A.C.I.T.-10(1), MUMBAI V. INTERNATIONAL BIOTECH PARK LTD., MUMBAI

ITA 6829/MUM/2011

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 6578 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 6 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-05-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: I
• Next Hearing Date: 08-04-2014
• Assessment Year: 2008-2009
• Appeal Filed On: 10-10-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ASHOK SURI
• Keywords: Business income; Depreciation; Business expenditure; Onus to prove; Revenue expenditure; Capital expenditure

Judgement Text

, INCOME TAX APPELLATE TRIBUNAL,MUMBAI - I BENCH. .. , ! , BEFORE S/SH.I.P.BANSAL, JUDICIAL MEMBER & RAJENDRA,ACCOUNTANT MEMBER /. ITA NO.401/MUM/2011, ' ' ' ' # # # # / ASSESSMENT YEAR-2007-08 DCIT, 10(1) R.NO. 455, AAYAKAR BHAVAN, M.K.ROAD, MUMBAI-400020 VS. INTERNATIONAL BIO-TECH PARK LTD. METROPOLITAN BUILDING, 5 TH FLOOR, E- BLOCK, BANDRA-KURLA COMPLEX, BANDRA(E),MUMBAI-400051 PAN: AABCJ1236J ( $% / APPELLANT) ( &'$% / RESPONDENT) /. ITA NO.6829/MUM/2011, ' ' ' ' # # # # / ASSESSMENT YEAR-2008-09 ACIT, 10(1) R.NO. 455, AAYAKAR BHAVAN, M.K.ROAD, MUMBAI-400020 VS. INTERNATIONAL BIO-TECH PARK LTD. METROPOLITAN BUILDING, 5 TH FLOOR, E- BLOCK, BANDRA-KURLA COMPLEX, BANDRA(E), MUMBAI-400051 PAN: AABCI1236J ( $% / APPELLANT) ( &'$% / RESPONDENT) ( ) / REVENUE BY : SHRI ASHOK SURI '*+ '*+ '*+ '*+ ) ) ) ) / ASSESSEE BY : SHRI NIRAJ SHETH ' ' ' ' ( (( ( +, +, +, +, / DATE OF HEARING : 08-04-2014 -.# ( +, / DATE OF PRONOUNCEMENT : 07-05-2014 ' ' ' ' , 1961 ( (( ( 254 )1( +/+ +/+ +/+ +/+ 0 0 0 0 ORDER U/S.254(1)OF THE INCOME-TAX ACT,1961(ACT) PER RAJENDRA,AM ! ! ! ! ' ' ' ' : CHALLENGING THE ORDERS OF THE CIT(A)-21,MUMBAI,ASSE SSING OFFICER (AO) HAS FILED APPEALS FOR THE ABOVE REFERRED TWO ASSESSMENT YEARS.GROUNDS OF APPE AL FOR THE AY 2007-08 READ AS UNDER: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN DIRECTING THE ASSESSING OFFICER TO ALLOW VARIOUS BU SINESS EXPENSES WITHOUT APPRECIATING THAT THE BUSINESS OF THE ASSESSEE COMPANY HAD NOT COMMENCED DURING THE YEAR UNDER CONSIDERATION AND NO BUSINESS INCOME HAD BEEN OFFERED TO TAX BY THE ASSE SSEE COMPANY. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD. CIT(A) ERRED IN DIRECTING THE ASSESSING OFFICER TO CONSIDER THE INC OME FROM SUB LEASE OF LAND AS BUSINESS INCOME WITHOUT APPRECIATING THAT THE ASSESSEE ITSELF HAS O FFERED THE SUB LEASE INCOME AS INCOME FROM HOUSE PROPERTY FOR THE YEAR UNDER CONSIDERATION. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD. CIT(A) ERRED IN DIRECTING THE ASSESSING OFFICER TO ALLOW INTEREST E XPENDITURE UNDER THE HEAD INCOME FROM HOUSE PROPERTY WITHOUT APPRECIATING THAT AS PER THE PROV ISIONS OF SECTION 24(B), THE DEDUCTION IS ALLOWABLE ONLY IN RESPECT OF THE AMOUNT OF INTEREST PAYABLE ON BORROWED CAPITAL IF THE PROPERTY HAS BEEN ACQUIRED,CONSTRUCTED, REPAIRED, RENEWED OR REC ONSTRUCTED WITH SUCH CAPITAL. 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD. CIT(A) ERRED IN DIRECTING THE ASSESSING OFFICER TO ALLOW INTEREST E XPENDITURE WITHOUT APPRECIATING THAT THE ONUS TO PROVE THE CORRECTNESS OF ITS CLAIM WAS ON THE ASSES SEE ITSELF, WHICH THE ASSESSEE HAD FAILED TO DISCHARGE. 5. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD. CIT(A) ERRED IN DIRECTING THE ASSESSING OFFICER TO TAX THE MISCELLA NEOUS INCOME OF RS. 18,71,708/-, FOREIGN EXCHANGE GAINS OF RS. 19,491/- AND OTHER INCOME OF RS. 7,720/- UNDER THE HEAD BUSINESS 2 ITA NOS. 401 & 6829//MUM/2011 INTERNATIONAL BIO-TECH PARK LTD. INCOME WITHOUT APPRECIATING THAT THE SAID INCOME I S NOT DERIVED FROM THE BUSINESS ACTIVITY OF THE ASSESSEE COMPANY AND THERE WAS NO BUSINESS ACTIVITY AT ALL IN THE YEAR UNDER CONSIDERATION. (I) THE APPELLANT CRAVES LEAVE TO ADD, AMEND, VARY, OMIT OR SUBSTITUTE ANY OF THE AFORESAID GROUNDS OF APPEAL AT ANY TIME BEFORE OR AT THE TIME OF HEARING OF APPEAL. (II) THE APPELLANT PRAYS FOR APPROPRIATE RELIEF BAS ED ON THE SAID GROUNDS OF APPEAL AND THE FACTS AND CIRCUMSTANCES OF THE CASE. AO HAS FILED FOLLOWING GROUNDS OF APPEAL FOR AY 200 8-09: 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD.CIT(A) ERRED IN DELETING THE ADDITION ON ACCOUNT OF INCOME FROM THE SUB LEASE OF LAND AND IN COME UNDER THE HEAD MAINTENANCE AS INCOME FROM OTHER SOURCES AND NOT BUSINESS INCOME AND T REATING REVENUE EXPENDITURE DEBITED BY THE APPELLATE IN P&L A/C. AS CAPITAL EXPENDITURE WITHOU T APPRECIATING THE FACT THAT INCOME NOT DERIVED FROM BUSINESS ACTIVITY HAS TO BE TAXED UNDER THE HE AD INCOME FROM OTHER SOURCES. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD.CIT(A) ERRED IN DELETING THE ADDITION ON ACCOUNT OF DISALLOWANCE OF DEDUCTION OF INTEREST PA ID ON BORROWINGS UTILIZED FOR CONSTRUCTION OF HOUSE PROPERTY U/S.24 OF THE ACT OF RS.2,93,69,207/ -, WITHOUT APPRECIATING THE FACT THAT IT IS NOT POSSIBLE TO DEMARCATE THE INTEREST PAYMENT MADE FOR BUILDING GIVEN ON RENT. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD.CIT(A) ERRED IN DELETING THE TREATMENT OF MAINTENANCE INCOME OF RS. 1,15,95,613/- AS A INC OME FROM OTHER SOURCES WITHOUT APPRECIATING THE FACT THAT THE INCOME WHICH IS NOT DERIVED FROM BUSINESS ACTIVITY IS NOT BUSINESS INCOME.. THE APPELLANT PRAYS THAT THE ORDER OF CIT(A) ON THE ABOVE GROUND BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED. THE APPELLANT CRAVES LEAVE TO AMEND OR ALTER ANY GR OUNDS OR ADD A NEW GROUND WHICH MAY BE NECESSARY. 2. ASSESSEE-COMPANY IS A DEVELOPER OF BIO-TECH PARK AN D IS ENGAGED IN THE BUSINESS OF CONSTRUC - TION,LEASING AND SELLING OF COMMERCIAL PROPERTIES.D ETAILS OF DATES OF FILING OF RETURNS,INCOMES RETURNED,DATES OF ASSESSMENT,ASSESSED INCOMES,DATES OF ORDERS OF THE CIT(A)CAN BE SUMMARISED AS UNDER : AY. DTS.OF FILING OF RETURN RETURNED INCOME (RS.) DATES OF ASSESSMENT ASSESSED INCOME DT. OF ORDERS OF CIT(A) 2007-08 31.10.2007 (-) 2,24,31,585/- 30.12.2009 2,77,48,150/- 10.11.2010 2008-09 30.09.2008 (-) 94,78,385/- 15.11.201 0 6,48,52,410/- 15.07.2011 ITA NO. 401/MUM/2011 DURING THE YEAR ASSESSEE HAD SHOWN INCOME OF SUB-LE ASE