ATUR INDIA P LTD, MUMBAI V. ACIT CIR 6(1), MUMBAI

ITA 865/MUM/2013

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 3318 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 7 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-09-2016
• Appeal Filed By: Assessee
• Bench Allotted: A
• Next Hearing Date: 11-01-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 01-02-2013
• Court: TRIBUNAL
• Department Lawyers: A B KOLI
• Section: 14A; 27

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, MUMBAI BEFORE SHRI B.R. BASKARAN (AM) & SHRI SANJAY GARG (JM) I.T.A. NO. 865 /MUM/ 20 1 3 (ASSESSMENT YEAR 200 8 - 0 9 ) I.T.A. NO. 2476/MUM/2013 (ASSESSMENT YEAR 2009 - 10) I.T.A. NO. 6403/MUM/2013 (ASSESSMENT YEA R 2010 - 11) ATUR INDIA PRIVATE LIMITED ATUR HOUSE 3 RD FLOOR WORLI NAKA MUMBAI - 400 018. VS. ACIT, CIRCLE 6(1) AAYAKAR BHAVAN M.K. ROAD MUMBAI - 400 020. ( APPELLANT ) ( RESPONDENT ) PAN NO . AAACA3508L ASSESSEE BY SHRI ANIL SATHE DEPARTMENT BY SHRI A. B. KOLI DATE OF HEARING 23 .8 . 201 6 DATE OF PRONOUNCEMENT 2.9 . 201 6 O R D E R PER B.R. BASKARAN (AM) : - ALL THE THREE APPEALS FILED BY THE ASSESSEE ARE DIRECTED AGAINST THE ORDERS PASSED BY LEARNED CIT(A) - 14, MUMBAI AND THEY RELATE TO A.YS. 20 08 - 09 TO 2010 - 11. 2. SINCE COMMON ISSUES ARE URGED IN THESE APPEALS , THE Y WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS COMMON ORDER, FOR THE SAKE OF CONVENIENCE. 3. THE ASSESSEE IS CARRYING BUSINESS OF CONSTRUCTION OF BUILDING, DAMS, POWER HOUS E ETC. THE C OMMON ISSUE URGED IN THESE APPEALS RELATES TO DISALLOWANCE MADE U/S. 14A OF THE ACT IN ALL THE THREE YEARS . ATUR INDIA PVT. LTD. 2 4. LEARNED COUNSEL APPEARING FOR THE ASSESSEE SUBMITTED THAT THE ASSESSING OFFICER HAS MADE DISALLOWANCE U/S 14A R.W. R. 8D(2)(II) RELA TING TO INDIRECT INTEREST EX PENSES AND ALSO U/R. 8D(2)(III) RELATING TO ADMINISTRATIVE EXPENSES. LEARNED COUNSEL SUBMITTED THAT THE ASSESSEE DOES NOT HAVE GRIEVANCE WITH REGARD TO DISALLOWANCE MADE U/R. 8D (2)(III) OF THE I.T. RULES. WITH REGARD DISALLOWAN CE OF INDIRECT INTEREST EXPENDITURE MADE U/R. 8D(2)(II) OF THE I.T. RULES , THE LEARNED AR SUBMITTED THAT THE INTEREST FREE FUNDS AVAILABLE WITH THE ASSESSEE ARE IN FAR IN EXCESS OF INVESTMENTS MADE AND HENCE AS PER THE DECISION RENDERED BY HON'BLE JURISDIC TIONAL HIGH COURT IN THE CASE OF CIT VS. HDFC BANK LTD. (366 ITR 505), NO DISALLOWANCE U/R. 8D(2)(II) IS CALLED FOR. IN THIS CONNECTION, HE ALSO DREW OUR ATTENTION TO THE COPIES OF THE BALANCE - SHEETS OF THE THREE YEARS UNDER CONSIDERATION. 5. WE HAV E HEARD LEARNED DEPARTMENTAL REPRESENTATIVE AND PERUSED THE RECORD. WE FIND MERIT IN THE CONTENTION S OF THE ASSESSEE. FOR THE SAKE OF CONVENIENCE, WE EXTRACT BELOW DETAILS OF OWN FUNDS AND INVESTMENTS AVAILABLE WITH THE ASSESSEE IN EACH OF THE THREE YEARS AS CULLED OUT FROM THE BALANCE SHEET FILED BY THE ASSESSEE . RS. I N LAKHS ASSESSMENT YEAR OWN FUNDS INVESTMENT 2008 - 09 (31.3.08) 1577 547 2009 - 10 1667 516 2010 - 11 1750 390 IT CAN BE NOTICED THAT OWN FUNDS AVAILABLE WITH THE ASSESSEE IN EACH OF THE THREE YEARS IS MORE THAN INVESTMENT MADE AND HENCE DISALLOWANCE U/R. 8D(2)(II) OF THE I.T. RULES IS NOT CALLED FOR IN VIEW OF T HE DECISION RENDERED BY HON'BLE BOMBAY HIGH COURT IN THE CASE OF HDFC BANK LTD. (SUPRA). ACCORDINGLY, WE SET ASIDE T HE ORDER OF LEARNED CIT(A) PASSED ON THIS ISSUE AND DIRECT THE ASSESSING OFFICER TO DELETE THE DISALLOWANCE MADE U/R. 8D(2)(II) OF THE I.T. RULES. ATUR INDIA PVT. LTD. 3 6. THE NEXT COMMON GROUND URGED IN AY 2009 - 10 AND 2010 - 11 RELATES TO THE ASSESSMENT OF SERVICE CHARGES RE CEIVED FROM THE TENANTS AS INCOME FROM OTHER SOURCES. THE ASSESSEE HAS LET OUT A PROPERTY AND COLLECTED RENT BY WAY OF TWO COMPONENTS, VIZ., RENT AND SERVICE CHARGES. THE ASSESSEE OFFERED BOTH THE RECEIPTS AS INCOME UNDER THE HEAD INCOME FROM HOUSE PROPE RTY. HOWEVER, THE AO ASSESSED THE SERVICES CHARGES AS INCOME UNDER THE HEAD INCOME FROM OTHER SOURCES AND THE SAME WAS ALSO UPHELD BY THE LD CIT(A). 7. THE LD A.R SUBMITTED THAT THE ASSESSEE HAS SPLIT T HE RENTAL RECEIPTS INTO TWO COMPONENTS TO SUIT CE RTAIN PURPOSES, BUT IT HAS NOT PROVIDED ANY SPECI ALISED SERVICES TO THE TENANTS. HE SUBMITTED THAT THE AO HIMSELF HAS NOTED DOWN THE NATURE OF SERVICES AS PROVIDING MAINTENANCE OF SURROUNDING PRECINTS OF THE RENTED PREMISES, SUPERVISING POWER AND WATER S UPPLY, PROVISION OF CAR PARKING, DISPOSAL OF GARBAGE ETC. THE LD A.R SUBMITTED THAT THE SERVICES DESCRIBED ABOVE ARE OF ROUTINE NATURE, WHICH IS CLOSELY CONNECTED TO RENTING OF PROPERTY. ACCORDINGLY HE CONTENDED THAT THE LD CIT(A) WAS NOT JUSTIFIED IN CO NFIRMING THE ORDER PASSED BY THE AO ON THIS ISSUE. 8. ON THE CONTRARY, THE LD D.R SUBMITTED THAT THE ASSESSEE HAS COLLECTED SEPARATELY THE SERVICE CHARGES AND HENCE IT IS NOT RELATED TO THE RENTING OF PREMISES. ACCORDINGLY HE SUBMITTED THAT THE AO HAS RIGHTLY ASSESSED THE SAME AS INCOME FROM OTHER SOURCES. 9. WE HEARD THE PARTIES ON THIS ISSUE AND PERUSED THE RECORD. ON A CAREFUL PERUSAL OF THE NATURE OF SERVICES DESCRIBED IN THE RENTAL AGREEMENT, WE ARE OF THE VIEW THAT THERE IS MERIT IN THE CON TENTIONS OF THE ASSESSEE. THE MAINTAINING THE SURROUNDINGS AND PRECINCTS, PROVIDING OF CAR PARKING, MAINTAINING ELECTRICITY AND WATER SUPPLY LINES ARE, IN OUR VIEW, CONNECTED WITH NORMAL RENTING OF PROPERTIES AND HENCE THEY CANNOT BE CONSIDERED TO BE SPEC IALIZED SERVICES NECESSITATING THE ASSESSMENT OF CHARGES, IF ANY, COLLECTED FOR THAT PURPOSE AS INCOME UNDER THE HEAD INCOME FROM OTHER SOURCES. ATUR INDIA PVT. LTD. 4 THOUGH THE ASSESSEE HAS SPLIT THE RENTAL RECEIPTS INTO RENT AND SERVICE CHARGES, WE ARE OF THE VIEW THAT THE S AME MAY BE IGNORED IN THE FACTS AND CIRCUMSTANCES AVAILABLE IN INSTANT CASE , SINCE THE SERVICE CHARGES ARE NOT RELATED TO ANY KIND OF SPECIALIZED SERVICES . ACCORDINGLY, WE SET ASIDE THE ORDER PASSED BY LD CIT(A) ON THIS ISSUE IN BOTH THE YEARS CITED ABOVE AND DIRECT THE AO TO TREAT THE SERVICE CHARGES ALSO AS PART OF RENTAL INCOME. 10. ONE MORE ISSUE THAT IS URGED IN AY 2009 - 10 RELATES TO THE ADDITION OF NOTIONAL RENT OF RS.10,02,400/ - . DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO ASKED THE A SSESSEE TO RECONCILE THE RENTAL INCOME WITH THE RENTAL AGREEMENTS. THE AO NOTICED THAT THERE WAS A DIFFERENCE OF RS.13,75,630/ - . AFTER FURTHER RECONCILIATION, THERE WAS STILL A DIFFERENCE OF RS.10,02,400/ - IN THE CASE OF RENTAL AGREEMENT ENTERED WITH M/S ATHMA PRODUCTIONS P LTD. THE AO ASSESSED THE SAME AS INCOME OF THE ASSESSEE. BEFORE THE LD CIT(A), THE ASSESSEE EXPLAINED THAT ASSESSEE HAS TERMINATED THE LEASE WITH M/S ATHMA PRODUCTIONS P LTD ON 29 - 07 - 2008 AND THE SAID PARTY HAS ALSO VACATED THE PREMI SES IN JULY 2008 ITSELF. THE ASSESSEE FURNISHED A COPY OF LETTER DATED 08 - 09 - 2008 WRITTEN BY IT TO M/S ATHMA PRODUCTIONS P LTD ACKNOWLEDGING PEACEFUL POSSESSION OF THE PROPERTY. THE ASSESSEE SUBMITTED THAT THE VERY SAME PREMISE WAS LET OUT TO M/S MERIDHU N ENTERTAINMENT P LTD UNDER AN AGREEMENT DATED 28 - 06 - 2009 SUBSEQUENTLY. IT WAS FURTHER SUBMITTED THAT THE SECURITY DEPOSIT OF RS.4,50,000/ - COLLECTED FROM M/S ATHMA PRODUCTIONS P LTD WAS CREDITED AS INCOME OF THE ASSESSEE IN JUNE 2009, AFTER SETTLEMENT OF DISPUTE. 11. THE LD CIT(A) TOOK THE VIEW THAT THE RENTAL INCOME FROM IMMOVABLE PROPERTY IS ASSESSED UNDER THE INCOME FROM HOUSE PROPERTY ON NOTIONAL BASIS. ACCORDINGLY HE TOOK THE VIEW THAT THE RENTAL INCOME PERTAINING TO THE PERIOD IN WHICH THE PR EMISE REMAINED VACANT SHOULD ALSO BE ASSESSED ON NOTI ONAL BASIS. ACCORDINGLY HE UPHE LD THE ORDER PASSED BY THE AO. ATUR INDIA PVT. LTD. 5 12. THE LD A.R SUBMITTED THAT THE PROVISIONS OF SEC. 23(1)(C) SHALL APPLY TO THE PREMISES LET OUT TO M/S ATHMA PRODUCTIONS PRIVATE LIMIT ED, SINCE THE VACANCY HAS ARISEN IN A LET OUT PROPERTY. HE SUBMITTED THAT AS PER THE PROVISIONS OF SEC. 23(1)(C) OF THE ACT, THE ACTUAL RENT RECEIVED SHOULD BE TAKEN AS ANNUAL LETTING VALUE. ACCORDINGLY HE SUBMITTED THAT THE VIEW TAKEN BY LD CIT(A) WAS N OT IN ACCORDANCE WITH THE PROVISIONS OF THE ACT. 13. ON THE CONTRARY, THE LD D.R SUPPORTED THE ORDER PASSED BY LD CIT(A) ON THIS ISSUE. 14. WE HAVE HEARD RIVAL CONTENTIONS AND PERUSED THE RECORD. THE INCOME UNDER THE HEAD INCOME FROM HOUSE PROPE RTY IS ASSESSED AS PER SECTION 23 TO 27 OF THE ACT. SEC. 23 PROVIDES FOR THE MANNER OF DETERMINATION OF ANNUAL VALUE OF A PROPERTY . AS SUBMITTED BY THE ASSESSEE, THE PROVISIONS OF SEC. 23(1)(C) GOVERNS THE LET OUT PROPERTIES THAT REMAINED VACANT. THE S AID PROVISION READS AS UNDER: - WHERE THE PROPERTY OR ANY PART OF THE PROPERTY IS LET AND WAS VACANT DURING THE WHOLE OR ANY PART OF THE PREVIOUS YEAR AND OWING TO SUCH VACANCY THE ACTUAL RENT RECEIVED OR RECEIVABLE BY THE OWNER IN RESPECT THEREOF IS LESS THAN THE SUM REFERRED TO IN CLAUSE (A), THE AMOUNT SO RECEIVED OR RECEIVABLE. UNDER SEC. 23(1)(A), THE ANNUAL VALUE OF THE PROPERTY SHALL BE DEEMED TO BE THE SUM FOR WHICH THE PROPERTY MIGHT REASONABLY BE EXPECTED TO LET FROM YEAR TO YEAR. THUS, IT IS SEEN THAT THE PROVISIONS OF SEC. 23(1)(C) PROVIDES FOR ADOPTION OF ACTUAL RENT RECEIVED IN THE CASE OF A PROPERTY WHICH IS LET AND WHICH REMAINED VACANT DURING THE WHOLE OR ANY PART OF THE YEAR. IT CAN BE SEEN THAT THE PROVISIONS OF SEC. 23(1)(C) DO NO T PROVIDE FOR ASSESSMENT OF ANY NOTIONAL RENT. 15. IN THE INSTANT CASE, THE IMPUGNED PROPERTY WAS LET AND THE TERMINATION NOTICE WAS GIVEN IN JULY 2008 AND IT WAS STATED THAT THE TENANT HAS VACATED THE PROPERTY IN THAT MONTH ITSELF. THE LD A.R ALSO M ADE A STATEMENT AT BAR THAT THE ASSESSEE HAS OFFERED THE RENT PERTAINING TO THE PERIOD FROM APRIL, 2008 ATUR INDIA PVT. LTD. 6 TO JULY 2008. IT IS NOT THE CASE OF THE AO THAT THE ASSESSEE HAS LET OUT THIS PROPERTY DURING THIS YEAR ITSELF, AFTER IT WAS VACATED BY M/S ATHMA PRODU CTIONS P LTD. THE ASSESSEE HAS STATED THAT THE PROPERTY WAS ONLY LET OUT IN JUNE 2009 AND THE SAME HAS NOT BEEN PROVED TO BE WRONG. 16. IN VIEW OF THE ABOVE, WE ARE UNABLE TO AGREE WITH THE VIEW EXPRESSED BY LD CIT(A) ON THIS ISSUE. ACCORDINGLY WE SET ASIDE THE ORDER PASSED BY LD CIT(A) ON THIS ISSUE AND DIRECT THE AO TO DELETE THE ASSESSMENT OF RS.10,02,400/ - MADE ON NOTIONAL BASIS. 17. IN THE RESULT, ALL THE APPEALS FILED BY THE ASSESSEE ARE TREATED AS ALLOWED. ORDER HAS BE EN PRONOUNCED IN THE COURT ON 2.9 .2016 SD/ - SD/ - (SANJAY GARG ) (B.R.BASKARAN ) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED : 2 / 9 / 20 1 6 COPY OF THE ORDER FORWARD ED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. BY ORDER, //TRUE COPY// ( DY./ASSTT. REGISTRAR) ITAT, MUMBAI PS