TMI Blog2013 (11) TMI 213X X X X Extracts X X X X X X X X Extracts X X X X ..... part and second part was related to the amount of sales of tickets. This arrangement cannot be said as partner ship, joint venture or franchise in any manner. From the copy of the agreement on the next date of agreement, the PVR Ltd. returned furniture, fittings and other equipments to the assessee with specific foot note to the list that no assets, equipments, furniture, fixture other than building has been retained by M/s Priya Village Roadshow limited. This recitals and documents specifically show that only cinema building was handed over to PVR Ltd. by the assessee for fixed consideration as mentioned in schedule second of the agreement. After taking over vacant possession of cinema building from assessee to the PVR Ltd. converted it into four screens multiplex with all modern fittings, fixtures and furniture therein - Overall risk/control of the management, operation and development of the cinema rests with PVR Ltd. and assessee is not bearing any kind of risk under the agreement - PVR Ltd. independently obtained the cinema license, entertainment tax registration etc. in its name and started its business - From the orders of the authorities below, this fact has not been c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cinema hall to PVR Ltd. 4. The Commissioner (Appeals) was not justified in not admitting the certificate of PVR Ltd. as additional evidence under rule 46A of Income Tax Rules that it had not taken over any furniture, fixtures and equipment, when the AO had not given adequate opportunity to produce such evidence and the certificate was obtained subsequent to the passing of the assessment order." 3. Briefly stated the facts giving rise to this appeal are that, the case was selected for scrutiny and notices u/s 143(2) and 142(1) of the Income Tax Act, 1961 (for short "the Act") along with questionnaire were served on the assessee. The AO held that there is no rent agreement nor lessor and lessee relation between the assessee and PVR Ltd. The AO also observed and held that the income of the assessee is to be assessed under the head "Other Sources" and accordingly statutory deduction of 30% provided for income from house property was disallowed. The AO finalized the assessment by holding income receipt from PVR Ltd. as income under the head of "Other Sources" in terms of operation and management agreement dated 18.05.2000. 4. Being aggrieved by the above assessment order, the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s replaced by the new concept of running of multiplexes. To change the concept of cinema to concept of multiplex required major changes in building plans, new furniture refurbishments, installation of new and modern equipments and gadgets. The assessee company was not in a position to carry out the necessary changes. Accordingly in the year 2000, the assessee company closed down its cinema business and let out the said dilapidated Cinema building to M/s Priya Village Roadshow Ltd. (now known as PVR Ltd.) vide an Operation and Mamagement Agreement dated 18th May, 2000 for running a multiplex cinema. As per the agreed understanding PVR had to reconstruct the Cinema building into a multiplex, bring in new furniture refurbishments and install its own new equipments during a period of nine months ( for which no rent was charged) and thereafter the assessee company was entitled to rent for the let out property. Accordingly PVR Ltd. changed the building plans and reconstructed/ renovated the old dilapidated building according to the requirements of multiplex, refurbished it by installing new furniture and installed new and modern plant and machinery therein to run a new multiplex by the n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the previous year relevant to A. Y. 2007-08 the assessee company has received rent of Rs.1,05,55,449/-. The assessee company has claimed a deduction of 30% of the annual value of the property and the same is in accordance with the provisions of clause (a) of Section 24 of the Income Tax Act, 1961. According to provisions of Section 22 of the Act, the annual value of the property consisting of any buildings or lands appurtenant thereto of which the assessee is the owner, shall be chargeable to income tax under the head "Income from House Property". In the present case the actual rent received shall be deemed to be annual value as per provisions of Section 23(b) of the Act. The term "rent" as defined u/ 1941, means any payment, by whatever name called under any lease, sub-lease, tenancy or any other agreement or arrangement for the use (either separately together) any land; or building (including factory building); or land appurtenant to a building ........... whether or not any or all of above are owned by the payee. Further your kind attention is drawn to the decisions of various High Courts that the provisions of section 22 do not only apply of dwelling houses but also to bu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent. Therefore, it could not be submitted before the AO and it was a sufficient cause which prevented the assessee to file the same before the AO. 8. Replying to the above, the Ld. DR submitted that the certificate dated 8th March, 2010 is self serving and certifying document which cannot be admitted as additional evidence at first appellate stage before CIT (A). The Ld. DR submitted that neither the AO had refused to admit evidence during the assessment proceedings nor was the appellant prevented by any sufficient cause from production of the impugned evidence during the assessment proceedings, therefore, prayer of the assessee for admission of additional evidence rightly rejected by the CIT (A). 