OF LAND AT RS. 3.54 CRORES, RENTAL INCOME AT RS.63.45LACS,MAINTENANCE INCOME AT RS. 33.10 LAC S.AO FOUND THAT ASSESSEE-COMPANY HAD CLAIMED BUSINESS LOSS OF RS. 3.40 CRORES AND HAD CO MPUTED INCOME FROM HOUSE PROPERTY AT RS.1, 01,76,053/- AND HAD SET OFF THE BUSINESS LOSS AGAIN ST SUCH INCOME, THAT IT HAD CREDITED INCOMES IN THE RETURN UNDER THE HEAD RENTAL INCOME AND OTHER I NCOME ONLY, THAT NO BUSINESS INCOME WAS SHOWN BY IT. IN ORDER TO ASCERTAIN THE CORRECTNESS OF THE CLAIMS AND AS TO WHETHER ANY BUSINESS ACTIVITY HAD BEEN CARRIED OUT,AO ISSUED A NOTICE U/ S.142(1)OF THE ACT AND CALLED FOR VARIOUS DETAILS.AFTER CONSIDERING THE SUBMISSIONS OF THE AS SESSEE, AO HELD THAT ASSESSEES CLAIM AS BUSINESS LOSS WAS NOT ALLOWABLE IN ABSENCE OF ANY B USINESS ACTIVITY, THAT THE DEVELOPMENT OF VARIOUS PROJECTS WERE SHOWN IN THE WORK-IN-PROGRESS THAT WERE CLAIMED TO BE BUSINESS ACTIVITY AND AGAINST THE SAME LOSS HAD BEEN COMPUTED, THAT THE P ROJECT WAS STILL IN THE STAGE OF WIP, THAT THE COST RELATED TO IT WAS NOT ALLOWABLE BUSINESS EXPEN DITURE, THAT NONE OF THE PROJECTS WAS COMPLETE EXCEPT TWO BUILDINGS TRANSFERRED TO THE INVESTMENTS , THAT THE ACTIVITIES UNDERTAKEN BY THE ASSESSEE- COMPANY WAS LETTING OUT OF THE TWO BUILDINGS SHOWN AS INVESTMENTS. CONSIDERING THESE FACTS,THE AO DID NOT ALLOW ANY EXPENDITURE CLAIMED IN THE P&L ACCOUNT EXCEPT AUDITORS REMUNERATION. HE ASSESSED THE INCOME SHOWN BY THE ASSESSEE, UNDER TH E HEAD INCOME FROM HOUSE PROPERTY, BUT 3 ITA NOS. 401 & 6829//MUM/2011 INTERNATIONAL BIO-TECH PARK LTD. DID NOT ALLOW INTEREST EXPENDITURE AND OTHER DEDUCT ION AVAILABLE UNDER THE SAME HEAD. SIMILARLY THE CAR PARKING INCOME, MISCELLANEOUS INCOME AND EN TRANCE INCOME SHOWN BY THE ASSESSEE IN ITS RETURN OF INCOME WAS ASSESSED BY HIM UNDER THE HEAD INCOME FROM OTHER SOURCES. 3. ASSESEE PREFERRED AN APPEAL BEFORE THE FIRST APPELL ATE AUTHORITY (FAA). AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE AND THE ASSESSMENT ORDE R,HE HELD THAT THE FACTS OF THE YEAR UNDER APPEAL WERE IDENTICAL TO THE FACTS OF THE IMMEDIATE LY PRECEDING AYS(AY-2006-07), THAT IN THE ORDER FOR THE AY 2006-07,HE HAD HELD THAT ASSESSEE S BUSINESS WAS ALREADY SET UP AND HAD COMME -NCED,THAT THE SUB-LEASE INCOME OF THE ASSESSEE WAS TO BE ASSESSEE UNDER THE HEAD BUSINESS INCOME,THAT INTEREST INCOME AND MISCELLANEOUS INCOM E OF THE ASSESSEE WERE TO BE ASSESSED AS BUSINESS INCOME.HE DIRECTED THE AO TO ALLOW VARIOUS EXPENSES CLAIMED IN P&L ACCOUNT AS BUSINESS EXPENSES.FOLLOWING HIS ORDER FOR THE EARLI ER AY.,HE FURTHER DIRECTED THE AO TO CONSIDER THE INCOME OF THE SUB-LEASE OF LAND, MAINTENANCE IN COME AND OTHER INCOME AS BUSINESS INCOME AS CLAIMED BY THE ASSESSEE IN ITS P&L ACCOUNT. 