Suryavardhan Estates (P) Ltd., CHENNAI V. ACIT, CHENNAI

ITA 697/CHNY/2017

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 5999 (ITAT-CHENNAI)
• Duration Of Justice: 6 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-10-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2012-2013
• Appeal Filed On: 22-03-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: ASISH TRIPATHI JT
• Keywords: Capital asset; Business income; Depreciation; Additional depreciation
• Section: 143(3); 12; 28

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL BENCH C, CHENNAI , ! . '# , $ %& ' BEFORE SHRI SANJAY ARORA, ACCOUNTANT MEMBER AND SHRI DUVVURU RL REDDY, JUDICIAL MEMBER ./ITA NO.462/MDS/2017 & C.O NO.36/MDS/2017 $ ( )( / ASSESSMENT YEAR : 2012-13 DY. COMMISSIONER OF INCOME TAX, CORPORATE CIRCLE-6(2), AAYAKAR BHAVAN, NEW BLOCK, 7 TH FLOOR, 121, M.G.ROAD, CHENNAI 600 034. VS. SURYAVARDHAN ESTATES PVT. LTD., 6 TH FLOOR, DHUN BUILDING, NO.827, ANNASALAI, CHENNAI 600 002. [PAN: AAJCS 5120M] ( /APPELLANT ) ( / RESPONDENT ) ./ITA NO.697/MDS/2017 $ ( )( / ASSESSMENT YEAR : 2012-13 ASST. COMMISSIONER OF INCOME TAX, CORPORATE CIRCLE-6, CHENNAI. VS. SURYAVARDHAN ESTATES PVT. LTD., 6 TH FLOOR, DHUN BUILDING, NO.827, ANNASALAI, CHENNAI 600 002. [PAN: AAJCS 5120M] ( /APPELLANT ) ( / RESPONDENT ) *+ - . / APPELLANT BY : SHRI ASISH TRIPATHI, JT. CIT /0*+ - . / RESPONDENT BY : SHRI V.S.JAYAKUMAR, ADVOCATE SHRI M.CHIDAMBARAM, FCA - 1 / DATE OF HEARING : 25.07.2017 2) - 1 / DATE OF PRONOUNCEMENT : 17.10.2017 /ORDER PER SANJAY ARORA, AM : 2 ITA NO.462 & 697/MDS/2017 & C.O NO.36/MDS/2017 SURYAVARDHAN ESTATES PVT. LTD. (AY 2012-13) THESE ARE CROSS APPEALS BY THE ASSESSEE AND THE RE VENUE DIRECTED AGAINST THE ORDER BY THE COMMISSIONER OF INCOME TAX (APPEAL S)-15, CHENNAI (CIT(A) FOR SHORT) DATED 07/11/2016, ALLOWING THE ASSESSEES APPEAL CONTESTING ITS ASSESSMENT U/S. 143(3) OF THE INCOME TAX ACT, 1 961 (THE ACT HEREINAFTER) FOR ASSESSMENT YEAR (AY) 2012-13 VIDE THE ORDER DAT ED 27.03.2015. THE ASSESSEE HAS IN ADDITION ALSO PREFERRED A CROSS OBJ ECTION. 2. THE BACKGROUND FACTS OF THE CASE IN BRIEF ARE TH AT THE ASSESSEE IS A COMPANY IN THE BUSINESS OF CIVIL CONTRACTORS AND FLAT PROMO TERS, FOLLOWING MERCANTILE SYSTEM OF ACCOUNTING. DURING THE COURSE OF ASSESSME NT PROCEEDINGS, THE ASSESSING OFFICER (AO), ON A PERUSAL OF THE NOTES F ORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDING 31.03.2012, OBSERVED THE ASSESSEE TO HAVE UNSOLD FINISHED STOCK OF 75,060 SQUARE FEET IN RESPECT OF A RESIDENTIAL BUILDING BY THE NAME VICTORIA TOWERS AT SIRUSERI, OMR, CHENNAI. S IMILARLY, IT HELD UNSOLD AREA TO THE EXTENT OF 40,477 SQ. FT. IN A SHOPPING COMPLEX BY THE NAME CORROMANDEL PLAZA, AT NAVALUR, OMR, CHENNAI. THE ANNUAL VALUE (AV) THEREOF IN TERMS OF S. 23 WAS, IS IN HIS VIEW, LIAB LE TO BE ASSESSED AS INCOME FROM HOUSE PROPERTY U/S. 22 OF THE ACT. ACCORDINGLY, THE AVERAGE RENTAL VALUE REALIZED BY THE ASSESSEE DURING THE YEAR WAS APPLIED BY HIM TO THE UNSOLD AREA AS AT THE YEAR-END, AND BROUGHT TO TAX AS INCOME FROM HOUSE P ROPERTY AT . 4,04,37,950/-, I.E., AFTER ALLOWING STANDARD DEDUCTION @ 30% OF TH E ANNUAL VALUE U/S. 24(A). IN APPEAL, THE LD. CIT(A) WAS OF THE VIEW THAT IN-AS-M UCH AS THE RESIDENTIAL APARTMENTS IN VICTORIA TOWERS REPRESENT THE ASSESSE ES TRADING STOCK, I.E., BUSINESS ASSETS, THERE WAS NO QUESTION OF THEIR REN TAL VALUE BEING ASSESSED AS INCOME FROM HOUSE PROPERTY, I.E., WHERE THE MAIN OB JECT OF THE APPELLANT COMPANY IS, AS STATED, TO ACQUIRE AND HOLD PROPERTI ES. SUBJECT TO THE DIRECTION TO THE AO TO VERIFY THE MAIN OBJECTS AS BEING IN CONSO NANCE WITH ITS ACTIVITIES, HE ALLOWED THE ASSESSEES CLAIM. THE ISSUE OF ASSESSME NT OF THE ANNUAL LETTING VALUE 3 ITA NO.462 & 697/MDS/2017 & C.O NO.36/MDS/2017 SURYAVARDHAN ESTATES PVT. LTD. (AY 2012-13) (ALV) OF THE UNSOLD FLATS WAS DISPOSED BY HIM ACCOR DINGLY. AS REGARDS THE AV OF THE UNSOLD SHOPS AT THE SHOPPING MALL, IT WAS FO UND BY HIM THAT THE ASSESSEE WAS PROVIDING VARIOUS COMMON FACILITIES AND SERVICE S, VIZ. CLEANING & MAINTENANCE, ESCALATORS, CENTRALIZED AIR CONDITIONI NG, REST ROOMS, SECURITY, FIRE FIGHTING, WATER PURIFICATION, SEWER TREATMENT AND N ET CONNECTIVITY. IN FACT, THE ASSESSEE ALSO MAINTAINED MAINTENANCE STAFF, VIZ. WA TCH & WARD, PLUMBERS, ELECTRICIANS, SUPERVISORS, LIFT OPERATORS, MANAGERS , ETC. THESE SERVICES AND FACILITIES, WHICH WERE PROVIDED TO THE TENANTS EITH ER FREE OR AT A CHARGE, WERE INSEPARABLE TO THE LETTING OF THE FLOOR SPACE (SHOP S), GIVEN ON LEAVE AND LICENSE BASIS TO THE CUSTOMERS. THE ASSESSEE COMPANY WAS ON LY EXPLOITING ITS IMMOVABLE PROPERTY BY WAY OF COMPLEX COMMERCIAL ACT IVITIES. THE RENTAL INCOME THERE-FROM WAS ACCORDINGLY ASSESSABLE AS BUS INESS INCOME, RELYING ON THE DECISION IN THE CASE OF CIT V. PRAKASH AGNIHOTRI [2014] 46 TAXMANN.COM 145 (ALL) AND PFH MALL AND RETAIL MANAGEMENT LTD . [2008] 110 ITD 337 (KOL) (SB). THE QUESTION OF COMPUTING THE ANNUAL VALUE, I .E., THE NOTIONAL RENT, OF THE AREA NOT LET DOES NOT THUS ARISE. THE SECOND ISSUE ARISING IN THE INSTANT APPEALS IS THE ASSESSEES CLAIM FOR ADDITIONAL DEPRECIATION (@ 10 PER CENT) ON CAR PARK ING FACILITY (AT . 1,24,81,645/-) AND ON PLANT AND MACHINERY (AT . 9,06,357/-) INSTALLED, AT THE SHOPPING COMPLEX, DISALLOWED BY THE AO ON THE GROUN D THAT IT WAS IN THE BUSINESS OF CONSTRUCTION, WHICH IS NOT INCLUDED IN THE DEFINITION OF MANUFACTURING U/S. 2(29BA) OF THE ACT (REFER PARA 4 .2 OF THE ASSESSMENT ORDER). THIS ASPECT, HOWEVER, REMAINED TO BE ADJUDICATED BY THE LD. CIT(A), WHICH IS THUS THE SUBJECT MATTER OF THE ASSESSEES APPEAL, W HO HAS ALSO PREFERRED A CROSS OBJECTION, RAISING IDENTICAL GROUNDS. WE MAY THOUGH MENTION THAT THE ASSESSEES APPEAL IS DELAYED BY A PERIOD OF 72 DAYS, WHICH IS NOT EXPLAINED, WITH THE APPEAL EVEN NOT ACCOMPANIED BY ANY CONDONATION PETITION. T HE SAME IS THEREFORE NOT MAINTAINABLE. 4 ITA NO.462 & 697/MDS/2017 & C.O NO.36/MDS/2017 SURYAVARDHAN ESTATES PVT. LTD. (AY 2012-13) THE SUBJECT MATTER OF THE REVENUES CHALLENGE, ON THE OTHER HAND, PER ITS GDS. 2.1 TO 2.6, IS THE ADJUDICATION BY THE LD. CIT (A) QUA THE FIRST ISSUE. THE REVENUES STAND IS TWO FOLD, I.E., ON PROCEDURE AS WELL AS ON MERITS. QUA PROCEDURE, IT IS CLAIMED THAT THE LD. CIT(A) OUGHT NOT TO HAVE DIRECTED THE AO TO VERIFY THE MEMORANDUM OF ASSOCIATION (MOA), I.E., QUA THE VICTORIA TOWER CONSTRUCTION. HE SHOULD HAVE, INSTEAD, ADMITTING AD DITIONAL EVIDENCE IN THE FORM OF MOA U/R. 46A, SOUGHT THE AOS CONSIDERATION IN T HE MATTER AND DECIDED ACCORDINGLY. ON MERITS, THE REVENUES GRIEVANCE (PE R GD.2.1 (PART) & 2.6) IS THAT THE RENTAL INCOME OF HOUSE PROPERTY, EVEN IF A COMMERCIAL COMPLEX, WAS ASSESSABLE AS INCOME FROM HOUSE PROPERTY U/S. 22, R ELYING ON THE DECISION IN THE CASE OF KEYARAM HOTELS P. LTD. V. DY. CIT [2015] 373 ITR 494 (MAD), SLP AGAINST WHICH STANDS DISMISSED VIDE [2015] 325 TAXM ANN 512 (SC). GD. 2.5, WE MAY CLARIFY, SPEAKS OF INVESTMENT OF NET CONSIDERAT ION WITHIN THE STIPULATED PERIOD AS A BASIS OF THE EXTENSION OF BENEFIT U/S. 54/54F. WE FIND NO RELEVANCE OF THE SAME IN THE PRESENT CASE NOR ANY ARGUMENT IN RE SPECT OF THIS GROUND WAS ADVANCED DURING HEARING, SO THAT THE SAME IS DISMIS SED AS WITHOUT MERIT. 