ACIT, New Delhi V. M/s. Atria Partner, New Delhi

ITA 711/DEL/2014

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 7250 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 11 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-01-2016
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 11-01-2016
• Assessment Year: 2010-2011
• Appeal Filed On: 07-02-2014
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: K K JAISWAL
• Keywords: Business income; 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 H.S. SIDHU , JUDICIAL MEMBER & SHRI L.P. SAHU, ACCOUNTANT MEMBER ITA NO. 711 /DEL/201 4 ASSTT. YEAR : 20 10 - 11 A .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, C . A . DATE OF HEARING : 14.01.2016 DATE OF PRONOUNCEMENT : 27 .01.2016 ORDER PER L.P. SAHU, ACCOUNTANT MEMBER: THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER DATED 25.11.2013 PASSED BY THE LEARNED CIT(A) - XXVI, DELHI FOR THE ASSESSMENT YEAR 20 10 - 11 ON THE FOLLOWING GROUNDS : 1. THE CIT(A) HAS ERRED IN DELETING THE DISALLOWANCE OF RS.3,97,79,926/ - MADE BY THE AO U/S. 24A OF THE IT ACT, AS THE PROPERTY WAS CONSTRUCTED AND DEVEL OPED BY THE PARTNERS /DLF GROUP. 2. THE CIT(A) HAS ERRED IN DIRECTING THAT ASSESS RENTAL INCOME OF THE ASSESSEE SHOULD BE ASSESSED UNDER THE HEAD INCOME FROM HOUSE PROPERTY AND NOT AS BUSINESS INCOME. ITA NO. 711 /DEL./201 4 2 3. THE CIT(A) HAS ERRED IN RESTRICTING THE DISALLO WANCE TO RS.2,00,000/ - OUT OF TOTAL DISALLOWANCE OF RS.3,00,155/ - MADE BY THE AO U/S. 57 (III) OF THE IT ACT. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE FILED ITS RETURN OF INCOME DECLARING TOTAL INCOME AT RS. 9,45,92,600 / - WHICH WAS PROCESSED U /S. 143(1). SUBSEQUENTLY THE CASE WAS SELECTED FOR SCRUTINY. 3. IN THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO NOTICED THAT THE ASSESSEE DECLARED RENTAL INCOME OF RS.13, 25,99,754 / - UNDER THE HEAD HOUSE PROPERTY ON WHICH THE ASSESSEE CLAIMED 30% DEDUC TION AMOUNTING TO RS. 3,97,79,926 / - UNDER SECTION 24( A ) OF THE IT ACT. THE AO REQUIRED THE ASSESSEE TO FURNISH THE REASONS FOR SHOWING RENTAL INCOME UNDER THE HEAD INCOME FROM HOUSE PROPERTY INSTEAD OF BUSINESS INCOME . IN RESPONSE, THE ASSESSEE FILED WR ITTEN 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 AS BUSINESS INCOME , AND DISALLOWED THE CLAIM OF DEDUCTION OF RS.3,97,79,926/ - ADDING THE SAME TO THE TOTAL INCOME OF THE ASSESSEE. 4 . 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 IN COME AS PER THE PROVISIONS OF LAW UNDER THE HEAD ITA NO. 711 /DEL./201 4 3 INCOME FROM HOUSE PROPERTY AS AGAINST BUSINESS INCOME ASSESSED U/S. 143(3) OF THE ACT. 5. THE ASSESSEE DECLARED INTEREST INCOME OFFERED TO TAX UNDER THE HEAD INCOME FROM OTHER SOURCES AT RS. 20,72,927 / - , ON WHICH EXPENSES OF RS.3,00,155/ - HAS BEEN CLAIMED U/S. 57 OF THE INCOME TAX ACT. THE ASSESSEE DECLARED TOTAL EXPENDITURE OF RS. 24,00,000/ - OUT OF WHICH THE ASSESSEE ITSELF DISALLOWED A SUM OF RS. 20,99,845/ - ATTRIBUTABLE TO EXEMPT INCOME OF RS.1,45,01, 932/ - AND BALANCE EXPENDITURE OF RS. 3,00,155/ - WAS CLAIMED AS DEDUCTION U/S. 57(III) OF THE IT ACT. THE ASSESSING OFFICER DISALLOWED THE SAME AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE. THE LD. CIT(A) RESTRICTED THE ADDITION TO RS.2,00,000/ - VIDE IMP UGNED ORDER. 6. AGGRIEVED BY THE IMPUGNED ORDER, THE REVENUE IS IN APPEAL BEFORE US ON BOTH THE ISSUES. 7 . 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 AND THE PROPERTY WAS CONSTRUCTED AND DEVELOPED BY THE PARTNERS/DLF GROUP 8 . 