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Ambience Hotel & Resort Pvt. Ltd. and others Versus Commissioner of Income-tax

2015 (6) TMI 718 - ITAT DELHI

Revision u/s 263 - CIT directing the A.O. to examine the issue that the lease rental incomes from shops/retail space owned by Ambience Hotels & Resorts Ltd. should not be assessed in the assessee’s hands but in the hands of Ambience Hotels & Resorts Ltd.- Held that:- It is now a established proposition of law that for invocation of the provisions laid down under sec. 263 of the Act, both the ingredients i.e. firstly the assessment order must be erroneous and secondly it must be prejudicial to th .....

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nquiry of the above aspect the assessment orders are erroneous as well as prejudicial to the interest of Revenue.

When the learned CIT was setting aside the matter to the file of the A.O. for framing the assessment orders afresh as per the law after examining/making inquiry on the issue, he was not justified and a contradiction in his stand in directing the Assessing Officer to tax the lease income in the hands of the Ambience Hotel & Resorts and reduce the same from Ambience Develope .....

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P) Ltd. are thus held invalid and are modified by deleting the same. - Decided partly in favour of assesse - ITA No. 2500/Del/2012,ITA No. 2501/Del/2012 - Dated:- 16-6-2015 - Shri I.C. Sudhir and Shri T.S. Kapoor ,JJ. For the Petitioner: S/Shri RK Gupta & Samit Goel, CA For the Respondent : Ms. A. Misra, CIT(DR) ORDER PER I.C. SUDHIR: JUDICIAL MEMBER ITA No.2500/Del/2012: (Ambience Hotel & Resort Pvt. Ltd.): Assessee has questioned validity of revisional order passed under 263 of the Inc .....

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issue of assessabiity of that income in the hands of the assessee on which TDS of ₹ 1,09,32,212 has been made, therefore, it is outside the scope of sec. 263. 3. That without prejudice, the directions and findings of the learned CIT are unsustainable and contradictory so much so that on one hand he has directed the A.O. to decide the issue of assessabiity of income in the hands of the assessee relating to TDS of ₹ 1,09,32,212, afresh while on other hand he has held that the said inco .....

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ial to the interest of Revenue apart from that no such circumstance exist which may justify invoking of Sec.263 of the I.T. Act. 2. That under the facts and circumstances, Ld. A.O. after proper application of mind has accepted the claim of the assessee that income of lease rental from leasing of retail space in Ambience Mall, Gurgaon is assessable under the head income from house property , thus, took one of the possible views, therefore, the impugned order is neither erroneous nor prejudicial t .....

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. and thereafter in further directing the A.O., that if it is assessable in assessee hands, then it should be assessed as income from sub-letting and should be assessed under the head income from other sources . The order of the Ld. A.O. on this issue is neither erroneous nor prejudicial to the interest of the Revenue. 3.2 That under the facts and circumstances, the Ld. A.O. after proper application of mind has taken a conscious decision by adopting one of the possible views, therefore, invoking .....

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& Resort Pvt. Ltd., New Delhi should have been typed. He requested that ground No.2 should be read and understood accordingly. 4. Heard and considered the arguments advanced by the parties in view of orders of the authorities below, material available on record and the decisions relied upon. 5. In both the appeals, the validity of revisional order passed under section 263 of the Income-tax Act, 1961 has been questioned on several grounds. In the case of Ambience Hotel & Resort Ltd., (in .....

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rn the Hotel gave to the developer company the rights in some retails spaces in the hotel premises for managing leasing and to receive an appropriate revenue and receipts from said space. The revenue receipts from the said spaces during the year was ₹ 6,27,84,240. The learned CIT held that the provisions of sec. 60 of the Income-tax Act, 1961 are applicable in the case of the Hotel. The learned CIT held that the Assessing Officer without application of mind, verification and investigation .....

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g the assessee an opportunity of being heard and after making proper inquiries and verifications. The Learned CIT has mentioned further that as the above lease income is taxable in the hands of Ambience Hotels & Resort Ltd., the Assessing Officer is directed to reduce the same from Ambience Developers and Infrastructure P. Ltd. where the above income has been erroneously assessed. This revisional order has been questioned by the above named two assessees before the ITAT on several grounds. 6 .....

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and the developers was having spare funds. Thus, both companies entered into an agreement whereby developers gave interest free refundable deposits of ₹ 75 crores to Hotels. In turn, hotels company gave to developer company the rights in some retail spaces in the hotel premises for managing leasing and to receive an appropriate revenue and receipts from said spaces. The revenue receipts from the said retail spaces owned by hotels was ₹ 6,27,84,240 during the year which was declared .....

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rt of their total income of ₹ 29,18,07,201 which included ₹ 6,27,84,240 in question. He submitted that complete books of account and other relevant records were examined. The issue was specifically addressed during the course of assessment proceedings in the case of developers. In this regard, he referred page No.22 and 23 of the paper book filed in the case of developers i.e. copy of the letter addressed to the Assessing Officer by the assessee on the subject of assessment proceedin .....

