DCIT, New Delhi V. M/s. Atria Partners, New Delhi

ITA 692/DEL/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 97295 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 7 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-09-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 24-08-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 04-02-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K K JAISWAL
• Keywords: Business income; Depreciation; Rule of consistency; Earning of tax free income
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, DELHI BENCH A NEW DELHI BEFORE : SHRI C.M. GARG, JUDICIAL MEMBER & SHRI L.P. SAHU , ACCOUNTANT MEMBER ITA NO. 692/DEL/2013 ASSTT. YEAR : 2009=10 D.C.I.T., CIRCLE 31(1) VS. M/S. ATRIA PARTNERS, NEW DELHI. 9 TH FLOOR, DLF CENTRE, SANSAD MARG, NEW DELHI. [PAN : AAHFA 1305 P] (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI K.K. JAISWAL, SR. DR RESPONDENT BY : SHRI R.S . SINGHVI & SATYAJIT GOEL, CA S DATE OF HEARING : 24.08.2015 DATE OF PRONOUNCEMENT : 16. 09.2015 ORDER PER L.P. SAHU, ACCOUNTANT MEMBER: THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER DATED 30.11.2012 PASSED BY THE LEARNED CIT(A) - XXVI, DELHI FOR THE ASSESSMENT YEAR 2009 - 10 ON THE FOLLOWING GROUNDS : 1. THE CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS.4,13,01,276/ - MADE BY THE AO BY TREATING RENTAL INCOME AS BUSINESS INCOME. 2. THE CIT(A) HAS ERRED IN DIRECTING THE AO TO ASSESS RENTAL INCOME UNDER THE HEAD I NCOME FROM HOUSE PROPERTY WITHOUT APPRECIATING THE FACT THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF BUILDING & LETTING OUT OF COMMERCIAL COMPLEXES. 3. THE CIT(A) HAS ERRED IN DELETING THE DISALLOWANCE OF RS.84,543/ - CLAIMED U/S. 57(III) OF THE IT ACT WITHOUT APPRECIATING THE FACT THAT ITA NO. 692/DEL./2013 2 THE ASSESSEE COULD NOT PROVE THAT SUCH EXPENDITURE WAS EXPENDED WHOLLY & EXCLUSIVELY FOR THE PURPOSE OF EARNING SUCH INCOME. 4. THE ORDER OF THE CIT(A) IS ERRONEOUS AND IS NOT TENABLE ON FACTS AND IN LAW. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A PARTNERSHIP FIRM WITH AN OBJECT TO CARRY ON THE BUSINESS ON SETTING UP COMMERCIAL COMPLEXES FOR SALE OR LETTING OUT AND EARNING RENTAL INCOME THERE FROM OR FOR RUNNING BUSINESS/CONVENTION CENTRES OR DEALING IN S HARES AND SECURITIES. THE ASSESSEE FILED ITS RETURN OF INCOME DECLARING TOTAL INCOME AT RS.9,69,36,833/ - WHICH WAS PROCESSED U/S. 143(1). SUBSEQUENTLY THE CASE WAS SELECTED FOR SCRUTINY UNDER CASS - AIR CATEGORY. IN THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO NOTICED THAT THE ASSESSEE DECLARED RENTAL INCOME OF RS.13,76,70,920/ - UNDER THE HEAD HOUSE PROPERTY ON WHICH THE ASSESSEE CLAIMED 30% DEDUCTION AMOUNTING TO RS.4,13,01,276/ - UNDER SECTION 24(1) OF THE IT ACT. THE AO REQUIRED THE ASSESSEE TO FURNISH TH E REASONS FOR SHOWING RENTAL INCOME UNDER THE HEAD INCOME FROM HOUSE PROPERTY INSTEAD OF BUSINESS INCOME . IN RESPONSE, THE ASSESSEE FILED WRITTEN SUBMISSIONS STATING THAT THE ASSESSEE FIRM RECEIVED RENTAL INCOME FROM PROPERTY OWNED BY IT AND HENCE, THE RENTAL INCOME WAS CORRECTLY SHOWN BY IT AS INCOME FROM HOUSE PROPERTY . THE AO, HOWEVER, DISALLOWED THE CLAIM OF DEDUCTION MADE BY ASSESSEE U/S. 24(1) OF THE ACT, BY TREATING THE RENTAL INCOME OF RS.4,13,01,276/ - AS BUSINESS INCOME , AND ADDED THE SAME TO THE TOTAL INCOME OF ASSESSEE WITH THE FOLLOWING OBSERVATIONS : IN THE A.Y. 2008 - 09, THE RENTAL INCOME OF THE ASSESSEE HAS BEEN ASSESSED UNDER THE HEAD BUSINESS INCOME AS AGAINST PROPERTY INCOME DECLARED BY IT IN THE RETURN OF INCOME. THE ASSESSEE VIDE ITS LETTER DATED 05.12.2012 HAS MADE A DETAILED SUBMISSIONS WITH RE GARD TO DISCLOSURE OF RENTAL INCOME UNDER THE HEAD PROPERTY INCOME AND IN SUPPORT THEREOF HAS RELIED UPON VARIOUS JUDICIAL RULINGS. THE ASSESSEE HAS FURTHER SUBMITTED THAT AGAINST THE ORDER U/S. 143(3) OF THE ACT FOR THE A.Y. 2008 - 09, IT HAS ITA NO. 692/DEL./2013 3 PREFERRED AN A PPEAL BEFORE THE COMMISSIONER OF INCOME TAX (A) - 17, NEW DELHI. THE REPLY OF THE ASSESSEE HAS BEEN DULY CONSIDERED. A PERUSAL OF THE PARTNERSHIP DEED SHOWS THAT THE MAIN ASSET OF THE COMPANY IS A BUILDING WHICH WAS PURCHASED BY THE CORPORATE PARTNERS OF TH E FIRM AND FURTHER THE PROPERTY WAS CONSTRUCTED AND DEVELOPED BY THE PARTNERS/DLF GROUP OF THE FIRM. THE BUILDING IS VALUED RS.20.24 CRORES AS PER THE BALANCE SHEET ON WHICH RENT OF RS.13.67 CRORES HAS BEEN SHOWN TO HAVE BEEN RECEIVED WHICH APPEARS TO BE D ISPROPORTIONATE TO THE VALUE OF THE PROPERTY. SUCH A HIGH INCOME CANNOT BE CATEGORIZED AS RENT. IT APPEARS THAT THIS ARRANGEMENT HAD BEEN MADE TO CLAIM THE DEDUCTION U/S. 24(1) OF 30% IN RESPECT OF INCOME FROM HOUSE PROPERTY WHICH AMOUNTS TO RS.4,13,01,276 / - .THE ASSESSEE HAS CLAIMED NO DEDUCTION ON ACCOUNT OF MUNICIPAL TAXES, SALARY, PERSONNEL AND ADMINISTRATIVE CHARGES. THE SAME HAVE BEEN CLAIMED TO EARN THE INCOME FROM OTHER SOURCES SO THAT HE CAN DECLARE THE RENTAL INCOME UNDER THE HEAD AS INCOME FROM HO USE PROPERTY INSTEAD OF INCOME FROM BUSINESS. ACCORDINGLY, THE RENTAL INCOME FOR THE YEAR UNDER ASSESSMENT IS BEING ASSESSED UNDER THE HEAD BUSINESS INCOME AS AGAINST PROPERTY INCOME DISCLOSED BY THE ASSESSEE. 3. THE LEARNED CIT(A) AFTER CONSIDERING THE DETAILED REPLY OF THE ASSESSEE AND THE SUBMISSIONS MADE BEFORE HIM IN THE LIGHT OF VARIOUS DECISIONS RELIED UPON BY THE ASSESSEE, ALLOWED THE CLAIM OF ASSESSEE DIRECTING THE ASSESSING OFFICER TO ASSESS THE RENTAL INCOME AS PER THE PROVISIONS OF LAW UNDER T HE HEAD INCOME FROM HOUSE PROPERTY AS AGAINST BUSINESS INCOME ASSESSED U/S. 143(3) OF THE ACT. AGGRIEVED BY THE IMPUGNED ORDER, THE REVENUE HAS COME UP IN THIS APPEAL BEFORE US. 4. THE DR, RELYING UPON THE ASSESSMENT ORDER, ARGUED THAT THE LD. CIT(A) IS NOT JUSTIFIED IN DIRECTING THE AO TO ASSESS RENTAL INCOME UNDER THE HEAD INCOME FROM HOUSE PROPERTY WITHOUT APPRECIATING THE FACT THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF BUILDING & LETTING OUT OF COMMERCIAL COMPLEXES. ITA NO. 692/DEL./2013 4 5. THE LEARNED AR OF THE ASSESSEE, ON THE OTHER HAND, RELIED UPON THE SUBMISSIONS MADE BEFORE THE LD. CIT(A) AND THE CONCLUSIONS REACHED BY HIM IN THE IMPUGNED ORDER. 6. WE HAVE HEARD AND CONSIDERED THE ARGUMENTS ADVANCED BY THE PARTIES AND HAVE GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW, MATERIALS AVAILABLE ON RECORD AND THE DECISIONS RELIED UPON AND WE FIND THAT THE LEARNED CIT)A) AFTER MAKING ELABORATE DISCUSSION ON THE ISSUE AND AFTER CONSIDERING VARIOUS LEGAL PRONOUNCEMENTS, HAS RIGHTLY ACCEPTED THE CLAIM OF THE ASSE SSEE . IT IS NOT IN DISPUTE THAT THE ASSESSEE HAS CONSISTENTLY BEEN SHOWING THE RENTAL INCOME FROM THIS PROPERTY, WHICH HAS BEEN ACCEPTED BY THE DEPARTMENT IN PREVIOUS YEARS. THE ASSESSEE HAS ALSO FILED ASSESSMENT ORDER FOR A.Y. 2012 - 13, WHEREIN ALSO THE A O HAS ACCEPTED THE RENTAL INCOME DECLARED BY ASSESSEE AT RS.12,08,06,640/ - . THERE BEING NO CHANGE IN THE FACTS AND CIRCUMSTANCES, THE ASSESSING OFFICER , IN OUR OPINION , WAS TO FOLLOW THE RULE OF CONSISTENCY. A PERUSAL OF THE ASSESSMENT ORDER REVEALS THAT THE A SSESSING O FFICER WHILE TREATING THE RENTAL INCOME , RETURNED BY ASSESSEE , AS BUSINESS INCOME , HAS TAKEN INTO ACCOUNT THAT IN A.Y. 2008 - 09, THE RENTAL INCOME OF THE ASSESSEE HAS BEEN ASSESSED UNDER THE HEAD BUSINESS INCOME AND THAT THE RENT OF RS.13.7 6 CRORES SHOWN TO HAVE BEEN RECEIVED BY THE ASSESSEE IS DISPROPORTIONATE TO THE VALUE OF THE PROPERTY DECLARED IN THE BALANCE SHEET AT RS.20.24 CRORES. THE LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT THE ASSESSMENT ORDER FOR A.Y. 2008 - 09 WAS CHALLENGED BEFORE THE LD. CIT(A) WHO ACCEPTED THE CLAIM OF ASSESSEE AND THE APPEAL FILED THE REVENUE HAS ALSO BEEN DISMISSED BY THE TRIBUNAL ON THE SAME ISSUE VIDE ORDER DATED 12.03.2014, WHEREIN ALL THE OBJECTIONS RAISED BY ASSESSING OFFICE R IN THE PRESENT CASE STA ND DECIDED IN FAVOUR OF THE ASSESSEE. THE RELEVANT PART OF THE ORDER OF ITAT (SUPRA) IS REPRODUCED AS UNDER : ITA NO. 692/DEL./2013 5 7. WE HAVE HEARD BOTH THE COUNSEL AND PERUSED THE RECORDS. WE FIND THAT ASSESSEE S FIRM OWNS COMMERCIAL BUILDING NAMELY DLF ATRIA IN DLF CITY, P HASE - II, GURGAON. THIS BUILDING WAS GIVEN ON RENT TO M/S CONERGYS INDIA SERVICES (P) LTD. AND THE RENTAL INCOME RECEIVED WAS SHOWN AS INCOME FROM HOUSE PROPERTY. ASSESSEE FIRM HAS A BRANCH OFFICE WHICH IS IN TRADING IN SHARES AND THE INCOME OF WHICH WAS SH OWN AS BUSINESS INCOME. THIS RENT WAS SHOWN UNDER THE HEAD HOUSE PROPERTY FROM ASSTT. YEAR 2003 - 04 ONWARDS AND THE ASSESSMENTS FOR THE A.Y. 2006 - 07 & 2007 - 08 WERE COMPLETED U/S. 143(3) ACCEPTING THE RENTAL INCOME AS INCOME FROM HOUSE PROPERTY. 7.1 AO HAS NOT DOUBTED THE OWNERSHIP OF THE ASSESSEE OR THE FACT THAT PREMISES ARE GIVEN ON RENT. AO S OBSERVATION THAT RENTAL INCOME IS TOO HIGH IS NOT AT ALL A REASON TO TREAT THE INCOME AS INCOME FROM BUSINESS. AO HAS NOT MADE OUT ANY CASE THAT ASSESSEE HAS BEEN PROVIDING SERVICES AND HENCE, THE CLAIM OF RENTAL INCOME IS TO BE DISALLOWED. WE AGREE WITH THE LD. COUNSEL OF THE ASSESSEE THAT THE INCOME TAX ACT DOES NOT MAKE ANY DISTINCTION BETWEEN COMMERCIAL PROPERTY AND OTHER PROPERTY FOR THE CLASSIFICATIO N OF INCOME FROM HOUSE PROPERTY. IN THESE CIRCUMSTANCES, NOTHING HAS BEEN BROUGHT ON RECORD BY THE AO TO SHOW THAT THE INCOME RETURNED AS HOUSE PROPERTY IS ACTUALLY INCOME FROM BUSINESS. 7.2 IN THIS REGARD, LD. COUNSEL OF THE ASSESSEE HAS ALSO SUBMITTED THAT IF THE RENTAL INCOME IS TREATED AS INCOME FROM HOUSE PROPERTY AND PROFESSION, THEN ASSESSEE WOULD BE ENTITLED TO DEPRECIATION ON ITA NO. 2490/DEL/ 2012 6 BUILDING OF RS. 20.24 CRORES. THIS WOULD RESULT IN PROPORTIONATE REDUCTION IN THE INCOME EARNED I N THIS REGARD. 7.3 HENCE, WE AGREE THAT THERE IS NO LOGIC IN TREATING THE INCOME FROM HOUSE PROPERTY AS INCOME FROM BUSINESS. WE HOLD THAT NOTHING HAS BEEN BROUGHT ON RECORD BY THE AO TO SHOW THAT THE INCOME FROM HOUSE PROPERTY IS ACTUAL INCOME FROM BUSI NESS. 7.4 IN THIS REGARD, WE PLACE RELIANCE UPON THE HON BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. DALMIA PROMOTERS DEVELOPERS (P) LTD. 281 ITR 346, WHEREIN IT WAS HAS HELD THAT FOR REJECTING THE VIEW TAKEN IN EARLIER ASSESSMENT YEARS, THERE MU ST BE MATERIAL CHANGE IN THE FACT, SITUATION OR IN LAW. WE FIND THAT IN THIS CASE THERE IS NO CHANGE IN THE FACTS, SITUATION OR IN LAW. HENCE, THE REVENUE CANNOT BE ALLOWED TO ADOPT ITA NO. 692/DEL./2013 6 A DIFFERENT STAND. THIS IS ALSO REITERATED BY THE HON BLE APEX COURT DECIS ION IN CIT VS. EXCEL INDUSTRIES LTD. IN CIVIL APPEAL NO. 125 OF 2013 INDUSTRIES LTD. IN CIVIL APPEAL NO. 125 OF 2013 VIDE ORDER DATED VIDE ORDER DATED 08.10.2013. IN THIS CASE, IT WAS HELD THAT WHEN IN EARLIER ASSTT. YEARS THE REVENUE ACCEPTED THE ORDER OF THE TRIBUNAL IN FAVOUR OF THE ASSESSEE, THEN REVENUE CANNOT BE ALLOWED TO FLIP FLOP ON THE ISSUE AND IT OUGHT LET THE MATTER REST RATHER THAN SPEND THE TAX PAYERS MONEY IN PURSUING LITIGATION FOR THE SAKE OF IT. 8. IN THE BACKGROUND OF THE AFORESAID DIS CUSSIONS AND PRECEDENTS, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LD. CIT(A). ACCORDINGLY, WE UPHOLD THE SAME. 7. RESPECTFULLY FOLLOWING THE DECISION OF CO - ORDINATE BENCH OF ITAT, DELHI BENCHES, NEW DELHI IN THE CASE OF ASSESSEE ITSELF FOR A.Y. 2 008 - 09, WE DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER OF THE LEARNED CIT(A) AND THE SAME IS UPHELD ON THIS ISSUE. 8. THE NEXT ISSUE RELATES TO DELETION OF ADDITION OF RS.84,543/ - MADE BY THE ASSESSING OFFICER OUT OF EXPENDITURE CLAIMED BY ASSESSEE U/S. 57(III) OF THE IT ACT FOR EARNING INCOME FROM OTHER SOURCES. THE ASSESSEE DECLARED INCOME FROM OTHER SOURCES AT RS.3,21,612/ - . THE ASSESSEE DECLARED TOTAL EXPENDITURE OF RS.13,31,9 63/ - OUT OF WHICH THE ASSESSEE ITSELF DISALLOWED A SUM OF RS.12,57,420/ - ATTRIBUTABLE TO EXEMPT INCOME AND BALANCE EXPENDITURE OF RS.84,543/ - WAS CLAIMED AS DEDUCTION U/S. 57(III) OF THE IT ACT. THE ASSESSING OFFICER DISALLOWED THE SAME OBSERVING THAT THE ASSESSEE HAS NO GROUND TO MAKE SUCH A CLAIM. THE LEARNED CIT(A) DELETED THE DISALLOWANCE OBSERVING THAT IT WOULD NOT BE JUDICIOUS TO ASSUME THAT NO EXPENSES WHATSOEVER HAS BEEN INCURRED FOR EARNING AN INCOME OF RS. RS.3.21 LACS. WE DO NOT FIND ANY JUSTIFI CATION TO INTERFERE WITH THE CONCLUSION ARRIVED AT BY THE LD.CIT(A) , AS THERE IS NO MATERIAL ON RECORD TO CONTRADICT THE FINDING OF THE FIRST APPELLATE AUTHORITY. MOREOVER, THERE IS NOTHING ON RECORD TO ESTABLISH THAT THE SAID ITA NO. 692/DEL./2013 7 EXPENDITURES WERE NOT INCURRE D FOR THE PURPOSE OF BUSINESS, PARTICULARLY, WHEN THE ASSESSEE ITSELF HAS DISALLOWED SUBSTANTIAL EXPENDITURE ATTRIBUTABLE TO EXEMPT INCOME. WE, THEREFORE, CONFIRM THE ORDER OF CIT(A) ON THIS COUNT ALSO. 9. IN VIEW OF THE ABOVE DISCUSSION, THE APPEAL OF T HE REVENUE IS FOUND TO HAVE NO MERIT AND IS LIABLE TO BE DISMISSED. 10. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED. ORDE R PRONOUNCED IN THE OPEN COURT ON 16.09.2015 . SD/ - SD/ - ( C.M. GARG ) ( L.P. SAHU ) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 16.09.2015 *AKS/ - COPY OF ORDER FORWARDED TO: (1) THE APPELLANT (2) THE RESPONDENT (3) COMMISSIONER (4) CIT(A) (5) DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE BY ORDE R ASSISTANT. REGISTRAR INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES , NEW DELHI