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DCIT Cir 7(1), R.No.622, Aayakar Bhavan, M.K. Road, Churchgate, Mumbai 400 020. Vs. Pristine Developers P. Ltd., 3 Naryan Bldg-23, L.N. Road, Dadar (E), Mumbai-14.
August, 28th 2014
      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.
                          Vs.
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
              Officer.
       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".
          


                                 2


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
grounds.
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
lower authorities.
                                                  3





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
      House Property".

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.

    Sd/-                                                       Sd/-
(AMIT SHUKLA)                                          (D. KARUNAKARA RAO )
  / JUDICIAL MEMBER                                     / ACCOUNTANT MEMBER
 Mumbai;                        27/08/2014
.../ OKK , Sr. PS

    /Copy of the Order forwarded to :
1.  / The Appellant
                              4


2.    / The Respondent.
3.    () / The CIT(A)-
4.     / CIT
5.    ,   ,  / DR,
     ITAT, Mumbai

6.     / Guard file.


                         //True Copy//
                                       / BY ORDER,



                                  /  (Dy./Asstt. Registrar)
                            ,  / ITAT, Mumbai

 
 
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