Smt G. Prameela Devi, Hyderabad V. ITO,Ward- 6(3), Hyderabad

ITA 646/HYD/2014

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 82595 (ITAT-HYDERABAD)
• Duration Of Justice: 7 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-11-2014
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2008-2009
• Appeal Filed On: 08-04-2014
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: RAJAT MITRA
• Assessee Lawyers: A V RAGHURAM
• Keywords: Business income; Depreciation

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B, HYDERABAD BEFORE SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER ITA NO. 646/HYD/2014 ASSESSMENT YEAR : 2008-09 SMT. G. PRAMEELA DEVI, HYDERABAD PAN AAHXPG7424J INCOME-TAX OFFICER, WARD 6(3), HYDERABAD (APPELLANT) (RESPONDENT) ASSESSEE BY SHRI A.V. RAGHURAM REVENUE BY SHRI RAJAT MITRA DATE OF HEARING 13-11-2014 DATE OF PRONOUNCEMENT 28-11-2014 O R D E R PER SAKTIJIT DEY, J.M.: AFORESAID APPEAL OF THE ASSESSEE IS DIRECTED AGAI NST ORDER DATED 10/01/2014 PASSED BY THE COMMISSIONER OF INC OME-TAX(A)-IV, HYDERABAD, FOR THE ASSESSMENT YEAR 2008-09. 2. THE ONLY EFFECTIVE GROUND RAISED BY ASSESSEE IS AS UNDER: THE LEARNED CIT(A) ERRED IN CONFIRMING THE ACTION O F THE AO IN HOLDING THAT THE INCOME FROM AMENITIES IS TO BE TRE ATED AS INCOME FROM PROPERTY WITHOUT APPRECIATING THE FACT THAT ARE BROUGHT ON RECORD IN THE CASE OF LULLA BROTHERS TRU ST TO COMPARE WITH THAT OF THE ASSESSEE AND THAT THE ITAT DECISION FOR THE AY 2005-06 IS BASED ON MISCONCEPTION OF FAC TS. 3. BRIEFLY THE FACTS ARE, ASSESSEE IS AN INDIVIDUAL . FOR THE ASSESSMENT YEAR UNDER CONSIDERATION ASSESSEE FILED HER RETURN OF INCOME DECLARING TOTAL INCOME OF RS. 5,31,057. 2 ITA NO. 646/HYD/2014 SMT. G. PRAMEELA DEVI 4. DURING THE SCRUTINY ASSESSMENT PROCEEDING, AO NO TICED THAT ASSESSEE ALONG WITH HER SON AND DAUGHTER WAS THE OW NER OF A LAND SITUATED AT SURVEY NO. 12, KONDAPUR VILLAGE, HYDERA BAD. THE SUBJECT LAND WAS GIVEN FOR DEVELOPMENT TO M/S SDE ENGINEERS UNDER A DEVELOPMENT AGREEMENT. AS PER THE TERMS OF DEVELOPM ENT AGREEMENT, ASSESSEE ALONG WITH HER SON AND DAUGHTER WERE ALLO CATED 99,702 SQ.FT. IN THE SUPERSTRUCTURE CONSTRUCTED OVER THE L AND. FURTHER, ASSESSEE ALONG WITH HER SON AND DAUGHTER PURCHASED AN AREA OF 7,328 SQ.FT. FROM THE DEVELOPER FOR BECOMING OWNERS OF FIRST, SECOND, SIXTH AND 8 TH FLOORS OF THE SUPERSTRUCTURE WHICH WAS SUBSEQUENTL Y NAMED AS SDE PRAMEELA TECHNO PARK. ASSESSEE ALONG WITH HER SON AND DAUGHTER LEASED OUT THE DEVELOPED AREA RECEIVED BY THEM IN THE SUPERSTRUCTURE TO M/S SATYAM COMPUTER SERVICES LTD. WHILE LEASING OUT ASSESSEE ENTERED INTO SEPARATE AGREEMENTS WITH THE TENANT, ONE TOWARDS RENT OF THE BUILDING AND OTHER, TOWARDS AME NITIES PROVIDED IN THE BUILDING. IN THE RETURN OF INCOME FILED FOR THE IMPUGNED ASSESSMENT YEAR, ASSESSEE OFFERED THE RENTAL INCOME UNDER THE HEAD HOUSE PROPERTY WHEREAS INCOME RECEIVED TOWARDS AM ENITIES WAS SHOWN AS BUSINESS INCOME AND ASSESSEE ALSO CLAIMED DEDUCTION TOWARDS INTEREST EXPENDITURE AND DEPRECIATION FROM SUCH BUSINESS INCOME. THE AO, HOWEVER, REJECTING ASSESSEES CLAIM TREATED THE ENTIRE AMOUNT RECEIVED FROM LEASING OF BUILDING TO M/S SATYAM COMPUTERS AS INCOME FROM HOUSE PROPERTY AND ACCOR DINGLY COMPLETED THE ASSESSMENT. BEING AGGRIEVED OF THE AS SESSMENT ORDER, SO PASSED, ASSESSEE PREFERRED APPEAL BEFORE CIT(A). 5. DURING THE APPEAL HEARING BEFORE LD. CIT(A), ASS ESSEE RELYING UPON A DECISION OF THE ITAT, HYDERABAD BENCH IN CAS E OF LULLA BROTHERS TRUST VS. ACIT IN ITA NOS. 528/HYD/2005 DA TED 07/03/2008 TRIED TO MAKE OUT A CASE THAT AMOUNT RECEIVED TOWAR DS AMENITIES SHOULD BE TREATED AS BUSINESS INCOME. HOWEVER, LD. CIT(A) TAKING NOTE OF THE FACT THAT WHILE CONSIDERING IDENTICAL N ATURE OF DISPUTE IN ASSESSEES OWN CASE FOR AYS 2005-06 AND 2006-07 IN ITA NOS. 67 TO 3 ITA NO. 646/HYD/2014 SMT. G. PRAMEELA DEVI 70/HYD/2010 DATED 30/04/2010, ITAT HAS HELD THAT AS SESSEE AS THE OWNER OF THE BUILDING WAS ONLY EXPLOITING THE PROPE RTY BY LETTING OUT THE SAME AND AS VARIOUS ASSETS LET OUT TO THE TENAN TS WERE INCIDENTAL TO LETTING OUT THE BUILDING, HENCE, SUCH RENTAL INC OME RECEIVED WAS LIABLE TO BE ASSESSED AS INCOME FROM HOUSE PROPERT Y, DISMISSED ASSESSEES APPEAL. 6. WE HAVE HEARD THE PARTIES AND PERUSED THE ORDERS OF REVENUE AUTHORITIES AS WELL AS OTHER MATERIALS ON RECORD. A T THE OUTSET, BOTH LD. COUNSEL FOR ASSESSEE AS WELL AS LD. DR AGREED THAT ISSUE IN DISPUTE IS SQUARELY COVERED AGAINST ASSESSEE BY THE DECISION O F THE ITAT IN ASSESSEES OWN CASE IN AYS 2005-06 AND 2006-07 WHER EIN THE COORDINATE BENCH HELD THAT AMENITIES PROVIDED ARE I NCIDENTAL TO LETTING OUT THE BUILDING, HENCE, SUCH RENTAL INCOME IS TO B E TREATED AS INCOME FROM HOUSE PROPERTY. THOUGH, LD. AR REITERATING S UBMISSIONS MADE BEFORE THE LD. FIRST APPELLATE AUTHORITY CONTENDED THAT AS PER THE ORDER PASSED BY THE ITAT, HYDERABAD BENCH IN CASE OF LULL A BROTHERS TRUST VS. ACIT, AMOUNT RECEIVED TOWARDS AMENITIES CANNOT BE TREATED AS HOUSE PROPERTY INCOME, WE ARE UNABLE TO ACCEPT THE SAME AS THE ISSUE HAS BEEN DECIDED AGAINST ASSESSEE IN ASSESSEE S OWN CASE FOR THE PRECEDING ASSESSMENT YEARS BY A COORDINATE BENC H OF THIS TRIBUNAL. IT WILL BE PERTINENT TO MENTION HERE, COO RDINATE BENCH OF THIS TRIBUNAL HAS DECIDED THIS PARTICULAR ISSUE AGAINST OTHER CO-OWNERS ALSO. IN THIS CONNECTION, WE REFER TO THE DECISION OF THE COORDINATE BENCH OF ITAT, HYDERABAD IN CASE OF DR. G. RAGHU RA M IN ITA NO. 111/HYD/2012, ORDER DATED 20/12/2012 WHEREIN THE CO