M/s D.M. Estates Pvt. Ltd., Bangalore V. ACIT, Bangalore

ITA 642/BANG/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 51346 (ITAT-BANGALORE)
• Duration Of Justice: 1 year(s) 5 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-11-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 08-11-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 10-05-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SUSAN THOMAS JOSE JT
• Assessee Lawyers: S VENKATARAM
• Keywords: Business income; Opportunity of being heard

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH : BANGALORE BEFORE SHRI N.K. SAINI, ACCOUNTANT MEMBER AND SHRI GEORGE GEORGE K., JUDICIAL MEMBER ITA NO.642/BANG/2010 ASSESSMENT YEAR : 2005-06 M/S. D.M. ESTATES PVT. LTD., 1 ST FLOOR, EMBASSY POINT, 150, INFANTRY ROAD, BANGALORE 560 001. PAN : AAACD 7449M VS. THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE 11(1), BANGALORE. APPELLANT RESPONDENT APPELLANT BY : SHRI S. VENKATARAM, C.A. RESPONDENT BY : SMT. SUSAN THOMAS JOSE, JT.CIT(DR) DATE OF HEARING : 08.11.2011 DATE OF PRONOUNCEMENT : 08.11.2011 O R D E R PER N.K. SAINI, ACCOUNTANT MEMBER THIS IS AN APPEAL BY THE ASSESSEE AGAINST THE ORD ER DATED 11.3.2010 OF THE LD. CIT(APPEALS)-I, BANGALORE. 2. THE FOLLOWING GROUNDS HAVE BEEN RAISED IN THIS A PPEAL: 1. THE CIT(A) ERRED BOTH IN LAW AND ON THE FACTS OF THE CASE IN HOLDING THAT THE INCOME FROM PROPERTY AT ST . MARKS ROAD, BANGALORE TO BE ASSESSED AS INCOME FROM PROP ERTY AND NOT INCOME FROM BUSINESS. ITA NO.642/BANG/10 PAGE 2 OF 5 2. HE FAILED TO APPRECIATE THAT THE PROPERTY WAS T AKEN ONLY FOR COMMERCIAL PURPOSES AND LETTING OUT WAS ONLY FOR A TEMPORARY PERIOD. 3. HE ERRED IN HOLDING THAT THE INTENTION OF THE A PPELLANT WAS ONLY TO EARN RENTAL INCOME AND NOT FOR UNDERTAKING THE WORK OF REAL ESTATE DEVELOPMENT. 4. HE ALSO ERRED IN HOLDING THAT THE APPELLANT DID NOT CARRY ON THE BUSINESS OF REAL ESTATE. 5. HE FAILED TO APPRECIATE THAT THE MERE DEDUCTION OF TDS BY BHM, ON PAYMENT OF RENT, CANNOT CONCLUDE THAT THE B UILDING WAS NOT USED FOR COMMERCIAL PURPOSES. 6. WITHOUT PREJUDICE TO THE ABOVE, THE APPELLANT S UBMITS THAT THE INTEREST ON LOANS, INSURANCE, LEASE RENT AND OT HER AMENITIES SHOULD HAVE BEEN DEDUCTED WHILE COMPUTING THE INCO ME FROM PROPERTY. 7. IT FURTHER SUBMITS THAT THE BOARDING CHARGES SH OULD HAVE BEEN ASSESSED AS INCOME FROM BUSINESS, AND NOT I NCOME FROM OTHER SOURCES. 8. IT FURTHER SUBMITS THAT, IN ANY CASE, THE ADDIT IONS MADE ARE EXCESSIVE AND UNREASONABLE. 9. THE APPELLANT PRAYS THAT THE INCOME MAY PLEASE BE ASSESSED AS INCOME FROM BUSINESS AND THAT THE DED UCTIONS CLAIMED BY THE APPELLANT MAY BE ALLOWED. 3. DURING THE COURSE OF HEARING, THE LD. COUNSEL FO R THE ASSESSEE DID NOT PRESS THE GROUNDS OF APPEAL, EXCEPT GROUND NO.6 . THEREFORE ALL THE GROUNDS EXCEPT GROUND NO.6 ARE DISMISSED AS NOT PRE SSED. 4. VIDE GROUND NO.6, THE CLAIM OF THE ASSESSEE IS T HAT DEDUCTION IS TO BE ALLOWED WHILE COMPUTING INCOME FROM HOUSE PROPER TY FOR THE INTEREST ON LOANS, INSURANCE, LEASE RENT AND OTHER AMENITIES. T HE FACTS RELATED TO THIS ISSUE IN BRIEF ARE THAT THE ASSESSEE FILED ITS RETU RN OF INCOME ON 28.10.2005 DECLARING TOTAL INCOME OF RS.19,72,970, HOWEVER, TH E ASSESSMENT WAS ITA NO.642/BANG/10 PAGE 3 OF 5 FRAMED AT AN INCOME OF RS.45,50,192. THE ASSESSEE DECLARED THE RENTAL INCOME RECEIVED FROM M/S. BOOKS & MARKS HOSPITALITY PVT. LTD. UNDER THE HEAD BUSINESS INCOME. THE AO CONSIDERED THE SAME AS INCOME FROM HOUSE PROPERTY FOR THE REASONS STATED IN PARAS TO 3 .4 TO 3.21 OF THE ASSESSMENT ORDER DATED 20.11.07, AT THE COST OF REP ETITION THE SAME ARE NOT REPRODUCED HEREIN. THE ASSESSEE CARRIED THE MATTER TO THE LD. CIT(APPEALS), WHO CONFIRMED THE ACTION OF THE AO. NOW THE ASSESSEE IS IN APPEAL. 5. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THERE IS NO OBJECTION TO THE VIEW EXPRESSED BY THE AO AS WELL AS THE LD. CIT(APPEALS) TO TREAT THE IMPUGNED INCOME AS INCOME FROM HOUSE PROPERTY, BUT THE DEDUCTION ON ACCOUNT OF EXPENSES WHICH WERE DIRECTLY RELATED TO THE EARNING OF RENTAL INCOME SHOULD ALSO HAVE BEEN ALLOWED. IT WAS FURTH ER STATED THAT NEITHER THE AO NOR THE LD. CIT(A) HAD CONSIDERED THE ISSUE IN THE RIGHT PERSPECTIVE, BECAUSE THE INTEREST ON LOANS, INSURANCE, LEASE REN T AND OTHER AMENITIES WERE REQUIRED TO BE DEDUCTED FROM THE RENTAL INCOME RECEIVED BY THE ASSESSEE. HE PRAYED THAT THE ISSUE MAY BE SENT BAC K TO THE AO FOR ALLOWING THE CLAIM OF THE ASSESSEE. 6. IN HER RIVAL SUBMISSIONS, THE LD. DR SUPPORTED T HE ORDERS OF THE AUTHORITIES BELOW. 7. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE P ARTIES AND ALSO PERUSED THE MATERIAL ON RECORD. IN THE INSTANT CAS E, IT APPEARS THAT THE ITA NO.642/BANG/10 PAGE 4 OF 5 ASSESSEE HAD SHOWN THE INCOME RECEIVED FROM M/S. BO OKS & MARKS HOSPITALITY PVT. LTD. AS BUSINESS INCOME FOR THE RE ASON THAT THE ASSESSEE WAS ALSO ENTITLED TO 10% OF GROSS COLLECTION OF THE SAID PARTY CALCULATED AT EVERY MONTH, WITH A MINIMUM GUARANTEED AMOUNT OF RS .1 LAKH. HOWEVER, THE AO CONSIDERED THE SAID INCOME AS INCOME FROM H OUSE PROPERTY AND THE LD. CIT(A) CONFIRMED THE ACTION OF THE AO. NOW THE CLAIM OF THE ASSESSEE IS THAT CERTAIN EXPENSES WHICH WERE DIRECT LY RELATED TO THE EARNING OF THE SAID INCOME HAD NOT BEEN ALLOWED. I N THE PRESENT CASE, IT IS NOTICED THAT NEITHER THE AO NOR THE LD. CIT(A) HAS DISCUSSED IN THEIR RESPECTIVE ORDERS AS TO WHETHER THE ASSESSEE HAD IN CURRED SUCH EXPENSES OR NOT, THEREFORE CLEAR FACTS ARE NOT EMERGING OUT OF THE IMPUGNED ORDER PASSED BY THE LD. CIT(A). IN THE INSTANT CASE, THE LD. CIT(A) HAD HELD IN THE IMPUGNED ORDER THAT SINCE THE INCOME WAS TAXED UNDE R THE HEAD HOUSE PROPERTY, NO BUSINESS LOSS ON ACCOUNT OF DEPRECIAT ION WAS ALLOWABLE AS CLAIMED BY THE ASSESSEE, BUT NO DISCUSSION HAS BEEN MADE WITH REGARD TO THE EXPENSES CLAIMED BY THE ASSESSEE ON ACCOUNT OF INTEREST ETC. WE THEREFORE DEEM IT APPROPRIATE TO SET ASIDE THIS ISS UE TO THE FILE OF THE AO TO DECIDE THE ISSUE RELATING TO THE CLAIM OF THE ASSES SEE FOR DEDUCTION OF EXPENSES. THE ASSESSING OFFICER IS DIRECTED TO VERI FY FROM THE RECORD AND DECIDE THE ISSUE AFRESH IN ACCORDANCE WITH THE LAW, AFTER PROVIDING DUE AND REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESS EE. 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PAR TLY ALLOWED FOR STATISTICAL PURPOSES. ITA NO.642/BANG/10 PAGE 5 OF 5 PRONOUNCED IN THE OPEN COURT ON THIS 8 TH DAY OF NOVEMBER, 2011. SD/- SD/- ( GEORGE GEORGE K. ) ( N.K. SAINI ) JUDICIAL MEMBER ACCOUNTANT MEMBER BANGALORE, DATED, THE 8 TH NOVEMBER, 2011. DS/- COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE (1+1) BY ORDER ASSISTANT REGISTRAR ITAT, BANGALORE.