TMI Blog2014 (7) TMI 1148X X X X Extracts X X X X X X X X Extracts X X X X ..... And I.T.A. No.3191/M/2012 & I.T.A. No.3192/M/2012 - - - Dated:- 25-7-2014 - SHRI VIJAY PAL RAO, JUDICIAL MEMBER AND SHRI D. KARUNAKARA RAO, ACCOUNTANT MEMBER For the Petitioner: Shri J.G. Verma For the Respondent : Shri A.C. Tejpal ORDER PER D. KARUNAKARA RAO, AM: There are four appeals under consideration involving two cross appeals for the assessment years 2007-2008 and 2008-2009. Since, the issues raised in all these appeals are identical, therefore, for the sake of convenience, they are clubbed, heard combinedly and disposed of in this consolidated order. Appeal wise and ground wise adjudication is given in the following paragraphs. Cross appeals for the AY 2007-2008 2. Firstly, we shall take up the appeal ITA No.2828/M/2012 , which is filed by the assessee on 26.4.2012 against the order of the CIT (A)-16, Mumbai. In this appeal, assessee raised the following grounds which read as under: 1. Assessing management fees (Royalty) received from Kamat Hotels (India) limited (KHIL) as income from property and not as business income. i) On the facts and in the circumstances of the case and in law, the CIT (A) erred in merely foll ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wherein the Tribunal has decided the issue in favour of the assessee vide para 14 and 14.3 of its order. Ld Counsel further submitted that the income from the hotel was taxed as income from property by the AO on the basis of similar stand taken by him in the AY 2006-2007, which has been held to be the business income by the ITAT in its order dated 13.9.2013 (supra). 4. On the other hand, Ld DR relied on the orders of the Revenue Authorities. 5. We have heard both the parties and perused the orders of the Revenue Authorities as well as the cited orders of the Tribunal (supra). On hearing both the parties and on perusal of the said order of the Tribunal dated 13.9.2013 (supra), we find the paras 14 to 14.3 of the Tribunal s order are relevant to the issue under consideration and the said paras read as under: 14. After considering the submission and perusing the material on record, we are of the view that there is no dispute that the assessee was running the hotel itself before giving to KHIL under agreement entered in the year of 1994. The entire activities of hotel carried out by the assessee itself before entering the agreement was given to KHIL. An interest free securit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsidered by the learned CIT(A) also. However, we noted that in the case of Shambhu Investments (supra), the Hon‟ble Apex Court has observed that, if the assessee has given any asset exploiting the property for commercial purpose, then the same has to be treated as business income. The following observations have been made by the Hon‟ble Supreme Court in the case of Shambhu Investments (supra):- Taking a sum total of aforesaid discussions, it clearly appears that merely because income is attached to any immovable property cannot be the sole factor for assessment of such income as income from property; what has to be seen is what was the primary object of the assessee while exploiting the property. If it is found, applying such test, that main intention is for letting out the property, or any part thereof, the same must be considered as rental income or income from property. In case, it is found that the main intention is to exploit the immovable property by way of complex commercial activities, in that event, it must be held as business income. In this case the Hon‟ble Supreme Court has held that if it is found that the main intention is for letting o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... permissions and no objection certificates required for running hotel were to be obtained in the name of the assessee was a pointer to the aspect that the assessee intended to exploit the business asset (the hotel). The income of ₹ 7,80,000 received from S in the hands of the assessee was income from business under section 28 of the Income-tax Act, 1961. While holding so, the Hon‟ble High Court has referred to the cases viz., CEPT Vs. Shri Lakshmi Silk Mills Ltd., 20 ITR 451 (SC), CIT Vs. Calcutta National Bank Ltd., 37 ITR 171 (SC), CIT Vs. Vikram Cotton Mills Ltd., 169 ITR 597 (SC), Sultan Brothers P. Ltd. Vs. CIT, reported in 51 ITR 353 (SC) and in case of Universal Plast Ltd. Vs. CIT, 237 ITR 454 (SC). After considering various decisions as mentioned above, the Hon‟ble High Court has held that the assessee has given hotel on lease for exploiting business asset and, therefore, the Tribunal was correct in holding that the income from leasing the hotel was income from business. Facts of the case in hand are similar to the facts before the Hon‟ble High Court in case of Mohiddin Hotels Pvt. Ltd. (supra). Therefore, for this reason also, we are of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsideration that no expenditure had been incurred by the assessee for earning the exempt income or for the investment in question. We find merit and substance in the contention of the assessee on this point because the investment has been made by the assessee in the group concern and not in the shares of any un-related party. Therefore, the primary object of investment is holding controlling stake in the group concern and not earning any income out of investment. Further the investment were made long back and not in the year under consideration. Therefore, in view of the fact that the investment are in the group concern we do not find any reason to believe that the assessee would have incurred any administrative expenses in holding these investments. The AO has not brought on record any material to show that the assessee has incurred any expenditure in relation to the income which does not form part of the total income. Section 14A has within it implicit the notion of apportionment in the cases where the expenditure is incurred for composite/indivisible activities in which taxable and non taxable income is received but when no expenditure has been incurred in relation to the exempt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reported in (2010) 328 ITR 81 (Bom) and to decide the issue afresh. AO shall grant a reasonable opportunity of being heard to the assessee. Accordingly, ground no.2 raised by the assessee is allowed for statistical purposes. 11. In the result, appeal of the assessee is partly allowed for statistical purposes . ITA No.3191/M/2012 (AY 2007-2008) (By Revenue) 12. This appeal filed by the Revenue on 8.5.2012 is against the order of the CIT (A)-16, Mumbai dated 10.02.2012 for the assessment year 2007-2008. In this appeal, Revenue raised the following ground which read as under: 1. 1. On the bets and in the circumstances of the case arid in law, the Ld. CIT (A) erred in deleting the addition of ₹ 11,91,45,000/- made by the AO to the a value of the property on account of notional interest @ 15% on interest free deposit of ₹ 79.42 crores taken by the assessee from the lessee. 2. On the facts and in the circumstances of the case and in law, the Ld. CIT (A) ought to have considered that the rent was brought down by the assessee on account of the interest free deposit as observed by the Supreme Court in the case of Director of Income tax Vs. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... upra). Accordingly, grounds no.3 4 raised by the Revenue are allowed for statistical purposes . 17. In the result, appeal of the Revenue is partly allowed for statistical purposes . Cross appeals for the AY 2008-2009 ITA No.2829/M/2012 (By Assessee) 18. In the cross appeals for the AY 2008-09, we shall take up the appeal ITA No.2829/M/2012, which is filed by the assessee on 26.4.2012 against the order of the CIT (A)-16, Mumbai dated 10.2.2012. In this appeal, assessee raised the following grounds which read as under: 1. Assessing management fees (Royalty) received from Kamat Hotels (India) limited (KHIL) as income from property and not as business income. iii) On the facts and in the circumstances of the case and in law, the CIT (A) erred in merely following the decision of the predecessor taken by him in the appeal for the AY 2006-2007 and his order dated 10.2.2012 for the AY 2007-08 and dismissing the claim of the appellant that management fees (Royalty) received from Kamat Hotels (India) Limited was assessable as income from business and not as income from House property . iv) The Ld CIT (A) erred in failing to appreciate that; ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ground which read as under: 2. 1. On the bets and in the circumstances of the case arid in law, the Ld. CIT (A) erred in deleting the addition of ₹ 12,00,00,000/- made by the AO to the a value of the property on account of notional interest @ 15% on interest free deposit of ₹ 79.42 crores taken by the assessee from the lessee. 2. On the facts and in the circumstances of the case and in law, the Ld. CIT (A) ought to have considered that the rent was brought down by the assessee on account of the interest free deposit as observed by the Supreme Court in the case of Director of Income tax Vs. Transmarine Corporation (CA No.5470 of 2011) and hence ought to have sustained the addition . 23. The above grounds no.1 and 2 raised by the Revenue are exactly identical to that of the grounds no.1 and 2 raised by the Revenue for the AY 2007-08, vide ITA No.3191/M/2012, which was adjudicated by us in the above paragraphs of this order. Since, the grounds raised by the Revenue and the facts in the present appeal are similar to that of the appeal adjudicated by us (supra) for the AY 2007-2008, therefore, the decision given by us in that appeal squarely applies ..... X X X X Extracts X X X X X X X X Extracts X X X X
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