3. WE HAVE HEARD THE PARTIES, AND PERUSED THE MATER IAL ON RECORD. THE ISSUE, ON MERITS, WHICH IS QUA BOTH THE PROPERTIES, IS CLEARLY AS TO WHETHER A HOUSE PROPERTY OWNED BY THE ASSESSEE, HEL D FOR BEING EITHER SOLD, AS IN THE CASE OF RESIDENTIAL FLATS AT VICTORIA TOWERS, O R FOR BEING LET, AS IN THE CASE OF THE SHOPPING COMPLEX, IS LIABLE TO BE ASSESSED AS I NCOME FROM HOUSE PROPERTY U/S. 22. THE REVENUES OBJECTION ON THE PROCEDURE F OLLOWED BY THE LD. CIT(A) IS OF LITTLE MOMENT IN-AS-MUCH AS IT IS CLEAR THAT IN HIS VIEW IF THE ASSESSEES ACTIVITY OF CONSTRUCTION AND SALE OF RESIDENTIAL FL ATS FALLS WITHIN THE MAIN OBJECTS OF THE COMPANY, THE RENTAL VALUE OF THE UNSOLD FLAT S AS AT THE YEAR-END COULD NOT BE CONSIDERED FOR BEING SUBJECT TO TAX ON THEIR ANN UAL VALUE. IT IS CLEAR THAT THE LD. CIT(A) REGARDS THE ASSESSEES MAIN OBJECT/S AS RELEVANT IN DECIDING THE ISSUE. 5 ITA NO.462 & 697/MDS/2017 & C.O NO.36/MDS/2017 SURYAVARDHAN ESTATES PVT. LTD. (AY 2012-13) HE IS WELL HIS POWERS, WHICH ARE COTERMINUS WITH TH AT OF THE AO, TO HAVE CALLED FOR AND EXAMINED THE ASSESSEES MOA, AND DECIDE ACC ORDINGLY. THAT HE HAS NOT IS APPARENT FROM THE ABSENCE OF ANY CERTIFICATE TO THAT EFFECT BELOW THE INDEX OF PAPERS FURNISHED BEFORE US BY WAY OF PAPER-BOOK, AS WELL AS THE ASSESSEES APPLICATION U/R. 10 OF THE ITAT RULES, 1963, STATIN G THAT IN-AS-MUCH AS THE DOCUMENTS LISTED AT THE SPECIFIED SERIAL NUMBERS OF THE INDEX, WHICH INCLUDES THE MOA, THE SAME MAY BE TAKEN ON RECORD . IN FACT, HE OUGHT TO HAVE, IN THE INTEREST OF JUSTICE AND FAIRNESS OF PROCEDURE, REQUIRED ITS EXAMINATION BY THE AO, OBTAINING HIS COMMENTS THEREON, AND MEETING THE SAM E. HOWEVER, AS APPARENT, THE BASIS OF HIS DECISION IS THE RELEVANCE OF THE A SSESSEES OBJECT CHARTER, AND FOR WHICH HE RELIES ON THE DECISION IN CHENNAI PROPERTIES & INVESTMENTS LTD. V. CIT [2015] 373 ITR 673 (SC). THE LD. CIT(A) RELYING ON THE DECISION BY THE APEX COURT FOR REGARDING THE MAIN OBJECTS AS RELEVANT, T HE REVENUES OBJECTION QUA THE PROCEDURAL ASPECT WOULD NOT BE OF MUCH CONSEQUE NCE EVEN AS, WITHOUT DOUBT, ON MERITS, IT COULD QUESTION THE SAME, WHICH IT DOES. THE REVENUE OBJECTION QUA PROCEDURE FAILS. COMING TO GDS. 2.1 (PART) AND 2.6; GD. 2.5 HAVING B EEN ALREADY DISMISSED, WE MAY VISIT THE LAW AS EXPLAINED BY THE HIGHER COURTS OF LAW. ANY INCOME ARISING OR ACCRUING OR RECEIVED BY THE ASSES SEE DURING THE RELEVANT PREVIOUS YEAR, OR DEEMED TO BE SO UNDER THE ACT, I. E., FROM ANY SOURCE, IS TO BE CLASSIFIED UNDER ANY OF THE SIX (NOW, FIVE) SPECIFI ED HEADS OF INCOME ON THE BASIS OF ITS SOURCE. THE SAID HEADS, AS EXPLAINED P ER ITS CONSTITUTIONAL BENCH DECISION BY THE APEX COURT IN SULTAN BROTHERS (P.) LTD. V. CIT [1964] 51 ITR 353 (SC), ARE MUTUALLY EXCLUSIVE, SO THAT IT CANNOT BE SAID THAT ONE IS MORE SPECIFIC THAN THE OTHER, AND ONCE AN INCOME IS ASSI GNABLE TO ONE, IT CANNOT BE TAXED UNDER ANOTHER; THE RELEVANT PART OF THE JUDGM ENT READING AS UNDER: THE SEVERAL HEADS OF INCOME MENTIONED IN SECTION 6 OF THE INCOME TAX ACT, 1922, AND DEALT WITH SEPARATELY IN SECTIONS 7 TO 12 ARE MUTUALLY EXCLUSIVE, EACH HEAD BEING SPECIFIC TO COVER THE INCOME ARISIN G FROM A PARTICULAR 6 ITA NO.462 & 697/MDS/2017 & C.O NO.36/MDS/2017 SURYAVARDHAN ESTATES PVT. LTD. (AY 2012-13) SOURCE , AND IT CANNOT BE SAID THAT ANY ONE OF THESE SECTI ONS IS MORE SPECIFIC THAN ANOTHER. THEREFORE, A PARTICULAR VARIETY OF IN COME MUST BE ASSIGNABLE TO ONE OR THE OTHER OF THESE SECTIONS. IF THE INCOM E UNDER CONSIDERATION IS TAXABLE UNDER SECTION 9 OR SECTION 10, THEN IT CANN OT BE TAXED UNDER SECTION 12. [EMPHASIS, OURS] INCOMES NOT FALLING UNDER ANY OF THE SPECIFIED SOUR CES WOULD FALL UNDER THE RESIDUARY HEAD, I.E., INCOME FROM OTHER SOURCES ( CHAPTER IV-F), WHICH SPECIFIES CERTAIN CATEGORIES OF INCOMES AS WELL, VI Z., DIVIDEND INCOME; INCOME FROM LETTING OF HOUSE PROPERTY BY A PERSON WHO IS N OT THE OWNER THEREOF; WHERE THE SAME IS LET (BY THE OWNER) ALONG WITH OTHER ASS ETS, I.E., FURNITURE, PLANT OR MACHINERY, UNDER THE CONDITION OF THE TWO LETTINGS BEING INSEPERABLE, ETC. IN THIS CONTEXT, IT MAY BE CLARIFIED THAT, FOR THE PURPOSE OF S. 22, THE OWNER IS THE PERSON WHO CAN EXERCISE THE RIGHTS OF THE OWNER, I.E., NOT ON BEHALF OF ANOTHER, BUT IN HIS OWN RIGHT. IN OTHER WORDS, IS A PERSON WHO IS ENTIT LED TO RECEIVE INCOME FROM HOUSE PROPERTY IN HIS OWN RIGHT ( R.B. JODHAMAL KUTHIALA V . CIT [1971] 82 ITR 570, 575, 578-9 (SC); CIT V. PODAR CEMENT PVT. LTD. [1997] 226 ITR 625, 647, 653 (SC)). OWNERSHIP OF HOUSE PROPERTY, HOWSOEVER PROFITABLE, IT WAS CLARIFIED IN CIT VS. NATIONAL STORAGE PVT. LTD. [1963] 48 ITR 577 (594) (BOM), CANNOT BE A BUSINESS OR TRADE UNDER THE ACT. FURTHER, WHERE INCOME FALLS UNDER ANY OF THE SPECIFIC HEADS, IT HAS GOT TO BE COMPUTED UNDER THA T HEAD ONLY AND IN THE MANNER SPECIFIED UNDER THE ACT. SECTION 22 IS THE CHARGING SECTION IN RESPECT OF INCOME FROM HOUSE PROPERTY (CHAPTER-IV-C OF THE ACT ) AND READS AS UNDER: CHAPTER-IV COMPUTATION OF TOTAL INCOME FROM HOUSE PROPERTY INCOME FROM HOUSE PROPERTY. 22. THE ANNUAL VALUE OF PROPERTY CONSISTING OF ANY BUI LDINGS OR LANDS APPURTENANT THERETO OF WHICH THE ASSESSEE IS THE OW NER, OTHER THAN SUCH PORTIONS OF SUCH PROPERTY AS HE MAY OCCUPY FOR THE PURPOSES OF ANY BUSINESS OR PROFESSION CARRIED ON BY HIM THE PROFITS OF WHIC H ARE CHARGEABLE TO INCOMETAX, SHALL BE CHARGEABLE TO INCOME-TAX UNDER THE HEAD INCOME FROM HOUSE PROPERTY. 7 ITA NO.462 & 697/MDS/2017 & C.O NO.36/MDS/2017 SURYAVARDHAN ESTATES PVT. LTD. (AY 2012-13) SECTION 23 DEFINES THE ANNUAL VALUE OF THE PROPERTY , WHICH IS THE SUBJECT MATTER OF CHARGE U/S. 22, AS WELL AS PROVIDES THE MANNER O F ITS DETERMINATION, AND READS AS UNDER: ANNUAL VALUE HOW DETERMINED. 23. (1) FOR THE PURPOSES OF SECTION 22, THE ANNUAL VAL UE OF ANY PROPERTY SHALL BE DEEMED TO BE ( A ) THE SUM FOR WHICH THE PROPERTY MIGHT REASONABLY B E EXPECTED TO LET FROM YEAR TO YEAR; OR ( B ) WHERE THE PROPERTY OR ANY PART OF THE PROPERTY IS LET AND THE ACTUAL RENT RECEIVED OR RECEIVABLE BY THE OWNER IN RESPECT THEREOF IS IN EXCESS OF THE SUM REFERRED TO IN CLAUSE ( A ), THE AMOUNT SO RECEIVED OR RECEIVABLE; OR ( C ) PROVIDED . ANNUAL VALUE (AV) OF A HOUSE PROPERTY U/S. 23(1)(A) IS THE SUM AT WHICH THE PROPERTY MAY REASONABLY BE EXPECTED TO BE LET FROM YEAR TO YEAR. THIS IS OF COURSE SUBJECT TO THE ACTUAL RENT, WHERE LET, BEING NOT IN EXCESS, SO THAT THE HIGHER SUM, WHERE SO, SHALL BE ADOPTED AS THE AV. O NCE AN INCOME IS DERIVED FROM HOUSE PROPERTY, HOW WOULD, ONE MAY ASK, IT MAT TER WHETHER THE LETTING IS UNDERTAKEN AS A BUSINESS OR OTHERWISE. WHY, INCOME FROM HOUSE PROPERTY WOULD STAND TO BE ASSESSED EVEN IF THE PROPERTY UNDER REF ERENCE IS NOT ACTUALLY LET, I.E., ON THE BASIS OF THE REASONABLE RENT THAT IT IS EXPE CTED TO FETCH ON A REGULAR BASIS . THAT IS, SEEKS TO BRING TO TAX THE INCOME POTENTIAL OF A PROPERTY IRRESPECTIVE OF WHETHER IT