ACIT, NEW DELHI vs. SH. AJAY KAILA, NEW DELHI

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES : A : NEW DELHI

BEFORE SHRI R.S. SYAL, AM & MS SUCHITRA KAMBLE, JM ITA No.245/Del/2014 Assessment Year : 2010-11 ACIT, Vs. Ajay Kalia, Circle-32(1), 128/B/1, Village Kilokari, New Delhi. Near Ashram, New Delhi. PAN: AACPK5645F CO No.254/Del/2014 (ITA No.245/Del/2014) Assessment Year : 2010-11

Ajay Kalia, Vs. ACIT, 128/B/1, Village Kilokari, Circle-32(1), Near Ashram, New Delhi New Delhi. PAN: AACPK5645F

Assessee By : Shri Suresh Anantha Raman, CA Deptt. By : Shri K.K. Jaiswal, DR

Date of Hearing : 06.01.2016 Date of Pronouncement : 07.01.2016

ITA No245/Del/2014 CO No.253/Del/2014 ORDER PER R.S. SYAL, AM: This appeal by the Revenue and the Cross Objection by the

assessee arise out of the order passed by the CIT(A) on 7.10.2013

in relation to the assessment year 2010-11.

AR submitted that pursuant to the mandate of section 268A, the

CBDT has issued Circular No. 21 of 2015 dated 10.12.2015 with

retrospective effect, revising the monetary limit to Rs.10,00,000/-

for not filing appeals before the Tribunal. He further submitted

that as the tax effect involved in the instant Departmental appeal

is less than Rs.10,00,000/-, the extant appeal is not maintainable.

The ld. D.R., although supported the order of the Assessing

Officer, but could not controvert the fact that tax effect involved

in this appeal is less than Rs.10,00,000/-.

Instruction is applicable to the pending appeals also with

retrospective effect and there is a clear-cut direction to the 2

ITA No245/Del/2014 CO No.253/Del/2014 Department to withdraw or not press such appeals filed before the

ITAT wherein tax effect is less than Rs.10,00,000/-. Going by the

prescription of the aforenoted Circular, we are of the view that

the Revenue should have either not filed the instant appeal before

the Tribunal or withdrawn the same as the tax effect in this appeal

is admittedly less than the prescribed limit for not filing the

appeals. Ex conseqeunti we dismiss the instant appeal without

going into merits of the case.

the ld. DR at the very outset vigorously argued that the same

should also be consequentially dismissed because the Revenue’s

appeal, pursuant to which the cross objection was filed, is likely

to be dismissed as a result of low tax effect. His contention was

that the CO has no independent existence distinct from the

Departmental appeal and hence the same cannot be allowed to

survive. This was opposed by the ld. AR who submitted that the

ITA No245/Del/2014 CO No.253/Del/2014 issue raised in the CO is different from the one raised in the

Revenue’s appeal.

relevant material on record. Before embarking upon the question

of the maintainability or otherwise of the Cross objection filed by

the assessee pursuant to the Revenue’s appeal, which involves tax

effect of less than Rs.10 lac and has been dismissed supra, we

need to concentrate on the prescription of section 253(4) which

empowers the respondent to file cross objection, the relevant part

of which reads as under:-

`(4) The Assessing Officer or the assessee, as the case may be, on receipt of notice that an appeal against the order of …. the Commissioner (Appeals) has been preferred under sub-section (1) or sub-section (2) or sub-section (2A) by the other party, may, notwithstanding that he may not have appealed against such order or any part thereof; within thirty days of the receipt of the notice, file a memorandum of cross-objections, verified in the prescribed manner, against any part of the order of …. the Commissioner (Appeals), and

ITA No245/Del/2014 CO No.253/Del/2014 such memorandum shall be disposed of by the Appellate Tribunal as if it were an appeal presented within the time specified in sub-section (3) or sub-section (3A).’

or the assessee (hereinafter referred to as `the other side’), on

receipt of notice of an appeal having been preferred by the

appealing party against the order passed by the CIT(A),

notwithstanding not having filed separate appeal, may file a Cross

objection `against any part of the order of the … Commissioner

(Appeals).’ It is amply clear from the language of sub-section (4)

that the right to file cross objection has been given to the other

side against any part of the order of the CIT(A), whether or not

connected with the issues raised in the appeal by the appealing

party. There can be one possibility when the cross objection is

filed by the other side in support of the order passed by the

CIT(A) and the other possibility can be of filing CO against the

issues decided against it in the impugned order. There can be

still one more possibility when the other side, apart from 5

ITA No245/Del/2014 CO No.253/Del/2014 supporting the impugned order appealed against, may also assail

certain other issues decided against it. This divulges that the CO

can be filed by the other side, on receipt of notice of appeal

having been filed by the appealing party, on any issue de hors the

issued raised by the appealing party. On filing, a CO assumes the

character of an appeal, which is apparent from section 253(4),

which provides that: `such memorandum shall be disposed of by

the Appellate Tribunal as if it were an appeal presented within

the time specified in sub-section (3) or sub-section (3A)’. Rule

22 of the ITAT Rules, 1963 also provides that: ‘A memorandum of

cross-objections filed under sub-section (4) of section 253 shall

be registered and numbered as an appeal and all the rules, so far

as may be, shall apply to such appeal. This shows that a cross

objection is treated in no way different from a separate appeal by

the tribunal.

