ACIT 6(3), MUMBAI V. MGEE MARKETING SERVICES P.LTD, MUMBAI

ITA 8807/MUM/2010

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 1845 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 1 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-01-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2002-2003
• Appeal Filed On: 16-12-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Reopening of assessment; Business income
• Section: 143(3); 142(1); 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL 'B' BENCH, MUMBAI BEFORE SHRI D. MANMOHAN, VICE PRESIDENT AND SHRI SANJAY ARORA, ACCOUNTANT MEMBER ITA NO. 8807 & 8808/MUM/2010 (ASSESSMENT YEARS: 2002-03 & 2004-05) ACIT, CIRCLE 6(3) M/S. MGEE MARKETING SERVICES P. L TD. ROOM NO. 522, 5TH FLOOR B-17/18, WADALA UDYOG BHAVA N AAYAKAR BHAVAN, M.K. ROAD VS. 8, NAIGAUM X ROAD, WADALA MUMBAI 400020 MUMBAI 400031 PAN - AAACM 9726 C APPELLANT RESPONDENT APPELLANT BY: SHRI MOHIT JAIN RESPONDENT BY: NONE DATE OF HEARING: 30.01.2013 DATE OF PRONOUNCEMENT: 30.01.2013 O R D E R PER D. MANMOHAN, V.P. THESE TWO APPEALS ARE FILED AT THE INSTANCE OF THE REVENUE AND THEY ARE DIRECTED AGAINST THE ORDERS DATED 24.09.2010 PASSED BY THE CIT(A)-12, MUMBAI. THE ISSUE INVOLVED IN BOTH THE APPEALS BEIN G COMMON WE PROCEED TO DISPOSE OF THESE APPEALS BY A COMBINED ORDER FOR THE SAKE OF CONVENIENCE. 2. AS CAN BE NOTICED FROM THE GROUNDS OF APPEAL, THE A PPELLANT CHALLENGES THE ORDERS PASSED BY THE CIT(A) WITH REG ARD TO TREATMENT OF INCOME EARNED FROM LEASE OF FACTORY PREMISES; WHETH ER IT HAS TO BE TREATED AS BUSINESS INCOME OR INCOME FROM HOUSE PROPERTY IS THE SUBJECT MATTER OF DISPUTE BEFORE US. 3. AS CAN BE NOTICED FROM THE ASSESSMENT ORDERS THE AS SESSEE HAD NO BUSINESS OTHER THAN LETTING OUT OF PREMISES. IN THE YEAR UNDER CONSIDERATION THE ASSESSEE COMPANY RECEIVED RENT ON LETTING OUT O F ITS FACTORY PREMISES AND THE INCOME THEREON WAS OFFERED TO TAX UNDER THE HEA D INCOME FROM HOUSE PROPERTY WHEREAS IN THE OPINION OF THE AO IT DESER VES TO BE TAXED UNDER THE HEAD BUSINESS INCOME. FOR A.Y. 2002-03 AS WELL AS FOR A.Y. 2004-05 RETURN OF INCOME WAS ORIGINALLY PROCESSED ON 28.02. 2003 AND THEREAFTER THE ITA NO. 8807&8808/MUM/2010 M/S. MGEE MARKETING SERVICES P. LTD. 2 AO ISSUED NOTICE UNDER SECTION 148 OF THE ACT ON TH E GROUND THAT BY ASSESSING THE IMPUGNED INCOME UNDER THE HEAD INCOM E FROM HOUSE PROPERTY INCOME CHARGEABLE TO TAX HAS ESCAPED ASSE SSMENT. 4. THE ASSESSEE COMPANY REQUESTED FOR REASONS FOR REOP ENING OF ASSESSMENT, WHICH WAS COMMUNICATED TO THE ASSESSEE. THE ASSESSEE OBJECTED TO THE REOPENING OF ASSESSMENT ON THE GROU ND THAT THERE WAS NO FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FUL LY AND TRULY ALL THE FACTS NECESSARY FOR THE ASSESSMENT, SINCE THE IMPUGNED IN COME WAS ALREADY OFFERED TO TAX UNDER THE HEAD HOUSE PROPERTY INCOM E. THE AO, HOWEVER, REJECTED THE PLEA OF THE ASSESSEE. IN RESPONSE TO T HE NOTICES ISSUED UNDER SECTION 143(2) AND 142(1) OF THE ACT THE AUTHORISED REPRESENTATIVE OF THE ASSESSEE APPEARED BEFORE THE AO AND SUBMITTED THAT THE ASSESSEE COMPANY WAS NOT CARRYING OUT ANY BUSINESS OTHER THAN LETTIN G OUT OF PREMISES. THERE IS NO MATERIAL CHANGE IN THE NATURE OF INCOME, AS C OMPARED TO THE PREVIOUS ASSESSMENT YEARS. THE AO, HOWEVER, OBSERVED THAT TH E ASSESSEE COMPANY WAS FORMED IN 1997 AND SINCE THEN IT HAS NOT DONE A NY ACTIVITY APART FROM GIVING THE FACTORIES ON RENT, WITHOUT USING THE FAC TORIES FOR A SINGLE DAY TO MANUFACTURE ANYTHING AS ITS BUSINESS ACTIVITY. UNDE R THOSE CIRCUMSTANCES IT IS INCOMPREHENSIBLE AS TO WHY A COMPANY WAS FORMED BY PURCHASING THE FACTORY EXCEPT TO CARRY ON BUSINESS OF LETTING OUT THE FACTORY TO OTHER PARTIES UNLESS IT IS TREATED AS A BUSINESS ACTIVITY. IN THE OPINION OF THE AO, LEASING THE FACTORY PREMISES WOULD AMOUNT TO A BUSINESS ACT IVITY AND INCOME THEREON IS ASSESSABLE TO TAX UNDER THE HEAD INCOME FROM BUSINESS. 5. AGGRIEVED, ASSESSEE CONTENDED BEFORE THE LEARNED CI T(A) THAT THE COMPANY WAS NOT FORMED ONLY TO LEASE OUT THE PROPER TY; IT JUST HAPPENED THAT THE COMPANY COULD NOT DO ANY OTHER BUSINESS. S INCE THE COMPANY WAS NOT IN THE BUSINESS OF GIVING FACTORIES ON RENT, TH E INCOME EARNED ON LEASING OUT OF FACTORY IS ASSESSABLE TO TAX UNDER THE HEAD INCOME FROM HOUSE PROPERTY. IT WAS ALSO SUBMITTED THAT IN RESPECT OF A.Y. 2005-06 SIMILAR ISSUE AROSE BEFORE THE FIRST APPELLATE AUTHORITY WHEREIN IT WAS HELD, IN THE LIGHT OF THE DECISION OF THE HON'BLE SUPREME COURT IN THE CA SE OF EAST INDIA HOUSING & LAND DEVELOPMENT TRUST (42 ITR 49), THAT THE IMPU GNED INCOME IS CHARGEABLE TO TAX UNDER THE HEAD INCOME FROM HOUSE PROPERTY. SINCE THE ITA NO. 8807&8808/MUM/2010 M/S. MGEE MARKETING SERVICES P. LTD. 3 FACTS AND CIRCUMSTANCES ARE IDENTICAL IN THE YEARS UNDER CONSIDERATION, IT WAS CONTENDED THAT EVEN FOR THESE YEARS THE IMPUGNE D INCOME IS ASSESSABLE TO TAX UNDER THE HEAD PROPERTY INCOME. 6. THE LEARNED CIT(A) ACCEPTED THE CONTENTION OF THE A SSESSEE BY OBSERVING AS UNDER: - 4. I FIND THAT IN THIS YEAR THERE IS NO CHANGE OF FACTS. THE ASSESSING OFFICER IN FACT HAS REOPENED THE CASE OF THE APPELL ANT BASED ON THE OBSERVATION OF THE ASSESSING OFFICER IN THE ASSESSM ENT ORDER FOR A.Y. 2005-06 PASSED U/S. 143(3) OF THE I.T. ACT. THE ASS ESSING OFFICER I FIND HAS FOLLOWED THE ASSESSMENT ORDER OF THE EARLI ER YEAR TOTALLY. NO INDEPENDENT INQUIRY OR INVESTIGATION HAS BEEN DONE TO HIGHLIGHT ANY NEW FACTS. IN VIEW OF THIS, I FIND THAT I AM IN TOT AL AGREEMENT WITH THE OBSERVATIONS MADE BY THE LD. CITS(A) IN THE ORDERS MENTIONED EARLIER. IT IS THEREFORE HELD THAT INCOME EARNED BY THE APPELLANT FROM LETTING OUT OF PROPERTY HAS BEEN RIGHTLY DECLARED U /S. 22 OF THE I.T. ACT. THE ASSESSING OFFICER IS DIRECTED TO ASSESS TH E SAME AS DECLARED AND ALLOW ENTITLED DEDUCTIONS. 7. AGGRIEVED, REVENUE IS IN APPEAL BEFORE US. NONE APP EARED ON BEHALF OF THE ASSESSEE. IN FACT THE NOTICES ISSUED TO THE ASS ESSEE WERE RETURNED UNSERVED WITH THE POSTAL REMARKS LEFT. 8. WE HAVE HEARD THE LEARNED D.R. IN THIS REGARD. SINC E THE ASSESSEE HAS NOT EARNED ANY OTHER BUSINESS INCOME FROM ITS INCEP TION AND MERELY LET OUT THE FACTORY PREMISES ON RENT THE BENCH CALLED UPON THE LEARNED D.R. TO FURNISH INFORMATION WITH REGARD TO THE STATUS OF TH E ASSESSMENTS MADE IN THE IMMEDIATELY PRECEDING YEARS. IN RESPONSE THERET O THE LEARNED D.R. FILED A COPY OF THE ORDER OF ITAT I BENCH MUMBAI (ITA NO. 2471 & 2472/MUM/2010 DATED 18 TH FEBRUARY, 2011) WHEREIN THE BENCH, WHILE DEALING WITH THE APPEALS FOR ASSESSMENT YEARS 2001- 02 AND 2003-04, OBSERVED IN PARAS 6 & 7 AS UNDER: - 6. WE HAVE CAREFULLY HEARD THE LEARNED D.R. AND PE RUSED THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT THE FACT S ARE NOT IN DISPUTE INASMUCH AS THE ASSESSEE HAS SHOWN THE INCOME FROM LEASING OUT OF FACTORY BUILDING AND LAND APPURTENANT THERETO UNDER THE HEAD INCOME FROM HOUSE PROPERTY WHICH WAS TREATED BY T HE A.O. AS INCOME FROM BUSINESS. HOWEVER, THE LEARNED CIT(A) F OR A.Y. 2005-06 HAS HELD THAT THE RENTAL INCOME IS LIABLE TO BE TAX ED AS INCOME FROM HOUSE PROPERTY AND THE DEDUCTION CLAIMED BY THE ASS ESSEE UNDER SECTION 24(A) AND 24(B) SHALL BE ALLOWED. ON FURTHE R APPEAL BY THE REVENUE BEFORE THE TRIBUNAL IN ACIT VS. M/S. MGEE M ARKETING ITA NO. 8807&8808/MUM/2010 M/S. MGEE MARKETING SERVICES P. LTD. 4 SERVICES P. LTD. FOR A.Y. 2005-06 ORDER DATED 19 TH NOVEMBER 2010 THE TRIBUNAL WHILE FOLLOWING THE DECISION OF THE HON'BL E SUPREME COURT IN THE CAES OF SHAMBHU INVESTMENT PVT. LTD. VS. CIT 26 3 ITR 143 UPHELD THE ORDER OF THE LEARNED CIT(A) THAT THE INCOME OF THE PROPERTY BE ASSESSED UNDER THE HEAD INCOME FROM HOUSE PROPERTY . 7. IN THE ABSENCE OF ANY CONTARY MATERIAL PLACED ON RE CORD BY THE REVENUE, WE RESPECTFULLY FOLLOWNG THE ORDER OF THE TRIBUNAL HOLD THAT UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE THE I NCOME FROM LETTING OUT OF THE BUILDING AND LAND APPURTENANT THERETO SH OULD BE ASSESSED UNDER THE HEAD INCOME FROM HOUSE PROEPRTY AND ACO RDINGLY WE ARE INCLINED TO UPHOLD THE FIDNINGS OF THE LEARNED CIT( A) THAT THE INCOME FROM LETTING OUT OF THE PROPERTY WOULD BE ASESSABLE UNDER THE HEAD HOUSE PROPERTY. THE COMMON GROUNDS TAKEN BY THE R EVENUE FOR BOTH THE ASSESSMENT YEARS 2001-02 AND 2003-04 ARE, THERE FORE, REJECTED. 9. EVEN IN THE YEARS UNDER CONSIDERATION THE LEARNED D .R. WAS NOT ABLE TO FURNISH ANY MATERIAL TO CONTRADICT THE FINDING OF T HE LEARNED CIT(A). HAVING REGARD TO THE CIRCUMSTANCES OF THE CASE, RESPECTFUL LY FOLLOWING THE DECISION OF THE ITAT IN ASSESSEES OWN CASE FOR EARLIER ASSESSM ENT YEARS, WE HOLD THAT THE LEARNED CIT(A) WAS JUSTIFIED IN TREATING THE IMPUGN ED INCOME AS HOUSE PROPERTY INCOME. IN OTHER WORDS, THE ORDERS PASSED BY THE LEARNED CIT(A) IS AFFIRMED AND THE APPEALS FILED BY THE REVENUE ARE D ISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 30 TH JANUARY, 2013. SD/- SD/- (SANJAY ARORA) (D. MANMOHAN) ACCOUNTANT MEMBER VICE PRESIDENT MUMBAI, DATED: 30 TH JANUARY, 2013 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 12, MUMBAI 4. THE CIT 6, MUMBAI CITY 5. THE DR, B BENCH, ITAT, MUMBAI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI N.P.