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

In so far as the appeal by the Revenue is concerned, the ld. 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.

From para 10 of the above Circular it is palpable that the Instruction is applicable to the pending appeals also with retrospective effect and there is a clear-cut direction to the 2

In the result, the appeal of the Revenue stands dismissed.

Insofar as the Cross Objection of the assessee is concerned, 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 CO No.253/Del/2014 issue raised in the CO is different from the one raised in the Revenue’s appeal.

We have heard the rival submissions and perused the 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:-

A bare perusal of the above provision transpires that the AO 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

The language of section 253(4) makes it abundantly vivid that the scope of a Cross objection is not restricted only to the points

The ld. DR’s contention that the Cross objections filed by 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

The only issue raised by the assessee in his CO is against the 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.

Briefly stated, the facts apropos this issue are that the assessee let out its building along with furniture & fixtures and electrical installations and offered the rental income so received

We have heard the rival submissions and perused the 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.’

Section 22 of the Act provides that the annual value of the 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 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 : -

When we read section 22 in juxtaposition to section 56(2) of 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.

As regards the contention of the ld. AR for following the 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.

In the ultimate analysis, we approve the view taken by the ld. CIT(A) in treating lease rental as falling under the head

In the result, the Cross Objection of the assessee is also dismissed.