ASST CIT 10(3), MUMBAI V. SAMEERA ELECTRONICS P. LTD, NAVI MUMBAI

ITA 782/MUM/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 84184 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 9 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-11-2014
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: E
• Next Hearing Date: 10-11-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 30-01-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: LOVE KUMAR
• Keywords: Business income; Depreciation; Business expenditure; Rule of consistency; Fair market value; Bad and doubtful debts; Notional interest; Onus to prove

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL E BENCH, M UMBAI BEFORE HONBLE S/SHRI VIJAY PAL RAO (JM) , AND B.R.BASKARAN (AM) , . . , ./I.T.A. NO782/MUM/2013 ( / ASSESSMENT YEAR : 2009-10) THE DY. COMMISSIONER OF INCOME TAX 10(3), ROOM NO.451, 4TH FLOOR, AAYAKAR BHAVAN,M.K.ROAD, MUMBAI-400020 / VS. M/S SAMEERA ELECTRONICS PVT.LTD. EL-79, ELECTRONIC ZONE, BLOCK A-TTC INDUSTRIAL AREA, MIDC, MAHAPE, NAVI MUMBAI- 4000701 ( / APPELLANT) .. ( / RESPONDENT) ./ ./ PAN/GIRNO.:AAECS3410M ! / APPELLANT BY : SHRI LOVE KUMAR ' ! /RESPONDENT BY SHRI DEVENDRA JAIN # ' $% / DATE OF HEARING : 10.11.2014 &' ' $% /DATE OF PRONOUNCEMENT : 19.11.2014. / O R D E R PER B.R.BASKARAN, ACCOUNTANT MEMBER: THE APPEAL FILED BY THE REVENUE IS DIRECTED AGAINS T THE ORDER DATED 23.11.2012 PASSED BY LD CIT(A)-22, MUMBAI AND IT RE LATES TO THE ASSESSMENT YEAR 2009-10. 2. THE REVENUE IS AGGRIEVED BY THE DECISION RENDERE D BY LD CIT(A) ON THE FOLLOWING ISSUES:- (A) WHETHER RENTAL INCOME IS ASSESSABLE UNDER TH E HEAD INCOME FROM HOUSE PROPERTY OR INCOME FROM BUSINESS. (B) WHETHER THE LD CIT(A) IS JUSTIFIED IN DELETING THE DISALLOWANCE OF ENTIRE EXPENDITURE OF RS.17,22,361/- CLAIMED BY THE ASSESSEE AS BUSINESS EXPENSES. (C) WHETHER THE INCOME FROM LABOUR CHARGES IS ASSESSABLE UNDER THE HEAD INCOME FROM BUSINESS OR INCOME FROM OTHER SOURCES. ITA NO.782/M/2013 2 3. THE FACTS RELATING TO THE CASE ARE STATED IN B RIEF. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF DEALING IN COMPUTERS AND PERIPHERALS. ON A PERUSAL OF THE P&L A/C, THE AO NOTICED THAT THE ASSESSEE DE CLARED LOSS OF RS.83,86,814/-. ON EXAMINATION OF THE SAME, THE AO NOTICED THAT THE ASSESSEE HAS DECLARED INCOME FROM LABOUR CHARGES TO THE TUNE OF RS.7,96,0 00/- AND OTHER INCOME OF RS.4,71,229/-. THE OTHER INCOME CONSISTED OF RENTA L INCOME FROM M/S RELIANCE INFRATEL LTD AND M/S SETO TEKNOLOG P LTD AND BANK I NTEREST. THE ASSESSEE TREATED THE OTHER INCOME AS ALSO AS BUSINESS RECEIP TS. 4. THE AO FURTHER NOTICED THAT THE ASSESSEE COMPA NY HAS BEEN TAKEN OVER BY M/S SETO TEKNOLOG P LTD AND HENCE THE ASSESSEE C OMPANY HAS BECOME ITS SUBSIDIARY. IT WAS FURTHER NOTICED THAT THE ASSESS EE HAS LET OUT ITS ENTIRE FACTORY BUILDING TO ITS HOLDING COMPANY CITED ABOVE. BESID ES THE ABOVE, THE ASSESSEE HAS LET OUT TERRACE OF THE BUILDING AND A SMALL POR TION OF GROUND FLOOR TO M/S RELIANCE INFRATEL TO ERECT A TELEPHONE TOWER. THE ASSESSEE, HOWEVER, CLAIMED TO HAVE INCURRED ADMINISTRATIVE EXPENSES TO THE TUNE O F RS.17,22,361/-. IT ALSO CLAIMED TO HAVE CARRIED OUT SOME JOB WORK FOR ITS H OLDING COMPANY M/S SETO TEKNOLOG P LTD. THE AO NOTICED THAT THE ASSESSEE D ID NOT ENTER INTO ANY AGREEMENT WITH ITS HOLDING COMPANY FOR PROVIDING TH E LABOUR SERVICES AND THE BILLS HAVE BEEN RAISED AT THE END OF EVERY MONTH WI THOUT MENTIONING ABOUT THE NATURE OF SERVICES LIKE TYPE AND QUANTITY OF WORK C ARRIED OUT, I.E., THE BILL MENTIONED AN ADHOC AMOUNT. THE AO ALSO NOTICED THA T THE ASSESSEE DID NOT INCUR ANY ELECTRICITY EXPENSES, MEANING THEREBY, TH E ASSESSEE COULD NOT HAVE USED ITS MACHINERIES FOR CARRYING OUT THE JOB WORKS . THE AO FURTHER NOTICED THAT THE ASSESSEE HAS CLAIMED TO HAVE INCURRED EXPENSES ON SALARY/WAGES TO THE TUNE OF RS.8,90,435/- AND LABOUR CHARGES OF RS.3,49 ,463/- FOR EARNING JOB CHARGES INCOME OF RS.7,96,000/-. BASED ON THESE F ACTS, THE AO CAME TO THE CONCLUSION THAT THE ASSESSEE DID NOT CARRY OUT ANY BUSINESS ACTIVITY AND ACCORDINGLY HELD THAT THE CLAIM OF INCURRING OF VAR IOUS EXPENSES IS NOT TENABLE. ACCORDINGLY, THE AO CAME TO THE CONCLUSION THAT THE JOB WORK CHARGES OF RS.7,96,000/- SHOULD BE ASSESSED AS INCOME FROM OTH ER SOURCES. IN THE ABSENCE OF ANY BUSINESS ACTIVITY, THE AO DISALLOWED THE ALL EXPENSES AGGREGATING TO RS.17,22,361/- BY HOLDING THAT THE ASSESSEE HAS NOT INCURRED THE EXPENSES FOR BUSINESS PURPOSES AND FURTHER IT HAS A LSO FAILED TO PROVE THE ITA NO.782/M/2013 3 GENUINENESS OF THE SAME. THE AO ALSO DISALLOWED TH E CLAIM OF DEPRECIATION ON THE REASONING THAT NONE OF THE ASSETS HAVE BEEN USE D FOR PURPOSE OF BUSINESS. 5. THE ASSESSEE HAD RECEIVED RENTAL INCOME OF RS .3,60,000/- FROM M/S RELIANCE INFRATEL LTD AND DECLARED THE SAME AS BUSI NESS INCOME. HOWEVER, THE AO ASSESSED THE SAME UNDER THE HEAD INCOME FROM HOU SE PROPERTY. THE ASSESSEE HAD ALSO RECEIVED RENTAL INCOME OF RS.1,08 ,000/- FOR AN AREA OF 1015.75 SQ. MTS FROM ITS HOLDING COMPANY M/S SETO T EKNOLOG P LTD. THE AO NOTICED THAT THE ABOVE SAID PREMISES IS LOCATED IN AN INDUSTRIAL AREA AND FURTHER THE ASSESSEE HAS LET OUT A WELL EQUIPPED PREMISES. THE RENT RECEIVED BY THE ASSESSEE WORKED OUT TO RE.0.82 PER SQ. FT. THE REN TAL INCOME WAS LOWER THAN THE MUNICIPAL RATABLE VALUE OF THE PROPERTY, WHICH WAS CLAIMED BY THE ASSESSEE TO BE RS.5,29,580/-. FURTHER IT WAS SEEN THAT THE ASSESSEE HAD RECEIVED INTEREST FREE DEPOSIT OF RS.3.00 CRORES. THE AO NOTICED THA T THE PREVAILING RENTAL RATE IN THAT AREA WAS RS.40/- TO RS.60/- PER SQ.FT. ACCORD INGLY THE AO, BY CONSIDERING THE FACTS AVAILABLE IN THE INSTANT CASE, ADOPTED A RATE OF RS.40/- PER SQ.FT. AND ACCORDINGLY DETERMINED THE ANNUAL LETTING VALUE (AL V) OF THE PROPERTY AT RS.52,46,400/- AND ASSESSED THE SAME UNDER THE HEAD HOUSE PROPERTY. SINCE THE ASSESSING OFFICER HAD DETERMINED THE ALV ON THE BASIS OF MARKET RATE, HE HELD THAT THERE IS NO NECESSITY TO ADD NOTIONAL INT EREST COMPUTED ON THE DEPOSIT OF RS.3.00 CRORES RECEIVED BY THE ASSESSEE. THE AO FU RTHER NOTICED THAT THE ASSESSEE HAD CLAIMED BAD DEBTS OF RS.59,51,514/-, B UT THE AO NOTICED THAT THE ASSESSEE FAILED TO SHOW THAT THE SAID AMOUNT HAD BE EN TAKEN AS INCOME IN THE CURRENT YEAR OR IN ANY OF THE PRIOR YEARS. THOUGH THE AMOUNT OF BAD DEBTS WAS SHOWN AS RS.59,51,514/- IN THE PROFIT AND LOSS ACC OUNT, YET THE ASSESSEE HAD CLAIMED A SUM OF RS.54,12,950/- IN THE COMPUTATION STATEMENT. THE ASSESSEE DID NOT RECONCILE BOTH THE AMOUNTS. THE AO ALSO NO TICED THAT THE SHAREHOLDING PATTERN OF THE ASSESSEE COMPANY HAS CHANGED FROM 5. 9.2006. HENCE, THE AO ALSO EXPRESSED THAT THE QUESTION OF ALLOWING LOSS I NCURRED PRIOR TO THAT DATE REQUIRES CONSIDERATION. ACCORDINGLY, THE AO DISALL OWED THE CLAIM OF BAD DEBTS ALSO. 6. IN THE APPELLATE PROCEEDINGS, THE LD CIT(A) A CCEPTED THAT THE ASSESSEE WAS CARRYING ON BUSINESS ACTIVITY. ACCORDINGLY HE A LLOWED THE CLAIM OF ADMINISTRATIVE EXPENSES, DEPRECIATION AND BAD DEBTS . HE ALSO ACCEPTED THAT THE ITA NO.782/M/2013 4 ASSESSEE HAS LET OUT THE BUILDING ON TEMPORARY BASI S DUE TO LULL IN THE BUSINESS AND HENCE THE RENTAL INCOME IS ASSESSABLE AS BUSINE SS INCOME. ACCORDINGLY HE ALLOWED THE APPEAL FILED BY THE ASSESSEE. THE REVE NUE IS AGGRIEVED BY THE DECISION OF LD CIT(A) IN RESPECT OF THE THREE ISSUE S CITED ABOVE, I.E., THE REVENUE HAS ACCEPTED THE DECISION OF LD CIT(A) IN RESPECT O F DEPRECIATION AND BAD DEBTS. 7. WE NOTICE THAT ALL THE THREE ISSUES REVOLVE AROUND QUESTION, VIZ., (A) WHETHER THE ASSESSEE CAN BE SAID TO HAVE CONTI NUED TO CARRY ON THE BUSINESS OR NOT? (B) WHETHER THE LETTING OUT OF BUSINESS PREMISES W AS TEMPORARY IN NATURE IN VIEW OF THE FACT THAT THE ASSESSEE COULD NOT USE THE BUILDING AND MACHINERIES GAINFULLY. 8. WE HAVE ALREADY NOTICED THAT THE SHARES OF THE ASSESSEE COMPANY WAS ACQUIRED BY M/S SETO TEKNOLOG P LTD ON 5 TH SEPTEMBER, 2006, DUE TO WHICH THE ASSESSEE COMPANY BECAME ITS SUBSIDIARY COMPANY. TH E FACTORY PREMISES OF THE ASSESSEE COMPANY WAS LET OUT TO ITS HOLDING COM PANY FROM SEPTEMBER, 2007 ONWARDS. HOWEVER, THE ASSESSEE COMPANY HAS CLAIMED TO HAVE UNDERTAKEN CERTAIN LABOUR WORKS FROM ITS HOLDING COMPANY. THE ASSESSING OFFICER HAS POINTED OUT THAT THE DETAILS OF WORKS CARRIED OUT B Y THE ASSESSEE COMPANY COULD NOT BE FURNISHED. THE ASSESSEE WAS SEEN SIMPLY RAI SING A BILL AT THE END OF EVERY MONTH, WITHOUT MENTIONING THEREIN THE NATURE OF SER VICES RENDERED. FROM THE DETAILS GIVEN IN THE ASSESSMENT ORDER, WE NOTICE TH AT THE ASSESSEE HEREIN WAS ENGAGED IN THE BUSINESS OF DEALING IN COMPUTERS AND PERIPHERALS. HOWEVER, THE HOLDING COMPANY M/S SETO TEKNOLOG P LTD IS ENGAGED IN THE BUSINESS OF MANUFACTURING OF COMPUTER BASED POWER LINE TRANSDUC ERS, CUSTOM DESIGNED MICROPROCESSORS ETC. WE NOTICE THAT THE BUSINESS A CTIVITY OF THE HOLDING COMPANY APPEAR TO BE MORE COMPLEX AND TECHNICAL IN NATURE, WHERE AS THE ACTIVITY OF THE ASSESSEE COMPANY CONSISTED OF MEREL Y DEALING IN COMPUTERS AND PERIPHERALS. HENCE, IN ORDER TO CARRY OUT THE JOB WORK GIVEN BY THE HOLDING COMPANY, THE ASSESSEE COMPANY SHOULD HAVE POSSESSED SKILLED WORKERS, WHO WERE HAVING REQUIRED TECHNICAL KNOWLEDGE. HOWEVER, IT IS UNBELIEVABLE THAT THE ASSESSEE COULD HAVE PERFORMED THE JOB WORK WITH THE HELP OF ITS EXISTING WORKERS, WHO WERE MERELY ENGAGED IN THE JOB OF SELLING COMPU TER. THIS VIEW IS FURTHER FORTIFIED BY THE FACT THAT THE ASSESSEE HAS FAILED TO SHOW THE NATURE OF SERVICES ITA NO.782/M/2013 5 PERFORMED BY IT TO ITS HOLDING COMPANY. SINCE THE ASSESSEE HAS CLAIMED TO HAVE RECEIVED THE LABOUR CHARGES FROM ITS HOLDING COMPAN Y BY CARRYING OUT CERTAIN TECHNICAL ACTIVITY AND SINCE IT FORMS THE FOUNDATIO N TO DETERMINE WHETHER THE ASSESSEE WAS CONTINUING TO CARRY ON THE BUSINESS, T HE ONUS TO PROVE ITS CLAIM IS FULLY PLACED UPON THE ASSESSEE. IN THE INSTANT CAS E, WE NOTICE THAT THE ASSESSEE HAS FAILED TO DISCHARGE THE SAID ONUS. HENCE, IN O UR VIEW, THE LD CIT(A) WAS NOT JUSTIFIED IN ACCEPTING THE CLAIM OF THE ASSESSEE TH AT IT HAS CONTINUED TO CARRY ON ITS BUSINESS. ON THE CONTRARY, WE ARE OF THE VIEW THAT THE ASSESSING OFFICER HAS BROUGHT OUT MORE IMPORTANT POINTS TO SUPPORT THAT I T WAS MERE MAKE BELIEVE ARRANGEMENT, VIZ., (A) NO ELECTRICITY EXPENSES WAS INCURRED, MEANING T HEREBY THE MACHINERIES OF THE ASSESSEE COMPANY WERE NOT USED. (B) ENTIRE FACTORY PREMISES HAVE BEEN LET OUT TO THE HOLDING