The DDIT (Intl Taxn), Hyderabad v. Shri G. Raghuram, Rep by GPA G. Prameela Devi, Hyderabad

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A HYDERABAD BEFORE SHRI G.C. GUPTA VICE PRESIDENT AND SHRI CHANDRA POOJARI ACCOUNTANT MEMBER ITA NO.6/HYD/2010 A.Y. 2005-06 DY. DIRECTOR OF IT (I.TAX) HYDERABAD VS SHRI G. RAGHURAM (REPRESENTED BY) SMT. PRAMEELA DEVI (GPA) HYDERABAD (PAN AHXPG 7433 R) (APPELLANT) (RESPONDENT) ITA NO.69/HYD/2010 A.Y. 2005-06 ITO WARD 6 (3) HYDERABAD VS. SMT. PRAMEELA DEVI (GPA) HYDERABAD (PAN AHXPG 7434 J) (APPELLANT) (RESPONDENT) ITA NO.70/HYD/2010 A.Y. ITO WARD 6 (3) HYDERABAD VS. SMT. PRAMEELA DEVI (GPA) HYDERABAD (PAN AHXPG 7434 J) (APPELLANT) (RESPONDENT) ITA NO.67/HYD/2010 A.Y. 2005-06 ITO WARD 6 (3) HYDERABAD VS SMT. G. MADHURIKIRAN HYDERABAD (ACAPG 3917 C) (APPELLANT) (RESPONDENT) ITA NO.68/HYD/2010 A.Y. 2006-07 ITO WARD 6 (3) HYDERABAD VS SMT. G. MADHURIKIRAN HYDERABAD (ACAPG 3917 C) (APPELLANT) (RESPONDENT) ITA NO.7/HYD/2010 A.Y. 2006-07 DY. DIRECTOR OF IT (I.TAX) HYDERABAD VS SHRI G. RAGHURAM (REPRESENTED BY) SMT. PRAMEELA DEVI (GPA) HYDERABAD (PAN AHXPG 7433 R) 2 2 (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI B. SENTHIL KUMAR CIT- D R RESPONDENT BY: SHRI K. VASANT KUMAR ADVOCATE O R D E R PER BENCH THESE SIX APPEALS PREFERRED BY THE REVENUE ARE DIRECT ED AGAINST DIFFERENT ORDERS PASSED BY THE CIT(A) VI HYDER ABAD AND PERTAINS TO ASSESSMENT YEARS 2005-06 AND 2006-07. SINCE COMMON ISSUES ARE INVOLVED IN ALL THESE APPEARS THEY ARE CLUBBED TOGETHER HEARD TOGETHER AND DISPOSED OF VIDE THESE COMMON ORDER FOR T HE SAKE OF CONVENIENCE. 2. THE FIRST COMMON GROUND IN ALL THESE APPEARS ARE THAT THE CIT(A) ERRED IN HOLDING THE INCOME RECEIVED AS LEASE RE NTALS TOWARDS THE AMENITIES AND FURNITURE AND FIXTURES IS TO BE ASSESSED UN DER THE HEAD OTHER SOURCES AND ACCORDINGLY THE DEPRECIATION IS TO BE ALLOWED FROM THE INCOME SO ARRIVED. SINCE THE ASSESSEE IS UNABLE TO FU RNISH THE DETAILS OF FURNITURE AND FIXTURES THE QUESTION OF ALL OWING DEPRECIATION DOES NOT ARISE. 3. THE NEXT COMMON GROUND IN APPEAL NOS. IN ITA N O.6 69 AND 7 /HYD/2010 ARE THAT THE CIT(A) ERRED IN CONSID ERING THE FACT THAT THE REAL CONSIDERATION RECEIVED BY THE ASSESSEE IN LIEU OF THE LAND FORGONE BY HIM IS THE SUPERSTRUCTURE AND THEREFORE THE SAME SHOULD BE CONSIDERED AS SALE CONSIDERATION INSTEAD OF THE MARKET VA LUE OF THE LAND. 3 3 4. IN THIS CASE THE BRIEF FACTS OF THE CASE ARE THAT TH E ASSESSEE FILED RETURN OF INCOME ALONG WITH HER SON AND DAUGHTE R OWNED LAND SITUATED AT SURVEY NO.12 OF KONDAPUR VILLAGE HYDERAB AD. THE SAID LAND WAS GIVEN TO M/S SDE ENGINEERS LTD. ON DEVELOPMENT BA SIS. ACCORDINGLY THE ASSESSEE ALONG WITH HER SON AND DAUGHTER WERE ALL ALLOCATED AN AREA OF 99 702 SQ. FT IN THE SUPER STRUCTUR E CONSTRUCTED ON THE SAID LAND BY THE DEVELOPER. ALL THESE THREE PERSO NS PUT TOGETHER PURCHASED FROM THE DEVELOPER AN AREA OF 7 328 SQ. FT I N ORDER TO BECOME THE OWNERS OF FIRST SECOND SIXTH AND EIGHTH FLOORS OF T HE SUPER STRUCTURE WHICH WAS SUBSEQUENTLY NAMED AS SDE PRAMEELA TECHNO PAR K. THE SAID BUILDING WAS LEASED OUT TO M/S SATYAM SERVICES LTD. BY THE ASSESSEE ALONG WITH HER SON AND DAUGHTER. SINCE SATYAM C OMPUTER SERVICES LTD. REQUIRES FURTHER MODIFICATIONS ON THE BA RE STRUCTURE IT APPEARS THAT A LOAN HAS BEEN OBTAINED BY THE THREE PE RSONS ALONG WITH THE DEVELOPER M/S SDE ENGINEERS LTD. AND WITH THE L OAN PROCEEDS THE BARE STRUCTURE AS PER THEIR REQUIREMENT. WHILE LEASING OUT THE BUILDING THE ASSESSEE ENTERED INTO TWO AGREEMENTS WITH THE TENANT ONE TOWARDS THE RENT OF THE BUILDING AND THE OTHER TOWARDS THE AMOUNTS FOR PROVIDING THE AMENITIES FOR THE SAME BUILDING. ACCORDI NGLY THE RENTAL INCOME RECEIVED AS PER THE FIRST AGREEMENT IS BEING OFFE RED AS INCOME FROM THE HOUSE PROPERTY AND THE OTHER AMOUNTS RECEIVE D BY THE ASSESSEE TOWARDS AMENITIES WERE OFFERED UNDER THE HEAD I NCOME FROM BUSINESS. FROM THE INCOME OFFERED UNDER THE HEAD BUSI NESS THE ASSESSEE DEDUCTED INTEREST PAID ON THE LOAN TAKEN AND DEP RECIATION ON THE AMENITIES TREATING THE SAID AMENITIES AS FURNITU RE PLANT AND MACHINERY. THE ASSESSEE RECEIVED AS ITS SHARE IN LIEU OF THE LAND FORGONE BY THEM. SINCE THE LAND OWNER HAS RELINQUISH ED HIS RIGHTS ON THE LAND FORGONE THE ASSESSING OFFICER TREATED IT AS A T RANSFER U/S 2(47) OF THE INCOME TAX ACT. ACCORDINGLY CAPITAL GAIN WAS COMP UTED. REGARDING THE APPLICABILITY OF S.2(47) THERE IS NO D ISPUTE. HOWEVER CONSIDERING THE VALUE OF SALES CONSIDERATION ACCORDING TO THE ASSESSEE 4 4 THE MARKET VALUE OF THE LAND AS TO THE DATE OF THE T RANSFER IS TO BE CONSIDERED INSTEAD OF CONSIDERING THE VALUE OF SUPER STRUCT URE. THE ASSESSING OFFICER NOT AGREED WITH THIS PROPOSITION AND HE PLACED RELIANCE ON THE ORDER OF THE DELHI BENCH ITAT IN THE CASE OF S MT. VASAVI PRATAP CHAND VS. DCIT (89 ITD 73) AND CONSIDERING THE VALUE O F SUPER STRUCTURE TO DETERMINE THE SALE VALUE AND COMPUTE THE CA PITAL GAIN. FURTHER AGAINST THIS THE ASSESSEE WENT IN APPEAL BEFORE CIT(A) AND CIT(A) DIRECTED THE ASSESSING OFFICER TO CONSIDER THE SALES CO NSIDERATION AS PER VALUE OF THE LAND ADOPTED BY THE REGISTRAR FOR STAMP DUTY PURPOSE ON THE DATE OF REGISTRATION OF THE DEVELOPMEN T AGREEMENT. SINCE IT IS NOT POSSIBLE TO ASCERTAIN THE SALES CONSIDERATION AT THE TIME OF DEVELOPMENT AGREEMENT AS THE TRANSFER WAS IN LIEU OF CONSTRUCTED AREA AND ITS VALUE WAS UNASCERTAINABLE AT THE RELEVANT POIN T OF TIME SINCE THE DEVELOPMENT AGREEMENT REGISTERED WITH REGISTRAR FOR STAMP DUTY PURPOSE. AGAINST THIS THE REVENUE IS IN APPEAL BEFORE US. FURTHER IN ADDITION TO THE CAPITAL GAINS THERE WAS A DISPUTE REGA RDING THE HEAD OF INCOME. THE ASSESSEE ENTERED INTO TWO AGREEMENTS ONE FO R RENTAL INCOME AND THE OTHER FOR AMENITIES PROVIDED. THE TE NANT DEDUCTED TAX TREATING THE WHOLE AMOUNT AS RENTAL INCOME AND TDS U/ S 194 OF THE IT ACT. ACCORDING TO THE ASSESSEE THE RENT ON BUILDING IS T O BE COMPUTED INCOME FROM HOUSE PROPERTY. ON THE OTHER HAND HIR E CHARGES COLLECTED ON AMENITIES PROVIDED TO BE TREATED AS INCOME FROM BU SINESS. ACCORDINGLY THE ASSESSING OFFICER TREATED THE ENTIRE IN COME FROM LETTING AS INCOME FROM HOUSE PROPERTIES. ON APPEAL. THE CI T(A) DIRECTED THE ASSESSING OFFICER TO SPLIT AND TREAT THE HIRE CHARGES INTO TWO AS ONE IS INCOME FROM HOUSE PROPERTY AND THE OTHER INCOME FRO M OTHER SOURCES. AGAINST THIS THE REVENUE IS IN APPEAL BEFORE US. 5. THE MAIN CONTENTION OF THE DEPARTMENTAL REPRESE NTATIVE IS THAT ALL AMENITIES ARE INTEGRAL PART OF THE BUILDING S. BECAUSE THERE IS SEPARATE AGREEMENT IT DOES NOT LEAD TO THE CONCLUSION T HAT IT IS TO BE 5 5 ASSESSED SEPARATELY AS INCOME FROM BUSINESS AND HE RELIED ON THE ORDER IN THE CASE OF SULTAN BROTHERS (P) LTD. VS. CIT BOMBAY CITY II (51 ITR 353) (SC) . 6. THE AR SUBMITTED THAT THE RENTAL INCOME RECEIVED FROM THE LETTING OF AMENITIES IS INCOME FROM BUSINESS AND THIS W AS COVERED IN FAVOUR OF THE ASSESSEE BY THE ORDER OF THIS TRIBUNAL D ATED 7.3.2008 IN ITA NO.528/HYD/2005 IN THE CASE OF LALLU BROTHERS TRUST SECUNDERABAD VS. ACIT FOR THE ASSESSMENT YEARS 2000-01. WE HAVE GONE THROUGH THIS ORDER. THERE IS NO READY MADE FORMULA FOR DECIDING T HIS ISSUE. EACH CASE HAS TO BE DECIDED ON ITS OWN FACTS AND AS SUCH WE HAV E TO SEE THE FACTS OF THE PRESENT CASE. AS WE HAVE GONE THROUGH THE E NTIRE FACTS OF THE CASE AND ALSO AGREEMENT ENTERED BETWEEN THE PARTIE S I.E. THE RENT AGREEMENT AND ALSO WE HAVE GONE THROUGH VARIOUS ITEMS GIVEN ON HIRE CHARGES TO THE TENANTS. WE HAVE ALSO GONE THROUGH THE AMENITIES PROVIDED TO THE TENANTS WHICH ARE AS FOLLOWS: ANNEXURE I WORKSTATION AND CUBICLE MODULAR TABLES WITH MODULAR PARTITIONS OF FEATHER LITE / BLOWPLAST MAKE CONFERENCE TABLES 20 CAPACITY MADE WITH PLY AND LAMINATED WITH VENEER AND MELAMINE POLISHED. TELEPHONE AND ALL CABLES CONCEALED. DISCUSSION TABLES 10 CAPACITY MADE WITH PLY AND LAMINATED WITH VENEER AND MELAMINE POLISHED. TELEPHONE AND ALL CABLES CONCEALED. CHAIRS GOOD QUALITY CUSHIONED CHAIRS OF HIMG TIE/EURO MAKE AIR CONDITIONING AIR CONDITIONING UNITS WILL BE WITH CHILLERS BLUE STAR/CARRIER MAKE AIR CONDITIONING IN NETWORK ROOM AND HUB ROOMS SEPARATE PRECISION AC WILL BE PROVIDED AND DESIGNED TO ACHIEVE 18 DEG C WITH 100% BACKUP FALSE CEILING A MIXTURE OF ARMSTRONG GRID CEILING 6 6 AND GYP BOARD FALSE CEILING LIGHTING 2 X 36W CFL 2 X 2 LIGHTING FIXTURE OF WIPRO/PHILLIPS MAKE LAN DONE WITH CAT 6 CABLE OF LUCENT/AMP MAKE FIRE FIGHTING DETECTORS IN ALL AREAS WITH GAS FLOODING SYSTEM/FIRE EXISTINGUISHERS ETC. IN APPROPRIATE AREAS CAFETERIA FIBER SHEETS ON MS STRUCTURE WITH GRANITE FLOORING AND FALSE CEILING. TABLES AND CHAIRS OF FEATHERLITE MAKE WITH REQUIRED WITH FITTINGS FOR SERVICE AND KITCHEN FOR THE ENTIRE COMPLEX AND TO BE USED COMMONLY BY ALL THE BUILDING OWNERS. DG SET SOUND PROOF DG SETS WITH 100% BACKUP UPS BATTERY 2 NOS. OF THE UPS AS REQUIRED FOR 100% BACKUP FOR COMPUTERS ONLY TRANSFORMER FULL CAPACITY TRANSFORMER WITH ALL REQUIRED CONTROL PANELS WILL BE PROVIDED EQUIPMENT MULTIMEDIA PROJECTORS WATER COOLERS WITH AQUA GUARDS FAX MACHINES WILL BE PROVIDED. 7. THE MAIN CONTENTION OF THE ASSESSEE COUNSEL IS THAT IT IS NOT COMMON TO PROVIDE THESE AMENITIES AND THESE ARE PROVIDE D AS PER SPECIFIC REQUIREMENTS OF THE TENANTS. HE RELIED ON THE O RDER IN THE CASE OF ATTUKAL SHOPPING COMPLEX (P) LTD. VS. CIT (259 IT R 567) (KER.) WHEREIN IT WAS HELD: THE INCOME FROM THE BUILDING FORMED PART OF THE BUS INESS AND PROPERTY. THEREFORE THE INCOME OF THE ASSESSEE HAD TO BE DIVI DED EQUALLY AS INCOME FROM PROPERTY AND INCOME FROM BUSINESS FOR T HE ASSESSMENT YEARS 1993-94 1994-95 AND 1995-96. 8. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MA TERIAL AVAILABLE ON RECORD. AFTER GOING THROUGH THE FACTS OF THE CASE WE ARE OF THE OPINION THAT MOST OF THE ITEMS LISTED ABOVE ARE COMMON IN NATURE WHICH 7 7 ARE TO BE PROVIDED TO SOFTWARE COMPANIES TO CARRY OUT T HEIR DAY TO DAY WORKS BY THE LANDLORD WITHOUT THESE THEY CANNOT FUN CTION. KEEPING IN VIEW THE NATURE OF ACTIVITIES OF THE TENANT THE AME NITIES ARE PROVIDED BY THE ASSESSEE TO EXPLOIT THE PROPERTY IN MOST PROFITABLE MANNER. IN THE PRESENT CASE THE ASSESSEE MADE SEPARATE LEASE AGREEMENTS IN ORDER TO HELP THE ASSESSEE IN TAX PLANNING ONLY THE LEASE FROM T HE LESSEES POINT OF VIEW IS ONLY FOR THE PROPERTY AS A WHOLE. THIS I S EVIDENT FROM THE FOLLOWING (A) THE TDS CERTIFICATES CLEARLY SHOW THAT TH E ENTIRE PAYMENTS MADE BY SATYAM COMPUTERS IS TOWARDS RENT A SIMPLE COMP OSITE PAYMENT DONE EVERY MONTH (B) THE ASSESEE IN SPITE OF RE PEATED REQUESTS COULD NOT FURNISH FOR THE DETAILS OF THE ASSETS O N WHICH LEASE RECEIPTS WAS BEING SHOWN AND DEPRECIATION WAS BEING CLAIME D. THE ONLY THING THAT ASSESEE COULD PRODUCE WAS THAT THE INTERIORS OF THE PROPERTY WAS DONE BY SDE ENGINEERS AND GOING BY GENERAL TRENDS THE AMOUNT CHARGED WAS PUT AS 60% TO EQUIP ET AND WHAT FURNITURE WAS LEASED OUT ON WHICH THE INCOME FROM OTHER SOURCES WAS BEING SHOWN (C) THE AGREEMENT OF PROVIDING THE INTERIORS WAS DONE WITH SD E ENGINEERS WHICH IS THE SAME ENTITY WITH WHOM THE ASSESEE HAD ENTERED INT O DEVELOPMENT PROPERTY I.E. THE PROPERTY DEVELOPER WAS PROVIDING FOR THE INTERIORS THIS PROVES THE POINT THAT THE AMENITIES WHICH ARE BEI NG STATED AS LEASED OUT SEPARATELY ARE IN FACT NOTHING SEPARATE BUT ARE PA RT OF THE PROPERTY INTEGRAL TO MAKE THE PROPERTY VIABLE FOR BEING USED AS A COMMERCIAL BUILDING (D) . THE BUILDING ITSELF IS THE AMENITY BEI NG PROVIDED HERE AND THAT IS WHY THE AGREEMENT FOR LEASE OF AMENITIES PRESCRI BES THE LESE AMOUNT IN TERMS OF SQ.FT RS.15 PER SQ.FT. PER MONTH WHICH IS THE SAME RATE AT WHICH THE PROPERTY LESE WAS ALSO AGREED UPON. WITHOUT THESE AMENITIES THE BARE BUILDING IS OF NO USE WHICH IS A CO MMON FEATURE IN ANY PROPERTY. FOR A PROPERTY TO BE USED AS RESIDENTI AL CERTAIN KINDS OF SAME AMENITIES AND FIXTURES WOULD BE REQUIRED OR ELSE PEOPLE CANNOT INHABIT IT SUCH AS KITCHEN VENTILATIONS ELECTRICAL F ITTINGS ETC. AND THE SAME GOES FOR A COMMERCIAL PROPERTY WITHOUT SOME AMENI TIES SUCH AS 8 8 PROVISION FOR AIR CONDITIONING AND CABINS IT CANNOT BE USEFUL FOR ANY PURPOSE. THEREFORE JUST BECAUSE THERE IS SOMETHING BEYO ND THE BARE STRUCTURE THAT IS BEING PROVIDED IT CANNOT BE SAID THA T THESE AMENITIES ARE NOT PART OF THE PROPERTY ITSELF. HOWEVER SINCE TH ESE AMENITIES ARE NOT SEPARATE ASSETS SUCH PLANT AND MACHINERY THE PROVISIO NS OF SEC.56(2) DO NOT APPLY HERE. IN OUR OPINION THOUGH THE ASSESSEE ENTERED SEPARATE AGREEMENT THESE AGREEMENTS CANNOT BE ACTED UPON AS FOOLPROOF DOCUMENTS. WHEN THE APPARENT IS NOT RE AL WE HAVE TO SEE THE ACTUAL BACKGROUND OF THE SITUATION. THE SEC. 22 OF THE IT ACT 1961 DEALS WITH INCOME FROM HOUSE PROPERTY WHICH IS TO BE COMPUTED W.R.T. THE ANNUAL LETTING VALUE (ALV) OF THE PROPE RTY. THE MODE OF DETERMINING THAT ALV IS SET OUT IN SEC. 23. SEC. 23(1)( A) DEEMS ANNUAL VALUE OF THE PROPERTY TO BE THE SUM FOR WHICH THE PRO PERTY MIGHT REASONABLY BE EXPECTED TO BE LET FROM YEAR TO YEAR. CLAUSE (B) DEEMS THE ACTUAL RENT RECEIVED OR RECEIVABLE BY THE OWNE R TO BE THE ANNUAL VALUE IF THAT SUM IS IN EXCESS OF THE SUM REFERRED TO IN CLAUSE (A). EXPLANATION (1) SEC.23 DEFINES ANNUAL RENT FOR THE PURPOSE OF THAT SUB SECTION. THE EXPLANATION READS AS UNDER: EXPLANATION 1: FOR THE PURPOSES OF THIS SUB SECTIO N ANNUAL RENT MEANS: A) IN A CASE WHERE THE PROPERTY IS LET THROUGHOUT THE PREVIOUS YEAR THE ACTUAL RENT RECEIVED OR RECEIVABLE BY THE OWNER IN RESPECT OF SUCH YEAR AND B) IN ANY OTHER CASE THE AMOUNT WHICH BEARS THE SAME PROPORTION TO THE AMOUNT OF THE ACTUAL RENT RECEIVED OR RECEIVABLE BY THE OWNER FOR THE PERIOD FOR WHICH THE PROPERTY IS LET AS THE PERIOD OF TWELVE MONTHS BEARS NO SUCH PERIOD. 9. THE ANNUAL RENT IN A CASE WHEN THE PROPERTY IS LET THROUGH OUT THE YEAR IS THE ACTUAL RENT RECEIVED OR RECEIVABLE BY THE OWNER. WHEN THE AMOUNT OF THE ACTUAL RENT RECEIVED OR RECEIV ABLE BY THE OWNER IS KNOWN THAT WOULD CONSTITUTE THE BASIS FOR DETERMININ G THE ANNUAL VALUE AND IT IS THAT VALUE WHICH WILL HAVE TO FORM TH E BASIS FOR DETERMINING THE INCOME FROM HOUSE PROPERTY AND FOR A LLOWING DEDUCTION FROM INCOME FROM HOUSE PROPERTY TO THE EXTENT IS PERMI TTED UNDER THE 9 9 OTHER PROVISIONS OF THE ACT. IN THE PRESENT CASE THE ASSESSEE MADE TWO AGREEMENTS ONE FOR LET OUT OF THE PROPERTY AND ANOTHER FOR PROVIDING AMENITIES AND THERE IS A DOUBT IN THE MIND OF THE ASSESSI NG OFFICER REGARDING THE CORRECTNESS OF THE INCOME DECLARED BY THE A SSESSEE AS INCOME FROM HOUSE PROPERTY AND INCOME FROM BUSINESS. HE HAS TREATED THE ENTIRE INCOME I.E. AS INCOME FROM HOUSE PROPERTY. ADMITTEDLY THE AUTHORITIES HAVE THE FREEDOM TO GO BEYOND THE DOCUMEN TS TO FIND OUT THE REAL INTENTION OF THE PARTIES. IN THIS CASE THOUG H THERE IS TWO AGREEMENTS THE REAL INTENTION OF THE PARTIES TO A DOCU MENT IS DIFFERENT WHAT APPEARS FROM IT EX FACIE. SINCE THERE IS A DOUBT THEN THE ASSESSING OFFICER IS JUSTIFIED IN GOING BEYOND THE DOCUMEN TS TO FIND OUT REAL INTENTION OF THE PARTIES BY IGNORING THE APPARE NT HAS TO BE AND HAS ALWAYS BEEN CONCEDED. IN THIS CIRCUMSTANCE THE ASSESSING OFF ICER HAS TO REMOVE THE FAADE TO EXPOSE THE REAL INTENTION OF THE PARTIES CLEVERLY CLOAKED AND THE ACTUAL AGREEMENT CANNOT BE GIVEN EFFE CT. THE ONLY BONA FIDE DOCUMENT TO BE ACTED UPON NOT OTHERWISE. TH ERE IS A SERIOUS DOUBT AND ALSO IT IS SHOCKING THE CONSCIOUS OF THE BENCH WHETHER THE ASSESSEE IS GETTING HIRE CHARGES EQUAL TO THE RENTAL AMOUN T FOR PROVIDING AMENITIES. IT CANNOT BE REAL ONE AND ASSESSING OFFICER REQUIRED TO SEE THE ACTUAL RENTAL VALUE OF THE PROPERTY IN THAT PLACE AND BRING THAT AMOUNT INTO TAX UNDER THE HEAD INCOME FROM HOUSE PRO PERTY. AS SUCH IN THE PRESENT CASE THE ASSESSING OFFICER CAME TO THE CORRE CT CONCLUSION THAT REAL RENTAL VALUE WAS BIFURCATED INTO TWO SEPARAT E INCOME VIZ. ONE IS RENTAL INCOME OF HOUSE PROPERTY AND ANOTHER IS HIRE CHARGES OF THE EQUIPMENT. FURTHER IN THE CASE OF LETTING OF THE M ACHINERY PLANT OR FURNITURE SEC.56(2) (III) OF THE ACT IS APPLICABLE B UT ONLY LETTING OF BUILDING WITH CERTAIN AMENITIES THIS PROVISION IS NOT A PPLICABLE AND IN THAT EVENT THE INCOME FROM LETTING OUT WAS CHARGEABLE UNDER THE HEAD INCOME FROM HOUSE PROPERTY. THE HIRE CHARGES SAID TO HEVE BEEN COLLECTED FOR THE PURPOSE OF PROVIDING AMENITIES AND TH E RENT FOR THE BUILDING NOT COME UNDER THE PURVIEW OF SEC.56(2)(III) OF THE ACT. THE 10 10 WORD PLANT CANNOT BE LIBERALLY CONSTRUED SO AS TO INCL UDE ALL ITEMS NOTED IN ANNEXURE I APPEARING ELSEWHERE IN THE ORDER WITH IN THE AMBIT OF THE WORD PLANT. IT IS NOT POSSIBLE TO GIVE SUCH A WIDE CO NSTRUCTION AS SUGGESTED BY THE LEARNED COUNSEL FOR THE ASESSEE. IN THE CASE OF SULTAN BROTHERS PVT.LTD. V. CIT 51 ITR 353 (SC) WHAT WAS LET OUT TO THE TENANT WAS A BUILDING FITTED UP WITH THE FURNITURE AND FIXT URES FOR BEING RUN AS A HOTEL. THEREFORE THE SUPREME COURT HELD THAT SIN CE THE BUILDING WAS LET ALONG WITH THE FURNITURE AND FIXTURES THE PROVI SIONS OF SEC.56(2) (III) WOULD BE APPLICABLE AND THE INCOME FROM BUILDING SHOUL D BE ASSESSED UNDER THE HEAD OTHER SOURCES. BUT ACCORDING TO THE FACT ARISING IN THE PRESENT CASE PLANT AND MACHINERY OR FURNITURE WAS NOT H IRED BY THE ASSESSEE ALONG WITH THE BUILDING. THEREFORE THE DECISIO N OF THE APEX COURT IN SULTAN BROS CASE SUPRA WILL NOT BE APPLICABLE T O THE FACTS OF THE PRESENT CASE. THUS ON A PLAIN READING OF SEC.56(2) (III ) OF THE ACT IN THE LIGHT OF THE FACTS OF THE CASE WE HOLD THAT CONCLU SION REACHED BY THE CIT(A) IS NOT CORRECT. FURTHER NO PRECISE TEST CAN B E LAID OUT TO ASCERTAIN WHETHER INCOME REFERRED TO BY WHATEVER NOMEN CLATURE LEASE AMOUNT RENT OR LICENCE FEE RECEIVED BY AN ASSESSEE FROM LEASING OR LETTING OUT OF ASSETS WOULD FALL UNDER THE HEAD PROFI T AND GAINS OF BUSINESS OR PROFESSION AND IT HAS TO BE DETERMINED FROM THE POINT OF VIEW OF A BUSINESSMAN IN THAT BUSINESS DEPENDING UPON T HE FACT AND CIRCUMSTANCES OF EACH CASE AND THERE IS NO READYMADE JACKET F ORMULA. THE RATIO LAID DOWN BY ONE CASE CANNOT BE APPLIED OR F IT TO THE FACTS OF THE PRESENT CASE. WE HAVE TO SEE THE INTENTION OF THE ASSESSEE WHETHER THE LETTING WAS THE DOING OF A BUSINESS OR TO EXPLOITA TION OF HIS PROPERTY BY AN OWNER. THE ASSESSEE WHEN EXPLOITED THE PROPERTY T O DERIVE RENTAL INCOME IT HAS TO BE HELD THAT THE INCOME REALIZED BY HIM BY WAY OF RENTAL INCOME FROM A BUILDING IF THE PROPERTY WITH O THER ASSET ATTACHED TO THE BUILDING TO BE ASSESSED AS INCOME FROM HOUSE PROP ERTY ONLY. THE ONLY EXCEPTIONS ARE CASES WHERE THE LETTING OF THE B UILDING IS INSEPARABLE FROM LETTING OF THE MACHINERY PLANT AND FURNITURE. IN SUCH 11 11 CASES IT HAS TO BE HELD THAT THE RENTAL WOULD NOT HAVE BEEN REALIZED BUT FOR THE LETTING OUT OF THE MACHINERY PLANT OR FURNI TURE ALONG WITH SUCH BUILDING AND THEREFORE RENTAL RECEIVED FOR THE BUIL DING IS TO BE ASSESSED UNDER THE HEAD INCOME FROM OTHER SOURCES. IN THE PRE SENT CASE ON THE FACTS OF THE CASE IT IS CLEAR THAT THE ASSESSEE AS THE OWNER OF THE BUILDING WAS ONLY EXPLOITING THE PROPERTY AS OWNER BY LETTING OUT THE SAME AND REALIZING INCOME BY WAY OF RENT. SUCH RENTAL INCOME WAS LIABLE TO BE ASSESSED UNDER THE HEAD INCOME FROM HOUSE P ROPERTY. THE VARIOUS ASSETS LET OUT TO THE TENANTS ARE INCIDENTAL TO LETTING OUT THE BUILDING BEING INTEGRAL PART OF THE LETTING. ACCOR DINGLY WE REVERSE THE ORDER OF THE CIT(A) AND RESTORE THAT OF THE ASSESSING OF FICER. THIS GROUND OF THE REVENUE IS ALLOWED. 10. THE NEXT COMMON GROUNDS IN ITA NOS.6 7 & 69/HYD/ 2010 IS REGARDING DETERMINING OF THE SALES CONSIDERATION U/S 48. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THIS ISSUE IS COVERED IN HIS FAVOUR BY THE ORDER OF THIS TRIBUNAL DT.9-6-2006IN T HE CASE OF SMT.SHANTA VIDYASAGAR ANNAM HYDERABAD IN ITA NO.88 5/HYD/2003 FOR THE ASSESSMENT YEAR 1997-98. WE HAVE CAREFULLY GONE THR OUGH THIS DECISION AND THIS ORDER IS RELATING TO THE WHETHER THE RE IS A TRANSFER U/S 2(47) (VI) OF THE I.T.ACT OR NOT ON TRANSFER IN WHIC H POSSESSION WAS HANDED OVER IN THE PROCESS OF EXCHANGE OF 40% OF THE CON STRUCTED AREA OF THE BUILDING WHICH IS TO BE CONSTRUCTED IN FUTURE WHICH ENABLES THE DEVELOPER TO ENJOY 60% OF THE UNDIVIDED SHARE OF LAN D. IN OUR CONSIDERED OPINION THIS DECISION WILL NOT COME TO THE RESCUE OF THE ASESSEE. IN OUR OPINION THE CONSIDERATION FOR THE TRAN SFER OF CAPITAL ASSET IS WHAT THE TRANSFERER RECEIVES IN LIEU OF THE ASSET S HE PARTS WITH AND THEREFORE THE VERY ASSET TRANSFERRED OR PARTED WIT H AND FULL VALUE OF CONSIDERATION CANNOT BE CONSTRUED AS HAVING A REFERENCE TO THE MARKET VALUE OF ASSET TRANSFERRED AND THE SAID EXPRESSION ONLY M EANS THAT FULL VALUE OF THE ASSET RECEIVED BY THE TRANSFERER IN EXCHANG E FOR THE CAPITAL 12 12 ASSET TRANSFERRED BY HIM. SINCE THE DEVELOPMENT AGREEM ENT SPECIFIES THAT CERTAIN PART OF CONSTRUCTED AREA SHALL BE SURRENDER ED TO THE OWNER BY THE BUILDER ON THE COMPLETION OF THE CONTRACT AND T HE VALUE OF THE CONSTRUCTED AREA TO BE TRANSFERRED TO THE ASSESSEE TO BE CON SIDERED AS CONSIDERATION RECEIVED AND AS SUCH FULL VALUE OF CONSIDERAT ION IN THE CASE OF NOT BY APPLYING THE RATIO OF THE ORDER OF THE DE LHI BENCH OF THE TRIBUNAL IN THE CASE OF M/S VASAVI PRATAP CHAND VS. DC IT (89 ITD 73) (DEL.) IS THE ONLY THE COST OF CONSTRUCTION OF PROPOSED B UILDING TO THE EXTENT OF WHICH WERE FALLS TO THE ASSESSEE IN THE ULTIMAT ELY CONSTRUCTED AREA AND NOT THE MARKET VALUE OF SUCH SHARE OF CONSTRUCTE D AREA WHICH MAY BE AFTER THE COMPLETION OF THE CONSTRUCTION. IN VI EW OF THIS WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE ASSESSING OF FICER ON THIS ISSUE AS HE HAS FOLLOWED THE ORDER OF THE TRIBUNAL IN THE CA SE OF M/S VASAVI PRATRAP CHAND VS. DCIT (SUPRA). ACCORDINGLY THIS GROUN D TAKEN BY THE REVENUE IS ALLOWED. 11. THE ASSESSEE RELIED ON THE JUDGEMENT OF MADRAS HIGH COURT IN THE CASE OF M/S T.V. SUNDARAM IYENGAR & SONS LTD. V S. CIT MADRAS (37 ITR 26) WHEREIN IT WAS HELD AS FOLLOWS: AS ON THE FACTS THERE WAS NOTHING TO SHOW THAT THE PRICE WAS TO BE OF ANY FUTURE TIME THE PRICE OF THE ASSETS TRANSFERRE D TO COMPANY C BECAME PAYABLE FORTHWITH VIZ. IN THE ACCOUNTING Y EAR THE ASSESSEES OBTAINED THE RIGHT TO RECEIVE THE PRICE IN THE ACCO UNTING YEAR AND THE CAPITAL GAINS IN RESPECT OF THE SALE OF THOSE ASSET S AROSE IN THAT YEAR: WHAT THE PARTIES DID SUBSEQUENT TO THAT YEAR DID NO T HAVE ANY BEARING ON THE LIABILITY OF THE ASSESSEES TO TAX IN RESPECT OF THAT YEAR. THERE WAS THEREFORE MATERIAL TO SUPPORT THE ASSESSMENTS MADE ON THE ASSESSEES. 12. IN OUR OPINION THE ABOVE JUDGEMENT SUPPORTS TH E VIEW TAKEN BY US RATHER THAN THE ASSESSEE. 13 13 13. SINCE THE ISSUES INVOLVED IN THE OTHER APPEALS ARE IDENTICAL APPLYING THE SAME REASONING HEREIN ABOVE THOSE APPEAL S ARE ALSO ALLOWED. IN THE RESULT THE REVENUES APPEALS ARE ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT 30. 4.2010 SD/- SD/- G.C. GUPTA CHANDRA POOJARI VICE PRESIDENT ACCOUNTANT MEMBER DATED THE APRIL 2010 COPY FORWARDED TO: 1. 1. SMT. G. PRAMEELA C/O SHRI G. RAGHURAM REP. BY GPA G. PRAMEELA FLAT NO.303 VISHNU BLUE APARTMENTS ROAD NO .3 BANJARA HILLS HYDERABAD. 2. SMT. G. MADHURI KIRAN PLOT NO.593 ROAD NO.31 JUBILEE HILLS HYDERABAD. 2. THE CIT(A) VI HYDERABAD CIT(A) IV HYDERABAD 3. CIT(A)- VI HYDERABAD. 4. CIT HYDERABAD 5. THE D.R. ITAT HYDERABAD. NP