ACIT-11(1)(2), Mumbai V. M/S.UPTOWN PROPERTIES AND LEASING PRIVATE LIMITED, Mumbai

ITA 6309/MUM/2017

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 3160 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 3 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-02-2019
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: F
• Assessment Year: 2013-2014
• Appeal Filed On: 18-10-2017
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: RAJIV GUBGOTRA
• Keywords: Depreciation

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL F BENCH, MUMBAI BEFORE S/ SHRI B.R. BASKARAN (AM) & SANDEEP GOSAIN (JM) I.T.A. NO. 6309 /MUM/20 1 7 (ASSESSMENT YEAR 20 13 - 14 ) ACIT - 11(1)(2) ROOM NO. 1 GROUND FLOOR AAYAKAR BHAVAN M.K. ROAD MUMBAI - 400 020. VS. M/S. UPTOWN PROPERTIES AND LEASING PVT. LTD. 2 ND FLOOR, BUILDING NO.2 SOLITAIRE CORPORATE PARK 167 GURU HARGOVIND MARG CHAKALA, ANDHERI EAST MUMBAI - 400 093. PAN : AAACU6834H ( APPELLANT ) ( RESPONDENT ) ASSESSEE BY SHRI SANDEEP JHANWAR DEPARTMENT BY S HRI RAJIV GUBGOTRA DATE OF HEARING 7 . 2 . 201 9 DATE OF PRONOUNCEMENT 7 . 2 . 201 9 O R D E R PER B.R. BASKARAN (AM) : - THE APPEAL FILED BY THE REVENUE IS DIRECTED AGAINST THE ORDER DATED 16.6.2017 PASSED BY LEARNED CIT(A) - 18, MUMBAI AND IT RELATES TO A.Y. 2013 - 14. SOLITARY ISSUE URGED BY THE REVENUE IS TO WHETHER LEARNED CIT(A) WAS JUSTIFIED IN HOLDING THAT THE RENTAL INCOME EARNED BY THE ASSESSEE IS CHARGEABLE UNDER THE HEAD INCOME FROM BUSINESS OR PROFESSION. 2. THE F ACTS RELATING TO THE ISSU E ARE STATED IN BRIEF. THE ASSESSEE COMPANY OWNED A PROPERTY AT PRABHADEVI. UP TO THE PRECEDING ASSESSMENT YEAR , THE RENTAL INCOME DERIVED FROM THE PROPERTY WAS OFFERED TO TAX UNDER THE HEAD INCOME FROM BUSINESS. THE ASSESSEE ALSO HELD THE ABOVE SAID PRO PERTY AS CURRENT INVESTMENT. DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE TRANSFERRED PRABHADEVI PROPERTY FROM CURRENT INVESTMENT TO FIXED ASSETS. DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE CLAIMED DEPRECIATION ON THE VALUE OF PROPERTY AND OTHER EXPENSES RELATING TO THE PROPERTY. WHEN M/S. UPTOWN PROPERTIES AND LEASING PVT. LTD. 2 QUESTIONED, THE ASSESSEE SUBMITTED BEFORE THE AO THAT THE SHAREHOLDING OF THE ASSESSEE - COMPANY CHANGED THE HAND FROM M/S. K. RAHEJA PROMOTERS TO M/S. BAJAJ CORPORATION LIMITED. POST ACQUISITION OF THE SHARES OF THE ASSESSEE - COMPANY, THE DIRECTORS DECIDED TO USE THE PROPERTY TO CARRY OUT BUSINESS ACTIVITY OF THE ASSESSEE - COMPANY AND ACCORDINGLY THE PROPERTY WAS TRANSFERRED TO FIXED ASSETS. ACCORDINGLY THE DEPRECIATION AND OTHER EXPENSES RELATING TO THE PROPERTY WERE CLAIMED UNDER THE HEAD INCOME FROM BUSINESS. 3. THE ASSESSING OFFICER DID NOT AGREE WITH THE CONTENTIONS OF THE ASSESSEE. ACCORDINGLY HE DISALLOWED THE CLAIM OF DEPRECIATION AND OTHER EXPENSES. HE ALSO COMPUTED DEEMED RENTAL INCOME FROM THE PRA BADEVI PROPERTY AND ASSESSED THE SAME UNDER THE HEAD INCOME FROM HOUSE PROPERTY. 4 . IN THE APPELLATE PROCEEDINGS, THE LEARNED CIT(A) AC CEPT ED THE CONTENTION S OF THE ASSESSEE AND ACCORDINGLY DIRECTED THE ASSESSING OFFICER NOT TO ASSESS DEEMED RENTAL INCOM E AND ALSO ALLOW THE DEPRECIATION & EXPENSES. AGGRIEVED, THE REVENUE HAS FILED THIS APPEAL BEFORE US. 5 . AT THE TIME OF HEARING, LEARNED AR PLACED RELIANCE OF THE DECISION RENDERED BY HON'BLE SUPREME COURT IN THE CASE OF RAYALA CORPORATION (P) LTD. (2016 ) 72 TAXAMNN.COM 149. THE LEARNED AR ALSO SUBMITTED THAT THE MAIN OBJECT S OF TH E ASSESSEE - COMPANY ALSO INCLUDE THE BUSINESS OF LEASING AND RENTING OUT THE PREMISES. THE LD A.R SUBMITTED THAT, UPON CHANGE OF SHAREHOLDERS/MANAGEMENT, IT HAS BEEN DECIDED TO H OLD THE PRABHADEVI PROPERTY AS FIXED ASSET AND TO CARRY ON BUSINESS THERE FROM. IT IS STATED THAT THE SAID PROPERTY WAS INTENDED TO BE USED AS OFFICE OF GROUP COMPANIES. ACCORDINGLY THE LD A.R SUBMITTED THAT THE ASSESSEE HAS CONVERTED THE PRABHADEVI PROP ERTY AS ITS OWN BUSINESS ASSET AND HENCE DEPRECIATION AND OTHER EXPENSES WERE CLAIMED. ACCORDINGLY, THE LEARNED AR SUBMITTED THAT THE ORDER PASSED BY LEARNED CIT(A) DOES NOT CALL FOR ANY INTERFERENCE. M/S. UPTOWN PROPERTIES AND LEASING PVT. LTD. 3 6 . THE LEARNED DR , ON THE CONTRARY, SUBMITTED THAT T HERE IS NO CHANGE IN THE ACTIVITY OF THE ASSESSEE WHEN COMPARED TO EARLIER YEARS. THE ASSESSEE HAS BEEN DECLARING RENTAL INCOME UNDER THE HEAD INCOME FROM HOUSE PROPERTY IN THE EARLIER YEARS . D URING THE YEAR UNDER CONSIDERATION, IT HAS CONVERTED THE PR OPERTY INTO ITS FIXED ASSET ONLY WITH THE PURPOSE OF CLAIMING DEPRECIATION AND OTHER EXPENSES. HE SUBMITTED THAT CHANGE IN MANAGEMENT ON SHAREHOLDING PATTERN COULD NOT ALTER CHARACTER OF THE ASSET OR INCOME DERIVED THEREFROM . 7 . WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE ORDER PASSED BY LEARNED CIT(A). WE NOTICED THAT LEARNED CIT(A) HAS GRANTED RELIEF TO THE ASSESSEE ACCEPTING THE CONTENTION S OF THE ASSESSEE THAT THERE IS CHANGE IN OWNERSHIP OF THE ASSESSEE - COMPANY AND FURTHER IT HAS BEEN DECID ED TO HOLD THE PROPERTY AS ITS FIXED ASSET BY TRANSFERRING IT IN THE BALANCE SHEET FROM CURRENT INVESTMENT . THE LD A.R ALSO SUBMITTED THAT THE IMPUGNED PROPERTY IS GOING TO BE USED AS OFFICE INFRASTRUCTURE FOR GROUP COMPANIES. 