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Income Tax Appellate Tribunal, ‘C’ BENCH: CHENNAI
Before: SHRI GEORGE MATHAN & SHRI INTURI RAMA RAO
आदेश / O R D E R
PER GEORGE MATHAN, JUDICIAL MEMBER:
These are two appeals filed by the assessee against the Orders of the Commissioner of Income Tax (Appeals)-1, Chennai, in dated 30.11.2017 for the AY 2013-14 and in ITA No.298/CIT(A)-1/2016-17 dated 30.11.2017 for the AY 2014-15. & 58/Chny/2018 :- 2 -:
Mr. R.Clement Ramesh Kumar, Addl.CIT, represented on behalf of the Revenue and Mr. S.Sridhar, Adv., represented on behalf of the assessee.
In the assessee’s appeal, the assessee has raised the following grounds:
For the AY 2013-14:
1. The order of The Commissioner of Income Tax (Appeals)-1, Chennai, dated 30.11.2017 in I.T.A.No.4/CIT(A)-1/2016-17 for the above mentioned Assessment Year is contrary to law, facts, and in the circumstances of the case.
2. The CIT (Appeals) erred in sustaining the disallowance of expenses incurred proportionately to the extent of Rs.65,29,416/- for getting the leasehold rights which led to the earning of the rental income in the computation of income house property at para 5 without assigning proper reasons and justification.
3. The CIT (Appeals) erred in sustaining the allocation of the expenses for earning rental income and for earning amenity charges in proportion to the turnover/income earned there from (75:25) which resulted in enhancement of the income earned from amenities for taxation under the head 'income from business' without assigning proper reasons and justification.
4. The CIT (Appeals) failed to appreciate that the rejection of the claim for expenses based on the facts available on record which according to the Appellant could not be allocated to the earning of the rental income was wholly unjustified, vitiating the allocation attempted/applied in para 13 of the impugned order.
5. The CIT (Appeals) failed to appreciate that having accepted the assessment of amenity income under the head 'income from business' and further having not disputed the incurring of expenses for earning such income, the sustenance of allocation of expenses artificially was wholly unjustified and erroneous.
6. The CIT (Appeals) failed to appreciate that having rejected the claim for expenses incurred proportionately in para 5 of the impugned order for creating the right in the lease in the computation of income from house property, the denial of deduction of such expenses either fully or proportionately in computing the amenity income under the head 'income from business' in para 13(3) of the impugned order was wrong, erroneous, unjustified, incorrect and not sustainable in law.
7. The CIT (Appeals) failed to appreciate that there was no proper opportunity given before passing of the impugned order and any order passed in violation of the principles natural justice would be nullity in law.
8. The Appellant craves leave to file additional grounds/arguments at the time of hearing.
For the AY 2014-15:
The order of The Commissioner of Income Tax (Appeals)-1, Chennai dated 30.11.2017 in I.TA.No.298/ClT(A)-1/2016-17 for the above mentioned Assessment Year is contrary to law, facts, and in the circumstances of the case.
& 58/Chny/2018 :- 3 -:
2. The CIT (Appeals) erred in sustaining the disallowance of expenses incurred proportionately to the extent of Rs,19,22,400/- for getting the leasehold rights which led to the earning of the rental income in the computation of income house property at para 5 without assigning proper reasons and justification.
3. The CIT (Appeals) erred in sustaining the allocation of the expenses for earning rental income and for earning amenity charges in proportion to the turnover/income earned there from (63:37) which resulted in enhancement of the income earned from amenities for taxation under the head 'income from business' without assigning proper reasons and justification.
4. The CIT (Appeals) failed to appreciate that the rejection of the claim for expenses based on the facts available on record which according to the Appellant could not be allocated to the earning of the rental income was wholly unjustified, vitiating the allocation attempted/applied in para 13 of the impugned order.
The CIT (Appeals) failed to appreciate that having accepted the assessment of amenity income under the head 'income from business' and further having not disputed the incurring of expenses for earning such income, the sustenance of allocation of expenses artificially was wholly unjustified and erroneous.
6. The CIT (Appeals) failed to appreciate that having rejected the claim for expenses incurred proportionately in para 5 of the impugned order for creating the right in the lease in the computation of income from house property, the denial of deduction of such expenses either fully or proportionately in computing the amenity income under the head 'income from business in para 13(3) of the impugned order was wrong, erroneous, unjustified, incorrect and not sustainable in law. ,
7. The CIT (Appeals) failed to appreciate that there was no proper opportunity given before passing of the impugned order and any order passed in violation of the principles natural justice would be nullity in law.
8. The Appellant craves leave to file additional grounds/arguments at the time of hearing.
It was submitted by the Ld.AR that the assessee is a company which is in the business of property development and real estate. It was a submission that the assessee had derived rental income from letting out of the premises. It was a submission that the assessee had also received amenity charges in respect of the property let out. It was a submission that the rental income had been offered under the head “income from house property” and the amenity charges had been offered under the head “income from business”. It was a submission that the AO had treated the income received by the assessee from amenity charges which had been offered under the head “income from business” as liable to be & 58/Chny/2018 :- 4 -:
assessed under the head “income from house property”. It was a submission that on appeal, the Ld.CIT(A) had deleted the addition by following the decision of the co-ordinate Bench of this Tribunal in the assessee’s own case for the AYs 2006-07, 2007-08, 2008-09 & 2009-10 and had held that the amenity income to be assessed under the head “income from business” and not from house property. However, the Ld.CIT(A) had upheld the stand of the AO that the expenses incurred was liable to be apportioned between the “income from house property” and the “income from business” and only the proportion of the expenditure under the head “income from business” is liable to be allowed. It was a submission that the issue is squarely covered by the decision of the co- ordinate Bench of this Tribunal in the case of M/s.A.R. Foundations Pvt. Ltd., for the AY 2014-15, sister concern of the assessee, wherein in Para No.5, it has been held as follows:
“……5. We have considered the rival submissions. Admittedly, the assessee is a company. The business of the assessee-company is real estate and development. The business of the assessee being putting up of buildings, selling them, or leasing them out, as the business requires. The income from such business is assessed under the specified five heads of income under the Income Tax Act, 1961. Just because the income earned by the assessee from its business of leasing out of buildings is assessed under the head “Income from House Property”, it would not mean that the business expenses of the assessee-company would not be allowable. The statutory expenditure incurred by the assessee for maintenance of status as a company, admittedly is expenditure, which is liable to be allowed. Thus, the employee’s benefit expenses under schedule-19, is admittedly allowable expenditure and cannot be apportioned. In respect of Schedule-20, being Finance Cost, the same being in respect of the interest paid to the Bank and also the banking charges, being for the business of the assessee is an allowable expenditure. Coming to other expenses, the assessee itself in its computation of total income has claimed the rates and taxes in respect of the property, when computing the income from the house property. The computation of total income clearly shows that the assessee has not claimed depreciation in respect of the leased out property. The income derived from letting out activity has been offered and assessed under the head “Income from House Property” by the assessee. This being so, perusal of the statement of total income as filed by the assessee along with the return, clearly shows that it is only the expenditure in relation to the earning of the income from the amenities and the statutory expenditure in relation to the assessee-company, which are being claimed by the assessee. The Revenue has not been able to point out any of the expenses, which have been claimed by the assessee against the income from the amenities, which is liable to be apportioned. The apportionment done by the Assessing Officer is also not specific. This being so, we are of the view that the apportionment of the & 58/Chny/2018 :- 5 -: expenditure as done by the ld. Assessing Officer is unsustainable and consequently, we delete the same”.
5. In reply, the Ld.DR vehemently supported the order of the AO and the Ld.CIT(A).
We have considered the rival submissions.
As it is noticed that the issue is now squarely covered by the decision of the co-ordinate Bench of this Tribunal in the case of M/s.A.R.
Foundations Pvt. Ltd., which has been extracted above, respectfully following the decision of the co-ordinate Bench of this Tribunal in the case of M/s.A.R. Foundations Pvt. Ltd., referred to supra, is held that the apportionment of the expenditure as done by the AO and as upheld by the Ld.CIT(A) is unsustainable and consequently, the same stands deleted.
In the result, the appeal filed by the assessee is allowed.
Order pronounced on the 25th day of July, 2019 in Chennai.