POOJEET ENTERPRISES, MUMBAI V. ACIT 25(3), MUMBAI

ITA 7356/MUM/2013

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 2998 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 6 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-06-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 17-05-2016
• Assessment Year: 2008-2009
• Appeal Filed On: 13-12-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business income
• Section: 6

Judgement Text

, INCOME-TAX APPELLATE TRIBUNAL C BENC H MUMBAI , , BEFORE S/SHJOGINDER SINGH,JUDICIAL MEMBER & RAJE NDRA,ACCOUNTANT MEMBER ./I.T.A./7356/MUM/2013, /ASSESSMENT YEAR: 2008-09 M/S. POOJEET ENTERPRISES 104, FALGUNI,ASHOK CHAKRAVARTI ROAD, KANDIVALI(W),MUMBAI-400067. PAN:AAAFP 0453 A VS. ACIT CIRCLE-25(3) MUMBAI. ( /APPELLANT ) ( / RESPONDENT ) REVENUE BY: SHRI V.K. AGARWAL-DR ASSESSEE BY: NONE / DATE OF HEARING: 17.05.2016 / DATE OF PRONOUNCEMENT: 29.06.2016 ,1961 254(1) ORDER U/S.254(1)OF THE INCOME-TAX ACT,1961(ACT) PER RAJENDRA, AM - CHALLENGING THE ORDER DATED 01.03.2013 OF CIT(A)-35 ,MUMBAI THE ASSESSEE HAS FILED THE PRESENT APPEAL.ASSESSEE-COMPANY, ENGAGED IN THE BUS INESS OF CONSTRUCTION BEING A BUILDER AND DEVELOPER,FILED ITS RETURN OF INCOME 04. 03. 20 09,DECLARING TOTAL INCOME AT RS.2.06 CRORES. THE ASSESSMENT ORDER U/S.143(3) OF THE ACT,WAS PASS ED ON 09.12.2010,DETERMINING THE TOTAL INCOME OF THE ASSESSEE AT RS.2.25 CRORES. 2. DURING THE ASSESSMENT PROCEEDINGS,THE AO FOUND THAT THE ASSESSEE HAD SHOWN BUSINESS INCOME FROM SALE PROCEEDS OF FLATS IN ONE BUILDING NAMELY BUILDING 'MARATHON OMEGA',THAT TWO FLATS IN THE BUILDING WERE REMAINED TO BE UNSOL D,THAT THE SAID TWO FLATS IN THE BUILDING WERE GIVEN ON LEASE BASIS,THAT THOSE FLATS ARE SHOW N AS 'CLOSING STOCK' IN THE BALANCE SHEET FOR THE YEAR UNDER APPEAL,THAT THE RENTAL INCOME RECEIV ED FROM THE FLATS WAS SHOWN UNDER THE HEAD INCOME FROM HOUSE PROPERTY.HE ISSUED A NOTICE STATING THAT THE INCOME RECEIVED FROM THE FLATS SHOULD BE TREATED AS INCOME FROM BUSINESS AS THE SAID FLATS ARE SHOWN AS STOCK IN TRADE IN THE BALANCE SHEET FOR THE ABOVE MENTIONED YEAR.AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE,THE AO HELD THAT LETTING WAS NOT THE M AIN BUSINESS OF THE ASSESSEE,IT WAS INCIDENTAL TO MAIN BUSINESS,THAT RENTAL INCOME OF R S.14.90 LAKHS WAS TO BE TAXED UNDER THE HEAD INCOME FROM BUSINESS. 3. AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE PRE FERRED AN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY (FAA).BEFORE HIM, THE ASSESSEE SUBMITTED THAT THE APPELLANT WAS A 7356/M/13-POOJEET E 2 BUILDER AND AS SUCH THE UNSOLD FLATS WERE GIVEN ON RENT CANNOT BE TREATED AS BUSINESS INCOME.AFTER CONSIDERING THE ASSESSMENT ORDER AND T HE SUBMISSIONS OF THE ASSESSEE THE FAA HELD THAT THE MAIN ACTIVITY OF THE APPELLANT WAS B UILDING,CONSTRUCTION AND DEVELOPER,THAT IT WAS ALSO SHOWING SALE RECEIPTS OF THE FLATS AS BUSI NESS INCOME,THAT WHATEVER FLATS REMAINED UNSOLD WERE 'STOCK IN TRADING' AND 'NOT STOCK IN IN VESTMENT',THAT INCOME ARISING OUT OF SUCH STOCK SHOULD BE TREATED AS BUSINESS INCOME OF THE A SSESSEE,THAT IT WAS ENGAGED IN THE BUSINESS OF INVESTING IN FLATS AND EARN FIXED RENTAL INCOME. HE UPHELD THE ORDER OF THE AO. 4. BEFORE US,IN ITS WRITTEN SUBMISSIONS THE ASSESSEE R ELIED UPON THE CASES OF AZIMGANJ ESTATE PVT. LTD.(ITA NO. 242 OF 2003,DATED,13/09/2011)AND MANGLA HOMES PVT LTD.(325 ITR 281)OF THE HONBLE CALCUTTA AND BOMBAY HIGH COURT RESPECTI VELY.IT HAS BEEN SUBMITTED BY THE ASSESSEE THAT RENTAL INCOME RECEIVED BY IT COULD NO T BE TAXED AS BUSINESS INCOME.DEPARTMENTAL REPRESENTATIVE(DR)SUPPORTED THE ORDER OF THE FAA. 5. AS STATED EARLIER NONE APPEARED FOR THE ASSESSEE. WE HAVE HEARD THE DR AND PERUSED THE MATERIAL BEFORE US.WE FIND THAT THE ONLY ISSUE TO B E DECIDED IS THE HEAD OF INCOME UNDER WHICH THE RECEIPT OF RS.14.99 LAKHS HAD TO BE TAXED .THE AO HAD TAXED IT AS BUSINESS INCOME WHEREAS THE ASSESSEE CLAIMS THAT THE RENTAL RECEIPT SHOULD BE TAXED AS HOUSE PROPERTY INCOME.IN OUR OPINION,THE RENT RECEIVED BY THE ASSE SSEE HAS BEEN RIGHTLY OFFERED AS HOUSE PROPERTY INCOME BY THE ASSESSEE.ENTRIES IN THE BOOK S OF ACCOUNTS ARE NOT ALWAYS TAKEN TO BE THE FINAL TRUTH.WHAT IS TO BE SEEN IS THE REAL NATU RE OF THE TRANSACTION.IN THE CASE UNDER APPEAL RENT HAS BEEN RECEIVED BY THE ASSESSEE BY LETTING O UT THE FLATS.SO,THERE WAS NO JUSTIFICATION IN TAXING THE RENTAL INCOME AS INCOME FROM BUSINESS.TH E ASSESSEE WAS NOT IN THE BUSINESS OF LETTING OUT PROPERTIES.HERE,WE WOULD LIKE TO REFER TO THE CASE OF EAST INDIA HOUSING AND LAND DEVELOPMENT TRUST LTD.( 42 ITR 49).IN THAT MATTER I T WAS FOUND THAT THE ASSESSEE WHICH WAS INCORPORATED WITH THE OBJECTS OF BUYING AND DEVELOP ING LANDED PROPERTIES AND PROMOTING AND DEVELOPING MARKETS, PURCHASED 10 BIGHAS OF LAND IN THE TOWN OF CALCUTTA AND SET UP A MARKET THEREIN. THE QUESTION BEFORE THE HONBLE COURT WAS AS TO WHETHER THE INCOME REALISED FROM THE TENANTS OF THE SHOPS AND STALLS WAS LIABLE TO B E TAXED AS 'BUSINESS INCOME' OR AS INCOME FROM PROPERTY.DECIDING THE MATTER,THE HONBLE APEX COURT HELD AS UNDER: INCOME-TAX IS UNDOUBTEDLY LEVIED ON THE TOTAL TAXAB LE INCOME OF THE TAXPAYER AND THE TAX LEVIED IS A SINGLE TAX ON THE AGGREGATE TAXABLE RECEIPTS FROM A LL THE SOURCES; IT IS NOT A COLLECTION OF TAXES SEPARATELY LEVIED ON DISTINCT HEADS OF INCOME. BUT THE DISTINCT HEADS SPECIFIED IN SECTION 6 OF THE INCOME-TAX ACT INDICATING THE SOURCES ARE MUTUALLY EXCLUSIVE AND INCOME DERIVED FROM DIFFERENT SOURCES FALLING UNDER SPECIFIC HEAD HAS TO BE COMPU TED FOR THE PURPOSE OF TAXATION IN THE MANNER 7356/M/13-POOJEET E 3 PROVIDED BY THE APPROPRIATE SECTION. IF THE INCOME FROM A SOURCE FALLS WITHIN A SPECIFIC HEAD SET OUT IN SECTION 6, THE FACT THAT IT MAY INDIRECTLY BE COVER ED BY ANOTHER HEAD WILL NOT MAKE THE INCOME TAXABLE UNDER THE LATTER HEAD. RESPECTFULLY FOLLOWING THE ABOVE JUDGMENT AND THE P ECULIAR FACTS AND CIRCUMSTANCES OF THE CASE,WE ARE REVERSING THE ORDER OF THE FAA. WE DECI DE EFFECTIVE GROUND OF APPEAL IN FAVOUR OF THE ASSESSEE. AS A RESULT, APPEAL FILED BY THE ASSESSEE STANDS AL LOWED. . ORDER PRONOUNCED IN THE OPEN COURT ON 29 TH JUNE,2016. ! 29 , 2016 SD/- SD/- /JOGINDER SINGH) ( / RAJENDRA) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; DATED : 29 .06.2016. JV.SR.PS. / COPY OF THE ORDER FORWARDED TO : 1. APPELLANT / 2. RESPONDENT / 3. THE CONCERNED CIT(A)/ , 4. THE CONCERNED CIT / 5. DR G BENCH, ITAT, MUMBAI / , , . . 6. GUARD FILE/ //TRUE COPY// / BY ORDER, / DY./ASST. REGISTRAR , /ITAT, MUMBAI.