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Facts
The assessee, M/s. Eepees Developers Pvt. Ltd., owned a building where a hospital was run. After stopping the hospital business, the building was leased, generating a license fee. The assessee treated this as 'business income', claiming expenses, depreciation, and set-off of losses, but the AO classified it as 'income from house property'. The assessee challenged this before the Ld. CIT(A), whose appeal was dismissed solely due to a 122-day delay, despite the assessee citing the auditor's mother's illness and death.
Held
The Tribunal found that there was sufficient cause for the 122-day delay in filing the appeal before the Ld. CIT(A), attributing it to the auditor's personal inconvenience. Therefore, the Tribunal condoned the delay, set aside the Ld. CIT(A)'s order, and directed the Ld. CIT(A) to decide the substantive issue (classification of income) on merits and in accordance with the law after hearing the assessee.
Key Issues
Whether the Ld. CIT(A) was justified in not condoning the 122-day delay in filing the appeal. Also, whether the license fee received by the assessee should be assessed as 'business income' or 'income from house property' for tax purposes.
Sections Cited
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Income Tax Appellate Tribunal, COCHIN BENCH : COCHIN
Before: SHRI INTURI RAMA RAO & SHRI SOUNDARARAJAN K.
ORDER PER SOUNDARARAJAN K., JUDICIAL MEMBER
This is an appeal filed by the assessee challenging the order of the NFAC, Delhi dated 14/06/2023 in respect of the A.Y. 2013-14 and raised several grounds.
The assessee is a private limited company and owned a building in which a hospital in the name of M/s. Sridhar Hospital Pvt. Ltd. was run by them. Thereafter, from 31/03/2017, the assessee had stopped the business of the hospital and the building was given on rent to M/s. Ahalya International Foundation after a lease agreement was entered between the assessee and the M/s. Ahalya International Foundation. As per the agreement, M/s. Ahalya International Foundation was permitted to use the building and the other amenities for which a monthly license fee was fixed. Similarly, another agreement was executed for the amenities. A security deposit of Rs. 20 Lakhs was also paid by the licensee to the licensor. The assessee while filing their return of income had declared the license fee received from the licensee under the head business income and claimed all the expenses and depreciation. The assessee has also brought forward the losses of the earlier years and the unabsorbed depreciation and set off the same with the current year’s income. The AO treated the said license fee under the head income from house property and denied the other deductions except the 30% towards repair and maintenance as per the provisions of the Act. The assessee challenged the said order before the Ld.CIT(A) and contended that the license fee received by the assessee is nothing but business income and therefore entitled for the set off of loss and depreciation since the property was acquired and used for commercial purposes and therefore the same is a business activity carried on by the assessee.
The assessee filed the appeal with a delay of 122 days and explained the reasons for the said delay. The assessee submitted that the mother of the auditor who has looked into their tax matters was ill and died on 03/05/2016 and therefore the auditor has some personal inconvenience to prepare the appeal in time. The Ld.CIT(A) had not accepted the reasons stated by the assessee for condoning the said delay and dismissed the appeal on the ground that the same was not filed in time and no sufficient reasons were furnished by the assessee. As against the said order, the assessee is in appeal before this Tribunal.
At the time of hearing, the Ld.AR submitted that the issue to be decided on merits is that whether the assessee is entitled to claim the license fee as business income and if so whether they are entitled for set off of losses and the depreciation. The AO had disputed the said facts and termed the income as income from house property. Therefore the said issue has to be decided on merits and also based on the documents furnished by the assessee but unfortunately the Ld.CIT(A) had dismissed the appeal on the ground of limitation.
We have also perused the reasons stated by the assessee and the fact narrated in the petition was not disputed by the authorities but the Ld.CIT(A) had observed that it is not a sufficient cause for condoning the delay of 122 days. We feel that the assessee had explained the delay and we feel that there is a sufficient cause for not preferring the appeal in time and for the mistake of the auditor, the assessee should not be penalised. In fact this view was upheld by the Hon’ble High Courts in a number of judgments.
We therefore set aside the order of the Ld.CIT(A) by condoning the said delay of 122 days in filing the appeal before him and direct the Ld.CIT(A) to decide the issue on merits and in accordance with law after hearing the assessee.
In the result, the appeal filed by the assessee is allowed for statistical purposes.
Order pronounced in the open court on 03rd February, 2025.
Sd/- Sd/- (INTURI RAMA RAO) (SOUNDARARAJAN K.) Accountant Member Judicial Member Bangalore, Dated, the 03rd February, 2025. /MS /