BIP DEVELOPERS PVT. LTD.,KOLKATA vs. DCIT, CIRCLE-2(1), KOLKATA, KOLKATA

First we take up the cross appeals for A.Y. 2006-07 being ITA No. 1214/KOL/2017 (assessee’s appeal) and ITA No. 1357/KOL/2017 (Revenue’s appeal).

The relevant facts of the case giving rise to these appeals are that the assessee is a Company, which is engaged in the business of giving the premises on rent. The return of income for A.Y. 2006-07 was filed by it on 25.11.2006 declaring a loss of Rs.52,20,446/-. The said loss was declared by the assessee partly under the head “income from house property” and partly under the head “profits and gains of business or profession”. During the course of assessment proceedings, it was found by the Assessing Officer that the only activity carried on by the assessee during the year under consideration was letting out of property owned by it and there was no other business activity whatsoever that had been carried out by the assessee-company. He, therefore, held that the entire rental income received by the assessee was chargeable to tax under the head “income from house property” and the business loss of Rs.30,34,296/- shown by the assessee by claiming the expenses under various heads was disallowed by him. He also disallowed the claim of the assessee for deduction on account of pre-construction interest amounting to Rs.27,92,431/- and determined the total income of the assessee for A.Y. 2006-07 at Rs.6,06,280/- in the assessment completed under section 143(3) vide an order dated 26.12.2008.

Against the order passed by the Assessing Officer under section 143(3), an appeal was preferred by the assessee before the ld.

The grounds raised by the assessee and Revenue in their respective appeals read as under:- ITA No. 1214/KOL/2017(Assessee’s appeal), A.Y. 2006-07 1. That, on the facts and in the circumstances of the case, the learned Commissioner of Income Tax (Appeals) erred in law in directing the Assessing Officer to assess the rental receipts of the Assessee Company as Business Income as against Income from House Property, the assessment of which has been regularly and consistently been assessed in earlier years under the head Income from House property.

We have heard the arguments of both the sides and also perused the relevant material available on record. The ld. Counsel for the assessee has submitted that even though there are several grounds raised in these appeals, the issues lying in a small compass. He has contended that the common ground of the appeals filed by the assessee and Revenue is that the rental income received by the assessee during the year under consideration is chargeable to tax under the head “income from house property” and the same is squarely covered by the decision of the Hon’ble Supreme Court in the case of Raj Dadarkar & Associates [394 ITR 592], wherein its earlier decision rendered in the case of Chennai Properties & Investments Limited (supra) was distinguished by the Hon’ble Supreme Court and it was held that where the entire income of the assessee was through letting out of the properties owned by it and there was no other income except income from let out of the said properties, which was business of the assessee, then income earned from the letting out should be taxable under the head “income from house property”. The ld. D.R. has

As regards the Grounds No. 2 to 4 raised in the assessee’s appeal for A.Y. 2006-07, the ld. Counsel for the assessee has submitted that the total expenses of Rs.1,99,05,446/- were claimed by the assessee partly under the head “income from house property” and partly under the head “profits and gains of business or profession”. He has contended that the entire rental income received by the assessee during the year under consideration having been held to be chargeable to tax under the head “income from house property”, the assessee is entitled for deduction under the said head only to the extent specified in section 24. As regards the expenses claimed under the head “profits and gains of business or profession”, he has relied on the decision of the Hon’ble Calcutta High Court in the case of CIT –vs.- Ganga Properties Limited (1992) 62 Taxman 285, wherein it was held that the expenses incurred by a Company, even when it does not carry on business, to maintain establishment for complying with statutory obligation are allowable as deduction. He has urged that the Assessing Officer may accordingly be directed to verify the expenses claimed by the assessee under various heads in the light of the decision of the Hon’ble Calcutta High Court in the case of Ganga Properties Limited (supra) and allow appropriate relief. We find merit in this contention of the ld. Counsel for the assessee and since the ld. D.R. has also not raised any objection in this regard, we direct the Assessing Officer to allow deduction to the assessee under the head “income from

As regards Ground No. 5, it is observed that the issue raised therein relating to the alternative claim of the assessee has become infructuous as a result of our decision rendered on the main issue holding that the rental income received by the assessee is chargeable to tax under the head “income from house property”. The same is accordingly dismissed.

Now we shall take up the cross appeals for A.Y. 2008-09 being ITA No. 1215/KOL/2017 (assessee’s appeal) and ITA No. 1358/KOL/2017(Revenue’s appeal).

After considering the rival submissions and perusing the relevant material available on record, it is observed that the common issue raised in Ground No. 1 of the assessee’s appeal for A.Y. 2008-09 and the solitary ground raised in the Revenue’s appeal for A.Y. 2008-09 is similar to the issue involved in Ground No. 1 of the assessee’s appeal and the solitary ground raised in Revenue’s appeal for A.Y. 2006-07, which has already been decided by us. Following our conclusion drawn in A.Y. 2006-07, we direct the Assessing Officer to assess the rental income received by the assessee during the year under consideration under the head “income from house property” and allow this ground of appeal.

As regards the issues raised in Grounds No. 2, 3 & 4 of the assessee’s appeal for A.Y. 2008-09, it is observed that the same are similar to the issues raised in Grounds No. 2 to 4 of the assessee’s appeal for A.Y. 2006-07, which have already been decided by us. Following our

In Ground No. 5 of assessee’s appeal for A.Y. 2008-09, the assessee has challenged the action of the authorities below in assessing its interest income under the head “income from other sources” instead of “profits and gains of business or profession”.

