The ACIT, Circle-2(1), Vijayawada V. Sri Paladugu Rama Krishna, Vijayawada

MA 194/VIZ/2010

• Counselvise Citation: [2010] 123 COUNSELVISE.COM (IT) 5831 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 1 month(s) 10 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 29-11-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 26-11-2010
• Assessment Year: 2004-2005
• Appeal Filed On: 19-10-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: T L PETER
• Keywords: Business income; Rectification of order
• Section: 56(2); 263; 63; 154; 2

Judgement Text

ITA NO.194 OF 10 PALADUGU RAMA KRISHNA VIJAYAWADA PAGE 1 OF 6 IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH, VISAKHAPATNAM BEFORE: SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI BR BASKARAN, ACCOUNTANT MEMBER MA NO.194/VIZAG/2010 (ARISING OUT OF ITA NO.152/VIZAG/2009) ASSESSMENT YEAR: 2004-05 ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-2(1) VIJAYAWADA VS. PALADUGU RAMA KRISHNA, VIJAYAWADA (APPELLANT) (RESPONDENT) PAN NO:ACGPP 0953 P APPELLANT BY: SHRI T.L. PETER, DR RESPONDENT BY: SHRI G.V.N. HARI, CA ORDER PER SHRI B. R. BASKARAN, ACCOUNTANT MEMBER: BY FILING THIS MISCELLANEOUS APPLICATION, THE REVE NUE SEEKS RECTIFICATION OF ORDER DATED 02-7-2010 PASSED BY TH IS BENCH IN THE HANDS OF THE ASSESSEE CITED ABOVE ON THE GROUND THAT THE TRI BUNAL HAS FAILED TO APPLY THE CORRECT LEGAL PROPOSITIONS RELATING TO THE IMPU GNED ISSUE. 2. THE RELEVANT FACTS ARE STATED IN BRIEF. THE IMPU GNED ORDER WAS PASSED BY THE TRIBUNAL AGAINST THE APPEAL FILED BY THE ASSESSEE CHALLENGING THE ORDER OF THE LEARNED CIT PASSED UNDER SECTION 2 63 OF THE ACT FOR THE ASSESSMENT YEAR 2004-05. THE ASSESSEE DERIVED RENT AL INCOME FROM A HOUSE PROPERTY NAMED S.R. TOWERS WHICH HE HAD REN TED OUT TO TWO EDUCATIONAL INSTITUTIONS. THE ASSESSEE CLAIMED THE BENEFIT OF DEDUCTION OF 30% TOWARDS REPAIRS UNDER SECTION 24 OF THE ACT ON THE ENTIRE RENTAL RECEIPTS. THE LEARNED CIT NOTICED THAT THE ASSESSEE WAS RECEIVING THE MONTHLY RENTAL IN TWO PARTS, VIZ., ONE PART TOWARDS RENT AND ANOTHER PART TOWARDS AMENITIES. THE LEARNED CIT WAS OF THE VIEW THAT THE RENTAL INCOME PERTAINING TO AMENITIES IS ASSESSABLE UNDER THE HEA D INCOME FROM OTHER SOURCES AND HENCE THE DEDUCTION OF 30% PRESCRIBED UNDER SECTION 24 WAS ITA NO.194 OF 10 PALADUGU RAMA KRISHNA VIJAYAWADA PAGE 2 OF 6 NOT ALLOWABLE ON THAT PORTION OF THE RENT. ACCORDI NGLY HE PASSED ORDER UNDER SECTION 263 OF THE ACT DIRECTING THE ASSESSIN G OFFICER TO ASSESS THE INCOME PERTAINING TO AMENITIES UNDER THE HEAD INCO ME FROM OTHER SOURCES. THE TRIBUNAL CONSIDERED THE ARGUMENTS OF THE ASSESSEE AND HELD THAT THE VIEW OF THE ASSESSING OFFICER IN ASSESSING THE RENTAL INCOME PERTAINING TO AMENITIES UNDER THE HEAD INCOME FROM HOUSE PROPERTY IS ONE OF THE POSSIBLE VIEWS AND ACCORDINGLY SET ASIDE THE ORDER PASSED UNDER SECTION 263. NOW THE REVENUE HAS FILED THIS MISCELL ANEOUS PETITION BY STATING THAT THE ITAT HAS FAILED TO RELY ON THE FOL LOWING JUDICIAL DECISIONS. A. MALABAR INDUSTRIAL CO. LTD VS. CIT (2000) 243 I TR 83 (S.C) B. INDIAN TEXTILES V CIT (1986) 157 ITR 112 (MAD) C. H.H.MAHARAJA RAJA POWER DEWAS V CIT (1982) 138 ITR 518 (MP) D. CIT V M.M.KHAMBHATWALA (1992) (198 ITR 144 (GUJ ) E. CIT V MODEL MFG. CO. (P) LTD. (1989) 175 ITR 3 74 (CAL) IT HAS BEEN FURTHER STATED THAT THE INCOME FROM AMEN ITIES CAN BE TREATED AS INCOME FROM OTHER SOURCES. ACCORDINGLY IT WAS SU BMITTED THAT THERE EXISTED A MISTAKE OF LAW IN THE ORDER OF THE TRIBUN AL AND ACCORDINGLY A REQUEST HAS BEEN MADE TO RE-EXAMINE THE ISSUE IN TH E LIGHT OF AFORESAID SETTLED LAW. IT IS SEEN THAT THE DECISIONS LISTED O UT IN SERIAL NO. (B) TO (E) HAVE BEEN RENDERED PRIOR TO THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF MALABAR INDUSTRIAL CO. LTD., (SUPRA), WHICH IS THE AUTHORITY TO EXAMINE THE VALIDITY OF THE PROCEEDINGS INITIATED U NDER SECTION 263 OF THE ACT. 3. THE LEARNED DEPARTMENTAL REPRESENTATIVE, IN ADDI TION TO THE CONTENTIONS MADE IN THE MISCELLANEOUS PETITION, PLA CED RELIANCE ON THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE O F KARNANI PROPERTIES LTD., V. CIT (1971) 82 ITR (547) TO SUBMIT THAT THE INCOME PERTAINING TO AMENITIES IS ASSESSABLE UNDER THE HEAD INCOME FROM OTHER SOURCES. ON THE OTHER HAND THE LEARNED AUTHORISED REPRESENTATIV E SUBMITTED THAT THERE IS NO ERROR IN THE ORDER OF THE TRIBUNAL SINCE IT H AS CATEGORICALLY BEEN HELD THAT THE ASSESSING OFFICER HAS TAKEN ONE OF THE POS SIBLE VIEWS AND FURTHER ITA NO.194 OF 10 PALADUGU RAMA KRISHNA VIJAYAWADA PAGE 3 OF 6 THE DECISION OF THE ASSESSING OFFICER IS SUPPORTED BY TWO CASE LAW WHICH WERE ALSO REFERRED TO IN THE ORDER OF THE TRIBUNAL. 4. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE ORDER WITH RELEVANT RECORD. FROM THE PAPER BOOK FILED BY THE A SSESSEE WE NOTICE THAT THE ASSESSING OFFICER ISSUED A NOTICE DATED 12-2-20 08 UNDER SECTION 154 OF THE ACT WITH A SPECIFIC PURPOSE OF TAXING THE AMOUN T RECEIVED ON ACCOUNT OF AMENITIES UNDER THE HEAD INCOME FROM OTHER SOURCES . THE ASSESSEE HAS SUBMITTED HIS REPLY ON 22-2-2008, WHEREIN HE HAS CL ARIFIED THE NATURE OF AMENITIES PROVIDED AS UNDER: 3. IT IS SUBMITTED, SIR, THAT WHAT IS LET OUT IS ON E UNIT OF BUILDING ONLY. NO AMENITIES IN ANY FORM, WHICH CAN BE DISTIN GUISHED FROM BUILDING ARE PROVIDED. THE ASSESSEE HAS NO OBLIGATI ON TO MAINTAIN ANY PART OF THE BUILDING OR UNDERTAKE ITS REPAIR OR MAINTENANCE. IT IS SOLE RESPONSIBILITY OF THE LESSEE TO MAINTAIN AN Y PART OF THE BUILDING OR UNDERTAKE ITS REPAIR OR MAINTENANCE. IT IS SOLE RESPONSIBILITY OF THE LESSEE TO MAINTAIN THE BUILDI NG AND IN TERMS OF PARA 9 OF LEASE DEED, THE LESSEE.. 4. IT IS RESPECTFULLY SUBMITTED THAT THE ASSESSEE HA S LET OUT ONLY THE BUILDING AND HAS NOT LET OUT ANY MACHINERY, PLA NT, FURNITURE OR IS PROVIDING ANY SERVICE. THE ENTIRE RENT EARNED IS ONLY TOWARDS THE BUILDING LET. IT IS EVIDENT FROM BOOKS OF ACCOUNT MAINTAINED THAT NO EXPENDITURE IS INCURRED BY THE A SSESSEE TOWARDS MAINTENANCE OF THE BUILDING OR PROVISION OF SERVICES FOR THE REASON THAT MAINTENANCE OF BUILDING IS THE OBLI GATION OF THE LESSEE AND NO SERVICE IS PROVIDED BY THE LESSER. TH ERE BEING NO LETTING OTHERWISE THAN THAT OF THE BUILDING ONLY, T HE PROVISIONS OF SEC. 56(2) (III) ARE NOT APPLICABLE. 5. YOUR ATTENTION SIR IS INVITED TO THE DECISION OF THE HIGH COURT OF KERALA IN THE CASE OF DR. P.A. VARGHESE VS. COMM ISSIONER OF INCOME-TAX REPORTED IN (1971) 80 ITR 180 (KER.) WHER EIN IT IS HELD THAT WHERE A BUILDING WITH CERTAIN AMENITIES I S LET, SEC. 56(2)(III) WAS NOT ATTRACTED AND INCOME WAS CHARGEA BLE AS INCOME FROM HOUSE PROPERTY ONLY. BY CONSIDERING THE REPLY OF THE ASSESSEE, IT APPEAR S THAT THE ASSESSING OFFICER DROPPED THE RECTIFICATION PROCEEDINGS. THE RE AFTER, THE LEARNED CIT HAS INITIATED THE PROCEEDINGS UNDER SECTION 263 OF THE ACT. ON THE BASIS OF ITA NO.194 OF 10 PALADUGU RAMA KRISHNA VIJAYAWADA PAGE 4 OF 6 THE ABOVE CITED FACTS, IT WAS SUBMITTED BEFORE US T HAT THE AMENITIES THAT WERE PROVIDED WERE ONLY BASIC AMENITIES SUCH AS ELE CTRICITY, WATER SUPPLY, DRAINAGE ETC. 4.1 IN THE CASE OF DDIT (I.TAX) VS. G. RAGHURAM ( 2010) 5 TAXMANN.COM 39 (HYD.ITAT) IT HAS BEEN HELD AS UNDER: WE HAVE TO SEE THE INTENTION OF THE ASSESSEE WHETH ER THE LETTING WAS THE DOING OF A BUSINESS OR TO EXPLOITAT ION OF HIS PROPERTY BY AN OWNER. THE ASSESSEE WHEN EXPLOITED T HE PROPERTY TO DERIVE RENTAL INCOME IT HAS TO BE