ORDINATE BENCH WHILE DECIDING THE IDENTICAL ISSUE HELD AS UNDER: 9. WE HAVE HEARD THE ARGUMENTS OF BOTH THE PARTIES AND PERUSED THE RECORD. WE FIND THAT THE ISSUE IN DISPUTE IS SQUARELY COVERED BY THE DECISION OF THE JURISDICTIONAL BENCH OF ITAT, HYDERABAD IN ASSESSEE S OWN CASE FOR AY 2005-06 & 2006-07 IN ITA NOS. 6/HYD/2010 AND OTHERS VIDE ORDER DATED 30 TH APRIL, 4 ITA NO. 646/HYD/2014 SMT. G. PRAMEELA DEVI 2010, WHEREIN THE TRIBUNAL HAS DEALT THE ISSUE AT P ARA 6 AND AT PARA 9 OF THE ORDER, WHICH ARE AS FOLLOWS: THE AR SUBMITTED THAT THE RENTAL INCOME RECEIVED F ROM THE LETTING OF AMENITIES IS INCOME FROM BUSINESS AND THIS WAS COVERED IN FAVOUR OF THE ASSESSEE BY THE O RDER OF THIS TRIBUNAL DATED 7.3.2008 IN ITA NO.528/HYD/2005 IN THE CASE OF LALLU BROTHERS TRUST , SECUNDERABAD VS. ACIT FOR THE ASSESSMENT YEARS 2000 - 01. WE HAVE GONE THROUGH THIS ORDER. THERE IS NO READY MADE FORMULA FOR DECIDING THIS ISSUE. EACH C ASE HAS TO BE DECIDED ON ITS OWN FACTS AND AS SUCH, WE HAVE TO SEE THE FACTS OF THE PRESENT CASE. AS WE H AVE GONE THROUGH THE ENTIRE FACTS OF THE CASE AND ALSO AGREEMENT ENTERED BETWEEN THE PARTIES I.E. THE RENT AGREEMENT AND ALSO WE HAVE GONE THROUGH VARIOUS ITEMS GIVEN ON HIRE CHARGES TO THE TENANTS. WE HAV E ALSO GONE THROUGH THE AMENITIES PROVIDED TO THE TENANTS. 9. THE ANNUAL RENT IN A CASE WHEN THE PROPERTY IS LET THROUGH OUT THE YEAR IS THE ACTUAL RENT RECEIVED OR RECEIVABLE BY THE OWNER. WHEN THE AMOUNT OF THE ACTUAL RENT RECEIVED OR RECEIVABLE BY THE OWNER, IS KNOWN THAT WOULD CONSTITUTE THE BASIS FOR DETERMINI NG THE ANNUAL VALUE AND IT IS THAT VALUE WHICH WILL HA VE TO FORM THE BASIS FOR DETERMINING THE INCOME FROM HOUS E PROPERTY AND FOR ALLOWING DEDUCTION FROM INCOME FRO M HOUSE PROPERTY TO THE EXTENT IS PERMITTED UNDER THE OTHER PROVISIONS OF THE ACT. IN THE PRESENT CASE, THE ASSESSEE MADE TWO AGREEMENTS ONE FOR LET OUT OF THE PROPERTY AND ANOTHER FOR PROVIDING AMENITIES AND TH ERE IS A DOUBT IN THE MIND OF THE ASSESSING OFFICER REGARDING THE CORRECTNESS OF THE INCOME DECLARED BY THE ASSESSEE AS INCOME FROM HOUSE PROPERTY AND INCOME FROM BUSINESS. HE HAS TREATED THE ENTIRE INCOME I.E. AS INCOME FROM HOUSE PROPERTY. ADMITTEDLY, THE AUTHORITIES HAVE THE FREEDOM TO GO BEYOND THE DOCUMENTS TO FIND OUT THE REAL INTENTION OF THE PARTIES. IN THIS CASE, THOUGH THERE IS TWO AGREEMENTS THE REAL INTENTION OF THE PARTIES TO A DOCUMENT IS DIFFERENT WHAT APPEARS FROM IT EX FACIE . SINCE THERE IS A DOUBT, THEN THE ASSESSING OFFICER IS JUSTIFIED IN GOING BEYOND THE DOCUMENTS TO FIND OUT REAL INTENTION OF THE PARTIES BY IGNORING THE APPARENT H AS TO BE AND HAS ALWAYS BEEN CONCEDED. IN THIS CIRCUMSTANCE, THE ASSESSING OFFICER HAS TO REMOVE T HE FAADE TO EXPOSE THE REAL INTENTION OF THE PARTIES CLEVERLY CLOAKED AND THE ACTUAL AGREEMENT CANNOT BE 5 ITA NO. 646/HYD/2014 SMT. G. PRAMEELA DEVI GIVEN EFFECT. THE ONLY BONA FIDE DOCUMENT TO BE AC TED UPON NOT OTHERWISE. THERE IS A SERIOUS DOUBT AND A LSO IT IS SHOCKING THE CONSCIOUS OF THE BENCH, WHETHER THE ASSESSEE IS GETTING HIRE CHARGES EQUAL TO THE RENTA L AMOUNT FOR PROVIDING AMENITIES. IT CANNOT BE REAL ONE AND ASSESSING OFFICER REQUIRED TO SEE THE ACTUAL RE NTAL VALUE OF THE PROPERTY IN THAT PLACE AND BRING THA T AMOUNT INTO TAX UNDER THE HEAD INCOME FROM HOUSE PROPERTY. AS SUCH, IN THE PRESENT CASE, THE ASSES SING OFFICER CAME TO THE CORRECT CONCLUSION THAT REAL RE NTAL VALUE WAS BIFURCATED INTO TWO SEPARATE INCOME VIZ., ONE IS RENTAL INCOME OF HOUSE PROPERTY AND ANOTHER IS H IRE CHARGES OF THE EQUIPMENT. FURTHER, IN THE CASE OF LETTING OF THE MACHINERY, PLANT OR FURNITURE, SEC.5 6(2) (III) OF THE ACT IS APPLICABLE, BUT ONLY LETTING OF BUILDING WITH CERTAIN AMENITIES, THIS PROVISION IS NOT APPLI CABLE AND IN THAT EVENT, THE INCOME FROM LETTING OUT WAS CHARGEABLE UNDER THE HEAD INCOME FROM HOUSE PROPERTY. THE HIRE CHARGES SAID TO HAVE BEEN COLL ECTED FOR THE PURPOSE OF PROVIDING AMENITIES AND THE RENT FOR THE BUILDING NOT COME UNDER THE PURVIEW OF SEC.56(2)(III) OF THE ACT. THE WORD PLANT CANNO T BE LIBERALLY CONSTRUED SO AS TO INCLUDE ALL ITEMS NOTE D IN ANNEXURE I APPEARING ELSEWHERE IN THE ORDER, WITHIN THE AMBIT OF THE WORD PLANT. IT IS NOT POSSIBLE TO GIVE SUCH A WIDE CONSTRUCTION AS SUGGESTED BY THE LEARNE D COUNSEL FOR THE ASESSEE. IN THE CASE OF SULTAN BRO THERS PVT.LTD. V. CIT 51 ITR 353 (SC) WHAT WAS LET OUT TO THE TENANT WAS A BUILDING FITTED UP WITH THE FURNITURE AND FIXTURES, FOR BEING RUN AS A HOTEL. THEREFORE, THE SUPREME COURT HELD THAT SINCE THE BUILDING WAS LET ALONG WITH THE FURNITURE AND FIXTURES, THE PROVISIO NS OF SEC.56(2) (III) WOULD BE APPLICABLE AND THE INCOME FROM BUILDING SHOULD BE ASSESSED UNDER THE HEAD OTHER SOURCES. BUT ACCORDING TO THE FACT ARISING IN THE PRESENT CASE, PLANT AND MACHINERY OR FURNITURE WAS NOT HIRED BY THE ASSESSEE ALONG WITH THE BUILDING. THEREFORE, THE DECISION OF THE APEX COURT IN SULTAN BROS CASE SUPRA, WILL NOT BE APPLICABLE TO THE FACTS OF THE PRESENT CASE. THUS, ON A PLAIN READING OF SEC.56(2 ) (III) OF THE ACT, IN THE LIGHT OF THE FACTS OF THE CASE, WE HOLD THAT CONCLUSION REACHED BY THE CIT(A) IS NOT CORRECT. FURTHER, NO PRECISE TEST CAN BE LAID OUT T O ASCERTAIN WHETHER INCOME REFERRED TO BY WHATEVER NOMENCLATURE, LEASE AMOUNT, RENT OR LICENCE FEE RECEIVED BY AN ASSESSEE FROM LEASING OR LETTING OU T OF ASSETS WOULD FALL UNDER THE HEAD PROFIT AND GAINS OF BUSINESS OR PROFESSION AND IT HAS TO BE DETERMINED FROM THE POINT OF VIEW OF A BUSINESSMAN IN THAT BUSINESS DEPENDING UPON THE FACT AND CIRCUMSTANCES OF 6 ITA NO. 646/HYD/2014 SMT. G. PRAMEELA DEVI EACH CASE AND THERE IS NO READYMADE JACKET FORMULA. THE RATIO LAID DOWN BY ONE CASE CANNOT BE APPLIED O R FIT TO THE FACTS OF THE PRESENT CASE. WE HAVE TO SEE T HE INTENTION OF THE ASSESSEE WHETHER THE LETTING WAS T HE DOING OF A BUSINESS OR TO EXPLOITATION OF HIS PROPE RTY BY AN OWNER. THE ASSESSEE WHEN EXPLOITED THE PROPERTY TO DERIVE RENTAL INCOME IT HAS TO BE HELD THAT THE INC OME REALIZED BY HIM BY WAY OF RENTAL INCOME FROM A BUIL DING IF THE PROPERTY WITH OTHER ASSET ATTACHED TO THE BU ILDING TO BE ASSESSED AS INCOME FROM HOUSE PROPERTY ONLY . THE ONLY EXCEPTIONS ARE CASES WHERE THE LETTING OF THE BUILDING IS INSEPARABLE FROM LETTING OF THE MACHINE RY, PLANT AND FURNITURE. IN SUCH CASES, IT HAS TO BE H ELD THAT THE RENTAL WOULD NOT HAVE BEEN REALIZED BUT FO R THE LETTING OUT OF THE MACHINERY, PLANT OR FURNITURE AL ONG WITH SUCH BUILDING AND THEREFORE, RENTAL RECEIVED F OR THE BUILDING IS TO BE ASSESSED UNDER THE HEAD INCO ME FROM OTHER SOURCES. IN THE PRESENT CASE, ON THE FA CTS OF THE CASE, IT IS CLEAR THAT THE ASSESSEE AS THE O WNER OF THE BUILDING WAS ONLY EXPLOITING THE PROPERTY AS OWNER BY LETTING OUT THE SAME AND REALIZING INCOME BY WAY OF RENT. SUCH RENTAL INCOME WAS LIABLE TO BE ASSESSED UNDER THE HEAD INCOME FROM HOUSE PROPERTY . THE VARIOUS ASSETS LET OUT TO THE TENANTS ARE INCID ENTAL TO LETTING OUT THE BUILDING BEING INTEGRAL PART OF THE LETTING. ACCORDINGLY, WE REVERSE THE ORDER OF TH E CIT(A) AND RESTORE THAT OF THE ASSESSING OFFICER. THIS GROUND OF THE REVENUE IS ALLOWED. 10. SINCE THE ISSUE UNDER CONSIDERATION IS SIMILAR TO THAT OF THE CASE DECIDED BY THE TRIBUNAL IN ASSESSE ES OWN CASE FOR AY 2005-06 AND 2006-07 (SUPRA), RESPECTFULLY FOLLOWING THE SAME, WE UPHOLD THE ORDE R OF THE CIT(A) IN CONFIRMING THE ACTION OF THE AO IN TR EATING THE INCOME IN QUESTION AS INCOME FROM HOUSE PROPER TY AND DISMISS THE GROUNDS RAISED BY THE ASSESSEE IN T HIS REGARD. CIT(A) HAVING FOLLOWED THE DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE, WE DO NOT FIND ANY INFIRMITY IN THE SAME. ACC ORDINGLY, WE UPHOLD THE ORDER OF LD. CIT(A) BY DISMISSING THE GROUND RA ISED. 7 ITA NO. 646/HYD/2014 SMT. G. PRAMEELA DEVI 7. IN THE RESULT, APPEAL OF THE ASSESSEE IS DISMISS ED. PRONOUNCED IN THE OPEN COURT ON 28/11/2014. SD/- SD/- (B. RAMAKOTAIAH) (SAKTIJIT DEY) ACCOUNTANT MEMBER JU DICIAL MEMBER HYDERABAD, DATED: 28 TH NOVEMBER, 2014 KV COPY TO:- 1) SMT. G. PRAMEELA DEVI, C/O K. VASANTKUMAR & A.V . RAGHURAM, ADVOCATES, 610, 6 TH FLOOR, BABHUKHAN ESTATE, BASHEERBAG, HYD-1. 2) ITO, WARD 6(3), HYDERABAD. 3) CIT(A)-IV, HYDERABAD 4) CIT-III, HYDERABAD 5)THE DEPARTMENTAL REPRESENTATIVE, I.T.A.T., HYDER ABAD.