DCIT 10(2)(2), MUMBAI V. MANAS PROPERTIES P.LTD, MUMBAI

ITA 768/MUM/2018

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 2434 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 1 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-03-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Assessment Year: 2014-2015
• Appeal Filed On: 07-02-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NARENDRA JANGPANGI

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES D , MUMBAI BEFORE SHRI B.R. BASKARAN, ACCOUNTANT MEMBER AND SHRI RAVISH SOOD, JUDICIAL MEMBER ITA NO. 768/MUM/2018 ASSESSMENT YEAR : 2014-15 DCIT-10(2)(2), MUMBAI VS. M/S. MANAS PROPERTIES PVT. LTD., 10 TH FLOOR, DEV PLAZA, S.V. ROAD, OPPOSITE FIRE BRIGADE, ANDHERI (WEST), MUMBAI [PAN : AAECM2637C] (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI NARENDRA JANGPANGI, CIT-DR RESPONDENT BY : SHRI ANUJ KISNADWALA, DATE OF HEARING : 07-03-2019 DATE OF PRONOUNCEMENT : 13-03-2019 O R D E R PER B.R. BASKARAN, ACCOUNTANT MEMBER: THE REVENUE HAS FILED THIS APPEAL, CHALLENGING THE O RDER DATED 15-11-2017 PASSED BY THE LD. COMMISSIONER OF IN COME TAX (APPEALS)-17, MUMBAI AND IT RELATES TO AY. 2014-1 5. ITA NO. 768/MUM/2018 : 2 : 2. THE REVENUE IS AGGRIEVED BY THE DECISION RENDERED BY THE LD. CIT(A) IN DELETING THE HOUSE PROPERTY INCOME O F RS. 11.76 CRORES ASSESSED BY THE AO. 3. THE FACTS RELATING TO THE ISSUE ARE STATED IN BRIEF. T HE ASSESSEE IS ENGAGED IN THE BUSINESS OF REAL ESTATE, CONSTRUCTION AND LETTING OUT OF COMMERCIAL PREMISES. IT WAS NOTICED BY THE AO THAT THE ASSESSEE HAD ENTERED INTO A L EASE AGREEMENT DT. 18-02-2011, WHICH WAS SUBSEQUENTLY AMEND ED VIDE SUPPLEMENTARY AGREEMENT DT. 16-01-2012 IN CONNECTI ON WITH LEASING OUT OF A PROPERTY LOCATED AT JUHU, MUMBA I TO M/S. JUNOBO HOTELS PVT. LTD. THE ASSESSEE DID NOT OFFER ANY RENTAL INCOME IN PURSUANCE OF THE ABOVE SAID AGREEMEN T. WHEN CONFRONTED, THE ASSESSEE SUBMITTED THAT, AS PER THE TERMS OF THE CONTRACT, RENT ACCRUES TO THE ASSESSEE ONLY FROM RENT COMMENCEMENT DATE, WHICH IS DETERMINED AS THE NEXT DATE TO THE DAY WHEN THE APPROVAL FROM MINISTRY OF ENVIRONMENT & FORESTS (MOEF) AND OCCUPANCY CERTIFICATE (OC) FROM MUNICIPAL CORPORATION OF GREATER MUMBAI (M CGM) ARE RECEIVED. IT WAS SUBMITTED THAT BOTH THE APPROVALS W ERE NOT RECEIVED BY THE END OF THE RELEVANT FINANCIAL YEAR AND HENCE NO RENTAL INCOME HAS ACCRUED TO THE ASSESSEE. TH E AO ITA NO. 768/MUM/2018 : 3 : NOTICED THAT, AS PER SUPPLEMENTARY AGREEMENT DT. 16-01 -2012, THE LESSEE IS LIABLE TO PAY AN AMOUNT OF RS. 4.20 CROR ES PER QUARTER AS COMPENSATION UP TO THE PERIOD, THE APPROVALS ARE RECEIVED. THE ABOVE SAID AMOUNT WAS TO BE PAID BEFORE FOR THE PERIOD PRIOR TO THE RENT COMMENCEMENT DATE. THE AO FUR THER NOTICED THAT THE COMPENSATION AMOUNT OF RS. 4.20 CRORES RECEIVABLE BY THE ASSESSEE PER QUARTER (RS.16.80 CRO RES PER ANNUM) WAS ASSESSED AS INCOME OF THE ASSESSEE UNDER THE HEAD INCOME FROM HOUSE PROPERTY IN AY. 2013-14. ACCORDINGLY, BY FOLLOWING THE SAME, AO TREATED THE COMPENSATION AMOUNT OF RS. 16.80 CRORES AS RENT RECEI VABLE BY THE ASSESSEE. AFTER ALLOWING DEDUCTION OF 30% U/S. 24(A) OF THE ACT, THE AO ASSESSED THE BALANCE AMOUNT OF RS. 11.76 CRORES AS INCOME OF THE ASSESSEE UNDER THE HEAD INCO ME FROM HOUSE PROPERTY IN THE YEAR UNDER CONSIDERATION ALSO. 4. LD. CIT(A) NOTICED THAT AN IDENTICAL ADDITION MADE BY THE AO IN AY. 2013-14 WAS DELETED BY HIM BY HOLDING THAT THE RENTAL INCOME HAS NOT ACCRUED TO THE ASSESSEE. ACCORDI NGLY, BY FOLLOWING THE ORDER PASSED BY HIM FOR THE AY. 201 3-14, THE LD. CIT(A) DIRECTED THE AO TO DELETE THE ADDITION DURIN G THIS YEAR ALSO. ITA NO. 768/MUM/2018 : 4 : 5. WE HAVE HEARD THE PARTIES AND PERUSED THE RECORD. 6. AT THE OUTSET, LD. DR SUBMITTED THAT ASSESSEE IS ENTITLED TO RECEIVE COMPENSATION OF RS. 4.20 CRORES BEING THE QUARTER AS PER THE SUPPLEMENTARY AGREEMENT PRIOR TO THE RENT COMMENCEMENT DATE. SINCE THE RIGHT OF THE ASSESSEE TO R ECEIVE COMPENSATION HAS ARISEN OUT OF SUPPLEMENTARY AGREEMENT, THE COMPENSATION RECEIVABLE BY THE ASSESSEE WAS RIGHTLY AS SESSED BY THE AO UNDER THE HEAD INCOME FROM HOUSE PROPERTY . ACCORDINGLY, THE LD. DR SUBMITTED THAT THE ORDER PASSE D BY THE LD. CIT(A) ON THIS ISSUE SHOULD BE REVERSED. 7. LD. AR SUBMITTED THAT THE ASSESSEE HAS NOT RECEIVED APPROVAL FROM MOEF AND OC FROM MCGM TILL DATE AND HEN CE, THE ASSESSEE DOES NOT HAVE RIGHT TO COLLECT RENT FROM THE LESSEE. 7.1. WITH REGARD TO COMPENSATION OF RS. 4.20 CRORES PE R QUARTER, THE LD. AR SUBMITTED THAT THE ASSESSEE HAD RECEI VED SOME AMOUNT IN THE PRECEDING YEAR BY WAY OF COMPENSA TION, BUT IT DID NOT RECEIVE ANY AMOUNT DURING THE YEAR UNDE R CONSIDERATION BY WAY OF COMPENSATION. HE FURTHER SUBMI TTED THAT THOUGH THE AMOUNT OF RS. 4.20 CRORES IS DESCRIBED A S ITA NO. 768/MUM/2018 : 5 : COMPENSATION, THE VARIOUS CLAUSES OF THE SUPPLEMENTARY AGREEMENT WOULD MAKE IT CLEAR THAT THE SAID AMOUNT ALSO ACCRUES TO THE ASSESSEE FROM THE RENT COMMENCEMENT DATE . TILL THAT POINT OF TIME, IT IS ALSO KEPT AS ADVANCE WHIC H SHALL BE ADJUSTED LATER, I.E., AFTER THE RENT COMMENCEMENT DATE AGAINST THE COMPENSATION AMOUNT. ACCORDINGLY THE LD A.R SUBMITTED THAT THE COMPENSATION AMOUNT ALSO HAS NOT ACCRUED TO THE ASSESSEE AND IN ANY CASE, THE ASSESSEE HAS NOT RECEIVED ANY AMOUNT DURING THE YEAR UNDER CONSIDERATIO N AS COMPENSATION. THE LD. AR FURTHER SUBMITTED THAT THE ORDER PASSED BY THE LD. CIT(A) FOR THE AY. 2013-14 WAS CHAL LENGED BY THE REVENUE BEFORE THE TRIBUNAL AND THE ITAT, VIDE ITS ORDER DT. 11-10-2018 PASSED IN ITA NO. 6987/MUM/2016 , HAS DISMISSED THE APPEAL OF THE REVENUE. ACCORDINGLY, LD . AR SUBMITTED THAT THE ORDER PASSED BY THE LD. CIT(A) DOES NO T CALL FOR ANY INTERFERENCE. 8. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THERE IS NO DISPUTE WITH REGARD TO THE FACT THA T THE RIGHT TO RECEIVE RENT SHALL ACCRUE TO THE ASSESSEE, AS PER THE AGREEMENT, ONLY AFTER OBTAINING APPROVAL FROM MOEF A ND OC FROM MCGM, WHICH IS DESCRIBED AS RENT COMMENCEMENT ITA NO. 768/MUM/2018 : 6 : DATE. THERE IS ALSO NO DISPUTE WITH REGARD TO THE FAC T THAT BOTH THESE CLEARANCES HAVE NOT BEEN RECEIVED BY THE AS SESSEE TILL THE END OF THE FINANCIAL YEAR RELEVANT TO THE AY. 2 014-15. HENCE, THE LD. CIT(A) HAS HELD THAT RENTAL INCOME ASSES SED BY THE AO IS NOT CORRECT AND ACCORDINGLY HE HAS DELETED TH E SAME. WE NOTICED THAT THE LD. CIT(A) HAS FOLLOWED HIS ORDER P ASSED FOR THE AY. 2013-14 AND THE SAID ORDER OF LD CIT(A) H AS SINCE BEEN UPHELD BY THE CO-ORDINATE BENCH OF THE TRIBUNAL. 8.1. HOWEVER, FROM THE ASSESSMENT ORDER WE NOTICED THA T THE AO HAS ACTUALLY ASSESSED THE COMPENSATION AMOUNT UNDER THE HEAD INCOME FROM HOUSE PROPERTY BY HOLDING THAT THE COMPENSATION AMOUNT IS PAYABLE TO THE ASSESSEE TILL THE RENT COMMENCEMENT DATE. ACCORDINGLY, LD. DR ARGUED THAT TH E COMPENSATION SHALL TAKE THE CHARACTER OF RENTAL INCOME. HOWEVER, ON A PERUSAL OF SUPPLEMENTARY AGREEMENT, WE NOTICE THAT THE COMPENSATION HAS BEEN AGREED TO BE PAYABLE BY THE LESSEE TO THE LESSOR FOR THE PERIOD PRIOR TO THE RENT COMMENCEMENT PERIOD. HOWEVER, IN CLAUSE 5.1 OF THE SUPPLEMENTARY AGREEMENT, IT IS SPECIFICALLY STATED THAT THE COMPENSATION AMOUNT IS PAYABLE ONLY ON THE RENT COMMENCEMENT PERIOD. IT IS FURTHER STATED THAT THE ITA NO. 768/MUM/2018 : 7 : COMPENSATION AMOUNT SO PAID SHALL BE KEPT AS ADVANCE TOWARDS THE COMPENSATION UNTIL THE PROCUREMENT OF THE SA ID OC BY THE LESSOR. THESE ASPECTS WERE MADE CLEAR FURTH ER IN CLAUSE 5.6 OF THE SUPPLEMENTARY AGREEMENT, WHEREIN IT I S STATED THAT THE PAYMENTS MADE TOWARDS COMPENSATION AS ADVANCE SHALL BE TREATED AND APPROPRIATED BY THE LESSO R AS COMPENSATION FROM LESSEE FOR OCCUPATION OF THE PROPERT Y ONLY UPON PROCUREMENT OF THE OC FROM MCGM. 8.2. AS NOTICED EARLIER, THE ASSESSEE HAS NOT RECEIVE D APPROVAL FROM MOEF AND OC FROM MCGM DURING THE YEAR UNDER CONSIDERATION. FURTHER, DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAS ALSO NOT RECEIVED ANY PAYMENT TOWARDS THE COMPENSATION ALSO. HENCE WE ARE OF THE VIE W THAT THE COMPENSATION AMOUNT OR LEASE AMOUNT HAS NOT ACCRUED TO THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION, SINC E THE ACCRUAL OF THE SAME WOULD DEPEND UPON THE RECEIPT OF APPROVALS REFERRED ABOVE. HENCE THE RATIO OF THE ORDE R PASSED BY THE CO-ORDINATE BENCH IN AY. 2013-14 IN THE ASSES SEES OWN CASE SHALL CONTINUE TO APPLY DURING THE YEAR UND ER CONSIDERATION ALSO. ACCORDINGLY, WE ARE OF THE VIEW TH AT THE ITA NO. 768/MUM/2018 : 8 : ORDER PASSED BY THE LD. CIT(A) DOES NOT CALL FOR ANY INTERFERENCE. 9. IN THE RESULT, THE APPEAL OF REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 13 TH DAY OF MARCH, 2019 SD/- SD/- (RAVISH SOOD) (B.R. BASKARAN) /JUDICIAL MEMBER /ACCOUNTANT MEMBER /MUMBAI; /DATED : 13 TH MARCH, 2019 TNMM ITA NO. 768/MUM/2018 : 9 : / COPY OF THE ORDER FORWARDED TO : 1. !' / THE APPELLANT 2. #!' / THE RESPONDENT 3. $ % ( ) / THE CIT(A), MUMBAI 4. $ % / CIT, MUMBAI 5. ()* +, , $ .+,$/ , / DR, ITAT, MUMBAI 6. *012 / GUARD FILE $ / BY ORDER, # //TRUE COPY// / $ (DY./ASST. REGISTRAR) $ .+,$/, / ITAT, MUMBAI