the scope of a Cross objection is not restricted only to the points

ITA No245/Del/2014 CO No.253/Del/2014 decided against the appealing party, but, also extends to the

points decided against the other side. The mandate of the

provision is quite vast and is unlike the prescription of rule 27 of

the ITAT Rules, which is limited in its realm empowering the

respondent to support the impugned order by providing that: `The

respondent, though he may not have appealed, may support the

order appealed against on any of the grounds decided against

him.’

the assessees should be invariably dismissed in limine for the

reason of the dismissal of the appeals of the Department because

of low tax effect, in our considered opinion, does not stand to any

logic in all circumstances. In a situation where the cross objection

is in support of the impugned order, then, of course, such a cross

objection has no independent existence and is liable to be

dismissed as infructuous pursuant to the dismissal of the appeal

of the Revenue. However, in a case where the cross objection

ITA No245/Del/2014 CO No.253/Del/2014 filed u/s 253(4) is on an issue independent of the appeal filed by

the Revenue, then, such a cross objection cannot be dismissed

simply on the ground of dismissal of the appeal by the Revenue

involving low tax effect. Acceptance of this contention of the ld.

DR would amount to snatching a valuable right given by the

statute to the assessee to file and pursue an appeal before the

Tribunal irrespective of any tax effect. We, therefore, negate the

contention of the ld. DR by holding that the instant CO

challenging the impugned order, is maintainable.

treatment of rental income from property located at F-62, Okhla,

New Delhi, as chargeable to tax under the head ‘Income from

other sources’ as against `Income from house property’ declared

by the assessee.

assessee let out its building along with furniture & fixtures and

electrical installations and offered the rental income so received

ITA No245/Del/2014 CO No.253/Del/2014 under the head ‘Income from house property.’ The AO held such

income to be chargeable to tax under the head ‘Income from other

sources’, which view came to be echoed in the first appeal. The

assessee is aggrieved against the treatment given to such rental

income as falling under the head ‘Income from other sources.’

relevant material on record. There is no dispute on the fact that

the lease rent received by the assessee was a composite rent of

building, furniture & fixtures and electrical installations. It is not

the case of the assessee that the letting out this property is his

business activity. Thus, the dispute is narrowed down to

considering such rental income either under the head ‘Income

from house property’ or ‘Income from other sources.’

property consisting of any building or land appurtenant thereto of

which the assessee is the owner, other than such portions of such

property as he may occupy for the purposes of any business or

ITA No245/Del/2014 CO No.253/Del/2014 profession carried on by him, shall be chargeable to income-tax

under the head ‘Income from house property.’ The essence of

section 22 is that the annual value of property consisting of any

building or land appurtenant thereto is chargeable to tax under

the head ‘Income from other sources.’ Section 56(1) provides that

income of every kind, which is not to be excluded from the total

income, shall be chargeable to income-tax under the head ‘Income

from other sources’, if it is not chargeable to income-tax under

any of the heads specified in section 14, Items A to E. Sub-

section (2) to section 56 contains an inclusive list of the incomes

which are chargeable to tax under the head ‘Income from other

sources.’ Clause (iii) of sub-section (2) of section 56, which is

relevant for our purpose, reads as under : -

`where an assessee lets on hire machinery, plant or furniture belonging to him and also buildings, and the letting of the buildings is inseparable from the letting of the said machinery, plant or furniture, the income from such letting, if it is not chargeable to

ITA No245/Del/2014 CO No.253/Del/2014 income-tax under the head "Profits and gains of business or profession";

the Act, it is manifested that whereas the former section covers

income only from land or building appurtenant thereto, the latter

covers within its ambit income from inseparable letting of

building, machinery, plant or furniture, etc. As, admittedly, the

assessee earned rental income from letting out of building,

furniture & fixtures and electrical installations in a composite

manner which are inseparable from each other, such income

specifically falls under the head ‘Income from other sources’ and

is liable to be taxed accordingly. The Hon’ble Supreme Court in a

celebrated decision in Sultan Brothers (P) Ltd. vs. CIT (1964) 51

ITR 353 (SC), has held that where the building and fixtures were

intended to be used together, then, combined rental income from

such inseparable letting out should be charged to tax under the

head ‘Income from other sources.’ Thus it is clear that the ld.

ITA No245/Del/2014 CO No.253/Del/2014 CIT(A) has rightly treated lease rentals as falling under the head

‘Income from other sources.’

rule of consistency inasmuch as in earlier years such income was

assessed under the head ‘Income from house property’, we find no

force in the same as admittedly there can be no estoppel against

the statute. When section 56(2)(iii) specifically provides for

treating such income as falling under the head ‘Income from other

sources’, there is no rationale in treating it as `Income from house

property’ simply on the ground that in the earlier years such

income has been wrongly taxed under section 22 of the Act.

There is no res judicata in so far as the taxation provisions are

concerned, more specifically, when the earlier accepted position

is contrary to the specific provisions of the Act. We, therefore,

refuse to countenance this argument.

ld. CIT(A) in treating lease rental as falling under the head

ITA No245/Del/2014 CO No.253/Del/2014 ‘Income from other sources’ in contrast to the assessee’s stand of

such income being chargeable under the head ‘Income from house

property.’

dismissed.

Order pronounced in the open Court on 07.01.2016.

Sd/- Sd/- [SUCHITRA KAMBLE] [R.S. SYAL] JUDICIAL MEMBER ACCOUNTANT MEMBER Dated, 07th January, 2016. dk Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT (A) 5. DR, ITAT

AR, ITAT, NEW DELHI.