TMI Blog2010 (10) TMI 703X X X X Extracts X X X X X X X X Extracts X X X X ..... e those expenses cannot be allowed as a deduction - Decided against the assessee - ITA No. 6291/Mum/2009, ITA No. 6292/Mum/2009, ITA No. 6293/Mum/2009, ITA No. 6294/Mum/2009, ITA No. 6295/Mum/2009 - - - Dated:- 15-10-2010 - P.M. Jagtap, N.V. Vasudevan, JJ. Vimal Punmiya for the Appellant Amrita Misra for the Respondent ORDER N.V. Vasudevan: These are five appeals filed by the assessee against orders of the Commissioner of Income-tax (Appeals), Mumbai, as per the details given below: (1) ITA No.6291/M/2009 Order dtd.29.9.2009 of CIT(A)-25,Mumbai A.Y. 2001-02 (2) ITA No.6282/M/2009 Order dtd.29.9.2009 of CIT(A)-25,Mumbai A.Y. 2002-03 (3) ITA No.6293/M/2009 Order dtd.29.9.2009 of CIT(A)-25,Mumbai A.Y. 2003-04 (4) ITA No.6294/M/2009 Order dtd.29.9.2009 of CIT(A)-25, Mumbai A.Y. 2005-06 (5) ITA No.6295/M/2009 Order dtd.29.9.2009 of CIT(A)-25,Mumbai A.Y. 2006-07 2. One of the common issues in all these appeals is as to under what head the income in the form of License fee and compensation received by the assessee on renting out of a property should be assessed. The issue arose for the first time in the assessment year 2005-06 and th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that there was no business activity by merely letting out of the property. He has also found that in the TDS certificate, the description of the receipt was mentioned as rent. The CIT(A) also found that the Profit and Loss Account several expenses have been claimed which are generally not allowed while computing the income from house property. The CIT(A) also found that under the Agreement of Leave and License, it was a mere letting out the premises to earn rental income and such receipts cannot be treated as business income. The CIT(A) also held that the fact that the income was accepted as business income in the past will not be a bar to make an assessment under a different head in the present assessment year. In this regard, the CIT(A) has also found that in the assessment year 1995-96, there was a scrutiny assessment and an order under section 143(3) of the Act in which there was no specific finding as to how the income from letting out the property was to be accepted as business income. He also found that in all the assessment years the return of the assessee was accepted under section 143(1) of the Act. For all the above reasons the CIT(A) held that the income in question has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee that the loan in question was given in the course of its business of carrying on money lending business was not correct. Accordingly, the AO's action was upheld. 10. Before us, the learned counsel for the Assessee could not point out any circumstances or show as to why the findings of the CIT(A) were not correct. In the circumstances, we uphold the order of the CIT(A) and dismiss ground No.2 raised by the assessee. 11. The other grounds are relating to levy of interest under section 234A and 234C which is purely consequential and the ground relating to initiation of penalty proceedings cannot be subject matter of appeal. Consequently, the appeal by the assessee is dismissed. 12. Now we shall take up the appeal in ITA No.6291/Mum/2009 for the assessment year 2001-02. Ground No. 1 raised by the assessee reads as under: "The Assessing Officer is not justified in re-opening the case u/s.148 of the Income-tax Act, 1961." 13. In this assessment year, the assessee filed its return of income on 30.6.2001, which was accepted under section 143(1) of the Act. Later on a notice under section 148 was issued and served on the assessee on 27.3.2008. The reasons for initia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... heard the rival submissions on this issue. We have already seen that the assessee as a nominee of the original debenture holder in Shree Madhu Industrial Estate Ltd. had a right of occupancy over the property. As to whether such occupancy rights had all the attributes of ownership, has neither been examined by the AO nor explained by the Assessee. The Assessee has not explained before us as to how it had a right of occupancy of the property. It is necessary to consider income from letting of property to be regarded as "Income from House Property" that the recipient of the rent should be the owner as under stood under the Act. In this regard we find the original allottee was one Indira Kumar Somani. As to how the Assessee came into possession of this property and as to how its right over the property, should be considered as a right of ownership of the property, are all matters which are not clear from the records. We therefore set aside the order of CIT(A) on this issue and direct the AO to examine this issue afresh. The Assessee will explain as to how it has to be considered as owner of the property and as to how the rent from letting of the property has to be considered as "Incom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erest cannot be treated as income from business. He, therefore, treated the same as income from other sources. The CIT(A) confirmed the order of the A.O. 22. Before us the learned counsel for the assessee reiterated the submissions made before the lower authorities, i.e. in the past interest income was accepted as income from business. 23. We have considered the submission of the assessee and are of the opinion that the same cannot be accepted. The only assessment u/s.143(3) in the case of the assessee was for the assessment year 1995-96 and in that year, there was no occasion to examine this issue. In the given circumstances, we are of the view that the assessee was not engaged in the activity of earning interest as business. Consequently, ground No.4 raised by the assessee is dismissed. 24. Ground No. 5 with regard to levy of interest under section 234B is purely consequential. 25. Ground No. 6 was not pressed and the same is dismissed as not pressed. 26. In the result, ITA No.6291/Mum/2009 is partly allowed for statistical purposes. ITA No. 6292/Mum/2009 for the assessment Year 2002-03 27. Ground No.1 is with regard to validity of reassessment proceed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ground No. 6 is with regard to charging of interest under section 234B of the Act is purely consequently. 36. Ground No. 7 was not pressed. Hence, it is dismissed as not pressed. 37. In the result, the appeal in ITA No.6292/Mum/2009 is partly allowed for statistical purposes. ITA No. 6293/M/2009 for the assessment year 2003-04 38. Ground No. 1 is with regard to the validity of initiation of reassessment proceedings for the reasons stated while deciding similar ground of appeal in the assessment year 6291/Mum/09 for the assessment year 1991-92, this ground is dismissed. 39. Ground Nos. 2 and 3 raised by the assessee read as under: "2. The Ld. CIT(A) erred in confirming and treating licence fees received of Rs.4,17,300/- as income from other sources as against treated by assessee as business income. 3. The Ld.CIT(A) erred in allowing only compensation paid of Rs.50,565/- and disallowed other expenses debited to profit and loss account." 40. We have already decided identical grounds of appeal in the assessee's appeal for the assessment year 2002-03 in ITA No.6292/Mum/2009 above, viz. ground Nos. 2 and 3. For the reasons stated therein, ground No.2 and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee, therefore, submitted that no profits whatsoever had accrued to the assessee and therefore, no profit should be taxed. The A.O. however, held that the assessee had completed the construction and has received the payments from buyers. According to him, in construction business profit is earned in every year of construction activity and builders generally offer profits for taxation at certain percentage every year. This method of offering income from construction contracts is called as percentage completion method of accounting profits from construction contracts. The A.O. referred to the fact that some builders follow project completion method and offer profits from the project for taxation when 80% of the project is completed. According to the A.O. the assessee cannot postpone the payment of tax on the profits earned on technical ground. Since the construction of flat was completed and only occupation certificate is pending, the A.O. was of the view that profits had been generated from the construction activity. He estimated 50% of the Work in progress shown in the balance sheet as the profit of the assessee for the previous year and thereby added a sum of Rs.11,29,4469/- to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to ground No. 5 and 6 raised by the assessee in ITA No.6291/Mum/2009 for the assessment year 2001-02. For the reasons stated therein, it is held that ground No. 5 is purely consequential and ground No. 6 is dismissed. 49. In the result, appeal by the assessee is partly allowed. ITA No.6295/Mum/2009 : Asst. Year 2006-07 50. Ground No. 1 raised by the assessee reads as follows: "The Ld. CIT(A) erred in confirming and treating licence fees received of Rs.3,86,438/- as income from house property as against treated by assessee as business income." 51. This ground of appeal is identical to ground No.1 raised by the assessee in the assessee 2005-06 in ITA No.6294/Mum/2009. For the reasons stated therein, this ground of appeal of the assessee is dismissed. 52. Ground No.2 raised by the assessee reads as follows: "The Ld.CIT(A) erred in confirming and treating interest received of Rs.7,749/- as income from other sources as against treated by the assessee as business income." 53. This is identical to ground No.4 in ITA No.6291/Mum/2009 for the assessment year 2001-02. For the reasons stated therein, this ground of appeal is dismissed. 54. Ground No. 3 with rega ..... X X X X Extracts X X X X X X X X Extracts X X X X
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