIT, ALL THE TENANTS HAVE VACATED AN D THERE WAS NO RENTAL INCOME FROM THE BUILDING. THE ASSESSEE HAS CLAIMED RENT, RATES AND TAX AND PROPERTY TAX OF RS.4,77,702/- PERTAINING TO THIS BU ILDING UNDER THE HEAD INCOME FROM HOUSE PROPERTY AND AFTER SETTING OFF INCOME FROM SHORT TERM CAPITAL GAINS AND OTHER SOURCE CLAIMED BALANCE LOSS OF RS.50,630/- UNDER THE HEAD HOUSE PROPERTY INCOME TO BE CARRIED FORW ARD. THE A.O. DISCUSSED THIS ISSUE VIDE PARA 4 OF THE ASSESSMENT ORDER AND CONSIDERED THAT THREE CONDITIONS ARE TO BE SATISFIED FOR TAKING THE INCOM E FROM HOUSE PROPERTY AND ANALYZED THE CONTENTION OF THE ASSESSEE AND ULTIMAT ELY HELD THAT THERE IS NO ANNUAL VALUE IN RESPECT OF THIS PART OF THE BUILDIN G, I.E. 80% OF THE BUILDING, WHICH IS TAXABLE UNDER THE ACT. ACCORDINGLY THE ASS ESSEES CLAIM OF LOSS OF ITA NO. 5917/MUM/2009 THE AIRLINES HOTEL PVT. LTD. 4 RS.4,77,702/- WAS DISALLOWED. BEFORE THE CIT(A) IT WAS CONTENDED THAT THE INCOME WAS TAXED UNDER HOUSE PROPERTY INCOME IN EAR LIER YEARS AS THE ASSESSEE WAS ABLE TO LET OUT TO VARIOUS TENANTS AND ACCORDINGLY THE COMPUTATION WAS DONE WHEREAS IN THIS YEAR THE BUILD ING WAS DECLARED UNSAFE AND THE ENTIRE BUILDING WAS UNDER THE POSSES SION OF THE ASSESSEE AND THE ASSESSEE IS USING THE BUILDING FOR ITS BUSINESS PURPOSES. FURTHER, REFERRING TO THE FINDINGS OF THE A.O. THAT THE WHOL E BUILDING WAS OCCUPIED BY THE ASSESSEE ITSELF FOR ITS OWN BUSINESS THE CONTEN TION WAS THAT THE MUNICIPAL TAXES PAID SHOULD BE ALLOWED IN FULL EITH ER UNDER THE HEAD INCOME FROM HOUSE PROPERTY OR UNDER THE HEAD BUSINESS. THE CIT(A), HOWEVER, DID NOT AGREE WITH THE ASSESSEES CONTENTIONS HOLDING T HAT THERE IS NO QUESTION OF ANY INCOME ACCRUING TO THE ASSESSEE FROM THE BUI LDING WHICH CAN BE TAXED UNDER THE HEAD HOUSE PROPERTY AND AS A RESULT THE RE IS NO QUESTION OF ALLOWING THE EXPENSES UNDER THIS HEAD. HE REJECTED ASSESSEES CONTENTIONS. 9. THE LEARNED COUNSEL SUBMITTED THAT THERE IS A FINDI NG BY THE A.O. THAT THE ENTIRE BUILDING IS UNDER THE OCCUPATION OF THE ASSESSEE AND THE ASSESSEE WAS TO PAY THE MUNICIPAL TAXES AS PER THE DEMANDS O F THE MUNICIPAL AUTHORITIES ON THE WHOLE OF THE BUILDING. SINCE THE BUILDING WAS UNDER THE OCCUPATION FOR BUSINESS PURPOSES, MUNICIPAL TAXES A RE ALLOWABLE EITHER UNDER THE HEAD HOUSE PROPERTY OR UNDER THE HEAD PROFITS FROM BUSINESS. IT WAS HIS CONTENTION THAT THE MUNICIPAL TAXES ARE ALL OWABLE DEDUCTION TO THE ASSESSEE AND THE A.O. AND CIT(A) ERRED IN REJECTING THE CLAIM. HIS FURTHER SUBMISSION WAS THAT THE FINDINGS OF THE A.O. AND CI T(A) THAT 80% OF THE BUILDING CANNOT BE CONSIDERED AS A BUILDING IS NOT CORRECT AS THE MUNICIPAL CORPORATION HAS CONSIDERED THE BUILDING UNSAFE BUT THAT DOES NOT MEAN THAT THERE IS NO BUILDING IN EXISTENCE AND THE FINDING O F THE A.O. AND THE CIT(A) ON THIS ISSUE ARE NOT CORRECT. 10. THE LEARNED D.R., HOWEVER, RELIED ON THE ORDERS OF THE A.O. AND THE CIT(A) IN THIS REGARD. 