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2017 (1) TMI 1197 - ITAT MUMBAI

2017 (1) TMI 1197 - ITAT MUMBAI - TMI - Income earned from running and operation of a Mall and service charges - income from profits and gains of business or as income from house property - Held that:- We find that the issue of whether or not the income earned by the assessee from leasing out of its property and for offering a host of other complex services is to be construed as commercial exploitation of its properties as stated in its objects and therefore to be held to be exigible to tax as ‘ .....

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ome - Held that:- In view of our holding that the income earned by the assessee from running and operation of Mall and a provision of host of other services and utilities is to be construed as commercial explanation of its properties and is exigible to tax as ‘business income’ as declared by the assessee, we hold that the assessee is entitled to be allowed deduction of Municipal taxes from its business income. - Depreciation claimed on the Mall building - Held that:- Following the order of .....

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in the assessee’s own case for A.Y. 2009-10 which followed the decisions of the Hon'ble Bombay High Court in Reliance Utilities and Power Ltd. (2009 (1) TMI 4 - BOMBAY HIGH COURT ) and HDFC Bank Ltd. (2009 (1) TMI 4 - BOMBAY HIGH COURT), we direct the AO to delete the impugned disallowance made under section 14A r.w. Rule 8D on account of interest expenditure. - ITA Nos. 3104 & 3105/Mum/2015 - Dated:- 20-1-2017 - Shri Jason P. Boaz, Accountant Member and Shri Ram Lal Negi , Judicial Member For T .....

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d in business as builder and property developer. For A.Y. 2010-11, the original return of income was filed on 15.10.2010 declaring loss of ₹ 14,24,57861/-. A revised return was filed on 21.09.2011 declaring loss of ₹ 14,30,60,659/-. Subsequently another revised return of income was filed on 30.03.2012 declaring loss of ₹ 15,01,82,084/-. The case was selected for scrutiny and the assessment was completed under section 143(3) of the Income Tax Act, 1961 (in short 'the Act' .....

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ncome was filed on 30.03.2013 declaring loss of ₹ 7,71,31,825/-. The case was selected for scrutiny and the assessment was completed under section 143(3) of the Act vide order dated 18.02.2014, wherein the assessee s loss was determined at ₹ 2,30,03,570/- . On appeal, the learned CIT(A) disposed off the appeal vide the impugned order dated 23.03.2015 allowing the assessee partial relief. 3. Aggrieved by the order of the CIT(A)-10, Mumbai dated 23.03.2015 for both assessment years 201 .....

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ad of income under the head 'Profits and Gains of Business or Profession" as declared by the appellant. 1.(b) On the facts and in the circumstances of the case and in law, the learned Commissioner of Income Tax (Appeals) failed to appreciate that: (a) the appellant does not simply let out part of its premises but also provides a host of other complex services; (b) the revenue received by the appellant is derived from commercial exploitation of the premises and not merely from exercise o .....

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uant to Accounting Standard 19 - Leases) and included in the total lease rental of ₹ 7,37,68,263/- credited to the Profit and Loss Account. 2.(b) Without prejudice to ground of appeal no. 1 above and on the facts and in the circumstances of the case and in law, the learned Commissioner of Income Tax (Appeals) failed to appreciate that the lease rental computed (pursuant to Accounting Standard 19) was neither actually received nor receivable but is only computed on notional basis to comply .....

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e and in law, the learned Commissioner of Income Tax (Appeals) ought to have allowed the entire depreciation of ₹ 7,88,20,827/- claimed on the Mail building u/s. 32 of the Act as the same forms part of commercial asset of the appellant and therefore depreciation on the said Mali building is allowable u/s. 32 of the Act. 4.(a) On the facts and in the circumstances of the case and in law, the learned Commissioner of Income Tax (Appeals) erred in upholding the disallowance made by the Assessi .....

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duction u/s. 37(1) of the Act having been incurred for the purpose of business of the appellant. 5.(a) On the facts and in the circumstances of the case and in law, the learned Commissioner of Income Tax (Appeals) erred in upholding the disallowance made by the Assessing Officer u/s. 14A of the Income Tax Act, 1961 r.w.r. 8D of the Income Tax Rules, 1962 to the extent of ₹ 6,15,771/- as against the disallowance of ₹ 1,22,932/- made by the appellant suo motto in its return of income. .....

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g grounds: - 1.(a) On the facts and in the circumstances of the case and in law, the learned Commissioner of Income Tax (Appeals) erred in treating Property Lease Income of ₹ 9,36,99,661/- as income under the head 'income from House Property' instead of income under the head 'Profits and Gains of Business or Profession" as declared by the appellant. 1.(b) On the facts and in the circumstances of the case and in law, the learned Commissioner of Income Tax (Appeals) failed t .....

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appreciate that total Recovery of Common Area Maintenance and Utility Expenses credited to the Profit and Loss Account and taxed as Business Income inter alia included a sum of ₹ 46,16,454/-, being Municipal Taxes recovered from the lessees and accordingly the whole of the Municipal Taxes of ₹ 63,44,478/- is allowable as deduction from Business Income being directly connected to the said receipt. 2.(b) Without prejudice to the aforesaid grounds, and on the facts and in the circumstan .....

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enses credited to the Profit and Loss Account which has been taxed as Business Income. 2.(c) Correspondingly, the residual Business Income would get reduced by aforesaid amount of ₹ 46,16,454/- (representing recovery of municipal taxes). 3. On the facts and in the circumstances of the case and in law, the learned Commissioner of Income Tax (Appeals) ought to have allowed the entire depreciation of ₹ 7.96,67,391/- claimed on the Mall building u/s. 32 of the Act as the same forms part .....

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thorities below failed to appreciate that the brokerage expenses were incurred for the purpose of grant of license of the Mall premises to various users which activity is in the nature of commercial exploitation of the said Mall premises and therefore the brokerage expenses are allowable as deduction u/s. 37(1) of the Act having been incurred for the purpose of business of the appellant. 5. Grounds No. 1(a) & 1(b) for both assessment years 2010-11 & 2011-12 5.1 In these identical grounds .....

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is derived from commercial exploitation of its premises and therefore constitutes business income as declared by the assessee. The learned A.R. of the assessee contends that this issue has been considered and held in favour of the assessee by the decision of the Coordinate Bench of the Tribunal in the assessee s own case for A.Y. 2009- 10 in ITA No. 3789/Mum/2014 dated 05.01.2016. 5.2 Per contra, the learned D.R. placed reliance on the orders of the authorities below. 5.3.1 We have heard the ri .....

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eld by Revenue, has been considered and adjudicated by a Coordinate Bench of the Tribunal in the assessee s own case for A.Y. 2009-10. In its order in ITA No. 3879/Mum/2014 dated 05.01.2016, the Coordinate Bench has decided this issue in favour of the assessee holding as under at paras 8 and 8.1 thereof: - 8. We have given a thoughtful consideration to the orders of the authorities below. We have also gone through the judicial decisions relied upon by the Ld. Counsel. The entire dispute has to b .....

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and holding the aforesaid properties and earning income by letting out those properties is the main objective of the company. Therefore, any income earned has to be taxed under the head Income from business . 8.1. In the present case also we find that in A.Y. 2008-09, the AO himself has accepted the nature of business of the assessee as Operation of Mall therefore any income earned by the assessee by the operation of mall has to be taxed under the head Profits & Gains of Business or Profess .....

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This will be in line with the ratio laid down by the Hon ble Supreme Court in the case of Chennai Properties & Investment Ltd (supra). We, accordingly set aside the findings of the Ld. CIT(A) and direct the AO to treat the income under the head Profits & Gains of Business. 5.3.2 Respectfully following the ratio of the decision of the Hon'ble Apex Court in Chennai Properties & Investments Ltd. vs. CIT 373 ITR 673 (SC) and the finding rendered by the Coordinate Bench in the assesse .....

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round No. 1, in respect of the addition on account of notional lease rental income amounting to ₹ 7,37,68,263/- for A.Y. 2010-11. In view of the finding rendered by us in respect of grounds No. 1(a) and 1(b) at paras 5.3.1 and 5.3.2 of the order (supra) that the income earned by the assessee from running and operation of a Mall and service charges recovered is to be treated and assessed as income from profits and gains of business and thereby addressing the assessee s grievance, we do not .....

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that the income earned by the assessee from running and operation of Mall and a provision of host of other services and utilities is to be construed as commercial explanation of its properties and is exigible to tax as business income as declared by the assessee, we hold that the assessee is entitled to be allowed deduction of Municipal taxes of ₹ 46,16,454/- from its business income. We hold and direct accordingly. Consequently, assessee s grounds No. 2(a) to 2(c) are allowed. 8. Grounds .....

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al on record. We find that the Coordinate Bench of the Tribunal in its order in the assessee s own case for A.Y. 2009-10 dated 05.01.2016 (supra) at para 8.2 thereof has held that the assessee is entitled for claim of depreciation on the Mall building and brokerage expenses. Following the order of the Coordinate Bench for A.Y. 2009-10 (supra), and having held that the assessee s income earned from running and operation of Mall and service charges etc. is to be taxed under the head profits and ga .....

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Act r.w. Rule 8D of the I.T. Rules to the extent of ₹ 6,15,771/- as against the suo moto disallowance of ₹ 1,22,932/- made by the assessee in the return of income; without appreciating that since the term loan was obtained by the assessee for the purpose of construction of the Mall, such a disallowance ought not to have been made. It was contended by the learned A.R. of the assessee that this issue was considered by the Coordinate Bench of the Tribunal in the assessee s own case for .....

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ial on record that the assessee earned exempt income of ₹ 8,06,800/- (i.e. dividends from Mutual Funds) and had made a suo moto disallowance of ₹ 1,22,932/-. The learned CIT(A) at para 5.3 of the impugned order after examining the details on record has rendered the finding that the facts during the year under consideration are identical to the A.Y. 2009-10 as submitted by the learned A.R. of the assessee. In this factual matrix of the case, we find that on the issue of disallowance u .....

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