TMI Blog2015 (6) TMI 252X X X X Extracts X X X X X X X X Extracts X X X X ..... Dated:- 28-8-2014 - SHRI G.S. PANNU AND SHRI R.S. PADVEKAR, JJ. For The Assessee : Mr. S.N. Doshi For The Department : Mr. S.K. Singh ORDER PER G. S. PANNU, AM The captioned appeal by the assessee is directed against an order of the Commissioner of Income Tax-I, Pune (in short the Commissioner ) dated 28.03.2013 passed u/s 263 of the Income Tax Act, 1961 (in short the Act ) whereby the assessment order made by the Assessing Officer u/s 143(3) of the Act dated 11.10.2010 has been held to be erroneous in so far as it is prejudicial to the interest of the Revenue within the meaning of section 263 of the Act. 2. In brief, the pertinent dispute raised by the assessee in this appeal is to the effect that the Commissioner erred in invoking section 263 of the Act and holding that the assessment order passed by the Assessing Officer was erroneous in so far as it is prejudicial to the interests of the Revenue, having regard to the facts and circumstances of the case. The relevant facts are as follows. The appellant is a company incorporated under the provisions of the Companies Act, 1956, with the object of carrying on activity of builders, developers, contra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sorbed depreciation amounting to ₹ 8,48,556/- could not be set-off against the current year s income. On the aforesaid lines, the Commissioner show-caused the assessee as to why the assessment order dated 11.10.2010 be not considered to be erroneous in so far as it is prejudicial to the interests of the Revenue within the meaning of section 263 of the Act. 4. Before the Commissioner, assessee vehemently pointed out that the Assessing Officer had duly examined the nature of rental incomes by making enquiries with regard to the nature of activities carried out by the assessee and the copies of lease agreements were duly furnished. Secondly, assessee pointed out that assessability of rental income under the head business income or under the head income from house property is a debatable issue and the Assessing Officer having adopted a permissible view the same cannot be termed as erroneous or prejudicial to the interests of the Revenue within the meaning of section 263 of the Act. Thirdly, assessee pointed out that the lease agreement clearly pointed out that assessee was not renting out the space simplicitor but it was providing various other services to the lessees and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... clients. The assessee bills separately for support service like additional parking charges, monthly cafeteria fees and service charges in Cybernex Energy Management Services (CEMS) etc. on a monthly basis and the income is shown under the head business . For all the above reasons,5 assessee asserted that lease charges were not earned from pure leasing of space but it was a composite charge for space and services plus facilities, making it as business income . 8. The Commissioner has not accepted the plea of the assessee. According to the Commissioner, the Assessing Officer did not raise any query as regards the head of income under which the rental incomes returned by the assessee has to be assessed. According to the Commissioner, the Assessing Officer did call for a note on the nature of business activity but there was no specific query raised as to the head of income under which such income was to be assessed, therefore, according to the Commissioner, the Assessing Officer did not apply his mind to the impugned issue. 9. With regard to assessee s claim that the income derived by it from leasing of CYBERNEX has been rightly assessed as business income, the same was not ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ined by the Assessing Officer in the course of assessment proceedings. In the course of hearing before us, the learned counsel has furnished a photocopy of the order-sheet entries dated 12.07.2010, 21.07.2010, 20.09.2010 and 08.10.2010 from the record of the assessment folder to point out that the Assessing Officer raised the relevant queries with regard to the impugned issue. The learned counsel pointed out that though the assessment order dated 11.10.2010 (supra) is quite brief but the Assessing Officer has discussed that the business activity of the assessee comprises of leasing out of the floor space in the infrastructure facility CYBERNEX to various parties from whom income by way of rentals was being earned. On that basis, it is sought to be pointed out that merely because there is absence of a detailed discussion in the assessment order, it could not be said that the Assessing Officer has not made relevant enquiries especially, after considering that the other material on record of the Assessing Officer, namely, queries raised by the Assessing Officer as well as replies furnished by the assessee, demonstrate due application of mind by the Assessing Officer. In support, rel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ry in this regard. 15. We have carefully considered the rival submissions. The crux of the controversy before us is with regard to the action of the Commissioner of invoking section 263 of the Act in order to hold that the assessment order dated 11.10.2010 is erroneous in so far as it is prejudicial to the interests of the Revenue within the meaning of section 263 of the Act. Notably, section 263 of the Act empowers the Commissioner to call for and examine record of any proceedings under the Act, and if he considers any order passed therein by the Assessing Officer erroneous in so far as it is prejudicial to the interests of the Revenue, he may, after giving the assessee an opportunity of being heard and after making or causing to be made such enquiries, as he may deem necessary pass such order thereon, including an order enhancing or modifying the assessment or cancelling the assessment and directing a fresh assessment. The phraseology of section 263 of the Act brings out that the Commissioner is competent to invoke his revisionary jurisdiction only upon satisfaction of two conditions, namely, that (i) the order of the Assessing Officer sought to be revised is erroneous; and, ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Hon ble Punjab Haryana High Court in the case of Hari Iron Trading Co. vs. CIT (2003) 263 ITR 437 (P H). As per the Hon ble High Court, section 263(1) of the Act requires the Commissioner to exercise his power only after examining the record of any proceeding under the Act . Further, the expression record in section 263(1) of the Act has also been defined in clause (b) of the Explanation thereof to include all records relating to any proceeding under this Act available at the time of examination by the Commissioner. Therefore, as per the Hon ble High Court, it is not only the assessment order but the entire material available on record which has to be examined before arriving at a conclusion as to whether or not the Assessing Officer has examined an issue. Explaining further, the Hon ble High Court noted that the aforesaid exercise was necessary because assessee has no control over the way an assessment order is drafted and therefore mere non-mentioning in the assessment order cannot be singularly determinative of the issue of non-application of mind by the Assessing Officer. Therefore, in order to determine whether or not the Assessing Officer has applied his mind on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vities, lease agreements, etc. were routinely accepted as resulting in rental incomes being assessed as business income, and therefore it could not be said that the Assessing Officer duly applied his mind to the impugned issue. 20. No doubt, the assessment order by itself does not explicitly bring out that the Assessing Officer examined the issue regarding the head of income under which the lease charges (rentals) returned by the assessee should be assessed. So however, as noticed by us in the earlier paragraphs, a mere perusal of the assessment order would not suffice rather the entire record is liable to be examined before coming to1 2conclude whether or not the Assessing Officer has applied his mind. In this context, in our considered opinion, the issue as to whether impugned rental lease charges (rentals) is liable to be assessed as business income or as income from house property is an issue which is dependent upon the mode and manner in which the activities have been carried out by the assessee in order to earn such lease charges (rentals). Ostensibly, it is a settled proposition that where the intention is to exploit the immovable property by way of complex commerci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... quite distinct and separate from the charge of lack of enquiry. As per the Hon ble Delhi High Court in the case of CIT vs. Leisure Wear Exports Ltd. (supra) and by the Hon ble Bombay High Court in the case of Design Automation Engg. (supra) lack of adequate enquiries cannot be a ground to hold an assessment order erroneous within the meaning of section 263 of the Act. Therefore, having regard to entirety of facts and circumstances of the case, we are unable to uphold the impugned charge made by the Commissioner against the assessment order dated 11.10.2010 (supra). 21. Apart from the aforesaid, it may also be pertinent to note that after Commissioner show-caused the assessee, the assessee made detailed submissions justifying the treatment of lease charges (rentals) received from leasing out of floor space in CYBERNEX as business income. The entire submissions put-forth by the assessee have been reproduced by the Commissioner in his order. The Commissioner considered such submissions but eschewed from deciding as to whether or not the stand of the assessee was correct. In one breath, as per discussion contained in para 6.3 of his order, the Commissioner finds that the rent recei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Since licensee were engaged in the I.T./Software business, the services were provided by the assessee round the clock, because the licensees were working according to the timings in the USA/Western countries. The assessee has specified as to how the normal renting of premises was different from the giving of premises to I.T. companies for I.T./software work alongwith the numerous services and facilities in these premises. All the premises were provided with huge airconditioning plants for central airconditioning, special electrification, uninterrupted power supply, etc. Due to the peculiar nature of work and odd hours of work, there were arrangements for restaurants, gymnasium, banking facilities in the premises, security service with dog squad, etc. Attention was drawn to the lease agreement with one of the software company exl. Services.com (India) Ltd., wherein para 15 of the said agreement reads as under: The Lessor shall also provide to the lessee certain additional amenities in the Demised Premises, as detailed in Schedule-II herein. The cost of providing such additional amenities has already been included in the monthly rent and the lessee shall not be required to pay to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly lease rent amount as sp1e6cified in clause 15 of the agreement as stated above. Thus, it was made clear as to how these specialised services for I.T. companies were of complex nature and therefore, the intention and object of the company was to develop I.T. Park as a systematic commercial activity to earn profit and not just earning of rental income. The Hon'ble Supreme Court in the case of Shambhu Investment Pvt. Ltd., (supra) has laid down that if the property whether furnished or unfurnished was let out with an intention to have rental income, it would be assessable as income from house property. On the other hand, if the primary object is to exploit the property by way of complex commercial activities, the income from the same was to be considered as business income. The case of Shambhu Investment (supra) does not go against the assessee. One point which was emphasised in said case is that the assessee has recovered the entire cost of the property let out to the occupier by way of interest free advance received from them. Therefore, it was held that in such a case the assessee was not exploiting the property for commercial business activity and the provisioning of some f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... services rendered were complex commercial/business activities. A perusal of agreements and the stipulations contained therein would not leave any doubt about the commercial character of the relationship between the parties, as distinguished from that merely of a landlord and his tenant. Occupation of space was inseparable from the provision of services and amenities. In Gesco Corporation Ltd., ITAT 1M7umbai Bench has distinguished the facts from Shambhu Investments Pvt. Ltd. (supra). In case of Prestige Estate Projects (P) Ltd. (2010) 129 TTJ 680 (Bangalore), following the decision of Gesco Corporaiton Ltd., and Harvindarpal Mehta (HUF) vs. DCIT (2009) 122 TTJ 163 (Mum), has decided the similar issue in favour of assessee. In the said decision, the premises was related to a business centre with multifarious facilities like central airconditioning services, attendants, sweepers, fax machine, furniture, receptionists, telephone operators, common waiting/guest room with attached toilets, etc. and it was held that the receipts from such activities alongwith these facilities was to be assessed under the head income from business rather than the income from house property or income f ..... X X X X Extracts X X X X X X X X Extracts X X X X
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