8. WE HAVE GONE THROU GH THE PAPER BOOK FILED BY THE ASSESSEE. WE NOTICE THAT THE ASSESSEE HAS FILED ONLY BALANCE SHEET AND NOT THE PROFIT AND LOSS ACCOUNT BEFORE US. HENCE IT IS NOT CLEAR AS TO WHETHER THE ASSESSEE HAS RECEIVED ANY RENTAL INCOME FROM ITS GROUP COMPANIES OR NOT. THERE SHOULD NOT BE ANY DISPUTE THAT THE ASSESSEE COMPANY IS A SEPARATE LEGAL ENTITY, DISTINCT AND DIFFERENT FROM ITS SHAREHOLDERS/DIRECTORS. FURTHER, IT IS STATED THAT THE IMPUGNED PROPERTY IS USED AS OFFICER INFRASTRUCTURE OF GROUP COMPANIES, MEAN ING THEREBY, THE ASSESSEE SHOULD HAVE RECEIVED RENTAL INCOME FROM ITS GROUP CONCERNS. IN THE ABSENCE OF THESE FACTS, WE ARE UNABLE TO DECIDE THE GROUND URGED BEFORE USE. IN ANY CASE, ALL THESE FACTS REQUIRE EXAMINATION. IN OUR VIEW , THE LEARNED CIT(A) H A S NOT CONSIDERED ALL THESE ASPECTS AND HENCE HIS VIEW CANNOT BE SUSTAINED. M/S. UPTOWN PROPERTIES AND LEASING PVT. LTD. 4 9. BEFORE US, THE LEARNED DR PLACED RELIANCE ON THE DECISION RENDERED BY HON'BLE SUPREME COURT IN THE CASE OF RAYALA CORPORATIO N (P) LTD. (SUPRA). HOWEVER, SUB SEQUENTLY THE HON' BLE SUPREME COURT HAS RENDERED ANOTHER DECISION IN THE CASE OF RAJ DADARKAR AND ASSOCIATES (CIVIL APPEAL NO. 6455 - 6460 OF 2017 DATED 9.5.2017), WHEREIN HON'BLE SUPREME COURT HAS EXPLAINED THE RATIO BEHIND THE DECISION S RENDERED BY IT IN THE CASE OF CHENNAI PROPERTIES AND INVESTMENTS LTD. (2015) 14 SCC 793 AND RAYALA CORPORATION (P) LTD. (SUPRA) . ACCORDINGLY, IN OUR VIEW THIS ISSUE REQUIRES FRESH EXAMINATION AT THE END OF LEARNED CIT(A) BY CONSIDERING THE FACTS SURROUNDING THE ISSUE IN PROPER PERSPECTIVE BY APPLYING THE PRINCIPLES LAID DOWN BY HON'BLE SUPREME COURT IN THE CASE OF RAJ DADARKAR AND ASSOCIATES (SUPRA). ACCORDINGLY, WE SET ASIDE THE ORDER PASSED BY LEARNED CIT(A) ON THIS ISSUE AND RESTORE THE SAME TO HIS FILE FOR EXAMIN ING IT AFRESH. THE ASSESSEE IS GIVEN LIBERTY TO RAISE ALL CONTENTIONS BEFORE LEARNED CIT(A). 10 . IN THE RESULT, APPEAL FILED BY THE REVENUE IS TREATED AS ALLOWED FOR STATISTICAL PURPOSES. ORDER HAS BE E N PRONOUNCED IN THE COURT ON 7 . 2 .201 9 . SD/ - SD/ - (SANDEEP GOSAIN ) (B.R.BASKARAN) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED : 7 / 2 / 20 1 9 COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. BY ORDER, //TRUE COPY// ( SENIOR PRIVATE SECRETARY ) PS ITAT, MUMBAI