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assing the impugned assessment order. He submitted that even in the case of two possible opinions, section 263 cannot be invoked. It is not the law that if the body of assessment orders does not touch upon some issues specifically, then section 263 can be invoked. The Learned AR placed reliance on several decisions including the decisions in the cases of Malabar Industries Co. Ltd. 243 ITR 83 (S.C), Supper Cassettes Industries Pvt. Ltd. 41 ITD 530 (Del.), Salora International Ltd. - 2 SOT 705 (D .....

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house property in the hands of developers company. The Learned CIT has opined that ₹ 6,27,84,240 should have been assessed as income from house property in the hands of hotels company. Wherever it stands assessed, the tax impact shall be the same. The observation of the Learned CIT that in one case, there is a loss and in other case, there is profit, therefore, this alleged arrangement will affect the tax amount is totally misconceived. In case of loss in a company, the loss is allowed to .....

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e submitted further that in the order of hotels, the Learned CIT has directed the Assessing Officer to reduce the said income from developers. Thirdly, both the assessment orders have been framed after approval of Additional CIT under sec. 153D of the Act, thus, the issues stands examined by the Assessing Officer and thereafter reexamined by the Additional CIT, hence, such findings are not open for disturbance under sec. 263 of the Act. In this regard, the Learned AR placed reliance on the decis .....

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earned AR has referred concluding paragraph of sec. 263 order in the case of hotels. The Learned AR submitted further that the Learned CIT in the case of developers has directed that if the said income is assessed in the hands of developers, it will be assessed as income from subletting. In support, he referred beginning paragraphs of page 7 of section 263 order in the case of developers. The Learned AR pointed out that Learned CIT further said that the issue under consideration is not that the .....

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arises from an asset which is not transferred, such income shall be taxed in the hands of transferor. The Learned CIT has failed to appreciate the facts of the present case which are totally different. In the present case, developer has given ₹ 75 crores interest free, refundable security to hotel. In turn, the hotel has compensated the developer by giving the rights to exploit and enjoy the receipts of certain retail spaces owned by hotel which exists in the hotel premises. It is a prope .....

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no transfer of assets does not mean that to come out of sec. 60, assets should be permanently transferred. He pointed out that in the present case, there is transfer of assets by transferring the rights of exploiting the specified space owned by hotel to the developers against which ₹ 75 crores was given. Transfer of rights in said retail spaces is a transfer. Right is also as asset. Thus, it is not a case of no transfer of asset . Hence, section 60 is not applicable. In support, he place .....

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t free advance of ₹ 75 crores tantamount to earning of deemed income by hotel by way of saving interest of ₹ 75 crores, if the amount would have been borrowed from bank/other sources and if calculated @ 1% per month, it will be nearing to the amount of income earned by developers from retail spaces. Thus, the Learned CIT was incorrect in giving the finding the ₹ 6,27,84,240 should be assessed as income of hotels. 7. In support of ground No.4 of the appeal preferred by developer .....

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sue of capital gain on transfer of shares of six companies under sec. 40A(2)(b) of the Act. He submitted further that in the assessment framed under sec. 143(3)/263, no addition has been made on this issue. Without prejudice, he contended that this aspect has been fully examined by the Assessing Officer during original assessment proceedings as well as by the learned Additional CIT while giving approval. 8. The Learned AR also informed that consequential assessments have already been framed vide .....

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failed to examine the issue involved regarding the receipt of ₹ 6,27,84,240 during the course of assessment proceedings before passing the original Assessment order, the Learned CIT was justified in invoking the provisions laid down under sec. 263 of the Act. He submitted that income has to be assessed in the correct hands. The provisions laid down under sec. 60 of the Act cannot be compared with sec. 64 of the Act since both are having different proposition. She placed reliance on the de .....

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sits of ₹ 75 crores to hotels. In turn, hotels gave to the developers the right in some retail spaces in the hotel premises for managing leasing and to receive an appropriate revenue and receipts from said spaces. ₹ 6,27,84,240 was declared as income from house property by the developers in their hands. The learned CIT is of the view that the said income from house property should have been assessed in the hands of hotels. Now, the issue before us under the background of the provisio .....

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eous then the second step would be to examine as to whether the said assessment order is also prejudicial to the interest of the revenue. It is now a established proposition of law that for invocation of the provisions laid down under sec. 263 of the Act, both the ingredients i.e. firstly the assessment order must be erroneous and secondly it must be prejudicial to the interest of revenue are to be examined. It appears from the assessment orders that taxability of ₹ 6,27,84,240 in the prop .....

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he revisional orders in question are upheld. The ground Nos. 1 and 2 in the case of Ambience Hotel & Resorts (P) Ltd. and ground Nos. 1, 2, 3.2 are thus rejected. We, however, are of the view that when the learned CIT was setting aside the matter to the file of the A.O. for framing the assessment orders afresh as per the law after examining/making inquiry on the issue, he was not justified and a contradiction in his stand in directing the Assessing Officer to tax the lease income in the hand .....

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