ITO, Panchkula V. M/s Polo Hotels Ltd., Panchkula

ITA 749/CHANDI/2015

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 95709 (ITAT-CHANDIGARH)
• Duration Of Justice: 3 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-11-2015
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2012-2013
• Appeal Filed On: 24-08-2015
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: CHANDER KANTA
• Keywords: Business income; Depreciation; Opportunity of being heard; Unabsorbed depreciation

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCHES, CHANDIGARH BEFORE SHRI H.L.KARWA, HON'BLE VICE PRESIDENT & MS. RANO JAIN, ACCOUNTANT MEMBER ITA NO. 749/CHD/2015 ASSESSMENT YEAR: 2012-13 THE ITO, VS. M/S POLO HOTEL LTD., WARD-3, PANCHKULA PANCHKULA PAN NO. AABCP0940L (APPELLANT) (RESPONDENT) APPELLANT BY : MS. CHANDER KANTA RESPONDENT BY : SH. VINEET KRISHAN DATE OF HEARING : 29.10.2015 DATE OF PRONOUNCEMENT : 27.11.2015 ORDER PER H.L.KARWA, VP THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAINS T THE ORDER DATED 30.07.2015 OF CIT(A), CHANDIGARH RELATING TO ASSES SMENT YEAR 2012-13. 2. THE ONLY EFFECTIVE GROUND RAISED BY THE REVENUE IN THIS APPEAL READS AS UNDER:- WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE , THE LD. CIT(A) IS RIGHT IN HOLDING THAT THE LEASE I NCOME DECLARED BY THE ASSESSEE IS BUSINESS INCOME AND NOT INCOME FROM HOUSE PROPERTY. 3. BRIEFLY STATED THE FACTS OF THE CASE ARE THAT TH E ASSESSEE HAD GIVEN ON LEASE ITS ENTIRE HOTEL BUILDING TO M/S HOT MILLIONS. THE HOTEL NORTH PARK, THE ONLY 2 VENTURE OF THE COMPANY HAD BEEN LEASED OUT FROM 26 .09.2001 TO HOT MILLION FOODS PVT. LTD, CHANDIGARH, A WELL KNOWN CHAIN OF F AST FOOD & RESTAURANTS. THE ASSESSEE COMPANY DECLARED INCOME UNDER MAT OF RS. 2 8,40,606/- IN THE CURRENT YEAR WHICH HAS BEEN SET OFF AGAINST THE BROUGHT FOR WARD LOSS AND UNABSORBED DEPRECIATION OF THE EARLIER YEARS. THE ASSESSEE IS RECEIVING ONLY RENTAL INCOME BY LEASING OUT THE HOTEL ON WHICH BUSINESS WAS BEIN G CARRIED OUT EARLIER BY THE ASSESSEE. THE ASSESSING OFFICER ASKED THE ASSESSEE TO EXPLAIN AS TO HOW THE GROSS RECEIPTS I.E LEASE RENTAL SHOWN AT RS. 76,77, 114/- IN THE PROFIT AND LOSS ACCOUNT MAY NOT BE ASSESSED AS INCOME FROM HOUSE PR OPERTY. AFTER ALLOWING AN OPPORTUNITY OF BEING HEARD TO THE ASSESSEE THE ASSE SSING OFFICER TREATED THE AMOUNT OF RS. 76,77,114/- AS INCOME FROM HOUSE PROP ERTY AND AFTER ALLOWING DEDUCTION U/S 24(A) OF THE ACT, COMPUTED THE NET IN COME FROM HOUSE PROPERTY AT RS. 53,73,980/-. 4. ON APPEAL, THE CIT(A) HELD THAT LEASE INCOME DEC LARED BY THE ASSESSEE IS BUSINESS INCOME AND NOT INCOME FORM HOUSE PROPERTY FOLLOWING THE ORDER OF HIS PREDECESSOR PASSED IN ASSESSEES OWN CASE FOR ASSE SSMENT YEAR 2009-10. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS. IT IS OBSER VED THAT THE ORDER OF CIT(A) PASSED IN ASSESSEES CASE FOR ASSESSMENT YE AR 2009-10 WAS A SUBJECT MATTER OF DEPARTMENTAL APPEAL BEFORE THE TRIBUNAL A ND THE TRIBUNAL VIDE ITS ORDER DATED 14.1.2013 PASSED IN ITA NO. 1118/CHD/20 12 UPHELD THE ORDER OF CIT(A), OBSERVING AS UNDER:- 5. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE TRIBUNAL IN ITA NO.532/CHANDI/2011 IN THE APPEAL FILED BY THE REVENUE AGAINST THE ASSESSEE RE LATING TO ASSESSMENT YEAR 2008-09, VIDE ORDER DATED 29.6.2011 , HAD DISMISSED THE APPEAL OF THE REVENUE RELYING UPON TH E ORDER 3 OF THE TRIBUNAL RELATING TO ASSESSMENT YEAR 2007-08 , ORDER DATED 9.12.2010. THE TRIBUNAL IN THE APPEAL RELATI NG TO ASSESSMENT YEAR 2007-08 HAD OBSERVED AS UNDER: '7. WE HAVE HEARD BOTH THE PARTIES. IT IS NOT IN DISPUTE THAT THE ASSESSEE HAS LEASED OUT THE ENTIRE HOTEL BUILDING TOGETHER WITH THE EQUIPMENTS, FURNITURE ET C., FOR A PERIOD EXCEEDING 15 YEARS LO M/S HOT MILLIONS FOO DS PVT.LTD. AND THAT THE ASSESSEE HAS RECEIVED LEASED RENT OF RS.62,10,000/- IN THE YEAR UNDER APPEAL. IT IS HOWEVER THE CASE OF THE LEARNED, COUNSEL FOR THE AP PLICANT THAT THE ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THIS TRIBUNAL IN ASSESSEE'S OWN CASE FO R ASSESSMENT YEAR 2004-05. THE AFORESAID FACT IS ALS O NOT DISPUTED BY THE LEARNED DEPARTMENT REPRESENTATIVE. LEARNED DEPARTMENT REPRESENTATIVE HOWEVER RELIED UPON THE DECISIONS REFERRED TO BY THE ASSESSING OFFICER IN HIS ASSESSMENT ORDER. 8. THE ASSESSING OFFICER HAS REFERRED TO THE JUDGEMENT IN SULTAN BROTHERS PVT.LTD. V CIT, 51 ITR 353 (S.C) . PERUSAL OF THE AFORESAID JUDGEMENT SHOWS THAT IT HA S BEEN RENDERED BY A BENCH OF 5 JUDGES OF THE HO N'BLE SUPREME COURT. THEREFORE THE PRINCIPLES LAI D DOWN IN THE AFORESAID JUDGEMENT WOULD CONTINUE TO BE A BIND ING TILL THEY ARE MODIFIED OR OVER-RULED BY A LARGER BENCH O F THE HON'BLE SUPREME COURT. IN THAT CASE THE CASE, A PRIVATE COMPANY, HAD CONSTRUCTED A-BUILDING ON A CERTAIN PLOT OF LAND, FITTED IT UP WITH FURNITURE A ND FIXTURES AND LET IT OUT ON LEASE FULLY EQUIPPED AND FURNISHE D FOR THE PURPOSE OF RUNNING A HOTEL. THE ISSUE THAT AROSE WAS WHETHER THE LEASE RENTAL WAS LIABLE TO BE ASSESSED AS INCOME FROM HOUSE PROPERTY OR AS INCOME FROM BUSINESS. THE HON'BLE SUPREME COURT NOTED THAT TH E ASSESSEE AND LESSEE HAD INSISTED IN THAT CASE THAT THE BUILDING AND THE FIXTURES AND FURNITURE WERE TO BE USED FOR THE PURPOSE OF RUNNING A HOTEL AND THEREFORE, T HE LEASE SATISFIED ALL THE CONDITIONS FOR APPLICABILITY OF S ECTION 12(4) OF THE OLD ACT OF 1922 AND THE RENT FROM THE BUILDING HAD TO BE COMPUTED UNDER SECTION 12 AFTER PROVIDING FOR THE ALLOWANCES MENTIONED IN S UB-SECTION 4 THEREOF, AND THAT SECTION 9 DID NOT APPLY. IN THE PRESENT CASE ALSO THE VERY FACT THAT THE LEASE OF H OTEL BUILDING HAS BEEN GIVEN FOR AS LONG AS 15 YEARS MAK ES IT ABSOLUTELY CLEAR THAT THE ASSESSEE AND THE LESSEE I NTEND TO USE THE BUILDING TOGETHER WITH FIXTURES, FURNITU RE AND 4 EQUIPMENTS FOR ONLY ONE PURPOSE I.E. FOR THE PURPOS E OF LEASING OUT A HOTEL AND RUNNING THE HOTEL THEREAFTE R. 9. IN SHAMBOO INVESTMENT PVT. LTD. V CIT, 263 ITR 143 (S.C) THE ASSESSEE HAD OWNED IMMOVABLE PROPERTY A P ART OF WHICH IT LET OUT FOR USE AS TABLE SPACE TO OCCUPANT S WITH FIXTURES, FURNITURE, LIGHTS AND THE AIR CONDITIONER S. ASSESSEE PROVIDED SERVICES LIKE WATCH AND WARD STAFF, ELECTR ICITY, WATER AND OTHER COMMON AMENITIES. ON THESE FACTS, T HE HON'BLE HIGH COURT HELD THAT THE RENTAL INCOME FROM LETTING OUT THE SPACE WAS CHARGEABLE TO TAX AS INCOME FROM HOUSE PROPERTY. APPEAL FILED BY THE ASSESSEE AGAINST AFOR ESAID JUDGEMENT OF HON'BLE HIGH COURT WAS DISMISSED BY TH E SUPREME COURT. 10. NOT-WITHSTANDING THE RELIANCE CORRECTLY PLACED BY ASSESSING OFFICER ON THE AFORESAID JUDGEMENTS FOR C OMING TO THE CONCLUSION THAT LEASE RENTAL WAS ASSESSABLE AS INCOME FROM HOUSE PROPERTY, THE FACT HOWEVER REMAIN S THAT A BENCH OF THIS TRIBUNAL HAS TAKEN A VIEW IN T HE ASSESSEE'S OWN CASE FOR ASSESSMENT YEAR 2004-05 THA T RENTAL INCOME WAS LIABLE TO BE ASSESSED AS INCOME F ROM BUSINESS. JUDICIAL DISCIPLINE REQUIRES AN ASSESSEE TO FOLLOW THE DECISION OF THE CO-ORDINATE BENCHES; UNI ON OF INDIA V PARAS, LAMINATES PVT. LTD., 186 ITR 722, 72 6-727 (S.C). IN THIS VIEW OF THE MATTER WE CONFIRM THE OR DER PASSED BY THE CIT(APPEALS) IN THE CASE BEFORE U S FOLLOWING THE ORDER OF THIS TRIBUNAL IN THE ASSESSEE'S CASE FOR ASSESSMENT YEAR 2004-05. 6. THERE IS NO MATERIAL CHANGE IN THE FACTS OF THE PRESENT YEAR AS COMPARED WITH THE ASSESSMENT YEAR 2009-10. RESPECTFULLY, FOL LOWING THE ORDER OF THE TRIBUNAL PASSED IN ASSESSEE CASE FOR THE ASSESSMENT YEAR 2009-10 (SUPRA), WE UPHOLD THE ORDER OF CIT(A) AND DISMISS THE APPEAL O F THE REVENUE. 7. IN THE RESULT, THE APPEAL IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 27.11.2015 SD/- SD/- (RANO JAIN) (H.L.KARWA) ACCOUNTANT MEMBER VICE PRESIDENT DATED 27 TH NOVEMBER, 2015 RKK 5 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR