ASST CIT 20(1), MUMBAI v. BRILLANTO TEXTILES MILLS, MUMBAI

ITA 4764/MUM/2010 | 2006-2007
Pronouncement Date: 27-07-2011 | Result: Dismissed

Appeal Details

RSA Number 476419914 RSA 2010
Assessee PAN AAKPK4022G
Bench Mumbai
Appeal Number ITA 4764/MUM/2010
Duration Of Justice 1 year(s) 1 month(s) 17 day(s)
Appellant ASST CIT 20(1), MUMBAI
Respondent BRILLANTO TEXTILES MILLS, MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 27-07-2011
Appeal Filed By Department
Order Result Dismissed
Bench Allotted J
Tribunal Order Date 27-07-2011
Assessment Year 2006-2007
Appeal Filed On 09-06-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL 'J' BENCH MUMBAI BEFORE SHRI R.S. PADVEKAR JUDICIAL MEMBER AND SHRI B. RAMAKOTAIAH ACCOUNTANT MEMBER ITA NO. 4764/MUM/2010 (ASSESSMENT YEAR: 2006-07) A C I T - 20(1) M/S. BRILLANTO TEXTILES MILLS ROOM NO. 603 6TH FLOOR BRILLANTO HOUSE PLOT NO. 6 1 PIRAMAL CHAMBER PAREL VS. MIDC ROAD NO. 13 ANDHERI (E) MUMBAI 400012 MUMBAI 400093 PAN - AAKPK 4022 G APPELLANT RESPONDENT APPELLANT BY: SHRI S.K. SINGH RESPONDENT BY: SHRI A.K. LAL O R D E R PER B. RAM AKOTAIAH A.M. THIS APPEAL BY THE REVENUE IS AGAINST THE ORDER OF THE CIT(A) XXX1 MUMBAI DATED 18.03.2010 IN WHICH THE REVENUE HAS RA ISED THE FOLLOWING TWO GROUNDS: - I. THE LD. CIT(A) HAS ERRED ON FACTS AND IN LAW AN D IN THE CIRCUMSTANCES OF THE CASE IN DIRECTION THE ASSESSIN G OFFICER TO ASSESS THE ENTIRE STUDIO HIRE CHARGES RECEIVED AS B USINESS INCOME OF THE ASSESSEE. II. THE LD. CIT(A) HAS ERRED ON FACTS AND IN LAW AN D IN THE CIRCUMSTANCES OF THE CASE IN ALLOWING THE APPEAL OF THE ASSESSEE BY HOLDING THAT THE INCOME FROM STUDIO HIRE CHARGES HAS BEEN TREATED AS BUSINESS INCOME IN EARLIER YEARS AS IT IS NOT MANDATORY ON THE ASSESSING OFFICER TO TAKE THE SAME VIEW TAKEN BY HIS PREDECESSOR. FURTHER HE FAILED TO OBSERVE TH AT INCOME RECEIVED FROM STUDIO HIRE CHARGES HAS ALL THE CHAR ACTERS TO TREAT AS INCOME FROM HOUSE PROPERTY WITH THE TERMS AND CO NDITIONS OF LEAVE AND LICENCE AGREEMENTS ENTERED INTO BY THE AS SESSEE. 2. BRIEFLY STATED ASSESSEE IS ENGAGED IN THE BUSINESS OF RUNNING A STUDIO MANUFACTURING AND TRADING OF FABRICS AND SH ARE TRADING DURING THE ASSESSMENT YEAR. IN THE COURSE OF ASSESSMENT THE A. O. NOTICED THAT ASSESSEE HAS RECEIVED OTHER INCOME IN THE P & L ACCOUNT ON A CCOUNT OF RENTAL INCOME. HE OBSERVED THAT AS PER THE TERMS AND CONDITIONS OF LEAVE AND LICENCE ITA NO. 4764/MUM/2010 M/S. BRILLANTO TEXTILES MILLS 2 AGREEMENT THE SAME IS IN THE NATURE OF INCOME FROM HOUSE PROPERTY. ACCORDINGLY HE COMPUTED THE INCOME RECEIVED FROM RE NT AS INCOME FROM HOUSE PROPERTY. ASSESSEE CONTESTED THE SAME BEFORE THE CIT(A) AND SUBMITTED THAT ASSESSEE IS IN THE BUSINESS OF MANUF ACTURING AND TRADING OF TEXTILES SINCE A.Y. 2001-02 AND PART OF ITS BUSINES S PREMISES WAS CONVERTED INTO A SPECIALISED STUDIO FOR PRODUCING T.V. SERIAL S. THIS STUDIO WAS BEING GIVEN ON HIRE TO VARIOUS T.V. SERIAL PRODUCERS AND THE HIRE CHARGES RECEIVED WERE OFFERED AS INCOME FROM BUSINESS WHICH WAS ACC EPTED IN EARLIER YEARS. IT WAS FURTHER SUBMITTED THAT DURING THIS YEAR ASSE SSEE GAVE IT ON HIRE TO ONLY ONE COMPANY FOR A PERIOD OF 11 MONTHS BUT THE FACTS ARE SIMILAR TO THAT OF OTHER YEARS AND PLACED ON RECORD THE HIRE CHARGE S RECEIVED IN VARIOUS ASSESSMENT YEARS AND ALSO THE FACT THAT THE DEPARTM ENT HAS ACCEPTED THE SAME IN EARLIER YEARS. IT WAS FURTHER SUBMITTED THA T ASSESSEE HAS PURCHASED LOT OF FURNITURE AND FIXTURES AND ELECTRICAL EQUIPM ENTS AIR CONDITIONERS ETC. THERE WERE SEPARATE STAFF CHARGES STATIONERY EXPEN SES MAINTENANCE ETC. WITH REFERENCE TO THE STUDIO. ON THE BASIS OF THE S UBMISSION AND EXAMINING THE FACTS THE CIT(A) HELD AS UNDER: - 3.3.4 THEREFORE ON ACCOUNT OF THESE FACTS BROUGHT ON RECORD ACCORDING TO THE AR IT IS A CASE OF COMMERCIAL EXP LOITATION OF ITS CAPITAL ASSET I.E. A VACANT PORTION OF ITS TEXTILE MILL FOR RUNNING A STUDIO MAINLY FOR PRODUCTION OF T.V. SERIALS. IT WAS ALSO SUBMITTED THAT THE APPELLANT AHS INSTALLED ELECTRICAL FITTINGS FURNIT URE AND FIXTURE AND AIR CONDITIONERS ESPECIALLY FOR THIS PURPOSE AT THE TIM E OF ITS COMMENCEMENT IN THE YEAR 2001 AGAINST WHICH DEPREC IATION IS ALLOWED BY THE APPELLANT IN ITS PRECEDING ASSESSMEN T YEARS. 3.3.5 FROM THESE FACTS BROUGHT ON RECORD I FIND TH AT EXCEPT FOR RELEVANT ASSESSMENT YEAR IN WHICH THE SAID STUDIO WAS GIVEN FOR HIRE FOR 11 MONTHS IN ALL OTHER PROCEEDINGS OR SUCCEEDIN G ASSESSMENT YEARS THE STUDIO WAS GIVEN ON A SMALLER PERIODS OF LEASE OR HIRE AND THE RECEIPTS THEREON ARE DULY ASSESSED AS ITS BUSIN ESS RECEIPTS. EVEN FOR THE RELEVANT ASSESSMENT YEAR IT IS DUE TO THE NEED OR REQUIREMENT OF THE LESSEE THAT THE STUDIO WAS GIVEN FOR A LONGE R PERIOD OF TIME ON LEAVE & LICENCE BASIS. AFTER ITS EXPIRY AGAIN THE STUDIO IS GIVEN ON HIRE FOR A SMALLER PERIOD TO DIFFERENT PARTIES AS P ER THEIR NEEDS OR REQUIREMENTS. THE APPELLANT IS ALSO MAINTAINING AND INCURRING ALL OTHER DAY TO DAY RUNNING EXPENSES FOR THE MAINTENAN CE OF THE STUDIO. IT HAS ALSO CHARGED SEPARATE INCOME FOR STAFF SERVI CES PROVIDED TO ITS CUSTOMERS. THEREFORE ON ACCOUNT OF THESE UNDISPUTE D FACTS BROUGHT ON RECORD AND ALSO CONSIDERING THE FACT THAT SIMILA R RECEIPTS IN ITS PRECEDING ASSESSMENT YEARS ARE ACCEPTED AND ASSESSE D AS ITS ITA NO. 4764/MUM/2010 M/S. BRILLANTO TEXTILES MILLS 3 BUSINESS RECEIPTS I FIND THAT THE AO IS NOT JUSTIF IED TO ASSESS ITS STUDIO RECEIPTS UNDER THE HEAD INCOME FROM HOUSE PR OPERTY MERELY THAT IT WAS GIVEN ON HIRE FOR A LONGER PERIOD OF TI ME DURING THE RELEVANT ASSESSMENT YEAR. THE RULE OF CONSISTENCY A ND THE MATERIAL FACTS AVAILABLE ON RECORD TO MY CONSIDERED OPINION DEMAND THAT THE ENTIRE STUDIO RECEIPTS BEING ITS GENUINE BUSINESS RECEIPTS NEED TO BE ASSESSED AS ITS BUSINESS INCOME AND NOT AS ITS INCO ME FROM HOUSE PROPERTY OR INCOME FROM OTHER SOURCES. ACCORDINGLY THE AO IS DIRECTED TO ASSESS THE ENTIRE STUDIO HIRE CHARGES RECEIVED A S ITS BUSINESS INCOME AND ALLOW THE CORRESPONDING BUSINESS EXPENSE S AFTER DUE VERIFICATION AND IN ACCORDANCE TO THE PROVISIONS OF THE ACT. SUBJECT TO THESE REMARKS THIS GROUND OF APPEAL IS ALLOWED. REVENUE IS AGGRIEVED. 3. THE LEARNED D.R. VEHEMENTLY SUBMITTED THAT RELYING ON THE PRINCIPLES ESTABLISHED IN THE CASE OF SHAMBU INVESTMENT P. LTD . 267 ITR 143(SC) THE RENTAL INCOME RECEIVED FROM THE SAID COMPANY ON LEA VE AND LICENCE AGREEMENT IS TO BE TREATED AS INCOME FROM HOUSE PRO PERTY WHEREAS THE LEARNED COUNSEL SUBMITTED THAT ASSESSEE IS HAVING A COMMERCIAL PROPERTY AND THIS IS BEING EXPLOITED COMMERCIALLY BY HIRING TO DIFFERENT TV SERIAL PRODUCERS AND THEREFORE THERE IS NO CHANGE IN THE F ACTS. IT WAS SUBMITTED THAT DURING THE YEAR M/S. UTV SOFTWARE COMMUNICATIO NS LTD. WANTED THE STUDIO FOR A LONGER PERIOD. THEREFORE AN AGREEMENT WAS REGISTERED. EXCEPT THAT THE OTHER CHARGES MAINTENANCE OF THE STUDIO A ND EXPLOITATION OF THE COMMERCIAL PROPERTY WAS SIMILAR TO EARLIER YEARS WH ERE REVENUE HAS ACCEPTED THE SAME AS BUSINESS INCOME. HE RELIED ON THE PRINCIPLES ESTABLISHED BY THE HON'BLE SUPREME COURT IN THE CAS E OF SULTAN BROTHERS PVT. LTD. VS. CIT 51 ITTR 353 ON THE ABOVE PRINCIPL E AND ON THE PRINCIPLE OF CONSISTENCY ON THE DECISION OF CIT VS. GOPAL PUROHI T 188 TAXMAN 140 (BOM). 4. WE HAVE CONSIDERED THE ISSUE. WE ARE OF THE OPINION THAT THERE IS NO NEED TO DIFFER FROM THE FINDINGS OF THE CIT(A) WHO RIGHTLY OBSERVED THAT ASSESSEE HAS EXPLOITED THE BUSINESS PREMISES COMMER CIALLY BY LEASING OUT THE PROPERTY TO VARIOUS INDIVIDUAL T.V. SERIAL PROD UCERS AND THE INCOME IS TO BE ASSESSED AS BUSINESS INCOME NOT ONLY ON THE FACT S OF COMMERCIAL EXPLOITATION BUT ALSO ON THE PRINCIPLES OF CONSISTE NCY. NOTHING WAS BROUGHT ON RECORD TO DIFFER FROM THE FINDINGS OF THE CIT(A) EXCEPT THE ARGUMENT THAT ASSESSEE HAS ENTERED INTO LEAVE AND LICENCE AGREEME NT FOR A PERIOD OF 11 ITA NO. 4764/MUM/2010 M/S. BRILLANTO TEXTILES MILLS 4 MONTHS. WE ARE NOT CONVINCED WITH THE ARGUMENT OF T HE REVENUE THAT JUST BECAUSE AN AGREEMENT WAS ENTERED INTO FOR 11 MONTHS AND THE HEAD OF INCOME HAS TO BE CONSIDERED AS HOUSE PROPERTY INCOM E. AS THE ASSESSEE HAS SPECIALLY ESTABLISHED THE STUDIO IN THE BUSINESS PR EMISES FOR THE PURPOSE OF BUSINESS AND WAS RECEIVING VARIOUS HIRE CHARGES FRO M DIFFERENT PEOPLE ON ACTUAL USAGE BASIS ON DAILY WEEKLY AND FORTNIGHTLY BASIS NOT ONLY IN EARLIER YEARS BUT ALSO IN LATER YEARS THE INCOME IS RIGHTL Y ASSESSABLE UNDER THE HEAD BUSINESS. THEREFORE REVENUES GROUNDS ARE REJECTED. 5. IN THE RESULT APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 27 TH JULY 2011. SD/- SD/- (R.S. PADVEKAR) (B. RAMAKOTAIAH) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI DATED: 27 TH JULY 2011 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) XXXI MUMBAI 4. THE CIT XX MUMBAI CITY 5. THE DR J BENCH ITAT MUMBAI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT MUMBAI BENCHES MUMBAI N.P.