CAMORON FINANCE AND INVESTMENTS, MUMBAI V. ASST CIT 21(1), MUMBAI

ITA 7497/MUM/2012

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 92609 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 5 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-05-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 31-03-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 18-12-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: PREMANAND J
• Assessee Lawyers: HAMESH G BUCH
• Keywords: Business income; Depreciation; Capital expenditure
• Section: 6; 12; 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, MUMBAI , . . , BEFORE SHRI JOGINDER SINGH , JM AND SHRI N. K. BILLAIYA , AM ./ I.T.A. NO. 7497/MUM/2012 ( / ASSESSMENT YEAR: 2009 - 10 ) CAMORON FINANCE AND INVESTMENTS, 139 - 140B SHIV, CROSSING OF SAHAR ROAD AND W. E. HIGHWAY, VILE PARLE (E), MUMBAI - 400 057 / VS. ASST. CIT - 21(1), MUMBAI ./ ./ PAN/GIR NO. AAAFC 5210 A ( ASSESSEE ) : ( REVENUE ) ./ I.T.A. NO. 170/MUM/2013 ( / ASSESSMENT YEAR: 2009 - 10 ) ASST. CIT - 21(1), MUMBAI / VS. CAMORON FINANCE AND INVESTMENTS, 139 - 140B SHIV, CROSSING OF SAHAR R OAD AND W. E. HIGHWAY, VILE PARLE (E), MUMBAI - 400 057 ./ ./ PAN/GIR NO. AAAFC 5210 A ( REVENUE ) : ( ASSESSEE ) A SSESSEE BY : SHRI HAMESH G. BUCH RE VENUE BY : SHRI PREMANAND J. / DATE OF HEARING : 26.05.201 5 / DATE OF PRONOUNCEMENT : 29 .05.2015 / O R D E R PER N. K. BILLAIYA, AM : TH ESE ARE CROSS APPEALS BY THE ASSESSEE AND THE REVENUE AGAINST THE VERY SAME ORDER OF THE LD. CIT(A) - 32, MUMBAI DATED 12.10.2012, PERTAINING TO A.Y. 2009 - 10. BOTH 2 ITA NO S . 7497/M / 12 & 170/M / 13 (A.Y. 2009 - 10) CAMORON FINANCE AND INVESTMENTS THESE APPEALS WERE HEARD TOGETHER AND ARE DISPOSED OF BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. ITA NO. 7497/MUM/2012 (ASSESSEES APPEAL) 2. THE FIRST GRIEVANCE OF THE ASSESSEE IS THAT THE LD. CIT(A) ERRED IN CONFIRMING THE ACTION OF T HE ASSESSING OFFICER (A.O.) OF TREATING THE INCOME RECEIVED IN RESPECT OF THE AMENITIES UNDER THE HEAD INCOME FROM OTHER SOURCES INSTEAD OF INCOME FROM HOUSE PROPERTY AS CLAIMED BY THE ASSESSEE. THE FACTS OF THE CASE ARE THAT THE ASSESSEE IS A PARTNERS HIP FIRM. DURING THE YEAR, THE ASSESSEE HAS DERIVED INCOME UNDER THE HEAD INCOME FROM HOUSE PROPERTY AND HAS ALSO EARNED INCOME FROM RUNNING OF CINEMA THEATER . ON SCRUTINIZING THE RETURN OF INCOME, THE A.O. NOTICED THAT THE ASSESSEE HAS EARNED INCOME FRO M HOUSE PR OPERTY AT RS.14,33,47,104/ - AS INCOME RECEIVED FROM LEASE AND AMENITIES CHARGES FOR LETTING OUT OF ITS PROPERTY. THE A.O. CALLED FOR THE DETAIL OF THE RENTAL INCOME. ON PERUSING THE DETAILS, THE A.O. FOUND THAT THE ASSESSEE HAS ENTERED INTO TWO D IFFERENT AGREEMENTS WITH HSBC BANK FOR THE LEASE RENTAL AND AMENITIES CHARGES. ON FURTHER GOING THROUGH THE AMENITIES AGREEMENT, THE A.O. FOUND THAT THE ONLY AMENITY TO BE PROVIDED WAS IN RESPECT OF REPAIRS AND MAINTENANCE OF THE PROPERTY AND PAYMENTS OF M UNICIPAL TAXES. THE A.O. ALSO NOTICED THAT THE ASSESSEE HAS SHOWN ENTIRE AMENITIES CHARGES UNDER THE HEAD INCOME FROM HOUSE PROPERTY. 3. THE ASSESSEE WAS ASKED TO EXPLAIN WHY AMENITIES CHARGES SHOULD NOT BE TREATED AS INCOME FROM OTHER SOURCES. THE A SSESSEE STRONGLY CONTENDED THAT THERE IS A NEXUS BETWEEN THE LEASE RECEIPT AND THE AMENITIES AGREEMENT. THE CLAIM OF THE ASSESSEE DID NOT FIND ANY FAVOUR WITH THE A.O. WHO WENT ON TO TAX THE AMENITIES CHARGES UNDER THE HEAD INCOME FROM OTHER SOURCES. THE ASSESSEE STRONGLY AGITATED THE MATTER BEFORE THE LD. CIT(A) BUT WITHOUT ANY SUCCESS. 4. BEFORE US, THE LD. C OUNSEL FOR THE ASSESSEE REITERATED WHAT HAS BEEN STATED BEFORE THE LOWER AUTHORITIES. IN SUPPORT OF HIS CONTENTION, THE COUNSEL RELIED UPON THE D ECISION OF THE H ONBLE SUPREME COURT IN THE CASE OF SHAMBHU INVESTMENT (P) LTD. VS. CIT 263 ITR 3 ITA NO S . 7497/M / 12 & 170/M / 13 (A.Y. 2009 - 10) CAMORON FINANCE AND INVESTMENTS 143 (SC) , THE H ONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. J. K. INVESTORS (BOM.) LTD. [2012] 2 11 TAXMANN 383 (BOM) AND HYDERABAD TRIBUNAL (I N ITA NOS. 1013 AND 1014/HYD/2013 ) . 5. PER CONTRA, THE LD. DR STRONGLY SUPPORTED THE ORDERS OF THE REVENUE AUTHORITIES. AFTER GIVING A THOUGHTFUL CONSIDERATION TO THE RIVAL SUBMISSIONS, WE HAVE CAREFULLY PERUSED THE ORDERS OF THE AUTHORITIES BELOW. IT IS NOT IN DISPUTE THAT THE ASSESSEE HAS ENTERED INTO TWO SEPARATE AGREEMENTS, ONE FOR LEASE RENTAL AND THE OTHER FOR AMENITIES. ON GOING THROUGH THE AMENITIES AGREEMENT, THE ONLY AMENITY TO BE PROVIDED BY THE LESSOR TO THE LESSEE WAS IN RESPECT OF STRUCTURAL REPAIRS TO THE BUILDING LET OUT AND TO PAY MUNICIPAL AND PROPE RTY TAXES IN RESPECT OF THE LET OUT PROPERTY. WE FAIL TO UNDERSTAND HOW THESE CAN BE TERMED AS AMENITIES IN RESPECT OF THE LETTING OUT PROPERTY. EVEN IF THE PROPERTY IS NOT LET OUT, THE ASSESSEE HAS TO INCUR EXPENDITURE TOWARDS REPAIRS AND MAINTENANCE OF THE SAID PROPERTY AND ALSO TO PAY MUNICIPAL TAXES. IT APPEARS THAT BY SEPARATELY CHARGING IN THE GUISE OF AMENITIES CHARGES, THE ASSESSEE WANTED TO REDUCE THE LIABILITY TO PROPERTY TAX WHICH IS BASED ON THE RE NTAL INCOME OF THE PROPERTY. TH E CASES RELIED UPON BY THE LD. C OUNSEL ARE TOTALLY MISPLACED AND NOT MATCHING THE FACTS OF THE CASE IN HAND. CONSIDERING THE FACT IN TOTALITY, WE DO NOT FIND ANY ERROR IN TREATING THE AMENITY CHARGES UNDER THE HEAD INCOME FR OM OTHER SOURCES. GROUND NO. 1 IS ACCORDINGLY DISMISSED. 6. GROUND NO. 2 IS AN ALTERNATE PLEA BY WHICH THE ASSESSEE HAS CLAIMED THAT THE AMENITIES CHARGES RECEIVED BY IT SHOULD BE TREATED AS ADVANCE. IT IS THE CLAIM OF THE ASSESSEE THAT AMENITY CHARGES S HOULD BE TREATED AS ADVANCE , AS IT RUNS THROUGH THE PERIOD OF LEASE. THEREFORE FOR THE YEAR UNDER CONSIDERATION, THE AMENIT Y CHARGES SHOULD BE TREATED AS ADVANCE. 7. WE DO NOT SUBSCRIBE TO THIS CLAIM OF THE LD. C OUNSEL. THE AMENIT Y CHARGES HAVE BEEN RECEI VED BY THE ASSESSEE AS PER THE AGREEMENT AND THE SAME HAS TO BE TAXED UNDER THE HEAD INCOME FROM OTHER SOURCES AS HELD HEREINABOVE. THE ALTERNATE CLAIM OF THE ASSESSEE IS ACCORDINGLY DISMISSED. 4 ITA NO S . 7497/M / 12 & 170/M / 13 (A.Y. 2009 - 10) CAMORON FINANCE AND INVESTMENTS 8. GROUND NO. 3 RELATES TO THE ADDITION OF RS.4,00,697/ - . FA CTS RELATING TO THIS GRIEVANCE SHOW THAT ON VERIFICATION OF THE TDS CERTIFICATE, THE A.O. FOUND THAT THE ASSESSEE HAS RECEIVED RENT INCOME AT RS.11,87,27,690/ - . HOWEVER, THE A.O. NOTICED THAT IN THE COMPUTATION OF TOTAL INCOME, THE ASSESSEE HAS SHOWN INCOM E AT RS.11,83,26,993/ - . THE A.O. OBSERVED THAT THE ASSESSEE HAS NOT RECONCILED THE DIFFERENCE AMOUNT OF RS.4,00,697/ - . THE A.O. ADDED THE SAME TO THE INCOME OF THE ASSESSEE. THE ASSESSEE CARRIED THE MATTER BEFORE THE LD. CIT(A) , BUT WITHOUT ANY SUCCESS. 9. BEFORE US, THE LD. C OUNSEL FOR THE ASSESSEE CLAIMED THAT THE ASSESSEE IS FOLLOWING THE CASH SYSTEM OF ACCOUNTING AND, THEREFORE, HAS BOOKED ONLY THAT MUCH OF RENT WHICH IT HAS RECEIVED. WE DO NOT AGREE WITH THIS CLAIM OF THE ASSESSEE AS THE METHOD OF AC COUNTING IS ONLY IN RESPECT OF PROFITS AND GAINS OF BUSINESS OR PROFESSION OR INCOME FROM OTHER SOURCES. THE RECONCILIATION STATEMENT FILED BEFORE US IS ALSO NOT CONVINCING AS THE ASSESSEE IS REQUIRED TO COMPUTE THE INCOME AS PER THE PROVISIONS OF THE LAW. THE UNDISPUTED FACT IS THAT THE ASSESSEE HAS RECEIVED RENT OF RS.11,87,27,690/ - AND THE SAME HAS TO BE TREATED AS INCOME OF THE ASSESSEE. THEREFORE , WE DO NOT FIND ANY REASON FOR NOT MAKING AN ADDITION OF RS.4,00,697/ - . GROUND NO. 3 IS ACCORDINGLY, DISMIS SED. 10. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS DISMISSED. ITA NO. 170/MUM/2013 (REVENUES APPEAL) 11. THE FIRST GRIEVANCE OF THE REVENUE IS THAT THE LD. CIT(A) ERRED IN ALLOWING MUNICIPAL TAXES AGAINST INCOME FROM OTHER SOURCES U/S.57(III) OF THE ACT. THE A.O. WHILE SCRUTINIZING THE RETURN OF INCOME NOTICED THAT THE ASSESSEE HAS CLAIMED MUNICIPAL TAXES OF RS.12,36,51,131/ - ALONG WITH OTHER EXPENSES AS CLAIMED AGAINST BUSINESS INCOME WHICH THE ASSESSEE HAS SHOWN AS RS.1,20,000/ - RECEIVED FROM RUNNING CINEMA THEATRE. THE A.O. FOUND THAT THE RECEIPT OF RS.1,20,000/ - AS INCOME FROM RUNNING CINEMA THEATRE IS NOTHING BUT AN AMOUNT RECEIVED FROM HSBC B ANK JUST TO SHOW THAT THE PREMISES OF THEATRE PROPERTY WAS USED FOR BUSINESS. THE A.O. TREATED RS.1 ,20,000/ - AS INCOME FROM HOUSE PROPERTY AND DISALLOWED THE ENTIRE CLAIM OF EXPENDITURE. THE ASSESSEE CARRIED THE MATTER 5 ITA NO S . 7497/M / 12 & 170/M / 13 (A.Y. 2009 - 10) CAMORON FINANCE AND INVESTMENTS BEFORE THE LD. CIT(A) AND CLAIMED THE LIABILITY OF MUNICIPAL TAXES ALLOWABLE AS INCOME FROM OTHER SOURCES. AFTER CONSIDERING THE FACTS AND THE SUBMISSIONS, THE LD. CIT(A) OBSERVED THAT SINCE THE LIABILITY FOR PAYMENT OF MUNICIPAL TAXES HAVE BEEN UNDERTA KEN BY THE ASSESSEE AS PER THE AMENITY AGREEMENT, THEREFORE, THE ASSESSEE IS ENTITLED FOR MUNICIPAL TAXES U/S.57(III) OF THE ACT. AGGRIEV ED BY THIS THE REVENUE IS BEFORE US. 12. THE LD. DR STRONGLY SUBMITTED THAT THE PAYMENT OF MUNICIPAL TAXES HAVE NOTHING TO DO WITH THE AMENITIES CHARGES RECEIVED BY THE ASSESSEE AS PER THE AGREEMENT. THEREFORE, THERE IS NO NEXUS IN INCURRING SUCH EXPENDIT URE FOR EARNING OF THE INCOME. ACCORDINGLY, THE ASSESSEE REITERATED WHAT HAS BEEN SUBMITTED BEFORE THE LD. CIT(A). 13. WE HAVE GIVEN A THOUGHTFUL CONSIDERATION TO THE RIVAL SUBMISSION AND HAVE CAREFULLY PERUSED THE ORDERS OF THE AUTHORITIES BELOW. AS DIS CUSSED ELSEWHERE, WE HAVE HELD THAT THE AMENITIES CHARGES HAVE TO BE TAXED UNDER THE HEAD OF INCOME FROM OTHER SOURCES. SECTION 57(III) SHOWS THAT ANY OTHER EXPENDITURE NOT BEEN IN THE NATURE OF CAPITAL EXPENDITURE LEAD OUT OF EXPANDED WHOLLY AND EXCLUSI VELY FOR THE PURPOSE OF MAKING OR EARNING INCOME WHICH IS TAXED UNDER THE HEAD INCOME FROM OTHER SOURCES. IN OUR CONSIDERED OPIN ION, PAYMENT OF MUNICIPAL TAXES CANNOT BE SAID TO BE LE T OUT OR