TMI Blog2018 (9) TMI 785X X X X Extracts X X X X X X X X Extracts X X X X ..... in activity of letting out the properties, the service and maintenance charges were chargeable to tax as income from house property as rightly held by the Assessing Officer. As regards the alternative claim of the ld. Counsel for the assessee that the assessee-company was engaged in other business activities during the earlier years and there was only temporarily suspension of the said activities during the year under consideration due to lull in the business, we find that this aspect has not been specifically considered either by the Assessing Officer or even by the ld. CIT(Appeals). Since the issue relating to the claim of the assessee for various business expenses is consequential to this issue, we restore the issue also to the file of the Assessing Officer for deciding the same afresh. Addition in respect of deemed rental income from the property at Qutub Institutional area, New Delhi - Held that:- We set aside the impugned order of the ld. CIT(Appeals) on this issue and restore the matter to the file of the Assessing Officer for deciding the same afresh after verifying the exact date of sealing of the property by Delhi Municipal Corporation from the relevant documentary ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he same, the ld. CIT(Appeals) directed the assessee to produce all the relevant details in support of the reconciliation for verification before the AO. This opportunity given by the ld. CIT(Appeals) to the AO to verify the reconciliation prepared and furnished by the assessee from the relevant details and documents, we are of the view that the revenue cannot be said to have any grievance from the order of the CIT(Appeals) on this issue. Addition u/s 14A read with Rule 8D - Held that:- No disallowance under section 14A can be made if there is no exempt income actually received by the assessee in the relevant year. We accordingly delete the disallowance made by the Assessing Officer and enhanced by the ld. CIT(Appeals) under section 14A read with Rule 8D. See case of Cheminvest Limited [2015 (9) TMI 238 - DELHI HIGH COUR]. - I.T.A. No. 297/KOL/2013 And I.T.A. No. 161/KOL/2013 - - - Dated:- 12-9-2018 - Shri P.M. Jagtap, Accountant Member And Shri S.S. Viswanethra Ravi , Judicial Member For The Department : Md. Usman, CIT, D.R. For The Assessee : Shri J .P. Khai tan, Sr. Advocate and Shri Arvind Agarwal , Advocate ORDER Per Shri P.M. Jagtap, A.M.: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, treated the entire service and maintenance charges received by the assessee as an integral part of the rental income liable to tax under the head income from house property . Accordingly, deduction of 30% was allowed by him against the service and maintenance charges of ₹ 90,38,482/- received by the assessee and the balance amount of ₹ 63,26,937/- was assessed by him under the head income from house property . As regards the claim of the assessee for business expenses under various heads, the Assessing Officer found that the only activity of the assessee carried out during the year under consideration was giving buildings on rent and providing some services and having assessed the entire income from rent and service maintenance charges under the head income from house property , the Assessing Officer held that there was no income chargeable to tax as business income of the assessee and accordingly the entire expenses claimed by the assessee as business expenses were disallowed by him. 4. The action of the Assessing Officer in treating its income from service and maintenance charges as income from house property and disallowing the entire expenses claimed as b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... preme Court held on the facts of that case that the rental income and the service charges are two different sources and not one source. In that case the flats and the shops were let out to the tenants which included charges for electric current, for the use of lifts, for the supply of hot and cold water, or the arrangements for scavenging, for providing watch and ward facilities as well as other amenities, 7. In the case of CIT v. Kanak Investments (P.) Ltd. [1974} 95 ITR 419 this Court held that where composite rent is received by the assessee from its tenant, it should be split up and the amount attributable to the building only should be computed under section 9(1) of the Indian Income-tax Act, 1922 ('the 1922 Act') while the amount attributable to the amenities provided by the assessee to the tenants should be assessed under section 12 of the 1922 Act. 8. In the case of Indian City Properties Ltd. v. CIT [1978] 111 ITR 19, this Court held that the income derived from letting out the buildings was assessable as income from house property under section 22, The lift charges and airconditioning charges, which had been shown separately in the ITO's order, wer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tenants should be assessed under section 12 of the 1922 Act. Accordingly, the receipts attributable to the various amenities provided by the landlord in the shape of electric fittings, lift, gas, sanitation, etc., were separately treated under section 12. 10. Indian City Properties Ltd. v. CIT [I978} 111 ITR 19 (Cal.) also involve a similar question. The lift charges and air-conditioning charges were held to be assessable under section 86 treating them separately from the income derived from the building under section 22. 11. CIT v. Model Mfg. Co. (P.) Ltd. [I986} 159 ITR 2701 (Cal.) also stated that the services rendered by the assessee in providing electricity, use of lifts. supply of water, maintenance of staircases and watch and ward facilities to the tenants constituted separate activities distinct from letting out of the property. The service charges realised by the assessee were held to be not assessable under section 22 but were assessable under the head 'Income from other sources'. 13. In case there is inseparability, as stated above, then it will not be an income from the house property at all and would be the income falling under the present sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6. Office maintenance 3,66,000 Total 1,68,66,000 14. The other expenses being incurred by the appellant are not commensurate with business or maintenance of the running of the office. The expenses for provision of rent and other items are not allowable as expense since the appellant gets standard deduction from the property income. The appellant has not show adequate expenses on the rent earning i.e. house property income. There are many expenses which are incurred by it for earning of house property income which are being shown in the Profit and Loss Account. The appellant is doing it to claim more deduction since its business loss is set off against the house property income and if it shows expenses incurred on earning of house property income, the same will be disallowed since appellant gets 30% deduction u/s 24(a) and no further expenses can be allowed. There is no justification given by the appellant for such huge expenses without business being carried out by it, since the expenses are incurred for the only work being done by the appellant is of giving property ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ant without further discussion, since it is considered to be fair and reasonable. The expenses as accepted by the appellant and to be apportioned for earning of house property income are as follows:- Sl. No. Particulars Amount (in Rs.) 1. Personal expenses 1,46,30,000 2. Travelling Conveyance 5,54,000 3. Vehicles maintenance 8,56,000 4. Communication expenses 4,72,000 5. Miscellaneous expenses 6,04,000 6. Total 1,71,16,000 17. The disallowance @ 40% of ₹ 1,71,16,000/- amounts to ₹ 68,46,400/- is considered and held to be pertaining to earning of House Property Income. Therefore, this will not be allowed as business expenses while calculating the loss in the Profit Loss account. The financial expenses do not pertain to House Property Income since no loan has be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Whether on the facts and circumstances of the case, ld. CIT(A) erred in law in deleting the addition made by AO of 23 in respect of unjustified and disproportionate expenses against income from services rendered. Assessee s appeal (1) Because that the ld. CIT(A) was erred in law as well as in facts in disallowing a sum of ₹ 68,46,400/- being 40% of the business expenditure of ₹ 1,71,16,000/- apportioned by him allegedly for earning of house property income and disallowing the same against the total claim of business expenses by the appellant and his such conclusions are based on his surmises and guesses and are contrary to the facts and materials on record. (2) Because that the ld. CIT(A) was erred in law as well as in facts in reducing the business loss of the appellant by ₹ 68,46,400/- to be set off against the house property income of the year under appeal, on the alleged ground that, the said proportionate expenses was for earning of house property income and were not relating to earning of business income, his such conclusions are based on his surmises and guesses and are contrary to the facts and materials on record. 7. The ld. D.R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... siness during the year under consideration, the assessee-company continued to carry on the said activities in the subsequent years and also started some new activities. He contended that the assessee-company thus had not gone out of business and it was a suspension of such business activities temporarily due to lull in the business. He submitted that the assessee-company, therefore, continued to employ its work source and maintain its corporate status as going concern. He contended that the entire facts and circumstances of the case need to be taken into consideration while deciding this issue. In support of his contention, ld. Counsel for the assessee relied on the following judicial pronouncements- (i) Lakshmi Naryan Board Mills Pvt. Ltd. vs.- CIT 205 ITR 88 (Calcutta High Court); (ii) Veecumsees vs.- CIT 220 ITR 185 (SC). 9. In the rejoinder, ld. D.R. contended that the claim of the assessee of other business activities as made by the ld. Counsel for the assessee is very vague and it is not clear. He contended that it is not clear as to what exactly was the main business of the assessee and how the various other activities claimed to be carried on constituted a compos ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d activity was ancillary to the main activity of letting out the properties, the service and maintenance charges were chargeable to tax as income from house property as rightly held by the Assessing Officer. 12. As regards the alternative claim of the ld. Counsel for the assessee that the assessee-company was engaged in other business activities during the earlier years and there was only temporarily suspension of the said activities during the year under consideration due to lull in the business, we find that this aspect has not been specifically considered either by the Assessing Officer or even by the ld. CIT(Appeals). Even the claim of the ld. Counsel for the assessee of a composite nature of business activities carried on by the assessee by relying on the decision of the Hon ble Supreme Court in the case of Veecumsees (supra) as well as that of the Hon ble Calcutta High Court in the case of Lakshmi Naryan Board Mills Pvt. Ltd. (supra), we find that the same has not been considered or examined either by the Assessing Officer or by the ld. CIT(Appeals). We, therefore, consider it fair and proper and in the interest of justice to send this matter to the file of the Assessing O ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e building at Qutub Institutional area as made by the Assessing Officer was challenged by the assessee in the appeal filed before the ld. CIT(Appeals) and after considering the submissions made by the assessee as well as the material available on record, the ld. CIT(Appeals) deleted the same for the following reasons given in paragraph no. 21 of his impugned order:- 21. I have carefully considered the observations of the Assessing Officer in the assessment order, and submissions of the appellant. The appellant has produced a copy of the Writ Petition filed in the Hon'ble Delhi High Court relating to sealing of the property in which it is clear that the building was sealed on 14/11/2006 in the sealing drive undertaken by Municipal Corporation of Delhi. Therefore, the appellant was prevented by sufficient cause not to let out this property. Therefore, the Notional Income from the said property lying vacant due to Act of Government cannot be added back. Hence, addition of ₹ 80,39,178/- is deleted . 16. We have heard the arguments of both the sides on this issue and also perused the relevant material available on record. The ld. D.R. has contended that the relief on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee. He accordingly worked out the notional rental income of the said property at ₹ 15,10,343/- at the rate of 6% of ₹ 2,51,72,384/- and after allowing deduction of 30%, addition of ₹ 10,57,240/- was made by him to the total income of the assessee under the head income from house property . 19. The addition of ₹ 10,57,240/- made by the Assessing Officer was challenged by the assessee in the appeal filed before the ld. CIT(Appeals) and after considering the submissions made by the assessee as well as the material available on record, the ld. CIT(Appeals) deleted the said addition for the following reasons given in paragraph no. 22 of his impugned order:- 22. The appellant has produced possession certificate as Annexure-2 duly singed by Mrs. Bindia Jain shown that the fixed position of Flat No. 506, 5th Silver Arch Apartment was handed to her on 01/12/2010. Therefore, since the possession of the flat has been handed over, the income of the same cannot be added in the hands of the appellant. The appellant has already received advance of ₹ 2,35,00,000/- out of total consideration of ₹ 2,51,72,384/- which is 90% of the total consideration. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ue on the wrong presumption that the possession of the property was already handed over. As rightly contended by the ld. D.R., the possession of the property remained with the assessee during the year under consideration and the assessee being the owner in possession of the property, the notional rental income from the same was chargeable to tax in the hands of the assessee under section 23(1)(a) as rightly held by the Assessing Officer. Even the decision of the Hon ble Supreme Court in the case of S.N. Wadiyar (Decd. through L.R.) (supra), cited by the ld. Counsel for the assessee is of no help to the assessee on this issue as the same is distinguishable on facts and the issue involved the same therein is found to be different. We, therefore, set aside the impugned order of the ld. CIT(Appeals) giving relief to the assessee on this issue and restore that of the Assessing Officer. Ground No. 4 of the revenue s appeal is accordingly allowed. 22. In Grounds No. 5 6, the Revenue has challenged the action of the ld. CIT(Appeals) in deleting the addition made by the Assessing Officer on account of deemed dividend under section 2(22)(e) of the Act for the loans received from Devbhoo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... basis of ITS data, it is observed that the difference in relevant ITS data as noted by the Assessing Officer was reconciled by the assessee during the course of appellate proceedings before the ld. CIT(Appeals) and after considering the same, the ld. CIT(Appeals) directed the assessee to produce all the relevant details in support of the reconciliation for verification before the Assessing Officer. Keeping in view this opportunity given by the ld. CIT(Appeals) to the Assessing Officer to verify the reconciliation prepared and furnished by the assessee from the relevant details and documents, we are of the view that the revenue cannot be said to have any grievance from the order of the ld. CIT(Appeals) on this issue. Even the ld. D.R. has not raised any argument on this issue. We, therefore, find no merit in Ground No. 7 of the Revenue s appeal and dismiss the same. 26. The common issue involved in Grounds No. 3 to 5 of the assessee s appeal relates to the action of the ld. CIT(Appeals) in confirming the disallowance of ₹ 30,90,656/- made by the Assessing Officer under section 14A of the Act read with Rule 8D of the Income Tax Rules, 1962 and further enhancement of the same ..... X X X X Extracts X X X X X X X X Extracts X X X X
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