The ACIT, Circle-2(1), Guntur v. M/s Uma Enterprises, Chilakaluripeta

ITA 127/VIZ/2004 | 1999-2000
Pronouncement Date: 25-01-2010 | Result: Allowed

Appeal Details

RSA Number 12725314 RSA 2004
Assessee PAN AAAFU5408N
Bench Visakhapatnam
Appeal Number ITA 127/VIZ/2004
Duration Of Justice 5 year(s) 10 month(s) 25 day(s)
Appellant The ACIT, Circle-2(1), Guntur
Respondent M/s Uma Enterprises, Chilakaluripeta
Appeal Type Income Tax Appeal
Pronouncement Date 25-01-2010
Appeal Filed By Department
Order Result Allowed
Bench Allotted DB
Tribunal Order Date 25-01-2010
Assessment Year 1999-2000
Appeal Filed On 01-03-2004
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH VISAKHAPATNAM BEFORE: SHRI SUNIL KUMAR YADAV JUDICIAL MEMBER AND SHRI BR BASKARAN ACCOUNTANT MEMBER ITA NOS.127&128/VIZAG/2004 ASSESSMENT YEARS : 1999-2000 & 2000-01 RESPECTIVELY ACIT CIRCLE-2(1) GUNTUR M/S. UMA ENTERPRISES CHILAKALURIPET (APPELLANT) VS. (RESPONDENT) PAN NO.AAAFU 5408N APPELLANT BY: SHRI G.S.S. GOPINATH DR RESPONDENT BY: SHRI U.L.N. SUDHAKAR ADVOCATE ORDER PER SHRI S.K. YADAV JUDICIAL MEMBER:- THESE APPEALS ARE PREFERRED BY THE REVENUE AGAINST THE RESPECTIVE ORDERS OF THE CIT(A) ON COMMON GROUNDS I.E. WITH R EGARD TO THE NATURE OF RENTAL INCOME RECEIVED BY THE ASSESSEES ON LETTING OF GODOWN TO M/S. V.S.T. INDUSTRIES LTD. SINCE THESE APPEALS WERE HEARD TOG ETHER THESE ARE BEING DISPOSED OFF THROUGH THIS CONSOLIDATED ORDER. ITA NO.79 OF 2009: 2. THIS APPEAL IS FILED LATE BY 2494 DAYS I.E. APPR OXIMATELY 6 YEARS. THE REVENUE HAS MOVED AN APPLICATION FOR CONDONATIO N OF DELAY ON 17 TH FEB09 ALONG WITH THE APPEAL STATING THEREIN THAT R EGISTRY VIDE LETTER NO.ITA NO.127 & 128/V/04 DATED 30 TH OCT08 CALLING FOR CERTAIN INFORMATION/CLARIFICATIONS FROM THIS OFFICE ALONG W ITH THE DIRECTION TO THIS OFFICE TO FILE AN APPEAL AND CONSEQUENT THERETO THIS APPEA L WAS FILED. ON PERUSAL OF RECORD WE FIND THAT REGISTRY OF THE TRIBUNAL HAS N EVER ASKED THE ASSESSING OFFICER TO FILE AN APPEAL BEFORE IT. IT WAS RATHER A PREROGATIVE OF THE REVENUE OR THE ASSESSEE TO PREFER AN APPEAL BEFORE THE TRIB UNAL IF THEY ARE NOT SATISFIED WITH THE ORDER OF THE CIT(A). THE TRIBUN AL HAS NO BUSINESS TO DIRECT ITA NO.79/VIZAG/2009 ASSESSMENT YEAR : 1998-99 2 OR TO PURSUE ANY ONE OF THE PARTIES TO PREFER AN AP PEAL BEFORE THE TRIBUNAL. ON THE PERUSAL OF RECORD WE FIND THAT THE ASSESSING OFFICER HAS WRONGLY MADE A REFERENCE TO THE LETTER OF THE REGISTRY TO THE TR IBUNAL WHEREAS A LETTER UNDER REFERENCE WAS WRITTEN BY SENIOR AUTHORISED RE PRESENTATIVE OF THE DEPARTMENT AND IN RESPONSE TO THEIR LETTER THE ASS ESSING OFFICER HAS FILED AN APPEAL AFTER A PERIOD OF 6 YEARS WITHOUT EXPLAINI NG ANY REASONS FOR THE DELAY IN FILING OF THE APPEAL. IT IS NOT A CASE WH ERE THE APPELLANT IS IGNORANT ABOUT THE LEGAL PROVISIONS AND WAS NOT ASSISTED BY A PROFESSIONAL. THE DEPARTMENT IS WELL VERSED WITH THE LEGAL PROVISIONS OF THE INCOME TAX ACT AND THE TIME FRAME UNDER WHICH AN APPEAL CAN BE FILED AGAINST THE ORDER OF THE CIT(A). IN THIS ENTIRE APPLICATION NOTHING HAS BEE N SPELT OUT BY THE REVENUE AS TO WHY THE APPEAL WAS NOT FILED IN TIME AGAINST THE ORDER OF THE CIT(A) AND WHO IS RESPONSIBLE FOR THE DELAY IN PRESENTATION OF THE APPEAL. NO DOUBT IT HAS BEEN REPEATEDLY HELD BY THE APEX COURT AND VARI OUS HIGH COURTS THAT REQUEST FOR CONDONATION OF DELAY SHOULD BE CONSIDER ED SYMPATHETICALLY BUT THERE SHOULD BE A PROPER EXPLANATION FOR THE DELAY IN PRESENTATION OF THE APPEAL WHICH CAN BE CONDONED. IN THE INSTANT CASE WE DO NOT FIND ANY REASON FOR THE DELAY IN PRESENTATION OF THE APPEAL. WE THEREFORE DECLINE TO ENTERTAIN THE REQUEST FOR CONDONATION OF THE DELAY IN FILING OF THE APPEAL. ACCORDINGLY THIS APPEAL IS BARRED BY LIMITATION AN D WE DISMISS THE SAME BEING NOT ADMITTED. 3. SINCE THE APPEAL IS DISMISSED BEING NOT ADMITTED WE FIND NO JUSTIFICATION TO DEAL THE ISSUES ON MERIT. ITA NO.127 OF 2004: 4. THIS APPEAL IS ALSO FILED LATE BY 27 DAYS AND TH E DELAY WAS EXPLAINED BY THE ASSESSING OFFICER THROUGH AN AFFIDAVIT BY DEPOS ING THAT THE ORDER OF THE CIT(A) WAS NOT RECEIVED IN TIME AND IT RESULTED IN DELAY IN PREPARATION AND FILING OF THE APPEAL BEFORE THE TRIBUNAL. SINCE TH E DELAY IS SATISFACTORILY EXPLAINED WE CONDONE THE SAME AND ADMIT THE APPEAL FOR HEARING. 3 5. IN ITA NO.127 OF 2004 AND 128 OF 2004 THE REVEN UE HAS ASSAILED THE ORDER OF THE CIT(A) ON A COMMON GROUND THAT CIT(A) HAS ERRED IN TREATING THE RENTAL INCOME AS BUSINESS INCOME. 6. DURING THE COURSE OF HEARING THE LD. DR HAS INV ITED OUR ATTENTION TO THE JUDGEMENT OF THE APEX COURT IN THE CASE OF SHAM BHU INVESTMENT PRIVATE LIMITED VS. CIT REPORTED AT 263 ITR 143 (SC) IN WHI CH THEIR LORDSHIP OF THE APEX COURT HAVE HELD THE INCOME DERIVED BY ASSESSEE BY LETTING OUT FURNISHED PREMISES ON MONTHLY RENT BASIS TO VARIOUS PARTIES A LONG WITH FURNITURE FIXTURES LIGHT AIR CONDITIONERS ETC. FOR BEING USE D AS A TABLE SPACE AND ALSO PROVIDING THEM COMMON SERVICE LIKE WATCH AND WARD S TAFF ELECTRICITY WATER AND OTHER AMENITIES AS INCOME FROM PROPERTY AND NOT BUSINESS INCOME. WITH REGARD TO THE RULE OF CONSISTENCY THE LD. D.R. HAS SUBMITTED THAT AT THE TIME OF DISPOSAL OF THE APPEALS IN ALL THESE CASES THE J UDGEMENT OF THE APEX COURT WAS NOT BROUGHT TO THE NOTICE OF THE CIT(A) AND CIT (A) HAS TAKEN A CONSISTENT VIEW THAT THE RENTAL INCOME FROM LETTING OF THE GODOWN IS A BUSINESS INCOME WITHOUT REALIZING THE CORRECT LEGAL POSITION OF LAW SETTLED BY THE APEX COURT THROUGH SHAMBHU INVESTMENT PRIVATE L IMITED (SUPRA). 7. THE LD. COUNSEL FOR THE ASSESSEE HOWEVER PLACED A HEAVY RELIANCE UPON THE ORDER OF THE CIT(A) WITH THE SUBMISSIONS T HAT IN ALL THE 3 YEARS THE CIT(A) HAS TAKEN A CONSISTENT VIEW THAT THE RENTAL INCOME IS A BUSINESS INCOME OF THE ASSESSEES AND IT SHOULD NOT BE DISTUR BED. 8. HAVING HEARD THE RIVAL SUBMISSIONS AND FROM A CA REFUL PERUSAL OF THE RECORD WE FIND THAT JUDGEMENT OF THE SHAMBHU INVES TMENT PVT. LTD. WAS NOT BROUGHT TO THE NOTICE OF THE CIT(A) AND CIT(A) HAVI NG RELIED UPON OTHER JUDGEMENTS HAVE TREATED THIS RENTAL INCOME AS BUSIN ESS INCOME. IN THE CASE OF SHAMBHU INVESTMENT PVT. LTD. THE CALCUTTA HIGH C OURT HAS CATEGORICALLY HELD THAT MERELY BECAUSE THE INCOME IS ATTACHED TO AN IMMOVABLE PROPERTY CANNOT BE THE SOLE FACTOR FOR ASSESSMENT OF SUCH IN COME AS INCOME FROM PROPERTY AND WHAT HAS TO BE SEEN IS WHAT WAS THE PR IMARY OBJECT OF THE ASSESSEE WHILE EXPLOITING THE PROPERTY. IF IT IS F OUND APPLYING SUCH TEST THAT MAIN INTENTION IS FOR LETTING OUT THE PROPERTY OR A NY PORTION THEREOF THE SAME 4 MUST BE CONSIDERED AS RENTAL INCOME OR INCOME FROM PROPERTY. THIS VIEW OF THE CALCUTTA HIGH COURT HAS BEEN APPROVED BY THE AP EX COURT IN THE CASE OF SHAMBHU INVESTMENT PVT. LTD. VS. CIT 263 ITR 143 (S C). THE RELEVANT OBSERVATIONS OF THE CALCUTTA HIGH COURT IS EXTRACTE D HEREUNDER FOR THE SAKE OF REFERENCE: MERELY BECAUSE THE INCOME IS ATTACHED TO AN IMMOV ABLE PROPERTY CANNOT BE THE SOLE FACTOR FOR ASSESSMENT OF SUCH IN COME AS INCOME FROM PROPERTY AND WHAT HAS TO BE SEEN IS WHAT WAS THE PR IMARY OBJECT OF THE ASSESSEE WHILE EXPLOITING THE PROPERTY. IF IT IS F OUND APPLYING SUCH TEST THAT MAIN INTENTION IS FOR LETTING OUT THE PROPERTY OR A NY PORTION THEREOF THE SAME MUST BE CONSIDERED AS RENTAL INCOME OR INCOME FROM PROPERTY. IN CASE IT IS FOUND THAT THE MAIN INTENTION IS TO EXPLOIT THE IMM OVABLE PROPERTY BY WAY OF COMPLEX COMMERCIAL ACTIVITIES IN THAT EVENT IT MUST BE HELD AS BUSINESS INCOME. FROM THE COPY OF THE AGREEMENT IT APPEARS THAT THE ASSESSEE HAS LET OUT THE FURNISHED OFFICE AT A MONTHLY RENT PAYABLE MONTH BY MONTH BY THE RESPECTIVE OCCUPANTS. SERVICES RENDERED TO THE VAR IOUS OCCUPANTS ACCORDING TO THE SAID AGREEMENT ARE NOT SEPARATELY CHARGED AN D THE MONTHLY RENT PAYABLE IS INCLUSIVE OF ALL CHARGES TO THE ASSESSEE . A PORTION OF THE SAID PROPERTY IS USED BY THE ASSESSEE HIMSELF FOR HIS OW N BUSINESS PURPOSE. THE REST OF THE SAID PROPERTY HAS BEEN LET OUT TO THE V ARIOUS OCCUPIERS. IT FURTHER APPEARS THAT THE ASSESSEE HAD ALREADY RECOVERED A S UM OF RS.4 25 000 AS AND BY WAY OF SECURITY FREE ADVANCE FROM THREE OCCU PANTS. HENCE THE ENTIRE COST OF THE PROPERTY LET OUT TO THOSE OCCUPIERS HAV E ALREADY BEEN RECOVERED AS AND BY WAY OF INTEREST-FREE ADVANCE BY THE ASSES SEE. HENCE IT CANNOT BE SAID THAT THE ASSESSEE IS EXPLOITING THE PROPERTY F OR ITS COMMERCIAL BUSINESS ACTIVITIES AND SUCH BUSINESS ACTIVITIES ARE PRIME M OTTO AND LETTING OUT THE PROPERTY IS A SECONDARY ONE. THERE IS NO SEPARATE AGREEMENT FOR FURNITURE AND FIXTURES OR FOR PROVIDING SECURITY AND OTHER AM ENITIES. THE ONLY INTENTION WAS TO LET OUT THE PORTION OF THE PREMISES TO THE R ESPECTIVE OCCUPANTS. HENCE THE INTENTION IN MAKING SUCH AGREEMENT IS TO ALLOW THE OCCUPANTS TO ENJOY THE TABLE SPACE TOGETHER WITH THE FURNITURE A ND FIXTURES. FROM A PLAIN READING OF THE AGREEMENT IT APPEARS THAT THE INTENT ION OF THE PARTIES TO THE SAID AGREEMENT ARE CLEAR AND UNAMBIGUOUS BY WHICH T HE FIRST PARTY HAS ALLOWED THE SECOND PARTY TO ENJOY THE SAID TABLE SP ACE UPON PAYMENT OF THE COMPREHENSIVE MONTHLY RENT. AS DISCUSSED HEREINBEF ORE IT IS COMPOSITE TABLE SPACE LET OUT TO VARIOUS OCCUPANTS THE AMENITIES G RANTED TO THOSE OCCUPANTS INCLUDING THE USER OF THE FURNITURE AND FIXTURES AR E ATTACHED TO SUCH LETTING OUT. BY THE SAID AGREEMENT THE PARTIES HAVE INTEND ED THAT SUCH LETTING OUT WOULD BE AN INSEPARABLE ONE. HENCE THE PRIME OBJE CT OF THE ASSESSEE UNDER THE SAID AGREEMENT WAS TO LET OUT THE PORTION OF TH E SAID PROPERTY TO VARIOUS OCCUPANTS BY GIVING THEM ADDITIONAL RIGHT OF USING THE FURNITURE AND FIXTURE AND OTHER COMMON FACILITIES FOR WHICH RENT WAS BEIN G PAID MONTH BY MONTH IN ADDITION TO THE SECURITY ADVANCE COVERING THE ENTIR E COST OF THE SAID IMMOVABLE PROPERTY. IN VIEW OF THE FACTS AND LAW D ISCUSSED ABOVE THE INCOME DERIVED FROM THE SAID PROPERTY IS INCOME FRO M PROPERTY AND SHOULD BE ASSESSED AS SUCH. IN FACT THERE WAS A RELATIONSHIP OF LANDLORD AND TENANT BETWEEN ASSESSEE AND PERSONS WHO HIRED OFFICE ACCOM MODATION. 5 9. TURNING TO THE FACT OF THE CASE WE FIND THAT THE GODOWN WERE LET OUT ONLY TO A ONE TENANT I.E. VST INDUSTRIES LTD. AGAIN ST SOME INTEREST FREE DEPOSITS. IT IS RATHER MORE STRONG CASE IN FAVOUR OF THE REVENUE BECAUSE THE GODOWNS WERE LET OUT FOR A LONGER PERIOD ONLY TO A ONE TENANT AND THERE CANNOT BE ANY OTHER REASON FOR LETTING OUT THE PROP ERTY EXCEPT TO EARN A RENTAL INCOME OR INCOME FROM HOUSE PROPERTY. WE TH EREFORE FOLLOWING JUDGEMENT OF THE SHAMBHU INVESTMENT HOLD THAT RENTA L INCOME EARNED BY THE ASSESSEES FROM LETTING OUT OF GODOWNS IS AN INCOME FROM HOUSE PROPERTY. WE ACCORDINGLY SET ASIDE THE ORDER OF THE CIT(A) A ND RESTORE THAT OF THE A.O. 10. IN THE RESULT THE ITA NO.79 OF 2009 IS DISMISS ED AND ITA NOS.127 & 128 OF 2004 ARE ALLOWED. PRONOUNCED IN THE OPEN COURT ON 25.01.2010 SD/- SD/- (BR BASKARAN) (SUNIL KUMAR YADAV) ACCOUNTANT MEMBER JUDICIAL MEMBER VG/SPS VISAKHAPATNAM DATED 25 TH JANUARY 2010 COPY TO 1 THE ACIT CIRCLE-2(1) GUNTUR 2 M/S. UMA ENTERPRISES D.NO.24-17 HIGH SCHOOL ROA D CHILAKALURIPET GUNTUR DIST. 3 THE CIT GUNTUR 4 THE CIT(A) GUNTUR 5 THE DR ITAT VISAKHAPATNAM. 6 GUARD FILE. BY ORDER SENIOR PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM