Kirloskar Systems Limited, Bangalore V. ACIT, Bangalore

ITA 721/BANG/2011

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 68360 (ITAT-BANGALORE)
• Duration Of Justice: 2 year(s) 4 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-11-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 25-11-2013
• Assessment Year: 2007-2008
• Appeal Filed On: 13-07-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PRISCILLA SINGSIT
• Assessee Lawyers: PADAMCHAND KHINCHA
• Keywords: Business income; Depreciation; Business expenditure; Rule of consistency; Question of law
• Section: 56(2); 37; 56

Judgement Text

ITA NOS.720 AND 721 & 685 OF 2011 KIRLOSKAR SYSTEMS LTD BANGALORE PAGE 1 OF 25 IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE C BENCH, BANGALORE BEFORE SHRI N. BARTHVAJASANKAR, VICE PRESIDENT AND SHRI GEORGE GEORGE K. JUDICIAL MEMBER ITA NOS.720 & 721/BANG/2011 (ASSESSMENT YEARS: 2006-07 & 2007-08) M/S. KIRLOSKAR SYSTEMS LTD NO.8 PALACE ROAD, VASANTHNAGAR BANGALORE 560052 PAN: AABCK 1631 K VS. ASSTT. COMMISSIONER OF INCOME-TAX, CIRCLE 11(5) NO.14/3, 5 TH FLOOR, BANGALORE 560001 (APPELLANT) (RESPONDENT) ITA NO.685/BANG/2011 (ASSESSMENT YEAR: 2007-08) ASSTT. COMMISSIONER OF INCOME- TAX, CIRCLE 11(5) NO.14/3, 5 TH FLOOR, BANGALORE 560001 VS. M/S. KIRLOSKAR SYSTEMS LTD NO.8 PALACE ROAD, VASANTHNAGAR BANGALORE 560052 PAN: AABCK 1631 K (APPELLANT) (RESPONDENT) ASSESSEE BY: SHRI PADAM CHAND KHINCHA, CA DEPARTMENT BY: MS. PRISCILLA SINGSIT, DR DATE OF HEARING: 25/11/2013 DATE OF PRONOUNCEMENT: 29/11/2013 O R D E R PER BENCH: THESE THREE APPEALS, TWO APPEALS AT THE INSTANCE OF THE ASSESSEE COMPANY AND ONE BY THE REVENUE, ARE DIRECTED AGAINS T THE CONSOLIDATED ORDER OF THE CIT (A)-I, BANGALORE, DATED 18.3.2011 FOR ASSESSMENT YEARS ARE 2006-07 AND 2007-08. ITA NOS.720 AND 721 & 685 OF 2011 KIRLOSKAR SYSTEMS LTD BANGALORE PAGE 2 OF 25 2. AS THE ISSUES RAISED IN THESE APPEALS PERTAINING TO THE SAME ASSESSEE, ALL THE APPEALS WERE HEARD TOGETHER AND D ISPOSED OFF BY THIS COMMON ORDER. WE SHALL NOW TAKE UP FOR ADJUDICATION OF THE ASSESSEES APPEAL. ITA NOS.720 & 721/2011 AYS 2006-07 & 2007-08 (ASS ESSEES APPEAL): 3. FOR BOTH THE ASSESSMENT YEARS UNDER APPEAL, THE ASSESSEE COMPANY HAS RAISED IDENTICAL ISSUES WHICH ARE REFORMULATED AS UNDER: (1) THAT THE CIT (A) ERRED IN TREATING THE RENT RECEIVE D ON FIT-OUTS, FIXTURES AND EQUIPMENT AS INCOME FROM H OUSE PROPERTY AS AGAINST THE CLAIM OF THE ASSESSEE AS BUSINESS INCOME; - THAT THE CIT (A) ALSO FAILED TO APPRECIATE THAT THE ASSESSEE IS ENGAGED IN DEVELOPING, OPERATING AND MAINTAINING INDUSTRIAL PARK AS PER S. 80IA (4)(III) OF THE ACT AND AS SUCH THE INCOME RECEIVED FROM RENTING OU T OF FIT-OUTS ETC., HAS TO BE TREATED AS INCOME FROM BU SINESS & (2) THAT THE CIT (A) ALSO ERRED IN TREATING THE INCOME FROM MAINTENANCE CHARGES AS INCOME FROM HOUSE PROPERTY AS AGAINST THE ASSESSEES CLAIM AS INCOME FROM BUSINE SS . 4. BEFORE TAKING UP THE ISSUES RAISED BY THE ASSES SEE FOR ADJUDICATION, WE WOULD LIKE TO POINT OUT THAT THE S ECOND ISSUE RAISED BY THE ASSESSEE (SUPRA) IS NOT MAINTAINABLE FOR THE AS SESSMENT YEAR 2006- 07 SINCE THE ASSESSEE ITSELF IN ITS WRITTEN SUBMISSION BEFO RE THE CIT (A) CONCEDED THAT 8. THE MAINTENANCE ACTIVITY HAS BEEN OUTSOURCED TO ITA NOS.720 AND 721 & 685 OF 2011 KIRLOSKAR SYSTEMS LTD BANGALORE PAGE 3 OF 25 EMBASSY SERVICES LIMITED, INCOME IN RESPECT OF WHIC H HAS ACCRUED FROM THE FOLLOWING YEAR . [SOURCE: PAGE 26 OF PB AR FOR AY 2006-07]. ACCORDINGLY, THE ISSUE RAISED BY THE ASSESSEE IS NO T ADJUDICATED AS THE SAME DOES NOT ARISE FOR ASSESSMENT YEAR 2006-07. 5. WE SHALL NOW PROCEED TO DEAL WITH THE ISSUES RA ISED BY THE ASSESSEE FOR BOTH THE ASSESSMENT YEARS, CHRONOLOGIC ALLY, AS UNDER: 5.1. BRIEFLY STATED, THE FACTS OF THE ISSUE S ARE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF REAL ESTATE DEVELOPMENT. IT HAD DEVELOPED AN INDUSTRIAL PARK IN THE NAME OF KIRLOSKAR BUSINESS PARK AND DURING THE PREVIOUS YEAR RELEVANT TO THE AY 2006-07, A PORTION OF THE BUILDING WAS LET OUT TO COLUMBIA ASIA HOSPITALS PRIVATE LIMITED. IN ADDITION TO LETTING OUT OF BUILDINGS IN THE INDUSTRIAL PARK, THE ASSESS EE ALSO UNDERTOOK TO PROVIDE VARIOUS AMENITIES AND SERVICES TO TENANTS S UCH AS MAINTENANCE OF ROADS AND AMONG OTHERS FIT OUTS COMPRISING OF FURNI TURE, PLANT AND MACHINERY AND FIXTURES ETC. FOR THE AY 2007-08, TH E INDUSTRIAL PARK WAS LET OUT TO OTHER TENANTS BY PROVIDING VARIOUS FACIL ITIES AND SERVICES AS EXPLAINED ABOVE, I.E., THE FIT OUTS WERE ALSO PROVI DED ON RENT. THE RENT FOR PROPERTY AND FIT-OUTS WAS FIXED SEPARATELY IN THE L EASE AGREEMENTS. THE ASSESSEE HAD ALSO RECEIVED MAINTENANCE CHARGES FOR MAINTENANCE OF THE INDUSTRIAL PARK. DURING THE COURSE OF ASSESSMENT P ROCEEDINGS, THE ASSESSEE CONTENDED THAT THE ENTIRE RENTAL INCOME WA S ON ACCOUNT OF COMMERCIAL EXPLOITATION OF THE PROPERTY BY WAY OF P ROVIDING PROPERTY, FIT OUTS AND VARIOUS SERVICES OR AMENITIES FOR RENT AND THAT THE DEVELOPMENT OF INDUSTRIAL PARK AND GIVING THE SAME ON RENT ALON G WITH A PACK OF SERVICES WAS A COMMERCIAL VENTURE IN THE COURSE OF BUSINESS. HOWEVER, THE AOS, RELIED ON CERTAIN DECISIONS, TOOK A VIEW T HAT THE RENTAL INCOME ITA NOS.720 AND 721 & 685 OF 2011 KIRLOSKAR SYSTEMS LTD BANGALORE PAGE 4 OF 25 FROM PROPERTY AND FIT-OUTS IS TAXABLE UNDER THE HEA D INCOME FROM HOUSE PROPERTY AS THE ACTIVITY OF LETTING OUT OF INDUSTR IAL PARK ALONG WITH PROVISION OF VARIOUS SERVICES AND AMENITIES CANNOT BE REGARDED AS A COMPLEX COMMERCIAL ACTIVITY. 5.2. WITH REGARD TO MAINTENANCE CHARGES, ELABORATE LY ANALYZING THE AGREEMENTS ENTERED INTO BY THE ASSESSEE WITH TH E TENANTS AND ALSO REFERRING TO THE JUDGMENTS OF THE HONBLE SUPREME C OURT IN THE CASES OF (I) EAST INDIA HOUSING & LAND DEVELOPMENT TRUST; AN D (II) CIT V. SHAMBU INVESTMENT PRIVATE LTD. 263 ITR 143 (SC) AND ALSO F OR THE REASONS RECORDED THEREIN, THE AO HAD CONCLUDED THAT 10.1. THE ASSESSEE HAS ALSO SHOWN INCOME FROM BUSINESS, MAINLY BY MAINTENANCE O F THE RENTED PREMISES. ACCORDINGLY, THE EXPENSES WHICH HAVE BEE N INCURRED FOR EARNING THE HOUSE PROPERTY INCOME ARE REDUCED FROM THE SAME AS IT IS NOT RELATED TO BUSINESS. [REFER: PAGE 6 OF ASST. ORDER FOR AY 2007-08]. 