Sri Laxmipat Surana, Kolkata v. ITO, WD-35(3), KOLKATA, Kolkata

CO 19/KOL/2016 | 2011-2012
Pronouncement Date: 10-11-2017 | Result: Dismissed

Appeal Details

RSA Number 1923523 RSA 2016
Assessee PAN AKQPS7037P
Bench Kolkata
Appeal Number CO 19/KOL/2016
Duration Of Justice 1 year(s) 7 month(s) 8 day(s)
Appellant Sri Laxmipat Surana, Kolkata
Respondent ITO, WD-35(3), KOLKATA, Kolkata
Appeal Type Cross Objection
Pronouncement Date 10-11-2017
Appeal Filed By Assessee
Tags No record found
Order Result Dismissed
Bench Allotted A
Tribunal Order Date 10-11-2017
Last Hearing Date 09-10-2017
First Hearing Date 09-10-2017
Assessment Year 2011-2012
Appeal Filed On 01-04-2016
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH A KOLKATA [BEFORE SHRI P.M. JAGTAP AM & SHRI S.S. VISWANETHRA RAVI JM] I.T.A. NO. 142/KOL/2016 ASSESSMENT YEAR: 2011-12 I.T.O. WARD 35(3) KOLKATA.............................................................................APPELLANT AAYAKAR BHAWAN POORVA 8 TH FLOOR 110 SHANTIPALLY KOLKATA 700107 SRI LAXMIPAT SURANA..........................RESPONDENT 12 BONFIELD LANE 1 ST FLOOR KOLKATA 700001 [PAN : AKQPS7037P] C.O. NO. 19/KOL/2016 (ARISING OUT OF ITA NO. 142/KOL/2016) ASSESSMENT YEAR: 2011-12 SRI LAXMIPAT SURANA......................CROSS-OBJECTOR 12 BONFIELD LANE 1 ST FLOOR KOLKATA - 700001 [PAN : AKQPS7037P] I.T.O. WARD 35(3) KOLKATA.............................................................................RESPONDENT AAYAKAR BHAWAN POORVA 8 TH FLOOR 110 SHANTIPALLY KOLKATA 700107 APPEARANCES BY: SHRI D.Z. CHOWNGTHU ADDL. CIT APPEARING ON BEHALF OF THE REVENUE SHRI ANIL KOCHAR ADVOCATE APPEARING ON BEHALF OF THE ASSESSEE DATE OF CONCLUDING THE HEARING : NOVEMBER 08 2017 DATE OF PRONOUNCING THE ORDER : NOVEMBER 10 2017 ORDER PER P.M. JAGTAP AM THIS APPEAL IS PREFERRED BY THE REVENUE AGAINST THE ORDER OF LD. CIT (A) 10 KOLKATA DATED 09.11.2015 AND THE SAME IS BEING DISPOSED OF ALONG WITH THE CROSS-OBJECTION FILED BY THE ASSESSEE BEING C.O. NO. 19/KOL/2016. 2 I.T.A. NO. 142 & C.O. NO. 19/KOL/2016 SRI LAXMIPAT SURANA 2. IN THE SOLITARY SUBSTANTIVE GROUND RAISED IN ITS APPEAL THE REVENUE HAS CHALLENGED THE ACTION OF THE LD. CIT (A) IN ALLOWING THE CLAIM OF THE ASSESSEE FOR DEPRECIATION ON THE COST OF PROPERTY. 3. THE ASSESSEE IN THE PRESENT CASES IS AN INDIVIDUAL WHO IS ENGAGED IN THE BUSINESS OF PROPERTY DEVELOPMENT UNDER THE NAME AND STYLE OF HIS PROPRIETARY CONCERN M/S. MAHAVEER CONSTRUCTION. THE RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION WAS FILED BY HIM ON 30.09.2011 DECLARING A TOTAL INCOME OF RS. 86 030/-. THE ASSESSEE HAD TAKEN A VACANT LAND ON LEASE FROM RAILWAYS FOR A PERIOD OF 25 YEARS WHICH WAS FURTHER RENEWABLE FOR A PERIOD OF 25 YEARS. ON THE SAID LAND THE ASSESSEE BEING A LICENSEE INTENDED TO CONSTRUCT A COMMERCIAL COMPLEX CONSISTING OF 3 BLOCKS BEING A B AND C. BEFORE THE COMPLETION OF B BLOCK THE ASSESSEE ENTERED INTO AN AGREEMENT TO SUB- LICENSE THE SHOWROOM SPACE IN B BLOCK TO M/S. PANTALOON RETAIL (INDIA) LTD. AND M/S. PGI RETAIL STORES PVT. LTD. DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE HAD RECEIVED LICENCE FEE OF RS. 2 62 70 750/- FROM THE SAID TWO SUB-LICENSE AND AFTER CLAIMING DEDUCTION FOR VARIOUS EXPENSES INCLUDING DEPRECIATION NET INCOME OF RS. 95 853/- WAS DECLARED BY THE ASSESSEE UNDER THE HEAD INCOME FROM BUSINESS OR PROFESSION IN THE RETURN OF INCOME. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSEE HOWEVER TOOK A STAND THAT THE SAID INCOME WAS INADVERTENTLY DECLARED IN THE RETURN AS INCOME FROM BUSINESS OR PROFESSION INSTEAD OF INCOME FROM HOUSE PROPERTY. THIS STAND OF THE ASSESSEE WAS NOT FOUND ACCEPTABLE BY THE A.O. RELYING INTER ALIA ON THE DECISION OF HONBLE SUPREME COURT IN THE 3 I.T.A. NO. 142 & C.O. NO. 19/KOL/2016 SRI LAXMIPAT SURANA CASE OF GOETZE (INDIA) LTD. 157 TAXMAN 1 (SC) WHEREIN IT WAS HELD THAT NO AMENDMENT CAN BE MADE IN THE RETURN AT THE ASSESSMENT STAGE WITHOUT REVISING THE RETURN. THE ASSESSING OFFICER ALSO HELD THAT THE ASSESSEE WAS ONLY A LICENSEE TO DEVELOP AND CONSTRUCT A COMMERCIAL COMPLEX ON THE VACANT LAND OWNED BY RAILWAYS AND HE WAS NOT OWNER OF THE PROPERTY. HE ACCORDINGLY HELD THAT THE ASSESSEE WAS NOT ENTITLED TO CLAIM DEPRECIATION ON THE COST OF THE SAID PROPERTY IN THE ASSESSMENT COMPLETED UNDER SECTION 143(3) VIDE AN ORDER DATED 21.03.2014. 4. AGAINST THE ORDER PASSED BY THE A.O. UNDER SECTION 143(3) AN APPEAL WAS PREFERRED BY THE ASSESSEE BEFORE THE LD. CIT (A) AND AFTER CONSIDERING THE SUBMISSIONS MADE BY THE A.O. AS WELL AS THE MATERIAL AVAILABLE ON RECORD THE LD. CIT (A) UPHELD THE ACTION OF THE A.O. IN REJECTING THE NEW STAND TAKEN BY THE ASSESSEE DURING THE COURSE OF ASSESSMENT PROCEEDINGS THAT THE AMOUNT RECEIVED FROM TWO SUB- LICENSEE OF THE PROPERTY WAS CHARGEABLE TO TAX UNDER THE HEAD INCOME FROM HOUSE PROPERTY INSTEAD OF PROFITS AND GAINS OF BUSINESS OR PROFESSION. HE HELD THAT THE SAID INCOME WAS RIGHTLY BROUGHT TO TAX BY THE A.O. IN THE HANDS OF THE ASSESSEE UNDER THE HEADS PROFITS OR GAINS OF BUSINESS OR PROFESSION. 5. AS REGARDS THE CLAIM OF THE ASSESSEE FOR DEPRECIATION ON THE LICENSED PROPERTY THE LD. CIT (A) HOWEVER ALLOWED THE SAID CLAIM BY VIRTUE OF EXPLANATION 1 TO SECTION 32. THE OBSERVATIONS RECORDED BY THE LD. CIT (A) IN THIS REGARD AS CONTAINED IN PARAGRAPH NO 4 AND 5 OF HIS IMPUGNED ORDER ARE REPRODUCED HEREUNDER: 4 I.T.A. NO. 142 & C.O. NO. 19/KOL/2016 SRI LAXMIPAT SURANA 4. THEREFORE ONLY THE MATTER OF BEING ELIGIBLE FOR DEPRECIATION (IN A SITUATION WHERE THE RECEIPT LEARNED TO BE ASSESSED AS BUSINESS INCOME) REMAINS FOR ADJUDICATION. IT IS NOT CLEAR WHETHER THE SAME HAS BEEN CLAIMED BY THE APPELLANT IN THE RETURN OF INCOME. THERE HAS BEEN NO SPECIFIC DISALLOWANCE MADE BY THE A.O. IN THE COMPUTATION. IN ANY CASE THE A.O. HAS REJECTED THE REQUEST FOR CLAIM ON GROUNDS THAT THE VERY FIRST REQUIREMENT FOR CLAIM OF DEPRECIATION TO BE ALLOWED NAMELY OWNERSHIP HAS NOT BEEN FULFILLED BY THE ASSESSEE-APPELLANT. IT IS A FACT THAT THE ASSESSEE IS A LICENSEE OR LESSEE OF THE SAID BUILDING HAVING OBTAINED THE SAME AFTER SANCTION BY THE RAILWAY AUTHORITIES. IT IS ALSO AN UNDISPUTED FACT THAT THE CONSTRUCTION OF THE SAID BUILDING WAS UNDERTAKEN BY THE ASSESSEE-APPELLANT AFTER ARRANGING NECESSARY FUNDS BY TAKING LOANS FROM BANKS AND OTHER PARTIES. THE ASSESSING OFFICER WHILE DENYING THE CLAIM OF DEPRECIATION HAS OBSERVED THAT THE ASSESSEE MERELY HOLDS A DEVELOPMENT RIGHT UNDER A LEASE AND NOT A OWNERSHIP RIGHT. IT IS TO BE OBSERVED THAT THE SAME IS IN EFFECT A LICENSE TO A LEASE TO HOLD TO THE PREMISES FOR A PERIOD OF 25 YEARS AND EXTENDABLE FOR A FURTHER PERIOD OF 25 YEARS AFTER EXPIRY OF THE FIRST TERM. IT IS ALSO PERTINENT THAT THE ASSESSEE-APPELLANT IS ABLE TO SUB-LICENSE IT TO PARTIES AND COLLECT SUB-LICENSE FEES FROM SUCH PARTIES. IN SUCH A SITUATION THE EXPLANATION (1) TO SECTION 32 WOULD BE APPLICABLE TO THE ASSESSEE-APPELLANT. EXPLANATION (1) TO SECTION 32 OF THE INCOME TAX ACT 1961 ACKNOWLEDGES THAT DEPRECIATION CAN BE CLAIMED BY AN ASSESSEE WHO CARRIES ON BUSINESS ON A BUILDING NOT OWNED BY HIM BUT IN RESPECT OF WHICH THE ASSESSEE HOLDS A LEASE OR OTHER RIGHT OF OCCUPANCY AND ANY CAPITAL EXPENDITURE IS INCURRED BY THE ASSESSEE FOR THE PURPOSES OF THE BUSINESS OR PROFESSION ON THE CONSTRUCTION OF ANY STRUCTURE OR DOING OF ANY WORK OR IN RELATION TO THE BUILDING. CLEARLY IN SUCH EVENT SECTION 32(1) WOULD APPLY. AS IS THE SAID STRUCTURE OR WORK IS A BUILDING OWNED BY THE ASSESSEE. 5. THE ABOVE VIEW OF THE MATTER IS SUPPORTED BY JUDICIAL CITATIONS MORE RECENTLY THE ORDER OF THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS BHARAT HOTELS LTD. ON 24 TH JULY 2014 WHEREIN A SIMILAR ISSUE HAS BEEN ADJUDICATED UPON IN FAVOUR OF THE APPELLANT. THE JUDGMENT OF THE APEX COURT IN MYSORE MINERALS VS CIT (1999) 239 ITR 775 (SC) ALSO HAS BEEN RELIED UPON WHEREIN THE COURT HAS OBSERVED THAT THE INTENTION OF LEGISLATURE IN THE ENACTING SECTION 32 WOULD BE BEST FULFILLED BY ALLOWING THE DEDUCTION IN RESPECT OF DEPRECIATION TO THE PERSON IN WHOM FOR THE TIME-BEING VESTS THE DOMINION OF THE BUILDING AND WHO IS ENTITLED TO USE IT 5 I.T.A. NO. 142 & C.O. NO. 19/KOL/2016 SRI LAXMIPAT SURANA IN HIS OWN RIGHT AND IS USING THE SAME FOR THE PURPOSES OF THE BUSINESS OR PROFESSION. THE MATTER OF OWNERSHIP AND THE RESULTANT CLAIM OF DEPRECIATION AS PER SECTION 32(1) HAS BEEN PROVIDED WITH REFERENCE TO THE CONTROL EXERCISED OVER THE PROPERTY BY THE PERSON CLAIMING RELAXATION. IT IS TO BE OBSERVED THAT THE APPELLANT WOULD APPEAR TO HAVE CONTROL OVER THE BUILDING INCLUDING THE RIGHT TO SUB-LEASE THEM. IN THAT VIEW OF THE MATTER I FIND MERIT IN THE CLAIM OF DEPRECIATION AS APPEALED FOR AND DIRECT THE A.O. TO ALLOW THE SAME. THIS MATTER THEREFORE IS ADJUDICATED IN FAVOUR OF THE APPELLANT. AGGRIEVED BY THE ORDER OF THE LD. CIT (A) THE REVENUE HAS PREFERRED THIS APPEAL BEFORE THE TRIBUNAL. 6. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AND ALSO PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. THE FIRST CONTENTION RAISED BY THE LEARNED DR IS THAT THE ASSESSEE HAVING NOT CLAIMED DEPRECIATION ON THE LICENCED PROPERTY IN THE RETURN OF INCOME THE LD. CIT (A) WAS NOT JUSTIFIED TO ALLOW THE CLAIM OF THE ASSESSEE FOR DEPRECIATION WHICH WAS NOT MADE EITHER IN THE ORIGINAL RETURN OR EVEN BY FILING REVISED RETURN. WE ARE UNABLE TO ACCEPT THIS CONTENTION OF THE LEARNED DR. IN OUR OPINION THE RESTRICTION LAID DOWN BY THE HONBLE SUPREME COURT IN THE CASE OF GOETZE (INDIA) LTD. (SUPRA) WHICH IS RELIED UPON BY THE ASSESSING OFFICER IS APPLICABLE ONLY AT THE ASSESSMENTS STAGE AND THE LD. CIT (A) BEING AN APPELLATE AUTHORITY IS SUFFICIENTLY EMPOWERED TO ENTERTAIN THE CLAIM MADE BY THE ASSESSEE FOR DEPRECIATION FOR THE FIRST TIME BEFORE HIM WITHOUT EVEN FILING THE REVISED RETURN AS CLARIFIED BY THE HONBLE SUPREME COURT IN THE CASE OF GOETZE (INDIA) LTD. (SUPRA) ITSELF. EVEN THE OLD CIRCULAR OF THE CBDT DATED 31.08.1965 RELIED UPON BY THE LEARNED DR WAS ISSUED IN A DIFFERENT CONTEXT AND THE SAME THEREFORE IS NOT 6 I.T.A. NO. 142 & C.O. NO. 19/KOL/2016 SRI LAXMIPAT SURANA APPLICABLE IN THE PRESENT CONTEXT. AS REGARDS THE CLAIM OF THE ASSESSEE FOR DEPRECIATION ON MERIT THE LEARNED DR HAS RELIED ON THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF MOTHER HOSPITAL PVT. LTD. VS CIT RENDERED ON MARCH 2 2017 WHEREIN IT WAS HELD THAT LESSEE UNDER EXPLANATION 1 TO SECTION 32 IS ENTITLED TO DEPRECIATION ON THE COST OF CONSTRUCTION INCURRED BY HIM BUT NOT ON THE COST INCURRED BY THE OWNER. AS CLARIFIED BY THE LEARNED COUNSEL FOR THE ASSESSEE IN THIS REGARD DEPRECIATION IN THE PRESENT CASE WAS CLAIMED BY THE ASSESSEE ONLY ON THE COST OF CONSTRUCTION INCURRED BY HIM. WE THEREFORE FIND NO INFIRMITY IN THE IMPUGNED ORDER OF THE LD. CIT (A) ALLOWING THE CLAIM OF THE ASSESSEE FOR DEPRECIATION ON THE COST OF LICENCED PROPERTY INCURRED BY HIM AND UPHOLDING HIS IMPUGNED ORDER ON THIS ISSUE WE DISMISS THIS APPEAL FILED BY THE REVENUE. 7. AT THE TIME OF HEARING BEFORE US THE LEARNED COUNSEL FOR THE ASSESSEE HAS NOT PRESSED THE ISSUES RAISED IN THE CROSS-OBJECTION FILED BY THE ASSESSEE. THE CROSS-OBJECTION FILED BY THE ASSESSEE IS ACCORDINGLY DISMISSED AS NOT PRESSED. 8. IN THE RESULT THE APPEAL OF THE REVENUE AND CROSS-OBJECTION OF THE ASSESSEE BOTH ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 10 TH NOVEMBER 2017. SD/- SD/- (S.S. VISWANETHRA RAVI) (P.M. JAGTAP) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 10/11/2017 BISWAJIT SR. PS 7 I.T.A. NO. 142 & C.O. NO. 19/KOL/2016 SRI LAXMIPAT SURANA COPY OF ORDER FORWARDED TO: 1. SRI LAXMIPAT SURANA 12 BONFIELD LANE 1 ST FLOOR KOLKATA-01. 2. ITO WARD 35(3) AAYAKAR BHAWAN POORVA 8 TH FLOOR 110 SHANTIPALLY KOLKATA 107. 3. THE CIT(A) 4. THE CIT 5. DR TRUE COPY BY ORDER SR. P.S. / H.O.O. ITAT KOLKATA