ITO WARD 1, TIRUNELVELI vs. ARYAMAN, TIRUNELVELI

the Order of Commissioner of Income Tax (Appeals)-3, Madurai, in dated 17.04.2017 for the AY 2011-12 & ITA No.1735/Chny/2017 is an appeal filed by the Revenue against the Order of Commissioner of Income Tax (Appeals)-3, Madurai, in ITA No.218/2016-17 dated 17.04.2017 for the AY 2012-13. CO No.129/Mds/2017 is a Cross-Objection filed by the assessee in ITA No.1734/Chny/2017 for the AY 2011-12 & CO No.130/Mds/2017 is a Cross-Objection filed by the assessee in AY 2012-13.

Shri S.Nataraja, JCIT, represented on behalf of the Revenue and Shri Y.Sridhar, CA, represented on behalf of the assessee.

As all the appeals are related to the same assessee and inter- connected, all appeals are disposed off by this common order.

It was submitted by the Ld.DR that there was a survey on the premises of the assessee on 18.02.2013. In the course of the survey, certain statements were recorded wherein declarations were given in respect of the cost of construction of the assessee’s hotel. When filing the return, the assessee had disclosed only Rs.15,542/- as his total income by & 1735/Chny/2017 CO Nos.129 & 130/Chny/2017 :- 3 -: applying provisions of Sec.44AD of the Act. Consequently, the AO has completed the assessment on an income of Rs.39,28,320/- by holding that the assessee is not maintained its books of accounts and the assessee had disclosed income under the head business, whereas, the income of the assessee was liable to be assessed only under the head income from house property. It was a submission that in the course of the survey, a notebook containing a slip in the name of “Aryaman 22.06.2010 to 30.04.2011 – Rs.62,34,615/-“, was found. The AO from the said notebook determined the total collections for the relevant AY 2011-12 at Rs.56,11,881/- and for the AY 2012-13 at Rs.56,11,153/- and brought the same to tax under the head income from house property. It was a submission that on appeal, the Ld.CIT(A) had deleted the addition and held that the assessee is a Partnership Firm which is doing business of service apartments and consequently, the total receipts was less than Rs.60.00 lakhs, the assessee was entitled to the benefit of Sec.44AD. It was a submission that the order of the Ld.CIT(A) was liable to be reversed.

In reply, the Ld.AR vehemently supported the order of the Ld.CIT(A). It was a submission that the business premises of the assessee where the service apartments were being operated under the name ‘Aryaman‘ was a leased premises and consequently, the income generated from there, could not be considered as income under the head house property in so far as the assessee was not the owner of the & 1735/Chny/2017 CO Nos.129 & 130/Chny/2017 :- 4 -: property, who was entitled to receive the income from the property on his own right. It was a submission that the turnover of the assessee being less than Rs.60.00 lakhs, the assessee was entitled to the benefit of Sec.44AD of the Act.

We have considered the rival submissions.

A perusal of the Assessment Order for the AY 2011-12 in Page No.2 clearly shows that the premises, is a rental premises and the rental agreement has been executed on 02.11.2010. Once, the fact that the premises of the assessee is accepted as a rented premises, then the income generated by the assessee by exploitation of the said leased premises, would have to be considered as income under the head business. This is, because, as per the provisions of Sec.22 of IT Act, the words used are ‘of which the assessee is the owner’. The assessee admittedly, is not the owner of the premises and is only lessor of the premises. Further, once the assessee’s income from the operation of the service apartments from the leased premises, is accepted to be assessed under the head business, then the next question is as to whether the assessee’s total turnover exceeds Rs.60.00 lakhs or not. In the present case, as per the total income determined by the AO on the basis of the evidences found in the course of the survey, clearly shows that the total income is less than Rs.60.00 lakhs. Once, the turnover is below Rs.60.00 lakhs, then the provisions of Sec.44AD is very much applicable to the & 1735/Chny/2017 CO Nos.129 & 130/Chny/2017 :- 5 -: assessee in so far as the Presumptive Taxation which is brought into the Statute Book w.e.f. AY 2011-12 by the Finance Act, 2009 clearly permits the Scheme to be applicable to Partnership Firms excluding Limited Liability Partnership Firm and the scheme also exempts, the assessee opting for the Presumptive Taxation Scheme from maintenance of the books of accounts as required u/s.44AA of the Act. This admittedly, has also been specifically recorded by the AO in Page No.3 of his Assessment

At the time of hearing, the Ld.AR did not wish to press the Cross- Objections filed by the assessee in & 1735/Chny/2017, ITA Nos.1734 & 1735/Chny/2017 CO Nos.129 & 130/Chny/2017 :- 6 -: consequently, the Cross-Objections filed by the assessee are dismissed as not pressed.

In the result, the appeals filed by the Revenue in & 1735/Chny/2017 are dismissed and the Cross-Objections filed by the assessee in CO Nos.129 & 130/Chny/2017 are dismissed