ACIT, CHENNAI v. Rainbow Foundations Limited, CHENNAI

ITA 1364/CHNY/2013 | 2006-2007
Pronouncement Date: 10-10-2013 | Result: Dismissed

Appeal Details

RSA Number 136421714 RSA 2013
Assessee PAN AAACR3089B
Bench Chennai
Appeal Number ITA 1364/CHNY/2013
Duration Of Justice 3 month(s) 23 day(s)
Appellant ACIT, CHENNAI
Respondent Rainbow Foundations Limited, CHENNAI
Appeal Type Income Tax Appeal
Pronouncement Date 10-10-2013
Appeal Filed By Department
Order Result Dismissed
Bench Allotted A
Tribunal Order Date 10-10-2013
Date Of Final Hearing 08-10-2013
Next Hearing Date 08-10-2013
Assessment Year 2006-2007
Appeal Filed On 17-06-2013
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH CHENNAI (BEFORE SHRI A.MOHAN ALANKAMONY ACCOUNTANT MEMBER AND SHRI CHALLA NAGENDRA PRASAD JUDICIAL MEMBER ) .. I.T.A. NO. 1363 & 1364/MDS/2013 ASSESSMENT YEARS : 2002-03 &2006-07 ASST. COMMISSIONER OF INCOME TAX COMPANY CIRCLE-V(3) FOURTH FLOOR MAIN BUILDING 121 N.H.ROAD CHENNAI. (APPELLANT) V. M/S.RAINBOW FOUNDATIONS LTD. 4 THANIKACHALAM ROAD CHENNAI 600 017. PAN : AAACR 3089 B (RESPONDENT) APPELLANT BY : SHRI SHAJI P JACOB ADDL. C.I.T. DR RESPONDENT BY : SHRI F.C.JA IN C.A. DATE OF HEARING : 08 .10.13 DATE OF PRONOUNCEMENT : 10.10.13 O R D E R PER A.MOHAN ALANKAMONY ACCOUNTANT MEMBER: BOTH THESE APPEALS ARE FIELD BY THE REVENUE AGGR IEVED BY THE ORDER OF LEARNED COMMISSIONER OF INCOME TAX(A) DATE D 22.02.2013 ITA NO. 1363 & 1364/MDS/13 2 FOR THE A.Y. 2002-03 & 2006-07 IN ITA NO.226 & 124/ 10-11 PASSED UNDER SECTION 143(3) R.W.S 263 OF THE ACT. 2. LEARNED D.R CONCEDED THAT FOR THE A.Y 2002-03 THOUGH FIVE GROUNDS WERE RAISED THE ONLY RELEVANT ISSUE WAS TH AT THE LEARNED COMMISSIONER OF INCOME TAX(A) HAD ERRED IN TREATING THE RENT RECEIVED FROM AGRICULTURAL LAND AS INCOME FROM A GRICULTURE WHILE AS IT OUGHT TO HAVE BEEN TAXED UNDER THE HEAD INCOME F ROM BUSINESS AS HELD BY THE LEARNED ASSESSING OFFICER. FURTHER LD . D.R CONCEDED THAT FOR THE A.Y.2006-07 OTHER THAN THE ABOVE MENT IONED GROUND ONE MORE RELEVANT GROUND WAS TO BE ADJUDICATED THA T THE LEARNED COMMISSIONER OF INCOME TAX(A) HAD ERRED IN TREATING THE INCOME RECEIVED BY LETTING OUT TWO PROPERTIES OF THE ASSES SEE HAS TO BE TAXED UNDER THE HEAD INCOME FROM HOUSE PROPERTY WHILE A S IT OUGHT TO HAVE BEEN TAXED UNDER THE HEAD INCOME FROM BUSINES S AS HELD BY THE LEARNED ASSESSING OFFICER. ITA NO. 1363 & 1364/MDS/13 3 3. GROUND NO.1:- INCOME FROM RENTING OUT THE AGRIC ULTURAL LAND FOR A.YS 2002-03 & 2006-07:- THE ASSESSEE IS ENGAGED IN THE BUSINESS OF DEVEL OPMENT OF APARTMENTS PROMOTION OF RESORTS AND LAYOUTS. IN I TS RETURN OF INCOME THE ASSESSEE HAD DECLARED AN AMOUNT OF ` 4.5 LAKHS AS AGRICULTURAL INCOME FOR THE A.Y 2002-03 AND ` 6 LAKHS FOR A.Y 2006-07 BEING THE LEASE AMOUNT RECEIVED FROM THE AGRICULTURAL LAND. BASED ON THE INTERVENTION OF LEARNED COMMISSIONER OF INCOME TAX UNDER SECTION 263 OF THE ACT THE LEARNED ASSESSING OFFICER TREAT ED THE ABOVE SAID AMOUNT RECEIVED BY THE ASSESSEE AS BUSINESS INCOME FOR BOTH THE YEARS BASED ON THE FOLLOWING FINDINGS: A. ASSESSEE DID NOT POSSESS ANY FIXED ASSETS RELAT ING TO AGRICULTURAL LAND. B. THE ASSESSEE HAD ASSETS ONLY IN THE FORM OF FLAT S CONSTRUCTED AND PROJECTS UNDER PROGRESS BEING A RESORT PROJECT. C. THE ASSESSEE HAD BEEN COMMERCIALLY EXPLOITING TH E RESORT PROJECT. 4. ON APPEAL LEARNED COMMISSIONER OF INCOME TAX(A ) DELETED THE ADDITION BASED ON HIS CONCLUSION THAT THE LEASE AMOUNT RECEIVED ITA NO. 1363 & 1364/MDS/13 4 FROM AGRICULTURAL LAND FALLS UNDER THE HEAD AGRICUL TURAL INCOME. THE FINDING OF THE LEARNED COMMISSIONER OF INCOME TAX(A ) IS REPRODUCED HEREIN BELOW FOR REFERENCE:- 6. I HAVE GONE THROUGH THE RIVAL CONTENTIONS. IT IS AN ADMITTED AND ACCEPTED FACT THAT INCOME GENERATED BY CARRYING OUT AGRICULT URAL OPERATIONS IS TO BE TREATED AS AGRICULTURAL INCOME IN THE HANDS OF THE TILLER A S WELL AS THE OWNER OF THE LAND. IN THIS GIVEN CASE ALL THE CERTIFICATES FILED BY TH E APPELLANT SUCH AS CERTIFICATE FROM THE VAO CHITTA ADANGAL AND THE LEASE AGREEMEN TS SUBSTANTIATE TO PROVE THAT THE INCOMES ARE DERIVED FROM THE AGRICULTURAL OPERATIONS CARRIED OUT IN THE LANDS BY THE LESSEE SHRI KUMARESAN AND THAT THE LAN DS ARE OWNED BY THE APPELLANT COMPANY. AS RIGHTLY ARGUED BY THE APPELL ANTS LEARNED AUTHORIZED REPRESENTATIVE IT IS IMMATERIAL WHETHER AGRICULTUR AL LANDS WERE SHOWN AS FIXED ASSETS OR CURRENT ASETS AS SUCH A TREATMENT WOULD N OT ALTER THE NATURE OF THE LANDS NOR THE INCOMES COMING THERE FROM. HENCE TH E LEARNED ASSESSING OFFICER IS DIRECTED TO TREAT THE INCOMES AS AGRICULTURAL IN COME IN BOTH THE AYS. ACCORDINGLY GROUND NO.1 IN BOTH THE YEARS IS TREAT ED AS ALLOWED IN FAVOUR OF THE ASSESSEE. 5. LD. A.R ARGUED BEFORE US REFERRING TO SE CTION 2(1A)(A) OF THE ACT BY STATING THAT THE ISSUE IS SQUARELY COVERED BY THE PROVISIONS OF THE ACT WHICH HAS EXPLICITLY PROVIDED THAT ANY RE NT OR REVENUE DERIVED FROM AGRICULTURAL LAND WHICH IS SITUATED IN INDIA WILL FALL UNDER ITA NO. 1363 & 1364/MDS/13 5 THE HEAD AGRICULTURAL INCOME. LD.DR ARGUED IN SUPP ORT OF THE REVENUE. 6. AFTER HEARING BOTH SIDES WE FIND MERIT IN THE C ONTENTION OF THE LD.AR. WE HEREIN BELOW REPRODUCED THE SECTION 2(1A )(A) OF THE ACT FOR REFERENCE. (1A) AGRICULTURAL INCOME MEANS - (A) ANY RENT FOR REVENUE DERIVED FROM LAND WHICH I S SITUATED IN INDIA AND IS USED FOR AGRICULTURAL PURPOSES; 7. FROM THE ABOVE IT IS EVIDENT THAT THE PROVI SION OF THE ACT CLEARLY STIPULATES THAT ANY RENT OR REVENUE DERIVED FROM LA ND WHICH IS SITUATED IN INDIA AND IF USED FOR AGRICULTURAL PURPOSE SUCH INCOME WILL FALL UNDER THE DEFINITION OF AGRICULTURAL INCOME AND THEREBY I S EXEMPT FROM TAX. THEREFORE WE DO NOT HAVE ANY HESITATION TO CONFIRM THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX(A) ON THIS I SSUE. THUS THIS GROUND RAISED BY THE REVENUE FOR BOTH TH E ASSESSMENT YEARS ARE DISMISSED. ITA NO. 1363 & 1364/MDS/13 6 6. GROUND NO.2 :- INCOME FROM HOUSE PROPERTY FOR T HE AY 2006- 07:- DURING THE COURSE OF ASSESSMENT PROCEEDINGS LEAR NED ASSESSING OFFICER OBSERVED THAT THE ASSESSEE HAD LE T OUT TWO BUILDING PREMISES ONE AT T.NAGAR CHENNAI AND THE OTHER AT ASHOK NAGAR CHENNAI FOR RS.5 60 710/- AND 3 36 000/- PER ANN UM RESPECTIVELY. THE ASSESSEE HAD SHOWN THE RENTAL INCOME UNDER THE HEAD INCOME FROM HOUSE PROPERTY. HOWEVER LEARNED ASSESSING OF FICER OPINED THAT SINCE THE ASSESSEE HAD CLASSIFIED THE ABOVE ME NTIONED PROPERTIES IN ITS BALANCE SHEET AS STOCK IN TRADE THE INCOME DERIVED FROM SUCH PROPERTY SHOULD BE TREATED AS INCOME DERI VED FROM BUSINESS AND ACCORDINGLY BROUGHT THE AMOUNT TO TAX. 7. HOWEVER ON APPEAL THE LEARNED COMMISSIONER O F INCOME TAX(A) HELD THAT SUCH RENTAL INCOME OUGHT TO BE TAX ED UNDER THE HEAD INCOME FROM HOUSE PROPERTY AND OBSERVED AS FOLLOWS :- 8. I HAVE GONE THROUGH THE FACTS OF THE CASE AND IT IS NOTICEABLE THAT THE PROPERTIES ARE OWNED BY THE ASSESSEE COMPANY AN D THEY WERE GIVEN ON RENT. ONCE THE RENTAL INCOMES ARE RECEIVED FROM THE RENTING OF A PROPERTY THE NATURE OF THEIR ACQUISITION IS IMMATER IAL AND SUCH INCOMES ARE TO BE ASSESSED AS INCOMES FROM HOUSE PROPERTY ALONE WITH ALL THE ITA NO. 1363 & 1364/MDS/13 7 DEDUCTIONS AND ALLOWANCES. ACCORDINGLY IT IS DIRE CTED THAT THE INCOME TO BE TREATED AS RENTAL INCOMES WITH DEDUCTIONS AND AL LOWANCES AS ELIGIBLE. 8. LD. D.R ARGUED IN SUPPORT OF THE LEARNED ASSESS ING OFFICER WHEREAS LD.AR RELIED ON THE ORDER OF LEARNED COMMIS SIONER OF INCOME TAX(A) AND PLEADED THAT THE ORDER OF THE LEA RNED COMMISSIONER OF INCOME TAX(A) MAY BE CONFIRMED. 9. WE HAVE HEARD BOTH SIDES AND PERUSED THE MATERI ALS ON RECORD CAREFULLY. SECTION 22 OF THE ACT EXPLICITLY MAKE I T CLEAR THAT ANY RENTAL INCOME DELIVERED FROM PROPERTY CONSISTS OF BUILDING OWNED BY THE ASSESSEE SHALL BE BROUGHT TO TAX UNDER THE HEAD IN COME FROM HOUSE PROPERTY. THE PROVISION OF THE ACT IS REPRODUCED HEREIN BELOW FOR REFERENCE:- SEC.22. THE ANNUAL VALUE OF PROPERTY CONSISTING O F ANY BUILDINGS OR LANDS APPURTENANT THERETO OF WHICH THE ASSESSEE IS THE OWNER OTHER THAN SUCH PORTIONS OF SUCH PROPERTY AS HE MAY OCCUPY FOR THE PURPOSES OF ANY BUSINESS OR PROFESSION CARR IED ON BY HIM THE PROFITS OF WHICH ARE CHARGEABLE TO INCOME TAX SHAL L BE CHARGEABLE TO INCOME-TAX UNDER THE HEAD INCOME FROM HOUSE PROPER TY. CONSIDERING THE FACTS OF THE CASE AND PROVISIONS OF THE ACT WHICH EXPLICITLY MAKES IT CLEAR THAT RENT RECEIVED FROM A NY PROPERTY ITA NO. 1363 & 1364/MDS/13 8 CONSISTING OF BUILDINGS AND LAND APPURTENANT THERET O SHALL BE TAXED UNDER THE HEAD INCOME FROM HOUSE PROPERTY WE DO NOT HAVE ANY HESITATION TO CONFIRM THE ORDER OF THE LEARNED COMM ISSIONER OF INCOME TAX(A) ON THIS ISSUE ALSO. THUS THIS GROUN D RAISED BY REVENUE FOR THE A.Y 2006-07 IS DISMISSED. 10. IN THE RESULT THE APPEALS OF THE REVENUE ARE D ISMISSED. ORDER PRONOUNCED ON 10 TH OCTOBER 2013 AT CHENNAI. SD/- SD/- ( CHALLA NAGENDRA PRASAD ) ( A.MOHAN ALANKAMONY ) JUDICIAL MEMBER ACCOUNTANT MEMBER CHENNAI DATED THE 10 TH OCTOBER 2013. K S SUNDARAM. COPY TO: ASSESSEE/AO/CIT (A)/CIT/D.R./GUARD FILE