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Income Tax Appellate Tribunal, BANGALORE BENCH “ A ”
Before: SHRI VIJAYPAL RAO & SHRI JASON P. BOAZ
Appellant By : Shri C. Ramesh, C.A. Respondent By : Shri G. Ramesha, JCIT (D.R) Date of Hearing : 8.9.2015. Date of Pronouncement : 7.10.2015. O R D E R Per Shri Jason P. Boaz, A.M. : This appeal by the assessee is directed against the order of the Commissioner of Income Tax (Appeals)-III, Bangalore dt.14.2.2014 for Assessment Year 2006-07.
The facts of the case, briefly, are as under :- 2.1 The assessee, a company engaged in the construction and provision of infrastructure for I.T. Parks, hotels, commercial complexes and to provide facilities and amenities for these properties, filed its return for Assessment Year 2006-07 on 13.11.2006 declaring Rs.4,77,82,518. The return was processed under Section 143(1) of the Income Tax Act, 1961 (in short 'the Act') and the case was subsequently taken up for scrutiny. The assessment was completed under Section 143(3) of the Act vide order dt.22.12.2008; wherein the income received from letting out of building/property shown as ‘business income’ was treated and held to be ‘income from house property’ by the Assessing Officer, following the same finding in the order of assessment for Assessment Year 2004-05. 3.1 On appeal for the earlier Assessment Years 2004-05 and 2005-06, the learned CIT (Appeals) – VI, Bangalore disposed off the assessee's appeal by way of a common order dt.2.9.2008, wherein it was held that the gross revenue of the assessee is to be bifurcated on the basis of the quantum of investment on infrastructure and building and was accordingly to be assessed under the heads ‘business income’ and ‘income from house property’ respectively. In this order, the learned CIT (Appeals) fixed the following percentages of the gross revenue to be assessed under the head ‘business’ and ‘house property’. S.No. Asst. Year Revenue to be considered Revenue to be considered under Head ‘Business Income’ under Head ‘Income form House Property’. 1. 2004-05 60% 40% 2. 2005-06 75% 25% 3.2 Aggrieved by the orders of the CIT (Appeals) – VI, Bangalore for Assessment Years 2004-05, 2005-06 dt.2.9.2008, both the assessee and revenue went in appeal Tribunal. The co-ordinate bench of this Tribunal vide its orders in & 1345(Bang)/2008 and ITA Nos.1411 & 1412/Bang/2008 dt.23.6.2009 upheld the orders of the learned CIT (Appeals) and dismissed both the assessee's and revenue’s appeals. 3.3 Both Revenue and the assessee went in further appeal before the Hon'ble High Court of Karnataka. The Hon'ble High Court by way of its order in CIT & Another V Mysore International Hotels (P) Ltd. (2010) 322 ITR 116 (Kar) dismissed Revenue’s appeal for Assessment Year 2004-05 at the admission stage itself. The assessee's appeal for Assessment Year 2004-05 was disposed off by the Hon'ble High Court vide order in ITA No.727 of 2009 dt.15.11.2014 as under :- “ ORDER i) Appeal is allowed. ii) Impugned orders passed by the appellate authorities are hereby set aside. The rental income shall be treated as income from the business i.e. profits and gains from the business under Section 28 of the Income Tax Act.” 4.1 For Assessment Year 2006-07 also, the assessee being aggrieved by the order of assessment dt.22.12.2008, preferred an appeal before the CIT (Appeals) – III, Bangalore. The learned CIT (Appeals), following the orders of the co-ordinate bench of this Tribunal for Assessment Year 2004-05 and 2005-06 in ITA Nos.1344 & 1345(Bang)/2008 and ITA Nos.1411 & 1412/Bang/2008 dt.23.6.2009, allowed partial relief to the assessee; holding 75% of the revenue for Assessment Year 2006-07 is to be assessed under the head ‘Business Income’ and remaining 25% was to be assessed under the head ‘Income from House Property.’ 5. Aggrieved by the order of the CIT (Appeals) – III, Bangalore for Assessment Year 2006-07 dt.14.2.2014, the assessee has preferred this appeal raising the following grounds :- “
1. The order of the learned CIT (Appeals) is opposed for the facts of the case and law applicable to the case.
2. The learned CIT (Appeals) erred in holding that the gross receipt accounted for by the appellant under the head business represents partly towards the building, assessable under the head ‘House Property’, and the balance under the head business.
3. The learned CIT (Appeals) erred in directing that the income be computed on the same lines as directed by Hon'ble Tribunal in its order in & 1345/Bang/2008 dt.23.6.2009 for the A.Ys 2004-05 & 2005-06.
4. The learned CIT (Appeals) has failed to notice tht on giving effect to the directions there would be enhancement in the total income vis-à-vis the income assessed and under the circumstances as provided under the provisions of section 251(2) of the Act, the Hon'ble CIT (Appeals) should have provided an opportunity of hearing before directing such enhancement and in the absence of such opportunity the order is bad in law.
5. The order of the CIT (Appeals) is in contravention of the provisions of section 251(2) of the Act.
6. The learned CIT (Appeals) erred in not giving any directions on the disallowance of maintenance cost ofRs.31,79,432 though the issue was raised by a specific ground of appeal.
7. The learned CIT (Appeals) erred in not giving any directions on the disallowance of maintenance cost of Rs.31,79,432 though the issue was raised by a specific ground of appeal.
8. The learned CIT (Appeals) erred in not giving any directions on the disallowance of processing charges ofRs.5,51,000 and bank charges ofRs.23,990 though the issues were raised by a specific ground of appeal.
The appellant craves permission to add, delete or alter any of the grounds at the time of hearing.” 6.1 The sole issue raised in the grounds of appeal at S.Nos.1 to 3 by the assessee is that the gross receipts/revenues received from renting out the buildings ought to be assessed under the head ‘business income’ and not as partly under the head ‘business income and partly under the head ‘income from house property’ as held by the learned CIT (Appeals) and the decision of the co-ordinate bench of the Tribunal in & 1345(Bang)/2008 and ITA Nos.1411 & 1412/Bang/2008 dt.23.6.2009. Before us, the learned Authorised Representative for the assessee submitted that the issue is now covered in favour of the assessee by the decision of the Hon'ble High Court of Karnataka in the assessee's own case for Assessment Year 2004-05 in ITA No.727/2009 dt.25.11.2014 allowing the assessee's appeal and holding that the rental income shall be treated as income from ‘profits and gains of business’. In view of this, it is prayed that the assessee's appeal be allowed on merits. 6.2 We have heard both the learned Authorised Representative for the assessee and the learned Departmental Representative for Revenue. We find that as submitted by the learned Authorised Representative for the assessee, the Hon'ble High Court of Karnataka vide its order in ITA No.727 of 2009 dt.25.11.2014 in the assessee's own case for Assessment Year 2004-05, on this very issue, has allowed the assessee's appeal holding as under :-
ORDER i) Appeal is allowed. ii) Impugned orders passed by the appellate authorities are hereby set aside. The rental income shall be treated as income from the business i.e. profits and gains from the business under Section 28 of the Income Tax Act.” Respectfully following the aforesaid decision of the Hon'ble High Court of Karnataka in of 2009 dt.25.11.2014 in the assessee's own case for Assessment Year 2004-05, we hold and direct the Assessing Officer to treat the rental income of the assessee from building/infrastructure as ‘Income from Business’ and assess the same accordingly. Consequently, the assessee's grounds of appeal at S.Nos. 1 to 3 are allowed. 6.3 Consequent to our finding in respect of ground at S.Nos. 1 to 3 at para 6.2 of this order, allowing the assessee's appeal, the other grounds raised by the assessee at S.Nos. 4to 9 would not require adjudication as they would be rendered infructuous and get disposed off automatically.