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Income Tax Appellate Tribunal, MUMBAI BENCH “C”, MUMBAI
Before: SHRI AMIT SHUKLA & SHRI RAJESH KUMAR
The aforesaid cross appeals have been filed by the Assessee as well as by the Revenue against the impugned order dt. 23.4.2014, passed by the CIT(A)-32, Mumbai for the quantum of assessment passed u/s 143(3) for the A.Y 2010-11.
2 M/s. Camoron Finance & Investments & 4583/Mum/2014
We will first take up the Assessee’s appeal vide which the following grounds have been raised :
“1. The Commissioner of Income-tax (Appeals)-32 ("CIT(A)") erred in confirming the action of the Assistant Commissioner of Income-tax- 21(1) ("A.O") in treating income received in respect of the Amenities Agreement with the lessee of the premises under the head 'Income from Other Sources' instead of 'Income from House Property', as claimed by the Appellant.
2. In the facts and circumstances of the case and in law, the CIT (A) ought to have held that such income received under the Amenities Agreement was assessable under the head 'Income from House Property' only, along with the rental income received under the Lease Agreement with the lessee for the same premises.
3. The Appellant therefore, prays that the said income received under Amenities Agreement be assessed as ‘Income from House Property’.”
At the outset, the Ld. Counsel pointed out that a defect notice was issued that the appeal of the Assessee is barred by limitation. However, the said notice was mis-conceived as, in the memo of appeal, the date of communication of the CIT(A) order dt. 23.4.2014 was mentioned as 9.4.2013 which was by mistake and later on, it was rectified and revised Form no. 36 was filed, wherein the date of communication has been correctly mentioned as 2.5.2014. Thus, the appeal filed on June, 2014 is well within the stipulated time limit. On verification, we find merits in the contention of the ld. Counsel and no adverse inference is drawn.
On merits, the Ld. Counsel submitted that the issues involved in both the grounds are covered against the Assessee by the order of the Tribunal for the A.Y 2009-10, wherein on similar facts this issue has been decided against the Assessee. He submitted that the only issue involved here is, whether the 3 M/s. Camoron Finance & Investments & 4583/Mum/2014 income received by way of compensation for amenities received by the Assessee is to be taxed under the head ‘income from house property’ or ‘income from other sources’. The Assessee has offered it as ‘income from house property’, whereas the Assessing Officer has treated it as ‘income from other sources’. The Assessee had shown gross rent of Rs. 14,68,63,122/- as income from lease and from amenities charges on the letting out its property. It had developed a property in Vile Parle (East), Mumbai comprising of 6 floors of office space and had entered into two separate agreements, one being “Indenture of Lease” and other being “Amenities Agreement” with the lessee, HSBC Bank. As per the amenities agreement, monthly charges of Rs.53,16,700/- for each of the 36 months was to be received by the Assessee. The Assessee had not bifurcated the rental income and the receipts from amenities charges as separate source, but had treated the entire income under the head ‘income from house property’. The Assessing Officer held that the “amenities charges” received would be taxed as ‘income from other sources’. Before the Ld. CIT(A) the Assessee had made a very detailed submission relying upon the various decisions including that of the Hon’ble Supreme Court in the case of CIT v. Shambhu Investment (P) Ltd. reported in 263 ITR 143 (SC) and the Hon’ble Bombay High Court in the case of CIT v. J.K. Investors Ltd. reported in (2012) 211 Taxman 383 (Bom). However, CIT(A) following the appellate order for the A.Y 2009-10 held that the amenities charges received as per the amenities agreement would be taxed as ‘income from other sources’. In the A.Y 2009-10, the Tribunal has also upheld the stand of the Revenue that the said receipt is to be taxed under the head ‘income from other sources’.
The Ld. Counsel for the Assessee, however, submitted that the Tribunal has not properly appreciated the various decisions as was referred
4 M/s. Camoron Finance & Investments & 4583/Mum/2014 and relied upon, especially Hon’ble Supreme Court decision in the case of CIT v. Shambhu Investment (P) Ltd. (supra) and Hon’ble Bombay High Court decision in the case of CIT v. J.K. Investors Ltd. (supra), wherein the Hon’ble Supreme Court and Hon’ble High Court have held that the decisive test to be applied in such cases is that, whether the service agreement is dependent on rent agreement or not. Therefore, the decision should be taken in view of the principles laid down by the court in these two cases, sans the decision arrived at by the Tribunal in Assessee’s own case.
On the other hand, the Ld. DR submitted that this issue is squarely covered by the decision of the Tribunal which is based on same agreement and on the same facts, therefore, the same decision should be followed in this year also.
After considering the rival contentions and on perusal of the impugned order, we find that the only issue involved qua ground no. 1 is, whether the receipts from “amenities agreement” from HSBC Bank is to be assessed as ‘income from other sources’ or as ‘income from house property’. As admitted by the Ld. Counsel, this issue had come up for consideration before the Tribunal in and 170/Mum/2013 for the A.Y 2009-10, wherein the Tribunal vide order dt. 29.5.2015 has decided this issue after considering the decisions relied upon by the ld. Counsel in the following manner :
“5. Per contra, the ld. DR strongly supported the orders of the Revenue authorities. After giving a thoughtful consideration to the rival submissions, we have carefully perused the orders of the authorities below. It is not in dispute that the assessee has entered into two separate agreements, one for lease rental and the other for amenities. On going through the amenities agreement, the only amenity to be provided by the lessor to the lessee was 5 M/s. Camoron Finance & Investments & 4583/Mum/2014 in respect of structural repairs to the building let out and to pay municipal and property taxes in respect of the let out property. We fail to understand how these can be termed as amenities in respect of the letting out property. Even if the property is not let out, the assessee has to incur expenditure towards repairs and maintenance of the said property and also to pay municipal taxes. It appears that by separately charging in the guise of amenities charges, the assessee wanted to reduce the liability to property tax which is based on the rental income of the property. The cases relied upon by the ld. Counsel are totally misplaced and not matching the facts of the case in hand. Considering the fact in totality, we do not find any error in treating the amenity charges under the head ‘income from other sources’. Ground No. 1 is accordingly dismissed.”
Since similar facts are permeating in this year also, arising out of the same agreement, therefore, no different view can be taken and following the rule of consistency and judicial precedent, we decide this issue against the Assessee by holding that the amenities charges received by the Assessee is to be assessed under the head ‘income from other sources’. Accordingly, ground no. 1 raised by the Assessee is treated as dismissed.
As regards ground no. 2, wherein the Assessee has raised the alternative plea that the municipal taxes paid should be allowed against ‘income from other sources’ instead of ‘income from house property’, it has been again admitted by both the parties that this issue too has been decided against the Assessee by the Tribunal vide same order. The relevant finding of the Tribunal in paragraphs 6 & 7 are reproduced hereunder :
“6. Ground No. 2 is an alternate plea by which the assessee has claimed that the amenities charges received by it should be treated as advance. It is the claim of the assessee that amenity charges should be treated as advance, as it runs through the period of lease. Therefore for the year under consideration, the amenity charges should be treated as advance.
7. We do not subscribe to this claim of the ld. Counsel. The amenity charges have been received by the assessee as per the agreement and the 6 M/s. Camoron Finance & Investments & 4583/Mum/2014
same has to be taxed under the head ‘income from other sources’ as held hereinabove. The alternate claim of the assessee is accordingly dismissed.”
Accordingly, in this year also, being similar ground raised by the Assessee the same is treated as dismissed.
In the result, the appeal of the Assessee is dismissed.
Now, we take up the Revenue’s appeal vide which the following grounds have been raised :
“1. On the facts and in the circumstances of the case and in law, the ld. CIT(A) has erred in allowing municipal taxes against 'Income from Other Sources' u/s. 57(iii) instead of Income from House Property ignoring that the municipal taxes are paid in respect of house property and thus are directly related to the House Property on which income is earned.
2. On the facts and in the circumstances of the case and in law, the ld. CIT(A) has erred in ignoring that the municipal taxes are to be deducted from "Income from House Property" u/s. 23 and not from "Other Sources" and hence not covered u/s. 57(iii) of the 1. T. Act.
3. On the facts and in the circumstances of the case and in law, the ld. CIT(A) has erred in not considering that the assessee had shown income from space utilization of theater property but not from conducting of cinema business and that the expenses claimed does not relate to theater business.”
As regards ground nos. 1 & 2, it has been admitted by both the parties that the same is covered in favour of the Department by the Tribunal order for A.Y 2009-10 (supra), whereby the Tribunal has decided this issue in para 13 after observing and holding as under :
“13. We have given a thoughtful consideration to the rival submission and have carefully perused the orders of the authorities below. As discussed elsewhere, we have held that the amenities charges have to be taxed under the head of ‘income from other sources'. Section 57(iii) shows that any 7 M/s. Camoron Finance & Investments & 4583/Mum/2014 other expenditure not been in the nature of capital expenditure lead out of expanded wholly and exclusively for the purpose of making or earning income which is taxed under the head ‘income from other sources'. In our considered opinion, payment of municipal taxes cannot be said to be let out or expanded wholly and exclusively for the purpose of earning amenity charges, as these municipal taxes are directly related to the letting out of the property, the rental income from which is taxed is under the head ‘income from house property’. We, therefore, find that the finding of the ld. CIT(A), in allowing the municipal taxes deductable as erroneous. We set aside the findings of the ld.CIT(A) and confirm that of the A.O. Ground Nos. 1 and 2 are accordingly allowed.”
Thus, consistent with the view taken by the Tribunal in the Assessee’s own case for the earlier years, we hold that the municipal taxes cannot be allowed from income from other sources. Accordingly, ground nos. 1 & 2 raised by the Department stands allowed.
As regards ground no. 3 relating to allowing of certain business expenses, again it has been admitted that the said issue had come up for consideration before the Tribunal in A.Y 2009-10, wherein this matter has been restored back to the file of the Assessing Officer to be decided afresh. The Assessee has claimed various expenses under the head ‘administrative expenses’ which has been claimed out of the income received from providing space and facilities for hosting functions for HSBC Bank. The Assessing Officer held that the Assessee had received hire charges from cinema hall which cannot be treated as business income, therefore, such an expenditure cannot be allowed. On this issue, we find that the Tribunal has set aside this issue to the file of the Assessing Officer with certain directions as given in para 17, which for the sake of ready reference is reproduced hereinbelow.
“17. We have carefully perused the documentary evidences brought on record before us and referred to. In our considered opinion, there appears to be conflict in these documentary evidences, therefore, in the interest of justice, we restore this issue to the file of the A.O. The A.O. is directed to 8 M/s. Camoron Finance & Investments & 4583/Mum/2014 verify whether the Cinema Theatre was fit for use after considering the report from the office of Commissioner of Police, Mumbai as brought on record by the ld. AR. The A.O. is directed to decide the issue afresh after giving reasonable and fair opportunity to the assessee.”
Thus, consistent with the view taken in the earlier year, we also direct the Assessing Officer to decide this issue afresh in line with the directions given by the Tribunal in the earlier year after giving reasonable opportunity to the Assessee. Thus, ground no. 3 is treated as allowed for statistical purpose.
In the result, the appeal of the Assessee is dismissed, whereas the appeal of the Revenue is treated as partly allowed for statistical purpose.
Order pronounced in the open court on 20th January, 2016.