COMPANY AND IN THAT CASE THE ASSESSEE SHOULD SPECIFY AS TO FROM WHICH PLACE THE ASSESSEE WAS DOING JOB WORKS. (C) THE MONTHLY BILL RAISED BY THE ASSESSEE DID NO T SPECIFY THE NATURE OF SERVICES RENDERED. (D) THERE IS NO WRITTEN AGREEMENT BETWEEN THE HOLD ING COMPANY AND THE SUBSIDIARY COMPANY WITH REGARD TO THE JOB WORK. FURTHER WE HAVE NOTICED THAT THE NATURE OF BUSINESS ACTIVITY OF THE ASSESSEE COMPANY AND ITS HOLDING COMPANY WAS DIFFERENT AND H ENCE THE POSSIBILITY OF WORKERS OF THE ASSESSEE COMPANY RENDERING TECHNICAL SERVICES WAS REMOTE. FURTHER THE SO CALLED ARRANGEMENT WAS BETWEEN A HOL DING COMPANY AND ITS SUBSIDIARY, IN WHICH CASE THERE IS HEAVY BURDEN UPO N THE ASSESSEE TO PROVE ITS CLAIM. DURING THE COURSE OF HEARING, THE LD A.R S UBMITTED THAT THE ASSESSEE MIGHT HAVE DEPUTED ITS WORKERS DIRECTLY TO THE HOLD ING COMPANY AND GOT THE WORK DONE. HOWEVER, THE SAID STATEMENT MADE BY THE LD A .R IS NOT SUPPORTED BY ANY MATERIAL AND SUCH A FINDING WAS NOT GIVEN IN THE IM PUGNED ORDERS. UNDER THESE SET OF FACTS, WE ARE OF THE VIEW THAT THE SO CALLED JOB WORK OR RECEIPT OF LABOUR CHARGES CAN ONLY BE CATEGORIZED AS COLOURABLE DEVI CE TO CREATE AN IMPRESSION THAT THE ASSESSEE HAS CONTINUED TO CARRY ON THE BUS INESS. ACCORDINGLY, WE ARE NOT ABLE TO AGREE WITH THE VIEW OF LD CIT(A) THAT T HE ASSESSEE COMPANY DID CARRY ON THE BUSINESS DURING THE YEAR UNDER CONSIDERATION . ACCORDINGLY, WE SET ASIDE ITA NO.782/M/2013 6 THE ORDER OF LD CIT(A) ON THIS ISSUE AND RESTORE TH E VIEW TAKEN BY THE ASSESSING OFFICER. 9. IN VIEW OF THE ABOVE, IN OUR VIEW, THE ASSESS ING OFFICER WAS JUSTIFIED IN DISALLOWING THE CLAIM OF ADMINISTRATIVE EXPENSES OF RS.17,22,361/- AND FURTHER HE WAS ALSO JUSTIFIED IN ASSESSING THE ALLEGED RECEIPT OF LABOUR CHARGES OF RS.7,96,000/- AS INCOME FROM OTHER SOURCES. 10. THE CONSIDERATION OF NEXT QUESTION STATED AS (B) ABOVE WOULD HELP US TO ADJUDICATE THE GROUND RELATING TO ASSESSMENT OF REN TAL INCOME, I.E., WHETHER IT IS ASSESSABLE AS BUSINESS INCOME OR HOUSE PROPERTY INC OME. 11. THE CASE OF THE ASSESSEE IS THAT IT DID NOT R ECEIVED ORDERS AND HENCE IT HAS STARTED PROVIDING LABOUR SERVICES TO ITS HOLDIN G COMPANY. FURTHER, IN ORDER TO EXPLOIT THE VACANT SPACE AVAILABLE WITH THE COMPANY , IT WAS CLAIMED THAT IT HAS LEASED OUT TERRACE AND A SMALL PORTION TO M/S RELIA NCE INFRATEL LIMITED FOR INSTALLATION OF THEIR TELEPHONE TOWER. FURTHER THE FACTORY PREMISES WAS ALSO LET OUT TO ITS HOLDING COMPANY. THE ASSESSEE DECLARED THE RENTAL INCOME AS BUSINESS RECEIPTS APPARENTLY ON THE PLEA THAT SUCH A LETTIN G OF THE PREMISES WAS ON TEMPORARY BASIS. THE LD CIT(A) ALSO AGREED WITH TH E VIEW OF THE ASSESSEE BY PLACING RELIANCE ON THE DECISION RENDERED BY HONBL E SUPREME COURT IN THE CASE OF CEPT VS. SHRI LAKSHMI MILLS LTD (1951)(20 ITR 45 1). 