M/s. Shalimar Exhibitors, Surat V. The Income tax Officer,Ward-2(1), Surat

ITA 602/AHD/2009

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 60278 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 1 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-04-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 17-04-2012
• Assessment Year: 2005-2006
• Appeal Filed On: 23-02-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P L KUREEL
• Keywords: Business income

Judgement Text

ITA NO.6 02/AHD/2009 ASSESSME NT YEAR 2005- 06 . 1 IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, A HMEDABAD (BEFORE SHRI G.C.GUPTA VICE PRESIDENT & SHRI T.R. M EENA, A.M.) I.T.A. NO.602 /AHD/2009 (ASSESSMENT YEAR: 2005- 06) M/S. SHALIMAR EXHIBITORS, C/O. RAJKUMAR THEATRE, UDHNA DARWAJA, RING ROAD, SURAT. (APPELLANT) VS. INCOME TAX OFFICER, WARD 2(1), AAYAKAR BHAVAN, MAJURA GATE, SURAT. (RESPONDENT) PAN: AAJFS 9213Q APPELLANT BY : WRITTEN SUBMISSION. RESPONDENT BY : SHRI P.L. KUREEL, SR. D.R. ( )/ ORDER DATE OF HEARING : 17-4-2012 DATE OF PRONOUNCEMENT : 20/4/2012 PER: SHRI T. R. MEENA,A.M. THIS APPEAL IS FILED BY THE ASSESSEE AGAINST THE O RDER OF CIT (A)- II, SURAT DATED 9-1-2009 FOR THE ASSESSMENT YEAR 20 05-06. 2. THE ASSESSEE HAS RAISED FOLLOWING GROUND OF APPE AL :- ITA NO.6 02/AHD/2009 ASSESSME NT YEAR 2005- 06 . 2 1. THE LD. CIT (A) GROSSLY ERRED IN CONFIRMING THE ADDITION IN RESPECT OF RENT INCOME TREATING IT AS BUSINESS INCO ME FOR RS.3,14,900/- AS PER PARA-10 OF THE CIT (A) ORDER. 3. THE BRIEF FACTS OF THE CASE ARE THAT RETURN OF I NCOME DECLARING TOTAL INCOME AT RS.36,850/- WAS FILED ON 30-10-2005 . THEREAFTER THE CASE WAS SELECTED FOR SCRUTINY AND THE ASSESSMENT W AS COMPLETED VIDE ORDER DATED 28-12-2007 DETERMINING THE TOTAL I NCOME AT RS.2,13,606/- BY MAKING FOLLOWING ADDITIONS:- (I) DISALLOWANCE OUT OF TELEPHONE AND PETROL EXPS. RS. 28,119/- (II) DISALLOWANCE U/S. 40 A(3). RS. 10,000/- (III) DISALLOWANCE U/S. 37(1)(VA) RS. 27,214/- (IV) DISALLOWANCE UNDER THE HEAD INCOME FROM HOUSE PROPERTY. RS. 3,14,900/- 4. AGAINST THE ABOVE DISALLOWANCES, THE ASSESSEE CA RRIED THE MATTER IN APPEAL BEFORE THE CIT (A). 5. BEFORE THE CIT (A), THE A.R. OF THE ASSESSEE RAI SED FOUR GROUNDS OF APPEAL AGAINST THE AFORESAID FOUR DISALLOWANCES, OUT OF THESE FIRST TWO DISALLOWANCES THE A.R. OF THE ASSESSEE WITHDREW GROUNDS RELATING TO FIRST TWO DISALLOWANCES AND THE REMAINING TWO GR OUNDS WERE CONTESTED IN APPEAL. ADDITION RELATING TO RS.27,21 4/- WAS DIRECTED TO DELETE BY THE CIT (A). THE GROUND NO.4 (I.E. GROUND NO.1 IN THE PRESENT APPEAL) REGARDING DISALLOWANCE OF RS.3,14,900/- WAS CONFIRMED BY CIT (A) BY OBSERVING AS UNDER:- ITA NO.6 02/AHD/2009 ASSESSME NT YEAR 2005- 06 . 3 10. I HAVE CAREFULLY CONSIDERED THE ISSUE. TO BEGI N WITH, THE EXAMPLE OF DIVIDEND INCOME CITED BY THE AR IS NOT R EALLY A RELEVANT EXAMPLE, THE ISSUE BEING OF A COMPLETELY D IFFERENT NATURE. AS REGARDS THE CASE OF SHAMBHU INVESTMENT ( P) LTD. (SUPRA) AND MARWAR TEXTILES (P) LTD. (SUPRA) A PERU SAL OF THESE TWO CASES CLEARLY SHOWS THAT THE FACTS OF THE ASSES SEES CASE ARE QUITE DIFFERENT FROM THE FACTS OF THE SAID CASE S. THE ISSUE IN SHAMBHU INVESTMENT WAS WHETHER THE LETTING OUT OF F URNISHED SPACE ON MONTHLY RENT ALONG WITH FURNITURE AND FIXT URES FOR BEING USED AS A TABLE SPACE WAS TO BE TREATED AS INCOME FROM PROPERTY OR BUSINESS INCOME. IN THE CASE OF MARWAR TEXTILES, WHICH FOLLOWED THE CASE OF SHAMBHU INVESTMENT (SUPR A), THE ASSESSEE LET OUT AN IMMOVABLE PROPERTY WITH FACILIT IES LIKE TELEPHONE ETC., TO VARIOUS COMPANIES OF THE SAME GR OUP AT FIXED MONTHLY CHARGES. THE ASSESSEE HAD CLAIMED SUCH CHAR GES AS BUSINESS INCOME, THE ITAT HELD THAT THE ASSESSEE HA D FAILED TO PROVE THAT ANY BUSINESS ACTIVITY WAS CARRIED OUT. B Y SIMPLY STATING THAT IT WAS RUNNING A BUSINESS CENTER, WAS NOT ENOUGH. THE ASSESSEES CLAIM OF BUSINESS INCOME WAS REJECTE D, WHILE THE HONBLE SUPREME COURT IN SHAMBHU INVESTMENT HAD TREATED THE LETTING OUT OF TABLE SPACE AS INCOME FROM HOUSE PROPERTY. THE BASIC PRINCIPLE WHICH EMERGES FROM THESE TWO CA SES, IS THE INTENTION OF THE OWNER OF THE PROPERTY AS ALSO THE NATURE OF THE ACTIVITY ACTUALLY CARRIED OUT IN SUCH PROPERTY. IN THE CASE OF THE ASSESSEE, THE IMMOVABLE PROPERTY I.E. THE CINEMA CO MPLEX, WAS CLEARLY A COMMERCIAL ASSET WHICH WAS BEING UTILIZED FOR THE ITA NO.6 02/AHD/2009 ASSESSME NT YEAR 2005- 06 . 4 PURPOSE OF BUSINESS. PARTS OF THE PREMISES WERE LET OUT BY THE ASSESSEE WHOLLY AND SOLELY TO FURTHER PROVIDE SUPPO RT TO THE RUNNING OF THE MAIN BUSINESS I.E. THE MULTIPLEX OR THE CINEMA HALL IN THE SAME BUILDING OR PROPERTY. THE RENTAL INCOME WAS EARNED FROM VARIOUS RESTAURANTS AND SHOPS WHICH WERE LOCAT ED WITHIN THE SAME BUILDING AND THE PREMISES WERE LET OUT QUI TE OBVIOUSLY TO ATTRACT THE CUSTOMERS BY PROVIDING THEM A COMPLE TE PACKAGE OF ENTERTAINMENT. THE FACTS OF THE ASSESSEES CASE ARE CLEARLY DISTINGUISHABLE FROM BOTH SHAMBHU INVESTMENT (SUPRA ) AND MARWAR TEXTILES (SUPRA). IN THE CASE OF THE ASSESSE E, THE RENTAL INCOME EARNED BY THE ASSESSEE, WHICH TOTALED RS.3,1 4,900/-, WAS CLEARLY IN THE NATURE OF BUSINESS INCOME. THE A.OS ACTION IS THEREFORE UPHELD, AND THE TREATMENT OF THE SAID SUM AS BUSINESS INCOME IS CONFIRMED. 6. NOW THE ASSESSEE IS IN APPEAL BEFORE US. 7. THE LD. D.R. SUPPORTED THE ORDER OF THE A.O. 8. WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED THE MATERIAL ON RECORD. THE A.R. OF THE ASSESSEE SUBMITTED THAT ON IDENTICAL SET OF FACTS CO-ORDINATE BENCH OF THE HONBLE ITAT AHMEDAB AD IN APPEAL NO.1647 TO 1649/AHD/2010 FOR THE ASSESSMENT YEARS 2 003-04, 2004-05 AND 2006-07 VIDE ORDER DATED 8-7-2010 HAS RESTORED THE MATTER BACK TO THE FILE OF A.O. AND THEREFORE, REQUESTED THAT THE PRESENT APPEAL BE RESTORED BACK TO THE FILE OF A.O. BY OBSERVING AS U NDER:- ITA NO.6 02/AHD/2009 ASSESSME NT YEAR 2005- 06 . 