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Income Tax Appellate Tribunal, DELHI BENCH: ‘B’ NEW DELHI
Before: SHRI R. K. PANDA & MS SUCHITRA KAMBLE
PER SUCHITRA KAMBLE, JM
These two appeals are filed by the Revenue against the order dated 29/09/2017 passed by CIT(A)-2, New Delhi for Assessment Years 2013-14 & 2014-15 respectively.
The grounds of appeal are as under:-
ITA No. 254 /DEL/2018 (A.Y. 2013-14) “1. Whether on the facts and in the circumstances of the case and in law, the Ld.CIT(A) has erred in deleting the addition made by the A.O on the issue of income from house property amounting to Rs.6,96,49,798/- by ignoring the
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fact that the annual letting value of the property known as West Tower was taxable as income from house Property”
ITA No. 255/DEL/2018 (A.Y. 2014-15) “1. Whether on the facts and in the circumstances of the case and in law, the Ld.CIT(A) has erred in deleting the addition made by the A.O on the issue of income from house property amounting to Rs.6,96,49,798/- by ignoring the fact that the annual letting value of the property known as West Tower was taxable as income from house Property.”
The facts of both the appeals for A.Ys. 2013-14 and 2014-15 are identical; therefore, we are taking up facts of Assessment Year 2013-14. The assessee Company is engaged in the business of running 5 Star Super Deluxe Hotel in New Delhi, in the name and style of “LE MERIDIEN.” The assessee company filed its return digitally on 28/09/2013 declaring income of Rs. 20,19,49,590/-. On perusal of the return of income and details filed by the assessee company, the Assessing Officer observed that the assessee company owns property adjacent to Hotel Building known as West Tower. This building is located in the same compound in which the hotel building is located. This building is not used for the hotel business of the assessee company. It has different entrance and other infrastructural services such as lifts, stairs and parking slots etc. The Assessing Officer held that the assessee company had sub licensed offices and apartment in this building to various parties. The sub-license is given to various parties for a period of 9 years and 11 months which is renewed on the request of sub-licensee. The assessee company is not charging any rent, lease, or license fee from these parties. It had received interest free security deposits in the year of original sub licensed period to which the assessee company showing as unsecured loan in its balance sheet. The assessee was show caused as to why income from house property in respect of West Tower be not compute and added back to the total income like in the preceding years. The assessee filed reply dated 18/1/2016 and 10/3/2016. The Assessing Officer held that the annual rental income in
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respect of West Tower was Rs. 6,96,49,798/- and thus taxed the same, under the head income from house property and added to the total income of the assessee.
Being aggrieved by the assessment order, the assessee filed appeal before the CIT(A). The CIT(A) allowed the appeal of the assessee by following the Hon’ble Delhi High Court decision dated 5th February, 2016 in the assessee’s own case for Assessment Year 2008-09.
The Ld. DR submitted that the assessee owns property adjacent to hotel building known as West Tower. This building is located in the same compound in which the hotel building is located. This building is not used for the hotel business of the assessee company. It has different entrance and other infrastructural services such as lifts, stairs and parking slots etc. It has been found that the assessee company had sub licensed offices and Apartments in this building to various parties. The sub-license is given to various parties for a period of 9 years and 11 months which is renewable on the request of sub- licensee. The assessee company is not charging any rent, lease or license fee from these parties. It had received interest free security deposits in the year of original sub-license to which the assessee company is showing as unsecured loan in its balance sheet. The Ld. DR further submitted that on being confronted on these issues of non-disclosure of rental income, the Assessing Officer has attracted provision of Section 22 and estimated the annual let-out value of the property and computed the rental income. This issue of addition of rental income is common for AY 2001-02 onward in assessee’s own case wherein the CIT (A), Tribunal (ITAT) and Jurisdictional High Court decided the issue in favour of assessee. However, department has not accepted the decision of above authority and filed SLP before the apex Court on merit of the case challenging the addition deleted by the appellate authority. Thus, the Ld. DR submitted that in this case non-charging of rental income on the part of the assessee in respect of West Tower adjacent to Hotel Le-Meridian is based
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on fact and law in which assessee received the rent in the garb of interest free security deposit from the user (sub-leasee) of the property which has rightly been estimated and taxed u/s 22/23 of the IT Act. Therefore, addition made by the Assessing Officer should be upheld. In this regard, the Ld. DR relied on the various judgments of the Hon’ble High Courts. The same are as follows:
Ram Pershad & Sons Vs CIT (Del) 81 Taxman 332 2. CIT Vs G. Ramesan (Ker) 241 ITR 426 3. N. Natarai Vs DCIT (Mad) 266 ITR 277 3. CIT Vs Parasmal Chordia (Mad) 233 ITR 147 4. Visveswarava Ind. Res. Dev. Centre Vs DCIT 59 ITD 156 (Mum) 5. CIT Vs Dhun D. Dalai (Mad) 233 ITR 143
The Ld. AR relied upon the order of the CIT(A) and the Hon’ble Delhi High Court decision in the assessee’s own case for A.Y. 2008-09.
We have heard both the parties and perused the material available on record. The Hon’ble Delhi High Court in case of CIT Vs. C. J. International Hotels Ltd. (2011) 197 Taxman 230 (Delhi) held as under:-
“10. The assessee preferred appeal against this order before the CIT(A). In this appeal, the assessee took an additional ground predicated on the provisions of Section 27(iii) read with Section 269UA(f) (ii) of the Act and submitted that under those provisions, it would be a sub-licensee as deemed owner would be charged to tax in his hands. The C1T(A) considered this argument, which was purely a legal argument based on the interpretation of the aforesaid sections on admitted facts on record, but did not accept the aforesaid pleading. After considering other submissions of the appellant, which were raised before the Assessing Officer, the CIT(A) upheld the order of the Assessing Officer on this ground. In this scenario, the assessee preferred further appeal before the Income-tax Appellate Tribunal (hereinafter referred to as ‘the This time, before the Tribunal,
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the assessee succeeded in its attempt to demonstrate that die assessee could not be liable to pay any such tax fixing letting value on notional basis when, in fact, no such amount of rent/license fee was received by the assessee. The Tribunal examined the license agreement entered into between the NDMC and the assessee on the basis of which it has come to the conclusion that it is the NDMC, which is the "owner of the premises and remains to be the owner of the premises in question". The Tribunal has further accepted the submissions of the assessee that in view of the provisions of section 27(iii) of the Act, it is the sub-licensee who would be "deemed owner" of those premises which the sub-licensees whereof transferred to the present occupiers and those occupiers are paying rent/license fee to the sub licensees. On that basis, the Tribunal has set aside the addition made by the Assessing Officer and deleted this component of income holding that the same would not be chargeable to tax.
This is how the Department has filed the appeals pertaining to different assessment years. As pointed out above, though the issues before the Assessing Officer, CIT(A) as well as the Tribunal were numerous, in these appeals primarily one question of law which is formulated and reproduced above has been pressed by the Department.
For die aforesaid reasons, we are of the view that die approach of the Tribunal in deciding the aforesaid issue is perfectly justified. There is no reason to interfere with the same. We clarify that the assessee would not be entitled to depreciation on this purpose. We, thus, answer the question of law in favour of the assessee and against die Revenue, as a result thereof all these appeals are dismissed.”
Thus, in view of the decision of the Hon’ble Delhi High Court in the assessee’s own case on the similar issue, the present appeal is also covered in favour of
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the assessee. The grounds raised by the Revenue for A.Y. 2013-14 are therefore dismissed. As regards the appeal for A.Y. 2014-15, the same is identical hence dismissed as well.
In result, both the appeals of the Revenue are dismissed.
Order pronounced in the Open Court on this 26th Day of AUGUST, 2020.
Sd/- Sd/- (R. K. PANDA) (SUCHITRA KAMBLE) ACCOUNTANT MEMBER JUDICIAL MEMBER
Dated: 26/08/2020 R. Naheed