11. WE HAVE CONSIDERED THE ISSUE. AS SEEN FROM THE COMP UTATION OF INCOME FILED IN THE ORIGINAL RETURN AS WELL AS IN T HE REVISED RETURN THE ASSESSEE HAS CLAIMED ONLY THE MUNICIPAL TAXES PAID AS A LOSS ON HOUSE PROPERTY INCOME AS THERE IS NO RENTAL INCOME RECEIV ED ON 80% OF THE ITA NO. 5917/MUM/2009 THE AIRLINES HOTEL PVT. LTD. 5 BUILDING. AS PER THE PROVISIONS OF SECTION 23(1) AN NUAL VALUE OF ANY PROPERTY SHALL BE DEEMED TO BE- (A) THE SUM FOR WHICH THE PR OPERTY MIGHT REASONABLY BE EXPECTED TO BE LET OUT FROM YEAR TO YEAR, (B) WH ERE THE PROPERTY OR ANY PART OF THE PROPERTY IS LET OUT AND THE ANNUAL RENT RECEIVED OR RECEIVABLE BY THE OWNER IN RESPECT THEREOF IS IN EXCESS OF THE SA ME REFERRED IN CLAUSE (A), THE AMOUNT SO RECEIVED OR RECEIVABLE, AND (C) WHERE THE PROPERTY OR ANY PART OF THE PROPERTY IS LET AND WAS VACANT DURING THE WH OLE OR ANY PART OF THE PREVIOUS YEAR THE AMOUNT SO RECEIVED OR RECEIVABLE PROVIDED THE TAXES LEVIED BY ANY LOCAL AUTHORITY SHALL BE DEDUCTED AND DETERM INED THE ANNUAL VALUE OF THE PROPERTY IN THE YEAR IN WHICH THE TAXES ARE ACT UALLY PAID BY THEM. VIDE SECTION 23(2) IF THE PROPERTY IS IN THE OCCUPATION OF THE OWNER FOR THE PURPOSE OF HIS RESIDENCE OR CANNOT BE OCCUPIED THE ANNUAL VALUE OF SUCH HOUSE OR PART SHALL BE TAKEN TO BE NIL. SINCE THE P ROPERTY IS IN THE OCCUPATION OF THE OWNER AND WAS NOT LET OUT DURING THE ENTIRE YEAR, AS PER PROVISIONS OF SECTION 23(2) THE ANNUAL VALUE OF SUC H HOUSE IS TO BE TAKEN AT NIL AND TAXES LEVIED BY THE LOCAL AUTHORITIES IS DE EMED TO HAVE BEEN ALLOWED. HOWEVER, THE REAL ASPECT IN THIS CASE IS NOT WITH R EFERENCE TO HOUSE PROPERTY INCOME COMPUTATION. THE A.O. VIDE PARA 4 OF THE ORD ER HAS GIVEN THE FOLLOWING FINDING: - IN SPITE OF HAVING BEEN DECLARED DANGEROUS AND STR UCTURALLY UNSAFE THE ASSESSEE IS OCCUPYING A PART OF IT (I.E. 20% OF THE BUILDING) FOR ITS OWN BUSINESS AT ITS OWN RISK. VIRTUALLY, THE WHOLE BUIL DING IS OCCUPIED BY THE ASSESSEE ITSELF FOR ITS OWN BUSINESS WHICH SHOWS TH AT THE 3 RD CONDITION DOES NOT GET FULFILLED. 12. ACCORDING TO THE AO THE BUILDING IS IN THE OCCUPATI ON OF THE ASSESSEE FOR ITS OWN BUSINESS. IN THAT VIEW THE MUNICIPAL TA XES PAID FOR THE BUILDING, WHETHER IT IS FOR THE PART OF THE BUILDING OR FOR W HOLE OF THE BUILDING, IS ALLOWABLE UNDER SECTION 37(1). THIS ASPECT WAS NOT CONSIDERED EITHER BY THE A.O. OR BY THE CIT(A). WE ARE OF THE OPINION THAT S INCE THE BUILDING IS IN THE OCCUPATION OF THE ASSESSEE FOR THE PURPOSE OF BUSIN ESS THE CLAIM OF THE MUNICIPAL TAXES IS TO BE CONSIDERED UNDER SECTION 3 7(1). THE A.O. IS DIRECTED TO ALLOW THE EXPENDITURE AS A DEDUCTION UNDER SECTI ON 37(1) EVENTHOUGH THE ASSESSEE HAS WRONGLY CLAIMED THE SAME AS DEDUCTION UNDER HOUSE PROPERTY INCOME FOLLOWING THE ORDERS IN EARLIER YEARS WHEN T HERE WAS RENTAL INCOME. ITA NO. 5917/MUM/2009 THE AIRLINES HOTEL PVT. LTD. 6 FOR THIS REASON THE GROUND IS CONSIDERED ALLOWED. A .O. IS DIRECTED TO ALLOW THE SAME WHILE WORKING OUT THE BUSINESS PROFIT. 13. IN THE RESULT, ASSESSEES APPEAL IS ALLOWED FOR STA TISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 16 TH JULY 2010. SD/- SD/- (R.S. PADVEKAR) (B. RAMAKOTAIAH) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED: 16 TH JULY 2010 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) I, MUMBAI 4. THE CIT I, MUMBAI CITY 5. THE DR, D BENCH, ITAT, MUMBAI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI N.P.