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Income Tax Appellate Tribunal, DELHI BENCH “D”: NEW DELHI
Before: SHRI H.S.SIDHU & SHRI PRASHANT MAHARISHI
O R D E R PER PRASHANT MAHARISHI, A. M. 1. This appeal is filed by the assessee against the order of the Ld. CIT (appeals) –XXVI, New Delhi dated 09/09/2013 for assessment year 2007 – 08 raising following grounds of appeal:- “1. That the authorities below erred in treating it as income of the assessee the amount of Rs.8,44,361 received by the assessee as part of its gross licence fee in respect of the shop F-16, Connaught Place, New Delhi which John Bros, had agreed to licence through the assessee for exclusive use of Bistro Hospitality Ltd.
2. That the authorities below erred in not holding that as John Bros, had agreed to give portion of the premises in its possessions on licence for the use of occupation of Bistro Hospitality Ltd., the licence fee relating thereto even though received by the assessee could not the assessed as its income even u/s 22 of the I.T. Act as it was beyond scope of section 5 of the I.T. Act.
3. That the authorities below erred in not holding that the Department having accepted in the earlier assessment years the fact that the assessee received licence fee and other amounts on behalf of John Bros, while computing the said amount as "Business Income" could not take a contrary view and assess it as assessee's income merely because the head of computation was changed to "Income from House Property".
(Assessment Year: 2007-08) Kripa Ram Bros. HUF, Vs, ACIT,
Without prejudice to the above, and in the alternate, that the authorities below erred in not holding that the sub-licence fee paid by the assessee to John Bros, in respect of portion of the area in premises F-16 Connaught Place, New Delhi, was related to asset of business of the asssessee and was otherwise entitled to set-off as business loss in computing the assessable income of the relevant prvious year.
That the order of the learned authorities below being contrary to the facts and circumstances of the case and in law the appeal be allowed.”
The brief facts of the case are that assessee is earning income under various heads during the year, such as, profits and gains from business and income from other sources. The main crux in the appeal is that assessee is showing rental income earned from the property is as business income, whereas the Ld. assessing officer was of the consistent view that such income is chargeable to tax under the head income from house property.
Assessee filed, in the status of Hindu undivided family, return of income on 31/10/ 2007 showing income of Rs. 4018148/–. The original assessment in this case was completed under section 143 (3) of the income tax act on 21/10/ 2009 on total income of Rs. 5352443/–. The original assessment proceedings were challenged by the assessee up to the level of the tribunal, who set aside the issue back to the file of the Ld. assessing officer on the issue of whether the rental income earned by the assessee with respect to the parties situated at Connaught Place, New Delhi subleased to M/s Bristo hospitality private limited is chargeable to tax under the head income from house property or business income. Therefore, pursuant to the order of the coordinate bench The Ld. assessing officer framed the assessment under section 143 (3) section 254 of the income tax act on 13/10/2011 holding that income derived by the assessee from the above property is chargeable to tax as income from house property. Therefore gross receipt of rent of Rs. 7631201/– was considered as rental income and from that deduction with respect to the property tax of Rs. 1105370/– was granted to derive at the net annual letting value of Rs. 6525831/–. From the above sum deduction under section 24 (a) at the rate of 30% was granted amounting to Rs. 1957749/– resulting into the taxable income from house property of Rs. 4568081/–. Consequently, the Ld. assessing officer disallowed all other expenses claimed by the assessee under the head income from business and a resultant loss was disallowed due to the above change in the head of the income. In nutshell the income offered by the assessee from rental income as business income was considered by the Ld. assessing officer as income from house property.
(Assessment Year: 2007-08) Kripa Ram Bros. HUF, Vs, ACIT,
4. The assessee aggrieved with the order of the Ld. assessing officer preferred an appeal before the Ld. CIT (A). The Ld. CIT (A) held that assessee has supplied the entire property admeasuring 385 7 ft.² to one party in terms of separate agreement. The Ld. CIT A was also of the view that finding of the coordinate bench that income from this house property has to be assessed in the hands of the appellant under section 22, has become final as same has not been challenged before the Hon’ble Delhi High Court by the appellant or the AO. Therefore he upheld the action of the assessing officer of charging the above rental income under the head income from house property. However, with respect to the chargeability of Rs. 844361/- under the head income from other sources, he granted certain relief to the assessee. The assessee aggrieved with the order of the Ld. CIT (A) has preferred an appeal before us. The Ld. authorised representative submitted that the order of the coordinate bench in the 1st 5. ground of appeal
was that whole issue was set aside to the file of the Ld. assessing officer with a direction to grant an opportunity of hearing to the assessee. The coordinate bench has not held that the rental income of the assessee was chargeable to tax as income from house property and not as business income. He therefore submitted that the Ld. lower authorities have erred in holding that the coordinate bench has already decided this issue. He referred to the page No. 2 of the assessment order wherein it has been mentioned that the whole issue has been set aside to the file of the Ld. assessing officer.
6. During the course of hearing an application under rule 11 of the income tax (Appellate Tribunal) Rules, 1963 was made raising an additional ground of appeal as under:- “that the authorities erred in not holding that the only business of the assessee being to on by Lease of its tenanted property, the income so-called should be treated as its business income.”
It was contended that after the decision of the Hon’ble Supreme Court in case of Rayala Corporation private limited versus assistant Commissioner of income tax (2016) 72 Taxmann.com 149 (SC) The issue has become crystal clear that the income is chargeable to tax as income from business only. He submitted that the above issue is legal in nature and goes to the root of the matter without further requirement of any facts and therefore the same may be admitted.
The Ld. departmental representative vehemently objected to the application of admission of the additional ground of appeal by the assessee. He submitted that the issue is not covered 3 | P a g e (Assessment Year: 2007-08) Kripa Ram Bros. HUF, Vs, ACIT, by the decision of the Hon’ble Supreme Court in the case of the assessee. On the issue of taxability of the above sum under the head income from house property income, he submitted that the issue has now been concluded by the order of the coordinate bench.
9. We have carefully considered the rival contentions and also perused the orders of the lower authorities. Whether the issue of chargeability of the above sum under the head business income or income from other sources is concluded or open is required to be tested on the basis of the decision of the coordinate bench in the 1st round of appellate proceedings. This is so because the lower authorities have proceeded on the adjunction that coordinate bench has already decided this issue against the assessee. The Ld. assessing officer has reproduced para No. 8 of the order of the coordinate bench which is as under:- “8. Assessee’s rental receipts is income from house property and instead of assessing accordingly, as provided by the law, it has been assessed as business income. We may reiterate that it is the duty of the ITAT to ensure that a proper and fair assessment is made on the income. We are of the view that the AO and the CIT (A) both have not considered the appropriate legal position in this behalf. Since assessee has not been heard in respect of treatment of so-called license fee/rental income as income from house property, the assessment is set aside restored back to the file of the AO to decide the same afresh in accordance with law after giving the assessee an opportunity of being heard. The issue of expenses in question will be considered in the light of the same.”
10. On reading of the above paragraph, it is clear that coordinate bench has set aside the whole issue back to the file of the Ld. assessing officer to decide it afresh. Therefore, the both the lower authorities erred in holding that the issue of chargeability of the above sum under the head of income from house property has attained finality. Furthermore, it is submitted before us that in all the earlier years as well as in the subsequent years assessee has offered the above income under the head income from business and same has been accepted by the revenue or the returns of the income have not been disturbed. Therefore, the assessee has also claimed on the basis of the consistency that the income of the assessee should be assessed under the head of business income Only. Further, the assessee has also produced the copy of the assessment order under section 143(3) for assessment year 2003-04, where the assessee was assessed under the head business income for the same income. Therefore, in the present case the issue whether the rental income earned by the assessee is a business income or income from house property has not been decided by the lower authority. The Ld. authorised representative has also placed before us decision of the Hon’ble Supreme Court in case of Rayala Corporation private limited versus assistant Commissioner of