Nile Tech Ltd., New Delhi V. ACIT, Circle-18(2), New Delhi

ITA 7557/DEL/2018

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 5149 (ITAT-DELHI)
• Duration Of Justice: 5 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-05-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: E
• Assessment Year: 2014-2015
• Appeal Filed On: 29-11-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: PARAMITA M BISWAS
• Keywords: Depreciation; Rule of consistency; TDS; Set aside
• Section: 143(3); 28; 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH E : NEW DELHI) BEFORE HONBLE VICE PRESIDENT, SHRI G.D. AGRAWAL AND SHRI KULDIP SINGH, JUDICIAL MEMBER ITA NO.7557/DEL./2018 (ASSESSMENT YEAR : 2014-15) M/S. NILE TECH LTD., VS. ACIT, ASSET NO.8, 3 RD FLOOR, CIRCLE 18 (2), WORLD MARK 2, AEROCITY NB-8, NEW DELHI. NEW DELHI 110 037. (PAN : AACCN3608E) (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI ANIL BHALLA, CA REVENUE BY : MS. PARAMITA M. BISWAS, CIT DR DATE OF HEARING : 13.05.2019 DATE OF ORDER : 28.05.2019 O R D E R PER KULDIP SINGH, JUDICIAL MEMBER : APPELLANT, M/S. NILE TECH LTD. (HEREINAFTER REFERR ED TO AS THE ASSESSEE) BY FILING THE PRESENT APPEAL SOUGHT TO SET ASIDE THE IMPUGNED ORDER DATED 17.10.2018 PASSED BY THE COMMI SSIONER OF INCOME-TAX (APPEALS)-6, NEW DELHI QUA THE ASSESSME NT YEAR 2014-15 ON THE GROUNDS INTER ALIA THAT :- 1. THE LEARNED CIT(APPEALS) HAS ERRED BOTH ON FACT S AND IN LAW IN UPHOLDING THE ACTION OF THE LEARNED ASSES SING OFFICER IN ASSESSING LEASE RENTAL INCOME UNDER THE HEAD OF INC OME 'PROFITS & GAINS OF BUSINESS OR PROFESSION U/S 28 INSTEAD O F ASSESSING LEASE RENTAL INCOME UNDER THE HEAD 'INCOME FROM HOU SE ITA NO.7557/DEL/2018 2 PROPERTY U/S 22 OF THE ACT AS DECLARED BY THE APPE LLANT COMPANY IN ITS RETURN OF INCOME AND WHICH BASIS HAS BEEN CO NSISTENTLY FOLLOWED SINCE INCEPTION I.E. ASSESSMENT YEAR 2010- 11 AND ASSESSED U/S 143(3) OF THE ACT AND THEREBY MAKING A DDITION OF RS.10,79,56,954 TO THE DECLARED TOTAL INCOME. THUS IGNORING THE DECISION OF HON'BLE SUPREME COURT IN RADHA SWAMI SA TSANG 193 ITR 321(SC). 1.1 THE LEARNED CIT(A) HAS ERRED IN LAW IN NOT FOLL OWING THE DECISION OF HON'BLE SUPREME COURT IN: 1. RAJ DADANKAR & ASSOCIATES IN 394 ITR, 592(SC). 2. EAST INDIA HOUSING AND LAND DEVELOPMENT TRUST LTD. - 42 ITR 49(SC). 3. SULTAN BROTHERS -51 ITR, 353(SC) 2 THE LEARNED CIT(APPEALS) HAS ERRED BOTH ON FACTS AND IN LAW IN UPHOLDING THE ACTION OF THE LEARNED ASSES SING OFFICER IN DISALLOWING INTEREST PAID U/S 201(1A) ON LATE DE POSITS OF TDS AMOUNTING TO RS.43179. 3. BRIEFLY STATED THE FACTS NECESSARY FOR ADJUDICAT ION OF THE CONTROVERSY AT HAND ARE : ASSESSEE HAS EARNED AN IN COME OF RS.57,49,98,489/- AS REVENUE FROM OPERATIONS. ASSE SSING OFFICER NOTICED THAT THE AFORESAID INCOME HAS BEEN EARNED B Y THE ASSESSEE FROM LEASING AND OFFERED INCOME TO TAX AS INCOME UN DER THE HEAD HOUSE PROPERTY INSTEAD OF INCOME UNDER THE HEAD BUSINESS AND PROFESSION. DECLINING THE CONTENTIONS RAISED BY T HE ASSESSEE, AO PROCEEDED TO CONCLUDE THAT THE INCOME EARNED BY THE ASSESSEE BY WAY OF LEASING THE PROPERTY WOULD BE TAXABLE AS BUS INESS INCOME AS THE BUSINESS OF THE COMPANY IS TO LEASE ITS PROPERT Y AND EARNED RENT AND THEREBY MADE ADDITION OF RS.10,79,56,954/- TO T HE TOTAL DECLARED INCOME. ITA NO.7557/DEL/2018 3 4. ASSESSEE CARRIED THE MATTER BY WAY OF AN APPEAL BEFORE THE LD. CIT (A) WHO HAS CONFIRMED THE ADDITION BY DISMI SSING THE APPEAL. FEELING AGGRIEVED, THE ASSESSEE HAS COME U P BEFORE THE TRIBUNAL BY WAY OF FILING THE PRESENT APPEAL. 6. WE HAVE HEARD THE LD. AUTHORIZED REPRESENTATIVES OF THE PARTIES TO THE APPEAL, GONE THROUGH THE DOCUMENTS R ELIED UPON AND ORDERS PASSED BY THE REVENUE AUTHORITIES BELOW IN T HE LIGHT OF THE FACTS AND CIRCUMSTANCES OF THE CASE. GROUND NO.1 7. UNDISPUTEDLY, ASSESSEE HAS EARNED THE TOTAL REVE NUE FROM THE OPERATION OF ITS COMPANY AT RS.57,49,98,489/- FROM THE RENTAL INCOME. IT IS ALSO NOT IN DISPUTE THAT THE ASSESSE E COMPANY WAS PRIMARILY ENGAGED IN THE BUSINESS OF REAL ESTATE. IT IS ALSO NOT IN DISPUTE THAT THE ASSESSEE HAS BEEN LEASING THE PROP ERTY IN QUESTION AND COLLECTING RENT SINCE 2010-11 WHICH HAS BEEN AS SESSED UNDER THE HEAD INCOME FROM HOUSE PROPERTY. IT IS ALSO NOT IN DISPUTE THAT THE ASSESSEE IS OWNER OF THE PROPERTY IN QUEST ION AND HAS LEASED OUT THE PROPERTY ON THE BASIS OF RENTAL AGRE EMENT. IT IS ALSO NOT IN DISPUTE THAT IN THE SUBSEQUENT YEAR, THE REN TAL INCOME OF THE ASSESSEE HAS BEEN ACCEPTED AS INCOME FROM THE HOUSE PROPERTY. 8. IN THE BACKDROP OF THE AFORESAID UNDISPUTED FACT S, THE LD. AR FOR THE ASSESSEE CONTENDED THAT WHEN THE ASSESSEE I S ADMITTEDLY ITA NO.7557/DEL/2018 4 OWNER OF THE PROPERTY IN QUESTION AND LEASED OUT TH E SAME ON THE BASIS OF RENTAL AGREEMENT, RENTAL INCOME IS TO BE A S TAXED UNDER THE HEAD INCOME FROM HOUSE PROPERTY AND FURTHER CONTE NDED THAT IN THE PRECEDING YEARS SINCE 2011-12 AND IN THE SUCCEE DING YEARS, THE RENTAL INCOME FROM THE PROPERTY IN QUESTION HAS BEE N ACCEPTED AS INCOME FROM HOUSE PROPERTY BY FRAMING ASSESSMENT UNDER SECTION 143 (3) OF THE ACT AND RELIED UPON THE DECISION REN DERED BY HONBLE SUPREME COURT IN THE CASE OF RAJ DADARKAR & ASSOCIATES (2017) 394 ITR 592 (SC) . 9. HOWEVER, THE LD. DR FOR THE REVENUE CONTENDED TH AT THE CONTENTIONS RAISED BY THE LD. AR FOR THE ASSESSEE A RE NOT TENABLE BECAUSE WHEN THE ASSESSEE HIMSELF AS CLAIMED DEPREC IATION OF THE PROPERTY, THE RENTAL INCOME IS TO BE TAXED UNDER TH E HEAD INCOME FROM BUSINESS AND PROFESSION. 10. FIRST OF ALL, WHEN THE REVENUE HAS BEEN ACCEPTI NG THE RENTAL INCOME OF THE ASSESSEE QUA THE PROPERTY IN QUESTION FOR THE LAST 15 YEARS AS INCOME FROM HOUSE PROPERTY AND IN THE SU BSEQUENT YEARS ALSO, THE SAME IS TREATED AS INCOME FROM HOUSE PRO PERTY AND THERE IS NO REASON WITH THE REVENUE TO DEPART FROM THE RU LE OF CONSISTENCY. SECONDLY, ASSESSEE IS OWNER OF THE PR OPERTY IN QUESTION WHO HAS LEASED OUT THE PROPERTY ON THE BAS IS OF RENTAL AGREEMENT. ITA NO.7557/DEL/2018 5 11. AO AS WELL AS LD. CIT (A) HAVE RELIED UPON THE DECISION RENDERED BY HONBLE SUPREME COURT IN THE CASE OF RAYALA CORPORATION (P) LTD. 243 ITR 360 (SC) . IN THE DECISION OF RAYALA CORPORATION (P) LTD. (SUPRA), RELIANCE HAS BEEN PLACED ON THE DECISION OF CHENNAI PROPERTIES & INVESTMENTS LTD. 373 ITR 673 (SC) WHEREIN IN THE MEMORANDUM OF ASSOCIATION BUSINESS OF LETTING WAS INCLUDED IN ITS OBJECT CLAUSE. 12. HOWEVER, HONBLE SUPREME COURT IN THE CASE OF RAJ DADARKAR & ASSOCIATES (SUPRA) DISCUSSED THE DECISIONS OF HONBLE SUPREME COURT IN CHENNAI PROPERTIES & INVESTMENTS LTD. AND RAYALA CORPORATION (P) LTD. (SUPRA) WHEREIN IT IS HELD AS UNDER :- MERELY BECAUSE THERE IS AN ENTRY IN THE OBJECT CLAU SE OF THE BUSINESS SHOWING A PARTICULAR OBJECT, WOULD NOT BE THE DETERMINATIVE FACTOR TO ARRIVE AT THE CONCLUSIO N THAT THE INCOME IS TO BE TREATED AS INCOME FROM BUSINESS . SO, THE OBJECT CLASS AS CONTAINED IN THE PARTNERSHIP DE ED WOULD NOT BE CONCLUSIVE FACTOR. SO, THE HONBLE APEX COURT HELD THAT WHEREVER THERE IS AN INCOME FROM LEASING OUT OF PREMISES AND COLLECTING RENT, N ORMALLY SUCH AN INCOME IS TO BE TREATED AS INCOME FROM HOUSE PROPER TY, IF THE PROVISION OF SECTION 22 ARE SATISFIED AND MERELY ON THE BASIS OF ENTRY IN THE OBJECT CLAUSE OF THE BUSINESS SHOWING A PARTICULAR OBJECT WOULD NOT BE A DETERMINATIVE FACTOR TO ARRIV E AT A CONCLUSION THAT INCOME IS TO BE TREATED AS INCOME FROM BUSINES S OR PROFESSION. ITA NO.7557/DEL/2018 6 13. SPECIAL PROVISIONS CONTAINED UNDER SECTION 22 O F THE ACT ARE CATEGORIC ENOUGH TO COVER THE CASE OF THE ASSESSEE WHO IS OWNER OF THE BUILDING IN QUESTION WHICH HAS BEEN LEASED OUT BY HIM AND AS SUCH, RENTAL INCOME EARNED BY HIM SHALL BE CHARGEAB LE TO INCOME- TAX UNDER THE HEAD INCOME FROM HOUSE PROPERTY. 14. SO, WHEN THE REVENUE HAS NOT BROUGHT ON RECORD ANY MATERIAL TO PROVE THAT LEASING OF THE PROPERTY IS T HE COMPLEX COMMERCIAL TRADING TRANSACTION, THE RENTAL INCOME H AS TO BE ASSESSED UNDER THE HEAD HOUSING PROPERTY BECAUSE THE VISIBLE INTENTION OF THE ASSESSEE / OWNER IS TO EXPLOIT THE PROPERTY BEING OWNER TO EARN THE RENT. WHEN THE COMPANY IS NOT DO ING ANY BUSINESS EXCEPT FOR LEASING OUT THE PROPERTY OWNED BY IT TO EARN THE RENT, THE RENTAL INCOME IS TO BE CHARGEABLE TO INCO ME-TAX UNDER THE HEAD INCOME FROM HOUSE PROPERTY. 15. IDENTICAL ISSUE HAS ALSO BEEN DECIDED BY THE CO ORDINATE BENCH OF THE TRIBUNAL IN CASE CITED AS SELECT INFRASTRUCTURE PVT. LTD. VS. ADDL. CIT & ORS. IN ITA NOS.3751/DEL/2013 & ORS. ORDER DATED 04.10.2017 IN FAVOUR OF THE ASSESSEE BY RELYING UPON THE DECISION RENDERED BY THE HONBLE SUPREME COURT IN T HE CASE CITED AS RAJ DADARKAR & ASSOCIATES (SUPRA). 16. THE CONTENTION OF THE LD. DR FOR THE REVENUE TH AT WHEN THE ASSESSEE HAS CLAIMED DEPRECIATION ON THE PROPERTY I TS RENTAL INCOME ITA NO.7557/DEL/2018 7 IS TO BE CHARGED TO INCOME-TAX UNDER THE HEAD INCOM E FROM BUSINESS & PROFESSION IS NOT TENABLE IN THE FACE OF THE FACT THAT COMPUTATION OF INCOME, AVAILABLE AT PAGE 44 OF THE PAPER BOOK, SHOWS THAT THE ASSESSEE HAS NEVER CLAIMED DEPRECIAT ION ON THE PROPERTY LEASED OUT. RATHER AO GRANTED THE DEPRECI ATION AFTER REJECTING THE CLAIM OF THE ASSESSEE THAT RENTAL INC OME IS TO BE ASSESSED UNDER THE HEADS INCOME FROM HOUSE PROPERT Y. 17. SO AO, AFTER ASSESSING THE INCOME OF THE ASSESS EE UNDER THE HEAD BUSINESS & PROFESSION, ADDED DEPRECIATION ON THE PROPERTY OF ASSESSEE. SO, WE ARE OF THE CONSIDERED VIEW THA T ENTIRE RENTAL INCOME EARNED BY THE ASSESSEE DURING THE YEAR IS CH ARGEABLE TO INCOME-TAX UNDER THE HEAD INCOME FROM HOUSE PROPER TY U/S 22 OF THE ACT AND THE ASSESSEE SHALL NOT BE ENTITLED FOR ANY DEPRECIATION ON THE PROPERTY. 18. IN VIEW OF WHAT HAS BEEN DISCUSSED ABOVE, FOLLO WING THE DECISION RENDERED BY THE COORDINATE BENCH OF THE TR IBUNAL AND ALSO BY FOLLOWING THE RULE OF CONSISTENCY LAID DOWN BY H ONBLE SUPREME COURT IN THE CASE OF RADHASOAMI SATSANG VS. CIT 193 ITR 321 (SC) AND FOLLOWING THE DECISION RENDERED BY HONBLE APEX COURT IN RAJ DADARKAR & ASSOCIATES (SUPRA), WE ARE OF THE CONSIDERED VIEW THAT RENTAL INCOME EARNED BY THE AS SESSEE FROM LEASING OUT THE PROPERTY OWNED BY IT IS CHARGEABLE TO INCOME-TAX ITA NO.7557/DEL/2018 8 UNDER THE HEAD INCOME FROM HOUSE PROPERTY UNDER S ECTION 22 OF THE ACT. CONSEQUENTLY, GROUND NO.1 IS DETERMINED I N FAVOUR OF THE ASSESSEE. GROUND NO.2 18. GROUND NO.2 IS DISMISSED HAVING NOT BEEN PRESSE D DURING THE COURSE OF ARGUMENTS. 19. RESULTANTLY, THE APPEAL FILED BY THE ASSESSEE I S HEREBY PARTLY ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON THIS 28 TH DAY OF MAY, 2019. SD/- SD/- (G.D. AGRAWAL) (KULDIP SINGH) VICE PRESIDENT JUDICIAL MEMBE R DATED THE 28 TH DAY OF MAY, 2019 TS COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT(A)-6, NEW DELHI. 5.CIT(ITAT), NEW DELHI. AR, ITAT NEW DELHI.