ADDL CIT 19(3), MUMBAI V. VAISHNAV S. PURI (HUF), MUMBAI

ITA 693/MUM/2012

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 3638 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 2 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-04-2013
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: F
• Assessment Year: 2007-2008
• Appeal Filed On: 02-02-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: OM PRAKASH MEENA
• Keywords: Business income; Question of law; Notional interest
• Section: 260A; 2

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES F MUMBAI . . , / , BEFORE SHRI I.P. BANSAL, JUDICIAL MEMBER /AND SHRI RAJENDRA, ACCOUNTANT MEMBER . / ITA NO. 693/MUM/2012 ! ! ! ! / ASSESSMENT YEAR 2007-08 A.C.I.T. 19(3), ROOM NO. 305, 3 RD FLOOR, PIRAMAL CHAMBERS, PAREL MUMBAI-400 012. VS. VAISHNAV S. PURI (HUF), (PROP KAKS INTERNATIONAL) NCL BUILDING, 8 TH FLOOR, BANDRA KURLA COMPLEX, BANDRA (E), MUMBAI. PAN: AACHP 9479 P ( '# / APPELLANT ) ( $%'# / RESPONDENT ) REVENUE BY : SHRI OM PRAKASH MEENA ASSESSEE BY : SHRI AASIFA KHAN & '( / DATE OF HEARING : 09-04-2013 )*! & '( / DATE OF PRONOUNCEMENT : 19-04-2013 + / O R D E R PER RAJENDRA, A.M. THE PRESENT APPEAL IS DIRECTED AGAINST THE ORDER DT .08-11-2011 PASSED BY THE CIT(A)-30, MUMBAI. FOLLOWING ARE THE GROUNDS OF A PPEAL: (1)ON THE FACT AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW THE LEARNED CIT(A) HAS ERRED IN HOLDING THE INCOME FROM RUNNING OF BUSINESS CENT RE AS INCOME FROM BUSINESS AND NOT INCOME FROM HOUSE PROPERTY BY FOLLOWING THE DECIS ION OF THE LD. CIT(A) IN THE ASSESSEES OWN CASE FOR AY. 2003-04 TO 2006-07 WITHOUT RELYING UPON THE SUPREME COURTS DECISION IN THE CASE OF CIT VS. SHAMBHU INVESTMENTS PVT. LTD., REPORTED IN 263 ITR 143. (2)ON THE FACT AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LEARNED CIT(A) HAS FAILED TO APPRECIATE THE FACTS THAT THE HONBLE ITAT HAS D ECIDED THE ISSUE AGAINST THE ASSESSEE FOR AY. 2003-04 TO 2006-07 AND UPHELD THE ACTION OF THE ASSESSING OFFICER. (3)ON THE FACT AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW THE LEARNED CIT(A) HAS ERRED IN DELETING THE ADDITION IN ANNUAL VALUE OF THE REN TED PROPERTIES ON ACCOUNT OF NOTIONAL INTEREST ON SECURITY DEPOSIT AND ADVANCED RENT RECE IVED BY FOLLOWING THE DECISION OF THE LD. CIT(A) IN THE ASSESSEES OWN CASE FOR A.Y. 2003-04 TO 2006-07 WITHOUT APPRECIATING THE DECISION OF SUPREME COURT IN THE CASE OF BHAGWANDAS JAIN VS. UNION OF INDIA REPORTED IN 128 ITR 315 AND DECISION OF THE HONBLE ITAT IN THE CASE OF TIVOLI INVESTMENT AND TRADING CO. PVT LTD., REPORTED IN 90 ITD 163 MUMBAI. ITA NO. 693/MUM/2012 VAISHNAV S. PURI (HUF) 2 THE APPELLANT PRAYS THAT THE ORDER OF THE CIT(A) ON THE ABOVE GROUND BE SET ASIDE AND THAT OF THE AO MAY BE RESTORED. (5) THE APPELLANT CRAVES LEAVE TO AMEND OR ALTER AN Y GROUND OR ADD A NEW GROUND WHICH MAY BE NECESSARY. 2. ASSESSEE-HUF, ENGAGED IN THE BUSINESS OF PROVIDING FACILITIES OF BUSINESS CENTER WITH INFRASTRUCTURE FACILITIES, FILED ITS RETURN OF INCOME ON 29.10.2007DECLARING TOTAL INCOME OF RS.1.84 CRORES. ASSESSING OFFICER (AO) FI NALISED THE ASSESSMENT ORDER U/S.143(3) OF THE INCOME-TAX ACT,1961 (ACT),ON 21.1 2.2009, DETERMINING THE TOTAL INCOME AT RS.2.08CRORES. ORDER U/S. 158A(6) OF THE ACT ON GROUND NOS. 1 & 2 OF THE REVENUE : 2.1. FIRST TWO GROUNDS OF APPEAL PERTAIN TO TREATING INC OME FROM BUSINESS; IN RESPECT OF PROVIDING BUSINESS CENTRE AS INCOME FRO M HOUSE PROPERTY. DURING THE ASSESSMENT PROCEEDINGS AO FOUND THAT THE APPELLANT WAS ENGAGED IN THE BUSINESS OF PROVIDING BUSINESS CENTRE AND OTHER RELATED SERVICE S, THAT IT HAD RECEIVED SERVICE CHARGES FROM PROVIDING BUSINESS CENTRE FACILITIES A MOUNTING TO RS. 3,13,47,736/- FOR THE YEAR UNDER CONSIDERATION. AFTER PERUSING THE A GREEMENTS FOR RENTS AO HELD THAT THE ASSESSEE WAS BASICALLY INTERESTED TO HAVE THE R ENTAL INCOME FROM THE SAID PREMISES. HE HELD THAT INCOME EARNED BY THE ASSESSEE-HUF HAD TO BE ASSESSED UNDER THE HEAD INCOME FROM HOUSE PROPERTY AND NOT UNDER THE HEAD BUSINESS INCOME. 2.2. AGAINST THE ORDER OF THE AO ASSESSEE PREFERRED AN A PPEAL BEFORE THE FIRST APPEAL AUTHORITY (FAA). AFTER CONSIDERING THE SUBM ISSION OF THE ASSESSEE AND THE ORDER OF THE AO FAA HELD THAT ISSUE OF BUSINESS INC OME OR RENTAL INCOME WAS DECIDED IN FAVOUR OF THE ASSESSEE BY HIS PREDECESSORS WHILE ADJUDICATING THE APPEALS FOR THE AYS.2003-04 TO 2006-07. FOLLOWING THE ORDERS OF TH E EARLIER AYS., HE HELD THAT INCOME FROM THE BUSINESS CENTER HAS TO BE ASSESSED UNDER THE HEAD INCOME FROM BUSINESS. 2.3. BEFORE US, DEPARTMENTAL REPRESENTATIVE (DR) SUBMITT ED THAT MATTER WAS DECIDED AGAINST THE ASSESSEE-HUF BY THE TRIBUNAL FO R THE EARLIER AYS., THAT FOLLOWING THE SAME, THESE GROUNDS SHOULD BE DISMISSED. AUTHOR ISED REPRESENTATIVE (AR) SUBMITTED THAT AGAINST THE ORDER OF THE ITAT ASSESS EE HAD FILED APPEAL BEFORE THE HONBLE BOMBAY HIGH COURT AND HONBLE COURT HAD ADM ITTED THE APPEAL VIDE ITS ORDER DATED 08-02-2013(INCOME TAX APPEAL NOS.,1411O F 2011,1412 OF 2011,1413 OF 2011 AND 456 OF 2012.) ASSESSEE FILED FORM NO.8 AS PER RULE 16 OF ITAT RULES,1963 IN THIS REGARD AND MADE A DECLARATION U/S.158A(1) O F THE ACT. IN THE DECLARATION FOLLOWING SUBMISSIONS WERE MADE: I, VAISHNAV S. PURI, SON OF SHRI SHORILAL PURI BEIN G THE KARTA OF VAISHNAV S PURI HINDU UNDIVIDED FAMILY DO HEREBY DECLARE: 1.THAT THE FOLLOWING QUESTION(S) OF LAW ARE PENDING IN THE CASE OF VAISHNAV S PURI HUF BEFORE THE HIGH COURT IN AN APPEAL UNDER SECTION 26 0A OF THE INCOME TAX ACT, 1961 IN RESPECT OF THE ASSESS- MENT YEARS 2003 -04 TO 2006-07. A COPY OF THE QUESTION OF LAW REFERRED TO THE HIGH COURT FOR THE ASSESSMENT YEARS 2003-04 TO 2006-07 IS ENCLOSED HEREWITH. ITA NO. 693/MUM/2012 VAISHNAV S. PURI (HUF) 3 2.THAT THE SAID QUESTION OF LAW IS IDENTICAL WITH T HE QUESTION OF LAW ARISING IN THE CASE VAISHNAV S PURI HUF IN RESPECT OF THE ASSESSMENT YE AR 2007-08 WHICH IS PENDING BEFORE THE HONBLE INCOME TAX APPELLATE TRIBUNAL. 3.THAT IF THE INCOME TAX APPELLATE TRIBUNAL AGREES TO APPLY TO THE CASE REFERRED TO IN PARAGRAPH 2 ABOVE THE FINAL DECISION ON THE QUESTIO N OF LAW IN THE CASE REFERRED TO IN PARAGRAPH 1 ABOVE, THE ASSESSEE MENTIONED IN PARAGR APHS 1 AND 2 ABOVE, SHALL NOT RAISE THE SAID QUESTION OF LAW IN THE CASE REFERRED TO III PA RAGRAPH 2 ABOVE IN APPEAL BEFORE ANY APPELLATE AUTHORITY OR FOR A REFERENCE BEFORE THE H IGH COURT UNDER SECTION 260A OR THE SUPREME COURT UNDER SECTION UNDER SECTION 261OR IN APPEAL BEFORE THE SUPREME COURT UNDER SECTION 257. ALONG WITH THE ABOVE DECLARATION, ASSESSEE HAS SUB MITTED THE ORDER OF THE HONBLE HIGH COURT WHICH IS DT. 11-01-2013 IN INCOM E TAX APPEAL NO. 1411/2011 IN WHICH THE FOLLOWING QUESTION HAS BEEN PASSED: HEARD ADMIT ON THE FOLLOWING REFRAMED SUBSTANTI AL QUESTION OF LAW: WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CAS E THE RECEIPTS UNDER VARIOUS AGREEMENTS ARE INCOME FROM BUSINESS OR INCOME FROM OTHER SOURCES OR INCOME FROM HOUSE PROPERTY 2. TO BE HEARD ALONG WITH INCOME TAX APPEAL NO. 3 343 OF 2009. ACCORDING TO THE DECLARATION, IT IS THE CASE OF THE ASSESSEE THAT IDENTICAL QUESTION OF LAW IS PENDING BEFORE THE HONBLE HIGH COURT. THEREFORE, AN ORDER UNDER SUB-SECTION 3 OF SECTION 158(A) SHOULD BE PASSED AS THE ASSESSEE SHALL NOT RAISE SUCH QUESTION OF LAW IN THE PRESENT CASE AND FINAL DECIS ION ON QUESTION OF LAW SHOULD BE APPLIED. COPY OF THE DECLARATION WAS ALSO GIVEN TO LD. DR WHO DID NOT OBJECT THAT THE QUESTION OF LAW ARISES IN GROUND NOS. 1 & 2 IS IDEN TICAL TO THE QUESTION OF LAW RAISED BY THE ASSESSEE BEFORE HONBLE HIGH COURT. IN THIS VIEW OF THE SITUATION, AFTER HEARING BOTH THE PARTIES, WE ADMIT THE CLAIM OF THE ASSESSEE UNDER THE PROVISIONS OF SUB-SECTION (3) OF 158(A) AND DECIDE THESE GROUNDS AGAINST THE ASSESSEE WITH THE DIRECTION THA T WHENEVER QUESTION OF LAW RAISED BY THE ASSESSEE BEFORE HONBLE HIGH COURT IN EARLIE R YEARS IS REPLIED THE SAME DECISION WILL APPLY TO THESE GROUNDS. IN OTHER WOR DS, IF THE EARLIER VIEW TAKEN BY ITAT IN RESPECT OF AYS. 2003-04 TO 2006-07 IS UPHEL D THEN THIS ORDER OF THE TRIBUNAL WILL STAND ON THESE GROUNDS AND IF THE ORDER OF THE HONBLE HIGH COURT ON THIS QUESTION IS OTHERWISE THAN APPLYING THE SAME, THIS ORDER OF THE TRIBUNAL WILL BE MODIFIED BY THE AO. WITH THESE DIRECTIONS, GROUND NOS. 1 & 2 FILED BY THE REVENUE IS DISPOSED-OFF UNDER THE PROVISIONS OF SUB-SECTION (6) OF SECTION 158(A) AND THESE GROUNDS OF REVENUE ARE ALLOWED. ORDER U/S. 254(1) ON OTHER GROUNDS: 3. NEXT EFFECTIVE GROUND OF APPEAL IS ABOUT DELETING O F ADDITION, MADE BY THE AO, ON ACCOUNT OF NOTIONAL INTEREST ON SECURITY DEP OSIT AND ADVANCED RENT RECEIVED. DURING THE ASSESSMENT PROCEEDINGS AO FOUND THAT THE ASSESSEE; FOR THE AY UNDER CONSIDERATION; HAD RECEIVED TOTAL SECURITY OF RS.1. 