ACIT, NEW DELHI vs. M/S. ATRIA PARTNER, NEW DELHI

The brief facts of the case are that the assessee filed its return of income declaring total income at Rs.9,45,92,600/- which was processed u/s. 143(1). Subsequently the case was selected for scrutiny.

In the course of assessment proceedings, the AO noticed that the assessee declared rental income of Rs.13,25,99,754/- under the head “house property” on which the assessee claimed 30% deduction amounting to Rs.3,97,79,926/- under section 24(a) of the IT Act. The AO required the assessee to furnish the reasons for showing rental income under the head “income from house property” instead of “business income”. In response, the assessee filed written submissions stating that the assessee firm received rental income from property owned by it and hence, the rental income was correctly shown by it as “income from house property”. The AO, however, disallowed the claim of deduction made by assessee u/s. 24(1) of the Act, by treating the rental income as ‘business income’, and disallowed the claim of deduction of Rs.3,97,79,926/- adding the same to the total income of the assessee.

The learned CIT(A) after considering the detailed reply of the assessee and the submissions made before him in the light of various decisions relied upon by the assessee, allowed the claim of assessee directing the Assessing Officer to assess the rental income as per the provisions of law under the head

The assessee declared interest income offered to tax under the head income from other sources at Rs.20,72,927/-, on which expenses of Rs.3,00,155/- has been claimed u/s. 57 of the Income Tax Act. The assessee declared total expenditure of Rs.24,00,000/- out of which the assessee itself disallowed a sum of Rs.20,99,845/- attributable to exempt income of Rs.1,45,01,932/- and balance expenditure of Rs. 3,00,155/- was claimed as deduction u/s. 57(iii) of the IT Act. The Assessing Officer disallowed the same and added to the total income of the assessee. The ld. CIT(A) restricted the addition to Rs.2,00,000/- vide impugned order.

Aggrieved by the impugned order, the Revenue is in appeal before us on both the issues.

The DR, relying upon the assessment order, argued that the ld. CIT(A) is not justified in directing the AO to assess rental income under the head income from House Property without appreciating the fact that the assessee is engaged in the business of building & letting out of commercial complexes and the property was constructed and developed by the partners/DLF group

The learned AR of the assessee, on the other hand, relied upon the submissions made before the ld. CIT(A) and the conclusions reached by him in the impugned order.

We have heard and considered the arguments advanced by the parties and have gone through the orders of the authorities below, materials available on record and the decisions relied upon and we find that both the issues under consideration are squarely covered by the decision dated 16.09.2015 of ITAT, Delhi Bench ‘A’ in the case of assessee itself (Revenue’s appeal No. 692/Del./2013-A.Y. 2009-10), whereby the ITAT in the identical facts, circumstances and submissions of both the parties, has decided the issues in favour of the assessee and against the Revenue. The relevant observations of the ITAT are reproduced as under : 6. We have heard and considered the arguments advanced by the parties and have gone through the orders of the authorities below, materials available on record and the decisions relied upon and we find that the learned CIT)A) after making elaborate discussion on the issue and after considering various legal pronouncements, has rightly accepted the claim of the assessee. It is not in dispute that the assessee has consistently been showing the rental income from this property, which has been accepted by the department in previous years. The assessee has also filed assessment order for A.Y. 2012-13, wherein also the AO has accepted the rental income declared by assessee at Rs.12,08,06,640/-. There being no change in the facts and circumstances, the Assessing Officer, in our opinion, was to follow the rule of consistency. A perusal of the assessment order reveals that the Assessing Officer while treating the rental income, returned by assessee, as business income, has taken into account that in A.Y. 2008-09, the rental income of the assessee has been assessed under the head “business income” and that the rent of Rs.13.76 Crores shown to have been received by the assessee is disproportionate to the value of the property declared in the balance sheet at Rs.20.24 Crores. The ld. Counsel for the assessee has submitted that the assessment order for A.Y. 2008-09 was challenged before the ld. CIT(A) who accepted the claim of assessee and the appeal filed the Revenue has also been dismissed by the Tribunal on the same issue vide order dated 12.03.2014, wherein all the objections raised by assessing officer in the present case stand decided in favour of the assessee. The relevant part of the order of ITAT (supra) is reproduced as under : “7. We have heard both the counsel and perused the records. We find that assessee’s firm owns commercial building namely DLF Atria in DLF City, Phase-II, Gurgaon. This building was given on rent to M/s Conergys India Services (P) Ltd. and the rental income received was shown as income from house property. Assessee firm has a branch office which is in trading in shares and the income of which was shown as business income. This rent was shown under the head house property from asstt. year 2003-04 onwards and the assessments for the A.Y. 2006-07 & 2007- 08 were completed u/s. 143(3) accepting the rental income as income from house property. 7.1 AO has not doubted the ownership of the assessee or the fact that premises are given on rent. AO’s observation that rental income is too high is not at all a reason to treat the income as income from business. AO has not made out any case that

Respectfully following the above decision, the appeal of the Revenue is found to have no merit and is liable to be dismissed.

In the result, the appeal filed by the Revenue is dismissed. Order pronounced in the open court on 27.01.2016.