M/S. MODERN ORGANISERS, MUMBAI v. INCOME TAX OFFICER 12(3)(3), MUMBAI

ITA 812/MUM/2009 | 2004-2005
Pronouncement Date: 12-02-2010 | Result: Partly Allowed

Appeal Details

RSA Number 81219914 RSA 2009
Assessee PAN AABFM1287A
Bench Mumbai
Appeal Number ITA 812/MUM/2009
Duration Of Justice 1 year(s) 5 day(s)
Appellant M/S. MODERN ORGANISERS, MUMBAI
Respondent INCOME TAX OFFICER 12(3)(3), MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 12-02-2010
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted B
Tribunal Order Date 12-02-2010
Assessment Year 2004-2005
Appeal Filed On 06-02-2009
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES B MUMBAI BEFORE SHRI R.S.SYAL AM AND SHRI R.S.PADVEKAR JM ITA NO.812/MUM/2009 : ASST.YEAR 2004-2005 M/S.MODERN ORGANISERS 5 STADIUM HOUSE BLOCK NO.3 2 ND FLOOR 81/83 V.N.ROAD CHURCHGAGE MUMBAI 400 020. PA NO.AABFM1287A. VS. THE INCOME TAX OFFICER WARD 12(3)(3) MUMBAI. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI REEPAL G.TRALSHAWALA RESPONDENT BY : S/SHRI PEEYUSH JAIN S.S.RANA & PRA BHAT JHA O R D E R PER : R.S.SYAL AM : THIS APPEAL BY THE ASSESSEE ARISES OUT OF THE ORDER PASSED BY THE COMMISSIONER OF INCOME-TAX (APPEALS) ON 2.12.2008 I N RELATION TO THE ASSESSMENT YEAR 2004-2005. 2. THE ASSESSEE HAS FILED CONCISE GROUNDS OF APPEAL . THE FIRST GROUND IS AGAINST THE CONFIRMATION OF THE ACTION OF THE ASSESSING OFF ICER IN HOLDING THAT THE INCOME RECEIVED FROM PROVIDING WAREHOUSE FACILITY WAS TO B E ASSESSED UNDER THE HEAD `INCOME FROM HOUSE PROPERTY AS AGAINST `BUSINESS INCOME CLAIMED BY THE ASSESSEE. BRIEFLY STATED THE FACTS OF THIS GROUND ARE THAT THE ASSESSEE FILED RETURN DECLARING INCOME OF RS.4 35 050. THE ASSESSING OFFI CER NOTED THAT THE ASSESSEE HAD RECEIVED GODOWN RENT CHARGES OF RS.20 95 278 W HICH WAS CLAIMED AS TAXABLE UNDER THE HEAD `PROFITS AND GAINS OF BUSINESS OR PR OFESSION. VARIOUS EXPENSES LIKE BANK INTEREST OF RS.5.31 LAKHS TELEPHONE EXPENSES OF RS.1.25 LAKHS SALARIES OF RS.2.87 LAKHS PETROL EXPENSES OF RS.1.57 LAKHS ETC . WERE CLAIMED AS DEDUCTIBLE AGAINST THE SAID INCOME FROM GODOWN RENT. ON BEING SHOW CAUSED THE ASSESSEE SUBMITTED ITS REPLY WHICH HAS BEEN REPRODUCED IN TH E ASSESSMENT ORDER. NOT CONVINCED THE ASSESSING OFFICER CAME TO HOLD THAT THE INCOME FROM LETTING OUT OF ITA NO.812/MUM/2009 M/S.MODERN ORGANISERS. 2 THE PROPERTY WAS TAXABLE UNDER THE HEAD `INCOME FRO M HOUSE PROPERTY. HE COMPUTED THE INCOME UNDER THIS HEAD ACCORDINGLY AFT ER ALLOWING DEDUCTION AT THE RATE OF 30% U/S.24(A) OF THE ACT. IN REACHING THIS CONCLUSION THE ASSESSING OFFICER TOOK INTO CONSIDERATION THE JUDGMENT RENDERED BY TH E HONBLE SUPREME COURT IN THE CASE OF CIT VS. M/S.SHAMBHU INVESTMENT PVT. LTD. [2003] 263 ITR 143[SC] . NO RELIEF WAS ALLOWED IN THE FIRST APPEAL. 3. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD. IT IS OBSERVED THAT THE ASSESSEE LET OUT IT S GODOWN TO FOOD CORPORATION OF INDIA LIMITED (FCI) ON MONTHLY RENT OF RS.4 81 137. 57. THE ASSESSEE CLAIMED THAT THE LETTING OUT OF THE GODOWN WAS A COMPLEX COMMERC IAL ACTIVITY FOR THE REASON THAT IT WAS OBLIGED TO KEEP THE PREMISES IN LEAK-PR OOF WATER-PROOF CONDITION AND FIT IN ALL RESPECT FOR STORAGE OF FOOD GRAIN. WHILE REF ERRING TO CERTAIN CLAUSES OF THE AGREEMENT BETWEEN THE ASSESSEE AND FCI COPY PLACED AT PAGES 10 ONWARDS OF THE PAPER BOOK THE LEARNED A.R. CONTENDED THAT THE ASS ESSEE WAS UNDER OBLIGATION TO MAINTAIN ALL APPROACH ROADS TO THE GODOWN IN GOOD A ND MOTORABLE CONDITION AND IT WAS ALSO BOUND TO SUPPLY WATER TO LABOUR AND GODOWN STAFF. IT WAS UNDER SUCH CIRCUMSTANCES THAT THE LEARNED A.R. CLAIMED IT TO B E A COMPLEX COMMERCIAL ACTIVITY. WE ARE NOT CONVINCED WITH THIS SUBMISSION ON THE GROUND THAT THOUGH THE ASSESSEE WAS TO MAKE ARRANGEMENT FOR SUPPLY OF WATE R TO LABOUR AND GODOWN STAFF ETC. BUT THE WATER CONSUMPTION CHARGES WERE TO BE B ORNE BY THE LESSEE. SIMILARLY ELECTRICITY CONSUMPTION CHARGES AND METER RENT WERE ALSO TO BE BORNE BY THE ASSESSEE. SIMPLY BECAUSE THE ASSESSEE UNDERTOOK TO CARRY OUT NECESSARY REPAIRS AND KEEP THE PREMISES IN CONDITION FIT FOR STORAGE OF F OOD GRAIN IT WILL NOT BECOME A COMPLEX COMMERCIAL ACTIVITY. MAINTAINING THE PROPER TY IS THE DUTY OF THE OWNER AND NOT THE TENANAT. ORDINARILY THE REPAIR IS DONE BY THE OWNER. FURTHER SINCE THE VERY PURPOSE OF TENANCY WAS TO MAKE STORAGE OF FOO D GRAINS ETC. IT WAS BUT NATURAL FOR TENANT TO EXPECT THE PREMISES IN STORA GEABLE CONDITION. BUT FOR THE FULFILLMENT OF THIS REQUIREMENT THERE WAS NO QUES TION IN TAKING SUCH PREMISES ON ITA NO.812/MUM/2009 M/S.MODERN ORGANISERS. 3 RENT. THE NATURE OF ACTIVITIES DONE BY THE ASSESSE E DO GO TO SHOW THAT IT WAS A SIMPLE CASE OF LETTING OUT THE PROPERTY AS SUCH AND NOT CARRYING OF ANY COMPLEX COMMERCIAL ACTIVITY. THE HONBLE SUPREME COURT IN T HE CASE OF SHAMBHU INVESTMENT PVT. LTD. (SUPRA) APPROVED THE VIEW TAKEN BY THE HONBLE CALCUTTA HI GH COURT IN THE CASE OF CIT VS. SHAMBHU INVESTMENT PVT. LTD. [(2001) 249 IT R 47 (CAL)] . IN THAT CASE INCOME DERIVED BY THE ASSESSEE BY LE TTING OUT FURNISHED PREMISES ON MONTHLY RENT BASIS TO VARIOUS PARTIES A LONG WITH FURNITURE FIXTURE LIGHT AIR-CONDITIONER ETC. FOR BEING USED AS A TA BLE SPACE AND ALSO PROVIDING COMMON SERVICES LIKE WATCH AND WARD STAFF ELECTRIC ITY WATER ETC. WITHOUT ANY SEPARATE CHARGES WAS HELD TO BE ASSESSABLE AS `INCO ME FROM HOUSE PROPERTY AND NOT `BUSINESS INCOME. IN THIS CASE IT WAS HELD BY THE HONBLE COURT THAT THE MAIN INTENTION OF THE ASSESSEE WAS NOT TO EXPLOIT THE PR OPERTY BY WAY OF COMPLEX COMMERCIAL ACTIVITIES IN WHICH CASE IT COULD HAVE B EEN HELD AS BUSINESS INCOME. ADVERTING TO THE FACTS OF THE INSTANT CASE WE FIND THAT THERE IS NO COMMERCIAL ACTIVITY MUCH LESS THE COMPLEX COMMERCIAL ACTIVIT Y WHICH COULD BRING THE RENTAL INCOME UNDER THE HEAD `PROFITS AND GAINS OF BUSINES S OR PROFESSION. IT IS A SIMPLE CASE OF LETTING OUT OF PROPERTY TO FCI FOR STORAGE PURPOSES. UNDER NO CIRCUMSTANCES CAN SUCH INCOME BE CONSIDERED AS BUSINESS INCOME. R ESPECTFULLY FOLLOWING THE AFORE-NOTED JUDGMENT OF THE HONBLE SUPREME COURT WE UPHOLD THE VIEW TAKEN BY THE LOWER AUTHORITIES ON THE HEAD OF INCOME UNDER W HICH SUCH RENTAL INCOME SHALL FALL. 4. THE LEARNED COUNSEL FOR THE ASSESSEE HAS PRESSED INTO SERVICE THE `PRINCIPLE OF CONSISTENCY BY ARGUING THAT THE ASSESSEE WAS I N THE SAME BUSINESS FOR SEVERAL YEARS AND THE TREATMENT OF SUCH INCOME AS FALLING U NDER THE HEAD `PROFITS AND GAINS OF BUSINESS OR PROFESSION HAS BEEN ACCEPTED BY TH E ASSESSING OFFICER ALL ALONG. HE REFERRED TO A CHART AT PAGE 41 OF THE PAPER BOOK FROM WHICH IT CAN BE SEEN THAT FROM THE ASSESSMENT YEAR 1986-87 TO 1996-97 THE ASS ESSMENTS WERE MADE U/S.143(3) AND THE TREATMENT TO SUCH INCOME WAS NO T DISTURBED BY THE ASSESSING ITA NO.812/MUM/2009 M/S.MODERN ORGANISERS. 4 AUTHORITY. OUR ATTENTION HAS ALSO BEEN DRAWN TOWAR DS SOME OF SUCH ORDERS PASSED BY THE ASSESSING OFFICER U/S.143(3) IN WHICH THE TR EATMENT GIVEN BY THE ASSESSEE TO THE RENTAL INCOME WAS NOT ALTERED. THE LEARNED A.R. CONTENDED THAT FOR ASSESSMENT YEAR 1997-98 ONWARDS UP TO ASSESSMENT YEAR 2003-200 4 THE RETURNS WERE PROCESSED U/S.143(1)(A) ACCEPTING THE INCOME DECLARED AS SUCH . IT WAS IN THE LIGHT OF SUCH FACTS THAT THE LEARNED A.R. ARGUED FOR THE APPLICAT ION OF PRINCIPLE OF CONSISTENCY. 5. FROM THE COPY OF THE AGREEMENT WITH FCI IT IS NOTED THAT IT WAS MADE ON 27 TH DAY OF MARCH 2002. IT IS UNCONTROVERTED THAT THE R ENTAL INCOME SHOWN BY THE ASSESSEE UNDER THE HEAD BUSINESS INCOME WAS DISTURB ED BY THE ASSESSING OFFICER. BUT THE FACT REMAINS THAT NO REGULAR ASSESSMENT HAS TAKEN PLACE IN THIS CASE AFTER ASSESSMENT YEAR 1997-98. HOW THIS PROPERTY WAS DEAL T WITH IN THE YEARS PRIOR TO LETTING OUT TO FCI IS ALSO NOT KNOWN. PRINCIPLE OF CONSISTENCY STATES THAT IN THE ABSENCE OF ANY CHANGE IN FACTUAL OR LEGAL POSITION THE VIEW TAKEN IN EARLIER YEAR SHOULD BE APPLIED IN SUBSEQUENT YEARS. IF HOWEVER S OME CHANGE HAS OCCURRED IN THE FACTUAL OR LEGAL POSITION THEN THE PRINCIPLE OF CONSISTENCY WILL GO OUT OF THE RECKONING. THE HONBLE SUPREME COURT IN C.K.GANGADHARAN AND ANOTHER VS. CIT [(2008) 304 ITR 61 (SC)] HAS HELD THAT MERELY BECAUSE THE REVENUE HAS NOT PREFERRED AN APPEAL IN ONE CASE WOULD NOT OPERATE A S A BAR FOR THE DEPARTMENT TO PREFER AN APPEAL IN ANOTHER CASE WHERE THERE IS JUS T CAUSE FOR DOING SO OR IT IS IN THE PUBLIC INTEREST TO DO SO OR FOR A PRONOUNCEMENT BY THE HIGHER COURT WHEN DIVERGENT VIEWS ARE EXPRESSED BY THE TRIBUNAL OR THE HIGH COU RTS. THIS JUDGEMENT CLEARLY BRINGS OUT THAT IF THERE IS EXPRESSION OF OPINION B Y A HIGHER COURT THEN THE VIEW TAKEN IN THE EARLIER YEAR WOULD NOT OPERATE AS A BA R TO PREFER AN APPEAL. IT IS SEEN THAT THE JUDGEMENT OF THE HONBLE SUPREME COURT IN THE CASE OF SHAMBHU INVESTMENT PVT. LTD. (SUPRA) WAS RENDERED ON 21 ST JANUARY 2003. THE DIVERGENCE OF JUDICIAAL OPINION ON THIS ISSUE WAS SETTLED BY THIS JUDGEMENT. IN VIEW OF THIS JUDGEMENT THE CONTRARY VIEW TAKEN BY THE AUTHORITIE S PRIOR TO THAT BECAME IMPLIEDLY OVER RULED. IT IS SEEN THAT THE ASSESSING OFFICER PASSED ORDERS U/S.143(3) ITA NO.812/MUM/2009 M/S.MODERN ORGANISERS. 5 UP TO ASSESSMENT YEAR 1996-97. APART FROM THE FACT THAT THE FACTUAL POSITION ABOUT THE MANNER AND PURPOSE IN WHICH THE PROPERTY WAS LE T OUT IN THESE YEARS HAS NOT BEEN BROUGHT ON RECORD THE CONSCIOUS DECISION TAKE N BY THE A.O. CANNOT BIND HIM PURSUANT TO THE JUDGEMENT RENDERED IN THE CASE OF SHAMBHU INVESTMENT PVT. LTD. (SUPRA). IN A MORE RECENT JUDGEMENT THE HONBLE SUPREME COU RT IN THE CASE OF CIT VS. OSWAL AGRO MILLS LTD. [(2009) 313 ITR 24 (SC)] SET ASIDE THE JUDGEMENT PASSED BY THE HIGH COURT DECIDING THE ISSUE ON THE PRINCIPLE OF CONSISTENCY AND REMANDED THE MATTER TO THE HIGH COURT FOR FRESH CON SIDERATION ON MERITS. THE JUDGEMENT OF THE HONBLE SUPREME COURT IN THE CASE OF RADHASOAMI SATSANG VS. CIT [(1992) 193 ITR 321 (SC)] RELIED ON BY THE LEARNED A.R. IN SUPPORT OF THE PRINCIPLE OF CONSISTENCY ALSO DOES NOT HELP HIM MU CH IN VIEW OF THE FACT IN THE PENULTIMATE PARA IT WAS NOTICED : IN THE ABSENCE OF ANY MATERIAL CHANGE JUSTIFYING THE REVENUE TO TAKE A DIFFERENT VIEW OF THE MATTER AND IF THERE WAS NO CHANGE IT WAS IN SUPPORT OF THE ASSESSEE WE DO NOT THINK TH E QUESTION SHOULD HAVE BEEN REOPENED. AGAIN IT IS NOTICED THAT THIS JUDGEMENT HAS BEEN RENDERED IN THE CONTEXT OF FACTUAL AND LEGAL POSITION PREVAILING IN THAT CA SE. WE HAVE NOTICED ABOVE THAT WITH THE ADVENT OF THE JUDGEMENT IN THE CASE OF SHAMBHU INVESTMENT PVT. LTD. (SUPRA) THE EARLIER CONTRARY DECISIONS ARE NO MORE VALID. IN THE LIGHT OF THESE APEX COURT JUDGMENTS WE ARE SATISFIED THAT THE PRINCIP LE OF CONSISTENCY DOES NOT HELP THE ASSESSEE IN THE INSTANT CASE AND THE INCOME FRO M FCI TO THE TUNE OF RS.20 95 278 IS LIABLE TO BE TAXED UNDER THE HEAD I NCOME FROM HOUSE PROPERTY. 6. THE FIRST ALTERNATIVE GROUND IS FOR ALLOWING DE DUCTION OF EXPENSES AGAINST THE RENTAL INCOME IF HELD TO BE CHARGEABLE UNDER TH E HEAD `INCOME FROM HOUSE PROPERTY. THE LEARNED COUNSEL FOR THE ASSESSEE CON TENDED THAT THE EXPENSES CLAIMED BY THE ASSESSEE AGAINST THE BUSINESS INCOME BE ALLOWED AS DEDUCTION AGAINST THE RENTAL INCOME IF IT WAS HELD TO BE TAX ABLE UNDER THE HEAD `INCOME FROM HOUSE PROPERTY. WE ARE NOT CONVINCED WITH THIS SU BMISSION FOR THE REASON THAT ONLY THE DEDUCTIONS AS PROVIDED FOR U/S.24 CAN BE ALLOWED AS DEDUCTION AGAINST ITA NO.812/MUM/2009 M/S.MODERN ORGANISERS. 6 THE RENTAL INCOME. IT IS NOT AS IF ANY EXPENDITUR E INCURRED BY THE ASSESSEE CAN BE CLAIMED AS DEDUCTION. THE ASSESSING OFFICER HAS ALL OWED DEDUCTION U/S.24(A) AT THE RATE OF 30% OF THE ANNUAL VALUE. APART FROM THAT TH E ONLY OTHER PROVISION WHICH REQUIRES CONSIDERATION IS CLAUSE (B) OF SECTION 24 WHICH PROVIDES FOR DEDUCTION OF INTEREST PAYABLE ON CAPITAL BORROWED FOR ACQUIRING CONSTRUCTING REPAIRING RENEWING OR RECONSTRUCTING THE PROPERTY. THE ASSESS ING OFFICER IS DIRECTED TO EXAMINE IF THE ASSESSEE HAD INCURRED ANY EXPENDITU RE ON ACCOUNT OF INTEREST FOR THE PURPOSES SPECIFIED UNDER CLAUSE (B) OF SECTION 24 A ND THEN PROCEED TO DECIDE THE QUESTION OF DEDUCTIONS U/S 24 AS PER LAW AFTER ALLO WING A REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. OTHER THAN THAT NO FU RTHER DEDUCTION FOR ANY OTHER EXPENDITURE CAN BE ALLOWED AGAINST THE INCOME FROM HOUSE PROPERTY ON THE GROUND THAT THE STATUTORY COMPOSITE DEDUCTION OF 30% HAS A LREADY BEEN ALLOWED BY THE AO. 7. THE LAST ALTERNATIVE GROUND RAISED BY THE ASSESS EE IS FOR ALLOWING DEDUCTION OF INTEREST AND OTHER EXPENSES AGAINST THE INTEREST INCOME TAXED BY THE ASSESSING OFFICER U/S.56 OF THE ACT. THE ASSESSEE EARNED INTE REST INCOME OF RS.6 09 316 WHICH WAS OFFERED FOR TAXATION UNDER THE HEAD `INCO ME FROM OTHER SOURCES. THE ASSESSING OFFICER ACCEPTED THE HEAD UNDER WHICH SUC H INTEREST INCOME SHALL FALL. THE LEARNED A.R. ARGUED THAT IN VIEW OF THE FACT TH AT THE EXPENSES INCURRED BY THE ASSESSEE WERE CLAIMED AS DEDUCTIBLE UNDER THE HEAD `PROFITS AND GAINS OF BUSINESS OR PROFESSION AGAINST THE RENTAL INCOME THERE WA S NO OCCASION FOR IT TO CLAIM ANY SEPARATE DEDUCTION U/S.57. IN VIEW OF OUR DECISION ON MAIN GROUND ABOVE ABOUT THE TREATMENT OF RENTAL INCOME AS CHARGEABLE TO TAX UND ER THE HEAD `INCOME FROM HOUSE PROPERTY AND THE SUBSEQUENT FINDING THAT ONLY THE EXPENSES INCURRED U/S.24 CAN BE ALLOWED IT REMAINS TO BE EXAMINED AS TO WHETHER AN Y DEDUCTION CAN BE ALLOWED U/S.57 OF THE ACT. IN THE ABSENCE OF ANY FINDING GI VEN BY THE AUTHORITIES BELOW ON THIS SCORE WE ARE OF THE CONSIDERED OPINION THAT IT WILL BE IN THE INTEREST OF JUSTICE IF THE ASSESSING OFFICER IS DIRECTED TO CONSIDER TH E GRANT OF ANY DEDUCTION ITA NO.812/MUM/2009 M/S.MODERN ORGANISERS. 7 ALLOWABLE AGAINST INTEREST EARNED BY THE ASSESSEE C HARGEABLE UNDER THE HEAD `INCOME FROM OTHER SOURCES U/S.57 OF THE ACT AS PE R LAW AFTER ALLOWING A REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSES SEE. 8. IN THE RESULT THE APPEAL IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON THIS 12 TH DAY OF FEBRUARY 2010. SD/- SD/- ( R.S.PADVEKAR ) ( R.S.SYAL ) JUDICIAL MEMBER ACCOUNTANT ME MBER MUMBAI : 12 TH FEBRUARY 2010. DEVDAS* COPY TO : 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT CONCERNED 4. THE CIT(A) XII MUMBAI. 5. THE DR/ITAT MUMBAI. 6. GUARD FILE. TRUE COPY. BY ORDER ASSISTANT REGISTRAR ITAT MUMBAI. ITA NO.812/MUM/2009 M/S.MODERN ORGANISERS. 8 DATE INITIAL 1. DRAFT DICTATED ON 11.02.2010 SR.PS 2. DRAFT PLACED BEFORE AUTHOR 12.02.2010 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/PS 6. KEPT FOR PRONOUNCEMENT ON SR.PS 7. FILE SENT TO THE BENCH CLERK SR.PS 8. DATE ON WHICH FILE GOES TO THE HEAD CLERK. 9. DATE OF DISPATCH OF ORDER. *