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. ITA NO. 711 /DEL./201 4 4 9 . WE HAVE HEARD AND CONSIDERED THE ARGUMENTS ADVANCED BY THE PARTIES AND HAVE GONE THROUG H THE ORDERS OF THE AUTHORITIES BELOW, MATERIALS AVAILABLE ON RECORD AND THE DECISIONS RELIED UPON AND WE FIND THAT BOTH THE ISSUES UNDER CONSIDERATION ARE SQUARELY COVERED BY THE DECISION DATED 16.09.2015 OF ITAT , DELHI BENCH A IN THE CASE OF ASSESSEE I TSELF (REVENUE S APPEAL NO. 692/DEL./2013 - A.Y. 2009 - 10), WHEREBY THE ITAT IN THE IDENTICAL FACTS, CIRCUMSTANCES AND SUBMISSIONS OF BOTH THE PARTIES, HAS DECIDED THE ISSUES IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE. THE RELEVANT OBSERVATIONS OF THE ITAT ARE REPRODUCED AS UNDER : 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 ASSESSEE. 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 AO 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 ASSESSING OFFICER WHILE TREATING THE RENTAL INCOME, RETURNED BY ASSESSEE, AS BUSINESS INCOME, HAS TAKEN INTO A CCOUNT 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.13.76 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 OFFICER IN THE PRESENT CASE STAND DECIDED IN FAVOUR OF THE ASSESSEE. THE RELEVANT PART OF THE ORDER OF ITAT (SUPRA) IS REPRODUCED AS UNDER : 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, PHASE - II, GURGAON. THIS BUILDING WAS GIVEN ON RENT TO M/S CONERGYS INDIA SERVICES (P) LTD. AND THE RENTAL INCOME RE CEIVED 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 SHOWN 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 RENTA L 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 ITA NO. 711 /DEL./201 4 5 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 CLASSIFICATION 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 DEPRECI ATION ON ITA NO. 2490/DEL/ 2012 6 BUILDING OF RS. 20.24 CRORES. THIS WOULD RESULT IN PROPORTIONATE REDUCTION IN THE INCOME EARNED IN THIS REGARD. 7.3 HENCE, WE AGREE THAT THERE IS NO LOGIC IN TREATING THE INCOME FROM HOUSE PROPERTY AS INCOME FROM BUSINES S. WE HOLD THAT NOTHING HAS BEEN BROUGHT ON RECORD BY THE AO TO SHOW THAT THE INCOME FROM HOUSE PROPERTY IS ACTUAL INCOME FROM BUSINESS. 7.4 IN THIS REGARD, WE PLACE RELIANCE UPON THE HON BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. DALMIA PROMOTE RS DEVELOPERS (P) LTD. 281 ITR 346, WHEREIN IT WAS HAS HELD THAT FOR REJECTING THE VIEW TAKEN IN EARLIER ASSESSMENT YEARS, THERE MUST 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 A DIFFERENT STAND. THIS IS ALSO REITERATED BY THE HON BLE APEX COURT DECISION IN CIT VS. EXCEL INDUSTRIES LTD. IN CIVIL APPEAL NO. 125 OF 2013 INDUSTRIES LTD. IN CIVIL APPEAL NO. 125 OF 2013 VIDE ORD ER 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 DISCUSSIONS 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. 2008 - 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.13,31,963/ - 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 A CT. 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 E ARNING AN INCOME OF RS. RS.3.21 LACS. WE DO NOT FIND ANY JUSTIFICATION 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 EXPENDITURES WERE NOT INCURRED FOR THE PURPOSE OF BUSINESS, PARTICULARLY, WHEN THE ASSESSEE ITSELF HAS DISALLOWED ITA NO. 711 /DEL./201 4 6 SUBSTANTIAL EXPENDITURE ATTRIBUTABLE TO EXEMPT INCOME. WE, THEREFORE, CONFIRM THE ORDER OF CIT(A) ON THIS C OUNT ALSO. 10 . RESPECTFULLY FOLLOWING THE ABOVE DECISION, THE APPEAL OF THE REVENUE IS FOUND TO HAVE NO MERIT AND IS LIABLE TO BE DISMISSED. 1 1 . IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 27.01.2016 . SD/ - SD/ - ( H.S. SIDHU ) (L.P. SAHU) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 27.01.2016 *AKS/ - COPY OF ORDER FORWARDED TO: (1) THE APPELLANT (2) THE RESPONDENT (3) COMMISSIONER (4) CIT(A) (5) DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE BY ORDER ASSISTANT. REGISTRAR INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES, NEW DELHI