SCAFFOLD PROPERTIES LTD, MUMBAI V. DCIT 5(3), MUMBAI

ITA 6749/MUM/2013

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 6797 (ITAT-MUMBAI)
• Duration Of Justice: 5 year(s) 5 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-04-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Assessment Year: 2010-2011
• Appeal Filed On: 22-11-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: CHAUDHARY ARUN KUMAR SINGH
• Keywords: Business income
• Section: 143(3); 234B; 28

Judgement Text

1 IN THE INCOME-TAX APPELLATE TRIBUNAL E BENCH MUMB AI BEFORE SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER AND SHRI PAWAN SINGH, JUDICIAL MEMBER ITA NO. 6749/MUM/2013 (ASSESSMENT YEAR 2010-11 ) SCAFFOLD PROPERTIES PVT. LTD. 373, KONARK HOUSE, VEER SAVARKAR ROAD, GROUND FLOOR, NEAR SIDDHI VINAYAK TEMPLE, PRABHADEVI, DADAR (WEST), MUMBAI-400028 . PAN: AAGCS1847J VS. DCIT-5(3) AAYAKAR BHAVAN, M.K. ROAD, MUMBAI-400020. APPELLANT RESPONDE NT APPELLANT BY : SHRI NITESH JOSHI (AR) RESPONDENT BY : SHRI CHAUDHARY ARUN KUMAR SINGH (DR) DATE OF HEARING : 11.02.2019 DATE OF PRONOUNCEMEN T : 05.04.2019 ORDER UNDER SECTION 254(1)OF INCOME TAX ACT PER PAWAN SINGH, JUDICIAL MEMBER; 1. THIS APPEAL BY ASSESSEE IS DIRECTED AGAINST THE ORD ER OF LD. COMMISSIONER OF INCOME-TAX (APPEALS)-9, HEREINAFTER REFERRED AS LD CIT (A), MUMBAI DATED 05.09.2013 FOR ASSESSMENT YEAR 2010-11. THE A SSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: 1. A) THE APPELLANT SUBMITS THAT THE ORDER PASSED B Y THE LEARNED ASSISTANT COMMISSIONER OF INCOME-TAX, (HEREINAFTER REFERRED T O AS 'THE ASSESSING OFFICER') ERRED IN TREATING OUTGOING CHARGES AMOUNT ING TO RS. 37,34,450/- AS INCOME UNDER THE HEAD 'INCOME FROM HOUSE PROPERTY' AS AGAINST OFFERED UNDER HEAD 'PROFITS AND GAINS FROM BUSINESS & PROFE SSION' AS PER THE RETURN OF INCOME FILED UNDER SECTION 139(1) OF THE ACT BY THE APPELLANT. 2. WITHOUT PREJUDICE TO WHAT HAS BEEN STATED ABOVE, THE APPELLANT SUBMITS THAT IF ITS CONTENTION THAT OUTGOING CHARGES BE TAXED UN DER HEAD 'PROFIT AND GAINS OF ITA NO. 6749 MUM 2013 -SCAFFOLD PROPERTIES PVT. LTD. 2 BUSINESS & PROFESSION' IS NOT ACCEPTED, THE NET OUT GOING CHARGES RECEIVED (I.E. OUTGOING CHARGES RECEIVED LESS EXPENSES INCURRED IN RESPECT OF THE SAME) BY THE APPELLANT OUGHT TO BE CONSIDERED WHILE CALCULAT ING ANNUAL RATEABLE VALUE UNDER SECTION 23 OF THE INCOME TAX ACT. 3 THE ASSESSING OFFICER ERRED IN LEVYING INTEREST U NDER SECTION 234B OF THE ACT AMOUNTING TO RS. 5,15,808/-. 4 THE ASSESSING OFFICER ERRED IN LEVYING INTEREST U NDER SECTION 234C OF THE ACT AMOUNTING TO RS. 41,955/- RESPECTIVELY. 5 THE APPELLANT SUBMITS THAT THE ASSESSING OFFICER BE DIRECTED:- A) TO TREAT OUTGOING CHARGES AMOUNTING TO RS. 37,34 ,450/- RECEIVED BY THE APPELLANT AS INCOME UNDER THE HEAD 'PROFITS & GAINS OF BUSINESS OR PROFESSION' B) WITHOUT PREJUDICE TO WHAT IS STATED ABOVE, IF IT S CONTENTION AS STATED IN 'A' ABOVE IS NOT ACCEPTED, NET OF OUTGOING CHARGES RECEIVED BY THE APPELLANT SHOULD BE DEDUCTED WHILE CALCULATING ANNUAL RATEABL E VALUE UNDER SECTION 23 OF THE ACT; C) TO DELETE LEVY OF INTEREST UNDER SECTION 234B OF THE ACT AMOUNTING TO RS. 5,15,808/-. D) TO DELETE LEVY OF INTEREST UNDER SECTION 234C OF THE ACT AMOUNTING TO RS. 41,955/-. 6. EACH OF THE ABOVE GROUNDS OF APPEAL ARE INDEPEND ENT AND WITHOUT PREJUDICE TO EACH OTHER. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A COMPANY, FILED HIS RETURN OF INCOME FOR ASSESSMENT YEAR 2010-11 ON 28.09.2010 DECLARING TOTAL INCOME OF RS. 5,33,63,938/-. THE ASSESSMENT WAS COM PLETED UNDER SECTION 143(3) ON 30.11.2012. THE ASSESSING OFFICER WHILE PASSING THE ASSESSMENT ORDER TREATED THE AMOUNT OF RS. 37,34,45 0/- RECEIVED ON ACCOUNT OF OUTGOING CHARGES AS INCOME FROM HOUSE P ROPERTY IN PLACE OF INCOME FROM BUSINESS AND PROFESSION AS CLAIMED BY ASSESSEE. ON APPEAL BEFORE THE LD. CIT(A), THE ACTION OF ASSESSI NG OFFICER WAS ITA NO. 6749 MUM 2013 -SCAFFOLD PROPERTIES PVT. LTD. 3 CONFIRMED. THEREFORE, FURTHER AGGRIEVED BY THE ORDE R OF LD. CIT(A), THE ASSESSEE HAS FILED THE PRESENT APPEAL BEFORE US. 3. WE HAVE HEARD THE SUBMISSIONS OF THE LD. AUTHORIZED REPRESENTATIVE (AR) OF THE ASSESSEE AND LD. DEPARTMENTAL REPRESENT ATIVE (DR) FOR THE REVENUE AND PERUSED THE MATERIAL AVAILABLE ON RECOR D. THE LD. AR OF THE ASSESSEE SUBMITS THAT THE ASSESSEE RECEIVED A SUM O F RS. 37,34,450/- AS OUTGOING CHARGES. THE ASSESSEE HAS SHOWN THE ADDITI ON UNDER THE HEAD INCOME FROM BUSINESS AND PROFESSION WHILE FILING RETURN OF INCOME. THE ASSESSING OFFICER TREATED THE SAID CHARGES UNDE R THE HEAD INCOME FROM HOUSE PROPERTY INSTEAD OF PROFIT & GAIN FROM BUSINESS & PROFESSION HOLDING THAT OUTGOING CHARGES ARE NOTHI NG BUT PAYMENTS FOR PROVIDING SERVICES CALLED MAINTENANCE CHARGES, ELEC TRICITY CHARGES, SECURITY CHARGES AND WATER CHARGES ETC. WHICH ARE P ART OF RENTAL INCOME, THEREFORE, THE SAME IS REQUIRED TO BE CHARGED UNDER THE HEAD INCOME FROM HOUSE PROPERTY. THE LD. AR OF THE ASSESSEE SU BMITS THAT THE SAID OUTGOING CHARGES ARE IN RESPECT OF MAINTENANCE OF C OMMON AREA, GARDEN, BUILDING PREMISES, 24 HOUR SECURITY, PARKING, ATTEN DANT, INFRASTRUCTURE MAINTENANCE, WATER AND COMMON AREA, POWER, ANNUAL M AINTENANCE IN GENERATING POWER BACK UP. THE LD. AR OF THE ASSESSE E FURTHER SUBMITS THAT LEAVE AND LICENSE AGREEMENT BETWEEN ASSESSEE A ND ITS TENANTS/LESSEE/LICENSEE ARE LIABLE TO PAY MAINTENAN CE OF AGENCY/ASSOCIATION OF ACTUAL/PROPORTIONATE SHARE OF COMMON COST OF ITA NO. 6749 MUM 2013 -SCAFFOLD PROPERTIES PVT. LTD. 4 MAINTENANCE OF SAID BUILDING ON PRO-RATA BASIS ON P ER SQ. FT AREA, THEREFORE, THE OUTGOING CHARGES ARE DISTINCT AND SE PARATE FROM RENT RECEIVED AND SAME CANNOT BE A PART OF RENTAL INCOME . THE LD. AR OF THE ASSESSEE SUBMITS THAT IN PAST, THE SAID OUTGOING CH ARGES HAS BEEN ACCEPTED AS INCOME FROM BUSINESS AND PROFESSION I N ASSESSMENT YEAR 2005-06, 2006-07, 2007-08, 2009-10, 2011-12, 2012-1 3, 2013-14 AND 2014-15. THE LD. AR OF THE ASSESSEE PLACED THE COPY OF ASSESSMENT ORDER ALONG WITH PROFIT & LOSS ACCOUNT FOR EACH OF THE AS SESSMENT YEAR, WHICH CONSISTS OF PRIOR OR SUBSEQUENT TO THE ASSESSMENT Y EAR UNDER CONSIDERATION. 4. THE LD. AR OF THE ASSESSEE FURTHER SUBMITS THAT COO RDINATE BENCH OF MUMBAI AND JAIPUR TRIBUNAL IN KAVITA MARKETING PVT. LTD. VS. ITO [2016] (159 ITD 547)/70 TAXMANN.COM 391 (MUMBAI TRI B) AND VIKRAM GOLECHA VS. CIT 123 ITD 438, ON SIMILAR FACTS HELD THAT WHEN THE ASSESSEE HAD LET OUT THE PROPERTY, ON WHICH HE WAS RECEIVING RENT AND FAICILITY SERVICES CHARGES FOR PROVIDING SPECIFIC S ERVICES LIKE HOUSEKEEPING SECURITY ETC., THE SAME IS LIABLE TO B E ASSESSED AS BUSINESS INCOME. 5. THE LD. AR OF THE ASSESSEE SUBMITS THAT BY WAY OF A LTERNATIVE GROUND NO.2 THE ASSESSEE HAS RAISED CONTENTIONS THAT IF TH E OUTGOING CHARGES ARE NOT ALLOWED AS BUSINESS INCOME, THE NET OUTGOING CH ARGES BE CONSIDERED WHILE CALCULATING ANNUAL RETABLE VALUE UNDER SECTIO N 23 OF THE ACT IN ITA NO. 6749 MUM 2013 -SCAFFOLD PROPERTIES PVT. LTD. 5 SUPPORT OF HIS SUBMISSIONS THE LD AR FOR THE ASSESS EE FURTHER RELIED UPON THE DECISION OF (1) SHARMILA TAGORE VS. JCIT [2005] 93 TTJ 483, ITAT, MUMBAI] (2) REALTY FINANCE & LEASING (P.) LTD. VS. ITO (3) SHRI TRILOCHAN SINGH SAHNEY VS. ACIT [ITA NO. 5304/MUM/2 008] (4) ACIT VS. SUNIL KUMAR AGARWAL [ 8 ITR (TRIB) 304, ITAT, L UCKNOW] (5) DILNAVAZ MANEK DAVER VS. ITO [ITA NO. 6072/MUM/2009 ] (6) MR. PRIYA MURALIDHARAN VS. ACIT [ITA NO. 7345/MUM/2012] (7) M/S JETHMAL BARTHIA VS. ACIT [ITA NO. 2361/KOL/2013]. 6. FOR GROUND NO.3 THE LD. AR SUBMITS THAT THIS GROUND OF APPEAL IS CONSEQUENTIAL AND NEED NO SPECIFIC ADJUDICATION. 7. FOR GROUND NO. 4 THE LD. AR SUBMITS THAT THE INTERE ST UNDER SECTION 234C IS TO BE CHARGE ON RETURN INCOME, HOWEVER, THE ASSE SSING OFFICER COMPUTED INTEREST ON ASSESSED INCOME. THEREFORE, TH E ASSESSING OFFICER BE DIRECTED ACCORDINGLY. 8. ON THE OTHER HAND THE LD. DR FOR THE REVENUE SUPPOR TED THE ORDERS OF THE LOWER AUTHORITIES. THE LD. DR FURTHER SUBMITS THAT PRINCIPLES OF RES- JUDICATA ARE NOT APPLICABLE ON THE INCOME TAX PROCE EDINGS EACH AND EVERY YEAR FACTS IS TO BE CONSIDERED INDEPENDENTLY. IT IS NOT ASCERTAINABLE IF THE ASSESSEE HAS FILED THE NECESSARY DOCUMENTS OR NOT B EFORE THE ASSESSING OFFICER THEREFORE, THE CASE MAY BE RESTORED TO THE FILE OF ASSESSING OFFICER FOR FRESH ADJUDICATION OF THE MAIN ISSUE. FOR GROUN D NO. 4 THE LD. DR ITA NO. 6749 MUM 2013 -SCAFFOLD PROPERTIES PVT. LTD. 6 SUBMITS THAT THE ASSESSING OFFICER MAY BE DIRECTED TO VERIFY THE FACTS AND RE-COMPUTE THE INTEREST UNDER SECTION 234C. 9. WE HAVE CONSIDERED THE SUBMISSIONS OF THE LD. AR FO R THE ASSESSEE AND LD DR FOR REVENUE AND PERUSED THE RECORD. THE FACTS LE ADING TO RAISING THE GROUNDS NO.1 OF THE APPEAL ARE NOT MUCH IN DISPUTE. THE ASSESSEE HAS RECEIVED THE OUTGOING CHARGED APART FROM THE RENT. THESE FACTS ARE ALSO INDICATED IN THE LEASE AGREEMENTS PLACED ON RECORD BY THE ASSESSEE. THE ASSESSEE OFFERED THE SAID CHARGES UNDER THE HEAD B USINESS INCOME, HOWEVER, THE ASSESSING OFFICER TREATED THE SAID OUT GOING CHARGES AS A PART OF INCOME FROM HOUSE PROPERTY. WE HAVE SEEN THAT THE COORDINATE BENCH OF MUMBAI TRIBUNAL IN KAVITA MARKETING (P) LT D VS ITO (SUPRA) ON SIMILAR FACTS PASSED THE FOLLOWING ORDER: 6. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIONS . QUITE CLEARLY, THERE CAN BE NO DISPUTE TO THE PROPOSITION THAT INC OME DERIVED FROM MERE LETTING OUT OF PROPERTY IS LIABLE TO BE ASSESSED ON LY UNDER THE HEAD 'INCOME FROM HOUSE PROPERTY'. THUS, THERE IS NO DISPUTE BET WEEN ASSESSEE AND THE REVENUE WITH REGARD TO THE RENTAL RECEIPTS OF RS. 1 3,80,000/-, WHICH HAVE BEEN RECEIVED FOR LETTING OUT THE PROPERTY. SO HOWE VER, THE POSITION CANVASSED BY THE ASSESSEE IS THAT APART FROM LETTIN G OUT OF PROPERTY, IT IS ALSO RENDERING CERTAIN SERVICES TO THE TENANT BY PR OVIDING SPECIFIC SERVICES ON ACCOUNT OF HOUSE-KEEPING, SECURITY, ETC. ASSESSE E HAS ALSO POINTED OUT THAT THE 'FACILITY SERVICE CHARGES' EARNED BY IT AL SO REQUIRE OUTGOINGS ALSO INASMUCH AS IT HAD HIRED SERVICES PROVIDERS FOR THE SAME. QUITE CLEARLY, THE PROVIDING OF SUCH SERVICES DO NOT SHOW THAT THE INC OME BY WAY OF 'FACILITY SERVICE CHARGES' CAN BE SAID TO BE DERIVED FROM MER E OWNERSHIP OF THE PROPERTY. FOR THIS REASON, THE STAND OF THE ASSESSE E IS THAT INCOME FROM SUCH SERVICES IS LIABLE TO BE TREATED AS 'BUSINESS INCOME'. IN THIS CONNECTION, IT WOULD BE RELEVANT TO REFER TO THE JUDGMENT OF TH E HON'BLE GUJARAT HIGH COURT IN THE CASE OF SARABHAI (P.) LTD. ( SUPRA ), WHICH LAYS DOWN THAT IF THE OWNER OF A PROPERTY CARRIES ON UPON THE PROPERTY SO ME ACTIVITIES WHICH RESULTS IN PROFITS AND GAINS ARISING, NOT FROM THE OWNERSHIP BUT FROM USE ITA NO. 6749 MUM 2013 -SCAFFOLD PROPERTIES PVT. LTD. 7 THEREOF, SUCH PROFIT AND GAINS WOULD BE CHARGEABLE TO TAX AS 'BUSINESS INCOME' AND NOT INCOME UNDER THE HEAD INCOME FROM H OUSE PROPERTY'. IN FACT, IN THE CASE BEFORE HON'BLE GUJARAT HIGH COURT , ASSESSEE WAS OWNER OF THE PROPERTY, WHICH WAS LET OUT TO THE TENANTS. APA RT FROM LETTING OUT, ASSESSEE WAS ALSO RENDERING CERTAIN SERVICES BY PRO VIDING VARIOUS AMENITIES FOR WHICH AMOUNT WAS BEING SEPARATELY EAR NED. THE HON'BLE HIGH COURT HELD THAT AMOUNT RECEIVED FROM THE TENAN TS AS 'RENT' FOR LETTING OF THE PROPERTY WAS ASSESSABLE UNDER SECTION 22 OF THE ACT AS 'INCOME FROM HOUSE PROPERTY' AND THE OTHER RECEIPTS IN RESPECT O F THE SERVICES RENDERED TO THE TENANTS WAS LIABLE TO BE ASSESSED UNDER SECTION 28 OF THE ACT AS 'BUSINESS PROFITS'. IN OUR VIEW, THE RATIO LAID DOW N BY THE HON'BLE GUJARAT HIGH COURT IN THE CASE OF SARABHAI (P.) LTD. ( SUPRA ) COVERS THE INSTANT SITUATION. UNDISPUTEDLY, THE 'FACILITY SERVICE CHAR GES' ARE BEING RECEIVED BY THE ASSESSEE IN RETURN OF PROVIDING SPECIFIC SERVIC ES LIKE HOUSE-KEEPING, SECURITY, ETC. TO THE SIMILAR EFFECT IS ALSO THE JU DGMENT OF THE HON'BLE MADRAS HIGH COURT IN THE CASE OF A.K. COMPLEX ( SUPRA ), WHICH WAS RELIED UPON BY THE ASSESSEE BEFORE US. THE ARGUMENT OF THE REVENUE THAT SERVICES RENDERED BY THE ASSESSEE ARE NOT OF SPECIAL NATURE, AND THEY ARE OF ROUTINE NATURE EXPECTED TO BE PROVIDED BY THE LANDLORD, IS OF NO CONSEQUENCE TO DECIDE THE CONTROVERSY IN QUESTION. THIS IS FOR THE REASON THAT FACTUALLY IT HAS NOT BEEN DISPUTED BY THE REVENUE THAT SERVICES BY WAY OF HOUSE- KEEPING, SECURITY, ETC. HAVE BEEN RENDERED BY THE A SSESSEE. MOREOVER, IT HAS TO BE DECIPHERED ON THE BASIS OF TERMS AND COND ITIONS IN EACH CASE AS TO THE NATURE OF THE SERVICES THAT MAY BE PROVIDED BY THE OWNER OF PROPERTY TO ITS TENANTS TO DECIDE AS TO WHETHER THEY ARE DISTIN CT FROM AN ACTIVITY WHICH IS MERELY BECAUSE OF OWNERSHIP OF THE PROPERTY. IN THE PRESENT CASE, IT IS QUITE EVIDENT THAT THE SAID SERVICES ARE DISTINCT F ROM LETTING OUT OF THE PROPERTY AND, THEREFORE, ASSESSEE IS JUSTIFIED IN A SSERTING THAT THE SAME BE TAXED AS 'BUSINESS INCOME'. THUS, ON THIS ASPECT, W E SET-ASIDE THE ORDER OF THE CIT (A) AND DIRECT THE ASSESSING OFFICER TO REC OMPUTE THE INCOME IN VIEW OF THE AFORESAID DIRECTIONS. IN THE RESULT, ON THIS GROUND ASSESSEE SUCCEEDS. 10. CONSIDERING THE DECISION OF THE COORDINATE BENCH O N THE SIMILAR ISSUE THAT WHERE THE ASSESSEE HAD GIVEN ON RENT A PROPERT Y, ON WHICH IT WAS RECEIVING RENT AND FACILITY SERVICE CHARGES, SINCE FACILITY SERVICE CHARGES WERE BEING RECEIVED BY ASSESSEE IN RETURN OF PROVID ING SPECIFIC SERVICES LIKE HOUSEKEEPING, SECURITY, ETC., SAME WAS LIABLE TO BE ASSESSED AS BUSINESS INCOME. SIMILAR VIEW WAS TAKEN BY JAIPUR T RIBUNAL IN VIKRAM ITA NO. 6749 MUM 2013 -SCAFFOLD PROPERTIES PVT. LTD. 8 GOLECHA (SUPRA). EVEN IN AY 2005-06, 2006-07, 2007- 08, 2009-10, 2011-12 THE REVENUE HAS ALLOWED THE SAID OUTGOING C HARGES AS BUSINESS INCOME OF THE ASSESSEE, THEREFORE, THE ASSESSING OF FICER SHOULD HAVE ALLOWED THE OUTGOING CHARGES AS BUSINESS INCOME ON THE CONCEPT OF CONSISTENCY. THUS, IN VIEW OF ABOVE DISCUSSIONS, W E RESPECTFULLY FOLLOWING THE DECISIONS OF COORDINATE BENCH DIRECT THE ASSESSING OFFICER TO TREAT THE OUTGOING CHARGES AS BUSINESS INCOME. I N THE RESULT THE GROUND NO. 1 OF THE APPEAL IS ALLOWED. GROUND NO.2 IS RAIS ED IN ALTERNATIVE TO THE GROUND NO.1, WHICH WE HAVE ALREADY ALLOWED, THEREFO RE, THE ADJUDICATION OF GROUND NO.2 HAS BECOME ACADEMIC. 11. GROUND NO. 3 IS CONSEQUENTIAL AND THUS NEEDS NO ADJ UDICATION. 12. GROUND NO. 4 RELATES TO CHARGING INTEREST UNDER SEC TION 234C. THE CONTENTION OF THE LD. AR FOR THE ASSESSEE IS THAT T HE ASSESSING OFFICER CHARGED THE INTEREST UNDER SECTION 234C ON ASSESSED INCOME, HOWEVER, IT IS TO BE CHARGEABLE ON RETURN INCOME. CONSIDERING T HE SUBMISSIONS OF THE LD. REPRESENTATIVES OF THE PARTIES THE ASSESSING OF FICER IS DIRECTED TO VERIFY THE FACTS AND PASS ORDER IN ACCORDANCE WITH LAW. IN THE RESULT THIS GROUND IF ALLOWED STATISTICALLY. 13. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 05/04/2019. SD/- SD/ - SHAMIM YAHYA PAWAN SINGH ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATE: 05.04.2019 ITA NO. 6749 MUM 2013 -SCAFFOLD PROPERTIES PVT. LTD. 9 SK COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE 2. RESPONDENT 3. THE CONCERNED CIT(A) 4. THE CONCERNED CIT 5. DR E BENCH, ITAT, MUMBAI 6. GUARD FILE BY ORDER, DY./ASST. REGISTRAR ITAT, MUMBAI