ITO 3(1)(2), MUMBAI V. BHARAT TILES AND MARBLE P.LTD, MUMBAI

ITA 789/MUM/2017

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 5401 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 5 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-07-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2011-2012
• Appeal Filed On: 03-02-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: T A KHAN
• Assessee Lawyers: PRAMILA ISHWER RATHI
• Keywords: Business income
• Section: 12

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL ' B ' BENCH, MUMBAI BEFORE SHRI R.C. SHARMA, ACCOUNTANT MEMBER AND SHRI AMARJIT SINGH , JUDICIAL MEMBER ITA NO S . 789 & 790 /MUM/ 2017 (ASSESSMENT YEAR S : 2011 - 12 & 2013 - 14 ) INCOME TAX OFFICER - 3(1)(2) ROOM NO. 666, 6TH FLOOR AAYAKAR BHAVAN, M.K. ROAD MUMBAI 400020 VS. M/S. BHARAT TILES AND MARBLE PVT. LTD. 4/27, KAMAL MANSION 1ST FLOOR, ARTHUR BUNDER ROAD COLABA , MUMBAI 400005 PAN AAACB1727A APPELLANT RESPONDENT APPELLANT BY: SHRI T.A. KHAN RESPONDENT BY: SHRI ISHWER PRAKASH RATHI & MS. PRAMILA ISHWER RATHI DATE OF HEARING: 09 .07.2018 DATE OF PRONOUNCEMENT: 30 . 07.2018 O R D E R PER R.C. SHARMA, AM THESE APPEALS ARE FILED BY REVENUE AGAINST THE ORDER OF THE CIT(A) - 8 , MUMBAI DATED 28 . 19 .201 6 FOR ASSESSMENT YEARS 2011 - 12 AND 2013 - 14 IN THE MATTER OF ORDER PASSED UNDER SECTION 271(1)(C) ) OF THE INCOME TAX ACT, 1961 (HEREINAFTER THE ACT). 2. THE ISSUE INVOLVED IN THESE APPEALS IS WITH REGARD TO TREATMENT OF RENTAL INCOME OFFERED BY THE ASSESSEE AS BUSINESS INCOME, WHICH HAS BEEN TREATED BY THE AO AS INCOME FROM HOUSE PROPERTY. THE LEARNED A.R., MISS PRAMILA ISHWER RATHI, APPEARING ON BEHALF OF THE ASSESSEE INVITED OUR ATTENTION TO THE ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR A.Y. 2011 - 12 DATED 14.02.2018, WHEREIN THE ISSUE WITH REGARD TO TREATMENT OF THE SAID INCOME WAS DECIDED IN FAVOUR OF THE ASSESSEE AFTER HAVING THE FOLLOWING OBSERV ATION: - 12. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. IT IS ITA NO. 789 /MUM/ 2017 M/S. BHARAT TILES AND MARBLE PVT. LTD. 2 ADMITTED FACT THAT THE ASSESSEE HAS DISCONTINUED ITS MANUFACTURING ACTIVITY AND CONTINUED THE ACTIVITY OF LE TTING OUT ITS PROPERTIES AND DERIVED RENTAL INCOME. THE ACTIVITY OF ASSESSEE IS ALSO SUPPORTED BY MAIN OBJECTS CLAUSE IN MEMORANDUM OF ASSOCIATION. WE FURTHER NOTICED THAT EXCEPT LETTING OUT PROPERTIES THE ASSESSEE HAS NOT CARRIED OUT ANY OTHER BUSINESS ACTIVITY. ONCE THE ASSESSEE HAS CARRIED OUT ITS MAIN ACTIVITY OF LETTING OUT PROPERTIES TO DERIVE RENTAL INCOME, SUCH RENTAL INCOME SHOULD BE CONSIDERED UNDER THE HEAD INCOME FROM HOUSE PROPERTY. THIS LEGAL PROPOSITION IS FURTHER SUPPORTED BY THE DECIS ION OF HONBLE SUPREME COURT IN THE CASE OF RAYALA CORPORATION PVT. LTD. VS. ACIT (SUPRA), WHEREIN UNDER SIMILAR CIRCUMSTANCES THE HONBLE SUPREME COURT OBSERVED THAT ONCE THE ASSESSEE HAD ONLY ONE BUSINESS THAT WAS OF LEASING ITS PROPERTY AND EARNING RENT THERE FROM, THE INCOME SO EARNED SHOULD BE TREATED AS BUSINESS INCOME AND SUCH INCOME WAS TO BE SUBJECTED TO TAX UNDER THE HEAD PROFIT AND GAINS OF THE BUSINESS OR PROFESSION. THIS LEGAL PROPOSITION IS FURTHER SUPPORTED BY THE DECISION OF ITAT MUMBAI S MC BENCH, IN THE CASE OF DISTINCT DEVELOPERS PVT. LTD. (SUPRA) WHEREIN UNDER SIMILAR CIRCUMSTANCES THE CO - ORDINATE BENCH BY FOLLOWING THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF RAYALA CORPORATION PVT. LTD. VS. ACIT (SUPRA) HAS HELD THAT RENTAL IN COME RECEIVED FROM LETTING OUT OF PROPERTIES SHOULD BE CONSIDERED UNDER THE HEAD INCOME FROM BUSINESS. 13. CONSIDERING THE FACTS AND CIRCUMSTANCES OF THIS CASE AND ALSO FOLLOWING THE RATIO OF HONBLE SUPREME COURT IN THE CASE OF RAYALA CORPORATION PVT. LTD. VS. ACIT (SUPRA), WE ARE OF THE CONSIDERED VIEW THAT IF THE MAIN ACTIVITY OF THE ASSESSEE IS OF LETTING OUT PROPERTIES AND DERIVE RENTAL INCOME WITHOUT ANY OTHER BUSINESS ACTIVITY, THEN SUCH RENTAL INCOME SHOULD BE CONSIDERED UNDER THE HEAD INCOME F ROM BUSINESS OR PROFESSION BUT NOT UNDER THE HEAD INCOME FROM HOUSE PROPERTY. THEREFORE, WE DIRECT THE AO TO ASSESS RENTAL INCOME UNDER THE HEAD INCOME FROM BUSINESS OR PROFESSI ON AS CLAIMED BY THE ASSESSEE. IN VIEW OF THE ABOVE DECISION OF THE TRIBUNAL MISS PRAMILA RATHI ARGUED THAT SINCE ON MERIT ISSUE HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE, AO WAS NOT JUSTIFIED IN LEVYING THE PENALTY UNDER SECTION 271(1)(C) OF THE ACT, WHICH WAS DELETED BY THE CIT(A). 3. WE HAVE CONSIDERED THE RIVAL CONTENTIO NS AND FOUND THAT IN A.Y. 2011 - 12 REVENUE IS AGGRIEVED BY THE ACTION OF THE CIT(A) FOR DELETING THE PENALTY IMPOSED UNDER SECTION 271(1)(C) OF THE ACT WITH RESPECT TO THE CHANGE OF HEAD OF INCOME. AS IN THE QUANTUM APPEAL THE TRIBUNAL HAS ALREADY REVERSED THE ORDER OF THE AO ACCEPTING ASSESSEES CONTENTION WITH REGARD TO THE NATURE OF INCOME BEING INCOME FROM BUSINESS AND PROFESSION, ITA NO. 789 /MUM/ 2017 M/S. BHARAT TILES AND MARBLE PVT. LTD. 3 THE PENALTY IMPOSED HAS NO LEGS TO STAND. WE ALSO FOUND THAT EVEN ON MERITS THE CIT(A) HAS DELETED THE PENALTY AFTER HAVING D ETAILED OBSERVATION AS PARA 5.2, WHICH HAS NOT BEEN CONTROVERTED BY THE LEARNED D.R. BY BRINGING ANY POSITIVE MATERIAL ON RECORD. 4. IN VIEW OF THE ABOVE WE DO NOT FIND ANY REASON TO INTERFERE IN THE ORDER OF THE CIT(A) FOR DELETING PENALTY IMPOSED UNDER SEC TION 271(1)(C) OF THE ACT IN A.Y. 2011 - 12. 5. IN A.Y. 2013 - 14 REVENUE IS AGGRIEVED BY THE ACTION OF THE CIT(A) FOR TREATING THE RENTAL INCOME AS INCOME FROM BUSINESS. AS MENTIONED ABOVE, THE ISSUE IS COVERED BY THE ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR A.Y. 2011 - 12 DATED 14.02.2018 , RELEVANT PARA NO. 12 HAS ALREADY BEEN REPRODUCED ABOVE. AS THE FACTS AND CIRCUMSTANCES DURING THE YEAR UNDER CONSIDERATION ARE SAME, RESPECTFULLY FOLLOWING THE ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE, WE DO NOT FIND ANY REASON TO INTERFERE IN THE ORDER OF CIT(A) FOR TREATING RENTAL INCOME AS INCOME FROM BUSINESS AND PROFESSION. 6. IN THE RESULT, BOTH THE APPEAL S FILED BY THE REVENUE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 30 TH JULY, 2018 . SD/ - SD/ - ( AMARJIT SINGH ) ( R.C. SHARMA ) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED: 30 TH JULY, 2018 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) - 8 , MUMBAI 4. THE PR. CIT - 3 , MUMBAI 5. THE DR, B BENCH, ITAT, MUMBAI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI N.P.