STELLER DEVELOPERS P. LTD, MUMBAI V. ASST CIT 5(3), MUMBAI

ITA 7636/MUM/2012

• Counselvise Citation: 763619914 RSA 2012
• Duration Of Justice: 2 year(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-01-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: H
• Next Hearing Date: 22-10-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 26-12-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: JITENDRA KUMAR
• Assessee Lawyers: VASANT I PATEL; NILESH JOSHI
• Keywords: Business income; Depreciation
• Section: 28; 234B

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL H , BENCH MUMBAI , BEFORE : SHRI R.C.SHARMA, AM & SHRI VIVEK VARMA , JM ITA NO. 4891 / MUM/20 08 ( ASSESSMENT YEAR : 200 5 - 06 ) ACIT RG.5(3), MUMBAI VS. M/S STELLER DEVELOPER P. LTD., 103 , SANGEETA ENCLAVE, SARVODAYA NAGAR, MULUND (W), MUMBAI - 80 . PAN/GIR NO. : A ABCS 1078 C ( APPELLANT ) .. ( RESPONDENT ) AND ITA NO. 6635 / MUM/20 09 ( ASSESSMENT YEAR :200 6 - 0 7 ) ITO RG.5(3) (2) , MUMBAI - 20 VS. M/S STELLER DEVELOPER P. LTD., 821, PAREKH MARKET, MAMA PARMAND MARG, OPERA HOUSE, MUMBAI. PAN/GIR NO. : AABCS 1078 C ( APPELLANT ) .. ( RESPONDENT ) AND ITA NO S . 126 TO 128/ MUM/20 10 ( ASSESSMENT YEAR :2001 - 02. 2002 - 03 & 2004 - 05 ) ACIT RG.5(3), MUMBAI VS. M/S STELLER DEVELOPER P. LTD., 103, SANGEETA ENCLAVE, SARVODAYA NAGAR, MULUND (W), MUMBAI - 80 . PAN/GIR NO. : AABCS 1078 C ( APPELLANT ) .. ( RESPONDENT ) ITA NO S . 4891/08, 6635/09 126 TO 128/10 & 7636/ 20 1 2 2 AND ITA NO. 7636 / MUM/20 12 ( ASS ESSMENT YEAR :200 9 - 10 ) M/S STELLER DEVELOPER P. LTD., 103, SANGEETA ENCLAVE, SARVODAYA NAGAR, MULUND (W), MUMBAI - 80 . VS. ACIT RG.5(3), MUMBAI PAN/GIR NO. : AABCS 1078 C ( APPELLANT ) .. ( RESPONDENT ) /REVENUE BY : SHRI JITENDRA KUMAR /ASSESSEE BY : MS. VASANTI PATEL & SHRI NILESH JOSHI DATE OF HEARING : 0 6 / 01 /201 5 DATE OF PRONOUNCEMENT : 21 /01/2015 O R D E R PER R.C.SHARMA ( A .M.) : TH ESE ARE THE APPEALS FIELD BY THE REVENUE AND ASSESSEE AGAINST THE ORDER OF CIT(A) FOR ASSESSMENT YEARS 2001 - 02, 2002 - 03, 2004 - 05, 2005 - 06, 2006 - 07 & 2009 - 10, RESPECTIVELY. 2. SINCE THE ONLY COMMON ISSUE INVOLVED IN ALL THE YEARS UNDER CONSIDERATION, RELATES TO TREATING THE INCOME FROM HOUSE PROPERTY AS BUSINESS INCOME, THEREFORE, ALL THESE APPEALS WERE HEARD TOGETHER AND ARE NOW DISPOSED OF BY THIS CONSOLIDATED ORDER. 3. WE HAVE HEARD RIVAL CONTENTIONS AND PERUSED T HE RECORD. FACTS IN BRIEF ARE THAT THE ASSESSEE IS A PRIVATE LIMITED COMPANY IS ENGAGED IN THE BUSINESS OF BUYING PROPERTIES ON OWNERSHIP OR LEASE OR RENTAL BASIS AND TO GIVE ON LONG LEASE, SUBLEASE AND/OR RENTAL BASIS. THE SOURCE OF INCOME OF THE ASSESS EE COMPANY IS RENTAL INCOME WHICH IS PART AND PARCEL OF THE ACTIVITIES OF THE COMPANY. S INCE 2000, THE ASSESSEE ITA NO S . 4891/08, 6635/09 126 TO 128/10 & 7636/ 20 1 2 3 COMPANY IS DULY REFLECTING SUCH RENTAL INCOME AS INCOME FROM BUSINESS OR PROFESSION AND THE SAME . THE ASSESSEE HAS ALSO DULY REFLECTED THESE A SSETS AS BUSINESS ASSETS AND ALSO CLAIMED DEPRECIATION IN EACH AND EVERY YEAR. DURING THE YEAR UNDER CONSIDERATION, THE AO HAS TREATED THE INCOME OFFERED BY THE ASSESSEE AS BUSINESS GAIN, AS INCOME FROM HOUSE PROPERTY. BY THE IMPUGNED ORDER THE CIT(A) HELD THAT INCOME WAS DERIVED FROM OPERATION OF BUSINESS AFTER HAVING THE FOLLOWING OBSERVATIONS : - 6.1 NOW COMING TO THE FACTS AND CIRCUMSTANCES OF THE INSTANT CASE, I FIND THAT THERE IS NO DISPUTE THAT AS PER MEMORANDUM OF ASSOCIATION OF THE COMPANY IT IS T HE MAIN OBJECT OF THE COMPANY TO PURCHASE AND/OR ACQUIRE PROPERTY AND TO GIVE ON LEASE AND/OR ON LICENSE BASIS ALONG WITH COMPLEX COMMERCIAL ACTIVITIES AND THAT IS HOW THE COMPANY HAS DECLARED ITS APPARENTLY RENTAL INCOME AS THEIR BUSINESS INCOME. THE AGR EEMENT WITH THE LESSEE FOR THE IMPUGNED PROPERTY DOES NOT MENTION THE WORD TENANT FOR THE OCCUPIER IN IT AND THEREFORE THERE IS NO SIMPLE LANDLORD AND TENANT RELATIONSHIP BETWEEN THE APPELLANT COMPANY AND THE LESSEE. SINCE, THERE IS NO CHANGE OF THE PARTY IN THE LEASE AGREEMENT I.E. M/SPER STOP LTD. AND SINCE THERE IS NO FRESH AGREEMENT ALSO FOR THE SAME EVEN AFTER ACQUIRING THE PROPERTY, IT IS CLEAR THAT THE INTENTION OF THE APPELLANT HAS NOT GONE FOR A CHANGE AND IT REMAINS THE EARLIER ONE ONY I.E. TO EXP LOIT COMMERCIALLY BY WAY OF COMPLEX COMMERCIAL ACTIVITIES GENERATING THE BUSINESS INCOME AS EARLIER AS IT IS PART AND PARCEL OF THE APPELLANTS BUSINESS ACTIVITY ONLY. THUS, IT IS HELD THAT THE INCOME HAS RIGHTLY BEEN ASSESSED IN THE EARLIER YEARS AS BUSI NESS INCOME AND EVEN IN VIEW OF THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF M/S SHAMBHU INVESTMENT PVT. LTD. THAT HAS UPHELD ALL THE FINDINGS AND RATIO OF HONBLE CALCUTTA HIGH COURT (SUPRA), TH EIMPUGNED INCOME IS ASSESSABLE AS BUSINESS INCOM E IN THE INSTANT YEAR ALSO. THE ASSESSING OFFICER IS NOT CORRECT IN SAYING THAT THE FACTS OF THE ASSESSEE ARE EXACTLY SIMILAR TO THE FACTS OF SHAMBHU INVESTMENT PVT. LTD. (SUPRA). IN THAT CASE, THE HONBLE HIGH COURT FOUND FROM A PLAIN READING OF THE AGREE MENT THAT IT WAS APPARENT THAT THE INTENTION OF THE PARTIES TO THE SAID AGREEMENT WAS CLEAR AND UNAMBIGUOUS BY WHIC H THE FIRST PARTY HAD ALLOWED THE SECOND PARTY TO ENJOY THE SAID TABLE SPACE UPON PAYMENT OF THE