ITO-5(1)(4), MUMBAI v. M/S. ESSAR PROPERTIES LTD., MUMBAI

ITA 2534/MUM/2010 | 2006-2007
Pronouncement Date: 06-07-2011 | Result: Dismissed

Appeal Details

RSA Number 253419914 RSA 2010
Assessee PAN AAACE0893Q
Bench Mumbai
Appeal Number ITA 2534/MUM/2010
Duration Of Justice 1 year(s) 3 month(s) 5 day(s)
Appellant ITO-5(1)(4), MUMBAI
Respondent M/S. ESSAR PROPERTIES LTD., MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 06-07-2011
Appeal Filed By Department
Order Result Dismissed
Bench Allotted E
Tribunal Order Date 06-07-2011
Date Of Final Hearing 28-06-2011
Next Hearing Date 28-06-2011
Assessment Year 2006-2007
Appeal Filed On 01-04-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH E MUMBAI BEFORE SHRI D.K. AGARWAL (JM) & SHRI J. SUDHAKAR R EDDY (AM) I.T.A.NO.2534/MUM/2010 (A.Y. 2006-07) INCOME-TAX OFFICER-5(1)(4) R.NO.568/525 AAYKAR BHAVAN M.K. ROAD MUMBAI-400 020. VS. M/S. ESSAR PROPERTIES LTD. ESSAR HOUSE 11 K.K. MARG MAHALAXMI MUMBAI-400 034. PAN: AAACE0893Q APPELLANT RESPONDENT APPELLANT BY SHRI R.K. GUPTA. RESPONDENT BY SHRI V IJAY MEHTA. O R D E R PER D.K. AGARWAL JM : THIS APPEAL PREFERRED BY THE REVENUE IS DIRECTED A GAINST THE ORDER DATED 28-01-2010 PASSED BY THE LD. CIT(A) FOR THE ASSTT. YEAR 2006-07. 2. BRIEFLY STATED FACTS OF THE CASE ARE THAT THE AS SESSEE COMPANY IS ENGAGED IN THE BUSINESS OF LEASING PROPERTY MANAGEMENT SER VICES AND BUSINESS CENTRE FACILITIES. THE RETURN WAS FILED DECLARING NIL INCO ME. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE AO NOTED THAT THE ASSES SEE COMPANY HAS SHOWN LEASE INCOME ON ACCOUNT OF LEASE RENT OF ITS PREMIS ES AT RS.1 49 67 056/- AND LEASE INCOME OF PLANT & MACHINERY AT RS.72 00 000/- . AFTER CLAIMING ADMINISTRATIVE EXPENSES UNDER VARIOUS HEADS AMOUNTI NG TO RS.16 95 993/- FINANCE CHARGES AND DEPRECIATION NET PROFIT HAS BE EN ARRIVED AT RS.81 67 346/-. THE P & L ACCOUNT REVEALS THAT THE ASSESSEE COMPANY HAS CLAIMED LEASE RENT AS BUSINESS INCOME. IN VIEW OF THIS FACT THE ASSESSEE WAS ASKED VIDE QUESTIONNAIRE ITA NO.2534/M/2010 ESSAR PROPERTIES LTD. 2 DATED 17-09-2008 TO EXPLAIN AS TO WHY THE RENTAL IN COME FROM HOUSE PROPERTY SHOULD NOT BE TREATED AS INCOME FROM HOUSE PROPERT Y. IN RESPONSE THE ASSESSEE INTER ALIA SUBMITTED THAT THE LEASING OF PROPERTY ITSELF IS THE BUSINESS OF THE ASSESSEE COMPANY AND IS CONGRUENT WITH THE OBJECT CLAUSE IN THE MEMORANDUM OF ASSOCIATION OF THE COMPANY HENCE REN TAL INCOME SHOULD BE CHARGED UNDER THE HEAD INCOME FROM BUSINESS. IT W AS FURTHER SUBMITTED THAT THE TRIBUNAL IN THE ASSESSEES OWN CASE HAS DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE IN ITA NO.2328/M/04 FOR ASSTT. YEAR 1997-9 8 AND IN ITA NO.3464/M/05 FOR ASSTT. YEAR 2001-02 VIDE ORDER DATED 29-02-2008 .. THE ASSESSEE HAS ALSO RELIED ON VARIOUS DECISIONS IN SUPPORT OF ITS CLAIM . HOWEVER THE AO WHILE OBSERVING THAT IN THE EARLIER YEAR THE RENTAL INCOM E OF THE PROPERTY HAS BEEN ASSESSED UNDER THE HEAD INCOME FROM HOUSE PROPERTY RELIED ON THE DECISION OF THE HONBLE SUPREME COURT IN SHAMBOO INVESTMENT PVT . LTD. (263 ITR 143) (SC) AND HELD THAT PROPERTY INCOME IN RESPECT OF THE PRO PERTIES WHICH ARE OWNED BY THE ASSESSEE IS ASSESSED UNDER THE HEAD INCOME FR OM HOUSE PROPERTY AND AFTER ALLOWING DEDUCTION U/S.24 IN RESPECT OF REPAIRS @ 3 0% AND ALSO FINANCE CHARGES COMPUTED THE INCOME FROM HOUSE PROPERTY AT RS.61 2 1 511/- AND THEREBY COMPLETED THE ASSESSMENT ON A TOTAL INCOME OF NIL A FTER ALLOWING SET OFF OF UNABSORBED DEPRECIATION OF RS.1 66 97 023/- VIDE O RDER DATED 18-12-2008 PASSED U/S. 143(3) OF THE I.T. ACT 1961 (THE ACT ). ON APPEAL THE LD. CIT(A) FOLLOWING THE TRIBUNAL ORDERS IN THE ASSESSEES OWN CASE FOR THE ASSTT. YEARS 1997-98 AND 2001-02 HELD THAT THE RENTAL RECEIPTS OF THE APPELLANT ARE REQUIRED TO BE TAXED UNDER THE HEAD BUSINESS INCOME. HE FU RTHER HELD THAT SINCE THE RENTAL RECEIPTS ARE TO BE TAXED UNDER THE HEAD BUS INESS INCOME THE EXPENSES AS WELL AS DEPRECIATION IS REQUIRED TO BE ALLOWED. ITA NO.2534/M/2010 ESSAR PROPERTIES LTD. 3 3. BEING AGGRIEVED BY THE ORDER OF THE LD. CIT(A) THE REVENUE IS IN APPEAL BEFORE US TAKING THE FOLLOWING GROUNDS OF APPEAL : 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) HAS ERRED IN HOLDING THAT RENTAL INC OME OFRS.1 49 67 056/- SHOULD BE TREATED AS BUSINESS IN COME. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW THE LD. CIT(A) ERRED IN HOLDING THAT RENTAL EXPENSE S OF RS.49 06 358/- AND DEPRECIATION OF RS.71 74 271/- S HOULD BE ALLOWED SINCE THE INCOME HAS BEEN HELD TO BE TAX ABLE UNDER THE BUSINESS INCOME. 3. THE APPELLANT PRAYS THAT THE ORDER OF THE LD. CI T(A) BE SET ASIDE AND THE ORDER OF THE AO BE RESTORED. 4. AT THE TIME OF HEARING THE LD. D.R. SUPPORTS TH E ORDER OF THE AO. 5. ON THE OTHER HAND THE LD. COUNSEL FOR THE ASSES SEE WHILE RELYING ON THE ORDER OF THE LD. CIT(A) ALSO FILED THE COPIES OF T HE TRIBUNAL ORDERS FOR THE ASSTT. YEARS 1997-98 2001-02 AND 2005-06 WHEREIN THE TRIB UNAL HAS HELD THAT THE LEASING ACTIVITY OF THE ASSESSEE IS A BUSINESS ACTI VITY. IT WAS ALSO DIRECTED TO ALLOW THE OTHER INCIDENTAL EXPENSES SUCH AS ELECTRI CITY CHARGES SECURITY CHARGES AND REPAIRS OF THE BUILDING. HE THEREFORE SUBMITS THAT THE ORDER PASSED BY THE LD. CIT(A) BE UPHELD. 6. HAVING CAREFULLY HEARD THE SUBMISSIONS OF THE RI VAL PARTIES AND PERUS THE MATERIAL AVAILABLE ON RECORD WE FIND THAT THE FAC TS ARE NOT IN DISPUTE INASMUCH AS IT IS ALSO NOT IN DISPUTE THAT THE TRIBUNAL IN T HE ASSESSEES OWN CASE IN ESSAR PROPERTIES LTD. VS. JCIT AND VICE VERSA IN ITA NO.2 328/M/2004 3464/M/05 AND 2203/M/04 FOR THE ASSTT. YEARS 1997-98 AND 2001-02 ORDER DATED 29-02-2008 HAS ALLOWED THE APPEALS OF THE ASSESSEE AND DIRECTE D THE AO TO ASSESS THE RENTAL INCOME FROM LEASING ACTIVITY UNDER THE HEAD BUSINE SS INCOME. THE TRIBUNAL FURTHER ALLOWED DEPRECIATION ON BUILDING AS WELL AS EQUIPMENTS PROVIDED BY THE ASSESSEE AND ALSO DIRECTED THE AO TO ALLOW OTHER IN CIDENTAL EXPENSES SUCH AS ELECTRICITY CHARGES SECURITY CHARGES AND REPAIRS O F THE BUILDING. WE FURTHER FIND ITA NO.2534/M/2010 ESSAR PROPERTIES LTD. 4 THAT THE ABOVE ORDER HAS BEEN FOLLOWED BY THE TRIBU NAL IN THE REVENUES APPEAL FOR THE ASSTT. YEAR 2005-06 IN ITA NO.5852/M/09 ORD ER DATED 03-06-2011. IN THE ABSENCE OF ANY DISTINGUISHING FEATURE BROUGHT ON RE CORD BY THE REVENUE WE RESPECTFULLY FOLLOWING THE CONSISTENT VIEW OF THE T RIBUNAL HOLD THAT THE INCOME FROM LEASING ACTIVITY OF THE ASSESSEE IS ASSESSABLE UNDER THE HEAD INCOME FROM BUSINESS. CONSEQUENTLY WE ALSO ALLOW DEPRECIATION ON BUILDING AS WELL AS EQUIPMENTS PROVIDED BY THE ASSESSEE. THE AO IS FURT HER DIRECTED TO ALLOW OTHER INCIDENTAL EXPENSES SUCH AS ELECTRICITY CHARGES SE CURITY CHARGES AND REPAIRS OF THE BUILDING AND ACCORDINGLY THE ORDER PASSED BY TH E LD. CIT(A) ON THE ABOVE ISSUES DOES NOT CALL FOR ANY INTERFERENCE. THE GROU NDS TAKEN BY THE REVENUE ARE THEREFORE REJECTED. 7. IN THE RESULT THE REVENUES APPEAL STANDS DISMI SSED. ORDER PRONOUNCED ON THE 06TH DAY OF JULY 201 1. SD/- SD/- (J. SUDHAKAR REDDY) (D.K. AGARWAL) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI: 06TH JULY 2011. NG: COPY TO : 1. DEPARTMENT. 2.ASSESSEE. 3 CIT(A)-XXVII MUMBAI. 4 CIT CITY-3 MUMBAI. 5.DR B BENCH MUMBAI. 6.MASTER FILE. (TRUE COPY) BY ORDER ASST.REGISTRAR ITAT MUMBAI. ITA NO.2534/M/2010 ESSAR PROPERTIES LTD. 5 DETAILS DATE INITIALS DESIGNA TION 1. DRAFT DICTATED ON 28-06-11 SR.PS/ 2. DRAFT PLACED BEFORE AUTHOR 29-06- SR.PS/ 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER JM/ AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS SR.PS/ 6. KEPT FOR PRONOUNCEMENT ON SR.PS/ 7. FILE SENT TO THE BENCH CLERK SR.PS/ 8. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK 9. DATE ON WHICH FILE GOES TO THE AR 10. DATE OF DISPATCH OF ORDER