9. On careful consideration of above submissions, firstly we find it proper and just to mention that the powers of the CIT (A) are coterminous with the AO and the CIT (A) can do what the AO is competent to do. In the present case, the AO has held that the agreement dated 18.05.2000 was not an agreement of renting out the property but it was an agreement to run the already existing cinema business in accordance with the changing market needs. Therefore, the AO also observed that it was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... O did not raise any objection to the return. The Counsel submitted that PVR Ltd. taken over vacant possession of the cinema building for the purpose of conversion into four screens multiplex at the fixed consideration as rent payable to the assessee. The Counsel also contended that the PVR Ltd. carried out substantial addition and alteration in the building after getting the plan sanctioned from Municipal Corporation of Delhi as per agreement dated 18.05.2000. The Counsel also contended that no consideration was payable for first nine months and after refurbishment of the multiplex and completion of all legal formalities necessary for obtaining cinema license and entertainment tax registration etc., the PVR Ltd. started its business form 1st August, 2001. The counsel vehemently contended that the multiplex business run by PVR Ltd. is exclusively owned and managed by the PVR Ltd. and there is no agreement or arrangement between the assessee and PVR Ltd. which may be called as partner ship, joint venture or franchise in any manner. The Counsel finally submitted that income from PVR Ltd. deserve to be treated as income from house property as per facts and circumstances of the case. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... new fact or evidence to support this contention and simply held that the income from PVR Ltd. was not an income from house property. 13. During the first appellate proceeding the CIT (A) also considered the issue of consistency and held against the assessee by passing impugned order. The relevant operative parts of the impugned order read as under: "2.6.2 I have considered the rival submissions on the issue of consistency. It is trite law that the principle of res judicata does not apply to income tax proceedings. Moreover, the AO has reported that in the assessment/reassessments for the A. Y.2004-05, 2005-06 as well as 2008-09 the same view as taken in the impugned assessment has been taken by the department and the reassessment for the year 2006-07 is still pending. The appellant have filed copies of the original assessment order for the A. Y. 2004-05, 2005-06 and 2006-07. It is noticed from thesse orders that though the assessments have been completed u/s 143(3) of the I. T. Act, in all three years the income as declared by the appellant under the head of "Income from house property" has simply been accepted without any discussion in the assessment order. For the first time, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aterial change justifying the Revenue to take a different view of the matter. and if there was not change it was in support of the assesses, we do not think the quest.1on should have been reopened and contrary to what had been decided by the CIT in the earlier proceedings, a different and contradictory stand should have been taken. We are, therefore, of the view that these appeals should be allowed and the question should be answered in the affirmative. namely, that the Tribunal was justified in holding that the income derived by the Radhasoami Satsang (supra) was entitled to exemption under ss. 11 and 12 of the IT Act of 1961." Their Lordships of Hon'ble Supreme Court held that the proposition of law and observation made therein is confined to the said case and may not be treated as authority on the aspects for general application. 60. However, in the case of Municipal Corporation of City of Thane (supra), Hon'ble Supreme Court while holding that the strict rule of res judicata as envisaged by s. 11 CPC has no application, Their Lordships further held that as a general rule, each year's assessment is final for that year and does not govern later years because it determines the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... practice, the Revenue cannot act mechanically without applying its mind to earlier facts and circumstances under which a view was taken by the taxman and the facts and circumstances of the assessment year in question calling to depart from earlier view. Where there is a fundamental aspect permeating through different assessment years allowed by the authorities to sustain, it would not be appropriate to change the view in subsequent year except on justifiable ground like change of circumstances or non-consideration of relevant material or statutory provisions, or failure on the part of assessing or appellate authority to exercise iurisdiction for extraneous reason or small amount of revenue involved or other justifiable ground depending on facts of each case. (emphasis supplied)" 2.6.3 From the discussion in the foregoing paragraphs, it is clear that in view of Ion. Supreme Court, on one hand, the strict rule of res judicata as envisaged by s.11of the CPC, 1908 has no application and on the other, the principle of consistency Id not be deemed as an immutable principle in matters of taxation. It has to be wed generally but for cogent reasons or on justifiable grounds, Revenue has g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... udicata has no application to the matters of taxation and Revenue has got right to depart from its earlier practice but at the same time, we also hold that the Revenue must bring out some material evidences or reasonable cause supporting to new facts to take a departure from its earlier practice. In the present case, the AO has only considered the title of the impugned agreement dated 18.05.2000, which reads as "Operation and Management Agreement" and held that it was an agreement to share profits of the cinema business but from careful reading of the above agreement and other documents available on paper book spreaded over 142 pages, we have no hesitation to hold that the intention of the parties while executing and entering in the agreement dated 18.05.2000 was not to share the profits of the cinema business as partners, joint venture or franchise but the intention of the parties was to rent out the property on minimum fixed consideration in one part and second part was related to the amount of sales of tickets. This arrangement cannot be said as partner ship, joint venture or franchise in any manner. From the copy of the agreement available on page no. 64 to 78 of paper book and ..... X X X X Extracts X X X X X X X X Extracts X X X X
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