EXPANDED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF EARNING AME NITY CHARGES , AS THESE MUNICIPAL TAXES ARE DIRECTLY RELATED TO THE LETTING OUT OF THE PROPERTY , T HE RENTAL INCOME FROM WHICH IS TAXED IS UNDER THE HEAD INCOME FROM HOUSE PROPERTY. WE, THEREFORE, FIND THAT THE FINDING OF THE LD. CIT(A), IN ALLOWING THE M UNICIPAL TAXES DEDUCTABLE AS ERRONEOUS. WE SET ASIDE THE FINDINGS OF THE LD.CIT(A) AND CONFIRM THAT OF THE A.O. GROUND NOS. 1 AND 2 ARE ACCORDINGLY ALLOWED. 14. GROUND NO. 3 RELATES TO THE GRIEVANCE THAT THE LD. CIT(A) HAS ERRED IN DIRECTING THE A.O. TO A LLOW THE REMAINING EXPENDITURE CLAIMED IN RESPECT OF CINEMA THEATRE TO ARRIVE AT THE BUSINESS LOSS ON CINEMA THEATRE. AS MENTIONED ELSEWHERE, ON AN INCOME OF RS.1,20,000/ - , THE ASSESSEE HAS CLAIMED FOLLOWING EXPENDITURE: 6 ITA NO S . 7497/M / 12 & 170/M / 13 (A.Y. 2009 - 10) CAMORON FINANCE AND INVESTMENTS 1) MUNICIPAL TAXES RS.1,73,65,131/ - 2) BANK INTEREST RS.42,44,745/ - 3) LEGAL AND PROFESSIONAL FEE RS.11,61,175/ - 4) DEPRECIATION RS.1,16,61,988/ - 5) ADMINISTRATIVE EXPENSE RS. 33,40,822/ - THE ASSESSEE WAS SPECIFICALLY ASKED TO EXPLAIN WHY THESE EXPENDITURE S SHOULD BE ALLOWED WHEN IT HAS NOT DONE ANY BUSINESS IN RESPECT OF CINEMA THEATRE. THE ASSESSEE STRONGLY CONTENDED THAT ITS CINEMA BUILDING WAS READY TO USE AND WAS IN FACT PUT TO USE FOR CONDUCTING MEETINGS/CONFERENCES BY HSBC BANK FROM WHICH IT HAS RECEIVED RS.1,20,000/ - AND , THEREFORE , THE EX PENDITURE SHOULD BE ALLOWED. THE A.O. DID NOT ACCEPT THIS CONTENTION OF THE ASSESSEE AND DISALLOWED THE ENTIRE CLAIM OF EXPENDITURE. 15. THE ASSESSEE CARRIED THE MATTER BEFORE THE LD. CIT(A) AND CONTENDED THAT ITS CINEMA BUILDING WAS READY TO USE AND WAS USED FOR GIVING ON HIRE TO HSBC B ANK FOR HOLDING MEETINGS AND CONFERENCE ON THREE OCCASIONS. AFTER CONSIDERING THE FACTS AND THE SUBMISSIONS, TH E LD. CIT(A) OBSERVED THAT THE C INEMA T HEATRE WAS FIT FOR EXHIBITION OF FILM FROM 31.03.2008, YET NO EXHIBIT ION OF FILMS H AS ACTUALLY BEEN DONE. THE LD. C IT(A) FURTHER OBSERVED THAT THE A.O. HAS NOT DOUBTED GENUINENESS OF THE EXPENDITURE CLAIMED BY THE ASSESSEE IN RESPECT OF CINEMA THEATRE . THE LD. CIT(A) WAS CONVINCED THAT THE CINEMA CONSTRUCTION WAS COMPLETED AND ALL REQUISITE PERMISSION WERE RECEIVED FOR USING THE SAME FOR EXHIBITION OF THE FILMS DURING THE YEAR ITSELF. THE LD. CIT(A) WAS OF THE OPINION THAT ONCE THE BUSINESS WAS SET UP, THE RELATED EXPENDITURE ARE ALLOWABLE. HOWEVER, THE LD. CIT(A) RESTRICTED TH E CLAIM OF EXPENDITURE AT RS.1,86,47,691/ - AND DIRECTED THE BALANCE TO BE TREATED AS CAPITAL EXPENDITURE. THE LD. C IT(A) FURTHER DISALLOWED THE CLAIM OF EXPENDITURE OF RS.2,11,277/ - AND RS.7,088/ - AS PERTAINING TO LEASE BUILDING. THE REMAINING EXPENDITURE WAS ALLOWED. AGGRIEVED BY THIS, THE REVENUE IS IN APPEAL BEFORE US. 16. THE LD. DR SUBMITTED THE COPY OF THE EXTRACT FROM THE OFFICE OF THE COMMISSIONER O F POLICE OF MUMBAI WHICH RELATES TO THE PARTICULARS OF RECIPIENTS OF CONCESSION/PERMI TS 7 ITA NO S . 7497/M / 12 & 170/M / 13 (A.Y. 2009 - 10) CAMORON FINANCE AND INVESTMENTS O F AUTHORIZAT ION . THE LD. DR POINTED OUT THAT THE PERMISSION IN RESPECT OF BAHAR CINEMA AT VILLE PARLE (E) WAS GRANTED ON 15.06.2010. THUS, THE CINEMA THEATRE BUILDING WAS PROHIBITED FROM EXHIBITION OF FILMS PRIOR TO 15.06.2010. IT IS THE SAY OF THE LD. DR THAT THE CIN EMA BUILDING WAS NOT READY TO USE FOR THE YEAR UNDER CONSIDERATION. PER CONTRA, THE LD. C OUNSEL FOR THE ASSESSEE DREW OUR ATTENTION TO THE CERTIFICATE PLACED AT PGS. 117 AND 118 OF THE PAPER BOOK AND POINTED OUT THAT THE THEATRE WAS FIT FOR EXHIBITION OF C INEMA SHOWS FO R THE PERIOD ENDING 31.12.2008 , WHICH CERTIFICATE IS IN PURSUANCE TO THE QUALIFIED REMARK OF MUMBAI FIRE BRI GADE VIDE ITS LETTER DATED 20.05.2008. 17. WE HAVE CAREFULLY P ERUSED THE DOCUMENTARY EVIDENCE S BROUGHT ON RECORD BEFORE US AND REFE RRED TO. IN OUR CONSIDERED OPINION, THERE APPEARS TO BE CONFLICT IN THESE DOCUMENTARY EVIDENCES, THEREFORE, IN THE INTEREST OF JUSTICE, WE RESTORE THIS ISSUE TO THE FILE OF THE A.O. THE A.O. IS DIRECTED TO VERIFY WHETHER THE CINEMA THEATRE WAS FIT FOR USE AFTER CONSIDERING THE REPORT FROM THE OFFICE OF COMMISSIONER OF POLICE , MUMBAI AS BROUGHT ON RECORD BY THE LD. AR. T HE A.O. IS DIRECTED TO DECIDE THE ISSUE AFRESH AFTER GIVING REASONABLE AND FAIR OPPORTUNITY TO THE ASSESSEE. 18. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE AND THE R EVENUE ARE ALLOWED IN PART FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON MAY 29 TH , 201 5 SD/ - SD/ - ( JOGINDER SINGH ) ( N. K. BILLAIYA ) / J UDICIAL MEMBER / A CCOUNTANT MEMBER MUMBAI ; DATED : 29 . 0 5 .201 5 . . ./ ROSHANI , SR. PS 8 ITA NO S . 7497/M / 12 & 170/M / 13 (A.Y. 2009 - 10) CAMORON FINANCE AND INVESTMENTS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. ( ) / THE CIT(A) 4. / CIT - CONCERNED 5. , , / DR, ITAT, MUMBAI 6. / GUARD F ILE / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI