ITO WD 19(3)(2), MUMBAI V. JOLLY HIGHRISE CO OP HSG. SOCIETY LTD, MUMBAI

ITA 7429/MUM/2012

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 88116 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 1 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-02-2015
• Appeal Filed By: Department
• Bench Allotted: J
• Next Hearing Date: 02-02-2015
• Assessment Year: 2003-2004
• Appeal Filed On: 14-12-2012
• Court: TRIBUNAL
• Department Lawyers: AKHILENDRA YADAV
• Assessee Lawyers: JITENDRA SINGH

Judgement Text

IN THE INCO ME TAX APPELLATE TRIBUNAL J BENCH, MUMBAI BEFORE SHRI VIJAY PAL RAO, JUDICIAL MEMBER AND SHRI D. KARUNAKARA RAO, ACCOUNTANT MEMBER I TA NO.7429/M/2012 (AY 2003 - 2004) ITA NO.7430/M/2012 (AY 2004 - 2005) ITA NO.7431/M/2012 (AY 2009 - 2010) ITA NO.7353/M/2012 (AY 2008 - 2009) ITO WARD - 19(3)(2), 3 RD FLOOR, PIRAMAL CHAMBER, R.NO.306, LALBAUG, MUMBAI 400 050. / VS. JOLLY HIGHRISE COOP. HSG. SOCIETY LTD., 241/A, PALIMANA ROAD, BANDRA (W), MUMBAI - 50. ./ PAN : AABFJ6559J ( / APPELLANT) .. ( / RESPONDENT ) / APPELLANT BY : SHRI AKHILENDRA YADAV, DR / RESPONDENT BY : SHRI K. GOPAL & SHRI JITENDRA SINGH / DATE OF HEARING : 02.02.2015 / DATE OF PRONOUNCEMENT : 02.02.2015 / O R D E R PER BENCH : THERE ARE FOUR APPEALS UNDER CONSIDERATION. ALL THESE APPEALS ARE FILED BY THE REVENUE INVOLVING FOUR DIFFERENT ASSESSMENT YEARS. SINCE THE ISSUES RAISED IN ALL THE FOUR APPEALS ARE IDENTICAL, THEREFORE, FOR THE SAKE OF CONVENIENCE THEY ARE CLUBBED, HEARD COMBINEDLY AND DISPOSED OF IN THIS CONSOLIDATED ORDER. APPEAL WISE ADJUDICATION IS GIVEN IN THE FOLLOWING PARAGRAPHS OF THIS ORDER. ITA NO.7429/M /2012 (AY 2003 - 2004) 2. THIS APPEAL FILED BY THE REVENUE ON 14.12.2012 IS AGAINST THE ORDER OF THE CIT (A) - 30, MUMBAI DATED 17.9.2012. IN THIS APPEAL ASSESSEE RAISED THE FOLLOWING GROUNDS WHICH READ AS UNDER: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD CIT (A) HAS ERRED IN DELETING THE ADDITION ON ACCOUNT OF DEEMED RENTAL INCOME OF RS. 65,18,512/ - WITHOUT APPRECIATING THE FACTS THAT SINCE THE ASSESSEE HAS OFFERED THE INCOME UNDER THE HE AD INCOME FROM HOUSE PROPERTY ON A AREA OF 400 SQ FT LET OUT TO CELLULAR COMPANIES OUT OF TOTAL ARE OF 3780 SQ FT OF TERRACE AND THE BALANCE ARE OF 3380 SQ FT OF THE TERRACE REMAINED VACANT, THEN BY 2 SAME YARDSTICK AND REASONING, THE ASSESSING OFFICER HAS C ORRECTLY INVOKED THE PROVISIONS OF SECTION 23(4)(B) OF THE ACT AND COMPUTED THE DEEMED RENTAL INCOME. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD CIT (A) HAS ERRED IN DIRECTING THE ASSESSING OFFICER TO ALLOW 50% OF THE CLAIM OF SERVICES CHARGES AS NECESSARY EXPENDITURE TO BE INCURRED UNDER THE HEAD INCOME FROM OTHER SOURCES WITHOUT APPRECIATING THE FACTS THAT THE NATURE OF EXPENDITURE INCURRED BY THE ASSESSEE FOR THIS PURPOSE IS NOT WHOLLY AND EXCLUSIVELY INCURRED IN RELATION TO THE SERVICE RENDERED TO THE LESSOR PARTIES AND FURTHER EXPENSES INCURRED ARE FOR THE PURPOSE OF ALL THE MEMBERS OF THE SOCIETY ALONG WITH THE LESSOR PARTIES I.E., THE SERVICE LIKE SECURITY, MAINTENANCE OF LIFT, CLEANNESS OF THE STAIRS ETC AND HENCE THE EXP ENDITURE ON WHICH EXCLUSIVE ONE TO ONE TO ONE RELATION WITH REGARD TO THE SERVICE CHARGES CANNOT BE ESTABLISHED BY THE ASSESSEE. 3. GROUND NO.1 RELATES TO DELETION OF ADDITION ON ACCOUNT OF DEEMED RENT OF RS. 65,18,512/ - . BRIEFLY STATED RELEVANT FACTS OF THE GROUND ARE THAT THE ASSESSEE HAS A TERRACE ADMEASURING OF 3780 SQ FT. OUT OF THIS, ASSESSEE LET OUT 400 SQ FT OF THE TERRACE FOR INSTALLATION OF CELLULAR TOWERS O F THREE COMPANIES NAMELY (I) BPL COMMUNICATION; (II) GATEWAY SYSTEMS (I) LTD AND (III) PAGEPOINT SERVICES. SUSPECTING THAT THE SIMILAR RENTIN G OUT WAS DONE BY THE ASSESSEE I N RESPECTIVE OF THE BALANCE OF TERRACE OF 3380 SQ FT, ASSESSING OFFICER WORKED OUT THE RENT AND REWORKED THE INCOME FROM OTHER SOURCES ON THIS ACCOUNT AFTER ALLOWING THE DEDUCTION U/S 24 OF THE ACT. MATTER TRAVELLED TO THE FIRST APPELLATE AUTHORITY. 4. DURING THE PROCEEDINGS BEFORE THE FIRST APPELLATE AUTHORITY, CIT (A) EXAMINED THE FACTS OF THE PRESENT CASE AND STATED THAT THE MANNER IN WHICH THE ASSESSING OFFICER INVOK ED THE PROVISIONS OF SECTION 2 3 (4)(B) OF THE ACT AND HELD THAT THE SAID PROVISIONS OF THE SAID SECTION ARE WRONGLY INVOKED. FINALLY, CIT (A) DELETED THE ADDITION MADE BY THE ASSESSING OFFICER. AGGRIEVED WITH THE SAID DECISION OF THE CIT (A), REVENUE IS I N APPEAL BEFORE THE TRIBUNAL BY RAISING THE ABOVE MENTIONED GROUNDS. 5. DURING THE PROCEEDINGS BEFORE US, LD DR RELIED ON THE ORDER OF THE ASSESSING OFFICER. 6. ON THE OTHER HAND, LD COUNSEL FOR THE ASSESSEE HEAVILY RELIED ON THE ORDER OF THE CIT (A) AND R EITERATED THE SUBMISSIONS MADE BEFORE THE LOWER AUTHORITIES. 7. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE ORDERS OF THE REVENUE AUTHORITIES AS WELL AS THE RELEVANT MATERIAL PLACED BEFORE US. BEFORE US, LD COUNSEL S T R O N G L Y OBJECTED T O INVOKING THE PR OVISIONS OF SECTION 2 3 (4)(B) OF THE ACT IN R E S P E C T O F T H E U N R E N T E D T E R R A C E . ON PERUSAL OF THE CIT (A)S ORDER IN GENERAL AND THE 3 CONTENTS OF PARA 4.4, WE FIND THE SAME ARE RELEVANT. FOR THE SAKE OF COMPLETENESS OF THIS ORDER, RELEVANT PORTION OF THE SAID PARA 4.4 IS EXTRACTED WHICH READS AS UNDER: 4.4IN THEIR REPLY IT HAS BEEN SUBMITTED BY THE LD AR THAT OUT OF TOTAL AREA OF THE TERRACE WHICH IS 3780 SQ FT ONLY 384 SQ FT ARE WAS LEASED AND RENTED TO THE 3 PARTIES VIZ BPL MOBILES RS. 3,90,000/ - ; GATEWAY SYSTEMS (I ) LTD RS. 3,00,000/ - AND PAGE POINT SERVICES (I) LTD RS. 4,12,031/ - AND THE BALANCE AREA OF THE TERRACE WAS NEVER LEASED OUT AND WAS ALWAYS IN POSSESSION OF THE APPELLANT SOCIETY. THIS BEING SO THE PROVISIONS OF SECTION 23(4)(B) CANNOT BE APPLIED IN THE C ASE OF THE APPELLANT. FURTHER, PART OF THE TERRACE WHICH HAS BEEN LEASED OUT CANNOT BE EQUATED WITH THAT OF THE RESIDENTIAL HOUSE IN THE STRICT SENSE OF THE TERM THOUGH THE INCOME THERE FROM IS ASSESSABLE AS INCOME FROM HOUSE PROPERTY. FURTHERMORE, SECTI ON 23(4)(B) STIPULATES THE EXISTENCE OF MORE THAN ONE HOUSE WHICH IS NOT THE CASE IN THE CASE OF THE APPELLANT SOCIETY. THEREFORE, IN MY CONSIDERED VIEW THE ASSESSING OFFICER IS NOT JUSTIFIED IN APPLYING THE PROVISIONS OF SECTION 23(4)(B) OF THE IT ACT TO THE FACTS AND CIRCUMSTANCES OF THE CASE OF THE APPELLANT SOCIETY. HENCE, THE ASSESSMENT OF DEEMED RENTAL INCOME AT RS. 65,18,512/ - IS NOT JUSTIFIED AND THE SAME IS DIRECTED TO BE DELETED. THIS GROUND OF APPEAL IS ALLOWED. 8. FROM THE ABOVE, IT IS EVID ENT THAT WHAT WAS LEASED OUT BY THE ASSESSEE TO THE SAID THREE COMPANIES IS ONLY 400 SQ FT NOT THE ENTIRE TERRACE. THUS, THE PROVISIONS OF SECTION 23(4)(B) CANNOT BE APPLIED. THE QUESTION OF EXISTENCE OF MORE THAN ONE HOUSE DOES NOT ARISE FOR INVOKING TH E SAID PROVISIONS. IN THAT SENSE OF THE MATTER, WE AGREE WITH THE ORDER OF THE CIT (A) AND CONFIRM THE DELETION MADE BY HIM. THUS, THE ORDER OF THE CIT (A) IS FAIR AND REASONABLE AND IT DOES NOT CALL FOR ANY INTERFERENCE. ACCORDINGLY, GROUND NO.1 RAISED BY THE REVENUE IS DISMISSED. 9. GROUND NO.2 RELATES TO ALLOWING OF 50% OF THE CLAIM OF SERVICE CHARGES. AT THE OUTSET, LD COUNSEL FOR THE ASSESSEE BROUGHT OUR ATTENTION TO THE ORDER OF THE TRIBUNAL DATED 25.6.2014, WHEREIN ONE OF US (AM) IS A PARTY TO THE SAID ORDER, IN THE ASSESSEES O WN CASE. BRINGING OUR ATTENTION TO GROUND NO.1 IN PARA 2 OF THE SAID TRIBUNALS ORDER (SUPRA), LD COUNSEL FOR THE ASSESSEE DEMONSTRATED THAT THE SAID GROUND IS IDENTICAL TO THE GROUND NO.2 OF THE PRESENT APPEAL OF THE REVENUE. HE MENTIONED THAT THE FACTS OF THE CASE DECIDED BY THE TRIBUNAL ARE SIMILAR TO THAT OF THE INSTANT APPEAL THEREFORE, THE FINDING OF THE TRIBUNAL APPLIES DIRECTLY TO THE AY UNDER CONSIDERATION. THUS, WE HAVE PERUSED THE SAID ORDER OF THE TRIBUNAL AND FIND PARAS 3 AND 4 ARE RELEVANT TO THE ISSUE UNDER CONSIDERATION. FOR THE SAKE OF COMPLETENESS O F THIS ORDER, PARAS 3 TO 4 OF THE SAID TRIBUNALS ORDER (SUPRA) ARE EXTRACTED AS FOLLOWS. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A CO - OPERATIVE HOUSING SOCIETY. ITS MEMBERS ARE THE PERSONS WHO OWN THE FLATS IN THE BUILDING OF THE SOCIETY. THE DAY TO DAY MAINTENANCE EXPENDITURE AND CHARGES RELATING TO THE VARIOUS AMENITIES AND SERVICES AVAILED BY THE SOCIETY MEMBERS ARE CONTRIBUTED TO THE 4 COMMON FUND BY THE MEMBERS OF THE SO CIETY AND HENCE ATTRACTS THE CONCEPT OF MUTUALITY. THE ASSESSEE - SOCIETY HAD SHOWN RECEIPT OF RS.7,26,005/ - AS SERVICE CHARGE FOR VARIOUS SERVICES AND FACILITIES INCLUDING ELEVATOR FACILITIES UPKEEP AND MAINTENANCE OF STAIRCASE AND SECURITY SERVICES ETC. THE ASSESSEE - SOCIETY RECEIVED THE SAID SERVICE CHARGES FOR OFFERING THE USE OF PORTION OF TERRACE TO CERTAIN PARTIES FOR AFFIXING OF TELEPHONE TOWERS ETC. THE ASSESSEE - SOCIETY CLAIMED A SUM OF RS.3,63,003/ - AS EXPENDITURE INCURRED FOR EARNING THE ABOVE SE RVICE CHARGES. HOWEVER, THE ASSESSING OFFICER (HEREINAFTER REFERRED TO AS THE AO) ALLOWED ONLY 1/19 TH OUT OF THE SAID SERVICE CHARGES AS EXPENDITURE AMOUNTING TO RS.78,727/ - AS AGAINST THE CLAIM OF RS.3,63,003/ - . 4. IN APPEAL, THE LD. CIT(A) ALLOWED 50% OF THE INCOME FROM SERVICE CHARGES AS EXPENDITURE FOLLOWING THE ORDER OF THE ITAT ON THE IDENTICAL ISSUE IN THE OWN CASE OF THE ASSESSEE FOR ASSESSMENT YEAR 2001 - 02. THE RELEVANT OBSERVATIONS AND FINDINGS OF THE LD. CIT(A) IN THIS RESPECT ARE REPRODUCED AS UNDER: 5.5 REGARDING ALLOWABLE EXPENSES TOWARDS SERVICE CHARGES THE APPELLANT HAS SUBMITTED THAT OUT OF RS.7,26,005/ - SERVICE/MAINTENANCE CHARGES FROM THE ABOVE COMPANIES, THE LD. AO HAS ALLOWED 1/19 TH DEDUCTION AMOUNTING TO RS.78,727/ - AS AGAINST THE CLAIM OF RS.3,63,003/ - . 5.6 THE HON. ITAT ORDER IN APPELLANT'S OWN CASE FOR THE ASSESSMENT YEAR 2001 - 2002 ORDER DATED 04.04.2006 HAS DIRECTED TO ALLOW 50% OF THE EXPENDITURE AGAINST THE INCOME UNDER THE H EAD SERVICE CHARGES IN PLACE OF 1/19 TH EXPENDITURE ALLOWED ON ESTIMATED BASIS BY A.O. MEANWHILE THE DEPARTMENT HAD FILED THE MISCELLANEOUS APPLICATION REQUESTING FOR RECALLING THE ORDER PASSED BY HON. ITAT MUMBAI I.E. DEDUCTION OF EXPENSES @ 50% IS UNCALLE D. THE HON. ITAT WHILE DISMISSING THIS APPLICATION VIDE ITS ORDER DATED 11 TH MAY 2011 OBSERVED AS UNDER: 'THE PRESENT MISC. APPLICATION HAS BEEN FILED BY THE REVENUE PUTTING FORTH THAT THE DEDUCTION OF EXPENSES AT 50% OF THE RECEIPTS OF RS.5,15,676/ - IS U NCALLED FOR INASMUCH AS THE TRIBUNAL OUGHT TO HAVE RECALLED THE ORIGINAL ORDER PASSED U/S.254(1) AND GIVEN OPPORTUNITY OF HEARING TO THE ASSESSEE AND THE REVENUE FOR MAKING A CLAIM OF EXPENSES AGAINST SUCH INCOME AND HAS DISMISSED THE MISC. APPLICATION FIL ED BY THE REVENUE AS BEREFT OF ANY FORCE. THEREFORE 50% OF SERVICE CHARGES SHOULD BE ALLOWED AS THE EXPENDITURE INCURRED FOR EARNING THE SAID INCOME. ' 5.7 I HAVE GONE THROUGH THE ASSESSMENT ORDER, THE REMAND REPORT AND THE ORDER DATED 11.05.2011 OF THE HON'BLE ITAT AND I AM OF THE VIEW THAT FOLLOWING THE DECISION OF THE HON'BLE IT AT, THE APPELLANT IS ALLOWED 50% OF SERVICE CHARGES AS EXPENDITURE INCURRED FOR EARNING THE SAID INCOME. SINCE THE DEPARTMENT'S MISC. PETITION HAS BEEN DISMISSED VIDE ORDER DAT ED 11.03.2011, SO THE 50% SERVICE CHARGES IS ALLOWED AS EXPENDITURE INCURRED FOR EARNING THE SAID INCOME. HOWEVER, SERVICE CHARGES OF RS.41,576/ - AS ADDED BY THE A.O. IS CONFIRMED. HENCE, THIS GROUND OF APPEAL OF THE APPELLANT IS PARTLY ALLOWED . 5. FROM THE ABOVE REPRODUCED FINDINGS OF THE LD. CIT(A) IT IS REVEALED THAT THE LD. CIT(A) HAS ALLOWED THE EXPENDITURE AT THE RATE OF 50% OF THE SERVICE CHARGES FOLLOWING THE DECISION OF THE TRIBUNAL IN THE OWN CASE OF THE ASSESSEE FOR ASSESSMENT YEAR 2001 - 02 . EVEN THE REVENUE HAD FILED A MISCELLANEOUS APPLICATION FOR RECALLING THE SAID ORDER OF THE TRIBUNAL ON THE ISSUE WHICH WAS ALSO DISMISSED BY THE TRIBUNAL. THE ORDER OF THE TRIBUNAL HAS NOT BEEN SET ASIDE BY ANY HIGHER AUTHORITIES. LD. D.R. COULD NOT BRING ANY LAW OR DECISION OF ANY HIGHER COURT CONTRARY TO THE VIEW TAKEN BY THE TRIBUNAL IN THE OWN CASE OF THE ASSESSEE. HENCE, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LD. CIT(A) WHILE ALLOWING THE CLAIM OF THE ASSESSEE AT THE RATE OF 50% OF TH E SERVICE CHARGES FOLLOWING THE DECISION OF THE TRIBUNAL IN THE OWN CASE OF THE ASSESSEE FOR THE EARLIER ASSESSMENT YEAR. 10. CONSIDERING THE COVERED NATURE OF THE ISSUE UNDER CONSIDERATION, WE ARE OF THE OPINION THAT THE ORDER OF THE CIT (A) IS FAIR AND REASONABLE AND IT DOES NOT CALL FOR ANY INTERFERENCE. ACCORDINGLY, GROUND NO.2 RAISED BY THE REVENUE IS DISMISSED. 5 ITA NO.74 30 /M/2012 (AY 2004 - 2005 ) ITA NO.74 31 /M/2012 (AY 2009 - 2010 ) ITA NO. 7353 /M/2012 (AY 2008 - 2009 ) 11. THESE THREE APPEALS ARE FILED BY THE REVENUE AGAINST THE DIFFERENT ORDERS OF THE CIT (A) - 30, MUMBAI COMMONLY DATED 17.9.2012. IN THE INSTANT APPEALS, REVENUE RAISED THE SIMILAR GROUNDS RAISED FOR THE AY 2003 - 2004 VIDE IT A NO.7429/M/2012, WHICH IS ADJUDICA TED BY US IN THE ABOVE PARAGRAPHS OF THIS ORDER. CONSIDERING THE COMMONALITY OF THE ISSUES RAISED BY THE REVENUE WITH THAT OF THE APPEAL FOR THE AY 2003 - 04, THE ADJUDICATION GIVEN BY US IN THE SAID APPEAL SQUARELY APPLIES TO THE INSTANT APPEALS TOO. ACCO RDINGLY, ALL THE GROUNDS RAISED BY THE REVENUE IN THE PRESENT APPEALS ARE DISMISSED. 12. IN THE RESULT, THREE APPEALS FILED BY THE REVENUE ARE DISMISSED. 13. CONCLUSIVELY, ALL THE FOUR APPEALS FILED BY THE REVENUE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 2 ND FEBRUARY, 2015. S D / - S D / - (VIJAY PAL RAO) (D. KARUNAKARA RAO) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; 2.2.2015 . . ./ OKK , SR. PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE . //TRUE COPY// / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI