Green Farm House, CHENNAI v. DCIT, CHENNAI

ITA 203/CHNY/2011 | 2005-2006
Pronouncement Date: 09-09-2011 | Result: Partly Allowed

Appeal Details

RSA Number 20321714 RSA 2011
Assessee PAN AABEG9254D
Bench Chennai
Appeal Number ITA 203/CHNY/2011
Duration Of Justice 7 month(s)
Appellant Green Farm House, CHENNAI
Respondent DCIT, CHENNAI
Appeal Type Income Tax Appeal
Pronouncement Date 09-09-2011
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted A
Tribunal Order Date 09-09-2011
Date Of Final Hearing 11-08-2011
Next Hearing Date 11-08-2011
Assessment Year 2005-2006
Appeal Filed On 09-02-2011
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH CHENNAI BEFORE SHRI U.B.S. BEDI JUDICIAL MEMBER AND SHRI ABRAHAM P. GEORGE ACCOUNTANT MEMBER I.T.A. NO. 203/MDS/2011 (ASSESSMENT YEAR : 2005-06) M/S GREEN FARM HOUSE 18 BALAMUTHUKRISHNAN STREET T. NAGAR CHENNAI 600 017. PAN : AABEG9254D (APPELLANT) V. THE DEPUTY COMMISSIONER OF INCOME TAX CENTRAL CIRCLE II(2) CHENNAI 600 034. (RESPONDENT) APPELLANT BY : SHRI G. NARAYANASAMY RESPONDENT BY : SHRI SHA JI P. JACOB DATE OF HEARING : 11.08.2011 DATE OF PRONOUNCEMENT : 09.09.2011 O R D E R PER ABRAHAM P. GEORGE ACCOUNTANT MEMBER : IN THIS APPEAL FILED BY THE ASSESSEE FOLLOWING GR OUNDS HAVE BEEN TAKEN:- (1) THE CIT(A) ERRED BOTH IN LAW AND ON THE FACTS OF THE CASE IN HOLDING THE AMENITIES OF RS.12 20 000 A S INCOME FROM OTHER SOURCES. (2) HE SHOULD HAVE APPRECIATED THAT THE LEASE DEED WAS A COMPOSITE ONE AND THAT THEREFORE AMENITIES OF I.T.A. NO. 203/MDS/11 2 RS.12 20 000 SHOULD ALSO HAVE BEEN ASSESSED AS INCOME FROM PROPERTY. (3) WITH PREJUDICE TO THE ABOVE THE APPELLANT PRAYS THAT IF THE AMENITIES ARE ASSESSED UNDER OTHER SOURCES DEPRECIATION SHOULD BE ALLOWED IN RESPECT OF LEASED ASSETS. (4) THE APPELLANT THEREFORE PRAYS THAT THE AMENITIES CHARGES RECEIVED MAY BE TREATED AS INCOME FROM PROPERTY . 2. FACTS APROPOS ARE THAT ASSESSEE HAD FILED RETURN FOR THE IMPUGNED ASSESSMENT YEAR DISCLOSING INCOME OF ` 25 20 000/- UNDER THE HEAD INCOME FROM HOUSE PROPERTY. THE RETURN ORIGINALLY PROCESSED UNDER SECTION 143(1) OF INCOME-TAX ACT 1 961 (IN SHORT THE ACT) WAS LATER SUBJECTED TO A REOPENING. ASS ESSEE HAD LEASED OUT A PROPERTY AT 3/178 EAST COAST ROAD VETTUVANK ANI CHENNAI-41 TO M/S APOLLO HOSPITALS & ENTERPRISES LTD. AND FOR THIS PURPOSE IT HAD ENTERED INTO TWO AGREEMENTS WITH THE SAID HOSPITAL. ONE WAS FOR THE PURPOSE OF HIRING OUT THE PROPERTY AND THE OTHER WA S FOR THE PURPOSE OF LEASING OUT AMENITIES. ASSESSEE CONSIDERED THE WHOLE OF THE AMOUNT THAT WAS RECEIVED FROM M/S APOLLO HOSPITALS & ENTERPRISES LTD. BASED ON THE ABOVE AGREEMENTS AS INCOME FROM HOUSE PROPERTY. HOWEVER THE ASSESSING OFFICER WAS OF T HE OPINION THAT THE INCOME RECEIVED FROM AMENITIES COULD BE CONSIDERED ONLY UNDER THE HEAD INCOME FROM OTHER SOURCES. THE RESULT WAS T HAT THE RECEIPT OF I.T.A. NO. 203/MDS/11 3 ` 12 20 000/- OUT OF A TOTAL SUM OF ` 36 40 000/- WAS CONSIDERED UNDER THE HEAD INCOME FROM HOUSE PROPERTY. FROM STATEMENT OF FACTS FILED BY THE ASSESSEE BEFORE CIT(APPEALS) IT SEEMS ASSESSEE HAD REQUESTED THE ASSESSING OFFICER TO ALLOW DEPREC IATION IF THE INCOME FROM AMENITIES WAS TO BE CONSIDERED UNDER TH E HEAD INCOME FROM OTHER SOURCES. HOWEVER THIS WAS NOT DONE. 3. ASSESSEE IN ITS APPEAL BEFORE LD. CIT(APPEALS) A RGUED AS UNDER:- (A) FOR THE ASSESSMENT YEAR 2005-06 THE APPELLANT H AD LET OUT A PROPERTY AT 3/178 EAST COAST ROAD VETTUVANKA NI CHENNAI- 41 TO M/S APOLLO HOSPITALS & ENTERPRISES LTD. ON A ANNUAL RENT OF ` 36 40 000/- WHICH INCLUDES ` 12 20 000/- TOWARDS AMENITIES IN PURSUANCE OF A AGREEMENT FOR LEASE AND AGREEMENT FOR AMENITIES DATED 01.02.2003 AND 01.02.2003 RESPECTI VELY (COPIES OF THE AGREEMENTS ARE ENCLOSED FOR YOUR READY REFEREN CE). THE APPELLANT OFFERED THE ENTIRE SUM OF ` 36 40 000/- TO TAX AS INCOME FROM HOUSE PROPERTY. (B) HOWEVER THE ASSESSING OFFICER HAS ASSESSED A S UM OF ` 24 20 000/- AS INCOME FROM HOUSE PROPERTY AND A SU M OF ` 12 20 000/- UNDER OTHER SOURCES. AS A RESULT TH E ASSESSING OFFICER HAS DENIED THE RELIEF U/S 24 IN RESPECT OF AMENITIES. (C) BOTH THESE AGREEMENTS ARE COMPOSITE IN NATURE A S IT COULD BE SEEN THAT THE TERMINATION OF ONE AGREEMENT TERMI NATES THE OTHER ONE. THE AMENITIES REFERRED TO ALSO CONSISTS ONLY NORMAL ELECTRICAL FITTINGS AND FURNITURE IN THE BUILDING. I.T.A. NO. 203/MDS/11 4 (D) THE AMENITIES REFERRED TO ALSO CONSISTS ONLY NOR MAL ELECTRICAL FITTINGS AND FURNITURE VIZ. AIR CONDITI ONERS REFRIGERATORS ETC. ATTACHED TO THE PROPERTY. (E) CLAUSE 7(D) OF THE AGREEMENT FOR AMENITIES SPEC IFICALLY STATES THAT THE AGREEMENT FOR AMENITIES WAS CO-TERM INUS WITH THE LEASE DEED AND ANY DEFAULT IN THE PAYMENT OF AMEN ITIES WOULD BE CONSIDERED AS DEFAULT IN PAYMENT OF RENT. (F) THE TENANT HAS BEEN DEDUCTING TAX AS IF IT WERE INCOME FROM HOUSE PROPERTY. IN SUPPORT OF THE SUBMISSIONS THE FOLLOWING DECISI ONS ARE RELIED UPON:- 1. ORIENTAL ENTERPRISES V. ITO (35 ITD 462) (ITAT MADR AS) 2. PUSHPA SEN GUPTA V. SUSMA GHOSE (1990) (2 SCC 651) (SC) 3. CIT V. BHAKTAWAR CONSTRUCTION PR. LTD. (162 ITR 452 ) (BOMBAY) 4. DR. P.A. VARGHESE V. CIT (80 ITR 180) (KER) 5. KEYARAM HOTELS P. LTD. V. ACIT (300 ITR 118) (MADRA S) 6. CIT V. MCLEOD & CO. LTD. (203 ITR 290) (CAL) 7. CIT V. NATIONAL STORAGE PRIVATE LTD. (66 ITR 596) ( SC) 8. ADDL. CIT V. HINDUSTAN MACHINE TOOLS LTD. (121 ITR 798) (KER) CRUX OF THE ABOVE CONTENTIONS OF THE ASSESSEE WAS T HAT THE AMENITIES AGREEMENT AND THE AGREEMENT FOR RENTING OUT OF THE BUILDING WAS TO BE CONSIDERED ON A COMPOSITE MANNER AND AMENITIES W ERE ONLY NORMAL ELECTRICAL AND OTHER FITTINGS ATTACHED THERE IN. FURTHER AS PER THE ASSESSEE IN THE ASSESSMENTS DONE FOR ASSESSMEN T YEARS 2004- 05 AND 2006-07 SUCH INCOME WAS CONSIDERED ONLY UND ER THE HEAD INCOME FROM HOUSE PROPERTY. ASSESSEE ALSO SUBMIT TED THAT DEPRECIATION OUGHT HAVE BEEN ALLOWED ON THE AMENITI ES HIRED OUT I.T.A. NO. 203/MDS/11 5 THROUGH A AMENITIES AGREEMENT IF IT WAS CONSIDERED UNDER THE HEAD INCOME FROM OTHER SOURCES. 4. HOWEVER LD. CIT(APPEALS) WAS NOT IMPRESSED. AC CORDING TO HIM THOUGH THE AGREEMENTS FOR THE AMENITIES AND FO R THE BUILDING WERE CO-TERMINUS WITH EACH OTHER THEY WERE SEPARAT E AND SUCH SEPARATE AGREEMENTS COULD NOT BE CONSIDERED AS ONE. AS PER THE LD. CIT(APPEALS) THE AMENITIES SUCH AS FANS TUBE LIGH T FITTINGS AIR- CONDITIONERS ETC. HAD NOTHING TO DO WITH THE BUILD ING AS SUCH. JUST BECAUSE THE LESSEE HAD DEDUCTED TAX AS APPLICABLE T O PAYMENT OF RENT IT WOULD NOT CONVERT AMENITIES CHARGES TO INC OME FROM HOUSE PROPERTY. WITH REGARD TO THE VARIOUS DECISIONS REL IED ON BY THE ASSESSEE THE OBSERVATION OF LD. CIT(APPEALS) WAS A S UNDER:- 9. ON THE FACTS OF THE APPELLANTS CASE NONE OF TH E CASE LAWS CITED BY THE APPELLANT SUPPORT THE APPELLANTS CASE. THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF PUSHPA SEN GUPTA V. SUSMA GHOSE (1990) (2 SCC 651) IS IN THE CONTEXT OF RENT CONTROL LEGISLATION AND IN THE CONTEXT OF EVICTION OF A DEF AULTER. THE DECISION OF THE HON'BLE SUPREME COURT IN CIT V. NAT IONAL STORAGE PRIVATE LTD. (66 ITR 596) IS WITH REFERENCE TO COMP UTATION OF INCOME AS INCOME FROM BUSINESS OR PROFESSION. TH E HON'BLE MADRAS HIGH COURT IN THE CASE OF KEYARAM HOTELS PVT. LTD. V. ACIT (300 ITR 118) HELD THAT NO PRECISE TEST CAN B E LAID DOWN TO ASCERTAIN WHETHER INCOME RECEIVED BY AN ASSESSEE FRO M LEASING OR LETTING OUT THE ASSETS WOULD FALL UNDER THE HEAD PROFITS AND GAINS OF BUSINESS OR PROFESSION OR UNDER THE HEAD INCOME FROM I.T.A. NO. 203/MDS/11 6 HOUSE PROPERTY. THE DECISION OF HON'BLE MADRAS HI GH COURT IN THE CASE OF CIT V. L.G. RAMAMURTHY WAS WITH REFERENC E TO APPEALS BEFORE ITAT AND THE METHOD TO BE FOLLOWED I N CASE ON THE SAME SET OF FACTS A DIFFERENT CONCLUSION IS ARR IVED AT. EXCEPT STATING THAT IN ASST. YEAR 2004-05 AND ASST. YEAR 2006- 07 THE INCOME WAS ASSESSED UNDER INCOME FROM HOUS E PROPERTY AS RETURNED THE APPELLANT HAS NOT SHOWN AS TO WHIC H WERE THE FACTS CONSIDERED IN THOSE YEARS AND HAS NOT DEMONSTR ATED THAT THEY ARE THE SAME AS THE FACTS IN ASST. YEAR 2005-06 . HE THUS UPHELD THE ORDER OF A.O. THAT THE RENTALS FOR THE AMENITIES WERE TO BE CONSIDERED UNDER THE HEAD INCOME FROM O THER SOURCES. NEVERTHELESS HE GAVE LIBERTY TO THE ASSESSEE TO CL AIM DEPRECIATION THROUGH AN APPLICATION MADE UNDER SECTION 154 OF TH E ACT TO THE ASSESSING OFFICER. 5. NOW BEFORE US LEARNED A.R. PRIMARILY POINTED OU T THAT IN EARLIER AS WELL AS SUBSEQUENT YEAR SUCH LEASE AMOUNTS RECE IVED FOR THE AMENITIES WERE CONSIDERED ONLY UNDER THE HEAD INCO ME FROM HOUSE PROPERTY IN ASSESSMENTS COMPLETED UNDER SECTION 1 43(3) OF THE ACT. ACCORDING TO HIM AMENITIES WERE ATTACHED TO THE PR OPERTY AND ALL THE DETAILS OF SUCH AMENITIES WERE AVAILABLE IN THE AGR EEMENT. RELYING ON PAPER-BOOK PAGE 13 LEARNED A.R. POINTED OUT THA T THE AMENITIES PROVIDED IN THE PREMISES WERE TABLES CHAIRS REFRI GERATORS AIR- CONDITIONERS CEILING FANS CUB-BOARDS ETC. AND TH ESE COULD BE I.T.A. NO. 203/MDS/11 7 CONSIDERED ONLY AS INTEGRAL PART OF THE BUILDING. AS PER THE LEARNED A.R. JUST BECAUSE THERE WERE TWO AGREEMENTS RENT ARISING FROM BUILDING AND LAND APPURTENANT THERETO WOULD NOT BEC OME INCOME FROM OTHER SOURCES AND BUILDING INCLUDED FITTINGS THEREI N AS WELL. IN ANY CASE ACCORDING TO HIM THE ASSESSING OFFICER OUGHT HAVE ALLOWED DEPRECIATION ON THE ASSETS IF INCOME FROM AMENITIES WERE TO BE CONSIDERED UNDER THE HEAD INCOME FROM OTHER SOURCE S. 6. PER CONTRA LEARNED D.R. SUBMITTED THAT ONCE BIF URCATION IS AVAILABLE BETWEEN AMENITIES AND BUILDING RENTED OUT THEN THE FORMER COULD BE CONSIDERED ONLY UNDER THE HEAD INCOME FRO M OTHER SOURCES. RELYING ON SECTION 22 OF THE ACT LEARNE D D.R. SUBMITTED THAT ONLY ANNUAL VALUE OF PROPERTY COMPRISING OF BU ILDING AND LAND APPURTENANT THERETO ALONE COULD BE CONSIDERED UNDER THE HEAD INCOME FROM HOUSE PROPERTY. AS REGARDS DEPRECIAT ION LEARNED D.R. SUBMITTED THAT THERE WAS NO SUCH CLAIM EVER MADE BY THE ASSESSEE BEFORE THE ASSESSING OFFICER AND THEREFORE NO SUCH DIRECTION COULD BE GIVEN AT THIS STAGE. 7. IN REPLY LEARNED A.R. MAINLY RELYING ON THE DE CISION OF CO- ORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF ORIE NTAL ENTERPRISES I.T.A. NO. 203/MDS/11 8 (SUPRA) SUBMITTED THAT WHEN THE INTENTION OF THE P ARTIES WAS FOR INSEPARABLE LETTING OUT OF BUILDING AND AMENITIES THERE COULD NOT BE ANY BIFURCATION OF THE RENTAL INCOME. 8. WE HAVE PERUSED THE ORDERS AND HEARD THE RIVAL C ONTENTIONS. THERE IS NO DISPUTE THAT THERE WERE TWO AGREEMENTS ENTERED INTO BY THE ASSESSEE BOTH DATED 1 ST FEBRUARY 2003. THE FIRST WAS A LEASE AGREEMENT FOR LEASING OUT THE LAND AND BUILDING FOR A PERIOD OF TEN YEARS. THE SECOND AGREEMENT WAS FOR HIRING OUT THE AMENITIES IN THE SAID BUILDING. BOTH THESE AGREEMENTS WERE ENTERED ON THE SAME DATE WITH THE SAME PARTY. NEVERTHELESS THE AMENITIES W HICH WERE HIRED OUT AS LISTED OUT AT PAGE NO.5 OF THE RELEVANT AGRE EMENT RUN AS UNDER:- 1. TABLES 2. CHAIRS 3. SOFA SETS 4. REFRIGERATORS 5. GEYSERS / WATER HEATERS 6. AIR CONDITIONERS 7. CELING FANS / TABLE FANS WALL MOUNT FANS. 8. CROCKERY SET 9. CUB-BOARDS FIXTURES AND FITTINGS 10. LAMPSHADES 11. TUBE LIGHTS AND LIGHT FITTINGS 12. TELEVISION I.T.A. NO. 203/MDS/11 9 THE ITEMS MENTIONED ABOVE WERE NEVER CONSIDERED BY THE PARTIES IN THE AGREEMENT AS INTEGRAL TO THE BUILDING. IF THE ABOVE ITEMS WERE CONSIDERED INTEGRAL TO THE BUILDING ASSESSEE WOULD NOT HAVE ENTERED INTO TWO SEPARATE AGREEMENTS. THEY WOULD HAVE IN ALL PROBABILITY LEASED OUT THE BUILDING ALONG WITH THE AMENITIES AT TACHED TO IT THROUGH A SINGLE AGREEMENT. THE FACT THAT ASSESSEE ENTERED INTO A SEPARATE AGREEMENT FOR AMENITIES WOULD CLEARLY SHO W THAT SUCH ITEMS WERE NOT PART OF THE BUILDING. NONE OF THE I TEMS GIVEN AT THE TABLE ABOVE CAN BE CONSIDERED AS INTEGRAL TO THE BU ILDING. ASSESSEE ITSELF TREATED SUCH ITEMS SEPARATELY AND ITSELF CAL LED THE AGREEMENT AS AGREEMENT FOR HIRE. WE CANNOT IN SUCH CIRCUMSTANC ES SAY THAT THE RENTAL OR INCOME ARISING FROM SUCH HIRING OUT WOULD BE INCOME FROM HOUSE PROPERTY. WHAT CAN COME UNDER THE HEAD INCO ME FROM HOUSE PROPERTY IS CLEARLY SPECIFIED UNDER SECTION 22 OF THE ACT AND THESE ARE ONLY RENTALS FROM BUILDING AND LAND APPURTENANT THERETO. AS FOR THE RELIANCE PLACED BY THE ASSESSEE ON THE DECISION OF CO-ORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF ORIENTAL ENTE RPRISES (SUPRA) THERE LETTING OUT OF THE BUILDING WAS ALONG WITH TH E CENTRAL AIR- CONDITIONING SYSTEM AND THERE WAS NO SEPARATE AGREE MENT FOR AMENITIES. IT WAS FOR THIS REASON THAT CO-ORDINAT E BENCH OF THIS I.T.A. NO. 203/MDS/11 10 TRIBUNAL HELD RENTAL AMOUNT TO BE ASSESSABLE UNDER THE HEAD INCOME FROM HOUSE PROPERTY. AS AFORESAID THE FACTS HERE ARE ENTIRELY DIFFERENT. ASSESSEE CALLED THE FIRST AGREEMENT AS LEASE AGREEMENT AND SECOND AGREEMENT FOR AMENITIES AS AGREEMENT FO R HIRING OUT. CLAUSE (2) OF THE SAID AGREEMENT REPRODUCED HEREUN DER WOULD CLEARLY BRING OUT THIS:- 2. THE AMENITIES HEREBY HIRED SHALL BE FOR A PERIO D OF 10 YEARS COMMENCING FROM 1 ST FEBRUARY 2003 TO 31 ST JANUARY 2013. THIS AGREEMENT FOR HIRE MAY BE RENEWED AT THE OPTION OF THE FIRST PARTY FOR A FURTHER PERIOD IN ACCORDANC E WITH THE TERMS AND CONDITIONS TO BE MUTUALLY AGREED AND DECID ED UPON BY BOTH THE PARTIES THERETO FOR WHICH A SEPARATE AGREE MENT FOR AMENITIES WILL BE EXECUTED NOT LATER THAN MONTHS BE FORE THE EXPIRY OF THIS AGREEMENT. WE ARE THEREFORE OF THE OPINION THAT THE AUTHORIT IES BELOW WERE WELL JUSTIFIED IN TREATING THE INCOME RECEIVED ON HIRING OUT THE AMENITIES AS INCOME FROM OTHER SOURCES. BUT NEVERTHELESS WE FIND CONSIDERABLE FORCE IN THE CONTENTION OF LEARNED A.R. THAT DEPREC IATION HAS TO BE ALLOWED ON SUCH ASSETS WHICH WERE HIRED OUT WHEN T HE RENTAL INCOME IS CONSIDERED UNDER THE HEAD INCOME FROM OTHER SOU RCES. SINCE ASSESSEE HAD ADMITTED THE TOTAL RECEIPTS UNDER THE HEAD INCOME FROM HOUSE PROPERTY THERE WAS NO OPPORTUNITY FOR CLAIMING SUCH DEPRECIATION BEFORE THE ASSESSING OFFICER IN THE FI RST INSTANCE. WHEN I.T.A. NO. 203/MDS/11 11 IT CAME TO KNOW THAT ASSESSING OFFICER CONSIDERED S UCH INCOME FROM AMENITIES UNDER THE HEAD INCOME FROM OTHER SOURCES IT HAD EVERY RIGHT TO CLAIM THE DEPRECIATION. DEPRECIATION BEIN G A STATUTORY ALLOWANCE WE ARE OF THE OPINION THAT IF THE ASSESS EE IS ABLE TO PRODUCE REQUIRED EVIDENCE DEPRECIATION WILL HAVE T O BE GRANTED TO IT. THEREFORE WHILE HOLDING THAT LOWER AUTHORITIES WER E JUSTIFIED IN CONSIDERING THE INCOME ARISING FROM HIRING OUT THE AMENITIES UNDER THE HEAD INCOME FROM OTHER SOURCES WE DIRECT THE A.O. TO CONSIDER THE CLAIM OF THE ASSESSEE FOR DEPRECIATION SINCE IT IS A STATUTORY ALLOWANCE DUE TO IT IF PROPER EVIDENCE IN THIS REG ARD IS PRODUCED. ORDERED ACCORDINGLY. 9. IN THE RESULT THE APPEAL FILED BY THE ASSESSEE IS TREATED AS PARTLY ALLOWED FOR STATISTICAL PURPOSES. THE ORDER WAS PRONOUNCED IN THE COURT ON 9 TH SEPTEMBER 2011. SD/- SD/- (U.B.S. BEDI) (ABRAHAM P. GEORGE) JUDICIAL MEMBER ACCOUNTANT MEMBER CHENNAI DATED THE 9 TH SEPTEMBER 2011. KRI. I.T.A. NO. 203/MDS/11 12 COPY TO: (1) APPELLANT (2) RESPONDENT (3) CIT(A)-II CHENNAI-34 (4) CIT CENTRAL-II CHENNAI (5) D.R. (6) GUARD FILE