GARDEN VIEW REALTORS PVT. LTD.,MUMBAI vs. I.T.O. 3(1)(4), MUMBAI

ITA 2544/MUM/2012Status: DisposedITAT Mumbai03 December 2015AY 2004-053 pages

AI SummaryPartly Allowed

What did the Tribunal hold?

The Tribunal held that the reopening of assessment was justified. However, issues related to the classification of license fees and disallowance of expenses were set aside to the AO for fresh examination in light of the Supreme Court decision in Chennai Properties. The issue of interest from bank deposits was upheld against the assessee.

What were the facts?

The Assessing Officer reopened the assessment to tax license fees received by the assessee. The assessee treated it as business income, while the AO treated it as income from other sources, disallowing related expenses. The assessee also claimed business loss on sale of shares, which was not accepted.

What were the issues?

Whether license fees received for property let out on license basis should be treated as business income or income from other sources, and the validity of reopening of assessment.

Which sections of the Income-tax Act were involved?

Section 143(1)

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Cases cited in this judgment(1)Show list

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Chennai Properties & Investments Ltd. v. CIT
373 ITR 673 · 2015 · SC
381 citing

Income Tax Appellate Tribunal, “G” BENCH, MUMBAI

Before: S/SHRI B.R.BASKARAN & SHRI SANDEEP GOSAIN

For Appellant: Shri Narayan Atal

Hearing: 3.12.2015Pronounced: 3.12.2015

O R D E R

PER B.R.BASKARAN,AM:

The appeal of the assessee is directed against the order dated 07.12.2011 passed by Ld CIT(A) for assessment year 2004-05 dismissing the appeal filed by the assessee.

The Ld Counsel submitted that the assessing officer has re-opened the assessment of the year under consideration in order to assess the license fee received by the assessee on giving a property on licence basis to M/s Mid day Publications Pvt Ltd. The assessee declared the licence fee received by it as business income, where as the assessing officer treated the same as income from other sources. Consequently, various expenses

claimed by the assessee have also been disallowed. Further the assessee had also claimed business loss on sale of shares, but the same has been not accepted without specifying proper reasons. The Ld Counsel submitted that the assessee’s objects included letting out of properties on commercial basis and hence, in view of the decision rendered by the Hon’ble Supreme Court in the case of Chennai Properties and Investments Ltd Vs. CIT (2015)(373 ITR 673), the decision rendered by the tax authorities are not correct.

When it was proposed by the bench that these matters may be set aside to the file of the assessing officer for examining all the issues afresh in the light of the decision rendered by Hon’ble Supreme Court in the case of Chennai Properties and Investments Ltd (supra), both the parties agreed to the same.

Now we shall dispose of the grounds urged by the assessee. The first ground of appeal relates to the validity of reopening of assessments. We notice that the original return of income filed by the assessee for the year under consideration was processed u/s 143(1) of the Act and the assessment has been reopened within four years from the end of the assessment year under consideration. We notice that the assessing officer has recorded reasons for reopening of assessment and hence we are of the view that the Ld CIT(A) was justified in holding that the reopening was justified.

5. With regard to Ground no.2,3 and 4, we have already noted that they require fresh examination at the end of the assessing officer. Accordingly, we set aside the order of Ld CIT(A) on these three grounds and restore them to the file of the AO with the direction to examine them afresh in the light of the decision rendered by Hon’ble Apex Court in the Chennai Properties & Investments Ltd (supra) and take appropriate decision in accordance with the law, after affording adequate opportunity of being heard to the assessee.

6. The fifth ground relates to the assessment of interest from bank deposits as income from other sources instead of income from business. We notice that the assessee has earned bank interest from deposits made out of surplus funds. An identical issue was considered by the Tribunal in the assessee’s own case in 5616 & 5617/Mum/2005 and the same was decided against the assessee. We notice that the Ld CIT(A) has followed the order of the Tribunal in deciding this issue against the assessee. Accordingly we uphold his order on this issue.

In the result, the appeal filed by the assessee is treated as partly allowed for statistical purposes. Order pronounced in the open court on 3rd Dec 2015.

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