IN THE INCOME TAX APPELLATE TRIBUNAL "C" BENCH, MUMBAI
BEFORE SHRI D. KARUNAKARA RAO, ACCOUNTANT MEMBER AND
SHRI AMIT SHUKLA, JUDICIAL MEMBER
./I.T.A. No.3379/M/2013 (AY:2009-2010)
DCIT Cir 7(1), / Pristine Developers P.
R.No.622, Aayakar Bhavan, Ltd., 3 Naryan Bldg-23, L.N.
M.K. Road, Churchgate, Road, Dadar (E),
Mumbai 400 020. Mumbai-14.
./ PAN : AACP2795G
( /Appellant) .. ( / Respondent)
/ Appellant by : Smt. Parminder, DR
/ Respondent by : Shri Vijay Mehta, Govind Javeri
/ Date of Hearing :13.8.2014
/Date of Pronouncement :27 .8.2014
/ O R D E R
PER D. KARUNAKARA RAO, AM:
This appeal filed by the Revenue on 1.5.2013 is against the order of the CIT
(A)-13, Mumbai dated 7.2.2013 for the assessment year 2009-2010.
2. In this appeal, Revenue raised the following grounds which read as under:
"i) The Ld CIT (A) has erred on facts and in law in directing the Assessing Officer to treat
rental income and service charges received as "income from house property"
instead of "business income" a treated by the Assessing Officer without
appreciating the legal and factual matrix as clearly brought out by the Assessing
ii) The Ld CIT (A) has erred on facts and in law in not appreciating the fact that the
assessee is developer and it has developed the said property for sale of commercial
units. Therefore, the rental income eared and service charges received are required
to be treated as business income.
iii) The Ld CIT (A) has erred on facts and in law in not appreciating the fact that the
assessee has itself offered the income under the head " business income" in the
original return of income and the assessee has changed the head of income to
"house property" with the intention to reduce the tax liability.
iv) The Ld CIT (A) has erred on facts and in law in not appreciating the fact that the
basic intention of the assessee to offer the income under the head "i ncome from
house property" is to reduce tax liability on sale of commercial unit by offering the
same under the head "capital gains".
3. Briefly stated relevant facts of the case are that the assessee is engaged in
the business of ,,property developers. Assessee originally filed the return of income
declaring the total income of Rs.36,66,398/-, wherein the assessee offered both
,,rental as well as ,,services charges received under the head ,,business
income. Subsequently, assessee filed the revised return of income declaring total
loss of Rs. 1,83,68,059/- under the normal provisions of the Act and declared book
profit of Rs. 3,66,63,983/- u/s 115JB of the Act and rental and services were offered
under the head ,,income from house property. In this regard, assessee was
asked substantiate its treatment of rental receipts and service charges under the
head ,,income from house property. AO did not accept the assessees contention
that the assessee-company is letting out the property and therefore, the entire
receipts should be treated under the head ,,income from house property and taxed
same under ,,business income by holding that the assessees business is in the
nature of commercial activity and accordingly, the entire receipts should be treated
as business receipts. Aggrieved, with the decision of the AO, assessee carried the
matter in appeal before the first appellate authority.
4. During the proceedings before the first appellate authority, after considering
the submissions made by the assessee, CIT (A) discussed the issue at length vide
para 2.3 of his order and directed the AO to assess the ,,rental income as well as the
,,service charges receipts under the head "income from house property" and partly
allowed the assessees appeal. Aggrieved with the decision of the CIT (A), Revenue
filed the present appeal before the Tribunal by raising the above mentioned
5. During the proceedings before us, Smt. Parminder, Ld DR relied on the order
of the AO and reiterated decisions relied on by him to support the view that the total
receipts received by the assessee during the year under consideration are in the
nature of ,,business receipts liable to be taxed as ,,profit and gains of business or
profession instead of ,,house property.
6. On the other hand, Shri Vijay Mehta, Ld Counsel for the assessee heavily
relied on the order of the CIT (A) and reiterated the submissions made before the
7. We have heard both the parties and perused the orders of the Revenue
Authorities as well as the relevant material placed before us. On perusal of the said
order of the CIT (A) in general and para 2.3 in particular, we find the same is
relevant in this regard. For the sake of completeness of this order, relevant contents
of the said para 2.3 of the CIT (A)s order are reproduced here which read as under:
"2.3................The appellant filed original return of income declaring total business
income at Rs. 4,54,26,491/-. Thereafter, the appellant filed revised return of income
declaring rental income and service charges income under the head ,,income from
house property showing loss of Rs. 1,83,68,059/-. In the original return of income,
the appellant did not claim interest expenditure of Rs. 7,82,37,859/- pertaining to the
year under consideration and interest of Rs. 1,53,67,625/- being 1/5th of the interest
pertaining to pre-construction period. These interest expenses were claimed by the
appellant in the revised return of income under the head ,,income from house
property. It is because of claim of interest, positive income of original return
became the loss in the revised return of income. In the P & L A/c, this interest
expenditure is not appearing. The appellant has explained that this interest
expenditure was appearing in the work-in-progress account. The value of building of
52.47 Crore and land at Rs. 13,47 Crore has been capitalized during the year and the
interest pertaining to the year under consideration and the interest pertaining to pre-
construction period has been claimed in the revised return of income. In my
considered view, the appellant was entitled to claim this interest expenditure even if
the rental income and service charges income was assessable under the head
,,Business Income. Without prejudice, the filing of revised return of income, the
appellant would have claimed this interest expenditure during assessment
proceedings itself which would have been resulted in assessed loss.
In view of the above facts the AO is directed to assess the rental
income as well as service charges receipts under the head "income from
8. Considering the above, we are of the opinion that the CIT (A) has rightly
adjudicated the issue while allowing the assessees appeal. Therefore, in our view
the order of the CIT (A) is fair and reasonable and it does not call for any
interference. Accordingly, grounds raised by the Revenue are dismissed.
9. In the result, appeal of the Revenue is dismissed.
Order pronounced in the open court on 27thAugust, 2014.
(AMIT SHUKLA) (D. KARUNAKARA RAO )
/ JUDICIAL MEMBER / ACCOUNTANT MEMBER
.../ OKK , Sr. PS
/Copy of the Order forwarded to :
1. / The Appellant
2. / The Respondent.
3. () / The CIT(A)-
4. / CIT
5. , , / DR,
6. / Guard file.
/ BY ORDER,
/ (Dy./Asstt. Registrar)
, / ITAT, Mumbai