5 5. I HAVE HEARD THE LD. A.R. AND LD. D.R. AND CARE FULLY PERUSED THE MATERIAL ON RECORD. IN MY CONSIDERED VI EW THE MATTER REQUIRES INVESTIGATION SO AS TO UNDERSTAND T HE TERMS OF THE AGREEMENT BETWEEN THE ASSESSEE AND THE CINEMA O WNER(S) WHO HAVE HIRED THE THEATRE ON LEASE FROM THE ASSESS EE. THIS WOULD SHOW THE INTENTION OF ASSESSEE AS TO WHETHER THE THEATRE IS GIVEN ON RENT TO A FIXED PERSON OR IT IS BEING R UN BY DIFFERENT EXHIBITORS FROM TIME TO TIME. I.E. WHETHER THE THEA TRE IS GIVEN ON SHORT TERM BASIS OR LONG TERM BASIS, WHAT OTHER ITE MS IN ADDITION TO THE BUILDING ARE INCLUDED FOR WHICH RENT IS CHAR GED, WHETHER RENT GIVEN IS COMPOSITE INCLUSIVE OF FURNITURE AND FIXTURES OR SEPARATE CHARGES TAKEN FOR FURNITURE AND FIXTURES. IN CASE WHERE BUILDING IS GIVEN TO EXHIBITOR ON SHORT TERM BASIS AND NEW EXHIBITOR COMES AFTER SHORT TIME, OR RENT IS COMPOS ITE INCLUSIVE OF FURNITURE AND FIXTURES OR EVEN WHERE ASSESSEE IS BOUND TO PROVIDE CANTEEN, SHOPS AND OTHER AMENITIES TO THE C USTOMERS THEN RENTAL INCOME OF THE ASSESSEE WOULD BE ASSESSE D UNDER THE HEAD BUSINESS. THUS IN ORDER TO EXAMINE THE LEASE AGREEMENT WITH THE EXHIBITOR AND WITH TEA STALL OR OTHER SHOP S RUNNERS, MATTER IS RESTORED TO THE FILE OF A.O. 9. IN THE LIGHT OF THE ABOVE DECISION, WE RESTORE T HIS ISSUE TO THE FILE OF A.O. FOR RE-DECIDING THE ISSUE AFTER GIVING SUFF ICIENT AND PROPER OPPORTUNITY TO THE ASSESSEE. ITA NO.6 02/AHD/2009 ASSESSME NT YEAR 2005- 06 . 6 10. IN THE RESULT, THE APPEAL IS ALLOWED FOR STATIS TICAL PURPOSE. ORDER PRONOUNCED IN OPEN COURT ON 20- 4 - 2012. SD/- SD/- (G.C.GUPTA) (T. R. MEENA) VICE PRESIDENT ACCOUNTANT MEMBER AHMEDABAD. S.A.PATKI. COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS) II, SURAT. 4. THE CIT CONCERNED. 5. THE DR., ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT,AHMEDABAD. ITA NO.6 02/AHD/2009 ASSESSME NT YEAR 2005- 06 . 7 1.DATE OF DICTATION 17 - 4 -2012 2.DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE TH E DICTATING 19 / 4 / 2012 MEMBER.OTHER MEMBER. 3.DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P.S./P.S - -2012. 4.DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT - -2012 5.DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR .P.S./P.S - -2012 6.DATE ON WHICH THE FILE GOES TO THE BENCH CLERK - -2012. 7.DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 8.THE DATE ON WHICH THE FILE GOES TO THE ASSTT. REG ISTRAR FOR SIGNATURE ON THE ORDER 9.DATE OF DESPATCH OF THE ORDER..