M.S WELLNESS N. SOLUTIONS (I) P.LTD, MUMBAI V. ITO 8(2)(3), MUMBAI

ITA 7697/MUM/2012

• Counselvise Citation: 769719914 RSA 2012
• Duration Of Justice: 1 year(s) 2 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-03-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 13-03-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 27-12-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business income; Rule of consistency
• Section: 143(3)

Judgement Text

B IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, MUMBAI .. , # %, & # ' BEFORE SHRI P.M. JAGTAP, AM AND SHRI SANJAY GARG, J M ./ I.T.A. NO.7697 /MUM/2012 ( &% % / ASSESSMENT YEAR : 2009-2010 M/S M.S. WELLNESS N. SOLUTIONS (INDIA) PVT. LTD., B-4, MANJU BUNGALOW, OWNERS CO-OP. HSG. SOC. LTD., 3 RD CROSS LANE, SWAMI SAMARTH NAGAR, LOKHANDWALA COMPLEX, ANDHERI (W), MUMBAI 400 061. / VS. INCOME TAX OFFICER 8(2)(3), MUMBAI. ./ PAN : AACCM54838 ( / APPELLANT ) .. ( / RESPONDENT ) A PPELLANT BY SHRI VIMAL PUNMIYA R E SPONDENT BY : SHRI RAVI PRAKASH / DATE OF HEARING : 13-03-2014 / DATE OF PRONOUNCEMENT : 21-3-2014 [ / O R D E R PER P.M. JAGTAP, A.M . : .. , THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER OF LD. CIT(A) 17, MUMBAI DATED 19-11-2012 AND THE SOLITARY ISSUE ARISING OUT OF THE SAME RELATES TO THE DISPUTE REGARDING HEAD OF INCOM E UNDER WHICH THE RENTAL INCOME RECEIVED BY THE ASSESSEE IS CHARGEABLE TO TA X. 2. THE ASSESSEE IN THE PRESENT CASE IS A COMPANY WH ICH FILED ITS RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION ON 26-09-20 09 DECLARING TOTAL ITA 7697/M/12 2 INCOME OF RS. 24,47,655/-. IN THE EARLIER YEAR, TH E ASSESSEE COMPANY HAD TAKEN ON RENT PREMISES NO. 101 AND 201 IN THE BUILD ING KNOWN AS THAKUR ENCLAVE SANKUL, THAKUR COMPLEX, KANDIVALI (EAST), MUMBAI FROM TWO OF ITS DIRECTORS ON RENT AND A FITNESS CENTRE WAS SET UP I N THE SAID PREMISES AFTER PROVIDING FOR ALL THE GYM EQUIPMENTS, FURNITURE AND FIXTURES ETC. THE BUSINESS OF RUNNING A FITNESS CENTRE WAS ALSO CARRI ED ON BY THE ASSESSEE IN THE SAID PREMISES DURING THE PREVIOUS YEAR RELEVANT TO A.Y. 2006-07. SUBSEQUENTLY IN THE PREVIOUS YEAR RELEVANT A.Y. 200 7-08, THE ENTIRE PREMISES WAS GIVEN BY THE ASSESSEE ON RENT AND THE RENTAL IN COME RECEIVED WAS OFFERED TO TAX BY IT UNDER THE HEAD PROFITS AND GAINS OF B USINESS OR PROFESSION IN A.Y. 2007-08 AS WELL AS IN THE SUBSEQUENT YEARS INC LUDING THE YEAR UNDER CONSIDERATION I.E A.Y. 2009-10. IN THE ASSESSMENT COMPLETED FOR A.Y. 2007- 08, THE A.O. HELD THAT THE RENTAL INCOME RECEIVED B Y THE ASSESSEE FOR ITS FITNESS CENTRE WAS CHARGEABLE TO TAX UNDER THE HEAD INCOME FROM OTHER SOURCES AND ACCORDINGLY THE CLAIM OF THE ASSESSEE FOR VARIOUS EXPENSES WAS RESTRICTED BY HIM BY APPLYING THE PROVISIONS OF SEC TION 57(III) OF THE INCOME TAX ACT, 1961. FOLLOWING THE ASSESSMENT ORDER PASSE D IN A.Y. 2007-08, THE RENTAL INCOME OF RS. 35,75,482/- FROM THE FITNESS C ENTRE OFFERED BY THE ASSESSEE TO TAX UNDER THE HEAD PROFITS AND GAINS O F BUSINESS OR PROFESSION WAS ALSO BROUGHT TO TAX BY THE A.O. UNDER THE HEAD INCOME FROM OTHER SOURCES AND THE CLAIM OF THE ASSESSEE FOR VARIOUS EXPENSES AGGREGATING RS. 37,27,337/- WAS RESTRICTED BY HIM TO RS. 20,48,145/ - BY APPLYING THE PROVISIONS OF SECTION 57(III) OF THE ACT. ON APPEAL , THE LD. CIT(A) UPHELD THE ORDER OF THE A.O. RELYING, INTER ALIA, ON THE ORDER OF THE FIRST APPELLATE AUTHORITY PASSED IN ASSESSEES OWN CASE FOR A.Y. 20 07-08. AGGRIEVED BY THE ORDER OF THE LD. CIT(A), THE ASSESSEE HAS PREFERRED THIS APPEAL BEFORE THE TRIBUNAL. 3. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AN D ALSO PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. AS AGREED B Y THE LD. REPRESENTATIVES OF ITA 7697/M/12 3 BOTH THE SIDES, A SIMILAR ISSUE INVOLVED IN ASSESSE ES OWN CASE FOR A.Y. 2007- 08 HAS ALREADY BEEN DECIDED BY THE TRIBUNAL IN FAVO UR OF THE ASSESSEE VIDE PARA 6 OF ITS ORDER DATED 28 TH OCTOBER, 2013 PASSED IN ITA NO. 1511/MUM/2012 WHICH READS AS UNDER:-- 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WEL L AS RELEVANT MATERIAL ON RECORD. THE ISSUE OF TREATING THE RENTAL INCOME WHE THER BUSINESS OR INCOME FROM OTHER SOURCES FOR ALLOWING THE PREMISES EQUIPP ED WITH FITNESS EQUIPMENTS AND OTHER FACILITIES AS FITNESS CENTRE I S A HIGHLY DEBATABLE ISSUE. THUS, THIS ISSUE HAS TO BE DECIDED ON THE PECULIAR FACTS OF THE CASE WE NOTE THAT THIS IS NOT A CASE OF SIMPLE LETTING OUT OF A PREMISES BUT THE ASSESSEE HAS DEVELOPED AND PREPARED THE PREMISES AS A FITNESS CE NTRE/GYMNASIUM BY INSTALLING THE ALL REQUISITE EQUIPMENTS, MACHINES A ND OTHER FACILITIES. THEREFORE, THE PRIMARY PURPOSE AND INTENTION OF THE ASSESSEE TO LEASE OUT THE ASSETS COMPRISING THE PREMISES AS WELL AS THE EQUIP MENTS IS TO EARN THE INCOME BY EXPLOITING THE ASSET BEING EARNING APPARA TUS. THE ASSESSEE HAS ALSO UNDERTAKEN THE VARIOUS ACTIVITY OF MAINTENANCE PROV IDING STAFF AND OTHER FACILITIES FOR SMOOTH FUNCTIONING OF THE FITNESS CE NTRE. THEREFORE, IT IS NOT A SIMPLE CASE OF EARNING THE RENTAL INCOME FROM LETTI NG OUT THE PREMISES. THE REVENUE HAS ACCEPTED THE INCOME FROM LEASE OUT THE PREMISES AS BUSINESS INCOME FOR THE ASSESSMENT YEAR 2006-07 TO 2010-11 E XCEPT THE ASSESSMENT YEAR UNDER CONSIDERATION. FOR THE ASSESSMENT YEARS 2006-07 AND2010-11 THE ASSESSMENT HAS BEEN COMPLETED U/S 143(3) AND FOR OT HER ASSESSMENT YEAR IT HAS BEEN ACCEPTED U/S 143(1). THEREFORE, EXCEPT THE YEAR UNDER CONSIDERATION THE REVENUE HAS ACCEPTED THE CLAIM OF THE ASSESSEE. WHEN THERE IS NO CHANGE IN THE FACTS AND CIRCUMSTANCES THEN THE PRINCIPLE O F CONSISTENCY HAS TO BE FOLLOWED. THE A.O HAS NOT POINTED OUT ANY NEW FACT OR CIRCUMSTANCES FOR DEVIATING THE VIEW CONSISTENTLY TAKEN IN THE OTHER ASSESSMENT YEARS WHEREBY THE CLAIM OF THE ASSESSEE WAS ACCEPTED. IN VIEW OF THE FACTS AND CIRCUMSTANCES OF THE CASE AND AS PER THE RULE OF CONSISTENCY WHEN THE REVENUE HAS ACCEPTED THE CLAIM OF THE ASSESSEE IN ALL OTHER YEARS THEN T REATING THE RENTAL INCOME IN RESPECT OF THE FITNESS CENTRE IS NOT JUSTIFIED. ACC ORDINGLY, WE SET ASIDE THE ORDERS OF THE AUTHORITIES BELOW ON THESE ISSUES AND ALLOW THE CLAIM OF THE ASSESSEE. 4. AS THE ISSUE INVOLVED IN THE YEAR UNDER CONSIDER ATION AS WELL AS ALL THE MATERIAL FACTS RELEVANT THERETO ARE SIMILAR TO A.Y. 2007-08, WE RESPECTFULLY FOLLOW THE DECISION OF THE CO-ORDINATE BENCH OF THI S TRIBUNAL RENDERED IN A.Y. 2007-08 AND DIRECT THE A.O. TO ASSESS THE RENTAL IN COME OF THE ASSESSEE FROM FITNESS CENTRE UNDER THE HEAD PROFITS AND GAINS OF BUSINESS OR PROFESSION AS OFFERED BY THE ASSESSEE. ITA 7697/M/12 4 5. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT ON 21 ST MARCH, 2014. . ( ) * 21-03-2014 SD/- SD/- (SANJAY GARG) (P.M. JAGTAP ) (- JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI ; * DATED 21-03-2014 [ .-../ RK , SR. PS , -&./ 0/ / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. / () / THE CIT(A)17 MUMBAI. 4. / / CIT 8 MUMBAI 5. 2 --4 , 4 , / DR, ITAT, MUMBAI B BENCH 6. 7 / GUARD FILE. / BY ORDER, 2 - //TRUE COPY// / ( DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI