TMI Blog2017 (7) TMI 1371X X X X Extracts X X X X X X X X Extracts X X X X ..... involved in the case before the Hon'ble High Court, now when in the case of the present assessee no such material had therein emerged which could go to justify taking of an inconsistent view by the A.O, therefore, the income received by the assessee from composite letting of furnished flats on the basis of same facts as were there before him in the preceding years, cannot be permitted to be assessed during the year under the head 'Income from house property'. Except for raising of oral averments, no material had been brought to our notice by the ld. D.R which could persuade us to subscribe to the claim of the department that certain new facts had emerged during the year under consideration, which clearly militated against the validity and legality of assessing of the composite rental receipts under the head 'business income' in the preceding years, and would thus justify a departure from the consistent approach that had been adopted by the department at stretch for years. We thus in the backdrop of our aforesaid observations, thus set aside the order of the CIT(A) and therein hold that the composite rental receipts were liable to be assessed, as claimed by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se Property . 2. She failed to appreciate and ought to have held that: a. The aforesaid property has been let out along with furniture, fixtures and other amenities from the A.Y. 2002-03 and have since been assessed under the head Profits and Gains of Business or Profession. There has not been any change in the activity of the Appellant during the captioned Assessment Year. In absence of change in facts, the license fees cannot be assessed under the head Income from House Property; b. the mere fact that the Appellant has not expanded her business activity cannot be a basis to treat the income as Income from House Property; 3. The Appellant, prays that the License fees be treated as income under the head Profits and gains of Business and Profession instead of income under the head Income from House Property. Ground II: Depreciation Disallowance 1. On the facts and circumstances of the case and in law, the Learned CIT(A) erred in upholding the action of the A.O in disallowing the claim of depreciation on fully furnished flats. 2. She failed to appreciate and ought to have held that once the flats are used for the purposes of the business of composite letting, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uring the course of the assessment proceedings, it was observed by the A.O that the assessee who was in receipt of rental income from letting of flats alongwith furniture and fixture, was showing the same as her 'business income' under the head 'Leave and license income'. It was further observed by the A.O that no bifurcated details in respect of the rent charged by the assessee for flats and furniture fixture was separately available. The A.O not being satisfied with the claim of the assessee that the income from letting of the flats was liable to be booked under the head 'business income', therein called upon the assessee to explain as to why the same in the backdrop of the judgment of the Hon'ble Supreme Court in the case of Shambhu Investment Pvt. Ltd. v. CIT (2003) 263 ITR 143) (SC), may not be brought to tax under the head 'Income from house property'. The assessee in her reply submitted before the A.O that her claim that the composite letting receipts were liable to be assessed under the head 'business income' was deliberated upon and accepted by his predecessor while framing the assessment in her case for A.Y. 2006-07. It was su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... if the receipts from composite letting were not to be assessed as 'business income', then the same could only be brought to tax under Sec. 56(2)(iii). 4. The A.O after deliberating on the contentions of the assessee, however, did not find favour with the same. The A.O holding a strong conviction that the income received by the assessee by way of license fees from the composite letting activity was liable to be brought to tax under the head 'Income from house property', thus rejected the claim of the assessee that the same was rightly reflected by her under the head 'business income'. The A.O rebutting the claim of the assessee that the department in the backdrop of the rule of consistency was therein precluded to take a different view on the same set of facts during the year under consideration, therein held a conviction that an erroneous and mistaken view arrived in the past cannot fetter and therein compel the assessing authority to repeat the same. It was thus observed by the A.O that as an erroneous view could not be allowed to perpetuate in light of consistency, therefore, the assessing authority was vested with the right to undo such an erroneous v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o bring furniture and fixture and make alterations and repairs, therefore, the claim of the assessee that the activities carried on by her were akin to a star category hotel, were clearly dislodged. (vi). That though the assessee had claimed that complex commercial activities were being provided by her, however, as no evidence was placed on record to substantiate the said factual position, therefore the assessee failed to clear the test laid down in the case of Shambu Investment (supra). (vii). That though the 'Leave and license agreement' revealed that the assessee was receiving rent in lieu of furniture fixtures and home appliances provided to the lessees, however, as neither any evidence in support of refurbishing of the flats by the assessee, as per the requirement of the occupants was placed on record, nor any material which could go to evidence the factum of provision of services, such as services of gardener, plumbing etc. was brought on record, therefore, the reliance placed by the assessee on the decision of the Hon'ble Supreme Court in the case of Sultan Brothers (supra) was found to be misplaced. (viii). That a perusal of the Wealth tax returns of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the activity of construction of flats etc. by the assessee by using interest bearing funds, therein fortified her claim that she was carrying on a business venture. The assessee further in order to drive home her contention that the income from the composite letting out had rightly been reflected by her as business income, therein submitted before the CIT(A) that the activities relating to acquisition of leasehold rights in land/entering into development agreement, purchasing TDR, engaging contractors, constructing building, furnishing the flats, providing several facilities and amenities, therein clearly placed her on an absolute different footing, as in comparison to a landlord who would be deriving rental income from the simpliciter letting out of property. The assessee further contended that the income from composite activity could never be brought to tax as 'Income from house property', and in support thereof relied on the provisions of Section 56(2)(iii) of the 'Act'. The CIT(A) however not being persuaded to subscribe to the contentions of the assessee, therein dismissed her appeal, by observing as under:- 7. I have considered the facts of the case, the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f various services and amenities as claimed. Therefore, I concur with the finding of the A.O. that the appellant fails the test of exploitation of immovable property by way of complex commercial activities. In this context it is pertinent to refer to the order of the Hon'ble ITAT in PFH Mall and Retail Management Ltd. v. ITO (2008) 298 ITR (80)(KOL) where on the basis of finding of fact that the assessee was providing various services and facilities for the occupant such as security system, cleaning and maintenance etc., diesel generators, telephones etc. and similar other amenities, it was held that income from letting out shopping mall is assessable as 'Business Income'. Evidently, in the case of the appellant, in the absence of any proof, it is clear that no such services or amenities are being provided. In view of the said facts and circumstances, it is held that the income by way of license fees in respect of the composite letting activity carried out by the appellant is chargeable to tax under the head 'Income from House Property' and not as 'Income from Business' as is being claimed. Grounds I II stand dismissed . 6. The assessee being aggrie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... single distinguishing feature in the assessment year in question which could have prompted the A.O to take a view different from that arrived at in the preceding years, had thus dismissed the appeal of the revenue. The ld. A.R. further took us through the order of the A.O and submitted that as it remained as a matter of a conceded fact that the income earned by the assessee from composite letting out of flats alongwith furniture fixtures was its predominant source of income, thus it could only be brought to tax under the head 'business income'. The ld. A.R in support of his contention that in the backdrop of the aforesaid factual matrix, the income from composite letting had rightly been shown by the assessee as her 'business income', therein placed reliance on the following judgments of the Hon'ble Supreme Court :- i. Rayala Corporation (P) Ltd. v. ACIT (2016) 72 taxmann.com 149 (Sc) ii. Chennai Properties and Investment Ltd. (2015) 373 ITR 673 (SC). The ld. A.R further submitted that in the course of the aforesaid activity the assessee had availed interest bearing borrowed funds which were utilised for making of investment towards purchase, constr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Hon'ble Apex Court had held that now when the covenants of the lease did not reveal that the lessor was rendering any services or doing any business at all, but rather, the same could safely be characterized as ordinary covenants used in the case of lease of a furnished building, therefore, the income received by the assessee could not be brought to tax as the letters 'business income'. The ld. D.R drawing force from the aforesaid judgment of the Hon'ble Apex Court, therein submitted that as observed by the lower authorities, though the assessee had claimed that she was providing a host of services, which included use of gymnasium, swimming pool, housekeeping facilities, gardeners etc., but however, there was no mention of either of the said services in the 'Leave and license agreements'. It was further averred by the ld. D.R that neither during the course of the search seizure proceedings any such document indicating the rendering of the aforesaid services was found, nor during the course of assessment proceeding the assessee had placed on record any such document in support of the fact that any such services were being provided to the occupants of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . We have heard the authorised representatives for both the parties, perused the orders of the lower authorities and the material produced before us. We have given a thoughtful consideration to the facts of the case and are of the considered view that the assessee who owns 3 fully furnished residential units in Bhojwani Enclave, viz. Flat No. 21, 41 and 71, situated on the ground floor, 2nd floor and 5th floor, respectively, in the Unit 1 of Bhojwani Enclave, therein claims to be in receipt of composite rental receipts from letting of the said respective furnished properties and rendering of certain services, viz. use of gymnasium, swimming pool, housekeeping facilities, gardeners etc. to the respective occupants of the property. We find that it remains as a matter of fact that pursuant to search conducted on the assessee way back on 26.02.2003, the A.O while framing the block assessment in the hands of the assessee for the 'block period' 1996-97 to 2001-02 and broken period of 01.04.2002 to 26.02.2003, had therein vide his order passed u/s. 158BC on 28.02.2005, after deliberating on the seized material, therein categorically observed that the assessee was engaged in the bu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder consideration, viz, A.Y. 2009-10, as well as the subsequent years, the A.O had initially accepted the claim of the assessee and therein assessed the activity of composite letting out of furnished flats, as the business income of the assessee. We find that pursuant to the search and seizure action conducted u/s. 132 of the 'Act' on 30.11.2010 at the premises of Sameer Bhojwani Group wherein the assessee was also covered, assessment in the case of the assessee for the immediately preceding years, viz. A.Y. 2008-09 was framed u/s. 143(3) r.w.s. 153A, wherein the A.O departing from the view as was earlier arrived at by him in the assessment framed u/s. 143(3) for the said year, viz. A.Y. 2008-09, therein concluded that the income from the letting out of the flats was liable to be assessed under the head 'Income from house property'. We find that the assessee carried the matter in appeal and a coordinate bench of the Tribunal i.e. ITAT 'E' Bench, Mumbai, vide its order dated 22.07.2016 passed in ITA No. 7365/Mum/2014, had observed that no incriminating material was found during the course of the search and seizure proceedings which could go to dislodge the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Supreme Court in the case of Sultan Brothers (P) Ltd. v. CIT (1964) 51 ITR 353, wherein the Hon'ble Apex Court had observed as under:- 12. We have earlier said that s. 12 can only apply if no other section is applicable, because it deals with the residuary head of income. Now sub-s. (4) of s. 12 only deals with certain allowances and it obviously proceeds on the basis that the income mentioned in it, namely, that from the building when inseparably let with plant, machinery or furniture, is not income falling under any of the specific heads dealt with by ss. 7 to 11 and is, therefore, income falling under the residuary head contained in s. 12. There a preliminary difficulty arises. In respect of buildings- and with them alone sub-s. (4) of s. 12 is concerned-as already seen, the owner is liable to tax under s. 9 not on the actual income received from it but on its annual value and in fact quite irrespective of whether he has let it out or not. How then can it be said that the rent received from a building could at all come under s. 12? In other words, why can it not be said that the specific section, that is, s. 9, covers the case and the income from the building cannot be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 the main intention is for letting out the property or any portion 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 . We find that the Hon'ble Apex Court had in unequivocal terms therein categorically held that where an assessee is into simpliciter letting out of property or any portion thereof, the same is liable to be assessed as 'Income from house property', but however, where it emerges that the main intention of the assessee is to exploit the immovable property by way of complex commercial activities, in that event the income is liable to be assessed as 'business income'. We find that as observed by us hereinabove, it remains as matter of fact that the assessee since inception, as conceded by the department, was engaged in the business activity of letting out furnished fl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... High Court of Delhi relying on the aforesaid judgment of the Hon'ble Apex Court, had taken a similar view in the case of CIT v. A.R.J. Securities Printers (2003) 131 Taxmann 297 (Delhi) and therein held that where the fundamental aspect permeating through different assessment years had been found as a fact one way or the other, and the parties had allowed the position to sustain by not challenging the order, it would not be at all appropriate to allow the position to be changed in the subsequent years. That a similar view had also been taken by the Hon'ble High Court of Madhya Pradesh in the case of CIT v. Godavari Corporation Ltd. (1985) 21 taxmann 279 (M.P.), wherein it was held that though the principles of res judicata does not apply to income tax proceedings, but the rule of consistency does apply. We find that the Hon'ble High Court while arriving at the aforesaid view had relied on the judgment of the Hon'ble High Court of Bombay in the case of H.A. Shah and Co. v. CIT (1956) (30 ITR 618) (Bom) and Jivat lal Purtapshi v. CIT (1967) (65 ITR 261) (Bom), as well as the judgment of the Hon'ble High Court of Kerala in the case of Annamalai Reddiar v. CIT (196 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dgment of the Hon'ble High Court of Bombay in the case of H.A. Shah and Co. v. CIT (1956) 30 ITR 618 (Bom) is distinguishable on facts. We find that in the aforesaid case the Hon'ble High Court had upheld the view arrived at by the A.O, for the reason that during the year under consideration certain documents justifying taking of such contrary view were made available on record. We are of the considered view that unlike the facts involved in the case before the Hon'ble High Court, now when in the case of the present assessee no such material had therein emerged which could go to justify taking of an inconsistent view by the A.O, therefore, the income received by the assessee from composite letting of furnished flats on the basis of same facts as were there before him in the preceding years, cannot be permitted to be assessed during the year under the head 'Income from house property'. That before culminating, we may herein observe that except for raising of oral averments, no material had been brought to our notice by the ld. D.R which could persuade us to subscribe to the claim of the department that certain new facts had emerged during the year under considera ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder the head 'Income from house property' and assessed the income of the assessee at ₹ 27,65,470/-. The order of the A.O was thereafter upheld by the CIT(A). The assessee being aggrieved with the order of the CIT(A) had thus carried the matter in appeal before us. 16. That at the very outset of the hearing of the appeal it was submitted by the Ld. A.R that the issues involved in the present appeal was identical to that involved in the aforementioned appeal of the assessee in Shibani S. Bhojwani v. DCIT, Central Circle 24 26, Mumbai for A.Y. 2009-10, marked as ITA No. 7573/Mum/2014. The Ld. D.R had not disputed the aforesaid factual position. We have perused the orders of the lower authorities and the material produced before us. We find that the issues involved in the present appeal are identical to the issues involved in the appeal before us in the case of Shibani S. Bhojwani v. DCIT, Central Circle 24 26, Mumbai for A.Y. 2009-10. Thus in the backdrop of our aforesaid observations, we herein adjudicate the present issues in terms of our order passed while disposing of the grounds of appeal raised by the assessee in the aforesaid appeal, viz. Shibani S. Bhojwa ..... X X X X Extracts X X X X X X X X Extracts X X X X
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