55 CRORES FOR DIFFERENT PROPERTIES, THAT RENT RECEIVED WAS VERY NOMINAL, THAT SAME WAS RECEIVED IN FORM OF SECURITY AND ADVANCE RENT. FINALLY HE MADE AN ADDITION OF RS.15 ,58,700/- ITA NO. 693/MUM/2012 VAISHNAV S. PURI (HUF) 4 (10% OF THE DEPOSITS) TO THE INCOME OF THE ASSESSEE -HUF. 3.1. AGAINST THE ORDER OF THE AO ASSESSEE PREFERRED AN A PPEAL BEFORE THE FAA. HE HELD THAT ISSUE OF NOTIONAL INTEREST ON DEPOSITS/AD VANCES WAS DECIDED IN FAVOUR OF THE ASSESSEE BY HIS PREDECESSORS WHILE DECIDING THE APP EALS FOR THE AYS. 2003-04 TO 2006-07. FOLLOWING THE ORDERS OF THE EARLIER AYS., HE DELETED THE ADDITION MADE BY THE AO. 3.2. BEFORE US, DR SUBMITTED THAT FAA HAD NOT CONSIDERED THE JUDGMENTS OF THE HONBLE APEX COURT DELIVERED IN THE CASE OF BHAGWAN DAS JAIN(128ITR315) AND THE DECISION OF THE TRIVOLI INVESTMENT AND TRADING CO. PVT. LTD.(90ITD163). AR SUBMITTED THAT COMMISSIONER OF INCOME-TAX -19, MUMB AI HAD FILED APPEALS AGAINST THE ORDER OF THE TRIBUNAL FOR THE SAME ISSUE IN ASS ESSEES OWN CASE , THAT HONBLE HIGH COURT HAD DISMISSED THE APPEAL FILED BY THE DEPARTM ENT VIDE ORDER DTD.04-07-2012. 3.3. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. IT IS FOUND THAT HONBLE JURISDICTIONAL HIGH COURT HAD FR AMED THE FOLLOWING QUESTION IN ASSESSEES OWN CASE WHILE DECIDING THE APPEAL NOS. 2196 OF 2011, 2202 OF 2011, 2205 OF 2011 AND 385 OF 2012. WHETHER ON THE FACTS AND CIRCUMSTANCES. OF THE CASE AND IN LAW, THE TRIBUNAL WAS JUSTIFIED IN UPHOLDING THE ORDER OF THE CIT(A) HOLD ING THAT THE NOTIONAL INTEREST INCOME ON THE SECURITY DEPOSIT / ADVANCE RENT CANNO T BE INCLUDED IN THE INCOME FROM PROPERTY FOR THE PURPOSE OF SECTION 23(1) (A) OF TH E INCOME TAX ACT, 1961? ABOVE-REFERRED QUESTION WAS ANSWERED IN FAVOUR OF T HE ASSESSEE BY THE HONBLE COURT BY HOLDING THE FOLLOWING : THE QUESTION AS RAISED DOES NOT ARISE IN THIS CASE . IT WAS NOT CONTENDED BY THE APPELLANT THAT THE AMOUNT RECEIVABLE UNDER SECTION 23(1) (A) WAS HIGHER THAN THE RENT ACTUALLY RECEIVED. IT IS AN ADMITTED POSITION THAT THE PROPERTY HAS BEEN LET AND THE MATTER IS THEREFORE GOVERNED BY SECTION 23(1) (B) O F THE ACT. THE QUESTION IS THEREFORE ANSWERED AGAINST THE APPELLANT-REVENUE BY THE JUDGM ENT OF THIS COURT IN COMMISSIONER OF INCOME TAX VERSUS J. K. INVESTORS ( BOMBAY) LTD 248 ITR 723. RESPECTFULLY FOLLOWING THE ABOVE ORDER OF THE JURIS DICTIONAL HIGH COURT WE DECIDED LAST GROUND OF APPEAL IN FAVOUR OF THE ASSE SSEE. AS A RESULT, APPEAL FILED BY THE AO STANDS PARTLY ALLOWED. , - -( / 01 & 2 + - 34 & ' 56. ORDER PRONOUNCED IN THE OPEN COURT ON 19 TH APRIL, 2013 + & )*! 8 9 19 $6,2013 * & 2 ? SD/- SD/- ( . . / I.P. BANSAL ) ( / RAJENDRA ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER / MUMBAI, 9 / DATE: 19 TH APRIL, 2013 TNMM ITA NO. 693/MUM/2012 VAISHNAV S. PURI (HUF) 5 + + + + & && & $'@ $'@ $'@ $'@ A@!' A@!' A@!' A@!' / COPY OF THE ORDER FORWARDED TO : 1. APP ELLANT 2. RESPONDENT 3. THE CONCERNED CIT (A) 4. THE CONCERNED CIT 5. DR F BENCH, ITAT, MUMBAI 6. GUARD FILE %@' $' //TRUE COPY// + + + + / BY ORDER, B BB B / 5 5 5 5 DY./ASST. REGISTRAR , / ITAT, MUMBAI