Sree Seshachala Builders Ltd., Bangalore V. DCIT, Bangalore

ITA 974/BANG/2016

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 8472 (ITAT-BANGALORE)
• Duration Of Justice: 10 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-03-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 21-02-2017
• Assessment Year: 2011-2012
• Appeal Filed On: 12-05-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: M K BIJU
• Assessee Lawyers: V SRINIVASAN
• Keywords: Business income; Business expenditure
• Section: 12

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH : BANGALORE BEFORE SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER 1. ITA NO. 974/BANG/2016 ASSESSMENT YEAR : 2011-12 2. ITA NO. 975/BANG/2016 ASSESSMENT YEAR : 2012-13 M/S. SREE SESHACHALA BUILDERS LTD., : APPELLANT #102/5, 7 TH MAIN, 3 RD BLOCK, JAYANAGAR, BENGALURU-560011. PAN : AACCS3831L VS. 1. DEPUTY COMMISSIONER OF INCOME TAX, : RESPONDE NTS CIRCLE-12(3), BENGALURU. 2. DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-6(1)(2), BENGALURU. ASSESSEE BY : SHRI. V. SRINIVASAN, ADVOCATE REVENUE BY : SHRI. M. K. BIJU, JCIT DATE OF HEARING : 21.02.2017 DATE OF PRONOUNCEMENT : 24.03.2017 ITA NO.974, 975/BANG/2016 PAGE 2 OF 8 O R D E R PER SUNIL KUMAR YADAV, JUDICIAL MEMBER THESE APPEALS ARE PREFERRED BY THE ASSESSEE AGAINS T THE ORDER OF CIT(A) ON COMMON GROUNDS. THEREFORE, THESE APPEALS WERE HEARD TOGETHER AND ARE BEING DISPOSED OFF THROUGH THIS CO NSOLIDATED ORDER. 2. FOR THE SAKE OF REFERENCE, WE EXTRACT THE GROUND S RAISED IN APPEAL NO. 974/BANG/2016 AS UNDER: 1. THE ORDERS OF THE AUTHORITIES BELOW IN SO FAR AS THEY ARE AGAINST THE APPELLANT, ARE OPPOSED TO LAW, EQUITY, WEIGHT OF EVIDENCE, PROBABILITIES, FACTS AND CIRCUMSTANCES OF THE CASE. 2. THE LEARNED CIT[A] IS NOT JUSTIFIED IN UPHOLDING THE ASSESSMENT OF THE BUSINESS RECEIPTS OF RS.46,20,413/- FROM ALL IED SERVICES/ ACTIVITIES PERFORMED BY THE APPELLANT AS PART OF THE INCOME AS SESSABLE UNDER THE HEAD 'INCOME FROM HOUSE PROPERTY' INSTEAD OF ASSESS ING THE SAID RECEIPTS UNDER THE HEAD 'PROFITS AND GAINS FROM BUS INESS' AS RETURNED BY THE APPELLANT UNDER THE FACTS AND IN THE CIRCUMS TANCES OF THE APPELLANT'S CASE. 2.1 THE LEARNED CIT[A] FAILED TO APPRECIATE THAT TH E RECEIPTS COLLECTED FROM THE TENANTS OF THE APPELLANT FOR THE MAINTENAN CE OF COMMON ITA NO.974, 975/BANG/2016 PAGE 3 OF 8 AREAS AND RENDERING COMMON UTILITY SERVICES, PROVIS ION OF AIR CONDITIONING AND UNINTERRUPTED POWER [DG] SERVICES AND RENDERING PARKING FACILITIES IN AND AROUND THE COMPLEX WERE C ONDUCTED IN AN ORGANIZED MANNER WITH EMPLOYED WORKMEN, AND THEREFO RE THE SAME WERE CORRECTLY REGARDED AS ASSESSABLE UNDER THE HEA D 'BUSINESS' AND THE CORRESPONDING BUSINESS EXPENSES INCURRED BY THE APPELLANT WAS ALLOWABLE UNDER THE FACTS AND IN THE CIRCUMSTANCES OF THE APPELLANT'S CASE. 3. WITHOUT PREJUDICE TO THE RIGHT TO SEEK WAIVER WI TH THE HON'BLE CCIT/DG, THE APPELLANT DENIES ITSELF LIABLE TO BE C HARGED TO INTEREST U/S 234-B AND 234-C OF THE ACT, WHICH UNDER THE FAC TS AND IN THE CIRCUMSTANCES OF THE APPELLANT'S CASE AND THE LEVY DESERVES TO BE CANCELLED. 4. FOR THE ABOVE AND OTHER GROUNDS THAT MAY BE URGE D AT THE TIME OF HEARING OF THE APPEAL, YOUR APPELLANT HUMBLY PRAYS THAT THE APPEAL MAY BE ALLOWED AND JUSTICE RENDERED AND THE APPELLA NT MAY BE AWARDED COSTS IN PROSECUTING THE APPEAL AND ALSO OR DER FOR THE REFUND OF THE INSTITUTION FEES AS PART OF THE COSTS. 3. THOUGH VARIOUS GROUNDS ARE RAISED IN THESE APPEA LS, BUT THE SOLE GROUND INVOLVED, RELATE TO THE NATURE OF RECEIPT RE CEIVED ON LEASING OF THE IMMOVABLE PROPERTY. 4. THE FACTS AND BRIEFS BORNE OUT FROM THE RECORD A RE THAT THE ASSESSEE HAS RECEIVED THE RENTAL INCOME ON LEASING OUT HIS I MMOVABLE PROPERTY AND ITA NO.974, 975/BANG/2016 PAGE 4 OF 8 CLAIMED IT TO BE THE INCOME AS BUSINESS INCOME, BUT THE ASSESSING OFFICER HAS ASSESSED IT AS AN INCOME FROM HOUSE PROPERTY. THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A) WITH THE SUBM ISSIONS THAT BESIDE LETTING OUT THE PROPERTY, THE ASSESSEE HAS ALSO PRO VIDED CERTAIN SERVICES TO ITS TENANTS. THEREFORE, THE CONSIDERATION RECEIVED ON ACCOUNT OF SERVICES RENDERED TO ITS TENANTS SHOULD BE TREATED AS BUSINE SS INCOME. RELYING UPON THE JUDGMENT OF THE APEX COURT IN THE CASE OF SHAMBU INVESTMENT PRIVATE LIMITED (2003) 263 ITR 143 (SC), THE CIT(A) HAS DISALLOWED THE CLAIM OF THE ASSESSEE AND CONFIRMED THE ORDER OF TH E AO. 5. NOW THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNA L AND PLACED RELIANCE UPON THE JUDGMENT OF THE JURISDICTIONAL HI GH COURT IN THE CASE OF CIT VS. S. MOHAN KUMAR (HUF) IN INCOME TAX APPEAL NO. 325/2009 DATED 7.2.2011 . RELIANCE WAS ALSO PLACED UPON THE JUDGMENT OF MA DRAS HIGH COURT IN THE CASE OF TARAPORE AND CO. VS. CIT 259 ITR 389, IN SUPPORT OF HIS CONTENTION THAT WHEREVER IT IS POSSIBLE TO WORK OUT RECEIPT RECEIVED ON ACCOUNT OF SERVICES RENDERED, IT WOULD BE BUSINESS INCOME. DURING THE COURSE OF HEARING, THE LEARNED COUNSEL FOR THE ASSE SSEE HAS ALSO INVITED OUR ATTENTION TO THE LEAVE AND LICENSE AGREEMENT AN D THE AGREEMENT EXECUTED FOR HIRE OF AMENITIES IN SUPPORT OF HIS CO NTENTION THAT THE AMOUNT OF CONSIDERATION RECEIVED FROM ITS TENANTS WOULD B E ITS BUSINESS INCOME. 6. THE LEARNED DR ON THE OTHER HAND SUBMITTED THAT FROM THE LEAVE AND LICENSE AGREEMENT, IT IS NOT CLEAR AS TO WHAT C ONSIDERATION WAS ITA NO.974, 975/BANG/2016 PAGE 5 OF 8 RECEIVED ON ACCOUNT OF PROVIDING CERTAIN AMENITIES, ENVISAGED IN PARA 26 OF THE AGREEMENT. THEREFORE, THE ENTIRE CONSIDERATION RECEIVED BY THE ASSESSEE SHOULD BE TREATED AS INCOME FROM HOUSE PRO PERTY, AS LAID DOWN IN THE JUDGMENT OF JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. S. MOHAN KUMAR (SUPRA). 7. HAVING CAREFULLY EXAMINED THE ORDER OF LOWER AUT HORITIES, IN THE LIGHT OF JUDGMENT REFERRED TO BY THE PARTIES, WE FIND THA T THE ASSESSEE HAS LET OUT THE PROPERTY TO ITS TENANT M/S. ICICI PRUDENTIAL L IFE INSURANCE CO. LTD.,. COPY OF LEAVE AND LICENSE AGREEMENT IS PLACED ON RE CORD AT PAGE NOS. 54 TO 63. BESIDES THE LEAVE AND LICENSE AGREEMENT, TH E ASSESSEE HAS ALSO FILED THE AGREEMENT FOR HIRE OF AMENITIES WHICH IS ALSO AVAILABLE ON RECORD AT PAGE NOS. 65 TO 71 OF THE COMPILATION. 8. FROM CAREFUL PERUSAL OF THE LEAVE AND LICENSE AG REEMENT, WE FIND THAT THE PROPERTY WAS LET OUT TO THE LESSEE AND CER TAIN AMENITIES AS MENTIONED IN PARA 26 WERE ALSO PROVIDED, BUT NOTHIN G HAS BEEN STIPULATED IN THE AGREEMENT AS TO WHAT AMOUNT TO BE PAID FOR AVAILING THE AMENITIES BY THE LESSEE TO THE LESSOR. FROM PERUSAL OF THE A GREEMENT FOR HIRE OF AMENITIES, WE FIND THIS AGREEMENT WAS EXECUTED ONLY TO PROVIDE THE ELECTRICITY FACILITIES THROUGH GENERATOR FOR WHICH THE LESSEE IS REQUIRED TO PAY CERTAIN AMOUNT TO THE LESSOR. BESIDES, NO OTHER ST IPULATION HAS BEEN MADE IN THE AGREEMENT. WE HAVE ALSO CAREFULLY EXAMINED THE JUDGMENT OF JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. S. MOHAN KUMAR (HUF) ITA NO.974, 975/BANG/2016 PAGE 6 OF 8 (SUPRA). WE FIND THAT IN THIS JUDGMENT, THE LORDSH IP HAS CATEGORICALLY HELD THAT WHEREVER THE INCOME FROM PROPERTIES ARE SEPARA BLE FROM LETTING OUT THE OTHER AMENITIES, THE INCOME CAN BE DIVIDED IN 2 CAT EGORIES VIZ., INCOME FROM HOUSE PROPERTY AND INCOME FROM BUSINESS BUT WH EREVER THE INCOME IS INSEPARABLE FROM LETTING OUT THE PROPERTY AND OTHER AMENITIES, THE ENTIRE INCOME WOULD BE CHARGEABLE UNDER THE HEAD INCOME F ROM HOUSE PROPERTY. FOR THE SAKE OF REFERENCE, WE EXTRACT THE RELEVANT PORTION OF THE JUDGMENT AS UNDER: ANSWERING THE SAID QUESTION, THEY HELD THE RENT FR OM THE BUILDING WILL BE COMPUTED SEPARATELY FROM THE INCOM E FROM THE FURNITURE AND FIXTURES AND IN THE CASE OF RENT FROM THE BUILDING THE APPELLANT- WILL BE ENTITLED TO THE ALLOWANCES M ENTIONED IN SUB- SECTION (4) OF SECTION 12 AND IN THE CASE OF INCOME FROM THE FURNITURE AND FIXTURES, TO THOSE MENTIONED IN SUB-S ECTION (3), AND THAT NO PART OF THE INCOME CAN BE ASSESSED UNDER SE CTION 9 OR UNDER SECTION 10. THEREFORE, IN SUBSTANCE IT WAS HELD THE INCOME FALLS UNDER THE HEADING OF INCOME FROM OTHER SOURCE S AND NOT INCOME FROM BUSINESS. THEREFORE, THE SUPREME COURT DID NOT GO INTO THE QUESTION WHETHER INCOME FROM THE FURNITURE AND FIXTURES WOULD FALL UNDER THE INCOME FROM HOUSE PROPERTY AT ALL. AS SUCH, THE SAID JUDGMENT HAS NO APPLICATION TO THE FACTS OF TH IS CASE. 16. IN THIS CASE THE QUESTION FOR CONSIDERATION IS WHETHER THE INCOME FROM FURNITURE AND FIXTURES IS TO BE PUT UNDER THE HEAD INCOME FROM HOUSE PROPERTY'. AS BOTH THE LEASES ARE CONTAINED IN VERY SAME DOCUMENT THE SAID JUDGMENTS ARE OF VERY LITTLE ASSISTANCE IN DECIDING THE CASE ON HAND. HOWEVER, THE MADRAS HIGH COURT IN THE CASE OF TARAP ORE AND COMPANY V. COMMISSIONER OF INCOME TAX REPORTED IN (2003) 259 I.T.R. 389 DEALING WITH AN IDENTICAL ISSUE HELD AS UNDER:- THAT THE ACTUAL RENT RECEIVED BY THE OWNER (ASSESSEE) WOULD CONSTITUTE THE BASIS FOR DETERMINI NG THE ANNUAL VALUE AND IT WAS THE VALUE WHICH WOULD HAVE TO FORM THE BASIS FOR DETERMINING THE INCOME F ROM HOUSE PROPERTY AND FOR ALLOWING THE DEDUCTION FROM INCOME FROM HOUSE PROPERTY TO THE EXTENT PERMITTED UNDER THE OTHER PROVISIONS OF THE INCOME-TAX ACT. IN MAKING SUCH COMPUTATION, THERE WAS NO PROVISION TO ADD ITA NO.974, 975/BANG/2016 PAGE 7 OF 8 OTHER AMOUNTS RECEIVED BY THE OWNER OF THE BUILDING AS REPRESENTING THE VALUE OF THE SERVICE CHARGES RENDE RED BY HIM TO HIS TENANTS AS INCOME FROM HOUSE PROPERTY. HENCE, THE TRIBUNAL WAS RIGHT IN HOLDING THAT THE RECEIPTS FROM SERVICE CHARGES WERE LIABLE TO BE ASSESSED AS INCOME FROM OTHER SOURCES AND NOT INCOME FROM HOUSE PROPERTY. 17. THEREFORE, FROM THE AFORESAID STATUTORY PROVISI ONS IT IS CLEAR THAT IF THE INCOME IS TO BE CHARGEABLE UND ER THE HEADING OF 'INCOME FROM HOUSE PROPERTY' IT SHOULD B E THE INCOME WHICH REPRESENTS THE ANNUAL VALUE OF PROPERT Y CONSISTING OF ANY BUILDING OR LANDS APPURTENANT THE RETO OF WHICH THE ASSESSEE IS THE OWNER AND ONLY SUCH INCOM E SHALL BE CHARGEABLE TO INCOME TAX UNDER THE HEAD 'INCOME FROM HOUSE PROPERTY.' WHEN SECTION 56(2)(III) MAKES IT E XPLICITLY CLEAR THAT THE INCOME FROM MACHINERY OR FIXTURE BEL ONGING TO THE ASSESSEE AND LET OUT ON HIRE, IF IS NOT CHARGEA BLE UNDER THE HEADING OF 'PROFITS AND GAINS OF BUSINESS OR PROFES SION', THEN IT- HAS TO BE CHARGED TO INCOME TAX UNDER THE HEADING ' INCOME FROM OTHER SOURCES.' IF THE AFORESAID INCOME IS INS EPARABLE FROM LETTING OUT THE SAID PLANT MACHINERY OTHER THA N THE INCOME OF SUCH LETTING OUT CANNOT IF IT IS NOT CHAR GEABLE TO INCOME TAX UNDER 'PROFITS AND GAINS OR PROFESSION', IS CHARGEABLE UNDER THE HEAD 'INCOME FROM OTHER SOURCE S. THEREFORE UNDER THESE CIRCUMSTANCES, THE INCOME DER IVED FROM LETTING OUT THE FURNITURE AND FIXTURE IS NOT C HARGEABLE UNDER THE HEADING OF 'INCOME FROM HOUSE PROPERTY. 9. IN THE LIGHT OF THE AFORESAID JUDGMENT, WE ARE O F THE VIEW THAT IN THE LEAVE AND LICENSE AGREEMENT, THE TOTAL CONSIDERATIO N HAS BEEN STIPULATED FOR LETTING OUT THE PROPERTIES AND WHATEVER AMENITI ES MENTIONED IN PARA 26 OF THIS AGREEMENT, NOTHING CAN BE WORKED OUT AS TO HOW MUCH MONEY WAS TO BE RECEIVED FOR PROVIDING THESE FACILITIES. THE REFORE, WHATEVER CONSIDERATION WAS RECEIVED ON ACCOUNT OF LEASE AND LICENSE AGREEMENT, THE ENTIRE RECEIPT CAN ONLY BE TREATED AS INCOME FR OM HOUSE PROPERTY AND NOT AS INCOME FROM BUSINESS. SO FAR AS THE INCOME RECEIVED BY VIRTUE OF ITA NO.974, 975/BANG/2016 PAGE 8 OF 8 ANOTHER AGREEMENT I.E., AGREEMENT FOR HIRE OF AMENI TIES, IT CAN ONLY BE CALLED TO BE BUSINESS INCOME. THEREFORE, WE ARE PA RTLY MODIFYING THE ORDER OF THE CIT(A) AND DIRECT THE ASSESSING OFFICER TO R ECOMPUTE THE INCOME FROM HOUSE PROPERTY AS WELL AS THE BUSINESS INCOME OF THE ASSESSEE FOR PROVIDING CERTAIN AMENITIES IN TERMS INDICATED ABOV E. 10. IN THE RESULT, BOTH THE APPEALS OF THE ASSESSEE ARE PARTLY ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON THIS 24 TH DAY OF MARCH, 2017. SD/- SD/- (INTURI RAMA RAO) (SUNIL KUMAR YA DAV) ACCOUNTANT MEMBER JUDIC IAL MEMBER BANGALORE. DATED: 24 TH MARCH, 2017 . /NS/ COPY TO: 1. APPELLANTS 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR, ITAT, BANGALORE.