We have heard the arguments of both the sides on this issue and also perused the relevant material available on record. The ld. Counsel for the assessee has submitted that the assessee-company during the year under consideration had earned interest income of Rs.12,60,780/- on Fixed Deposits and the same was declared as its business income. In this regard, he has relied on the Memorandum and Articles of Association of the assessee-company and pointed out that to lend and advance money was one of the ancillary objects of the assessee-company. However, as rightly pointed out by the ld. D.R., the said object was incidental or ancillary to the attainment of the main object of the assessee, which was to carry on the business of real estate including to acquire and to lease the property. In this regard, the ld. Counsel for the assessee has not been able to establish as to how the investment in Fixed Deposits with Bank was made by the assessee-company for the attainment of its main object and how the interest income received on the said Fixed Deposits was incidental or attributable to the attainment of the main object so as to treat the same as its business income. We, therefore, find no infirmity in the impugned order of the ld. CIT(Appeals) treating the interest income

As regards Ground No. 6 of the assessee’s appeal for A.Y. 2008-09 relating to its claim for set off of unabsorbed brought forward losses assessed in the earlier years under the head “income from house property” with current year’s income as computed by the Assessing Officer under the head “income from house property”, we direct the Assessing Officer to verify the same and allow the claim of the assessee in accordance with law.

As regards Ground No. 7 of the assessee’s appeal for A.Y. 2008-09, it is observed that the issue raised therein is similar to the issue involved in Ground No. 5 of the assessee’s appeal for A.Y. 2006-07, which has already been decided by us. Following our conclusion drawn in A.Y. 2006- 07, we dismiss Ground No. 7 of the assessee’s appeal as infructuous.

Now we shall take up the cross appeals for A.Y. 2009-10 being ITA No. 1216/KOL/2017 (assessee’s appeal) and ITA No. 1359/KOL?2017 (Revenue’s appeal).

As regards Ground No. 1 of the assessee’s appeal as well as Ground No. 1 of Revenue’s appeal for A.Y. 2009-10, it is observed that the issue raised therein is similar to the issue involved in Ground No. 1 of the assessee’s appeal for A.Y. 2006-07, which has already been decided by us. Following our conclusion drawn in A.Y. 2006-07, Ground No. 1 of the assessee’s appeal as well as Ground No. 1 of the Revenue’s appeal are allowed.

Grounds No. 2 & 3 of the assessee’s appeal are similar to Grounds No. 2, 3 & 4 of assessee’s appeal for A.Y. 2006-07, which have already

Ground No. 4 for the A.Y. 2009-10 of assessee’s appeal is similar to Ground No. 5 for A.Y. 2008-09 (interest income). Following our conclusion drawn in A.Y. 2008-09, we dismiss Ground No. 4 of assessee’s appeal.

Ground No. 5 for the A.Y. 2009-10 of assessee’s appeal is similar to Ground No. 6 for A.Y. 2008-09. Following our conclusion drawn in A.Y. 2008-09, we direct the Assessing Officer to verify the same and allow the claim of the assessee in accordance with law.

Ground No. 6 for the A.Y. 2009-10 of assessee’s appeal is similar to Ground No. 5 for A.Y. 2006-07. Following our conclusion drawn in A.Y. 2006-07, we dismiss Ground No. 6 of the assessee’s appeal.

In Grounds No. 2 & 3 of its appeal for A.Y. 2009-10, the Revenue has raised a new issue relating to the deletion by the ld. CIT(Appeals) of the addition made by the Assessing Officer on account of rental income for 75% of the Parking Space.

In its return of income for A.Y. 2009-10, rental income of Rs.45,52,052/- received for Parking Space was declared by the assessee. The Assessing Officer found that the said rental income was in respect of only 25% of the Parking Space. He, therefore, estimated the rental income for the entire Parking Space at Rs.1,82,08,208/- and made addition to the total income of the assessee on this issue. On appeal, the ld. CIT(Appeals) found from the relevant lease agreements that the concerned tenants were entitled for 75% of the Car Parking Space for no extra cost and they were liable to pay the rent for Car Parking Space only for the balance 25% area. The assessee also filed letters from the concerned tenants

We have heard the arguments of both the sides on this issue and also perused the relevant material available on record. It is observed that the addition made by the Assessing Officer on estimated basis for 75% of the Parking Space was deleted by the ld. CIT(Appeals) after having found from the relevant lease agreements that the concerned tenants were actually entitled for 75% of the Parking Space for no extra cost. He also found that this position was further corroborated by the confirmation letters filed by the assessee of the concerned tenants. At the time of hearing before us, the ld. D.R. has not been able to bring anything on record to rebut or controvert this findings recorded by the ld. CIT(Appeals) in his impugned order on the basis of relevant documentary evidence while giving relief to the assessee. We, therefore, find no justifiable reason to interfere with the impugned order of the ld. CIT(Appeals) on this issue and upholding the same, we dismiss Grounds No. 2 & 3 of the Revenue’s appeal for A.Y. 2009-10.

In the result, all the appeals of the assessee as well as Revenue are partly allowed as indicated above.