BRINDABAN BUILDERS P. LTD, MUMBAI V. ITO WD 9(1)(2), MUMBAI

ITA 6902/MUM/2011

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 8512 (ITAT-MUMBAI)
• Duration Of Justice: 11 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-10-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2008-2009
• Appeal Filed On: 11-10-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: K R LAKSHMINARAYAN
• Keywords: Business income
• Section: 142(1); 154

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES B MUMBAI . , BEFORE SHRI D. MANMOHAN, VICE PRESIDENT / AND !'# , !$ %& SHRI RAJENDRA, ACCOUNTANT MEMBER . / ITA NO. 6902/MUM/2011 ' ' ' ' / ASSESSMENT YEAR 2008-09 BRINDABAN BUILDERS P. LTD., RAHEJAS MAIN AVENUE, SANTACRUZ (W), MUMBAI-400 054. PAN: AAACB 1815 B VS. ITO WD. 9(1)(2), AAYAKAR BHAVAN, MUMBAI. ( () / APPELLANT ) ( *+() / RESPONDENT ) () , ! / APPELLANT BY : SHRI K.R. LAKSHMINARAYAN *+() - , ! / RESPONDENT BY : SHRI MOHIT JAIN - .$ / DATE OF HEARING : 13-09-2012 /' - .$ / DATE OF PRONOUNCEMENT : 03-10-2012 %!0 / O R D E R PER RAJENDRA, A.M. THE PRESENT APPEAL IS DIRECTED AGAINST THE ORDER DT . 16-08-2011 PASSED BY THE CIT(A)- 19,MUMBAI.FOLLOWING GROUNDS OF APPEAL HAVE BEEN RAI SED BY THE ASSESSEE-COMPANY: 1.THE LEARNED CIT(A) ERRED IN SUSTAINING THE ORDER OF CIT(A) IN FULL. 2.THE LEARNED CIT(A) ERRED IN HOLDING THAT COMPENSA TION RECEIVED FROM LETTING OUT THE USE OF TABLE SPACES TO DIFFERENT PARTIES ALONG WITH OFFICE EQUIPMENT & AIR CONDITIONER AND FOR PROVIDING CLEANING & SECURITY SERVICES IS INCOME FR OM HOUSE PROPERTY & NOT INCOME FROM BUSINESS AS CLAIMED BY THE APPELLANT. 3.THE LEARNED CIT(A) FAILED TO APPRECIATE THAT RIGH T FROM BEGINNING FOR ALL THE YEARS EXCEPT A.Y. 2007-08, APPELLANTS CLAIM REG. BUSINESS INCOM E WAS ACCEPTED & THAT FOR A.Y. 2007-08 WHERE INCOME WAS ASSESSED AS INCOME FROM HP WITHOUT GIVING OPPORTUNITY TO THE APPELLANT, APPLICATION U/S. 154 TO A.O. & U/S.264 TO CIT HAVE BEEN MADE BUT NO REPLY HAS SO FAR BEEN RECEIVED. 4.THE LEARNED CIT(A) ERRED IN NOT APPRECIATING THE FACT THAT CONSISTENCY IN ASSESSMENT SHOULD ITA NO. 6902/MUM/2011 BRINDABAN BUILDERS P. LTD. 2 BE MAINTAINED AS HELD BY BOMBAY HIGH COURT IN CIT V DARIUS PUNDOLE 330 ITR 485 BOM. 5.THE LEARNED CIT(A) ERRED IN NOT TAKING IN TO A/C THE DECISION IN KARNANI PROPERTIES LTD V CIT 82 ITR 547 (SC). 6.THE LEARNED CIT(A) ERRED IN NOT ALLOWING EXPENSES CLAIMED IN THE P & L ACCOUNT. 7.IT IS PRAYED THAT THE INCOME FROM COMPENSATION MA Y BE ASSESSED AS BUSINESS INCOME & THE EXPENSES DEBITED TO P & L A/C MAY BE ALLOWED. 8.THE APPELLANT CRAVES LIBERTY TO ADD, AMEND, ALTER , AND / OR WITHDRAW ANY OF THE ABOVE GROUNDS OF APPEAL. 2. ASSESSEE-COMPANY IS A BUILDER AND DEVELOPER.IT FILE D ITS RETURN OF INCOME ON 25- 09-2008 DECLARING TOTAL INCOME OF RS. NIL. RETURN W AS PROCESSED U/S. 143(1) OF THE INCOME TAX ACT, 1961(ACT).LATER ON, IT WAS SELECTED FOR SCRUTINY AND NOTICES U/S. 143 (2) AND 142(1) OF THE ACT WERE ISSUED ALONG WITH DE TAILED QUESTIONER. 3. DURING THE ASSESSMENT PROCEEDINGS, ASSESSING OFFICE R (AO) FOUND THAT THE ASSESSEE- COMPANY HAD OFFERED INCOME RECEIVED ON ACCOUNT OF C OMPENSATION FOR USE OF OFFICE PREMISES OF RS.9.6 LAKHS AS BUSINESS INCOME.AGAIN ST THE SAME, THE ASSESSEE HAD CLAIMED ADMINISTRATIVE AND OTHER EXPENSES TO THE TU NE OF RS. 9.41 LAKHS. HE ASKED THE ASSESSEE-COMPANY TO EXPLAIN AS WHY INCOME SHOWN UND ER THE HEAD BUSINESS SHOULD NOT BE TREATED AS INCOME FROM HOUSE PROPERTY,AS T HE SAME RELATED TO RENTING OUT OF THE PROPERTY.AFTER CONSIDERING THE SUBMISSIONS OF T HE ASSESSEE-COMPANY, AO HELD THAT IN EARLIER YEAR ALSO INCOME FROM THE SAID PROPERTY WAS NOT CONSIDERED AS INCOME FROM BUSINESS,THAT COMPENSATION RECEIVED BY THE ASSESSE E WAS NOTHING BUT THE RENT RECEIVED,THAT SUCH INCOME WAS TAXABLE UNDER THE HEA D HOUSE PROPERTY INCOME,THAT ASSESSEE HAD GIVEN THE OFFICE EQUIPMENTS TO TENANTS , THAT NATURE OF THE EXPENSES INCURRED BY THE ASSESSEE PROVED THAT INCOME EARNED BY THE ASSESSEE SHOULD BE TAXED UNDER THE HEAD HOUSE PROPERTY INCOME, THAT THE ON LY INTENTION OF THE ASSESSEE WAS TO REDUCE TAX LIABILITY BY CLAIMING HUGE EXPENDITURE.F INALLY,HE HELD THAT THE COMPEN- SATION RECEIVED BY THE ASSESSEE-COMPANY WAS RENT IN COME RECEIVED FROM HIRING OF OFFICE PREMISES. HE ALLOWED BASIC DEDUCTION AS PER THE PROVISIONS OF SECTION 24(A) OF THE ACT TO THE ASSESSEE-NO OTHER EXPENSES WERE ALLO WED. 3.1. ASSESSEE PREFERRED AN APPEAL BEFORE THE FIRST APPEL LATE AUTHORITY (FAA).AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE,HE HELD THAT AS PER THE MEMORANDUM OF ARTICLE OF THE COMPANY, THE MAIN OBJECT OF THE ASSE SSEE WAS TO CARRY ON BUSINESS BUILDERS AND CONTRACTORS, THAT LETTING OUT SHOPS/OF FICES AND OTHER PLACES ON LEASE /HIRE WAS INCIDENTAL OBJECT.RELYING UPON THE ORDER OF THE EAST INDIA HOUSING AND LAND DEVELOPMENT TRUST (42 ITR 49) HE DECIDED THE ISSUE AGAINST THE ASSESSEE AND UPHELD THE ORDER OF THE AO. 4. BEFORE US,AUTHORISED REPRESENTATIVE (AR) SUBMITTED THAT COMPENSATION RECEIVED FROM LETTING-OUT OF USE OF TABLE SPACE ALONG WITH T HE OFFICE EQUIPMENTS AND AIR- CONDITIONER WAS INCOME FROM BUSINESS, THAT RIGHT FROM THE BEGINNING FOR ALL THE YEARS EXCEPT FOR THE ASSESSMENT YEAR 2007-08, APPELLANTS CLAIM REGARDING BUSINESS INCOME WAS ACCEPTED BY THE DEPARTMENT,THAT ASSESSEE HAD FI LED APPLICATION U/S. 154 AS WELL AS 264 OF THE ACT TO RESPECTIVE AUTHORITIES.FAA DID NO T CONSIDER THE CASES OF DARIUS PUN -DOLE(330 ITR 485) AND KARNANI PROPERTIES LTD (82 ITR 547).HE FURTHER REFERRED TO THE ORDERS OF THE EARLIER ASSESSMENT YEARS.HE RELIE D UPON THE CASES OF HARYANA STATE IND. DEV.CORP.(326 ITR 640); PATESHWARI ELED ASS. I ND. (282 ITR 61);V ASSOCIATED BUILDING (137ITR339);V.RUSSEL PROPERTIES(137ITR473) .DEPARTMENTAL REPRESENTATIVE ITA NO. 6902/MUM/2011 BRINDABAN BUILDERS P. LTD. 3 (DR)SUBMITTED THAT PRINCIPLES OF RES JUDICATA WERE NOT APPLICABLE IN THE INCOME-TAX PROCEEDINGS,THAT APPLICATION FILED BY THE ASSESSEE- COMPANY U/S. 264 WAS REJECTED BY THE CIT,THAT MONEY RECEIVED BY THE ASSESSEE-COMPANY WAS IN NATURE OF RENT,THAT MAIN ACTIVITY OF THE ASSESSEE WAS BUILDING AND CONSTRUCT ION,THAT INCOME RECEIVED FROM LETTING-OUT THE PREMISES WAS RIGHTLY BEEN ASSESSED UNDER THE HEAD PROPERTY INCOME. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US. IN ORDER TO BE TAXED UNDER SECTION 22 OF THE ACT, THE CONDITION S TO BE SATISFIED ARE (A) THE PROPERTY SHOULD CONSIST OF BUILDINGS OR LANDS APPURTENANT TH ERETO; (B) THE ASSESSEE SHOULD BE THE OWNER; (C) THE PROPERTY SHOULD NOT BE USED BY THE O WNER FOR THE PURPOSE OF ANY BUSINESS CARRIED ON BY HIM THE PROFITS OF WHICH ARE CHARGEABLE TO INCOME-TAX. IN ORDER TO DETERMINE WHETHER RENT IS ASSESSABLE AS INCOME F ROM PROPERTY OR BUSINESS INCOME, WHAT HAS TO BE SEEN IS WHETHER THE ASSET IS BEING E XPLOITED COMMERCIALLY BY THE LETTING OUT OR WHETHER IT IS BEING LET OUT FOR THE PURPOSE OF ENJOYING THE RENT. THE DISTINCTION BETWEEN THE TWO IS A NARROW ONE AND HAS TO DEPEND O N CERTAIN FACTS PECULIAR TO EACH CASE.THE QUESTION WHETHER A PARTICULAR LETTING IS B USINESS HAS TO BE DECIDED IN THE CIRCUMSTANCES OF EACH CASE AND IN THE SETTING AND B ACKGROUND OF FACTS. THERE IS NO SUCH THING AS A NATURAL COMMERCIAL ASSET,BECAUSE AN ASSET BECOMES A COMMERCIAL ASSET BY THE USE TO WHICH IT IS PUT IN BUSINESS AND NOT B ECAUSE OF ANY INHERENT QUALITIES.IN THE CASE UNDER CONSIDERATION INCOME FROM THE PROPER TY IN QUESTION WAS BEING ASSESSED UNDER THE HEAD BUSINESS INCOME FOR LAST SO MANY YEA RS. PROPERTY-IN-QUESTION, RENTED AMINITIES-LIKE OFFICE EQUIPMENT & AIR CONDITIONER A ND FOR PROVIDING CLEANING & SECURITY SERVICES-TERMS AND CONDITIONS OF LETTING O UT WERE THE SAME AS OF THE EARLIER AYS.AO HAS NOT BROUGHT ANYTHING NEW ON RECORD TO PR OVE THAT THERE WAS SOMETHING SUBSTANTIALLY DIFFERENT FROM THE EARLIER YEARS. 5.1 .IN OUR OPINION,WHERE THE INCOME RECEIVED IS NOT FR OM THE BARE LETTING OF THE TENEMENT OR FROM THE LETTING ACCOMPANIED BY INCIDEN TAL SERVICES OR FACILITIES,BUT THE SUBJECT HIRED OUT IS A COMPLEX ONE AND THE INCOME O BTAINED IS NOT SO MUCH BECAUSE OF THE BARE LETTING OF THE TENEMENT BUT BECAUSE OF THE FACILITIES AND SERVICES RENDERED, THE OPERATIONS INVOLVED IN SUCH LETTING OF THE PROPERTY IS OF THE NATURE OF BUSINESS OR TRADING OPERATIONS AND THE INCOME DERIVED IS OF THE NATURE OF BUSINESS OR TRADING OPERATIONS.AS THE INCOME RECEIVED BY THE ASSESSEE-C OMPANY IS NOT ONLY FROM LETTING OUT,BUT IT IS BECAUSE OF FACILITIES AND SERVICES RE NDERED,AS DISCUSSED IN PARAGRAPH 5,SO IN OUR OPINION SAME SHOULD BE ASSESSED UNDER THE HE AD BUSINESS INCOME. FOLLWING THE DECISIONS OF KARNANI PROPERTIES(SUPRA),GROUNDS NO.1 -8 ARE DECIDED IN FAVOUR OF THE ASSESSEE-COMPANY. REVERSING THE ORDER OF THE FAA WE ALLOW THE APPEAL FILED BY THE ASSESSEE. ORDER PRONOUNCED IN THE OPEN COURT ON 3 RD OCTOBER, 2012. SD/- SD/- ( . / D. MANMOHAN) ( !'# / RAJENDRA) / VICE PRESIDENT !$ %& / ACCOUNTANT MEMBER MUMBAI, 1% DATE: 3 RD OCTOBER, 2012 ITA NO. 6902/MUM/2011 BRINDABAN BUILDERS P. LTD. 4 TNMM %!0 %!0 %!0 %!0 - -- - *.2 *.2 *.2 *.2 3!2'. 3!2'. 3!2'. 3!2'. / COPY OF THE ORDER FORWARDED TO : 1. APPELLANT 2. RESPONDENT 3. THE CONCERNED CIT (A) 4. THE CONCERNED CIT 5. DR B BENCH, ITAT, MUMBAI 6. GUARD FILE +2. *. //TRUE COPY// %!0 %!0 %!0 %!0 / BY ORDER, / DY./ASSTT. REGISTRAR , / ITAT, MUMBAI