IS REALIZED OR NOT. IT IS FOR THIS REASO N THAT THE HON'BLE COURTS HAVE REGARDED THE OWNERSHIP (OF THE HOUSE PROPERTY) PER SE AS THE BASIS FOR THE CHARGE OF RENTAL INCOME TO TAX UNDER THE ACT. THE CONCLUSIONS DRAWN IN THE MATTER IN NATIONAL STORAGE PVT. LTD. (SUPRA) (AFFIRMED IN [1967] 66 ITR 596 (SC), A LARGER BENCH DECISION) AFTER AN EXHAUSTIVE REVIEW OF THE AUTHORITIES ON THE SUBJECT , ARE AS UNDER: 1. INCOME-TAX IS A SINGLE TAX LEVIED ON THE TOTAL INC OME CLASSIFIED AND CHARGEABLE UNDER THE VARIOUS HEADS AND NOT AN AGGREGATE OF THE DISTINCT TAXES LEVIED SEPARATELY ON EACH HEAD OF INCOME. 8 ITA NO.462 & 697/MDS/2017 & C.O NO.36/MDS/2017 SURYAVARDHAN ESTATES PVT. LTD. (AY 2012-13) 2. THAT THE HEADS OF INCOME IN SECTION 6 OF THE ACT A RE SPECIFIC HEADS, WHICH ARE EXCLUSIVE AND EXHAUSTIVE. 3. THE INCOME WHICH FALLS UNDER ANY OF THESE SPECIFIC HEADS HAS GOT TO BE COMPUTED UNDER THAT HEAD ONLY IN THE MANNER SPECIFIED IN THE FOLLOWING SECTIONS 7 TO 12 . 4. IF THE INCOME FALLS UNDER THE HEAD 'INCOME FROM PR OPERTY' WHICH IS CHARGEABLE UNDER SECTION 9, IT HAS TO BE TAXED UNDER SECTION 9 ONLY AND CANN OT BE TAKEN TO SEC- TION 10 ON THE GROUND THAT THE BUSINESS OF THE ASSE SSEE WAS TO EXPLOIT PROPERTY AND EARN INCOME OR BECAUSE THE INCOME WAS OBTAINED BY A TRADING CONCERN IN THE COURSE OF ITS BUSINESS. 5. HOUSE-OWNING, HOWEVER PROFITABLE, CANNOT BE A BUSI NESS OR TRADE UNDER THE INCOME-TAX ACT. WHERE INCOME IS DERIVED FROM HOUSE PROPERTY BY THE EXERCISE OF PROPERTY RIGHTS PROPERLY SO CALLED, THE INCOME FALL S UNDER THE HEAD 'INCOME FROM PROPERTY' CHARGEABLE UNDER SECTION 9. IT IS THE NAT URE OF THE OPERATIONS AND NOT THE CAPACITY OF THE OWNER THAT MUST DETERMINE WHETHER T HE INCOME IS FROM PROPERTY OR FROM TRADE. WHERE THE OPERATIONS INVOLVED IN THE AC TIVITY OF EARNING INCOME FROM HOUSE PROPERTY ARE NOT DIFFERENT FROM THOSE OF AN O RDINARY HOUSE-OWNER TURNING TO PROFITABLE ACCOUNT THE PROPERTY OF WHICH HE IS THE OWNER, THE INCOME DERIVED IS INCOME FROM PROPERTY CHARGEABLE UNDER SECTION 9 IRR ESPECTIVE OF WHETHER THE OPER- ATIONS ARE CARRIED ON BY A COMPANY ONE OF WHOSE OBJ ECTS OR EVEN THE SOLE OBJECT IS TO INDULGE IN THE ACTIVITY OF EARNING INCOME FROM HOUS E PROPERTY. THUS, WHERE HOUSE PROPERTY IS GIVEN ON LEASE OR LICENCE BASIS FOR EAR NING INCOME THEREFROM, THE TRUE CHARACTER OF THE INCOME DERIVED IS INCOME FROM PROP ERTY FALLING UNDER SECTION 9. THE SAID CHARACTER IS NOT CHANGED AND THE INCOME DOES N OT BECOME INCOME FROM TRADE OR BUSINESS IF THE HIRING IS INCLUSIVE OF CERTAIN ADDI TIONAL SERVICES SUCH AS HEATING, CLEAN- ING, LIGHTING OR SANITATION, WHICH ARE RELATIVELY I NSIGNIFICANT AND ONLY INCIDENTAL TO THE USE OF OCCUPATION OF THE TENEMENTS. 6. IN CASES WHERE THE INCOME RECEIVED IS NOT FROM THE BARE LETTING OF THE TENEMENT OR FROM THE LETTING ACCOMPANIED BY INCIDENTAL SERVI CES OR FACILITIES, BUT THE SUBJECT HIRED OUT IS A COMPLEX ONE AND THE INCOME OBTAINED IS NOT SO MUCH BECAUSE OF THE BARE LETTING OF THE TENEMENT BUT BECAUSE OF THE FACILITIES AND S ERVICES RENDERED, THE OPERATIONS INVOLVED IN SUCH LETTING OF THE PROPERTY MAY BE OF THE NATURE OF BUSINESS OR TRADING OPERATIONS AND THE INCOME DERIVED MAY BE INCOME NOT FROM EXERCISE OF PROPERTY RIGHTS PROPERLY SO CALLED SO AS TO FALL UN DER SECTION 9 BUT INCOME FROM OPER- ATIONS OF A TRADING NATURE FALLING UNDER SECTION 10 OF THE ACT; AND 7. IN CASES WHERE THE LETTING IS ONLY INCIDENTAL AND SUBSERVIENT TO THE MAIN BUSINESS OF THE ASSESSEE, THE INCOME DERIVED FROM THE LETTIN G WILL NOT BE THE INCOME FROM PROP- ERTY FALLING UNDER SECTION 9 AND THE EXCEPTION TO S ECTION 9 MAY ALSO COME INTO OPER- ATION IN SUCH CASES. THE WORD 'BUSINESS' IS DEFINED IN SECTION 2(13) TO INCLUDE 'ANY TRADE, COMMERCE OR MANUFACTURE OR ANY ADVENTURE OR CONCERN IN THE N ATURE OF TRADE, COMMERCE OR MANUFACTURE'. IT, THEREFORE, FOLLOWS THAT IF THE AS SESSEE OWNER IS OCCUPYING THE PROP- ERTY FOR CARRYING ON ANY ADVENTURE OR CONCERN IN TH E NATURE OF TRADE THE PROFITS WHEREOF ARE CHARGEABLE TO INCOME-TAX, SECTION 22 SP ECIFICALLY EXCLUDES SUCH PROPERTY FROM THE SCOPE AND OPERATION OF SECTIONS 22 TO 27. 9 ITA NO.462 & 697/MDS/2017 & C.O NO.36/MDS/2017 SURYAVARDHAN ESTATES PVT. LTD. (AY 2012-13) THE APEX COURT HAD EARLIER, PER ITS LARGER BENCH D ECISION IN EAST INDIA HOUSING & LAND DEVELOPMENT TRUST LTD. [1961] 42 ITR 49 (SC), CLARIFIED THAT THE CHARACTER OF INCOME IS NOT ALTERED BECAUSE IT W AS RECEIVED BY A COMPANY FORMED WITH THE OBJECT OF DEVELOPING LANDED PROPERT IES AND SETTING UP OF MARKETS. THIS ASPECT, I.E., THE COMPANY BEING REGIS TERED WITH THE SOLE OBJECT TO ACQUIRE LAND, BUILD HOUSES AND LET PREMISES TO TENA NTS, WAS AGAIN FOUND OF NO MOMENT, AS THE INCOME CONTINUED TO BE FROM PROPERTY , AND THE MERE FACT THAT THE OWNER IS A COMPANY WOULD NOT BE RELEVANT ( COMMERCIAL PROPERTIES LTD ., IN RE, AIR [1928] CAL 456 (ALSO, INDIAN CITY PROPERTIES LTD. V. CIT [1965] 55 ITR 262 (CAL)). HOW DOES IT MATTER, THEN, THAT THE LETTING, WHERE S O, FORMS ONE OF THE OBJECTS OF THE ASSESSEE-COMPANY ? WE CANNOT HELP BUT REFER AGAIN TO THE DECISION IN SULTAN BROTHERS (P.) LTD. (SUPRA), WHEREIN, AMONG OTHERS, THE CONCEPT OF COMPLEX LETTING, I.E., THE INSEPARABLE LETTING OF A HOUSE PROPERTY BELONGING TO THE ASSESSEE, ALONG WITH FURNITURE, PLANT OR MACHINERY, IS EXPLAINED, AND IN WHICH CASE THE INCOME WOULD BE ASSESSABLE AS EITHER INCOM E FROM OTHER SOURCES (U/S. 56(2)(III)) OR AS BUSINESS INCOME U/S. 28. THIS IS AS, AS EXPLAINED, THIS BECOMES A NEW SOURCE OF INCOME . THE APEX COURT DEVISED TESTS FOR DETERMINING THE INSEPARABILITY OF THE TWO LETTINGS, FOLLOWED IN SHAMBHU INVESTMENTS (P.) LTD. V. CIT [2003] 263 ITR 143(SC). THAT IS, THE ENTIRE (RENT) INCOME WOULD, IN CASE OF SUCH INSEPARABILITY, STAND TO BE ASSESSED UNDER EIT HER HEAD, DEPENDING ON WHETHER IT CONSTITUTES OR FORMS A PART OF THE ASSES SEES BUSINESS OR NOT. WE MAY AT THIS STAGE CLARIFY THAT THE ACT DOES NOT DRAW ANY DISTINCTION BETWEEN A HOUSE PROPERTY USED FOR RESIDENTIAL PURPO SES OR NOT SO, AS WHERE IT IS USED FOR COMMERCIAL PURPOSES. AND THE RENTAL INCOME FROM BOTH IS ASSESSABLE AS INCOME FROM HOUSE PROPERTY. REFERENCE HERE MAY BE M ADE TO THE CONSTITUTIONAL BENCH DECISION IN SULTAN BROTHERS PVT. LTD. (SUPRA) WHEREIN THE APEX COURT DISCOUNTENANCED THE PLEA WITH REGARD TO THE COMMERC IAL EXPLOITATION OF A HOUSE 10 ITA NO.462 & 697/MDS/2017 & C.O NO.36/MDS/2017 SURYAVARDHAN ESTATES PVT. LTD. (AY 2012-13) PROPERTY BY ITS OWNER. A THING IS NOT, IT HELD, BY ITS NATURE A COMMERCIAL ASSET, AND WHICH IS ONLY AN ASSET USED IN A BUSINESS AND N OTHING ELSE, AND THAT BUSINESS MAY BE CARRIED ON BY PRACTICALLY ALL THINGS, SO THA T NOTHING TURNS ON THE FACT THAT THE LETTING IS OF A COMMERCIAL ASSET OR TOWARD CO MMERCIAL EXPLOITATION OF A HOUSE PROPERTY. TO THE EXTENT, THEREFORE, THE LD. C IT(A) HAS IN THE INSTANT CASE BASED HIS DECISION QUA THE SHOPPING COMPLEX ON THE COMMERCIAL EXPLOITATIO N OF ITS PROPERTY BY THE ASSESSEE, THE SAME IS WITHOUT B ASIS IN LAW. WE SHALL CONSIDER THE RESIDENTIAL FLATS AT VICTORI A TOWERS FIRST. AS AFORE- NOTED, MAKING REFERENCE TO SULTAN BROS. (P.) LTD . (SUPRA), WHICH REPRESENTS TRITE LAW, REITERATED TIME AND AGAIN BY THE HONBLE APEX COURT, AND FOR WHICH REFERENCE MAY BE DRAWN, FOR BETTER COMPREHENSION, T O EAST INDIA HOUSING & LAND DEVELOPMENT TRUST LTD. (SUPRA); ITS OBSERVATIONS, SUCCINCTLY PUT, BEING AS UNDER: INCOME-TAX IS UNDOUBTEDLY LEVIED ON THE TOTAL TAXA BLE INCOME OF THE TAXPAYER AND THE TAX LEVIED IS A SINGLE TAX ON THE AGGREGATE TAXABLE RECEIPTS FROM ALL THE SOURCES; IT IS NOT A COLLECTION OF TAX ES SEPARATELY LEVIED ON DISTINCT HEADS OF INCOME. BUT THE DISTINCT HEADS SP ECIFIED IN S. 6 INDICATING THE SOURCES ARE MUTUALLY EXCLUSIVE AND INCOME DERIVED FROM DIF FERENT SOURCES FALLING UNDER SPECIFIC HEADS HAS TO BE COMP UTED FOR THE PURPOSE OF TAXATION IN THE MANNER PROVIDED BY THE APPROPRIATE SECTION. IF THE INCOME FROM A SOURCE FALLS WITHIN A SPECIFIC HEAD SET OUT IN S. 6, THE FACT THAT IT MAY INDIRECTLY BE COVERED BY ANOTHER HEAD WILL NOT MAKE THE INCOME TAXABLE UNDER THE LATTER HEAD. (AT PG. 51) [EMPHASIS, OURS] TO THE SAME EFFECT IS ITS DECISION IN RAJASTHAN STATE WAREHOUSING CORPORATION VS. CIT [2000] 242 ITR 450 (SC). I NCOME, THEREFORE, STANDS CLASSIFIED UNDER THE ACT SOURCE-WISE, I.E., ON THE BASIS OF ITS DEFINING OR IGIN AND CHARACTER. IT IS THUS ONLY WHERE THE SOURCE DOES NOT FULLY CAPTURE THE INTRINS IC NATURE OF THE RECEIPT THAT THERE IS SCOPE FOR INCOME FALLING UNDER ONE HEAD OF INCOME AS LIABLE TO BE CHARACTERIZED AS INCOME COVERED ALSO BY ANOTHER (HE AD OF INCOME) AND, WHICH, THEREFORE, COULD BE SAID TO BE INDIRECTLY COVERED BY THE LATTER HEAD OF INCOME, THOUGH WOULD NOT MAKE IT ASSESSABLE UNDER THAT, LAT TER HEAD. THE HEADS OF 11 ITA NO.462 & 697/MDS/2017 & C.O NO.36/MDS/2017 SURYAVARDHAN ESTATES PVT. LTD. (AY 2012-13) INCOME UNDER REFERENCE IN THE INSTANT CASE PRESENT ONE SUCH EXAMPLE. THIS IS AS SECTION 22 MAKES NO DISTINCTION BETWEEN A PROPERTY HELD EITHER AS A CAPITAL ASSET OR AS A TRADING ASSET . A HOUSE PROPERTY MAY, THEREFORE, FORM PART OF THE STOCK- IN-TRADE AND, YET, WHERE COMPLETE, I.E., ITS ANNUAL VALUE IS LIABLE TO BE BROUGHT TO TAX UNDER SECTION 22 R/W S. 23 OF THE ACT. JUXTAPOS E THIS WITH THE SETTLED POSITION IN LAW THAT THE INCOME ASSESSABLE UNDER A PARTICULA R HEAD OF INCOME IS TO BE NECESSARILY COMPUTED UNDER THAT HEAD ONLY AND IN TH E MANNER PROVIDED UNDER THE RELEVANT SECTIONS ( SULTAN BROTHERS (P.) LTD. (SUPRA); EAST INDIA HOUSING & LAND DEVELOPMENT TRUST LTD. (SUPRA)), AND THERE CAN BE NO MANNER OF ANY DOUBT THAT THE ASSESSEES CLAIM IS NOT SUSTAINABLE IN LAW . AS APPARENT FROM THE CLEAR READING OF THE RELEVANT PROVISIONS, AND WHICH AGAIN REPRESENT TRITE LAW, THE ACTUAL LETTING OF THE HOUSE PROPERTY IS NOT A CONDI TION FOR INCOME THEREOF TO BE ASSESSABLE AS INCOME FROM HOUSE PROPERTY U/S. 22. A S AFORE-NOTED, IT IS THE OWNERSHIP OF THE HOUSE PROPERTY PER SE WHICH IS THE SOURCE OF INCOME, AND NOT THE FACT WHETHER THE SAME IS OCCUPIED BY THE ASSESS EE ONLY OR SOMEONE ELSE AT A CONSIDERATION (VIZ. A TENANT) OR OTHERWISE. IN TH AT SENSE, IT IS THE INCOME POTENTIAL OF THE HOUSE PROPERTY THAT IS SUBJECT TO TAX. THE ONLY EXCEPTION, COVERED BY THE PROVISION ITSELF, IS WHERE THE PROPE RTY IS OCCUPIED BY THE OWNER FOR THE PURPOSE OF HIS BUSINESS OR PROFESSION. FISC AL STATUTES, IT IS AGAIN TRITE LAW, HAVE TO BE STRICTLY CONSTRUED. REFERENCE, IN THIS C ONTEXT, MAY BE MADE, INTER ALIA , TO UOI VS. BOMBAY ELPHINSTONE SPINNING & WEAVING CO. L TD. & ORS . 2001(1) SC 536; ORISSA STATE WAREHOUSING CORPN. VS. CIT [1999] 237 ITR 589 (SC); NOVAPAN INDIA LTD. V. CCE 1994 (73) ELT 769 (SC); IPCA LABORATORY LTD. V. DY. CIT [2004] 266 ITR 521 (SC)). WHAT ALL IS THEREFORE RE LEVANT, AND THE ONLY CAVEAT, IS THAT THE ANNUAL VALUE ASSESSED SHOULD CA PTURE THE FAIR RENTAL VALUE OF THE PROPERTY, QUA WHICH WE OBSERVE NO DISPUTE IN THE PRESENT CASE; T HE AO HAVING ADOPTED THE SAME ON THE BASIS OF RELIABLE DA TA. WE, THEREFORE, FIND NO LEGAL INFIRMITY IN THE REVENUE ASSESSING THE FAIR R ENTAL VALUE OF THE, SINCE 12 ITA NO.462 & 697/MDS/2017 & C.O NO.36/MDS/2017 SURYAVARDHAN ESTATES PVT. LTD. (AY 2012-13) COMPLETED, UNSOLD RESIDENTIAL FLATS AT VICTORIA TOW ERS TO TAX AS INCOME FROM HOUSE PROPERTY U/S. 22 OF THE ACT. IN FACT, SEC. 23 (5) STANDS INSERTED BY FINANCE ACT, 2017 (W.E.F. 01.04.2018), SPECIFICALLY PROVIDI NG THAT THE ANNUAL VALUE OF A HOUSE PROPERTY HELD AS STOCK-IN-TRADE OF HIS BUSINE SS BY THE ASSESSEE SHALL BE TAKEN AT NIL FOR A PERIOD OF ONE YEAR FROM THE END OF THE YEAR IN WHICH A COMPLETION CERTIFICATE IS OBTAINED IN ITS RESPECT. FURTHER ENDORSING, IF IT WAS NECESSARY, THAT THE ANNUAL VALUE OF A HOUSE PROPERT Y HELD AS STOCK-IN-TRADE IS EQUALLY ASSESSABLE U/S. 22, I.E., IRRESPECTIVE OF W HETHER THE SAME IS ACTUALLY LET OR NOT. THE SAME, IT NEEDS TO BE APPRECIATED, IS NOT I N OCCUPATION OF THE OWNER, MUCH LESS FOR THE PURPOSES OF HIS BUSINESS, BUT REP RESENTS THE INVENTORY OF HIS TRADE, TO BE SOLD OR EVEN LET. EVEN AS OUR VIEW IS BASED ON AND, AS SUCH, IN CONFORMITY WITH THE SETTLED LAW, AS EXPLAINED BY TH E LARGER BENCHES OF THE HONBLE APEX COURT, CITED SUPRA, THE SAME, WE MAY A DD, HAS FOUND ENDORSEMENT BY THE RECENT DECISIONS BY IT AS WELL AS THE HONBL E JURISDICTIONAL HIGH COURT, VIZ. RAJ DARARKAR V. ASST. CIT (IN CIVIL APPEAL NOS. 6455 TO 6460 OF 2017, DATED 9/5/2017) AND KEYARAM HOTELS P. LTD. (SUPRA) (REFERENCE HERE MAY ALSO BE MADE TO KEYARAM HOTELS PVT. LTD. V. ASST. CIT [2008] 300 ITR 118 (MAD). COMING TO THE RENTAL VALUE, BASED ON FACTUAL LETTIN G OR OTHERWISE, OF THE UNSOLD SHOPS AT THE SHOPPING COMPLEX CORROMANDEL P LAZA. THE REVENUE HAS ALREADY ASSESSED THE RENTAL (ANNUAL) INCOME OF THES E SHOPS, BEING REGULARLY LET, AS A PART OF THE ASSESSEES BUSINESS INCOME U/S. 28 . WHERE, THEN, WE MAY ASK, IS THE QUESTION OF THE REVENUE, CONTRADICTING ITS OWN STAND, SEEKING AN ASSESSMENT OF THE LETTABLE VALUE OR THE RENT RECEIVED AS INCOM E FROM HOUSE PROPERTY U/S. 22? WHERE IT CONSIDERS THE AOS STAND AS UNTENABLE IN L AW, THE ONLY COURSE AVAILABLE TO IT IN LAW IS THE REVISION OF HIS ORDER U/S. 263. THE CLAIM FOR ADDITIONAL DEPRECIATION ON PLANT AND MACHINERY AND CAR PARK FA CILITY (SO THAT IT IS NOT REGARDED BY THE ASSESSEE AS PART OF THE BUILDING) H AS NOT, AS AFORE-NOTED, BEEN ADJUDICATED BY THE LD. CIT(A) PER THE IMPUGNED ORDE R, SO THAT THE MATTER SHALL 13 ITA NO.462 & 697/MDS/2017 & C.O NO.36/MDS/2017 SURYAVARDHAN ESTATES PVT. LTD. (AY 2012-13) HAVE TO NECESSARILY TRAVEL TO HIS FILE FOR ADJUDICA TION AFTER HEARING THE PARTIES, I.E., IN ACCORDANCE WITH LAW, PER A SPEAKING ORDER. WE DECIDE ACCORDINGLY. 4. IN THE RESULT, THE REVENUES APPEAL IS PARTLY AL LOWED; THE ASSESSEES CO IS ALLOWED FOR STATISTICAL PURPOSES, AND ITS APPEAL IS DISMISSED AS NOT MAINTAINABLE. ORDER PRONOUNCED ON OCTOBER 17 , 2017 AT CHENNAI . SD/- SD/- ( ! . '# ) (DUVVURU RL REDDY) $ /JUDICIAL MEMBER ( ) (SANJAY ARORA) /ACCOUNTANT MEMBER /CHENNAI, 3 /DATED, OCTOBER 17, 2017 EDN 4 - /$156 76)1 /COPY TO: 1. *+ /APPELLANT 2. /0*+ /RESPONDENT 3. 81 ( )/CIT(A) 4. 81 /CIT 5. 69: /$1$ /DR 6. :#( ; /GF