5.3. AGGRIEVED, THE ASSESSEE TOOK UP BOTH THE ISSU ES, AMONG OTHERS, BEFORE THE CIT (A). AT THE TIME OF APPELLA TE PROCEEDINGS, THE ASSESSEE COMPANY DID NOT PRESS THE GROUND RELATING TO TAXABILITY OF RENT FROM LETTING OF PROPERTY AS BUSINESS INCOME. THE OT HER ISSUES DEALT WITH ITEM-WISE BY THE CIT (A) ARE EXTRACTED AS UNDER: WHETHER THE FIT-OUT RENT IS INCOME FROM HOUSE PROPE RTY? 5.3.1. AFTER HAVING CONSIDERED THE REASONING OF TH E AO AND ALSO THE CONTENTIONS OF THE ASSESSEE AS RECORDED IN HIS FINDINGS, THE CIT (A) HAD DECIDED THE ISSUE AGAINST THE ASSESSEE ON THE P REMISE THAT THE RENT FROM FIT OUTS IS TAXABLE UNDER THE HEAD INCOME FRO M HOUSE PROPERTY, AS (I) FIT OUTS ARE INEXTRICABLE PART OF THE PREMISES LET OUT TO TENANTS; (II) FIT ITA NOS.720 AND 721 & 685 OF 2011 KIRLOSKAR SYSTEMS LTD BANGALORE PAGE 5 OF 25 OUTS CANNOT BE REGARDED AS STOCK-IN-TRADE OF THE AS SESSEE; AND (III) SINCE RENT FROM PROPERTY IS ACCEPTED AS INCOME FALLING UN DER THE HEAD INCOME FROM HOUSE PROPERTY, RENT FROM OUTFITS CANNOT BE T REATED AS BUSINESS INCOME. WHETHER MAINTENANCE CHARGES ARE TAXABLE UNDER THE HEAD HOUSE PROPERTY? 5.3.2. WITH REGARD TO TAXABILITY OF MAINTENANCE CH ARGES, THE CIT (A) HAD HELD THAT (I) THE ASSESSEE HAD ENTERED INTO AN AGREEMENT FOR MAINTENANCE OF THE INDUSTRIAL PARK WITH M/S. EMBASS Y MANAGEMENT CONSULTANTS P. LTD., (II) THE ASSESSEE COLLECTS MAI NTENANCE CHARGES AT COST + 15% AS PROPERTY MANAGEMENT FEE AND PAYS 12% OF PR OJECT MANAGEMENT FEES TO THE PROPERTY MANAGER, (III) THE ASSESSEE IS NOT ENGAGED IN PROVIDING SERVICES MENTIONED IN THE LEASE DEED; (IV ) MAINTENANCE CHARGES TO THE EXTENT OF 3% IS EARNED AS OWNER OF THE HOUSE PROPERTY AND, THUS, ACCORDING TO THE CIT (A), THE MAINTENANCE CHARGES A RE TAXABLE AS INCOME FROM HOUSE PROPERTY. 6. AGGRIEVED, THE ASSESSEE HAS COME UP BEFORE US W ITH THE PRESENT APPEALS. DURING THE COURSE OF HEARING, THE SUBMISSIONS MADE BY THE LEARNED AR ARE SUMMARIZED AS UNDER: - THAT IN THE PRESENT CASE THE FIT OUT RENT WAS EAR NED FROM LETTING VARIOUS FACILITIES SUCH AS INTERIORS, FURNITURE AND FIXTURES, ELECTRICAL FITTINGS ETC., SIMILARLY, MAINTENANCE C HARGES WERE ON ACCOUNT OF MAINTENANCE SERVICES PROVIDED TO THE TEN ANTS; AND THAT THOSE FACILITIES AND SERVICES WOULD NOT FALL UNDER THE EXPRESSION BUILDINGS OR LANDS APPURTENANT THERETO AS USED IN S. 22. THUS, THE CONTENTION OF THE AO THAT FIT OUT RENT AND MAINTENA NCE CHARGES WERE CHARGEABLE UNDER THE HEAD INCOME FROM HOUSE P ROPERTY IS WITHOUT ANY MERIT; ITA NOS.720 AND 721 & 685 OF 2011 KIRLOSKAR SYSTEMS LTD BANGALORE PAGE 6 OF 25 - THAT THE AUTHORITIES OBSERVATIONS THAT THE FIT- OUTS FORM AN INTEGRAL PART OF THE STRUCTURE OWNED BY THE ASSESSE E AND, HENCE, THE RENTAL INCOME FROM THOSE FIT-OUTS IS TO BE TREA TED AS INCOME FROM HOUSE PROPERTY IS WITHOUT MERIT SINCE RENT IS SEPARATELY FIXED FOR FIT-OUTS GIVEN ON RENT; AND THAT THE AMOUNT OF RENT FOR THE LETTING OUT THE BUILDING IS FIXED BASED ON EXTENT O F AREA LET OUT, LOCATION OF THE BUILDING ETC., WHEREAS RENT FOR THE LETTING OF FIT- OUTS ARE FIXED BASED ON TYPE OF FIT-OUTS PROVIDED, ITS ESTIMATED USEFUL LIFE, THE PROBABLE MAINTENANCE COST, REPLACE MENT ETC., - THAT THERE WILL BE AN INCREMENT IN RENT FROM THE BUILDING IN SUBSEQUENT YEARS WHEREAS THERE IS NO SUCH ESCALATIO N IN THE FIT- OUTS RENT AND THAT THE FIT-OUTS HAVE A SHORTER USE FUL LIFE THAN THAT OUT OF THE BUILDING OR SUPER-STRUCTURE; AND ON ACCO UNT OF THE ABOVE DIFFERENCES IN THE INHERENT NATURE OF THESE TWO PRO PERTIES, IT CANNOT BE CONSIDERED THAT THE OUT-FITS ARE AN INTEG RAL PART OF A BUILDING; - THAT COMMERCIAL ACCOUNTING PRINCIPLES AND THE AC COUNTING STANDARDS MANDATE THE RECOGNITION AND ACCOUNTING OF CLOSELY LINKED FIXED ASSETS ON SEPARATE BASIS, HAVING INDEPENDENT IDENTITY AND THAT THE SEPARATION IS BASED ON FACTORS SUCH AS NAT URE OF ASSET, ITS USEFUL LIFE ETC., [SOURCE PARAGRAPH 8.3 OF AS 10]; - DISTINGUISHING THE JUDGMENTS OF THE HONBLE CALC UTTA HIGH COURT AND THE HONBLE SUPREME COURT IN THE CASE OF SHAMBH U INVESTMENT PVT. LTD (SUPRA), IT WAS CONTENDED THAT THOSE DECIS IONS WERE BASED ON PECULIAR FACTS AND CIRCUMSTANCES OF THE CASE WHI CH CANNOT BE GENERALIZED AND BE HELD AS APPLICABLE TO ALL CASES WITHOUT CONSIDERING THE RELEVANT FACTS AND CIRCUMSTANCES OF EACH CASE; AND, FURTHER, THAT THE ABOVE DECISIONS ARE NOT APPLICABL E FOR THE FOLLOWING REASONS: (A) IN THE ABOVE CASE, RENT FOR FIT-OUTS WAS NOT SE PARATELY FIXED, BUT WAS A COMPOSITE RENT FOR LET OUT OF THE PROPERTY AN D FIXTURES, BUT, IN THE PRESENT CASE, RENT FOR PROPERTY AND FIT OUTS WE RE FIXED SEPARATELY; (B) IN THAT CASE, NO RENT WAS CHARGED SEPARATELY FO R LETTING OUT OF FURNITURE AND FIXTURES; THAT THE TENANTS WERE PAYIN G CONSOLIDATED SUM FOR THE USAGE OF BOTH PREMISES AND FACILITIES AND T HERE WAS ALSO NO DEMARCATION OF RENT TOWARDS THE USAGE OF FACILITIES WHEREAS IN THE ITA NOS.720 AND 721 & 685 OF 2011 KIRLOSKAR SYSTEMS LTD BANGALORE PAGE 7 OF 25 PRESENT CASE, RENT WAS DETERMINED, CHARGED AND COLL ECTED SEPARATELY FOR THE LET OUT OF THE PREMISES AND ALSO THE FACILI TIES, RESPECTIVELY; (C) IN THAT CASE, COST OF THE BUILDING HAD BEEN REC OVERED BY WAY OF RECEIPT OF INTEREST FREE ADVANCES FROM TENANTS, HOW EVER, SUCH PRACTICE WAS NOT FOLLOWED IN THE PRESENT CASE; (D) IN THAT CASE, BASED ON THE FACT THAT THERE WAS NO SEPARATE RENT FOR LETTING OF FIT-OUTS, THE HONBLE COURT HELD THAT TH E LETTING WAS AN INSEPARABLE ONE WHEREIN IN THE INSTANT CASE, RENT F OR FIT-OUTS WAS FIXED SEPARATELY AND RENTAL INCOME FROM THE PREMISES AND FIT-OUTS WAS AGREED TO BE TAXABLE UNDER THE HEADS, INCOME