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Income Tax Appellate Tribunal, “G” BENCH, MUMBAI
ITA No. 1515, 7924, 7925 & 7926/Mum/2 /Mum/2013 order dated 04-12-2009, 30-07-2010, 11-12-2008, 02-08-2010 & 30-11-2011 u/s 143(3) read with section 147 of the Income Tax Act, 1961 (hereinafter ‘the Act’).
The first common issue in these three appeals in and 7925/Mum/2010 for the A.Ys. 2004-05, 2005-06, 2007- 08 is as regards to the issue of reopening under section 147 / 148 of the Act.
At the outset, the learned Counsel for the assessee stated that in assessment years 2004-05 and 2007-08, the assessee has not raised this issue before the AO or before CIT (A). The learned Counsel for the assessee stated that the additional ground is raised regarding assessing the leave and license receipts under the head profit and gains of business specially, in view of the recent decision of the Hon'ble Supreme Court in the case of Chennai Properties and Investment P Ltd. v. CIT, (2015) 373 ITR 673 (SC). The learned Counsel for the assessee stated that in assessment year 2004-05 this ground was taken before CIT(A), but was not pressed. In such circumstances, the leaned Counsel for the assessee stated this being a legal issue, the same should be admitted and adjudicated in term of the decision of the Hon’ble Supreme Court in the case of National Thermal Power Co. Ltd. v. CIT [1998] 229 ITR 383 (SC).
We have gone through the above additional ground regarding reopening of assessment and notice that this is raised in view of the decision of the Hon’ble Supreme Court in the case of Chennai Properties and Investment Ltd. (supra), and these facts are not coming out of the order of CIT(A) or the AO because the assessee has not objected the same before the AO. In term of the above, a query was put to the learned Sr. DR, he fairly conceded that the issue can be remitted back to the file of the AO for adjudication of these additional ground raised qua this jurisdictional issue of reopening. In term of the above, we set aside this issue to the file of the AO for fresh adjudication in all these three years. Accordingly, this issue of these three appeals of assessee is allowed for statistical purpose.
The next common issue in these six appeals is as regards to the assessment of income derived by assessee from leave and license fee and declared under the head of profit and gains of business but assessed by the AO as income from house property. Page 2 of 4
ITA No. 1515, 7924, 7925 & 7926/Mum/2 /Mum/2013 The learned Counsel for the assessee argued that now Hon’ble Supreme Court has laid down certain principles that whether the Memorandum of Article and Association of Article authorized the company to rent out the property, and the income is to be declared as business, needs verification in term of the Hon’ble Supreme Court in the case of Chennai Properties and Investment Ltd.(supra). When this matter was put to the learned Sr. DR he fairly conceded the position and requested the Bench to restore the matter back to the file of the AO. After hearing both the sides and going through the facts of the case, we ae of the view that let the AO verify the issue and will decide the issue in term of the decision of the Hon’ble Supreme Court in the case of Chennai Properties and Investment Ltd. (supra), after verifying the facts of the present case including the Memorandum of Association and Article of Association of the assessee’s company. As regards the consequential disallowance of expenses of renovation and brokerage, corporate expenses and expenses incurred for letting out of premises, these all are consequential to first ground whether the income is to be assessed under the head of income from house property or it is to be assessed under the head profits and gains of business. Let the first issue be decided by the AO and the consequences will be following from these grounds. Accordingly, these issues of disallowance of expenses raised by various grounds are also set aside to the file of the AO.
The next common issue in these six appeals is as regards to the disallowance of expenses under section 14A of the Act. The learned Counsel for the assessee stated that in all these years, the AO has invoked the provisions of section 14A read with Rule 8D of the Act and in all these years i.e. AYs 2004-05 to 2007-08 the provision of Rule 8D will not apply and only disallowance can be made, if there is a direct nexus between expenditure and the income earned which is claimed to be exempt. According to the learned Counsel, there is no finding by the AO in these AYs and hence, additions should not be sustained.
The learned Sr. DR conceded the position and argued that let’s this issue also be set aside to the file of the AO because issue regarding jurisdiction is going back to the file of the AO for a fresh adjudication, hence, this issue also can go back to the Page 3 of 4
ITA No. 1515, 7924, 7925 & 7926/Mum/2 /Mum/2013 file of these assessment years. After hearing both the sides and going through the facts of the case, we restore back this issue in all these six years to the file of the AO for fresh adjudication and this issue of assessee’s appeal is allowed for statistical purposes.
In the result, these six appeals of assessee are partly allowed for statistical purposes.
Order pronounced in the open court on 25-01-2017.