IN THE INCOME TAX APPELLATE TRIBUNAL
`F' : NEW DELHI
DELHI BENCH `F
BEFORE SHRI G.D. AGRAWAL, VICE PRESIDENT AND
VARKEY, JUDICIAL MEMBER
SHRI ABY T. VARKEY,
Nos.1127/Del/2012 & 694/Del/2013
ITA Nos
Years : 2008-
Assessment Years 2009-10
2008-09 & 2009-
Assistant Commissioner of Vs. M/s Renkon Partners,
Income Tax,
Income 9th Floor, DLF Centre,
Circle-
Circle-31(1), C.R. Building, Sansad Marg,
I.P. Estate, New Delhi. New Delhi.
PAN : AAFFR2063P.
(Appellant) (Respondent)
Appellant by : Shri Vivek Wadekar, CIT-DR.
Respondent by : Shri R.S. Singhvi, CA.
ORDER
PER G.D. AGRAWAL, VP :
:-
ITA No.1127/Del/2012 :-
This appeal by the Revenue is directed against the order of
learned CIT(A)-XXVI, New Delhi dated 23rd December, 2011 for the AY
2008-09.
2. The Revenue has raised the following grounds of appeal:-
"(A) Whether in the facts and circumstances of the
case, ld.CIT(A) was justified in deleting the addition of
Rs.11,07,97,978/- made by AO disallowing deduction
u/s 24(1) of I.T. Act.
(B) Whether in the facts and circumstances of the
case, ld.CIT(A) was justified in treating the rental
income as income from house property when the
business of the assessee consisted of letting out/renting
out of business centre.
2 ITA-1127/D/2012 &
694/D/2013
(C) The appellant craves leave to add, alter or amend
any/all the grounds of appeal before or during the
course of hearing of the appeal."
3. At the time of hearing before us, it is submitted by the learned
counsel that the similar issue has been considered by the ITAT in
another case of the group company. He submitted that the assessee is
one of the group concerns of DLF Group and in this concern which is a
partnership firm, certain assets are owned on which rent is being
received. The assets are kept as investment and the assets kept in
this firm are not being stock in trade. That rent is received year after
year and is being disclosed under the head `income from house
property'. In all the preceding years, the income disclosed under the
head income from house property has been accepted. He submitted
that the similar issue has been considered by the ITAT in the case of
ACIT Vs. Atria Partners vide ITA No.2490/Del/2012 and ACIT Vs. Plaza
Partners vide ITA No.1265/Del/2012 and 695/Del/2013. He submitted
that those concerns are also entities of the DLF Group and the facts are
identical. He, therefore, submitted that the order of learned CIT(A)
should be sustained.
4. Learned DR, on the other hand, fairly admitted that the facts in
the case of the assessee are more or less similar to the facts in the
case of Atria Partners (supra) and Plaza Partners (supra) except one
major difference. He further submitted that during the accounting year
relevant to the assessment year 2008-09, there was change in the
constitution of the assessee firm and the Assessing Officer has referred
to the partnership deed wherein it was mentioned that the partners of
the firm agreed to continue to carry on the business of setting up of
commercial complex for sale or for letting out etc. Thus, as per
partnership firm, the primary business of the assessee is of setting up
of commercial complex for sale. In view of the above decision of ITAT in
3 ITA-1127/D/2012 &
694/D/2013
the cases of Atria Partners (supra) and Plaza Partners (supra) relied
upon by the learned counsel would not be applicable. He, therefore,
submitted that the order of the Assessing Officer as well as learned
CIT(A) is quite justified. The same should be sustained.
5. We have carefully considered the arguments of both the sides
and perused relevant material placed before us. We find that in
paragraph Nos.7.1.1 & 7.1.2, learned CIT(A) has recorded the following
facts :-
"7.1.1 It is an admitted fact that the appellant is the
owner of only one property during the year under
appeal, which was let out. It is also borne from record
and past history of the case that the income accrued
from letting out since inception has been disclosed as
income from house property and assessed as such by
the Assessing Authorities. The AR of the appellant
pleaded that it is the ownership and the character of
income which determines the head of income under
which income is to be assessed and not otherwise
unless proved contrary by the AO.
7.1.2 It is also a fact that the appellant has shown
this asset as a fixed asset and not stock-in-trade in its
balance sheet which was verifiable from the copy of the
annual accounts placed as part of the Paper Book
during the appellate proceedings."
6. The above facts recorded by the learned CIT(A) have not been
controverted before us. Thereafter, the learned CIT(A) has recorded
various judicial pronouncements and has also considered the judicial
pronouncements relied upon by the Assessing Officer and arrived at
the following conclusion :-
"7.1.7 I have considered the facts of the case,
submissions of the AR, Rule of consistency and the
judicial decisions, Supra. It is noted that the Assessing
Officer ignoring the fact that the property has been
4 ITA-1127/D/2012 &
694/D/2013
shown as a fixed capital asset by the appellant and
without placing on record any material to support his
finding that the rental income was to be assessed as
business income and not income from property, is
patently not justified. On the other hand, on facts of
the case, judicial decisions, Supra, and following Rule of
Consistency, it is observed that the income from letting
out was rightly disclosed under the head income from
house property. The Assessing Officer is therefore
directed to assess the rental income received under the
head `income from house property' as per the provision
of law as against `business income' assessed u/s 143(3)
of the Act. This ground of appeal is accordingly
allowed."
7. After considering the arguments of both the sides and the facts
of the case, we do not find any infirmity in the above conclusion of the
learned CIT(A). The assessee is owner of one building which was let
out from past several years. The asset which is let out is held as
investment and not as stock in trade. In all the preceding years, rental
income is shown as income from house property and which has been
accepted by the Revenue as such. The learned DR has argued at the
time of hearing before us that rule of res-judicata does not apply to
income tax proceedings. It is true that the rule of res-judicata does not
apply to income tax proceedings but, at the same time, the rule of
consistency does apply. When the facts are similar and rental income
from the same property is accepted as income from house property in
the preceding years, there cannot be any justification to treat the
rental income as business income in the year under consideration
without there being any change in the facts or in law. Moreover, The
assessee is not carrying on any activity which can be said to be in the
nature of business activity. It is simply receiving the rent of the
building owned by it. We also find that on identical facts, ITAT `A'
Bench in the case of Atria Partners (supra) held as under:-
5 ITA-1127/D/2012 &
694/D/2013
"7. We have heard both the counsel and perused the
records. We find that assessee's firm owns commercial
building namely DLF Atria in DLF City, Phase-II,
Gurgaon. This building was given on rent to M/s
Conergys India Services (P) Ltd. and the rental income
received was shown as income from house property.
Assessee firm has a branch office which is in trading in
shares and the income of which was shown as business
income. This rent was shown under the head house
property from asstt. year 2003-04 onwards and the
assessments for the A.Y. 2006-07 & 2007-08 were
completed u/s. 143(3) accepting the rental income as
income from house property.
7.1 AO has not doubted the ownership of the assessee
or the fact that premises are given on rent. AO's
observation that rental income is too high is not at all a
reason to treat the income as income from business. AO
has not made out any case that assessee has been
providing services and hence, the claim of rental
income is to be disallowed. We agree with the Ld.
Counsel of the assessee that the Income Tax Act does
not make any distinction between commercial property
and other property for the classification of income from
house property. In these circumstances, nothing has
been brought on record by the AO to show that the
income returned as house property is actually income
from business.
7.2 In this regard, Ld. Counsel of the assessee has also
submitted that if the rental income is treated as income
from house property and profession, then assessee
would be entitled to depreciation on building of Rs.
20.24 crores. This would result in proportionate
reduction in the income earned in this regard.
7.3 Hence, we agree that there is no logic in treating
the income from house property as income from
business. We hold that nothing has been brought on
record by the AO to show that the income from house
property is actual income from business.
7.4 In this regard, we place reliance upon the Hon'ble
Jurisdictional High Court in the case of CIT vs. Dalmia
Promoters Developers (P) Ltd. 281 ITR 346, wherein it
was has held that for rejecting the view taken in earlier
6 ITA-1127/D/2012 &
694/D/2013
assessment years, there must be material change in
the fact, situation or in law. We find that in this case
there is no change in the facts, situation or in law.
Hence, the Revenue cannot be allowed to adopt a
different stand. This is also reiterated by the Hon'ble
Apex Court decision in CIT vs. Excel Industries Ltd. in
Civil Appeal No. 125 of 2013 vide order dated
08.10.2013. In this case, it was held that when in earlier
asstt. Years the revenue accepted the order of the
Tribunal in favour of the assessee, then Revenue cannot
be allowed to flip flop on the issue and it ought let the
matter rest rather than spend the tax payers money in
pursuing litigation for the sake of it.
8. In the background of the aforesaid discussions and
precedents, we do not find any infirmity in the order of
the Ld. CIT(A). Accordingly, we uphold the same."
8. Similar view is taken by ITAT `F' Bench in the case of Plaza
Partners (supra). Learned DR also fairly stated that the facts in the
case of the assessee and facts in the case of Atria Partners (supra) and
Plaza Partners (supra) are more or less similar. He tried to distinguish
the above two cases on the ground that in the case under appeal
before us, the Assessing Officer has referred to the partnership deed
which mentions as under:-
"That the parties hereto have agreed to continue to
carry on the business of setting up commercial
complexes for sale or for letting out and earning rental
income there from or for running business/convention
centers or dealing in shares and securities and other
movable or immovable assets or carrying on any other
business or businesses as may be mutually agreed
upon from time to time."
9. However, from the above, it is evident that the partnership deed
has mentioned not only the setting up of the commercial complex for
sale but also mentioned for letting out and earning rental income there
from. That it is a common practice that the partnership deed or a
7 ITA-1127/D/2012 &
694/D/2013
memorandum of association of the company are drafted covering large
number of activities but which of several activities mentioned in the
partnership deed or memorandum of association is carried on by the
assessee will be relevant for the purpose of assessment under the
Income Tax Act. When from the facts of the assessee's case it is
evident that the assessee owns a commercial complex for letting out
and earning rental income than merely because the partnership also
permits the assessee to sale the commercial complex will not change
the nature of rental income. Ordinarily, the rental income from a
building is to be assessed under the head income from house property.
In view of the totality of above facts, we do not find any justification to
interfere with the order of learned CIT(A). The same is sustained and
Revenue's appeal for AY 2008-09 is dismissed.
:-
ITA No.694/Del/2013 :-
10. Ground Nos.1 & 2 of the Revenue's appeal read as under:-
"1. The CIT(A) has erred in deleting the addition of
Rs.11,74,06,143/- made by the AO by treating rental
income as business income.
2. The CIT(A) has erred in directing the AO to assess
rental income under the head `income from house
property' without appreciating the fact that assessee is
engaged in the business of building & letting out of
commercial complexes."
11. At the time of hearing before us, both the parties fairly admitted
that these grounds are identical to ground Nos.1 & 2 of the Revenue's
appeal for AY 2008-09 and therefore, whatever is the outcome of the
Revenue's appeal for AY 2008-09 would be squarely applicable. We
have already considered this issue while deciding the Revenue's
appeal for AY 2008-09 and for the detailed discussion above, ground
Nos.1 & 2 of the Revenue's appeal are rejected.
8 ITA-1127/D/2012 &
694/D/2013
12. Ground No.3 of the Revenue's appeal reads as under:-
"The CIT(A) has erred in deleting the disallowance of
Rs.1,20,000/- out of total addition of Rs.7,96,563/-
claimed u/s 57(iii) of the IT Act without appreciating the
fact that the assessee could not prove that such
expenditure was expended wholly & exclusively for the
purpose of earning such income."
13. We have heard both the sides and perused relevant material
placed before us. The facts of the case are that the assessee has
disclosed the income of `60,87,202/- under the head income from
other sources out of which the total expenses incurred by the assessee
was `21,97,452/-. However, the assessee itself disallowed the sum of
`14,00,889/- and claimed the deduction of only `7,96,563/- against the
income from other sources. The Assessing Officer disallowed the
entire expenses claimed by the assessee and assessed the income
from other sources at `60,87,202/-. On appeal, learned CIT(A) allowed
the relief of `1,20,000/- with the following finding:-
"7.3 I have considered the facts of the case and
submissions of the appellant. I am of the view that the
appellant has not been able to justify the claim of the
entire expenses. However, considering the nature of
the expenditure being office maintenance, salary paid,
conveyance, legal and professional etc., it would not be
judicious to assume that no expenses whatsoever has
been incurred for earning an income of over Rs.60 lacs
from other sources. Consequently, keeping in view the
provisions of Section 57(iii) of the Act and the judicial
decisions, supra, the appellant is allowed a relief of
Rs.1,20,000/- (@ Rs.10,000/- per month) on account of
expenses or maintenance of its status as a Firm.
Accordingly, the addition of Rs.6,76,563/- is confirmed."
14. After considering the arguments of both the sides and the facts
of the case, we do not find any infirmity in the above finding of the
9 ITA-1127/D/2012 &
694/D/2013
learned CIT(A). The assessee has income from other sources
amounting to `60,87,202/-, out of which, the total expenses allowed by
the learned CIT(A) were only `1,20,000/- which is approximately 2% of
the income from other sources and remaining 98% has been taxed.
Incurring of 2% of the expenses on office maintenance, salary,
conveyance, legal and professional fee etc. cannot be said to be
excessive or unreasonable. Therefore, we do not find any infirmity in
the order of learned CIT(A). The same is sustained and ground No.3 is
rejected.
15. Ground Nos.4 & 5 are of general nature and need no specific
adjudication.
16. In the result, the appeals of the Revenue are dismissed.
Decision pronounced in the open Court on 12th December, 2014.
Sd/- Sd/-
VARKEY)
(ABY T. VARKEY) AGRAWAL)
(G.D. AGRAWAL)
JUDICIAL MEMBER VICE PRESIDENT
Dated : 12.12.2014
VK.
Copy forwarded to: -
1. Appellant : Assistant Commissioner of Income Tax,
Circle-
Circle-31(1), C.R. Building,
I.P. Estate, New Delhi.
2. Respondent : M/s Renkon Partners,
9th Floor, DLF Centre, Sansad Marg, New Delhi.
3. CIT
4. CIT(A)
5. DR, ITAT
Assistant Registrar
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