FROM HOUSE P ROPERTY AND INCOME FROM BUSINESS RESPECTIVELY; (E) IN THAT CASE, THE HONBLE HIGH COURT DID NOT CO NSIDER THE APPLICABILITY OF S. 52(2)(III) AFTER CONCLUDING THA T THE LETTING OF PREMISES AND FACILITIES WAS AN INSEPARABLE ONE. UNDER S. 56 (2)(III), IF THE LETTING OF THE BUILDING IS INSEPARABLE FROM THE LETTING OF MACHINERY, PLANT OR FURNITURE, THE INCOME FROM SUCH LETTING IS CHARGEAB LE TO TAX UNDER THE HEAD INCOME FROM OTHER SOURCES, IF NOT CHARGED UN DER THE HEAD PROFITS AND GAINS OF BUSINESS; - THAT THE JUDGMENT OF HONBLE SUPREME COURT IN TH E CASE OF EAST INDIA HOUSING AND LAND DEVELOPMENT TRUST LTD V. CIT (1961 ) 42 ITR 49 (SC) RELIED ON BY THE AUTHORITIES IS ALSO DISTINGUISHABL E IN THE SENSE THAT THE ISSUE BEFORE THE HONBLE COURT WAS WHETHER RENT FRO M LETTING OF SHOPS AND STALLS WERE TAXABLE AS BUSINESS INCOME OR IN COME FROM HOUSE PROPERTY. HOWEVER, THERE WAS NO RENT FROM LETTING OF FIT-OUTS, HOWEVER, IN THE PRESENT CASE IS THE TAXABILITY OF RENT FROM FIT-OUTS; 6.1. TO DRIVE HOME ITS ARGUMENT THAT THE HIRE CHAR GES, SERVICE CHARGES FOR LETTING OUT THE PLANTS, MACHINERY, FURN ITURE AND FOR EXTENDING CERTAIN SERVICES ARE TAXABLE UNDER THE HEAD INCOME FROM BUSINESS OR INCOME FROM OTHER SOURCES, THE ASSESSEE HAS PLACE D RELIANCE ON THE FOLLOWING CASE LAWS, NAMELY: (A) TARAPORE AND CO V. CIT (2003) 259 ITR 0389 (MAD); (B) CIT V. KANAK INVESTMENTS (PVT) LTD (1974) 95 ITR 41 9 (CAL); ITA NOS.720 AND 721 & 685 OF 2011 KIRLOSKAR SYSTEMS LTD BANGALORE PAGE 8 OF 25 (C) SHAH (D.C) V. CIT (1979) 118 ITR 419 (KAR); (D) CIT V. SANKARANARAYANA HOTELS (P) LTD (1993) 201 IT R 138 (KAR); (E) CIT V. MYSORE INTERCONTINENTAL HOTELS P LTD (2010) 322 ITR 116 (KAR); (F) CIT V. SRI S MOHAN KUMAR (HUF) (2011) 201 TAXMAN 161 KARNATAKA HC; & (G) PRESTIGE ESTATE PROJECTS P LTD V. ACIT ITA NO.857 /BANG/2008 DT: 29.5.2009. 6.1.1. IN CONCLUSION, IT WAS PLEADED THAT THE INCO ME FROM MAINTENANCE CHARGES WAS ON ACCOUNT OF MAINTENANCE S ERVICES PROVIDED BY THE ASSESSEE AND THAT IT WAS AN INCOME FROM SERVICE ACTIVITY AND NOT FROM PROPERTY. THE ANNUAL VALUE OF BUILDINGS AND LAND A PPURTENANT THERETO DOES NOT INCLUDE AMOUNT CHARGED FOR SERVICE PROVIDED BY THE OWNER. IT WAS, FURTHER, STRESSED THAT THE OBLIGATION TO PROVIDE MA INTENANCE SERVICE WAS INDEPENDENT FROM LEASING OUT THE BUILDINGS WHICH WA S NOT INCIDENTAL TO OWNERSHIP OF THE PROPERTY. IT WAS SETTLED LAW THAT INCOME FROM MAINTENANCE SERVICE OR ANY OTHER SERVICE PROVIDED T O TENANTS IS TAXABLE UNDER THE HEAD PROFITS AND GAINS OF BUSINESS OR I N THE ALTERNATIVE INCOME FROM OTHER SOURCES, IF IT IS NOT TAXABLE UNDER THE HEAD PROFIT AND GAINS OF BUSINESS. IT WAS, THEREFORE, ASSERTED THAT THE INCOME FROM MAINTENANCE CHARGES ARE TO BE TAXED UNDER THE HEAD PROFITS AND GAINS OF BUSINESS AND NOT UNDER THE HEAD INCOME FROM HOUSE PROPERTY. 6.2. ON THE OTHER HAND, THE LEARNED DR HAD JUSTIFI ED THE STAND OF THE AUTHORITIES BELOW IN TREATING THE RENTS RECEIVE D FOR THE BUILDINGS AND OUT-FITS AS INCOME FROM HOUSE PROPERTY. FOR THE ABOVE PROPOSITION, HE HAD PLACED STRONG RELIANCE ON THE JUDGMENT OF THE H ONBLE BOMBAY HIGH COURT IN THE CASE OF CIT V. J.K. INVESTOR (BOM) LTD (2012) 48 (1) ITC 2 186 [BOM-HC] AND THE FINDINGS OF THE HONBLE HYDERA BAD TRIBUNAL IN THE CASE OF CIT V. G RAGHURAM (2010) 134 TTJ (HYD) 87 . WITH REGARD TO ITA NOS.720 AND 721 & 685 OF 2011 KIRLOSKAR SYSTEMS LTD BANGALORE PAGE 9 OF 25 DEDUCTION U/S 80-1A (4)(III) WAS CONCERNED, THE LEA RNED DR ASSERTED THAT THE CIT (A) HAD NOT DISCUSSED THIS ISSUE AT ALL, A LTHOUGH THIS ISSUE WAS RAISED BY THE ASSESSEE. IT WAS, HOWEVER, SUBMITTED WITHOUT PREJUDICE THAT THIS ISSUE MAY BE REMANDED BACK TO THE CIT (A) FOR CONSIDERATION REGARDING ELIGIBILITY OF DEDUCTION U/S 80-1A(4)(III ) OF THE ACT. 7. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSI ONS, PERUSED THE RELEVANT MATERIALS ON RECORD AND ALSO THE VARIO US CASE LAWS ON WHICH EITHER OF THE PARTY HAVE PLACED THEIR STRONG RELIAN CE. RENT RECEIVED ON FIT-OUTS, FIXTURES E TC: 7.1. IT IS AN UNDISPUTED FACT THAT DURING THE PREV IOUS YEAR RELEVANT TO THE ASSESSMENT YEARS UNDER DISPUTE, THE ASSESSEE HAD LET OUT THE BUILDINGS IN ITS INDUSTRIAL PARK FOR RENT. APA RT FROM LETTING OUT THE BUILDINGS TO ITS TENANTS, THE ASSESSEE HAD ALSO PRO VIDED CERTAIN AMENITIES AND SERVICES SUCH AS ROADS IN THE INDUSTRIAL PARK, MULTIPLE CAR PARKING, SECURITY, STREET LIGHTS, POWER SUPPLY AND MAINTENAN CE OF ELECTRICAL INSTALLATIONS AND BUILDINGS, ACS, FIXTURES, LIFTS, FIT-OUTS COMPRISING OF FURNITURE, PLANT AND MACHINERY ETC., 7.1.2. AS RIGHTLY HIGHLIGHTED OUT BY THE ASSESSEE DURING THE COURSE OF HEARING, THE RENTS FOR THE BUILDINGS AND VARIOUS AMENITIES PROVIDED WERE FIXED SEPARATELY IN THE LEASE AGREEMENTS ENTER ED INTO. BEING QUERIED AT THE TIME OF ASSESSMENT PROCEEDINGS, THE ASSESSEE HAD CONTENDED BEFORE THE RESPECTIVE AOS THAT THE ENTIRE RENTALS INCOME WAS ON ACCOUNT OF COMMERCIAL EXPLOITATION OF THE PROPER TIES BY WAY OF PROVIDING PROPERTY, FIT-OUTS AND VARIOUS AMENITIES FOR RENT AND THAT THE DEVELOPMENT OF INDUSTRIAL PARK AND PROVIDING THE SA ME ALONG WITH AMENITIES WAS A COMMERCIAL VENTURE IN THE COURSE OF BUSINESS AND, ITA NOS.720 AND 721 & 685 OF 2011 KIRLOSKAR SYSTEMS LTD BANGALORE PAGE 10 OF 25 THEREFORE, RENTALS RECEIVED FOR BOTH (BUILDING + AM ENITIES) ARE TO BE TAXABLE AS BUSINESS INCOME. HOWEVER, THE AOS TOO K A VIEW THAT THE RENTAL INCOME FROM PROPERTY AND FIT-OUTS ARE TAXABL E UNDER THE HEAD INCOME FROM HOUSE PROPERTY ON THE PREMISE THAT TH E ACTIVITY OF LETTING OUT OF INDUSTRIAL PARK ALONG WITH PROVISION OF VARI OUS SERVICES AND AMENITIES CANNOT BE REGARDED AS A COMPLEX COMMERCIA L ACTIVITY. 7.1.3. BEFORE THE FIRST APPELLATE AUTHORITY, THE A SSESSEE HAD, HOWEVER, AGITATED ONLY THE ISSUE OF THE RENTS RECEI VED ON FIT-OUTS WHICH SHOULD BE TAXABLE AS BUSINESS INCOME BUT NOT UNDER THE HEAD HOUSE PROPERTY. THIS PLEA OF THE ASSESSEE WAS, HOWEVER, TURNED DOWN BY THE CIT (A) FOR THE REASONS RECORDED IN HIS FINDINGS. 7.1.4 IN THE PRESENT CASE, THE ASSESSEE IS ENGAGED IN THE BUSINESS OF DEVELOPMENT, OPERATION AND MAINTENANCE OF INDUST RIAL PARK. THE INCOME FROM FIT OUTS LET OUT WAS RECEIVED IN COURSE OF BUS INESS CARRIED ON BY THE ASSESSEE COMPANY. THE FIT OUT RENT WAS EARNED FROM LETTING VARIOUS FACILITIES SUCH AS INTERIORS, FURNITURE AND FIXTURE S, ELECTRICAL FITTINGS ETC. THE OBSERVATION OF THE LEARNED ASSESSING OFFICER AN D THE CIT (A) THAT THE FIT OUTS FORM AN INTEGRAL PART OF THE STRUCTURE OWNED BY THE ASSESSEE AND HENCE THE RENTAL INCOME FROM THESE FIT OUTS IS TO BE TREATED AS INCOME FROM HOUSE PROPERTY IS WITHOUT MERIT. RENT I S SEPARATELY FIXED FOR FIT OUTS GIVEN ON RENT. THE AMOUNT OF RENT FOR THE LET OUT BUILDINGS IS FIXED BASED ON VARIOUS FACTORS SUCH AS EXTENT OF AR EA (IN SQ.FT, SQ.METR ETC) LET OUT, LOCATION OF THE BUILDING WHETHER LO CATED IN AN AREA PROXIMATE TO CIVIC AMENITIES AND FACILITIES, TYPE O F CONSTRUCTION ETC. HOWEVER, RENT FOR THE LET OUT OF FIT OUTS ARE FIXED BASED ON OTHER FACTORS ITA NOS.720 AND 721 & 685 OF 2011 KIRLOSKAR SYSTEMS LTD BANGALORE PAGE 11 OF 25 SUCH AS TYPE OF FIT OUT PROVIDED, ITS ESTIMATED USE FUL LIFE, THE PROBABLE MAINTENANCE COST OF FIT OUTS ON ACCOUNT OF WEAR AND TEAR, REPLACEMENT ETC. THERE WAS AN INCREMENT IN RENT FROM BUILDING I N SUBSEQUENT YEARS. HOWEVER, THERE WAS NO SUCH INCREMENT IN THE FIT OUT RENT. FIT OUTS HAVE A SHORTER USEFUL LIFE THAN THAT OF THE BUILDING OR SU PERSTRUCTURE. THEY ARE ALSO SUSCEPTIBLE TO ACCELERATED WEAR AND TEAR, LIAB LE FOR REPLACEMENT ON ACCOUNT OF CHANGES IN TRENDS IN OFFICE DECORUM ETC. ON ACCOUNT OF THE ABOVE DIFFERENCES IN THE INHERENT NATURE OF THESE T WO PROPERTIES, IT CANNOT BE CONSIDERED THAT THE FIT OUTS ARE AN INTEG RAL PART OF THE BUILDING. THE PROVISIONS OF THE COMPANIES ACT, INCOME TAX ACT AND RULES RECOGNIZE THE SEPARATE EXISTENCE OF ASSETS ATTACHED TO BUILDI NGS OR SUPERSTRUCTURE. FOR EXAMPLE, THE RATE OF DEPRECIATION FOR BUILDING, PLANT AND MACHINERY, FURNITURE AND FITTINGS ARE DIFFERENT. THIS IS SO EV EN IF THE PLANT AND MACHINERY IS EMBEDDED PERMANENTLY INTO THE EARTH AN D FURNITURE AND FITTINGS ARE ATTACHED TO THE BUILDING. AS PER NOTE 5 TO NEW APPENDIX I OF IT RULES, WHICH PRESCRIBES THE DEPRECIATION RATES F OR VARIOUS ASSETS, ELECTRICAL FITTINGS INCLUDE ELECTRICAL WIRING, SWIT CHES, SOCKETS, OTHER FITTINGS AND FANS, ETC. THUS ASSETS PERMANENTLY ATT ACHED TO BUILDING ARE TREATED SEPARATELY AND THEY ARE ENTITLED TO SEPARAT E RATE OF DEPRECIATION. 7.1.5. THE VARIOUS JUDGMENTS ON A SIMILAR CIRCUMST ANCE HAVE HELD THAT LETTING OUT OF THE BUILDING TOGETHER WITH FURN ITURE, FIXTURES ETC., SHOULD NOT BE ASSESSED UNDER THE HEAD HOUSE PROPER TY. TO ILLUSTRATE FURTHER, WE SHALL ANALYZE THE JUDGMENTS OF THE HON BLE JURISDICTIONAL HIGH COURT ON A SIMILAR ISSUE, AS UNDER: ITA NOS.720 AND 721 & 685 OF 2011 KIRLOSKAR SYSTEMS LTD BANGALORE PAGE 12 OF 25 (I) CIT V. SHANKARANARAYANA HOTELS (P) LTD (1993) 201 I TR 0138 (KAR): THE ISSUE BEFORE THE HONBLE COURT WAS WHETHER, THE TRIBUNAL WAS RIGHT IN HOLDING THAT THE COMPOSITE RENT RECEIVED BY THE ASSESSEE FROM ITS TENANTS SHOULD BE SPLIT AND THE AMOUNTS ATTRIBUTABL E TO THE PROPERTY ONLY SHOULD BE ASSESSED UNDER THE HEAD PROPERTY INCOME , WHILE THE AMOUNT ATTRIBUTABLE TO AMENITIES PROVIDED/SERVICES RENDERE D BY THE ASSESSEE TO THE TENANTS SHOULD BE ASSESSED UNDER THE HEAD OTHE R SOURCES? AFTER HEARING THE RIVAL PARTIES AND ALSO EXTENSIVELY REFE RRING THE EARLIER RULINGS OF THE VARIOUS HONBLE COURTS INCLUDING THE CASES O F (I) SHAH (DC) V. CIT (1979) 118 ITR 0419 (KAR); (II) KARNANI PROPERTIES LTD CASE (1971) 82 ITR 547 (SC); (III) CIT V. KANAK INVESTMENTS (PVT) LTD (1974) 95 ITR 419 (CAL); & (IV) INDIAN CITY PROPERTIES LTD V. CIT (1978) 111 ITR 19 (CAL), THE HONBLE COURT HAD HELD THAT IN CASE THERE IS INSEPARABILITY, AS STATED ABOVE, THEN IT WILL NOT BE INCOME FROM HOUSE PROPERTY AT ALL BUT WOULD BE INCOME FALL ING UNDER THE PRESENT SECTION 56 (2)(III). FURTHER, WHAT FOLLOWS FROM THI S IS THAT IN CASE OF SEPARABILITY, THE TWO SETS OF INCOME ATTRIBUTABLE T O THE TWO SEPARATE ENTITIES ALSO SHOULD BE ASSESSED UNDER THE RESPECTI VE HEADS. IN OTHER WORDS, THE INCOME THAT SHOULD BE ATTRIBUTED TO THE PROPERTY AS SUCH ALONE SHOULD BE ASSESSED UNDER SECTION 22. IN VIEW OF THE ABOVE DISCUSSION, WE HAVE NO HESITAT ION IN HOLDING THAT THE COMPOSITE RENT RECEIVED BY THE ASSESSEE COULD BE SP LIT UP. (II) CIT V. SRI S MOHAN KUMAR (HUF) (2011) 201 TAXMAN 161 (KAR): THE SUBSTANTIAL QUESTION OF LAW RAISED BEFORE THE H ONBLE COURT WAS THAT (1) WHETHER THE TRIBUNAL WAS JUSTIFIED IN HOLDING THAT THE RENTAL INCOME RECEIVED BY THE ASSESSEES FROM LETTING OUT THE BUI LDING TOGETHER WITH FURNITURE, FIXTURES AND EQUIPMENT SHOULD BE BIFURCA TED UNDER THE TWO HEADS: (A) INCOME FROM HOUSE PROPERTY; (B) INCOME FROM OTHER SOURCES ITA NOS.720 AND 721 & 685 OF 2011 KIRLOSKAR SYSTEMS LTD BANGALORE PAGE 13 OF 25 INSOFAR AS THE INCOME FROM FURNITURE, FIXTURES AND EQUIPMENT IS CONCERNED NOT THE ENTIRE RENTAL INCOME UNDER THE HE ADING OF INCOME FROM HOUSE PROPERTY THE INCOME IS TO BE ASSESSED AS INC OME FROM HOUSE PROPERTY. REFERRING THE CASES OF (I) CIT V. SHAMBHU INVESTMEN T (P) LTD (2001) 249 ITR 47 (CAL); (II) SULTAN BROS (P) LTD V. CIT (1964 ) 51 ITR 353 (SC); & (III) TARAPORE & CO V. CIT (2003) 259 ITR 389 (MAD) AND A LSO ANALYZING THE PROVISIONS OF SECTIONS 22,23,27,56 OF THE ACT, THE HONBLE COURT HAD RULED THAT - 17. THEREFORE, FROM THE AFORESAID STATUTORY PROVIS IONS, IT IS CLEAR THAT IF THE INCOME IS TO BE CHARGEABLE UNDER THE HEADING OF INCOME FROM HOUSE PROPERTY IT SHOULD BE THE INCOME WHICH REPRE SENTS THE ANNUAL VALUE OF PROPERTY CONSISTING OF ANY BUILDING OR LAN DS APPURTENANT THERETO OF WHICH THE ASSESSEE IS THE OWNER AND ONLY SUCH INCOME SHALL BE CHARGEABLE TO INCOME-TAX UNDER THE HEAD INCOME FROM HOUSE PROPERTY. WHEN SECTION 56(2)(III)MAKES IT EXPLICI TLY CLEAR THAT THE INCOME FROM MACHINERY OR FIXTURE BELONGING TO THE A SSESSEE AND LET OUT ON HIRE, IF IT IS NOT CHARGEABLE UNDER THE HEADING OF PROFITS AND GAINS OF BUSINESS OR PROFESSION, THEN IT HAS TO BE CHARG ED TO INCOME-TAX UNDER THE HEAD INCOME FROM OTHER SOURCES. IF THE AFORESAID INCOME IS INSEPARABLE FROM LETTING OUT THE SAID PLANT AND MAC HINERY OTHER THAN THE INCOME OF SUCH LETTING OUT CANNOT IF IT IS NOT CHARGEABLE TO INCOME- TAX UNDER PROFITS AND GAINS OR PROFESSION, IS CHA RGEABLE UNDER THE HEAD INCOME FROM OTHER SOURCES. THEREFORE UNDER THESE CIRCUMSTANCES, THE INCOME DERIVED FROM LETTING OUT THE FURNITURE AND FIXTURE IS NOT CHARGEABLE UNDER THE HEADING OF INC OME FROM HOUSE PROPERTY. 18. THE FINDING RECORDED BY THE TRIBUNAL IS IN ACCO RDANCE WITH LAW AND DOES NOT SUFFER FROM ANY ILLEGALITY OR INFIRMITY AN D, THEREFORE, IT DOES NOT CALL FOR INTERFERENCE WHILE COMING TO THE ABOVE CONCLUSION, THE HONB LE COURT HAD ALSO DISTINGUISHED THE RULING OF THE HONBLE SUPREME COU RT IN THE CASE OF SHAMBHU INVESTMENTS (SUPRA). FOR APPRECIATION OF F ACTS, THE RELEVANT PORTION OF THE OBSERVATION OF THE HONBLE COURT IS REPRODUCED AS UNDER: ITA NOS.720 AND 721 & 685 OF 2011 KIRLOSKAR SYSTEMS LTD BANGALORE PAGE 14 OF 25 11. WE HAVE TO SEE THE STATUTORY PROVISION CONT AINED IN S. 56 WHICH DEALS WITH INCOME FROM OTHER SOURCES. SUB-S. (1) OF S. 56 MAKES IT CLEAR THAT INCOME OF EVERY KIND WHICH IS NOT TO BE EXCLUDED FR OM THE TOTAL INCOME UNDER THIS ACT SHALL BE CHARGEABLE TO INCOME-TAX UN DER THE HEAD 'INCOME FROM OTHER SOURCES'; IF IT IS NOT CHARGEABLE TO INC OME-TAX UNDER ANY OF THE HEADS SPECIFIED IN S. 14, ITEMS A TO E, SUB-S. (2) OF S. 56 SPECIFICALLY STATES THE RATE OF INCOME-TAX WHICH SHALL BE CHARGEABLE TO INCOME-TAX UNDER THE HEAD INCOME FROM OTHER SOURCES. SUB-CL. (II) PROV IDES THAT 'INCOME FROM MACHINERY, PLANT OR FURNITURE BELONGING TO THE ASSE SSEE AND LET ON HIRE, IF THE INCOME IS NOT CHARGEABLE TO INCOME-TAX UNDER TH E HEAD PROFITS AND GAINS OF BUSINESS OR PROFESSION. CLAUSE (III) ALSO PROVIDES THAT 'WHERE AN ASSESSEE LETS ON HIRE MACHINERY, PLANT OR FURNITURE BELONGING TO HIM AND ALSO BUILDINGS AND THE LETTING OF THE BUILDINGS IS INSEPARABLE FROM THE LETTING OF THE SAID MACHINERY, PLANT OR FURNITURE, THE INCOME FROM SUCH LETTING, IF IT IS NOT CHARGEABLE TO INCOME-TAX UNDE R THE HEAD 'PROFITS AND GAINS OF BUSINESS OR PROFESSION'. THEREFORE, THE IN TENTION OF THE LEGISLATURE IS EXPLICIT. IF THE MACHINERY, PLANT AND FURNITURE ARE NOT SEPARATE FROM THE LETTING OF THE SAID MACHINERY, THE INCOME FROM SUCH MACHINERY, PLANT ALONG WITH THE INCOME FROM THE BUILDING, THE INCOME IS CHARGEABLE TO INCOME-TAX UNDER THE HEAD OF INCOME FROM OTHER SOU RCES, IF IT DOES NOT FALL UNDER 'PROFITS AND GAINS OF BUSINESS OR PROFES SION'. THEREFORE, UNDER NO CIRCUMSTANCE THE INCOME FROM LETTING OUT THE FUR NITURE AND FIXTURE BECOMES CHARGEABLE TO INCOME-TAX UNDER THE HEAD OF INCOME FROM HOUSE PROPERTY. (III) IN THE CASE OF CIT V. M/S. VELANKANI INFORMA TION SYSTEMS PVT. LTD & OTHERS IN ITA NO.273/2012 C/W, I.T.A.NOS.274/2012, 275/2012, 276/20122, 374/2011 & 375/2011 DATED 2.4.2013, THE ISSUE BEFORE THE HONBLE JURISDICTIONAL HIGH COURT WAS, AMONG OTHERS , THAT WHETHER THE APPELLATE AUTHORITIES WERE CORRECT IN HOLDING THAT THE RENTAL INCOME EARNED BY THE ASSESSEE COMPANY FROM L ETTING OUT BUILDING SHOULD BE BROUGHT TO TAX UNDER THE HEAD INCOME FRO M BUSINESSES AND NOT UNDER THE HEAD INCOME FROM HOUSE PROPERTY AS HELD BY THE ASSESSING OFFICER? EXTENSIVELY QUOTING AND ALSO ANALYZING THE PRO VISIONS OF SECTIONS 22, 28, 56 (1), 80IA OF THE ACT AND REFERRING TO TH E RULINGS OF VARIOUS JUDICIARIES INCLUDING THE HONBLE SUPREME COURT IN (I) EAST INDIA HOUSING & LAND DEVELOPMENT TRUST LTD V. CIT (1961) 42 ITR 49 (SC); (II) KARANPURA DEVELOPMENT CO. LTD V. CIT (1962) 44 ITR 362 (SC); (III) SULTAN BROS. (P) LTD (SUPRA); (IV) CIT V. NATIONAL STORAGE (P) LTD ( 1967) 66 ITR 596 (SC); & (IV) THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF ADDL. CIT V. ITA NOS.720 AND 721 & 685 OF 2011 KIRLOSKAR SYSTEMS LTD BANGALORE PAGE 15 OF 25 HINDUSTAN MACHINE TOOLS LTD (1980) 121 ITR 798 (KAR ), THE HONBLE COURT HAD OBSERVED THUS 25. WE HAVE TO FIND OUT IN THAT CONTEXT WHAT WAS T HE INTENTION OF THE PARTIES IN ENTERING INTO THE LEASE TRANSACTION. IT IS NOT THE NUMBER OF AGREEMENTS WHICH ARE ENTERED INTO BETWEEN THE PARTI ES WHICH IS DECISIVE IN DETERMINING THE NATURE OF TRANSACTION. WHAT IS THE OBJECT OF ENTERING INTO MORE THAN ONE SAID TRANSACTIONS IS TO BE LOOKE D INTO. HOWEVER, IF FOR ENJOYMENT OF LEASE, THE SUBJECT MATTER OF ALL T HE AGREEMENTS IS NECESSARY, THEN NOTWITHSTANDING THE FACT THAT THERE ARE MORE THAN ONE AGREEMENT OR ONE LEASE DEED, THE TRANSACTION IS ONE . AS ALL THE AGREEMENTS ARE ENTERED INTO CONTEMPORANEOUSLY AND T HE OBJECT IS TO ENJOY THE ENTIRE PROPERTY VIZ., BUILDING FURNITURE AND THE ACCESSORIES AS A WHOLE WHICH IS NECESSARY FOR CARRYING ON THE BUSI NESS, THEN THE INCOME DERIVED THERE FROM CANNOT BE SEPARATED BASED ON THE SEPARATE AGREEMENT ENTERED INTO BETWEEN THE PARTIES. WHAT H AS TO BE SEEN IS, WHAT WAS THE PRIMARY OBJECT OF THE ASSESSEE WHILE E XPLOITING THE PROPERTY. IF IT IS FOUND APPLYING SUCH PRINCIPLE T HAT THE INTENTION IS FOR LETTING OUT THE PROPERTY OR ANY PORTION THEREOF, TH E SAME MAY BE CONSIDERED AS RENTAL INCOME OR INCOME FROM PROPERTI ES. IN CASE, IF IT IS FOUND THAT THE MAIN INTENTION IS TO EXPLOIT IMMOVAB LE PROPERTY BY WAY OF COMPLEX COMMERCIAL ACTIVITIES, IN THAT EVENT IT MUST BE HELD AS BUSINESS INCOME. 26. SUB-SECTION (1) OF SECTION 56 MAKES IT CLEAR TH AT INCOME OF EVERY KIND WHICH IS NOT BE EXCLUDED FROM THE TOTAL INCOM E UNDER THIS ACT SHALL BE CHARGEABLE TO INCOME-TAX UNDER THE HEAD I NCOME FROM OTHER SOURCES, IF IT IS NOT CHARGEABLE TO INCOME-TAX UND ER ANY OF THE HEADS SPECIFIED IN SECTION 14, ITEMS A TO E. SUB-SECTION (2) OF SECTION 56 SPECIFICALLY STATES THAT THE INCOMES SHALL BE CHARG EABLE TO INCOME-TAX UNDER THE HEAD INCOME FROM OTHER SOURCES. CLAUSE (II) OF SECTION 56(2) PROVIDES THAT INCOME FROM MACHINERY, PLANT OR FURNITURE BELONGING TO THE ASSESSEE AND LET ON HIRE, IF THE I NCOME IS NOT CHARGEABLE TO INCOME-TAX UNDER THE HEAD PROFIT AND GAINS OF BUSINESS OR PROFESSION. CLAUSE (III) ALSO PROVIDES THAT WH ERE AN ASSESSEE LETS ON HIRE MACHINERY, PLANT OR FURNITURE BELONGING TO HIM AND ALSO BUILDINGS, AND THE LETTING OF THE BUILDINGS IS INSEPARABLE FRO M THE LETTING OF THE SAID MACHINERY, PLANT OR FURNITURE, THE INCOME FROM SUCH LETTING, IF IT IS NOT CHARGEABLE TO INCOME-TAX UNDER THE HEAD PROFIT S AND GAINS OF BUSINESS OR PROFESSION. THEREFORE, THE INTENTION OF THE LEGISLATURE IS EXPLICIT. THE PROVISION IS CLEAR I.E., IF THE LETT ING OF THE BUILDING, PLANT, MACHINERY AND FURNITURE IS INSEPARABLE, THE INCOME FROM SUCH LETTING SHOULD ORDINARILY FALL WITHIN THE HEAD PROFITS AND GAINS OF BUSINESS OR PROFESSION. BUT FOR ANY REASON, IF IT DOES NOT FA LL UNDER THAT HEAD, IT SHALL FALL UNDER THE HEAD INCOME FROM OTHER SOURCE S, BUT CERTAINLY NOT UNDER THE HEADING INCOME FROM HOUSE PROPERTY. IF TH E INTENTION IS TO EXPLOIT COMMERCIAL PROPERTY BY PUTTING UP CONSTRUCT ION AND LETTING IT OUT FOR THE PURPOSE OF GETTING RENTAL INCOME, THEN NOTWITHSTANDING THE ITA NOS.720 AND 721 & 685 OF 2011 KIRLOSKAR SYSTEMS LTD BANGALORE PAGE 16 OF 25 FACT THAT THE FURNITURE AND FITTINGS ARE PROVIDED T O THE LESSEE, THE INCOME FROM THE BUILDING FALL UNDER THE HEAD INCOME FROM H OUSE PROPERTY. BUT IF THE ASSESSEE IS IN THE BUSINESS OF TAKING LAND, PUTTING UP COMMERCIAL BUILDINGS THEREON AND LETTING OUT SUCH BUILDINGS WI TH ALL FURNITURE AS HIS PROFESSION OR BUSINESS, THEN NOTWITHSTANDING TH E FACT THAT HE HAS CONSTRUCTED A BUILDING AND HE HAS ALSO PROVIDED OTH ER FACILITIES AND EVEN IF THERE ARE TWO SEPARATE RENTAL DEEDS, IT DOE S NOT FALL WITHIN THE HEADING OF INCOME FROM HOUSE PROPERTY. THEREFORE, FIRSTLY WHAT IS THE INTENTION BEHIND THE LEASE AND SECONDLY WHAT ARE TH E FACILITIES GIVEN ALONG WITH THE BUILDINGS AND DOCUMENTS EXECUTED IN RESPECT OF EACH OF THEM IS TO BE SEEN. THIRDLY, IT IS TO BE FOUND OUT WHETHER IT IS INSEPARABLE OR NOT. IF THEY ARE INSEPARABLE AND TH E INTENTION IS TO CARRY ON THE BUSINESS OF LETTING OUT THE COMMERCIAL PROPE RTY AND CARRYING AT COMPLEX COMMERCIAL ACTIVITY AND GETTING RENTAL INCO ME THEREFROM, THEN SUCH A RENTAL INCOME FALLS UNDER THE HEADING OF PRO FITS AND GAINS OF BUSINESS OR PROFESSION. IN FACT, ANY OTHER INTERPR ETATION WOULD DEFEAT THE VERY OBJECT OF INTRODUCTION OF SECTION 80-IA AS WELL AS THE SCHEME WHICH IS FRAMED BY THE GOVERNMENT FOR DEVELOPMENT O F INDUSTRIAL PARKS IN THE COUNTRY. IN THAT VIEW OF THE MATTER, THE FI NDING RECORDED BY THE APPELLATE AUTHORITY AS WELL AS THE TRIBUNAL IS IN A CCORDANCE WITH LAW AND DOES NOT SUFFER FROM ANY LEGAL INFIRMITY WHICH CALLS FOR INTERFERENCE.. 7.1.6. IN TOTALITY OF THE FACTS AND CIRCUMSTANCES OF THE ISSUE AS NARRATED ABOVE AND IN CONSONANCE WITH THE RULINGS O F THE HONBLE JURISDICTIONAL HIGH COURT (SUPRA), WE ARE OF THE OP INION THAT THE INCOME DERIVED FROM LETTING OUT THE OUT-FITS, FIXTURES, FU RNITURE ETC., IS NOT CHARGEABLE UNDER THE HEAD INCOME FROM HOUSE PROPER TY. IT IS ORDERED ACCORDINGLY. MAINTENANCE CHARGES: 7.2 AS POINTED OUT BY THE CIT (A), THE ISSUE HAS N OT BEEN ELABORATELY DEALT WITH BY THE AO IN HER ASSESSMENT ORDER FOR THE AY 2007-08. THE CIT (A) HAD ALSO FAIRLY CONCEDED THAT UNDER NORMAL CIRCUMSTANCES, THE MAINTENANCE CHARGES SHOULD HAVE BEEN CONSIDERED AS INCOME FROM BUSINESS ON THE PREMISE THAT THE APPELL ANT LANDLORD HAD UNDERTAKEN TO DELIVER THE SERVICES OF LIFT, SECURIT Y, PROVIDING WATER, ELECTRICITY, CLEARING ETC., WHICH REQUIRES CONSTANT AND ORGANIZED ACTIVITY ITA NOS.720 AND 721 & 685 OF 2011 KIRLOSKAR SYSTEMS LTD BANGALORE PAGE 17 OF 25 TO KEEP IT BUSY AND ACTIVE ON DAY-TO-DAY BASIS AND SUCH HAS TO BE TREATED AS INCOME FROM BUSINESS [REFER: PARA 6.2 ON PAGE 8 OF CIT (A)S ORDER]. HOWEVER, IN CONCLUSION, THE CIT (A) JUSTIFIED THE A OS STAND IN TREATING THE SAME AS INCOME FROM HOUSE PROPERTY ON GROUND TH AT THE ASSESSEE WAS NOT ENGAGED IN ANY BUSINESS ACTIVITY TO PROVIDE THE SERVICES MENTIONED IN THE LEASE DEED, BUT THE EARNING OF INCOME ON MAINTE NANCE OF THE BUILDINGS FROM THE TENANTS IS AS OWNER OF THE HOUSE PROPERTY. 7.2.1. HOWEVER, WE FIND FORCE IN THE ARGUMENT OF THE ASSESSEE THAT THE INCOME FROM MAINTENANCE CHARGES WAS ON ACC OUNT OF MAINTENANCE SERVICES PROVIDED BY IT. AS RIGHTLY EXPLAINED BY T HE ASSESSEE, THE ANNUAL VALUE OF BUILDINGS AND LAND APPURTENANT THERETO DOE S NOT INCLUDE THE AMOUNTS CHARGED FOR AMENITIES PROVIDED BY THE ASSES SEE. IT IS ALSO FACTUAL THAT THE OBLIGATION OF PROVIDING, MAINTAINI NG THE SERVICE WAS INDEPENDENT FROM LEASING OF THE BUILDINGS WHICH CAN NOT BE TERMED AS INCIDENTAL TO THE OWNERSHIP OF THE SUBJECT PROPERTI ES. OUR ATTENTION WAS ALSO DRAWN BY THE ASSESSEE TO VARIOUS JUDICIAL PRON OUNCEMENTS TO THE EFFECT THAT THE INCOME FROM SUCH MAINTENANCE SERVIC ES OR ANY OTHER AMENITIES PROVIDED TO THE TENANTS ARE TO BE TAXED U NDER THE HEAD PROFITS AND GAINS OF BUSINESS OR IN THE ALTERNATIVE INCOM E FROM OTHER SOURCES. WE SHALL PROCEED TO ANALYZE THE JUDICIAL VIEWS ON T HE SAME AS UNDER: (I) THE HONBLE CALCUTTA HIGH COURT HAD, IN THE CASE OF CIT V. RUSSELL PROPERTIES (P) LTD REPORTED IN (1982) 137 I TR 0473 (CAL), HELD THAT FURTHER CONSIDERING THE DUTIES AND OBLIGATIONS CA SE ON THE ASSESSEE AND THE LESSEE, THE TRIBUNAL WAS RIGHT IN HOLDING T HAT THE SERVICE AND MAINTENANCE CHARGES RECOVERED FROM THE LESSEES WERE NOT ONLY TOWARDS ITA NOS.720 AND 721 & 685 OF 2011 KIRLOSKAR SYSTEMS LTD BANGALORE PAGE 18 OF 25 THE PROVISION OF LIFTS BUT ALSO FOR OTHER SERVICES RENDERED BY THE ASSESSEE AND THE INCOME FROM SUCH SERVICES WAS TO B E ASSESSED AS BUSINESS INCOME. (II) YET ANOTHER RULING THE HONBLE COURT, I N THE CASE OF CIT V. MODEL MANUFACTURING CO. P. LTD REPORTED IN (1986) 1 59 ITR 0270 (CAL), HELD, AFFIRMING THE DECISION OF THE TRIBUNAL, THAT THE SERVICES RENDERED BY THE ASSESSEE IN PROVIDING ELECTRICITY, USE OF LI FTS, SUPPLY OF WATER, MAINTENANCE OF STAIRCASES AND WATCH AND WARD FACILI TIES TO THE TENANTS CONSTITUTED SEPARATE ACTIVITIES DISTINCT FROM THE L ETTING OUT OF THE PROPERTY AND WERE NOT INCIDENTAL TO SUCH LETTING OU T. IT WAS FURTHER HELD THAT THE SERVICE CHARGES REALISED BY THE ASSESSEE WERE NOT PART AND PARCEL OF INCOME DERIVED FROM HOUSE PROPERTY ASSESS ABLE UNDER SECTION 22 OF THE ACT AND THAT THEY WERE ASSESSABLE UNDER T HE HEAD INCOME FROM OTHER SOURCES. (III) THE EARLIER BENCH OF THIS TRIBUNAL I N THE CASE OF PRESTIGE ESTATE PROJECTS (P) LTD V. DCIT REPORTED IN (2010) 129 TTJ 680 (BNG) ON A SIMILAR ISSUE HAS RULED IN FAVOUR OF THE ASSESSEE . THE RELEVANT PORTIONS OF ITS FINDINGS ARE EXTRACTED AS UNDER: 6. THE FOURTH GRIEVANCE OF THE APPELLANT IS THAT T HE LOWER IT AUTHORITIES HAVE ERRED IN TREATING THE HIRE CHARGES IN RESPECT OF FIT-OUTS LET OUT TO TENANTS AS INCOME FROM HOUSE PROPERTY IN STEAD OF AS INCOME FROM OTHER SOURCES. 6.1. THIS ISSUE HAS BEEN DECIDED BY THIS TRIBUNAL I N THE CASE OF THE ASSESSEE FOR THE ASST. YR. 2004-05. THE TRIBUNAL V IDE ORDER DATED 29 TH MAY, 2009 IN ITA NO.851/BANG/2008 VIDE PARA 14 OF T HE ORDER HELD THAT THE FACTS AND CIRCUMSTANCES BROUGHT ON RECORD BY TH E ASSESSING AUTHORITIES AND THE LEARNED COUNSEL INDICATE THAT T HE INTENTION OF THE ASSESSEE FOR RENDERING THE SAME AS INCOME FROM OTHE R SOURCES OUGHT NOT TO HAVE BEEN DISTURBED AS IN EARLIER YEARS. HENCE, THE RECEIPT ON LETTING OF IT IS TO BE TAXED UNDER THE HEAD INCOME FROM OTHER SOURCES ITA NOS.720 AND 721 & 685 OF 2011 KIRLOSKAR SYSTEMS LTD BANGALORE PAGE 19 OF 25 ON THE BASIS OF THE TRIBUNAL IN THE EARLIER YEAR AN D ALSO ON THE BASIS OF THE PRINCIPLE OF CONSISTENCY. 7.2.2 IN VIEW OF THE JUDICIAL PRONOUNCEMENTS ON A SIMILAR ISSUE AS DISCUSSED (SUPRA), WE ARE OF THE OPINION T HAT THE AUTHORITIES BELOW WERE NOT JUSTIFIED IN TREATING THE INCOME FRO M MAINTENANCE CHARGES AS INCOME FROM HOUSE PROPERTY. IT IS ORDERED ACC ORDINGLY. 8. WE SHALL NOW PROCEED TO DISPOSE OFF THE REVENUE S APPEAL: ITA NO.685/BANG/2011 (DEPARTMENTAL APPEAL) AY 2007- 08 8.1 IN THIS APPEAL, THE REVENUE HAS RAISED TEN GROU NDS. GROUND NOS. 1, 9 & 10 ARE GENERAL IN NATURE AND NO SPECIFIC ADJUDICA TION IS CALLED FOR, HENCE, THESE GROUNDS ARE REJECTED. GROUND NOS.2, 3 & 4 REL ATE TO THE ISSUE WHETHER THE CIT (A) IS JUSTIFIED IN ALLOWING, AS BU SINESS EXPENDITURE A SUM OF RS.1,76,50,000 BEING THE PROFESSIONAL CHARGES IN CURRED BY THE ASSESSEE. GROUND NOS. 5 & 6 RELATE TO THE ISSUE WH ETHER THE CIT (A) IS JUSTIFIED IN ALLOWING AS BUSINESS EXPENDITURE A SUM OF RS.42,86,866/- PAID TO M/S EMBASSY MANAGEMENT AND CONSULTANTS (P) LTD. GROUND NOS. 7 & 8 CHALLENGES THE CIT (A)S DIRECTIONS TO ALLOW, AS BU SINESS EXPENDITURE, THE RENT PAID TO THE GUEST HOUSE AMOUNTING TO RS.15,60, 000/-. 8.1.1. WE SHALL NOW PROCEED TO DEAL WITH THE ISSUES RAISED CHRONOLOGICALLY. GROUND NOS. 2, 3 & 4 (PROFESSIONAL CHARGES RS.1,7 6,50,000). 8.2. IN THE COMPUTATION OF INCOME, THE ASSESSING OF FICER HAS DISALLOWED A SUM OF RS.1,76,50,000/- BEING PROFESSIONAL CHARGE S PAID BY THE ASSESSEE ITA NOS.720 AND 721 & 685 OF 2011 KIRLOSKAR SYSTEMS LTD BANGALORE PAGE 20 OF 25 RELATING TO HOUSE PROPERTY INCOME (PAGE 8 OF THE AS SESSMENT ORDER). HOWEVER, THE ASSESSING OFFICER HAS NOT GIVEN ANY RE ASONS FOR DISALLOWING THE SAME. ON FURTHER APPEAL, THE CIT (A) CONSIDERIN G THE SUBMISSION OF THE ASSESSEE, DECIDED THE ISSUE IN FAVOUR OF THE AS SESSEE. FOR READY REFERENCE THE SUBMISSION OF THE ASSESSEE AND THE FI NDINGS OF THE CIT (A) IS REPRODUCED BELOW: 7. ISSUE NO.3 PROFESSIONAL CHARGES RS.1,76,50,0 00/- GROUND NO.1 OF A.Y 2007-08. THE A.O HAS NOT NARRATED THE REASONS FOR MAKING THE ABOVE DISALLOWANCE. HOWEVER, THE A.R. SUBMITS AS UNDER: DURING THE YEAR UNDER THE HEAD PROFESSIONAL CHARGE S COMPANY HAS DEBITED RS.1,50,00,000/- TOWARDS COMPENSATION F OR TERMINATION OF PROJECT WITH EMBASSY MANAGEMENT & CONSULTANT PVT. LTD. THE AMOUNT IS AN ALLOWABLE EXP ENDITURE SINCE THE PAYMENT WAS LOSS INCIDENTAL TO BUSINESS. THE SETTLEMENT WAS FOR A TOTAL AMOUNT OF RS.2.00 CRORES OUT OF WHICH RS.50.00 LAKHS HAS BEEN CHARGED TO PROFIT & L OSS ACCOUNT FOR THE YEAR ENDED 31.3.2004. RS.6,50,000 TO AN ADVOCATE TOWARDS DRAFTING DEEDS R ELATING TO BUSIENSS ACTIVITY. RS.20,00,000/- TO EMBASSY MANAGEMENT SERVICES. COMPANY HAS APPOINTED EMBASSY MANAGEMENT SERVICES L IMITED FOR MAINTAINING THE PROPERTY AT HEBBAL WHICH HAS BE EN LET OUT BY THE COMPANY. IN THIS CONNECTION EMBASSY MAY HAVE TO INCUR EXPENSES TOWARDS HOUSEKEEPING, SECURITY ETC.. 7.1 THE ABOVE SHOWS THAT RS.1,76,50,000/- CONSISTS OF THREE EXPENDITURES: I) RS.1,50,00,000 PAID TO EMBASSY MANAGEMENT & CONSULTANCY PVT. LTD. II) RS.6,50,000/- PAID TO ADVOCATE ITA NOS.720 AND 721 & 685 OF 2011 KIRLOSKAR SYSTEMS LTD BANGALORE PAGE 21 OF 25 III) RS.20,00,000/- PAID TO EMBASSY MANAGEMENT & CONSULTANCY PVT.LTD. SO FAR AS (I) IS CONCERNED, THE SAME IS ALLOWABLE B ECAUSE THE OTHER PART I.E. PAYMENT OF RS.50,00,000 PAID IN A.Y 2004-05 NO DISALLOWANCE HAD BEEN MADE BY THE ASSESSING OFFI CER. SO FAR AS (II) IS CONCERNED, IT IS ALLOWABLE AS BUSINE SS EXPENDITURE. SO FAR (II) IS CONCERNED, SUCH BEING PART OF 12% CO LLECTED FROM TENANTS TOWARDS MAINTENANCE CHARGES AS PER THE TERM S AND CONDITIONS OF DEED CITED SUPRA, IS ALSO AN ALLOWABL E EXPENDITURE. HENCE THE ADDITION IS DELETED. 8.2.1 THE REVENUE, BEING AGGRIEVED, IS IN APPEAL B EFORE US. 8.2.2 THE LEARNED DR SUBMITTED THAT THE CIT (A) HA S ERRED IN GRANTING RELIEF TO THE ASSESSEE WITHOUT APPRECIATIN G THE FACT THAT THE PROFESSIONAL CHARGES HAVE BEEN INCURRED FOR THE MAI NTENANCE OF THE PROPERTY LET OUT BY THE ASSESSEE. IT WAS SUBMITTED THAT THE RENTAL INCOME RECEIVED WAS ASSESSED AS INCOME FROM THE HOUSE PROP ERTIES AND AS SUCH THESE EXPENSES ARE NOT TO BE ALLOWED AS BUSINESS EX PENDITURE. 