DCIT, Bangalore V. M/s Bangalore Villas Pvt. Ltd., Bangalore

ITA 75/BANG/2016

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 7693 (ITAT-BANGALORE)
• Duration Of Justice: 1 year(s) 6 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-08-2017
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 19-06-2017
• Assessment Year: 2008-2009
• Appeal Filed On: 25-01-2016
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: SWAPNA DAS J
• Assessee Lawyers: C RAMESH
• Keywords: Business income

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, B E NGAL U R U BEFORE SHRI VIJAY PAL RAO, JUDICIAL MEMBER AND SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER ITA NO. 75 / BANG/20 16 (ASSESSMENT YEAR: 20 08 - 09) DEPUTY COMMISSIONER OF INCOME - TAX, CIRCLE 1(1)(2), BENGALURU. APPELLANT VS. BANGALORE VILLAS PVT. LTD. NO.190, SANKEY ROAD, SADASHIVANAGAR , BENGALURU - 560080. PAN: AACCB 2166 R RESPONDENT APPELLANT BY : SMT.SWAPNA DAS, JCIT(DR). RESPONDENT BY : SHRI C.RAMESH, CA. DATE OF HEARING : 19/06/2017 DATE OF PRONOUNCEMENT : 09 /0 8 /2017 O R D E R PER I NTURI RAMA RAO, AM : THIS IS AN APPEAL FILED BY THE REVENUE DIRECTED AGAINST THE ORDER OF THE CIT(A) - 1, B ANGALORE DATED 19/10/2015 FOR THE ASSESSMENT YEAR 2008 - 09. ITA NO . 75 /BANG/201 6 PAGE 2 OF 7 2. THE REVENUE RAISED T HE FOLLOWING GROUNDS OF APPEAL: 3. BRIEFLY FACTS OF THE CASE ARE THAT THE RESPONDENT - ASSESSEE IS A COMPANY DULY INCORPORATED UNDER THE PROVISIONS OF THE COMPANIES ACT 1956. I T IS ENGAGED IN THE BUSINESS OF RUNNING OR LEA SING OF HOTELS . THE RETURN OF INCOME FOR THE ASSESSMENT YEAR 2008 - 09 WAS FILED ON 29 /09/ 2008 DISCLOSING NIL INCOME . S UBSEQUENTLY THE CASE WAS TAKEN UP FOR SCRUTINY ASSESSMENT AND THE ASSESSMENT WAS COMPLETED AT TOTAL INCOME OF RS. 51 , 99 , 376 / - VIDE ORDER DATED 30 /09/ 2010 PASSED U/S 143 ( 3 ) OF THE OF THE INCOME - TAX ACT, 1961 [HEREINAFTER REFERRED TO AS 'THE ACT' FOR SHORT]. T HE DISPARITY BETWEEN RETURNED INCOME AND THE ASSESSED INCOME IS ON ACCOUNT OF TREATING THE INCOME EARNED FROM LETTING ITA NO . 75 /BANG/201 6 PAGE 3 OF 7 OUT A MULTISTORI ED COMMERCIAL HOTEL BUILDING AS INCOME FROM HOUSE PROPERTY AS AGAINST CLAIM OF THE ASSESSEE THAT IT SHOULD BE ASSESSED UNDER THE HEAD BUSINESS INCOME . THE FACTUAL BACKGROUND OF THE CASE IS THAT THE RESPONDENT - ASSESSEE COMPANY HAD PURCHASED A MULTISTOR IED HOTEL BUILDING SITUATED AT 5/42, SESHADRI ROAD , MUNICIPAL WARD NO.14, GANDHINAGAR , BENGALURU , F ROM KARNATAKA STATE INDUSTRIAL INVESTMENT DEVELOPMENT CORPORATION . T HE ASSESSEE - COMPANY , AFTER PROVIDING ALL THE AMENITIES LEASED OUT TO M/S. DAR PROPERTIES LTD., FOR RUNNING A HOTEL AT THE AGREED MONTHLY RENT PLUS CERTAIN PERCENTAGE ON THE GROSS SALES. THE LEASE WAS GIVEN INITIALLY FOR A PERIOD OF 10 YEARS COMMENCING FROM 0 1 / 12 / 2007 AND ENDING ON 30 /11/ 2017 . IT IS CONTENDED BEFORE THE ASSESSING OFFICER ( AO ) THAT THERE WAS INTENTION OF PERMANENTLY RUNNING A HOTEL BUSINESS IN THE SAID BUILDING . I T IS ONLY FOR A TEMPORARY PERIOD THE BUILDING WAS LEASED OUT WITH AN INTENTION OF BUYING GOOD - WILL . T HE AO REJECTED THIS CON TENTION AND ASSESSED THE SAME UNDER THE HEA D INCOME FROM HOUSE PROPERTY . 4. BEING AGGRIEVED , AN APPEAL WAS FILED BEFORE THE CIT(A) WHO VIDE IMPUGNED ORDER , ALLOWED THE APPEAL BY HOLDING THAT INCOME RECEIVED FROM TENANTS SHOULD BE ASSESSED UNDER THE HEAD BUSINESS HOLDING AS UNDER : ITA NO . 75 /BANG/201 6 PAGE 4 OF 7 5. BEING AGGRIEVED , THE REVENUE IS IN APPEAL BEFORE US. 5.1 THE LEARNE D DR VEHEMENTLY CONTENDED THAT THE ASSESSEE IS NOT ENGAGED IN THE BUSINESS ACTIVITY AND THEREFORE THE ITA NO . 75 /BANG/201 6 PAGE 5 OF 7 INTENTION OF THE ASSESSEE IS ONLY TO EARN RENTAL INCOME AND THEREFORE SHOU LD BE ASSESSED UNDER THE HEAD INCOME FROM HOUSE PROPERTY ONLY . RELIANCE WAS PLACED ON THE DESIGN OF THE HON BLE MADRAS HIGH COURT IN THE CASE OF KEYARAM HOTELS PVT.LTD. VS. DY.CIT (373 ITR 434) . 5.2 ON THE OTHER HAND , LEARNED AR OF THE ASSESSEE VEH EMENTLY CONTENDED THAT THERE WAS NO INTENTION ON THE PART OF THE ASSESSEE - COMPANY TO EARN ONLY RENTAL INCOME AND THE PROPERTY WAS B OUGHT WITH THE INTENTION OF CARRYING ON HOTEL BUSINESS . T HEREFORE , INCOME DERIVED FROM SAID BUILDING SHOULD BE TREATED AS I NCOME FROM BUSINESS AND HE PLACED R ELIANCE ON THE DECISION OF THE HON BLE KARNATAKA HIGH COURT IN THE CASE OF MYSORE INTERCONTINENTAL HOTELS LTD. VS. ASST.CIT REPORTED IN (2015) (56 TAXMAN.COM 149) AND EAST WEST HOTELS LTD. VS. DY.CIT (309 ITR 149)(KAR). 6. WE HEARD RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. T HE ISSUE IN THE PRESENT A PPEAL IS W H ETHER RENTAL INCOME RECEIVED FROM LEASING OF HOTEL BUILDING SHOULD BE ASSESSED UNDER THE HEAD BUSINESS INCOME O R INCOME FROM HOUSE PROPERTY . N O DOUBT , THE ISSUE IS REQUIRED TO BE DECIDED BASED ON FACTS OF EACH CASE . R ECENTLY THE HON BLE SUPREME COURT IN THE CASE OF RAJ DADARKAR & ASSOCIATES VS. CIT ( 394 ITR 592)(SC) AFTER DISTINGUISHING THE JUDGMENT OF THE HON BLE SUPREME COURT IN THE CASE OF CH ENNAI PROPERTIES AND INVESTMENTS LTD. V. CIT [2015] ITA NO . 75 /BANG/201 6 PAGE 6 OF 7 ( 373 ITR 673 ) RAYALA CORPORATION (P.) LTD. V. ASSTT. CIT [2016] ( 386 ITR 50 0 ) HELD THAT THE ISSUE REQUIRED TO BE DECIDED WITH REFERENCE TO FACTS OF EACH CASE AND FROM THE FACTS IT NEEDS TO BE FOUND OUT WHETHER THE ASSESSEE IS ENGAGED IN ORGANIZED BUSINESS ACTIVITY OF LETTING OUT PROP ERTIES OR NOT. F ROM THE P ERUSAL OF THE ASSESSMENT ORDER AS WELL AS THE ORDER OF THE CIT(A), IT IS NOT DISCERNABLE TO MAKE OUT THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS ACTIVITY OF LETTING OUT PROPERTY OR ONLY HOLDING THE A SSET FOR THE PURPOSE OF EARNIN G RENTAL I NCOME IN WHICH EVENT , IT IS TAXABLE UNDER THE HEAD INCOME FROM HOUSE PROPERTY . T HEREFORE , IN OUR CONSIDERED OPINION , THE MATTER REQU IRES REMAND TO THE AO FOR DE NOVO EXAMINATION OF THE ISSUE IN THE LIGHT OF LAW LAID DOWN BY THE HON BLE A PEX CO URT IN RAJ DADARKAR & ASSOCIATES (SUPRA). T HEREFORE W E SET ASIDE THE ISSUE TO THE FILE OF THE AO FOR DE NOVO EXAMINATION . 7. IN THE RESULT , T HE A PPEAL FILED BY THE REVENUE IS ALLOWED FOR STATISTICAL PURPOSES . ORDER PRONOUNCED IN THE OPEN COU RT ON THIS 09 TH AUGUST, 201 7 SD/ - SD/ - (VIJAY PAL RAO) (INTURI RAMA RAO) JUDICIAL MEMBER ACCOUNTANT MEMBER PLACE : B EN GAL URU D A T E D : 09 /0 8 /2017 SRINIVASULU, SPS ITA NO . 75 /BANG/201 6 PAGE 7 OF 7 COPY TO : 1 APPELLANT 2 RESPONDENT 3 CIT(A) 4 CIT 5 DR, ITAT, BANGALORE. 6 GUARD FILE BY ORDER SENIOR PRIVATE SECRET ARY INCOME - TAX APPELLATE TRIBUNAL BANGALORE