4. BEFORE US,DEPARTMENTAL REPRESENTATIVE(DR)SUPPORTED THE ORDER OF THE AO. AUTHORISED REPRESE -NTATIVE (AR) SUBMITTED THAT THE BUSINESS OF THE AS SESSEE HAD ALREADY COMMENCED IN EARLIER AY.S., THAT ASSESSEE WAS IN BUSINESS OF DEVELOPING I.T.PAR K,THAT IT WAS GRANTED A PLOT OF LAND BY GOVERN - MENT AGENCY,THAT IT HAD CONSTRUCTED OFFICES IN THE SAID LAND,THAT THE RENT RECEIVED BY IT WAS TO BE ASSESSED AS BUSINESS INCOME.ALTERNATIVELY,IT WAS SU BMITTED THAT IF INCOME WAS TO BE ASSESSED UNDER THE HEAD INCOME FROM HOUSE PROPERTY DEDUCTI ON ALLOWABLE AS PER SECTION 24 OF THE ACT HAD TO BE ALLOWED.HE FURTHER STATED THAT SIMILAR IS SUE HAD ARISEN FOR THE YEAR 2006-07 IN THE APPEAL FILED BY THE AO,THAT TRIBUNAL VIDE ITS ORDER DATED 11.09.2013 (ITA NO. 33322/MUM/2011-AY 2005-06 AND ITA NO. 224/MUM/2010-AY 2006-07 DATED 2 3.11.2012) HAD DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE, THAT IT WAS HELD BY THE TRI BUNAL IN BOTH THE YEARS THAT ASSESSEE HAD STARTED ITS BUSINESS IN AY-2004-05. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US. WE FIND THAT IN THE ORDER DATED 23.11.2012 FOR THE AY 2006-07 TRIBUNAL HAS HELD AS UNDER: WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND EXAMINED PAPER BOOK ON RECORD AND ALSO VARIOUS CASE LAW RELIED UPON BY THE PARTIES. AS SEEN FROM T HE ORDER OF CIT U/S. 263, THE MAIN THRUST OF THE ARGUMENT WAS ON THE BASIS OF FINDINGS GIVEN BY ASSE SSING OFFICER IN ASSESSMENT YEAR 2006-07 THAT ASSESSEE HAS NOT COMMENCED BUSINESS EVEN IN THAT YE AR. AS RIGHTLY SUBMITTED BY THE ASSESSEE, THIS FINDING OF AO IN AY 2006-07 WAS NOT UPHELD. ON THE BASIS OF MEMORANDUM AND ARTICLES OF ASSOCIATION OF THE ASSESSEE COMPANY, IT WAS ACCEPTE D THAT ONE OF THE ACTIVITIES OF THE ASSESSEE COMPANY WAS SUB-LEASING OF MOVABLE OR IMMOVABLE PRO PERTY ACCORDING TO THE OBJECT CLAUSE OF THE COMPANY. SUB-LEASING INCOME WAS SHOWN AS BUSINESS I NCOME OF THE ASSESSEE COMPANY. IT WAS FURTHER HELD BY CIT(A) THAT IT TOOK LAND ON LEASE D URING ASSESSMENT YEAR 2004-05 ON AN AGREEMENT WITH MIDC. LD. CIT(A) FURTHER HELD THAT THE ASSESSE E WAS FORMED AS A RESULT OF JOINT VENTURE BETWEEN MIDC AND TCL URBAN INFRASTRUCTURE HOLDING L TD. WITH THE MAIN OBJECT OF DEVELOPMENT OF BIOTECH PARK AND TECHNO PARK AND INDUSTRIAL DEVELOP MENT CENTRES. IT WAS FURTHER HELD THAT FOR THE PURPOSE OF ITS OBJECTIVES THE ASSESSEE WAS TO D EVELOP LAND, CREATE INFRASTRUCTURE FACILITIES WHICH WERE TO BE MADE AVAILABLE TO OTHER PARTIES. IT WAS FURTHER NOTICED THAT SINCE WAS NOT HAVING LAND OF ITS OWN, THE LAND FOR THIS PURPOSE WAS MADE AVAILAB LE BY MIDC ON LEASE BASIS AND SO ASSESSEE COULD NOT SELL THE DEVELOPED LAND ON OWNERSHIP BASI S TO OTHER PARTIES. THE LD. CIT(A) FINALLY CONCLUDED THAT WITH THE PURCHASE OF LAND AND INCURR ING VARIOUS EXPENSES FOR DEVELOPMENT OF LAND THE ASSESSEE SAID TO HAVE SET UP/COMMENCED ITS ACTI VITIES. THESE FINDINGS WERE UPHELD BY THE ITAT IN THE ABOVE REFERRED ORDER IN ASSESSMENT YEAR 2006 -07 IN ASSESSEES OWN CASE. THEREFORE, WE ARE OF THE OPINION THAT THE ASSESSEE DID COMMENCE ITS B USINESS ACTIVITY BY ENTERING INTO LEASE OF LAND IN MARCH 2004 IN ASSESSMENT YEAR 2004-05 AND SETTING U P BUSINESS ACTIVITY IN 2005-06 BY INCURRING EXPENDITURE FOR DEVELOPING THE LAND AND ULTIMATELY RECEIVED INCOME BY SUB-LEASE OF LAND IN ASSESSMENT YEAR 2006-07 WHICH WERE ACCEPTED AS ASSE SSEES BUSINESS ACTIVITIES. IN THE LIGHT OF THE 4 ITA NOS. 401 & 6829//MUM/2011 INTERNATIONAL BIO-TECH PARK LTD. FACTS, WE DO NOT SEE ANY MERIT IN THE CONTENTION OF THE CIT THAT ASSESSEE HAS NOT SET UP BUSINESS ACTIVITY. IT IS ALSO SURPRISING TO SEE THAT TOTAL EXPENDITUR E CLAIMED IN PROFIT & LOSS A/C. WAS OF TUNE OF RS.61,28,430/- WHICH INCLUDE PERSONAL EXPENSES OF R S 1,34,990/- OPERATING AND OTHER EXPENSES OF RS 57,87,162 AND DEPRECIATION AND PRE PRELIMINARY E XPENSES (SECTION 35D). THE ASSESSEE HAD CLAIMED TOTAL LOSS AT RS.44,81,336/- AFTER SETTING OFF INCOME FROM OTHER SOURCES RS. 22,21,427/-.WE WERE NOT SURE WHY ONLY DEPRECIATION CLAIM OF RS.2,9 5,145/- AND PRELIMINARY EXPENSES OF RS.18,970/- WERE ONLY CONSIDERED BY CIT FOR DISALLO WANCE. IF HIS STAND WERE TO BE ACCEPTED THEN THE OTHER EXPENDITURE CLAIMED AS PERSONNEL AND OPER ATING EXPENSES ALSO REQUIRE TO CAPITALIZED. THERE IS NO CONSISTENCY IN THE STAND OF THE CIT. BE THAT IT MAY, WE ARE OF THE OPINION THAT SINCE ASSESSEE HAS COMMENCED ITS BUSINESS AND SET UP BUSI NESS ALSO, THE ORDER PASSED BY AO IN THE ORIGINAL INSTANCE IS NOT ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF THE REVENUE. THEREFORE, CIT HAS NO JURISDICTION TO SET ASIDE THE SAME. ASSESSEES GROUNDS ARE ALLOWED. WE FURTHER FIND THAT WHILE DECIDING THE APPEAL FOR, AY 2005-06 ON 11.09.2013,TRIBUNAL HAD HELD THAT ASSESSEE COMMENCED ITS BUSINESS ACTIVITY IN MA RCH 2004 I.E. IN AY 2004-05. IT WAS FINALLY HELD THAT ASSESSEE HAD SET UP HIS BUSINESS ACTIVITI ES IN EARLIER YEARS. AS THE FACTS AND CIRCUMSTANCES FOR THE YEAR UNDER APPEAL ARE IDENTICAL TO THE EARL IER AY.S,SO,RESPECTFULLY FOLLOWING THE SAME WE DECIDE GROUND NO.1 & 2 AGAINST THE AO. HE IS DIRECT ED TO ALLOW THE DEDUCTIONS TO THE ASSESSEE AS PER THE PROVISIONS OF LAW. 6. NEXT GROUND OF APPEAL IS ABOUT DIRECTION GIVEN BY T HE FAA TO ALLOW THE AO TO INTEREST EXPENDITURE UNDER THE HEAD INCOME FROM HOUSE PROPE RTY.WE HAVE,FOLLOWING ORDERS FOR THE EARLIER YEARS,HELD THAT INCOME OF THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION HAS TO BE ASSESSED UNDER THE HEAD BUSINESS INCOME,THEREFORE, IN OUR OPINION GROUND TAKEN BY THE AO HAS TO BE DISMISSED. 7. NEXT GROUND OF APPEAL IS ABOUT ALLOWING THE INTERES T EXPENDITURE.WHILE DECIDING FIRST TWO GROUNDS OF APPEAL,WE HAVE HELD THAT AO SHOULD ALLOW THE DEDUCTIONS AS PER THE PROVISIONS OF LAW. CONSIDERING OUR ABOVE DIRECTIONS,WE ARE OF THE OPIN ION THAT GROUND NO.4 TAKEN BY THE AO IS INFRUCTUOUS AND DOES NOT NEED ANY ADJUDICATION. 8. NEXT GROUND OF APPEAL IS ABOUT DIRECTION GIVEN BY T HE FAA TO THE AO TO TAX THE MISCELLANEOUS INCOME (RS.18.71 LACS),FOREIGN EXCHANGE GAIN(RS. 19 ,491/-)AND OTHER INCOME(RS.7720/-) UNDER THE HEAD BUSINESS INCOME.DURING THE ASSESSMENT PR OCEEDINGS,AO HELD THAT INCOME EARNED BY THE ASSESSEE UNDER ABOVE REFERRED THREE HEADS HAD T O BE ASSESSED AS INCOME FROM OTHER SOURCES. IN THE APPELLATE PROCEEDINGS,FAA HELD THAT INCOMES FROM FOREIGN EXCHANGE GAIN AND OTHER INTEREST WERE INCIDENTAL TO THE BUSINESS ACTIVITIES OF THE A SSESSEE,THAT SAME SHOULD BE TREATED AS BUSINESS INCOME, THAT THE MISCELLANEOUS INCOME CONSISTED OF PARKING CHARGES,PENAL INTEREST,RECOVERY OF HVAC CHARGES,TENDER MONEY,THAT THOSE INCOMES WERE I NCIDENTAL TO BUSINESS ACTIVITIES. 8.1. BEFORE US,DR SUBMITTED THAT ASSESSEE HAD NOT COMMEN CED ITS BUSINESS ACTIVITY DURING THE YEAR UNDER APPEAL,THAT INCOME UNDER THE HEAD MISCELLANE OUS INCOME, FOREIGN EXCHANGE GAIN, OTHER INCOME COULD NOT BE ASSESSED AS BUSINESS INCOME.AR RELYING UPON THE ORDERS OF THE TRIBUNAL FOR THE EARLIER YEARS SUBMITTED THAT SAID INCOME WAS DE RIVED FROM THE BUSINESS ACTIVITY OF THE ASSESSEE-COMPANY,THAT BUSINESS OF THE ASSESSEE WAS SET UP AND HAD COMMENCED PRIOR THE YEAR UNDER CONSIDERATION,THAT THE SAID INCOME HAD RIGHTL Y BEEN ASSESSED BY THE FAA UNDER THE HEAD BUSINESS INCOME. 5 ITA NOS. 401 & 6829//MUM/2011 INTERNATIONAL BIO-TECH PARK LTD. 9. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US.WE FIND THAT AO WAS OF THE OPINION THAT ASSESSEE HAD NOT COMMENCED ITS BUS INESS ACTIVITY AND THEREFORE, INCOME RECEIVED UNDER THE HEADS MISCELLANEOUS INCOME ETC. COULD NOT BE ASSESSED AS BUSINESS INCOME.BUT,IN THE EARLIER YEARS IT HAS BEEN HELD BY THE TRIBUNAL THAT INCOME FROM SUB-LEASING OF PREMISES OF THE I.T.PARKS WAS THE BUSINESS OF THE ASSESSEE AND SAME WAS SET UP/COMMENCED IN EARLIER YEARS AND WE HAVE FOLLOWED THE ORDER OF EARLIER YEARS.IN THES E CIRCUMSTANCES,IN OUR OPINION,FAA HAD RIGHTLY HELD THAT INCOMES FROM FOREIGN EXCHANGE GAIN,CAR PA RKING,PENALTY ETC.WERE INCIDENTAL TO THE BUSINESS,CARRIED OUT BY THE ASSESSEE.CONFIRMING THE ORDER OF THE FAA,WE REJECT THE GROUND NO.5. AS A RESULT, APPEAL FILED BY THE AO STANDS DISMISSE D. ITA NO. 6829/MUM/2011 AY.2008-09 10. THE FIRST GROUND OF APPEAL IS ABOUT DELETING THE AD DITION ON ACCOUNT OF INCOME FROM SUB-LEASE OF LAND AND INCOME UNDER THE HEAD MAINTENANCE.IN TH E ASSESSMENT ORDER AO HELD THAT INCOME CREDITED IN P&L ACCOUNT WERE IN THE NATURE OF RENTA L INCOME OR MAINTENANCE INCOME OR INCOME ON SUB-LEASE OF LAND OR OTHER INCOME,THAT THE ONLY BUSINESS ACTIVITY UNDERTAKEN BY THE ASSESSEE DURING THE YEAR WAS SELL OF LAND TO TCGLS. HE WAS N OT SATISFIED WITH THE CLAIM OF THE ASSESSEE OF BUSINESS LOSS AS HE WAS OF THE OPINION THAT IT HAD NOT CARRIED OUT ANY BUSINESS ACTIVITY DURING THE AY UNDER APPEAL.HE HELD THAT INCOME OF RS. 1.89 CRO RES RECEIVED BY THE ASSESSEE ON ACCOUNT OF SUB-LEASE OF LAND HAD TO BE ASSESSED UNDER THE HEAD INCOME FROM OTHER SOURCES.SIMILARLY, MAINTENANCE INCOME OF RS.1.15 CRORES WAS TREATED BY THE AO AS INCOME FROM OTHER SOURCES. WHILE FINALISING THE ASSESSMENT,AO DISALLOWED VARIO US EXPENSES CLAIMED BY THE ASSESSEE AND CAPITALISED THE SAME. 11. IN THE APPELLATE PROCEEDINGS,FAA HELD THAT IN THE A PPEAL ORDERS FOR THE AY.S. 2006-07 AND 2007-08 HE HAD HELD THAT THE ASSESSEES BUSINESS OF DEVELOPING OF BIO-TECH PARK WAS ALREADY SET UP AND HAD COMMENCED,THAT THE SUB-LEASE INCOME, APA RT FROM THE RENTAL INCOME,WAS TO BE ASSESSED AS BUSINESS INCOME,THAT THE MISCELLANEOUS INCOME WA S ASSESSABLE UNDER THE HEAD BUSINESS INCOME. HE IS DIRECTED THE AO TO ALLOW VARIOUS EXPENSES CLA IMED BY THE ASSESSEE IN THE P&L ACCOUNT, AS BUSINESS EXPENDITURE.HE FURTHER HELD THAT BUSINESS INCOME SHOWN BY THE ASSESSEE REQUIRED ENHANC -EMENT/REDUCTION OF BUSINESS LOSS TO THE EXTENT OF RS. 20.17 LACS ON ACCOUNT OF VARIOUS EXPENSES CLAIMED AS BUSINESS EXPENSES AS THE SAME PERTAINED TO THE PROPERTIES GIVEN ON RENT,THAT THE RENTAL INCOME THEREOF WAS ASSESSABLE UNDER THE HEAD INCOME FROM HOUSE PROPERTY, THAT THE DEDUCTION ALLOWABLE @ 30% UNDER THE HEAD INCOME FROM HOUSE PR OPERTY TOOK CARE OF ALL EXPENSES INCURRED IN RESPECT OF PROPERTIES GIVEN ON THE RENT, THAT TH E EXPENSES WERE NOT ALLOWABLE EITHER UNDER THE HEAD BUSINESS INCOME OR UNDER THE HEAD INCOME FROM HOUSE PROPERTY.IN VIEW OF ABOVE, HE ALLOWED THE GROUND OF APPEAL FILED BY THE ASSESSEE BESIDES ENHANCING/REDUCING INCOME/LOSS BY RS. 20,17,787/-. 12. BEFORE US,DR SUPPORTED THE ORDER OF THE AO.AR STATE D THAT ASSESSEE HAD NOT PREFERRED ANY APPEAL AGAINST THE ENHANCEMENT MADE BY THE FAA.HE R EFERRED TO THE ORDERS OF THE TRIBUNAL PASSED BY IT FOR THE EARLIER AY.S.WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US. FOLLOWING OUR ORDER FOR THE EARLIER YEAR,WE HOLD TH AT INCOME FROM THE SUB LEASE OF LAND AND INCOME UNDER THE HEAD MAINTENANCE HAS TO BE ASSESSE D UNDER THE HEAD BUSINESS INCOME AND NOT UNDER THE HEAD INCOME FROM OTHER SOURCES.AS A RESUL T,WE DECIDE FIRST GROUND OF APPEAL AGAINST THE AO. 13. NEXT GROUND OF APPEAL IS ABOUT DELETION OF ADDITION AMOUNTING TO RS. 2.93 CRORES ON ACCOUNT OF INTEREST PAID ON BORROWINGS UTILISED FOR CONSTRUCTI ON OF HOUSE PROPERTY UNDER SECTION 24 OF THE 6 ITA NOS. 401 & 6829//MUM/2011 INTERNATIONAL BIO-TECH PARK LTD. ACT.WHILE DISALLOWING THE ABOVE CLAIM MADE BY THE A SSESSEE ,AO HELD THAT THE EXPENDITURE WAS NOT SPECIFICALLY IDENTIFIABLE TO ANY BUILDING,THAT THE LAND UTILISED FOR THE PURPOSES OF PROJECT WAS NOT OWNED BY THE ASSESSEE,THAT THE PROJECT CONSISTE D ON VARIOUS BUILDINGS,THAT IT WAS NOT POSSIBLE TO DEMARCATE THE INTEREST USED FOR BUILDING GIVEN O N RENT AND USED FOR OTHER PURPOSES,THAT THE ASSESSEE HAD NOT PRODUCED ANY CERTIFICATE FROM THE PERSON TO WHOM ANY INTEREST WAS PAYABLE ON CAPITAL BORROWED SPECIFYING THE AMOUNT PAYABLE BY T HE ASSESSEE FOR THE PURPOSE 14. DECIDING THE APPEAL,FAA HAD HELD THAT IN COMPUTATIO N THE INCOME UNDER THE HEAD HOUSE PROPERTYTHE ASSESSEE HAD CLAIMED INTEREST EXPENSES OF RS. 2.93 CRORES,THAT ASSESSEE HAD OBTAINED LOAN FORM BANK,THAT LOAN WAS UTILISED FOR THE PURPO SE OF PROJECT,THAT IT HAD ESTABLISHED THE NEXUS BETWEEN THE LOAN TAKEN AND CONSTRUCTION OF BUILDING ,THAT THE PROJECT CONSISTED OF VARIOUS BUILDINGS,THAT OF THE BUILDINGS WERE LET OUT BY THE ASSESSEE, THAT THE RENT THEREOF WAS OFFERED BY THE ASSESSEE UNDER THE HEAD INCOME FROM HOUSE PROPERTY, THAT THERE WAS NO DISPUTE ABOUT THE FACT THAT PART OF THE LOAN WAS UTILISED FOR CONSTRUCTION OF L ET OUT PROPERTIES,THAT THE AUDITORS, IN SCHEDULE 19 OF THE BALANCE-SHEET HAD GIVEN A FINDING THAT OUT O F TOTAL CLAIM OF INTEREST EXPENDITURE INTEREST AMOUNTING TO RS. 2.48 CRORES HAD BEEN CAPITALISED,T HAT INTEREST PERTAINED TO WORK IN PROGRESS,THAT ASSESSEES CLAIM ON INTEREST EXPENDITURE WAS JUSTIF IED.HE FURTHER HELD THAT BALANCE INTEREST WAS TO BE ALLOWED UNDER EITHER OF THE HEADS-BUSINESS INCOM E OR INCOME FROM HOUSE PROPERTY.FINALLY,HE HELD THAT ENTIRE INTEREST EXPENSE HAD TO BE ALLOWED . 15. BEFORE US,DR SUPPORTED THE ORDER OF THE AO.AR SUBMI TTED THAT THE ASSESSEE HAD CONSTRUCTED BUILDINGS DURING THE YEAR UNDER APPEAL,THAT IT HAD AVAILED LOAN FACILITY,THAT IT HAD PAID INTEREST,THA T INTEREST EXPENSE SHOULD BE ALLOWED UNDER ANY OF THE TWO HEADS-BUSINESS INCOME/HOUSE PROPERTY INCOME. WE HAVE HEARD THE RIVAL SUBMISSIONS.IT IS NOT IN DI SPUTE THAT THE ASSESSEE HAD TAKEN LOAN FOR CONSTRUCTION OF BUILDINGS AND IT HAD ALSO PAID INTE REST.FAA HAD HELD THAT OUT OF THE INTEREST OF RS.2.93 CRORES RS. 2.48 CRORES SHOULD BE ALLOWED AS INTEREST EXPENDITURE UNDER THE HEAD INCOME FROM HOUSE PROPERTY.FROM THE BALANCE SHEET IT IS CL EAR THAT THE ASSESSEE HAS INTEREST AMOUNTING TO RS.2.48 CRORES WAS CAPITALISED.THEREFORE,IN OUR OPI NION FAA WAS JUSTIFIED IN HOLDING THAT IT REPRESENTED WORK IN PROGRESS.FOR THE BALANCE INTERE ST PAYMENT OF RS.45 LAKHS HE HELD THAT SAME WAS ALLOWABLE UNDER EITHER OF THE HEADS.IN OUR OPIN ION,IF INTEREST HAS BEEN PAID BY AN ASSESSEE;FOR ACQUIRING OR CONSTRUCTING ASSETS THAT ARE USED FOR EARNING TAXABLE INCOME;THEN HIS CLAIM FOR INTEREST EXPENDITURE HAS TO BE ALLOWED.THEREFORE,CO NFIRMING THE ORDER OF THE FAA,WE DISMISS GROUND NO.2,FILED BY THE AO. 16. LAST GROUND OF APPEAL IS ABOUT TREATMENT OF MAINTEN ANCE INCOME OF RS. 1,15,95,613/-.DURING THE ASSESSMENT PROCEEDINGS AO HELD THAT THE MAINTEN ANCE INCOME RECEIVED BY THE ASSESSEE,AMOUNTING TO RS.1.15 CRORES,SHOULD BE ASSE SSED AS INCOME FROM OTHER SOURCES AND NOT AS BUSINESS INCOME.IN THE APPELLATE PROCEEDINGS,FAA HELD THAT THE SAID INCOME WAS TO BE ASSESSED UNDER THE HEAD BUSINESS INCOME. 17. BEFORE US,DR AND AR ADVANCED THE SAME ARGUMENTS THA T WERE RAISED FOR LAST ASSESSMENT YEAR. IN PARAGRAPH 9 OF OUR ORDER,WE HAVE HELD THAT THE I NCOME RECEIVED BY THE ASSESSEE AS MAINTENANCE INCOME HAS TO BE ASSESSED AS BUSINESS INCOME.FOLLOW ING THE SAME GROUND NO. 3 IS DECIDED AGAINST THE AO. AS A RESULT,APPEALS FILED BY THE AO FOR B OTH THE ASSESSMENT YEARS STAND DISMISSED. 1+2 '*+ , 3 4 ( / .'5 ' #6 ( 7 '8 ( + 9:. 7 ITA NOS. 401 & 6829//MUM/2011 INTERNATIONAL BIO-TECH PARK LTD. ORDER PRONOUNCED IN THE OPEN C OURT ON 7 TH MAY,2014 . 0 ( -.# 7 ;' 7 EBZ ,201 4 . ( / < SD/- SD/- ( .. / I.P. BANSAL) ( ! ! ! ! / RAJENDRA) / JUDICIAL MEMBER /ACCOUNTANT MEMBER / MUMBAI, ;' /DATE: 07.05 . 2014. SK 0 0 0 0 ( (( ( &+= &+= &+= &+= > =#+ > =#+ > =#+ > =#+ / COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE / $% 2. RESPONDENT / &'$% 3. THE CONCERNED CIT(A)/ ? @ , 4. THE CONCERNED CIT / ? @ 5. DR I BENCH, ITAT, MUMBAI / =A/ &+' , . . . 6. GUARD FILE/ / 1 '=+ '=+ '=+ '=+ &+ &+&+ &+ //TRUE COPY// 0' / BY ORDER, B / 9 DY./ASST. REGISTRAR , /ITAT, MUMBAI