M/s. Shalimar Exhibitors, Surat v. The Income tax Officer,Ward-2(1),, Surat

ITA 1647/AHD/2010 | 2003-2004
Pronouncement Date: 08-07-2010 | Result: Allowed

Appeal Details

RSA Number 164720514 RSA 2010
Bench Ahmedabad
Appeal Number ITA 1647/AHD/2010
Duration Of Justice 1 month(s) 21 day(s)
Appellant M/s. Shalimar Exhibitors, Surat
Respondent The Income tax Officer,Ward-2(1),, Surat
Appeal Type Income Tax Appeal
Pronouncement Date 08-07-2010
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted SMC
Tribunal Order Date 08-07-2010
Assessment Year 2003-2004
Appeal Filed On 18-05-2010
Judgment Text
- 1 - IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH SMC AHMEDABAD BEFORE SHRI D.C.AGRAWAL ACCOUNTANT MEMBER M/S SHALIMAR EXHIBITORS C/O RAJKUMAR THEATRE UDHNA DARWAJA RING ROAD SURAT. VS. INCOME-TAX OFFICER WARD 291) SURAT. (APPELLANT) .. (RESPONDENT) ASSESSEE BY :- SHRI K. K. SHAH AR REVENUE BY:- SHRI P. R. GHOSH DR O R D E R PER D. C. AGRAWAL ACCOUNTANT MEMBER . THESE ARE APPEALS FILED BY THE ASSESSEE RAISING CO MMON GROUNDS AS UNDER : ASST. YEAR 2003-04 (1) THE LD. CIT(A) ERRED IN CONFIRMING RENT INCOME OF RS.3 21 600/- AS INCOME FROM BUSINESS AND THEREBY E RRED IN REJECTING THE STANDARD DEDUCTION AVAILABLE UNDER TH E HEAD INCOME FROM HOUSE PROPERTY. (2) THE LD. CIT(A) ERRED IN CONFIRMING 20% DISALLOWANCE OUT OF TELEPHONE EXPENSES PETROL EXPENSES AND DEPRECIATIO N ON CAR FOR RS.23 511/- AS PER PARA 13.2 OF THE ORDER. ASST. YEAR 2004-05 (1) THE LD. CIT(A) ERRED IN CONFIRMING RENT INCOME OF R S.3 22 000/- AS INCOME FROM BUSINESS AND THEREBY ERRED IN REJECTING THE STANDARD DEDUCTION AVAILABLE UNDER THE HEAD INCOME FROM HOUS E PROPERTY. ITA NOS.1647 TO 1649/AHD/2010 ASST. YEARS :2003-04 2004-05 & 2006-07 2 (2) THE LD. CIT(A) ERRED IN CONFIRMING 20% DISALLOWANCE OUT OF TELEPHONE EXPENSES PETROL EXPENSES AND DEPRECIATIO N ON CAR FOR RS.19 882/- AS PER PARA 13.2 OF THE ORDER. ASST. YEAR 2006-07 (1) THE LD. CIT(A) ERRED IN CONFIRMING RENT INCOME OF R S.3 50 700/- AS INCOME FROM BUSINESS AND THEREBY ERRED IN REJECTING THE STANDARD DEDUCTION AVAILABLE UNDER THE HEAD INCOME FROM HOUS E PROPERTY. (2) THE LD. CIT(A) ERRED IN CONFIRMING 20% DISALLOWANCE OUT OF TELEPHONE EXPENSES PETROL EXPENSES AND DEPRECIATIO N ON CAR FOR RS.29 764/- AS PER PARA 13.2 OF THE ORDER. 2. THE FACTS OF THE CASE ARE THAT THE ASSESSEE OWNE D A THEATRE BUILDING GIVEN ON RENT. THE RENTAL INCOME WAS DECLARED UNDER THE HEAD INCOME FROM HOUSE PROPERTY. THE AO SOUGHT TO TAX THIS INC OME FROM LETTING OUT PART OF THE THEATRE BUILDING INCLUDING LETTING OF CANTEEN STALLS ETC. UNDER THE HEAD BUSINESS. THE LD. AR FOR THE ASSESSEE SU BMITTED FOLLOWING EXPLANATION:- MY CLIENT HAD EARNED RENT FOR RS.3 21 600/- ON LET TING OUT THE CERTAIN PART OF THE BUILDING DURING THE YEAR AND THEREFORE THE INCOME WAS SHOWN UNDER THE HEAD INCOME FROM HOUSE PROPERTY. KINDLY N OTE THAT THE SAID RENT DOES NOT INCLUDE ANY RENT ON LETTING OUT THE T HEATRE PORTION OF THE CINEMA BUILDING. IT IS FURTHER URGED THAT A SPECIFI C PORTION OF THE BUILDING WAS LET OUT AND RENT WAS EARNED ON MONTHLY BASE. IN VIEW OF THE HON. SUPREME COURT JUDGMENT IN THE CASE OF SHAMBHU INVES TMENT LTD. VS. CIT (2003) 263 ITR 143 SUCH INCOME OUGHT TO BE TAXED AS INCOME UNDER THE HEAD INCOME FROM HOUSE PROPERTY. AT THE MOST SOME PART OF DEPRECIATION ON BUILDING MAY BE DISALLOWED. ASSUMING BUT NOT ADMITTING IF SUCH INCOME IS TAXED UNDER THE HEAD INCOME FROM BUSINESS THAN THE PROPORTIONATE EXPENS ES RELATING TO EARNING OF INCOME OF RENT WHICH WAS ADDED IN THE CO MPUTATION OF INCOME AS NOT ALLOWABLE SHALL BE FULLY ALLOWABLE. THE AO HOWEVER DID NOT ACCEPT THE ABOVE EXPLANATI ON AND HELD THAT CINEMA BUILDING IS COMPOSITE STRUCTURE. THREE UNITS NAMELY HOTEL CANTEEN 3 AND STALL ARE PART AND PARCEL OF THE THEATRE BUILDI NG. THE ASSESSEE HAS ALSO CLAIMED DEPRECIATION ON ENTIRE CINEMA BUILDING AT N ORMAL RATE. IT HAS NOT EXCLUDED ANY PART OF THE BUILDING LET OUT FOR CANTE EN STALL ETC. THE AO ACCORDINGLY TAXED THE ENTIRE RENTAL INCOME UNDER TH E HEAD BUSINESS AND ALLOWED DEPRECIATION. 3. HE ALSO DISALLOWED 20% OF TELEPHONE EXPENSES CLA IMED BY THE ASSESSEE ON THE GROUND THAT ENTIRE EXPENDITURE WAS NOT INCURRED FOR BUSINESS PURPOSES. PART OF EXPENDITURE IS INCURRED FOR PERSONAL PURPOSES AS WELL. 4. THE LD. CIT(A) CONFIRMED THE ORDER OF THE AO IN TAXING RENTAL INCOME UNDER THE HEAD BUSINESS ON THE GROUND THA T INTENTION OF THE ASSESSEE IS NOT TO ACTUALLY LET OUT PROPERTY BUT TO DO BUSINESS THEREWITH. IT HAS A CINEMA COMPLEX WHICH IS CLEARLY A COMMERCIAL ASSET AND USED FOR THE PURPOSE OF BUSINESS AND PART OF THE PREMISES AR E LET OUT BY THE ASSESSEE WHOLLY AND SOLELY TO FURTHER PROVIDE SUPPO RT TO THE RUNNING OF THE MAIN BUSINESS I.E. CINEMA. THE RENTAL INCOME WAS EA RNED FROM VARIOUS STALLS AND SHOPS WHICH ARE LOCATED IN THE SAME BUIL DING. THIS IS A COMPLETE PACKAGE OF ENTERTAINMENT PROVIDED TO THE C USTOMERS. THE LD. CIT(A) RELIED ON THE DECISION OF HON. SUPREME COURT IN SHAMBHU INVESTMENT (P) LTD. VS. CIT (2003) 263 ITR 143 (SC) AND THAT OF MUMBAI BENCH OF THE ITAT IN THE CASE OF MARWAR TEXTILES (A GENCY) (P) LTD. VS. ITO MUMBAI 307 ITR 19 IN SUPPORT OF HIS JUDGMENT. 5. I HAVE HEARD THE LD. AR AND LD. DR AND CAREFULLY PERUSED THE MATERIAL ON RECORD. IN MY CONSIDERED VIEW THE MATTE R REQUIRES INVESTIGATION SO AS TO UNDERSTAND THE TERMS OF THE AGREEMENT BETWEEN THE ASSESSEE AND THE CINEMA OWNER(S) WHO HAVE HIRED THE THEATRE ON LEASE 4 FROM THE ASSESSEE. THIS WOULD SHOW THE INTENTION OF ASSESSEE AS TO WHETHER THE THEATRE IS GIVEN ON RENT TO A FIXED PER SON OR IT IS BEING RUN BY DIFFERENT EXHIBITORS FROM TIME TO TIME I.E. WHETHE R THE THEATRE IS GIVEN ON SHORT-TERM BASIS OR LONG TERM BASIS WHAT OTHER ITE MS IN ADDITION TO THE BUILDING ARE INCLUDED FOR WHICH RENT IS CHARGED WH ETHER RENT GIVEN IS COMPOSITE INCLUSIVE OF FURNITURE AND FIXTURES OR SE PARATE CHARGES TAKEN FOR FURNITURE AND FIXTURES. IN CASE WHERE BUILDING IS G IVEN TO EXHIBITOR ON SHORT TERM BASIS AND NEW EXHIBITOR COMES AFTER SHOR T TIME OR RENT IS COMPOSITE INCLUSIVE OF FURNITURE AND FIXTURES OR EV EN WHERE ASSESSEE IS BOUND TO PROVIDE CANTEEN SHOPS AND OTHER AMENITIES TO THE CUSTOMERS THEN RENTAL INCOME OF THE ASSESSEE WOULD BE ASSESSE D UNDER THE HEAD BUSINESS. THUS IN ORDER TO EXAMINE THE LEASE AGRE EMENT WITH THE EXHIBITOR AND WITH TEA STALL OR OTHER SHOPS RUNNERS MATTER IS RESTORED TO THE FILE OF AO. 6. SO FAR AS DISALLOWANCE AT 20% OF TELEPHONE EXPEN SES IS CONCERNED IT IS CONFIRMED BECAUSE THE ASSESSEE IS NOT ABLE TO PROVE THAT ENTIRE EXPENDITURE IS INCURRED FOR BUSINESS PURPOSES. THIS GROUND OF ASSESSEE IS REJECTED. 7. AS A RESULT APPEALS FILED BY THE ASSESSEE ARE A LLOWED BUT FOR STATISTICAL PURPOSES. ORDER WAS PRONOUNCED IN OPEN COURT ON 8/7/2010 SD/- (D.C.AGRAWAL) ACCOUNTANT MEMBER AHMEDABAD DATED : 8/7/2010 5 MAHATA/- COPY OF THE ORDER FORWARDED TO :- 1. THE ASSESSEE. 2. THE REVENUE. 3. THE CIT(APPEALS)- 4. THE CIT CONCERNS. 5. THE DR ITAT AHMEDABAD 6. GUARD FILE. BY ORDER DEPUTY / ASSTT.REGISTRAR ITAT AHMEDABAD