SEA SCAN MARINE SERVICES P. LTD, GOA V. DCIT CC-9, MUMBAI

ITA 7086/MUM/2014

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 8125 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 3 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-03-2017
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: E
• Assessment Year: 2010-2011
• Appeal Filed On: 24-11-2014
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: AKHILENDRA JADAV
• Assessee Lawyers: AMAR GAHLOT
• Keywords: Business income; Depreciation

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, BENCH E,MUM BAI BEFORE SHRI B.R. BASKARAN, ACCOUNTANT MEMBER AND SHRI PAWAN SINGH, JUDICIAL MEMBER ITA NO.7086/MUM/2014 (ASSESSMENT YEAR- 2010-11) M/S SEA SCAN MARINE SERVICES PVT. LTD., FIRE SERVICES COMPOUND, ST. INEZ PANAJI, GOA-403001 PAN: AADCS4236J VS. DCIT CC-9, OLD CGO BUILDING, MUMBAI-400020 (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI AMAR GAHLOT (AR) REVENUE BY : SHRI AKHILENDRA JADAV (DR) DATE OF HEARING : 25.01.2017 DATE OF PRONOUNCEMENT : 08.03.2017 ORDER UNDER SECTION 254(1) OF INCOME TAX ACT PER PAWAN SINGH, JUDICIAL MEMBER: 1. THIS APPEAL BY ASSESSEE U/S 253 OF THE INCOME-TAX A CT (THE ACT) IS DIRECTED AGAINST THE ORDER OF LD. COMMISSIONER OF INCOME-TAX (APPEALS) [FOR SHORT THE CIT(A)] 37, MUMBAI DATED 01.09.2014 FOR ASSESSMENT YEAR (AY) 2010-11. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL ARE THAT: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE HON'BLE CIT(A) GROSSLY ERRED IN UPHOLDING RENT INCOME AS IN COME FROM BUSINESS AND DISALLOWANCE MADE BY THE LEARNED A.O OF DEDUCTION O F RS. 36,00,000/- CLAIMED U/S 24(A) OF THE ACT. THE APPELLANT PRAYS T HAT THE RENT INCOME SHOULD BE TREATED AS INCOME FROM HOUSE PROPERTY AND ADDITI ON OF RS 36,00,000/- WITH RESPECT TO DEDUCTION CLAIMED U/S 24(A) MAY PLEASE B E DELETED. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE-COMPA NY IS ENGAGED IN THE BUSINESS OF BOAT PLEASURE, CRUISINE AND LETTING OUT OF PREMISES . THE ASSESSEE FILED ITS RETURN OF INCOME FOR RELEVANT AY ON 07.09.2010 DECLARING T OTAL INCOME AT RS. 54,60,000/-. THE ASSESSMENT WAS COMPLETED U/S 143(3 ) OF THE ACT ON 22.03.2013. ITA NO.7086/M/2014 M/S SEA SC AN MARINE SERVICES PVT. LTD. 2 THE ASSESSING OFFICER (AO) WHILE FRAMING THE ASSESS MENT ORDER TREATED THE RENTAL INCOME OF RS. 1,20,00,000/- AS BUSINESS INCOME. O N APPEAL BEFORE THE LD. CIT (A), THE ACTION OF AO WAS CONFIRMED. THUS, FURTHER AGGRIEVED BY THE ORDER OF CIT(A), THE ASSESSEE HAS FILED THE PRESENT APPEAL B EFORE THE TRIBUNAL. 3. WE HAVE HEARD THE LD. AUTHORIZED REPRESENTATIVE (AR ) OF THE ASSESSEE AND LD. DEPARTMENTAL REPRESENTATIVE (DR) FOR THE REVENUE AN D PERUSED THE MATERIAL AVAILABLE ON RECORD. LD. AR OF THE ASSESSEE ARGUED THAT FOR THE FINANCIAL YEAR (FY) UNDER CONSIDERATION, THE ASSESSEE HAS SHOWN RE NTAL INCOME OF RS. 1,20,00,000/- UNDER THE HEAD INCOME FROM HOUSE PRO PERTY AND CLAIMED STANDARD DEDUCTION U/S 24(A) OF THE ACT @ 30% I.E. RS. 36,00 ,000/-. THE AO TREATED THE RENTAL INCOME UNDER THE HEAD PROFIT & GAIN FROM BU SINESS AND PROFESSION HOLDING THAT RENTAL INCOME WAS CONSISTENTLY OFFERED AS BUSINESS INCOME AND THERE WAS NO CHANGE IN THE FACTS RELATING TO THAT I NCOME. IT WAS FURTHER ARGUED THAT THE MAIN OBJECT OF THE ASSESSEE-COMPANY IS NOT LEAS E OUT THE PROPERTY. THE PROPERTY IS MERELY LET OUT AND NO OTHER BUSINESS AC TIVITY IS CARRIED OUT IN RELATION TO PROPERTY LET OUT BY ASSESSEE. LETTING OUT IS NOT A SYSTEMATIC AND ORGANIZED ACTIVITIES OF THE ASSESSEE. THE LETTING OF THE PROP ERTY IS IN THE CAPACITY OF A HOUSE OWNER AND NOT IN THE CAPACITY AS A TRADER OR BUSINE SSMEN. IN SUPPORT OF THIS SUBMISSION, THE LD. AR OF THE ASSESSEE RELIED UPON THE FOLLOWING DECISIONS: 1. UNITED COMMERCIAL BANK LTD. VS. CIT [1975] 32 ITR 6 88 (SC). 2. EAST INDIA HOUSING AND LAND DEVELOPMENT TRUST LTD. [1961] 42 ITR 49 (SC). 3. KARANPURA DEVELOPMENT CO. LTD. VS. CIT [1962] 44 IT R 362(SC). 4. SULTAN BROTHERS (P) LTD. VS CIT [1964] 51 ITR 353 ( SC). 5. CHENNAI PROPERTIES & INVESTMENTS LTD. VS. CIT [2015 ] 373 ITR 673. 6. ABDUL QAYUME VS. CIT [1990] 50 TAXMAN 171 (ALL). 7. PROFILE CONSULTANCY SERVICES (P) LTD. VS CIT [2016] 161 296 (MUMBAI-TRIB.). 4. ON THE OTHER HAND, LD. DR FOR THE REVENUE SUPPORTED THE ORDER OF AUTHORITIES BELOW AND ARGUED THAT THE ASSESSEE CONSISTENTLY WAS SHOWING BUSINESS INCOME FROM LETTING OUT OF THE PROPERTY. THE ASSESSEE WAS RECEIVING THE RENTAL INCOME BY SHOWING RENTAL INCOME AS STUDENT ACCOMMODATION AND THERE HAS BEEN NO CHANGE IN THE NATURE OF INCOME RECEIVED BY THE ASSESSEE. THE RENTAL INCOME OF THE ASSESSEE HAS INCREASED SO TO CLAIM THE STANDARD DEDUCTION @ 30%, THE ASSESSEE HAS SHOWN LETTING INCOME UNDER THE HEAD INCOME FROM HOUSE PR OPERTY WHEREAS THE ACTUAL ITA NO.7086/M/2014 M/S SEA SC AN MARINE SERVICES PVT. LTD. 3 EXPENSES INCURRED BY THE ASSESSEE ON REPAIR AND MAI NTENANCE OF PROPERTY IS ONLY RS. 76,085/-. NO JUSTIFICATION WAS PROVIDED BY ASSE SSEE FOR DIVERGENT APPROACH FOR THE AY UNDER CONSIDERATION. THE NATURE OF ACTIVITIE S, MODUS OPERENDI, MANNER OF KEEPING RECORD AND PRESENTATION OF RENTAL INCOME IN THE YEAR UNDER CONSIDERATION 5. ARE SAME AS IN THE PRECEDING YEARS. THE ASSESSEE I NTENDS TO CHANGE THE HEAD OF INCOME ONLY TO REDUCE ITS TAX LIABILITY. 6. WE HAVE CONSIDERED THE RIVAL CONTENTION OF THE PART IES AND GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. THE ASSESSING OFFICER WHILE MAKING ASSESSMENT NOTIC ED FROM THE STATEMENT OF COMPUTATION OF INCOME THAT ASSESSE E HAS SHOWN RENTAL INCOME OF RS.120,00,000/- UNDER THE HEAD INCOME FROM HOUSE P ROPERTY AND CLAIMED DEDUCTION UNDER SECTION 24(A) @ 30% OF RS.36,00,000 /- AND OFFERED INCOME OF RS. 84,00,000/-.THE AO FURTHER NOTICED THAT THE ASSESSE E CONSISTENTLY OFFERING SUCH RENTAL INCOME UNDER THE HEAD BUSINESS INCOME AND WAS ASSESSED AS SUCH AND THERE IS NO MATERIAL CHANGE IN FACTS AND OTHER CIRC UMSTANCES, AS WELL AS IN THE NATURE OF INCOME AND THE ACTIVITIES. THE ASSESSEE W AS ASKED TO EXPLAIN THE REASON OF CHANGE OF HEAD OF INCOME. THE ASSESSEE FILED ITS REPLY AND CONTENDED THAT DURING LAST FEW YEARS THE INCOME WAS TREATED UNDER THE HEAD BUSINESS INCOME IN THE RETURN OF INCOME. IT WAS FURTHER CONTENDED THAT THE PREDECESSOR OF AO POINTED OUT/ ASKED THE ASSESSEE WHY SUCH INCOME SHOULD NOT BE TREATED AS INCOME FROM HOUSE PROPERTY. AND THE ASSESSEE TO AVOID THE LITIG ATION WITH THE DEPARTMENT HAS CHANGED THE HEAD OF INCOME. THE CONTENTION OF THE A SSESSEE WAS NOT ACCEPTED BY AO HOLDING THAT THE ASSESSEE HAD BEEN RECEIVING REN TAL INCOME FROM STUDENT ACCOMMODATION AND THERE IS NO CHANGE. THE AO FURTHE R CONCLUDED THAT THE ASSESSEE CLAIMED DEDUCTION OF RS. 36 LAKHS, HOWEVER ONLY A SUM OF RS.76,085/- WAS SPENT ON REPAIR AND MAINTENANCE AND TREATED THE RENTAL INCOME AS BUSINESS INCOME ON THE PRINCIPAL OF CONSISTENCY WHEN THERE W AS NO CHANGE IN THE NATURE OF INCOME AND OTHER INCIDENTAL FACTS. ON FIRST APPEAL BEFORE FIRST APPELLATE AUTHORITY THE FACTS WERE INDEPENDENTLY EXAMINED BY LD CIT(A) QUA THE ISSUE RAISED BY ASSESSEE. THE LD CIT(A) ASKED THE ASSESSEE TO FURN ISH THE DETAILS OF BLOCK OF ASSET LEASED AND THE DETAILS OF DEPRECIATION CLAIMED FROM THE AY 2004-05 TILL AY 2010- ITA NO.7086/M/2014 M/S SEA SC AN MARINE SERVICES PVT. LTD. 4 11. NO DETAILS WERE FURNISHED BY ASSESSEE TILL 17/0 7/2014. SOME STATEMENTS REGARDING THE QUERIES RAISED BY LD CIT(A) WERE FILE D BY ASSESSEE ON 28/08/2014, FROM WHICH THE FACTS WERE NOT VERIFIABLE AS TO WHIC H ARE THE ASSET USED FOR MARINE TRAINING. THE LD CIT(A) CONCLUDED THAT ASSESSEE COM PANY EXECUTED TWO AGREEMENTS , ONE IN RESPECT OF BUILDINGS AND OTHER IN RESPECT OF FURNITURE AND FIXTURE. THE ASSESSEE COMPANY DERIVED THE BENEFITS CLAIMING DEPRECIATION ALL THE YEARS AND NOW HAS CHANGED THE HEAD THE INCOME ONLY TO CLAIM STANDARD DEDUCTION UNDER SECTION 24(A) WHICH IS HIGHER THAN THE DEPREC IATION COMPARATIVE TO REPAIRS AND MAINTENANCE. WE HAVE NOTICED THAT THE ASSESSEE HAS NOT FILED COPY OF MEMORANDUM OF ASSOCIATION OF ASSESSEE COMPANY FOR T HE REASONS BEST KNOWN TO THEM. THE AUDIT REPORT FILED BY THE ASSESSEE REVEAL S THAT NATURE OF BUSINESS OR PROFESSION IS BOAT PLEASURE, CRUISING, RENTING OF PROPERTIES [PARA 8(A)] AND THERE IS NO CHANGE IN THE NATURE OF BUSINESS OR PROFESSIO N [ PARA 8(B) PAGE 32OF PB]. THE RATIO OF THE VARIOUS DECISIONS IS NOT APPLICABL E AS THE FACTS OF THE PRESENT CASE ARE AT VARIANCE. WE HAVE SEEN THAT THE ORDER OF LD CIT (A) IS REASONED ONE AND DOES NOT REQUIRE ANY INTERFERENCE AT OUR END. THE F ACTS OF THE VARIOUS DECISIONS RELIED BY THE ASSESSEE ARE AT VARIANCE AND THE RATI O OF THESE DECISIONS ARE NOT APPLICABLE ON THE FACTS OF THIS CASE. HENCE, THE G ROUND OF APPEAL RAISED BY ASSESSEE IS DISMISSED. NO ORDER AS TO COST. 7. IN THE RESULT APPEAL OF THE ASSESSEE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 8 TH DAY OF MARCH, 2017. SD/- SD/- (B.R. BASKARAN) (PAWAN SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI; DATED 08/03/2017 S.K.PS COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI ITA NO.7086/M/2014 M/S SEA SC AN MARINE SERVICES PVT. LTD. 5 BY ORDER, (ASSTT.REGISTRAR) ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY/