M/s. Hiralal Tulsidas Morarji Properties & Investments, Kolkata v. ITO, Ward - 34(3),Kolkata, Kolkata

ITA 621/KOL/2010 | 2006-2007
Pronouncement Date: 26-05-2010

Appeal Details

RSA Number 62123514 RSA 2010
Assessee PAN AADFH3922K
Bench Kolkata
Appeal Number ITA 621/KOL/2010
Duration Of Justice 1 month(s) 28 day(s)
Appellant M/s. Hiralal Tulsidas Morarji Properties & Investments, Kolkata
Respondent ITO, Ward - 34(3),Kolkata, Kolkata
Appeal Type Income Tax Appeal
Pronouncement Date 26-05-2010
Appeal Filed By Assessee
Bench Allotted B
Tribunal Order Date 26-05-2010
Assessment Year 2006-2007
Appeal Filed On 29-03-2010
Judgment Text
1 IN THE INCOME TAX APPELLATE TRIBUNAL 'B BENCH : KOLKATA (BEFORE HONBLE SRI D.K.TYAGI J.M. AND HONB LE SRI B.C.MEENA A.M.) I.T.A. NO. 621 /KOL/2010 ASSESSMENT Y EAR : 2006-2007 M/S HIRALAL TULSIDAS MORARJI PROPERTIES & VS ITO WARD-34(3) KOLKATA INVESTMENTS (PAN AADFH 3922 K) (APPELLANT) (RESPONDENT) APPELLANT BY : SRI A.K.BANERJEE. RESPONDENT BY : SR I B.R.PURAKAYASTHA SR. D.R. O R D E R PER SHRI B.C.MEENA A.M. THIS APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER OF THE CIT(A)- XX KOLKATA DATED 5 TH JANUARY 2010 FOR THE ASSESSMENT YEAR 2006-07. 2. GROUNDS OF APPEAL RAISED ARE AS FOLLOWS : 1. FOR THAT HAVING REGARD TO THE FACTS THAT TH E INCOME DERIVED BY THE APPELLANT FROM THE PROPERTY WAS ALL ALONG ASSESSE D AS BUSINESS INCOME IN THE PAST AND BILLING OF THE TENEMENT WITH FACILIT IES AND SERVICES RENDERED WAS IN THE NATURE OF BUSINESS OR TRADING OPERATION THE LEARNED CIT(A) WAS NOT JUSTIFIED IN CONFIRMING THE INCOME OF RS. 6 87 864 ASSESSED UNDER THE HEAD HOUSE PROPERTY IN THE IMPUGNED ASSE SSMENT ORDER WITHOUT APPLICATION OF HIS MIND TO THE FACTS OF THE CAS E AS WELL AS APPLICABLE IN THIS CASE. 2. FOR THAT IN VIEW OF THE FACTS THAT THE A PPELLANT DERIVED INCOME BY WAY OF SERVICE CHARGES AND ELECTRIC CHARGES FROM THE OCCUPANTS AND SUCH SERVICES AND NATURE OF EXPENSES CLEARLY IN DICATED BUSINESS ACTIVITIES THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) AND THE LEARNED ASSESSING OFFICER ERRED IN LAW IN DISREGARDING T HE INCOME OF RS.1 26 680 DISCLOSED BY THE APPELLANT AS INCOME FROM BUSINES S ON MISCONCEPTION OF LAW AS WELL AS FACTS. 3. FOR THAT THE EXPENDITURE INCURRED BY THE APPELLANT FOR THE PURPOSE OF CARRYING ON BUSINESS OUGHT TO HAVE BEEN ALL OWED IN THE COMPUTATION OF TOTAL INCOME PURSUANT TO THE PROVISIONS OF CHA PTER IV-D OF THE INCOME TAX ACT. 3. WHILE PLEADING ON BEHALF OF THE ASSESSEE T HE LEARNED A.R. SUBMITTED THAT THE ASSESSEE WAS DRAWING INCOME FROM BUSINE SS OF THE HOUSE PROPERTY. THE 2 ASSESSEE HAS EARNED RENTAL INCOME IN RESPECT O F PROPERTY NO. 40 EZRA STREET KOLKATA WHICH HAS BEEN LET OUT TO THE DIFFERENT. SERVICE CHARGES HAVE ALSO BEEN RECEIVED FOR PROVIDING VARIOUS SERVICES SUCH AS WATER ELECTRICITY. THE ASSESSEE HAS SHOWN THESE RECEIPTS AS BUSINESS INCOME AND CLA IMED THE EXPENSES AGAINST SUCH INCOME. THE A.O. WRONGLY HELD THAT THE ASSES SEE IS THE OWNER OF THE PROPERTY AND INCOME FROM THIS PROPERTY IS TO BE TAXED AS INCOME FROM HOUSE PROPERTY AS PER PROVISIONS OF SECTION 22 TO 27 O F THE I.T.ACT. HE ALSO PLEADED THAT THE RETURN OF INCOME WHERE SUCH INCOME HAS BEEN SHOWN AS BUSINESS INCOME HAS BEEN ACCEPTED BY THE DEPARTMENT IN PAS T YEARS THEREFORE THE DEPARTMENT IS JUSTIFIED IN CHANGING THE STAND .HE RELIED ON THE FOLLOWING DECISIONS : 1. PFH MALL & RETAIL MANAGEMENT LTD. VS ITO WARD 8(3) KOLKATA (110 ITD 337) (ITAT KOLKATA BENCH A) - INC OME ATTACHED TO THE IMMOVABLE PROPERTY CANNOT BE SOLE CRITERION FOR AS SESSMENT IF SUCH INCOME AS INCOME FROM HOUSE PROPERTY. IT IS NECE SSARY TO DIG OUT THE PRIMARY OBJECT OF ASSESSEE. IF IT IS NECESSARY TO DIG OUT FURTHER TO FIND OUT WHAT IS PRIMARY OBJECT OF ASSESSEE WHILE EXPLOITING PROPERTY. IF SIMPLY LETTING OUT OR PROPERTY IS INTENTION THEN IT SHOUL D BE TAXED UNDER THE HEAD INCOME FROM HOUSE PROPERTY AND IF INTENTION IS T O BE EXPLOITATION OF IMMOVABLE PROPERTY BY WAY OF COMMERCIAL ACTIVITIES THEN RESULTANT INCOME SHALL BE ASSESSED AS BUSINESS INCOME. 2. CIT VS SARABHAI PVT. LTD. (263 ITR 197) (GUJARAT). THE INCOME RECEIVED BY ASSESSEE TOWARDS DIFFERENT SERVICES R ENDERED TO THE TENANTS SHOULD BE TREATED AS PROFIT & GAINS OF BUSINESS AN D PROFESSION. 3. CIT VS J.K.CHARITABLE TRUST (308 ITR 161) (SC).- FOR THE PROPOSITION THAT WHERE THE FACTUAL SITUATION IN AL L THE ASSESSMENT YEARS IS SAME THE DEPARTMENT HAS NOT APPEALED FROM THE DECISION OF EARLIER YEARS ITS APPEAL FOR SUCCEEDING YEARS SHALL BE DISMISSE D. AND HE VEHEMENTLY PLEADED THAT THE ORDERS OF THE AUTHORITIES BELOW DESERVE TO BE SET ASIDE. 3 4. ON THE OTHER HAND THE LEARNED D.R. RELIED ON THE ORDERS OF THE AUTHORITIES BELOW AND SUBMITTED THAT THE ASSESSEE IS THE OWNER OF THE PROPERTY WHICH HAS BEEN LET OUT TO VARIOUS TENANTS. THE ASSESSEE IS G ETTING REGULAR RENTAL INCOME. THE PRINCIPLES OF RES JUDICATA ARE NOT APPLICABLE TO THE INCOME TAX PROCEEDINGS AND EVERY ASSESSMENT YEAR IS A SEPARATE ASSESSMENT YEAR. HE PLEADED THAT THE FACTS OF THE CASE RELIED UPON ARE DIFFERENT THAN THE FA CTS INVOLVED IN THE ASSESSEES CASE. HE SUBMITTED THAT THE ORDERS OF THE AUTHORIT IES BELOW DESERVE TO BE SUSTAINED. 5. AFTER HEARING BOTH THE SIDES AND GOING THROUGH THE CASE LAWS RELIED UPON BY THE ASSESSEE WE FIND THAT THE ASSESSEE IS T HE OWNER OF THE PROPERTY NO.40 EZRA STREET KOLKATA. IT HAS BEEN LET OUT TO VARIO US TENANTS AND THE ASSESSEE WAS GETTING MONTHLY RENT. THE BALANCE SHEET OF THE A SSESSEE REFLECTS THE INVESTMENT IN THE PROPERTY WHICH IS EVIDENT FROM PAGE 23 OF T HE PAPER BOOK WHICH IS BALANCE SHEET OF THE ASSESSEE FOR THE YEAR ENDING 31.3.20 06. THE ASSESSEE IS DE FACTO OWNER OF THE PROPERTY AS SAME IS REFLECTED IN BAL ANCE SHEET UNDER THE HEAD INVESTMENTS. THE ASSESSEE HAS PUT THE PROPERTY O N RENT TO EARN THE REGULAR MONTHLY RENT. IT IS ADMITTED FACT THAT THE ASSES SEE HAD LET OUT THE PROPERTY TO VARIOUS TENANTS AND RECEIVING RENTAL INCOME REGULAR LY. SECTION 14 OF THE I.T.ACT PROVIDES VARIOUS HEADS OF INCOME WHICH ARE AS UNDE R : 14. SAVE AS OTHERWISE PROVIDED BY THIS ACT ALL INCOME SHALL FOR THE PURPOSES OF CHARGE OF INCOME TAX AND COMPUTATIO N OF TOTAL INCOME BE CLASSIFIED UNDER THE FOLLOWING HEADS OF INCOME :- A- SALARIES 68[***] C- INCOME FROM HOUSE PROPERTY D- PROFITS AND GAINS OF BUSINESS OR PROFESSION E- CAPITAL GAINS F- INCOME FROM OTHER SOURCES AS PER THIS SECTION INCOMES FOR THE PURPOSE OF LEVYING INCOME TAX HAS TO BE BROUGHT UNDER THESE HEADS. THERE IS SPECIFIC HEAD IN SECTION FOR THE INCOME FROM HOUSE PROPERTY AND NECESSARY PROVISION HAS B EEN PROVIDED IN SECTIONS 22 TO 27 OF THE INCOME TAX ACT. THE ASSESSEE IS RECEIVI NG MONTHLY RENTAL INCOME FROM THE PROPERTY AND THE ASSESSEE IS NOT DOING THE BUS INESS OF LETTING OUT OF PROPERTY 4 THEN IT HAS TO BE TAXED AS INCOME FROM HOUSE PROPER TY. AS PER THE PARTNERSHIP DEED ASSESSEE DOING BUSINESS CONTRACTING BUILDING AND O WNING OF ESTATE. BUT CERTAINLY ASSESSEE IS NOT DOING THE BUSINESS OF LETTING OUT OF PROPERTY AS A COMMERCIAL ADVENTURE. THE COMMERCIAL ADVENTURE HAS TO BE HAVI NG AN ELEMENT OF RISK OR SAY UNCERTAINTY REGARDING SURPLUS OR INCOME TO BE REC EIVED. WHEN RETURNS FROM THE PROPERTY PROPERTY ARE FIXED ON MONTHLY BASIS THE N IT CANNOT BE SAID TO BE A COMMERCIAL ADVENTURE. HENCE IT CANNOT BE ALSO SAI D THAT ASSESSEE WAS HAVING MAIN INTENTION TO EXPLOIT THE PROPERTY BY WAY OF C OMPLEX COMMERCIAL ACTIVITIES. THE PRIMARY OBJECT APPEARS TO BE THE EARNING OF RE NT RATHER THAN PROFIT. FURTHER THE ASSESSEES CLAIM THAT HIS VERSION WAS ACCEPTED IN THE EARLIER YEARS SHOULD BE ACCEPTED IN THIS YEAR ALSO. ON THIS ISSUE IT IS HE LD THAT THE PRINCIPLE OF RES JUDICATA IS NOT APPLICABLE IN INCOME TAX ASSESSMENT PROCEE DINGS. FURTHER THE FACTS OF THE CASE LAWS RELIED UPON ARE AT VARIANCE TO THE FA CTS OF THE ASSESSEES CASE . THE ASSESSEE IS RECEIVING RENT REGULARLY FOR PREMISES AND SERVICES INEXTRICABLY ATTACHED THE PROPERTY. THE HONBLE CALCUTTA HIGH COURT IN T HE CASE OF CIT VS SHAMBHU INVESTMENT PVT. LTD. (249 ITR 47) (CAL) HELD AS UNDER : MERELY BECAUSE INCOME IS ATTACHED TO ANY IMMOVABLE PROPERTY THAT CANNOT BE THE SOLE FACTOR FOR ASSESSM ENT OF SUCH INCOME AS INCOME FROM PROPERTY. IF THE MAIN INTENT ION OF THE ASSESSEE IS TO LET OUT THE PROPERTY OR ANY PORTION THEREOF THE INCOME MUST BE CONSIDERED AS THE RENTAL INCOME OR I NCOME FROM PROPERTY WHEREAS IF THE PRIMARY OBJECT IS TO E XPLOIT THE IMMOVABLE PROPERTY BY WAY OF COMPLEX COMMERCIAL ACT IVITIES IN THAT EVENT IT MUST BE HELD AS BUSINESS INCOME. THE COST OF THE IMMOVABLE PROPERTY OWNED BY THE ASSESSEE WAS RS.5 42 443. A PORTION OF THE PROPERT Y WAS USED BY THE ASSESSEE ITSELF FOR ITS OWN BUSINESS PURPOSE . THE REST OF THE PROPERTY HAD BEEN LET OUT TO THE VARIOUS OCCUPA NTS WITH FURNITURE FIXTURES LIGHTS AIR-CONDITIONERS FOR B EING USED AS TABLE SPACE. UNDER AN AGREEMENT WITH THOSE OCCUPAN TS THE ASSESSEE PROVIDED SERVICES LIKE WATCH AND WARD STAF F ELECTRICITY WATER AND OTHER COMMON AMENITIES. THE SERVICES RENDERED TO THE VARIOUS OCCUPANTS ACCORDING TO THE SAID AGREEMENT WAS NOT SEPARATELY CHARGED AND THE MONTHL Y RENT PAYABLE WAS INCLUSIVE OF ALL CHARGES TO THE ASSESSE E. THE ASSESSEE HAD RECOVERED A SUM OF RS.4 25 000 AS AND BY WAY OF 5 SECURITY ADVANCE FROM THREE OCCUPANTS. THE INCOME D ERIVED BY THE ASSESSEE FROM THE PROPERTY WAS ASSESSED AS BUSI NESS INCOME BY THE ASSESSING OFFICER. THE COMMISSIONER R EMANDED THE MATTER TO THE ASSESSING OFFICER WITH A DIRECTIO N TO ASSESS THE INCOME AS INCOME FROM PROPERTY BUT THE TRIBUNA L RESTORED THE ORDER OF THE ASSESSING OFFICER. ON A REFERENCE: HELD THAT IT WAS EVIDENT FROM THE AGREEMENT THAT T HE ASSESSEE HAD LET OUT THE FURNISHED OFFICE TO THE OC CUPANTS ON A MONTHLY RENTAL WHICH WAS INCLUSIVE OF ALL CHARGES T O THE ASSESSEE. THE ENTIRE COST OF THE PROPERTY LET OUT T O THE OCCUPANTS HAD BEEN RECOVERED AS AND BY WAY OF INTER EST-FREE ADVANCE BY THE ASSESSEE. THEREFORE IT COULD NOT BE SAID THAT THE ASSESSEE WAS EXPLOITING THE PROPERTY FOR ITS CO MMERCIAL BUSINESS ACTIVITIES. THE HONBLE SUPREME COURT IN THE CASE OF SHAMBHU I NVESTMENT P. LTD. VS CIT (263 ITR 143) UPHELD THE ORDER REPORTED IN 249 IT R 47 (SUPRA) AND HELD AS UNDER : THE ASSESSEE OWNED AN IMMOVABLE PROPERTY COSTING RS.5 42 443. IT OCCUPIED A PORTION OF THE PROPERTY AND LET OUT THE REST TO BE USED AS TABLE SPACE TO OCCUPANTS WITH FURNITURE AND FIXTURES AN D LIGHTS AND AIR- CONDITIONERS. THE ASSESSEE PROVIDED SERVICES LIKE WATCH AND WARD STAFF ELECTRICITY AND WATER AND OTHER COMMON AMENITIES. THE MONTHLY RENT PAYABLE WAS INCLUSIVE OF ALL CHARGES. THE ASSESSE E HAD ALSO RECOVERED BY WAY OF SECURITY FROM THE OCCUPANTS A SUM OF RS.4 2 5 000. THE HIGH COURT HELD THAT THE INCOME FROM THE PROPERTY WAS ASSESSAB LE IN THE HANDS OF ASSESSEE AS INCOME FROM HOUSE PROPERTY (SEE [2001 ] 249 ITR 47 (CAL) ). THE ASSESSEE PREFERRED APPEALS TO THE SUPREME COURT . THE SUPREME COURT DISMISSED THE APPEALS HOLDING THAT THERE WAS NO REA SON TO INTERFERE WITH THE CONCLUSION ARRIVED AT BY THE HIGH COURT. DECISION OF THE CALCUTTA HIGH COURT IN CIT VS S HAMBHU INVESTMENT P. LTD. [2001] 249 ITR 47 AFFIRMED. THEREFORE RESPECTFULLY FOLLOWING THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE (SUPRA) (263 ITR 143) WE FIND NO FAUL T IN THE ORDERS OF THE AUTHORITIES BELOW. WE ACCORDINGLY CONFIRM THEIR ORDERS. 6. IN THE RESULT THE APPEAL OF THE ASSESSEE IS DISMISSED. 6 ORDER PRONOUNCED IN THE OPEN COURT ON 26.05.2010 SD/- SD/- (D.K.TYAGI) (B.C.MEENA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 26.05.2010 COPY FORWARDED TO :- 1) ITO WARD-34(3) KOLKATA. 2) M/S HIRALAL TULSIDAS MORARJI PROPERTIES & INV ESTMENTS 35 EZRA STREET KOLKATA. 3) CIT(A) KOLKATA. 4) CIT KOLKATA. 5) D.R. ITAT KOLKATA. BY ORDER TRUE COPY ASSISTANT REGISTRAR BCD I.T.AT. KOLK ATA.