COMPREHENSIVE MONTHLY RENT. THE HONBLE HIGH CURT IN THAT CASE DID NOT FIND THAT M/S SHAMBHU INVESTMENT PVT. LTD. WAS IN THE BUSINESS OF ACQUIRING THE PROPERTIES EITHER BY WAY OF OWNERSHIP OR ON LEASE TO SUBLET OR LEASE IT OUT TO OTHERS WITH AN INTENTION O F COMMERCIAL EXPLOITATION OF THE SAME WITH C OMPLEX COMMERCIAL ACTIVITIES. THIS VIEW IS ALSO UPHELD IN THE RECENT DECISION OF HONBLE ITAT CALCUTTA IN THE CASE OF PFH MALL AND RETAIL MANAGEMENT LTD. VS. ITO IN ITA NOS.435 & 2068/KOL/2006, DATED 11 - 5 - 2007, 16 SOT ITA NO S . 4891/08, 6635/09 126 TO 128/10 & 7636/ 20 1 2 4 (83) (KOL) . THUS, IN VIEW OF THE ABOVE DISCUSSION AND IN THE FACTS AND CIRCUMSTANCES OF THE INSTANT CASE, THE LD. A. O . IS DIRECTED TO AC C EPT THE DISCLOSED BUSINESS INCOME BY WAY OF LEASE RENT. THE APPEAL IS ALLOWED ON THIS GROUND. 7. THE NEXT GROUND IS THAT THE LD. AO. HAS ERRED IN CHARGING INTEREST U/S.234A, 234B AND 234C. I FIND THAT THESE GROUNDS ARE CONSEQUENTIAL IN NATURE AND THEREFORE DISMISSED ACCORDINGLY . HOWEVER, THE LD. ASSESSING OFFICER IS DIRECTED TO FOLLOW THE LAW LAID DOWN BY HONBLE SUPREME COURT IN THE CASE OF CIT VS. RANCHI C LUB LTD. (2001) 114 TAXMAN 414 (SC)/RANCHI CLUB LTD. VS. CIT{1996] 217 ITS 72/85 TAXMAN 201 (PAT) & CIT VS. KWALITY BISCUITS LTD. (2006) 155 TAXMAN 658 (SC) WHILE CHARGING THE INTEREST U/S.234A, 234B & 234C. IN THE RESULT, THE APPEAL IS PARTLY ALLO W ED. 4. LEARNED DR RELIED ON THE ORDER OF THE AO AND SUBMITTED THAT THE ASSESSEE IS THE OWNER OF THE PREMISES AND HAS GIVEN THE SAME ON LEASE RENT, THEREFORE, THE INCOME EARNED FROM THE SAME SHOULD BE HELD AS INCOME FROM PROPERTY. LD. DR FURTHER SUBMITTED THAT THE MEMORANDUM OF ASSOCIATION OF THE ASSESSEE COMPANY IS NOT FINAL AND THE OBJECTS STATED IN THE MEMORANDUM OF ASSOCIATION IS WHAT THE ASSESSEE IS PERMITTED TO DO, WHICH ASSESSEE HAS NOT DONE SO FAR. FOR THIS PURPOSE, LD. DR RELIED ON THE DECISION OF HON BLE SUPREME COURT IN THE CASE OF ORIENTAL INVESTMENT CO. LTD. VS. CIT, 32 ITR 664 (SC). 5. ON THE OTHER HAND, LEARNED AR, RELYING ON THE VARIOUS JUDICIAL AUTHORITIES, SUBMITTED THAT THE MAIN OBJECTS OF THE ASSESSEE COMPANY ARE TO BUY PROPERTIES, DEVELOP A ND TO LEASE OUT THE PROPERTY AND THE INCOME RECEIVED FROM LETTING OUT PROPERTIES SHOULD BE ASSESSED AS BUSINESS INCOME . LD. AR FURTHER SUBMITTED THAT THE ASSESSEE HAS REFLECTED IN ITS REGULAR BOOKS OF ACCOUNTS FROM TIME TO TIME THE SAID ASSETS AS ITA NO S . 4891/08, 6635/09 126 TO 128/10 & 7636/ 20 1 2 5 COMMERCIA L ASSETS OR BUSINESS ASSETS, AND WHICH IS DULY ACCEPTED BY THE DEPARTMENT FROM TIME TO TIME, AND THE SAID ASSETS ALSO INCLUDE VARIOUS AMENITIES SUCH AS ELECTRICITY, COOLING, TOWERS, ELEVATORS CAR PARKING FOR THE LESSEE AND/OR VISITORS ETC. THE SAID SERVICE S AND AMENITIES ARE PROVIDED BY THE ASSESSEE COMPANY ARE INSEPARABLE AND THE SAME HAS TO BE PROVIDED ALONG WITH THE BUILDINGS AND AS SUCH SERVICES, AMENITIES ARE ALSO CO - TERMINUS AND CO - EXISTENT WITH THE PRINCIPAL SUBJECT MATTER OF THE PROPERTY. THEREFORE , THE INCOME REFLECTED AS INCOME FROM BUSINESS AND PROFESSION IS TO BE TREATED AS UNDER THE SAME HEAD AND NOT IN THE HEAD OF INCOME FROM HOUSE PROPERTY. 6. WE HAVE CONSIDERED RIVAL CONTENTIONS AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. FROM THE RECORD WE FOUND THAT THE AO TREATED T HE INCOME FROM COMMERCIAL EXPLOITATION OF ASSETS AS INCOME FROM HOUSE PROPERTY ON THE PLEA THAT IMPUGNED PROPER T Y HAS BEEN ACQUIRED BY THE ASSESSEE D URING THE YEAR WHEREAS THE SAME , WAS TAKEN BY THEM O N LEASE IN EARLIE R YEAR . M ERELY BECAUSE INCOME IS ATTACHED TO A PROPERTY IT CANNOT BE A SOLE FACTOR FOR ASSESSING SUCH INCOME AS INCOME FROM HOUSE PROPERTY AND IT HAS TO BE SEEN THAT WHETHER IT WAS THE PRIMARY OBJECTIVE OF THE ASSESSEE TO EXPLOIT THE PROPERTY IN A SIMPL E MANNER OR TO EXPLOIT IT COMMERCIALLY I.E. TO EXPLOIT IT BY WAY OF COMPLEX COMMERCIAL ACTIVITIES TO ARRIVE AT THE GENERATION OF INCOME THAT COULD BE TAXED UNDER THE HEAD INCOME FROM HOUSE PROPERTY OR AS INCOME FROM BUSINESS. IF IT IS FOUND THAT MAIN INTEN TION IS TO SIMPLY LET OUT PROPERTY OR ANY PART OF IT, RESULTANT INCOME MUST BE ASSURED ASSESSED AS INCOME FROM HOUSE PROPERTY BUT IF MAIN INTENTION IS FOUND TO BE EXPLOITATION OF PROPERTY BY WAY OF COMMERCIAL ITA NO S . 4891/08, 6635/09 126 TO 128/10 & 7636/ 20 1 2 6 ACTIVITIES, THEN RESULTANT INCOME MUST BE HELD AS BUSINESS INCOME. WHERE ASSESSEE COMPANY HAS DEVELOPED SHOPPING MALLS/BUSINESS CENTRES ON PROPERTIES OWNED BY IT AND LET OUT SAME BY PROVIDING HOST OF SERVICES/FACILITIES/AMENITIES IN THE SAID MALL/BUSINESS CENTRES, IT CAN BE SAID THAT BASIC INTENTION OF ASSESSEE WAS COMMERCIAL EXPLOITATION OF ITS PROPERTIES BY DEVELOPING THEM AS SHOPPING MALLS/BUSINESS CENTRES, THEREFORE, INCOME DERIVED THEREFROM IS ASSESSABLE AS BUSINESS INCOME. IN THE INSTANT CASE BEFORE US THERE IS NO DISPUTE THAT AS PER MEMORANDUM OF ASSOCIATION OF THE COMPANY IT IS THE MAIN OBJECT OF THE COMPANY TO PURCHASE AND/OR ACQUIRE PROPERTY AND TO GIVE ON LEASE AND/OR ON LICENSE BASIS ALONG WITH COMPLEX COMMERCIAL ACTIVITIES AND THAT IS HOW THE COMPANY HAS DECLARED ITS INCOME FROM SUCH PROPERT Y AS THEIR BUSI NESS INCOME. EVEN T HE AGREEMENT EXECUTED WITH THE LESSEE OF THE IMPUGNED PROPERTY DOES NOT MENTION THE WORD TENANT , THEREFORE THERE IS NO SIMPLE LANDLORD AND TENANT RELATIONSHIP BETWEEN THE ASSESSEE COMPANY AND THE LESSEE. SINCE, THERE IS NO CHANGE OF THE PARTY IN THE LEASE AGREEMENT I.E. M/S SHOP PER STOP LTD. AND SINCE THERE IS NO FRESH AGREEMENT ALSO FOR THE SAME EVEN AFTER ACQUIRING THE PROPERTY, IT IS CLEAR THAT THE INTENTION OF THE ASSESSEE HAS NOT GONE FOR A CHANGE AND IT REMAINS THE EA RLIER ONE ON L Y I.E. TO EXPLOIT COMMERCIALLY BY WAY OF COMPLEX COMMERCIAL ACTIVITIES GENERATING THE BUSINESS INCOME AS PART AND PARCEL OF THE ASSESSEE S BUSINESS ACTIVITY ONLY . 7. THE HONBLE SUPREME COURT IN THE CASE OF KARNANI PROPERTIES LTD. V. CIT, (19 71) 82 ITR 547 VERY SUCCINCTLY ENUNCIATED THE UNIQU E CHARACTERISTICS OF A BUSINESS ACTIVITY. THE APEX COURT HAS LAID DOWN ITA NO S . 4891/08, 6635/09 126 TO 128/10 & 7636/ 20 1 2 7 PRECISE TESTS THAT ARE NECESSARY TO DETERMINE WHETHER THE SERVICES RENDERED BY AN ASSESSEE TO ITS TENANTS/RECIPIENTS OF SERVICE, ARE I N THE NATURE OF BUSINESS ACTIVITIES AND INCOME GENERATED THEREFROM ASSESSABLE AS BUSINESS INCOME, OR NOT. THE HONBLE COURT EXPRESSED THE VIEW THAT IF THE SERVICES RENDERED BY THE ASSESSEE ARE THE RESULTS OF ITS ACTIVITIES CARRIED ON CONTINUOUSLY IN AN OR GANIZED MANNER, WITH A SET PURPOSE AND WITH A VIEW TO EARN PROFITS, THOSE ACTIVITIES WOULD CONSTITUTE BUSINESS ACTIVITIES AND THE INCOME ARISING THEREFROM WOULD BE ASSESSABLE AS BUSINESS INCOME UNDER SECTION 28 OF THE 1961 ACT. 8. A PERUSAL OF THE AGREE MENTS ENTERED BY ASSESSEE WOULD SHOW THAT THE ACTIVITIES INVOLVED IN PROVIDING THE VARIOUS SERVICES/FACILITIES/AMENITIES MEET ALL THE AFORESAID FOUR REQUIREMENTS LAID DOWN BY HONBLE SUPREME COURT TO QUALIFY AS BUSINESS ACTIVITIES. HENCE, WE DO NOT FIND A NY REASON TO DEVIATE FROM THE FINDINGS RECORDED BY THE CIT(A). ACCORDINGLY, WE UPHOLD THE ORDER OF THE CIT(A) AND DIS MISS THE APPEALS OF THE REVENUE AND ALLOW THE APPEAL OF THE ASSESSEE ON THE ISSUE OF TREATMENT OF INCOME DECLARED BY ASSESSEE AS INCOME FRO M BUSINESS. 7 . IN THE RESULT, APPEALS OF THE REVENUE ARE DISMISSED, WHEREAS APPEAL OF THE ASSESSEE (I.E. ITA NO. 7636/MUM/2012) IS ALLOWED , ORDER PRONOUNCED IN THE OPEN COURT ON THIS 21 ST JANUARY . 201 5 . 21 ST JAN ,201 5 SD/ - SD/ - ( ) ( VIVEK VARMA ) ( ) ( R.C.SHARMA ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI ; DATED 21 / 01/201 5 /P KM , PS ITA NO S . 4891/08, 6635/09 126 TO 128/10 & 7636/ 20 1 2 8 COPY OF THE ORDER FORWARDED TO : / BY ORDER, ( ASSTT. REGISTRAR) / ITAT, MUMBAI 1. / THE APPELLANT 2. / THE RESPONDENT. 3. / THE CIT(A) - X, MUMBAI. 4. / CIT 5. / DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY//