NATIONAL REALTY P.LTD,MUMBAI vs. DCIT CIR 5(2), MUMBAI

The brief facts of the case are that the assessee filed the return of income declaring total income to the tune of Rs.80,52,729/- on 11.09.2009. The return was processed u/s.143(1) of the Income Tax Act, 1961 (in short “the Act”). Thereafter, the case was selected for scrutiny and notice u/s.143(2) of the Act was issued on 24.08.2010 and served upon the assessee. Subsequently statutory notice u/s.142(1) of the Act along with questionnaire dated 14.07.2011 was issued and served upon the assessee. The assessee is engaged in the business of leasing of properties and other assets and has shown income from house property, capital gains and dividend income. In the instant case the assessee has claimed the compensation for amenities as business income which was treated by the Assessing Officer as rental income and accordingly the assessment was completed, thereafter the assessee went up in appeal where CIT(A) confirmed the order passed by the Assessing Officer. Feeling aggrieved the assessee has filed the present appeal before us.

According to issue no.1 &2 the claim of the assessee is that the compensation for amenities is business income and cannot be treated as rental income. On appraisal of order of the Income Tax Appellate Tribunal in the assessee’s own case for the A.Y.2005-06, the contention of the assessee has been declined and the compensation for amenities has been treated as rental income. The said orders also speaks that the matter of controversy is pending before Hon’ble Bombay High Court for disposal. The Hon’ble Tribunal has decided the matter of controversy on the basis of Calcutta High Court, in case titled as Commissioner of Income Tax Vs. Shambhu Investment Pvt. Ltd. [2001] 249 ITR 47. The representative of the assessee has argued that the matter of controversy has now been adjudicated by the Hon’ble Supreme Case in case of Chennai Properties & Investment Ltd. Vs. CIT [2015] 373 ITR 0673 (SC). However, on the other hand the learned departmental representative has refuted the said contentions. In the instant case the assessee filed the return of income by declaring the rental income from house property to the tune of Rs.12,73,37,632/-. The assessee also received the compensation from amenities to the tune of Rs.1,24,08,780/-. However, the said income has been claimed by the assessee as business income. The Hon’ble Supreme Court has observed in the above mentioned case i.e. Chennai Properties & Investment Ltd. (Supra) that where in the terms of 4 A.Y. 2009-10 memorandum of association, the main object of the company is to acquire the property and to earn the income by letting out the property, the said income was brought to tax as business income not as income from house property. In view of the said circumstances we are of the view that the matter of controversy is required to be re- examined / verified afresh in view of the observations of the Hon’ble Supreme Court in the case of Chennai Properties & Investment Ltd. (Supra). Accordingly, we set aside the finding of the learned CIT(A) on this issue and remand the case to the Assessing Officer to re- consider the matter of controversy in view of the guidelines contained in the judgment of Hon’ble Supreme Court in the case of Chennai Properties & Investment Ltd. (Supra). The Assessing Officer would provide the reasonable and proper opportunity to the assessee before passing the order in the interest of justice.

The other ground are related to the finding of the Assessing Officer while deciding the matter of controversy on the adjudication of issue no.1&2 as decided above therefore these issues would be consequential result thereof. Accordingly, we also set aside these issues and restore to the file of Assessing Officer to adjudicate the matter afresh in the light of decision taken by him while deciding the issue no.1 &2.

In the result, the appeal filed by the assessee is hereby allowed for statistical purpose.