Coronet Hotel Services & Suppliers Pvt. Ltd., Delhi V. ITO, Ward- 6(3), New Delhi

ITA 7418/DEL/2018

• Counselvise Citation: [2022] 106 COUNSELVISE.COM (IT) 8430 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 8 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-08-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2013-2014
• Appeal Filed On: 21-11-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business income; Depreciation; Opportunity of being heard; Rule of consistency; Difference of opinion; Change of opinion; TDS
• Section: 139; 143(1); 44AB; 48

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH ‘B’ : NEW DELHI) SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER and SHRI YOGESH KUMAR US, JUDICIAL MEMBER ITA No.7418/Del./2018 (ASSESSMENT YEAR : 2013-14) Coroner Hotel Services & Suppliers Pvt. Ltd., vs. ITO, Ward 6(3), C-8/1A, Vasant Vihar, New Delhi. New Delhi – 110 057. (PAN : AAACC3164A) (APPELLANT) (RESPONDENT) ASSESSEE BY : Shri R.S. Singhvi, CA Shri Rajat Garg, CA Shri Satyajeet Goel, CA REVENUE BY : Md. Gayasuddin Ansari, Senior DR Date of Hearing : 20.07.2022 Date of Order : 11.08.2022 ORDER PER SHAMIM YAHYA, ACCOUNTANT MEMBER : This is an appeal filed by the assessee against the order of the CIT(A)-2, New Delhi pertaining to Assessment Year 2013-14. 2. The grounds of appeal taken by the assessee read as under :- “1. That on fact and law, the Ld. CIT (A) and the Ld. AO erred in mis- interpreting the facts by treating the Revenue from Operation taxable under the head 'House Property' instead of considering it as Revenue From 'Business' despite the fact that in earlier years the same has been assessed as Income from Business and there was no change of facts warranting change of opinion. ITA No.7418/Del./2018 2 2. That the CIT(A) & Ld. AO erred in holding that since the Revenue is assessable as "Rent" under Service Tax Act, the corresponding Revenue is also Taxable under Income Tax Act under head "income from House Property" ignoring the fact that the basis of determination of Income from House Property are materially different from use of premises defined under Service Tax Act. 3. That the Ld. CIT (A) and the Ld. AO erred in law in not accepting the Revised Computation filed by the appellant during the course of assessment proceedings declaring the income taxable under the head 'Business' and consequently erred in disallowing the claim of the appellant for deduction of business expenses amounting to Rs.49,06,419/- & depreciation amounting to Rs.1,02,03,444/-. 4. Without prejudice to above grounds of appeal, even if the income of the appellant is taxable under the head 'House Property', the Ld. CIT (A) erred in law in not allowing claim of setting off brought forward unabsorbed Depreciation loss of earlier years amounting to Rs.2,33,71,919/- without giving any cogent finding for the same.” 3. Brief facts of the case are that assessee company filed its return for AY 2013-14 on 30.09.2014 declaring income at nil. The same was processed under section 143(1) of the Income-tax Act, 1961 (for short ‘the Act’) and later on taken up for scrutiny. During the course of assessment proceedings, it was submitted that the main object of the assessee company is to derive income from hotel/resort in building developed by the assessee at Tarudhan Valley Golf Home Project, Village Dadu, Tehsil Tauru, District Mewat, Haryana. From the perusal of return, AO noticed that the assessee company received rental income of Rs.1,17,85,125/- which was declared as income from house property on which deduction u/s 24(a) being 30% for repairs has been claimed. AO further noted that assessee has claimed various expenses relating to rental income including depreciation. Assessee has filed computation of ITA No.7418/Del./2018 3 assessable income in which rental income was declared as income from house property. Assessee company had also filed service-tax return, from which it was noted that the assessee was registered with the service tax for renting of immovable properties and declared rental income from renting activities and the tenant has also deducted TDS as payments for rental u/s 194-I of the Act. AO asked the assessee why the expenses claimed on rental activities including depreciation should not be disallowed. Assessee filed revised computation of income wherein rental income has been declared as business income. In support of the same, assessee submitted that in earlier year also, assessee had been in receipt of rental of immovable properties and declared the same as business income. It was further submitted that assessee company in AY 2010-11 appointed an expert & experienced operating management agency, M/s. Four Seasons Hospitality Pvt. Ltd. for managing the business from the said premises in consideration of management licence basis. It was further submitted that the assessee based on the representation made by M/s. Four Seasons Hospitality Pvt. Ltd. had agreed to engaged M/s. Four Seasons Hospitality Pvt. Ltd. for carrying on the business from the said demised premises on management licence basis and in consideration of being permitted to carry on the business, M/s. Four Seasons Hospitality Pvt. Ltd. shall pay to assessee the management fees in the manner ITA No.7418/Del./2018 4 mentioned in the agreement. However, AO was not satisfied. He noted that no business activities were conducted by the assessee in their own name and the business of hotel activities were conducted by M/s. Four Seasons Hospitality Pvt. Ltd. and declared the receipts as business income and payments of assessee company has been declared as rent payments. AO rejected the plea of the assessee that the rental income and deduction claimed in the ITR was wrongly claimed. AO further held that revised computation filed by the assessee was not acceptable and hereby rejected. AO further held that the claim of the assessee is also rejected as assessee is now accepting that the rental receipts are business receipts which is Rs.1,17,85,125/- and in case, assessee’s contention for sake of arguments if accepted, then the assessee company was required to get their accounts audited as the receipts were more than the prescribed limit as per the provisions of section 44AB of the Act. He further noted that assessee company had filled the tax audit column as nil and no tax audit report has been filed. It was further observed by the AO that in the IT filed by the assessee, depreciation on fixed assets were claimed at Rs.18,88,764/- and no depreciation on building was claimed in the ITR which was claimed in computation of income and revised computation of income. AO concluded as under :- “ Since no other receipts were declared by the assessee company except the Rental Income and interest income, expenses claimed by the assessee as other expenses of Rs.49,33,273/- and depreciation claimed are ITA No.7418/Del./2018 5 disallowed except Audit Fees of Rs.16,854/ and Rs.10,000/- for other expenses to maintain the status of the company. Reliance is also placed as decided by the Jurisdiction High Court of Delhi vide decision dated 22.11.2012 reported in ITA 319/2012 in the case of MIs Garg Dyeing & Processing Industries vs. Asst. Commissioner of Income Tax in which it was held that the lease rent has to be assessed under the residuary head. As per above discussion, I hereby held that the Rent Received by the assessee company is assessed as Income from House Property and deduction U/s 24 is allowable to the assessee company. In view of above Rental Income of the assessee company is computed as under :. Rent Received Rs.1,17,85,125/- Less: 30% for Repairs Rs. 35,35,538/- Income from House Property Rs. 82,49,588/- 5. Since the assessee during the assessment proceedings had filed the contention that the receipts are business receipts and no tax audit has been conducted by the assessee company. Accordingly penalty proceedings under section 271-8 are being initiated separately. 6. Since the assessee had filed their return of income after the end of financial year which is contravention of provision of section 139 for which penalty proceedings under section 271-/F are being initiated separately.” 4. Against the above order, assessee appealed before the ld. CIT (A). Ld. CIT (A) noted the submissions of the assessee. He noted that income of the assessee was related to the revenue receipts received from M/s. Four Seasons Hospitality Pvt. Ltd.. It was submitted that assessee company received 20% of the revenue which fluctuates from month to month and has different terms for each source of revenue, viz., Golf Court, F&B, rooms etc. As per the terms and conditions of the agreement, M/s. Four Seasons Hospitality Pvt. Ltd. was involved in day to day management of the business affairs of the hotel/resort under ITA No.7418/Del./2018 6 instructions from the assessee company. Ld. CIT (A) noted that assessee has submitted plethora of decisions. He also noted that assessee has also pleaded to apply principle of consistency and decision of the earlier year should be followed. He further noted that assessee has submitted that Income Tax Act and service Tax Act are two different statutes. Assessee further contended that even if it is contended that assessee company had let out its resort, conference center and club house (also collectively referred to as hotel) to M/s. Four Seasons Hospitality Pvt. Ltd., on this ground also, the income from letting out of commercial asset is to be treated as business income. Ld. CIT (A) referred to Hon’ble Bombay High Court decision in the case of CIT vs. national Storage Pvt. Ltd. 48 ITR 517 wherein it was held that house owning, however profitable, cannot be a business 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 falls under the head ‘income from house property’. Ld. CIT (A) referred to several case laws. He noted that assessee has simply leased out its property to M/s. Four Seasons Hospitality Pvt. Ltd. for running the hotel which occupies the time, attention and labour of a person normally with the object of making profit. It also denotes continuous and systematic exercise of an occupation or profession with the object of making income or profit. He further noted that the ITA No.7418/Del./2018 7 involvement of the assessee in the business of running the hotel is not supported by any evidence. He also noted that the assessee has not submitted the copy of agreement between itself and M/s. Four Seasons Hospitality Pvt. Ltd. to determine the nature of activities to be performed by M/s. Four Seasons Hospitality Pvt. Ltd. and by the assessee, though in the written submission, it is mentioned that the copy of the agreement dated 1 st July, 2009 is enclosed. Taking adverse inference, ld. CIT (A) rejected the assessee’s claim at the threshold. Besides, he noted that assessee did not get its accounts audited u/s 44AB. The lessee made TDS u/s 194-I on the payments made to the assessee which is clear proof that assessee was receiving the income for letting out its property. He noted that the issue of fixed rent or rent linked to the receipts is not decisive factor in this case because the important issue is the activity from the income is earned. He further referred to Hon’ble Supreme Court decision in the case of Goetze India Ltd. vs. CIT 284 ITR 323 wherein it was held that assessee cannot make a fresh claim before the AO without filing a revised return. He held that for cases referred by assessee, facts of the case are distinguishable from the facts of the assessee’s case. Hence he confirmed the AO’s action to assessee the rental income under the head ‘income from house property. ITA No.7418/Del./2018 8 5. Assessee has further pleaded that AO erred in determining the taxable income of Rs.82,22,730/- without setting off carried forward of losses/depreciation of Rs.15,60,692/- and consequently erred in determining the tax payable at Rs.32,19,940/-. After noting the submissions of the assessee, ld. CIT (A) concluded as under :- “The appellant has not given the copy of assessment orders finalized by the department determining the income (including the loss) of the assessee. It is to be kept in mind that the income of the assessee for the year under consideration has been assessed under the head ‘Income from house property’. The Assessing Officer is only required to check the set off of loss from one head against income from another.” 6. Against this order, assessee is in appeal before us. We have heard both the parties and perused the records. 7. First, we note that authorities below have invoked the decision of Hon’ble Supreme Court in the case of Goetze India Ltd. (supra) wherein it has been held that a fresh claim cannot be made otherwise that by the revised return of income. In the same decision, it was held that in their order in that case, will not impinge upon the ITAT to admit claims otherwise of revised return. In according with the aforesaid Hon’ble Apex Court decision, we hold that revised claim needs to be accepted and examined as per law. Further we note that ld. CIT (A) has taken adverse inference also on the ground that written agreement has not been submitted by the assessee though mentioned that being submitted. We note that the issue of agreement was also before the AO and AO did not ITA No.7418/Del./2018 9 offer any adverse inference that the agreement was not there. Prima facie, this does not seem to be a case of rent simplicitor. It is claimed that there is an agreement with M/s. Four Seasons Hospitality Pvt. Ltd. and according to which, revenue is shared by assessee company. However, ld. CIT (A) has found that assessee did not provide the agreement. In our considered opinion, the entire aspect needs to be examined properly in the light of the said agreement. Assessee will certainly need to provide cogent reply as to its business income why the tax audit report was not submitted and consequences will accordingly follow. Hence, in the interest of justice, we direct that the issue be remitted to the file of AO. AO is directed to consider the revised claim of the assessee as per law. He shall take into account the agreement claimed by assessee as mentioned before CIT (A). Needless to add that assessee may be provided proper opportunity of being heard. 8. In the result, the appeal of the assessee is allowed for statistical purposes. Order pronounced in the open court on this 11 th day of August, 2022. Sd/- Sd/- (YOGESH KUMAR US) (SHAMIM YAHYA) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated the 11 th day of August, 2022 TS ITA No.7418/Del./2018 10 Copy forwarded to: 1.Appellant 2.Respondent 3.CIT 4.CIT(A)-2, New Delhi. 5.CIT(ITAT), New Delhi. AR, ITAT NEW DELHI.