12. THERE IS NO DISPUTE WITH REGARD TO THE PROP OSITION THAT THE RENT RECEIVED ON LETTING OUT OF FACTORY PREMISES ON TEMPORARY BASIS DUE TO LULL IN THE BUSINESS IS NORMALLY ASSESSED AS BUSINESS INCOME, SINCE THE O BJECT OF THE ASSESSEE IN SUCH TYPE OF CASES WAS NOT MERE EARNING OF RENTAL I NCOME, BUT EFFECTIVE EXPLOITATION OF BUSINESS ASSETS. ANOTHER IMPORTANT FACTOR IS THAT THE ASSESSEE, IN SUCH TYPE OF CASES, WOULD BE TAKING ALL POSSIBLE ST EPS TO REVIVE THE BUSINESS ACTIVITIES. HOWEVER, IN ORDER TO APPLY THIS PROPOS ITION, ONE SHOULD CONSIDER THE FACTS PREVAILING IN EACH CASE, I.E., THE ASSESSEE H AS TO SHOW THAT THE LETTING OUT WAS NOT WITH THE INTENTION TO EARN RENTAL INCOME BU T FOR COMMERCIAL EXPLOITATION OF THE ASSETS, WHICH WAS INDUCED BY THE LULL IN THE BU SINESS. GENERALLY THE LULL IN THE BUSINESS IS CAUSED BY THE FACTORS, WHICH ARE BEYOND THE CONTROL OF THE ASSESSEE, SOME OF THEM MAY BE, HIGH FLUCTUATION IN THE PRICES MAKING PRODUCTION UNVIABLE ITA NO.782/M/2013 7 FOR A WHILE, SUDDEN SLUMP IN THE DEMAND FOR PRODUCT S MANUFACTURED BY THE ASSESSEE, ACT OF GOD, MACHINERY BREAK DOWNS REQUIRI NG LONG TIME TO SET RIGHT, ACTION OF BANKS AND FINANCIAL INSTITUTIONS, SHORTAG E OF FUNDS ETC. AS NOTICED EARLIER, ANOTHER IMPORTANT FACTOR, FROM WHICH THE T EMPORARY LULL COULD BE ASCERTAINED, IS THAT THE ASSESSEE SHOULD BE TAKING ALL POSSIBLE STEPS TO REVIVE ITS BUSINESS ACTIVITY, WHICH CLEARLY BRINGS OUT THE INT ENTION OF THE ASSESSEE THAT THE LETTING OUT WAS NOT WITH THE INTENTION OF EARNING R ENTAL INCOME, BUT FOR THE PURPOSE OF EFFECTIVE COMMERCIAL EXPLOITATION OF THE ASSETS. 13. WE SHALL NOW ANALYZE THE FACTS PREVAILING IN THE INSTANT CASE. THE ASSESSEE HAS LET OUT THE TERRACE OF THE BUILDING FO R ERECTING A TELEPHONE TOWER. WE ARE ALL AWARE THAT THE TELEPHONE TOWERS ARE ESSE NTIAL FOR A TELEPHONE COMPANY TO PROVIDE COMMUNICATION SERVICES TO ITS CU STOMERS. THE INSTALLATION OF TOWERS INVOLVES HUGE COST. HENCE, IT IS IN THE COMM ON KNOWLEDGE OF EVERYBODY THAT THE TELEPHONE COMPANY OR THE COMPANY PROVIDING SERVICES TO THE TELEPHONE COMPANY, COULD NOT HAVE ACCEPTED INSTALLATION OF TH E SAME FOR A SHORTER PERIOD. FURTHER, THE ASSESSEE HAS LET OUT THE TERRACE, WHIC H MEANS, IT HAS LET OUT THE SPACE WHICH WAS NOT REQUIRED FOR IT. HENCE, THE CL AIM OF LETTING OUT ON A TEMPORARY BASIS, IN OUR VIEW, DOES NOT APPLY TO THE FACTS SURROUNDING THE RENTAL RECEIPT FROM M/S RELIANE INFRATEL LTD. WE ARE OF THE VIEW THAT THE INTENTION OF THE ASSESSEE IN LETTING OUT THE TERRACE TO A TELEPHONE COMPANY FOR ENABLING IT TO ERECT A TOWER COULD ONLY BE WITH THE INTENTION TO EARN RE NTAL INCOME. HENCE, IN OUR VIEW, THE ASSESSING OFFICER WAS JUSTIFIED IN ASSESS ING THE RENTAL INCOME RECEIVED FROM M/S RELIANCE INFRATEL LIMITED UNDER THE HEAD INCOME FROM HOUSE PROPERTY. ACCORDINGLY, WE SET ASIDE THE ORDER OF LD CIT(A) ON THIS ISSUE. 14. THE NEXT ISSUE RELATES TO THE ASSESSMENT OF R ENTAL INCOME RECEIVED FROM THE HOLDING COMPANY OF THE ASSESSEE. WE HAVE ALREA DY NOTICED THAT THE ASSESSEE HAD LET OUT ITS FACTORY PREMISES TO ITS HO LDING COMPANY ON A MONTHLY RENT OF RS.9000/- P.M. THE ASSESSING OFFICER HAS N OTICED THAT THE SAID RENT WAS FAR LESS THAN THE MARKET RATE. ACCORDINGLY HE ENHA NCED THE RENTAL INCOME TO RS.52,46,400/- P.A. AND ASSESSED THE SAME AS INCOME FROM HOUSE PROPERTY. 15. THE CLAIM OF THE ASSESSEE IS THAT THE FACTORY PREMISES HAVE BEEN LET OUT ON TEMPORARY BASIS, AS THERE WERE NO ORDERS FOR THE ASSESSEE COMPANY. FIRST OF ITA NO.782/M/2013 8 ALL, WE NOTICE THAT THE SAID CONTENTION IS NOT SUBS TANTIATED. SECONDLY, WE HAVE EARLIER NOTICED THAT THE ASSESSEE COMPANY HAS BECOM E SUBSIDIARY OF M/S SETO TEKNOLOG PVT. LTD AND THE PREMISES HAVE BEEN LET OU T TO THE ABOVE SAID COMPANY ONLY, MEANING THEREBY, THERE IS A POSSIBILITY THAT THE ASSESSEE COMPANY HAS LET OUT THE FACTORY PREMISES IN PURSUANCE OF A BUSINESS POLICY DECISION. WE HAVE ALREADY NOTICED THAT THE LETTING OUT OF FACTORY BUS INESS SHOULD BE DUE TO THE FACT OF TEMPORARY LULL IN THE BUSINESS AND THE INTENTION OF THE ASSESSEE COULD BE ASCERTAINED FROM THE EFFORTS TAKEN TO REVIVE THE BU SINESS ACTIVITIES. IN THE INSTANT CASE, THOUGH THE ASSESSEE CLAIMS THAT THE LETTING O UT OF FACTORY PREMISES WAS FOR A TEMPORARY PERIOD, YET NO MATERIAL WAS BROUGHT ON RECORD TO SUBSTANTIATE THE SAID CLAIM. FURTHER, THE RELATIONSHIP BETWEEN THE ASSESSEE AND ITS HOLDING COMPANY ALSO WEAKENS THE SAID CLAIM. THE ASSESSEE HAS ALSO FAILED TO SHOW THAT IT WAS TAKING EFFORTS TO REVIVE ITS BUSINESS A CTIVITIES. ALL THESE FACTORS CUMULATIVELY SHOW THAT THE INTENTION OF THE ASSESSE E IN LETTING OUT THE FACTORY PREMISES COULD NOT BE DUE TO TEMPORARY LULL IN THE BUSINESS. ACCORDINGLY, IN OUR VIEW, THE ASSESSING OFFICER WAS JUSTIFIED IN ASSESS ING THE RENTAL INCOME UNDER THE HEAD INCOME FROM HOUSE PROPERTY. ACCORDINGLY, WE S ET ASIDE THE ORDER OF LD CIT(A) ON THIS ISSUE. 16. THE ASSESSEE SUBMITTED THAT THE RENTAL INCOM E WAS ASSESSED AS BUSINESS RECEIPTS IN THE EARLIER ASSESSMENT YEARS AND HENCE, BY FOLLOWING THE PRINCIPLE OF CONSISTENCY, THE SAME TREATMENT SHOULD BE CONTINUED IN THIS YEAR ALSO. HOWEVER, THE PRINCIPLE OF RES-JUDICATA WOULD NOT APPLY TO IN COME TAX PROCEEDINGS AND FURTHER, THERE IS NO ESTOPPEL AGAINST THE LAW. HEN CE, WE ARE OF THE VIEW THAT THE PRINCIPLE OF CONSISTENCY COULD NOT BE APPLIED IN TH E FACTS AND CIRCUMSTANCES OF THE PRESENT CASE. 17. THE NEXT ISSUE RELATES TO THE DETERMINATION O F ANNUAL LETTING VALUE (ALV) OF THE FACTORY PREMISES LET OUT TO THE HOLDING COMP ANY. THE ASSESSEE HAS COLLECTED ANNUAL RENT OF RS.1,08,000/-, BUT THE ASS ESSING OFFICER HAS ENHANCED THE SAME TO RS.52,46,400/-. THE ASSESSING OFFICER HAS ADOPTED A RATE OF RS.40/- PER SQ. FT. AND APPLYING THE SAME ON 10,930 SQ. FT. ARRIVED AT ALV OF RS.52,46,400/-. THE AO ALSO NOTED THAT THE LOWER R ENT WAS CHARGED BY THE ASSESSEE IN VIEW OF THE FACT THAT IT HAS RECEIVED I NTEREST FREE DEPOSIT OF RS.3.00 ITA NO.782/M/2013 9 CRORES FROM THE HOLDING COMPANY. BEFORE THE AO, TH E ASSESSEE HAS SUBMITTED THAT THE RATABLE VALUE FOR PROPERTY TAXES PURPOSES WAS FIXED AT RS.5,29,850/-. 18. THE ANNUAL LETTING VALUE IS DETERMINED AS PE R THE PROVISIONS OF SEC. 23 OF THE ACT, ACCORDING TO WHICH THE FAIR MARKET VALUE O R THE ACTUAL RENT RECEIVED WHICHEVER IS HIGHER IS TAKEN AS ALV. THERE ARE ALS O CASES TO THE EFFECT THAT THE MUNICIPAL RATABLE VALUE MAY BE ADOPTED AS FAIR RENT AL VALUE. THE COURTS HAVE DECIDED AGAINST ADDING THE NOTIONAL INTEREST CALCUL ATED ON THE SECURITY DEPOSIT TO THE ALV. IN THE INSTANT CASE, THE ASSESSEE HAS SUB MITTED THAT THE MUNICIPAL RATABLE VALUE FOR PROPERTY TAXES WAS RS.5,29,850/- AND THE ACTUAL RENT RECEIVED WAS RS.1,08,000/-. HENCE, IN OUR VIEW, THE ALV MAY BE TAKEN AS THE MUNICIPAL RATABLE VALUE OF RS.5,29,850/- IN THE INSTANT CASE. ACCORDINGLY, WE MODIFY THE ORDER OF LD CIT(A) ON THIS ISSUE AND DIRECT THE ASS ESSING OFFICER TO ADOPT THE MUNICIPAL RATABLE VALUE AND ASSESS THE SAME UNDER T HE HEAD INCOME FROM HOUSE PROPERTY. 19. IN THE RESULT, THE APPEAL FILED BY THE REVE NUE IS PARTLY ALLOWED. THE ABOVE ORDER WAS PRONOUNCED IN THE OPEN COURT ON 19TH NOV, 2014 . &' # () * + 19TH NOV , 2014 ' ' , - SD SD ( / VIJAY PAL RAO ) ( . . ,/ B.R. BASKARAN ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER ( # MUMBAI: 19TH NOV,2014. . . ./ SRL , SR. PS !'# $#%! / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. # 0$ ( ) / THE CIT(A)- CONCERNED 4. # 0$ / CIT CONCERNED 5. 6. 1, $ 2 , % 2 , ( # / DR, ITAT, MUMBAI CONCERNED ,3 4 / GUARD FILE. ITA NO.782/M/2013 10 5 # / BY ORDER, TRUE COPY 6 (ASSTT. REGISTRAR) % 2 , ( # /ITAT, MUMBAI