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Income Tax Appellate Tribunal, JAIPUR BENCHES, JAIPUR
Before: SHRI KUL BHARAT, JM & SHRI VIKRAM SINGH YADAV, AM vk;dj vihy la-@ITA No. 261 & 262/JP/2017
आयकर अपीलीय अधिकरण] जयपुर न्यायपीठ] जयपुर IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES, JAIPUR Jh dqy Hkkjr] U;kf;d lnL; ,oa Jh foØe flag ;kno] ys[kk lnL; ds le{k BEFORE: SHRI KUL BHARAT, JM & SHRI VIKRAM SINGH YADAV, AM vk;dj vihy la-@ITA No. 261 & 262/JP/2017 fu/kZkj.k o"kZ@Assessment Year :2012-13 & 2013-14 cuke Assistant Commissioner Bhim Singh Vs. of Income Tax, Ummed Bhawan, Kota Circle-02 Kota LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: AAAHB7814B vihykFkhZ@Appellant izR;FkhZ@Respondent vk;dj vihy la-@C.O. Nos. 20/JP/2017 (Arising out of ITA Nos. 261/JP/2017) fu/kZkj.k o"kZ@Assessment Years : 2012-13 cuke Assistant Commissioner H.H. Maharao Brijraj Singh (Sole Vs. of Income Tax, Owner of Estate of H.H. Maharao Circle-02 Shri Bhim Singh Ji Sahib of Kota, Kota Kota LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: AAAHB7814B vihykFkhZ@Appellant izR;FkhZ@Respondent vk;dj vihy la-@C.O. Nos. 21/JP/2017 (Arising out of ITA Nos.262/JP/2017) fu/kZkj.k o"kZ@Assessment Years : 2013-14. cuke H.H. Maharao Brijraj Assistant Commissioner of Income Vs. Singh (Sole Owner of Tax, Estate of H.H. Maharao Circle-02 Shri Bhim Singh Ji Kota Sahib of Kota, Kota LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: AAAHB7814B vihykFkhZ@Appellant izR;FkhZ@Respondent
2 ITA No. 261 & 262/JP/2017 CO. No. 20 & 21 /JP/2017 ACIT, Kota vs. Bhim Singh, Kota
fu/kZkfjrh dh vksj ls@ Assessee by : Shri B.B.Maheshwari (C.A.) jktLo dh vksj ls@ Revenue by : Shri R.A.Verma (Addl. CIT) lquokbZ dh rkjh[k@ Date of Hearing : 29/09/2017 mn?kks"k.kk dh rkjh[k@Date of Pronouncement : 04/10/2017 vkns'k@ ORDER
PER: VIKRAM SINGH YADAV, A.M.
These are two appeals filed by the Revenue against the order of Ld. CIT (A), Kota dated 23.01.2017 for A.Y. 2012-13 and dated 24.01.2017 for A.Y 2013-14 respectively wherein the respective grounds of the appeals are as under:-
ITA No. 261/JP/2017 (Ground of Revenue’s appeal):
“On the facts and in the circumstances of the case, the ld. CIT(A) has erred in:- i) allowing the appeal of the assessee holding that the status of the assessee should be deemed as individual instead of HUF considered by the AO; ii) allowing the assessee exemption u/s 10(19A) on the rental income received from Ummed Bhawan Palace amounting to Rs. 5,57,319/- and 50,61,933/- compensation receivable; iii) holding that receipts from ITC Ltd. amounting to Rs. 48,49,721/- is the income under the head “Income from Business and profession” as against “Income from other sources” held by the AO; iv) holding that the income from interest on FDRs amounting to Rs. 26,41,454/- is assessable as business income instead of income from other sources held by the AO;
3 ITA No. 261 & 262/JP/2017 CO. No. 20 & 21 /JP/2017 ACIT, Kota vs. Bhim Singh, Kota
v) holding that income from sarovar complex amounting to Rs. 3,25,790/- is assessable as business income instead of income from House property held by the AO; vi) restricting the disallowance out of business expenses to Rs. 7,12,020/- against disallowance of Rs. 30,60,101/- made by the AO.” ITA No. 262//JP/2017 (Ground of Revenue’s appeal):
“ i) allowing the appeal of the assessee holding that the status of the assessee should be deemed as individual instead of HUF considered by the AO;
ii) allowing the assessee exemption u/s 10(19A) on the rental income received from Ummed Bhawan amounting to Rs. 3,78,708/- and 50,61,933/- compensation receivable;
iii) holding that receipts from ITC Ltd. amounting to Rs. 50,11,783/- is the income under the head “Income from Business and profession” as against “Income from other sources” held by the AO;
iv) holding that the income from interest on FDRs amounting to Rs. 31,47,183/- is assessable as business income instead of income from other sources held by the AO;
v) holding that income from sarovar complex amounting to Rs. 1,97,693/- is assessable as business income instead of income from House property held by the AO;
vi) restricting the disallowance out of business expenses to Rs. 8,41,945/- against disallowance of Rs. 42,09,725/- made by the AO.”
The assessee has also filed cross objection against each of two appeals filed by the Revenue wherein the respective grounds of the appeals are as under:-
C.O. No. 21/JP/2017 (Ground of Assessee’s appeal):-
4 ITA No. 261 & 262/JP/2017 CO. No. 20 & 21 /JP/2017 ACIT, Kota vs. Bhim Singh, Kota
“i) That the learned Commissioner of Income Tax (Appeal) erred in law as well as on facts is not accepting also the alternative ground that besides allowing exemption u/sec. 10(19A), the rental income of “Ummed Bhawan Palace” from structure and land requisitioned by defence department is neither accrued nor arose nor received this year, as the rental is in dispute in writ petition before Hon’ble Rajasthan High Court filed by Defence Department and quantum thereof is neither settled nor determined at all.
Hence not taxable on this score in alternative ground also.
ii) That the learned Commissioner of Income Tax (Appeal) erred in law as well as on facts not allowed deduction of Senior Citizen quantum of exemption as provided under Schedule First of Sec. 2 (Part 1) of I.T.Act 1961 as it is allowable in the status as of “Individual”, as the appellant age is more than 65 Years old.
The same deserves to be allowed.”
C.O. No. 20/JP/2017 (Ground of Assessee’s appeal):-
“i) That the learned Commissioner of Income Tax (Appeal) erred in law as well as on facts is not accepting also the alternative ground that besides allowing exemption U/sec. 10(19A), the rental income of “Ummed Bhawan Palace” from structure and land requisitioned by defence department is neither accrued nor arose nor received this year, as the rental is in dispute in writ petition before Hon’ble Rajasthan High Court filed by Defence Department and quantum thereof is neither settled nor determined at all.
Hence not taxable on this score in alternative ground also.
ii) That the learned Commissioner of Income Tax (Appeal) erred in law as well as on facts not allowed deduction of Senior Citizen quantum of exemption as provided under Schedule First of Sec. 2(Part 1) of I.T.Act 1961 as it is allowable in the status as of “Individual”, as the appellant age is more than 65 Years old.
5 ITA No. 261 & 262/JP/2017 CO. No. 20 & 21 /JP/2017 ACIT, Kota vs. Bhim Singh, Kota
The same deserves to be allowed.”
At the outset, ld. Counsel for the assessee submitted that all the issues as raised in the various grounds of appeal filed by the Revenue for both the years are covered by the decisions of the Tribunal for the earlier years. It was further submitted that there is no change in the facts and circumstances of the case and the earlier orders of the Tribunal may kindly be followed.
On the other hand, the ld. DR fairly stated that almost of the issues are covered by the order of the Tribunal for earlier years. However, he placed reliance on the order of the Assessing Officer for the impunged assessment years.
The relevant findings of the CIT(A) for AY 2012-13 are reproduced as under:- “As regards Ground of appeal no. 1, it is observed that my predecessor CIT(A), while deciding the appeal in the case of the appellate for A.Y. 2011-12 (the immediately preceding year of the present appeal) vide order in appeal no. 579/13-14 dt. 27/06/2014 had held following orders of earlier years & order of ITAT Jaipur dated 31.07.2007 on this issue that the appellant should be deemed individual owner of all the properties comprised in the Estate and hence allowed the appeal on this ground.
Respectfully following the same line of decision as in earlier year, I hold the same as above. The appeal is allowed on this ground of appeal.”
6 ITA No. 261 & 262/JP/2017 CO. No. 20 & 21 /JP/2017 ACIT, Kota vs. Bhim Singh, Kota
“As regards Ground of appeal no. 2 & 3 on exemption of rental income of Umed Bhawan Palace (including rental income of land & structure requisitioned by defence department and treating the same as income from house property, it is seen that my predecessor (CIT(A) vide order in appeal no. 579/13-14 dt. 27/06/2014 for A.Y. 2011-12 decided this issue in favour of the appellant by mentioning that the appellant was entitled for exemption u/s 10(19A) of the I.T. Act, 1961 against the receipt of rent & compensation for the properties in question.
As regards Ground No. 4, it had been held by my predecessor CIT(A), if the said income is finally held to be income from House Property, then assessee will be entitled for statutory deductions on the same.
This ground of appeal was therefore, partly allowed.
It may however, be of note that the Hon’ble Supreme Court vide Civil appeal No. 2812 of 2016 order dated 05.12.2016 in the case of the appellant himself has allowed the appeal & held that:
The appellant is allowed exemption u/s 10(19A) of the I.T. Act in respect of entire rental income of “Umed Bhawan” Kota (from defence department & others).
Since the Apex court has settled this issue, the addition on accrued income for Rs. 56,19,252/- cannot be sustained.
Grounds of appeal no. 2 to 4 are accordingly allowed in favour of the appellant in view of Hon’ble Apex Court decision in this regard on principles involved in these recurrent additions. These Grounds of appeal (No 2, 3 & 4) are allowed.“
7 ITA No. 261 & 262/JP/2017 CO. No. 20 & 21 /JP/2017 ACIT, Kota vs. Bhim Singh, Kota
“As regards Grounds of appeal no. 5, the issue has been decided in favour of the appellant by my predecessor in appeal order for A.Y. 2011-12 following earlier ITAT orders on the same line as well.
Respectfully following the same, I hold that receipts from ITC Ltd. constitute business income of the appellant & are taxable u/s 28 of the I.T. Act, 1961 & not as income from other sources. This Ground of appeal is allowed.”
“As regards Ground of appeal no. 6, vide the order of my predecessor CIT(A) in appeal no. 519/13-14 for A.Y. 2011-12, the issue has been decided in favour of the appellant referring to similar orders in earlier years as well.
Following the same line of decision, I am of the opinion that net interest income of Rs. 26,41,454/- from Bank deposits should be assessed as income from business and not income from other sources. This ground of appeal is allowed.”
“As regards Ground of appeal no. 7, as per the order of my predecessor CIT(A) referred in ground no. 6 above, on this issue in the earlier assessment year I hold that the income from commercial property is to be assessed as business income & not as income from property. As a corollary, the appellant would not be entitled for deduction @ 30% u/s 24 of the I.T. Act. This ground of appeal is partly allowed.”
“As regards Ground of appeal no. 8 related to disallowance of expenses out of the claim of Rs. 35,60,101/- incurred for business purposes & earning of income, the issue has also been examined in earlier years by ITAT Jaipur (order dt. 30.07.2007) as my predecessor CIT(A) vide
8 ITA No. 261 & 262/JP/2017 CO. No. 20 & 21 /JP/2017 ACIT, Kota vs. Bhim Singh, Kota
above referred appeal order (see ground no. 6) following the same line of decision as in earlier years, I hold that a more reasonable approach while making the disallowance out of these expenses was required than what treatment has been given by the A.O. Accordingly, I restrict the disallowance to 20% of the total claim of expenses of Rs. 35,60,101/-, which comes to Rs. 7,12,020/-.
The balance disallowance of Rs. 23,48,080/- is directed to be deleted in addition to the allowance of Rs. 5,00,000/- already given by the A.O. This Ground of appeal is partly allowed.”
“As regards Ground of appeal no. 9 related to rebate for senior citizen, following the decision of my predecessor in appeal no. 579/13-14 for A.Y. 2011-12 vide order dt. 27.06.2014, I hold that the appellant is not entitled to deduction u/s 88B of the I.T. Act, 1961 and the decision of the A.O. is confirmed. This ground of appeal is dismissed.”
We now refer to the latest order of the Coordinate Bench for AY 2010-11 and 2011-12 (in ITA No. 596, 597 & CO 29,30/JP/2014 dated 28/04/2016) and find that identical grounds of appeal were raised for consideration before the Coordinate Bench and the relevant findings on each of the grounds are as reproduced below:
“4. Now the Revenue challenged the issue in year under consideration but both the parties fairly accepted that this issue is covered in assessee’s own case in ITA No. 610 to 613/JP/2010 in preceding years, therefore, we dismiss the revenue appeal on this ground.”
9 ITA No. 261 & 262/JP/2017 CO. No. 20 & 21 /JP/2017 ACIT, Kota vs. Bhim Singh, Kota
“9. We have heard the rival contentions of both the parties and perused the material available on the record. In past, similar additions were made by the Assessing Officer, which has been deleted by the learned CIT(A). In A.Y. 2007-08 passed in ITA No. 610 to 613/JP/2010, the Coordinate Bench decided this issue as under:- “These two issues are decided by the ld. CIT(A) following the decision of Tribunal for assessment years 1986-87 to 1990-91 (supra). Relevant findings have been given at page 50 of the order of the Tribunal. Thereafter also the Tribunal following this order allowed the issue in favour of the assessee while deciding the issue in assessment year 2004-05. Since the issues have been decided by the ld. CIT(A) following the order of Tribunal in case of assessee for earlier years, therefore, we see no reason to interfere with the finding of ld. CIT(A) in respect of these two issues also.” By respectfully following the decision of the Coordinate Bench in assessee’s own case, we do not find any reason to differ with the findings given by the Coordinate Bench on this issue. Accordingly, the Revenue’s appeal on this ground is dismissed.”
“10. Ground No. 3 is against treating the receipts from ITC Limited amounting to Rs. 39,59,066/- as business income by the Assessing Officer. The assessee has received Rs. 39,59,066/- from ITC Limited and shown this income in the return as business income, which was treated by the Assessing Officer “income from other sources” as held in past by the department. The assessee challenged this issue before the learned CIT(A), who has accepted
10 ITA No. 261 & 262/JP/2017 CO. No. 20 & 21 /JP/2017 ACIT, Kota vs. Bhim Singh, Kota
the assessee’s income under the head business and profession on the ground that in past the issue is covered by the ITAT order in assessee’s own case. Both the parties have accepted the fact before us that this issue is covered in favour of the assessee in preceding orders by various decisions of the ITAT, therefore, we do not find any reason to differ with the order of the Coordinate Bench in assessees own case in preceding year. Accordingly, we dismiss the appeal of the Revenue on this ground.”
“12. The learned D.R. argued that this issue is covered in favour of the revenue and in past the interest income on FDR has been held under the head “income from other sources”, which has been fairly accepted by the learned A.R. of the assessee. Similar issue was involved in the past and the Coordinate Bench has decided this issue against the assessee and interest income was held to be treated income from other sources and not business income. Therefore, we do not find any reason to differ with the findings of the Coordinate Bench given in the assessee’s own case in A.Y. 2007-08. The appeal on this ground is allowed.”
“17. We have heard the rival contentions of both the parties and perused the material available on the record. The assessee consistently showing rental income from the commercial property under the head business and profession, which has been confirmed by the learned CIT(A) not only in this year but in the preceding years also. The learned D.R. had not controverted the findings of
11 ITA No. 261 & 262/JP/2017 CO. No. 20 & 21 /JP/2017 ACIT, Kota vs. Bhim Singh, Kota
the learned CIT(A), therefore, we confirm the order of the learned CIT(A).”
“22. We have considered the rival submissions of both the parties and perused the material available on the record. The present issue has already been decided by the Coordinate Bench in ITA No. 147 & 148/JP/2005 for A.Y. 2001-02 and 20% expenses have been estimated by the Coordinate Bench. The facts are identical during the year under consideration. Thus, we confirm the order of the learned CIT(A).”
We have heard the rival contentions and purused the material available on record. Both the parties agreed that there are no change in the facts and circumstances of the case and identical grounds of appeal have been taken in the earlier years which have been consistently decided by the Coordinates Benches.
The only development that we observe is that in the context of exemption u/s 10(19A) on the rental income relating to Ummed Bhawan, the decision of the Hon’ble Supreme Court in assessee’s own case has since been pronounced and in its decision dated 5.12.2016, it has been held as under:
“25. In order to claim exemption from payment of income-tax on the residential palace of the Ruler under Section 10(19A), it is necessary for the Ruler to satisfy that first, he owns the palace as his ancestral property; second, such palace is in his occupation as his residence; and
12 ITA No. 261 & 262/JP/2017 CO. No. 20 & 21 /JP/2017 ACIT, Kota vs. Bhim Singh, Kota
third, the palace is declared exempt from payment of income-tax under Paragraph 15 (iii) of the Order, 1950 by the Central Government.
Now, the question arises that where part of the residential palace is found to be in occupation of the tenant and remaining is in occupation of the Ruler for his residence, whether in such circumstances, the Ruler is entitled to claim exemption for the whole of his residential palace under Section 10(19A) or such exemption would confine only to that portion of the palace which is in his actual occupation. In other words, whether the exemption would cease to apply to let out portion thereby subjecting the income derived from let out portion to payment of income-tax in the hands of the Ruler.
This very question was examined by the M.P. High Court in the case of Bharatchandra Banjdeo (supra) in detail. It was held that no reliance could be placed on Section 5(iii) of the Wealth Tax Act while construing Section 10(19A) for the reason that the language employed in Section 5(iii) is not identical with the language of Section 10(19A) of the I.T. Act. Their Lordships distinguished the decision of Delhi High Court rendered in the case of Mohd. Ali Khan v. CIT [1983] 140 ITR 948/12 Taxman 330, which arose under the Wealth Tax Act. It was held that even if the Ruler had let out the portion of his residential palace, yet he would continue to enjoy the exemption in respect of entire palace because it is not possible to split the exemption in two parts, i.e., the one in his occupation and the other in possession of the tenant.
Relying upon the aforesaid decision, Rajasthan High Court in the case of the appellant herein in H.H. Maharao Bhim Singhji, (supra)
13 ITA No. 261 & 262/JP/2017 CO. No. 20 & 21 /JP/2017 ACIT, Kota vs. Bhim Singh, Kota
answered the question in favour of the appellant for the assessment years (1973-74 to 1977-78).
In our considered opinion, the view taken by the Madhya Pradesh High Court in the case of Bharatchandra Banjdeo (supra) and the one taken in the case of the appellant in Maharao Bhim Singhji's case (supra) by rightly placing reliance on Bharatchandra Banjdeo's case (supra) is the correct view and we find no good ground to take any other view.
We find that in Section 10(19A) of the I.T. Act, the Legislature has used the expression "palace" for considering the grant of exemption to the Ruler whereas on the same subject, the Legislature has used different expression namely "any one building" in Section 5 (iii) of the Wealth Tax Act. We cannot ignore this distinction while interpreting Section 10(19A) which, in our view, is significant.
In our considered opinion, if the Legislature intended to spilt the Palace in part(s), alike houses for taxing the subject, it would have said so by employing appropriate language in Section 10(19A) of the I.T. Act. We, however, do not find such language employed in Section 10(19A).
As rightly pointed out by the learned senior counsel for the appellant, Section 23(2) and (3), uses the expression "house or part of a house". Such expression does not find place in Section 10(19A) of the I.T. Act. Likewise, we do not find any such expression in Section 23, specifically dealing with the cases relating to "palace". This significant departure of the words in Section 10(19A) of the I.T. Act and Section
14 ITA No. 261 & 262/JP/2017 CO. No. 20 & 21 /JP/2017 ACIT, Kota vs. Bhim Singh, Kota
23 also suggest that the Legislature did not intend to tax portion of the "palace" by splitting it in parts.
It is a settled rule of interpretation that if two Statutes dealing with the same subject use different language then it is not permissible to apply the language of one Statute to other while interpreting such Statutes. Similarly, once the assessee is able to fulfill the conditions specified in section for claiming exemption under the Act then provisions dealing with grant of exemption should be construed liberally because the exemptions are for the benefit of the assessee.
In the light of these reasonings, we are of the considered opinion that the view taken by the M.P. High Court in Bharatchandra Banjdeo's case (supra) and the Rajasthan High Court in H.H. Maharao Bhim Singhji's case (supra) is a correct view.
In the light of foregoing discussion, in our considered opinion, the reasoning and the conclusion arrived at by the High Court in the impugned order including the view taken by the Rajasthan High Court in Maharaval Lakshmansingh's case (supra) does not lay down correct principle of law whereas the view taken by the M.P. High Court in cases of Bharatchandra Bhanjdeo (supra), CIT v. Bharatchandra Bhanjdev [1989] 176 ITR 380 (MP) and H.H. Maharao Bhim Singhji (supra) lays down correct principle of law.”
In light of above, following the decision of the Hon’ble Supreme Court referred supra and the consistent view taken by the Coordinate Benches as we have noticed in AY 2010-11 and 2011-12 supra, we affirm the order and the findings of the ld CIT(A).
15 ITA No. 261 & 262/JP/2017 CO. No. 20 & 21 /JP/2017 ACIT, Kota vs. Bhim Singh, Kota
In the result, grounds no. 1, 2, 3, 5 & 6 of the Revenue’s appeal are dismissed and ground no. 4 of the Revenue’s appeal is allowed.
Regarding first ground of cross objection, the ld. AR submitted that in view of the decision of the Hon’ble Supreme Court where the entire income of the Palace has been held as exempt, cross objection is not pressed. Similarly, second ground of cross objection was not pressed. In the result, cross objection is dismissed as not pressed.
ITA No. 262/JP/2017 & CO. No. 21/JP/2017
In the appeal filed by the revenue and the cross objection filed by the assessee, both the parties submitted that the facts and circumstances of the case are identical to the facts and circumstances in ITA No. 261/JP/2017 and CO No. 20/JP/2017. Our findings and directions contained in ITA NO. 261 & CO No. 20/JP/2017 shall accordingly apply mutatis mutandis to these two appeals as well. In the result, the appeal of the revenue is partly allowed and cross objection of the assessee is dismissed.
Order pronounced in the open court on 04/10/2017
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