8.2.3 THE LEARNED AR ON THE OTHER HAND SUPPORTED T HE FINDINGS OF THE CIT (A). 8.2.4 WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERU SED THE MATERIAL ON RECORD. NO REASON WAS GIVEN BY THE ASSE SSING OFFICER IN MAKING THE IMPUGNED ADDITIONS. THE CIT (A) ON ITS P ART HAS NOT DISCUSSED THE FACTS OF THE CASE IN DETAIL FOR DELETING THE AD DITIONS MADE BY THE ASSESSING OFFICER. THEREFORE, IN THE INTEREST OF JU STICE AND EQUITY, THE MATTER IS REMANDED BACK TO THE ASSESSING OFFICER FO R A PROPER ITA NOS.720 AND 721 & 685 OF 2011 KIRLOSKAR SYSTEMS LTD BANGALORE PAGE 22 OF 25 APPRECIATION OF THE FACT AND ADJUDICATION OF THE SA ME. IT IS ORDERED ACCORDINGLY. 8.2.5 HENCE GROUND NOS. 2 3 & 4 ARE ALLOWED FOR ST ATISTICAL PURPOSES. GROUND NOS. 5 & 6 (INTEREST & OTHERS RS.42,86,866) : 8.3 THE ASSESSING OFFICER HAS NOT ASSIGNED ANY REA SON WHATSOEVER FOR MAKING THE ADDITION OF RS.42,86,866. THE ADDITION HAS BEEN MADE IN THE COMPUTATION OF TOTAL INCOME (PAGE 8 OF THE ASSESSMENT ORDER). ON FURTHER APPEAL THE CIT (A) DELETED THE A DDITION. THE RELEVANT FINDING OF THE CIT (A) READS AS FOLLOWS: 8 ISSUE NO.4: INTEREST OTHERS RS.42,86,866 GR OUND NO.2 OF A.Y 2007-08. DURING THE YEAR COMPANY HAS PA ID A INTERST OF RS.42,86,866 TO EMBASSY MANAGEMENT SERVI CES AND TDS ON SAME HAS BEEN DEDUCTED. THE ABOVE INTERE ST IS CONNECTED TO COMPENSATION FOR TERMINATION OF PROJEC T WITH EMBASSY MANAGEMENT & CONSULTANT PVT. LTD. HENCE SAM E IS ALLOWABLE AS BUSIENSS EXPENDITURE U/S 37 OF INCOME TAX, 1961. ADDITION IS DELETED 8.3.1 THE REVENUE, BEING AGGRIEVED, IS IN APPEAL B EFORE US. 8.3.2 THE LEARNED DR SUBMITTED THAT THE CIT (A) IS NOT JUSTIFIED IN ALLOWING THE EXPENDITURE OF RS.42,86,866/- PAID TO M/S. EMBASSY MANAGEMENT AND CONSULTANTS (P) LTD AS BUSINESS EXPE NDITURE. IT WAS SUBMITTED THAT THE ABOVE AMOUNT WAS PAID IN RESPECT OF TERMINATION OF THE PROJECT WITH M/S EMBASSY MANAGEMENT AND CONSULT ANTS (P) LTD WHICH ITA NOS.720 AND 721 & 685 OF 2011 KIRLOSKAR SYSTEMS LTD BANGALORE PAGE 23 OF 25 IS IN RELATION TO EARNING OF INCOME FROM HOUSE PROP ERTY AND THEREFORE, NOT ELIGIBLE FOR DEDUCTION U/S 37 OF THE I.T. ACT, 1961 . 8.3.3 THE LEARNED AR SUPPORTED THE ORDERS OF THE C IT (A). 8.3.4 WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERU SED THE MATERIAL ON RECORD. THE ASSESSING OFFICER HAS NOT G IVEN ANY REASON WHILE DISALLOWING THE EXPENDITURE CLAIMED BY THE ASSESSEE . THE CIT (A) HAS MERELY NARRATED THAT THE ABOVE SAID EXPENSES ARE BU SINESS EXPENDITURE AND THE SAME IS TO BE ALLOWED. THE FACTS OF THE ISS UE WAS NOT CONSIDERED EITHER BY THE ASSESSING OFFICER OR BY THE CIT (A). THEREFORE, FOR A PROPER ADJUDICATION OF THE SAME, THE ISSUE IS RESTO RED TO THE ASSESSING OFFICER FOR DE NOVA CONSIDERATION. IT IS ORDERED AC CORDINGLY. IN THE RESULT GROUND NOS. 5 & 6 IS ALLOWED FOR STATISTICAL PURPOS ES. GROUND NOS. 7 & 8 (RENT PAID TO GUEST HOUSE RS.15 ,60,000) : 8.4. THE ASSESSING OFFICER HAD DISALLOWED A SUM OF RS.15,60,000/- BEING THE GUEST HOUSE RENT PAID TO THE TRUST (SOME OF THE TRUSTEES WERE THE DIRECTORS OF THE ASSESSEE COMPANY). THE RELEVAN T OBSERVATIONS OF THE ASSESSING OFFICER FOR DISALLOWANCE OF THE SAID SUM READS AS FOLLOWS: 11. DISALLOWANCES IN BUSIENSS INCOME: 11.1 THE ASSESSEE HAS SHOWN AN EXPENSE OF RS.15,60, 000 BEING PAID AS GUEST HOUSE RENT TO THE TRUST RELATED TO THE DIRECTOR. DURING THE COURSE OF HEARING, THE NECESSI TY OF THE SAME WAS ASKED AND THE CONTENTION OF THE ASSESSEE I S NOT ACCEPTED. HENCE, THE AMOUNT OF RS.15,60,000 IS DISA LLOWED U/S 40A(2) OF THE INCOME TAX ACT, 1961. ITA NOS.720 AND 721 & 685 OF 2011 KIRLOSKAR SYSTEMS LTD BANGALORE PAGE 24 OF 25 8.4.1 THE CIT (A) DELETED THE ADDITION BY HOLDING THAT THE GUEST HOUSE IS USED FOR THE BUSINESS OF THE ASSESSEE AND HENCE THE EXPENDITURE INCURRED ON THE SAME IS TO BE ALLOWED AS A DEDUCTIO N. THE FINDINGS OF THE CIT (A) READS AS FOLLOWS. 9. ISSUE NO.5 RENT PAID TO GUEST HOUSE RS.15,60, 000 GROUND NO.3 OF A.Y. 2007-08. DURING THE YEAR COMPANY HAS PAID A SUM OF RS.15,60, 000/- TOWARDS GUEST HOUSE RENT AND TDS ON SAME IS DEDUCTE D. THE GUEST HOUSE IS USED FOR BUSINESS PURPOSE AND HENCE ALLOWABLE. ADDITION IS DELETED 8.4.2 AGGRIEVED, THE REVENUE IS IN APPEAL BEFORE U S. 8.4.3 THE LEARNED DR SUBMITTED THAT THE CIT (A) HA S ALLOWED THE RELIEF TO THE ASSESSEE WITHOUT PASSING A SPEAKING O RDER AND WITHOUT APPRECIATING THE APPLICABILITY OF THE PROVISIONS OF SECTION U/S 40A(2) OF THE INCOME TAX ACT, 1961. THE LEARNED AR PRESENT WA S DULY HEARD. 8.4.4 AS RIGHTLY POINTED OUT BY THE LEARNED DR THE CIT (A) HAS NOT DISCUSSED THE ISSUE IN DETAIL AND HAS NOT CONSIDERE D THE APPLICABILITY OF PROVISIONS OF SECTION U/S 40A(2) OF THE INCOME TAX ACT, 1961.THERE HAS NOT BEEN MUCH DISCUSSION OF THE FACTS BY THE ASSESS ING OFFICER ALSO. THEREFORE, THIS ISSUE IS ALSO RESTORED TO THE ASSES SING OFFICER FOR FRESH CONSIDERATION. IT IS ORDERED ACCORDINGLY. IN THE RE SULT GROUND NOS. 7 & 8 RAISED BY THE REVENUE ARE ALLOWED FOR STATISTICAL P URPOSES. ITA NOS.720 AND 721 & 685 OF 2011 KIRLOSKAR SYSTEMS LTD BANGALORE PAGE 25 OF 25 9. IN THE RESULT: I) THE ASSESSEE APPEAL FOR ASSESSMENT YEAR 2006-07 AND 2007-08 ARE ALLOWED. II) THE REVENUE APPEAL FOR ASSESSMENT YEAR 2007-08 IS A LLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 29 TH NOVEMBER, 2013. SD/- SD/- (N. BARTHVAJASANKAR) (GEORGE GEORGE K) VICE PRESIDENT JUDICIAL MEMBER BANGALORE DATED 29 TH NOVEMBER, 2013. VNODAN/SPS COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CONCERNED CIT(A) 4. THE CONCERNED CIT 5. THE DR, ITAT, BANGALORE 6. GUARD FILE BY ORDER SENIOR PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL, BANGALORE BENCHES, BANGALORE