HELD THAT THE INCOME REALIZED BY HIM BY WAY OF RENTAL INCOME FROM A BUILDING, IF THE PROPERTY WITH OTHER ASSET ATTACHED TO THE BUILDING TO BE ASSESSED AS INCOME FROM HOUSE PROPER TY ONLY. THE ONLY EXCEPTIONS ARE CASES WHERE THE LETTING OF THE BUILDING IS INSEPARABLE FROM LETTING OF THE MACHINE RY, PLANT AND FURNITURE. IN THE VERY SAME CASE, THE TRIBUNAL HAS ALSO GIVEN I TS OPINION WITH REGARD TO THE RELIABILITY OF THE DOCUMENTS AS UNDER: IN THE PRESENT CASE, THE ASSESSEE MADE TWO AGREEME NTS ONE FOR LET OUT OF THE PROPERTY AND ANOTHER FOR PROVIDING A MENITIES AND THERE IS A DOUBT IN THE MIND OF THE ASSESSING OFFIC ER REGARDING THE CORRECTNESS OF THE INCOME IN THE DECLARED BY TH E ASSESSEE AS INCOME FROM HOUSE PROPERTY AND INCOME FROM BUSINE SS. HE HAS TREATED THE ENTIRE INCOME I.E. AS INCOME FROM HOUS E PROPERTY. ADMITTEDLY, THE AUTHORITIES HAVE THE FREEDOM TO GO BEYOND THE DOCUMENTS TO FIND OUT THE REAL INTENTION OF THE PARTIES. IN THIS CASE, THOUGH THERE IS TWO AGREEMENTS, THE REAL INTENTION OF THE PARTIES TO A DOCUMENT IS DIFF ERENT WHAT APPEARS FROM IT EX FACIE. SINCE THERE IS DOUBT, THE N THE ASSESSING OFFICER IS JUSTIFIED IN GOING BEYOND THE DOCUMENTS TO FIND OUT THE REAL INTENTION OF THE PAR TIES BY IGNORING THE APPARENT HAS TO BE AND HAS ALWAYS BEEN CONCEDED. IN THIS CIRCUMSTANCE, THE ASSESSING OFFIC ER HAS TO REMOVE THE FAADE TO EXPOSE THE REAL INTENTION OF T HE PARTIES CLEVERLY CLOAKED AND THE ACTUAL AGREEMENT CANNOT BE GIVEN EFFECT. THE ONLY BONAFIDE DOCUMENT TO BE ACTED UPON NOT OTHERWISE. 4.2 THUS IT IS SEEN THAT THE ASSESSING OFFICER HAS EXAMINED THE VERY SAME ISSUE IN THE RECTIFICATION PROCEEDINGS INITIAT ED UNDER SECTION 154 OF THE ITA NO.194 OF 10 PALADUGU RAMA KRISHNA VIJAYAWADA PAGE 5 OF 6 ACT, THAT TOO PRIOR TO THE INITIATION OF REVISION P ROCEEDINGS BY THE LEARNED CIT (A) AND THE VIEW OF THE ASSESSING OFFICER WAS A LSO SUPPORTED BY A CASE LAW, WHICH MEANS THAT THE ASSESSING OFFICER HAS ADO PTED ONE OF THE POSSIBLE VIEWS. IN VIEW OF THE ABOVE, THE TRIBUNAL HAS HELD THAT THE DECISION TAKEN BY THE ASSESSING OFFICER CANNOT BE T AKEN AS ERRONEOUS ONE. 5. THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF KARNANI PROPERTIES LTD (SUPRA), WHICH WAS RELIED UPON BY TH E LEARNED DEPARTMENTAL REPRESENTATIVE BEFORE US NOW, IS NOT APPLICABLE TO THE FACTS OF THE PRESENT CASE AND THE SAME IS DISCERNIBLE FROM THE READING O F THE HEAD NOTES OF THAT CASE. THE SAID HEAD NOTES ARE EXTRACTED BELOW: INCOME FROM BUSINESS-HOUSE PROPERTIES CONSISTING O F NUMEROUS FLATS AND SHOPS COMPANY PURCHASING CURRENT IN BUL K AND CONVERTING IT IN ITS OWN POWER HOUSE TO SUPPLY TO T ENANTS-PUMP- HOUSE AND BOILER MAINTAINED-SERVICE SUCH AS SCAVENG ING AND LIFTS PROVIDED-LARGE STAFF EMPLOYED-INCOME FROM SUC H SERVICES WHETHER BUSINESS INCOME-REFERENCE-FINDING OF TRIBUN AL-WHEN CAN BE INTERFERED WITH-INDIAN INCOME TAX ACT, 1922. SS. 9, 10,12, 66. IN THE INSTANT CASE, THERE IS NO FINDING TO SUGGEST THAT THE ASSESSEE HAS BEEN PROVIDING SEPARATE SERVICES AS MENTIONED IN TH E CASE CITED ABOVE. INSTEAD, THE LEARNED CIT WAS LED ONLY BY THE RECITAL S MADE IN THE LEASE AGREEMENT ONLY. 6. THE HON'BLE SUPREME COURT, IN THE CASE OF MALABA R INDUSTRIAL CO. LTD., V. CIT (2000) 243 ITR 83 (S.C) HAS HELD AS UN DER WITH REGARD TO THE POWER OF LEARNED CIT TO INITIATE REVISION PROCEEDIN GS UNDER SECTION 263 OF THE ACT: THE PHRASE PREJUDICIAL TO THE INTERESTS OF THE RE VENUE HAS TO BE READ IN CONJUNCTION WITH AN ERRONEOUS ORDER PASS ED BY THE ASSESSING OFFICER. EVERY LOSS OF REVENUE AS A CONSE QUENCE OF THE ORDER OF THE ASSESSING OFFICER CANNOT BE TREATE D AS PREJUDICIAL TO THE INTERESTS OF THE REVENUE. FOR EXAMPLE, IF THE ASSESSING OFFICER HAS ADOPTED ONE OF THE COURSES PERMISSIBLE IN LAW AND IT HAS RESULTED IN LOSS OF R EVENUE, OR WHERE TWO VIEW ARE POSSIBLE AND THE ASSESSING OFFICER HAS TAKEN ONE VIEW WITH WHICH THE ITA NO.194 OF 10 PALADUGU RAMA KRISHNA VIJAYAWADA PAGE 6 OF 6 COMMISSIONER DOES NOT AGREE, IT CANNOT BE TREATED A S AN ERRONEOUS ORDER PREJUDICIAL TO THE INTERESTS OF THE REVENUE, UNLESS THE VIEW TAKEN BY THE ASSESSING OFFICER IS UNSUSTAINABLE IN LAW. 7. IN VIEW OF THE FOREGOING DISCUSSIONS, WE DO NOT F IND ANY MISTAKE IN THE IMPUGNED ORDER OF THE TRIBUNAL. 8. ACCORDINGLY, THE MISCELLANEOUS PETITION FILE D BY THE REVENUE IS DISMISSED. PRONOUNCED IN THE OPEN COURT ON 29 TH NOVEMBER, 2010. SD/- SD/- (SUNIL KUMAR YADAV) (B R BASKARAN) JUDICIAL MEMBER ACCOUNTANT MEMBER PVV/SPS VISAKHAPATNAM, DATE: 29-11-2010 COPY TO 1 THE ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE-2( 1) VIJAYAWADA 2 SHRI PALADUGU RAMA KRISHNA, C/O SHRI NANDKISHORE JHAWAR, N.K.JHAWAR & CO. CHARTERED ACCOUNTANT FLAT NO.1A, CLASSIC CIRC LE BUILDINGS, 36-8- 8B RAJ FUNCTION HALL ROAD, MOGHALARAJAPURAM, VIJAYA WADA 520010 3 4. THE CIT VIJAYAWADA THE CIT(A), VIJAYAWADA 5 THE DR, ITAT, VISAKHAPATNAM. 6 GUARD FILE. BY ORDER SENIOR PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM