ROPAR DISTRICT CO-OPERATIVE UNION LIMITED,MOHALI vs. PCIT, CHANDIGAR-1, CHANDIGARH

आदेश/ORDER

PER A.D.JAIN, VICE PRESIDENT

This is assessee's appeal against the order dated 27.03.2023 of the ld. Principle Commissioner of Income Tax, Chandigarh (in short ‘the ld. PCIT’) pertaining to 2018-19

assessment year contending that the order of the ld. PCIT,

Chandigarh, passed u/s 263 of the Income Tax Act,1961 ( in short ‘the Act’) is nothing other than a change of opinion,

ITA 360/CHD/2023 A.Y. 2018-19 2

particularly so when the AO has followed the orders of the

Income Tax Appellate Tribunal in the earlier orders.

CPC, determining its income at Rs.11,24,08,940/-.

Subsequently, the case was selected for complete scrutiny

regarding the issue of ICDS Compliance and Adjustment.

Vide order dated 19.02.2021, passed u/s 143(3) read with

Section 143(3A) and 143(3B) of the Act, the total income of

the assessee was determined at Rs.11,24,08,940/-, i.e., the

income determined u/s 143(1) of the Act.

to show cause under the provisions of Section 263 of the Act

by the ld. PCIT, as follows ;

3.1 The assessee is engaged in the purchase of raw milk, manufacturing of milk products and sale of goods manufactured out of it. During the year under-consideration, the assessee had declared an income under the head income from House Property, Business Income and Income from Other- Sources. The assessee had also shown an agricultural income. 3.2 Further, it is noticed that the assessee had taken three booths on lease from the Municipal Corporation, Chandigarh since 01.07.1987. These three booths had further been sub-let out to three different milk vendors from whom rent was received. Moreover, the assessee had also claimed deduction .u/s 24(a) @ 30% from the annual rental values u/s 23 from these properties. In this regard, it is pertinent to mention here that the definition of "Owner of house property", annual charge", etc defined under Income Tax Act, 1961 is as follows: -

ITA 360/CHD/2023 A.Y. 2018-19 3

(b) a person who acquires any rights (excluding any rights by way of a lease from month to month or for a period not exceeding one year) in or with respect to any building or part thereof, by virtue of any such transaction as is referred To in clause (f) of section 269UA, shall be deemed to be the owner of that building or part thereof; (iv) [***] (vi)-taxes levied by a local authority in respect of any property shall be deemed to include service taxes levied by the local authority in respect of the property. As per this definition, "a member of a co-operative society, company or other association of persons to whom a building or part thereof is allotted or leased under, a house building scheme of the society, company or association, as the case may be, shall be deemed to be the owner of that building or part thereof,". However, the property leased by the assessee is for business purposes only: and as such the assessee cannot be deemed to be the owner of that property. Also, as per the evidence placed on record, the assessee has agreed that no depreciation has been claimed by the assessee on these properties as these do not form part and parcel of the fixed assets. Hence, no constructed part on these booths belongs to the assessee. It is a case of sub-lease of property which is assessable u/s 56.

ITA 360/CHD/2023 A.Y. 2018-19 4 4. Not satisfied with the reply furnished by the

assessee, the ld. PCIT has, by virtue of the impugned order,

held the assessment order dated 19.02.2021 to be erroneous

and prejudicial to the interests of the Revenue. The ld. PCIT

set aside the assessment order and directed the AO to make

requisite enquiries and proper verification with regard to the

issues concerned and to make assessment denovo in

accordance with law.

material on record. The assessee is engaged in the purchase

of raw milk and manufacturing of milk products and sale of

goods manufactured out of it. During the year, it had

declared income from house property, business income and

income from other sources. It had also shown agriculture

income. The assessee had taken three booths on lease from

the Municipal Corporation, Chandigarh, since 01.07.1987.

These booths had been sub-let to three different milk

vendors from whom rent was received. The assessee had

claimed deduction u/s 24(a) of the Income Tax Act @ 30%

from the annual rental value u/s 23 of the Act from these

booths. The claim of the assessee was allowed by the AO.

The AO had issued questionnaires dated 27.01.2021 and

ITA 360/CHD/2023 A.Y. 2018-19 5 05.02.2021 to the assessee, seeking details of the income

under the head of “income from house property” shown by

the assessee in its return of income. The assessee had

furnished copy of notice issued u/s 142(1), dated 25.11.2020

and notice dated 10.12.2020, notice dated 27.01.2021 and

notice dated 05.02.2021 and reply dated 10.02.2021 pages 6

to 19 respectively. It was stated that the assessee had

returned rental income from the three properties, amounting

to Rs.33,75,454/-, from the milk booths, Chandigarh, which

had been leased out to the assessee by the Municipal

Corporation since 01.07.1987 and which were let out by the

assessee to the milk vendors, and of Rs.23,59,709/-, again

from milk booths at Mohali, which were leased out to the

assessee in the year 2016-17 and which were also let out by

the assessee to the milk vendors on rent. It was stated that

both these properties were leased rent properties and did not

form part of the fixed assets to the assessee; that since the

assessee had not paid the leased/rent for the year in respect

of these properties, it had not claimed it as a deduction; that

rent of Rs.9,44,165/- had been received by the assessee from

the State Bank of India for operating ATM on the land

outside the building premises of the assessee, by raising

ITA 360/CHD/2023 A.Y. 2018-19 6 documentary structure as per the scheme of the Government

of Punjab; that this was also not a fixed asset of the assessee

and no depreciation thereon had been claimed; that all these

incomes had been offered to tax in the earlier year also and

the proposed disallowance for assessment year 2012-13 had

been appealed against; that the ld. CIT(A), following the

Chandigarh Tribunal decision in the case off for the earlier

years had deleted the addition made by the AO; that no

further appeal had been preferred by the Department against

the ITAT’s order, which had, thus, attained finality; that the

assessee was, therefore, not falling within the requirement of

Section 263 of the Act; that a similar addition in respect of

assessment year 2009-10 had been decided in favour of the

assessee by the Tribunal, which had become final, since the

Department had not gone in appeal.

own case, the Department had filed appeal against the

Tribunal order, for assessment years 2009-10 and 2010-11,

which had been dismissed by the Hon'ble High Court vide

order dated 26.08.2019; that such dismissal had been

ordered on account of low tax effect and not on merits; that

also, the AO for the preceding assessment year 2017-18, had

ITA 360/CHD/2023 A.Y. 2018-19 7 added back and assessed the amount in the hands of the

assessee; and that, therefore, it could not be said that a final

decision in the matter had been arrived at and the matter

had been settled; that therefore, it could not be said that the

earlier order was correct and complete from every stand

point; that there was, thus, a clear failure on the part of the

AO in framing the assessment order without making

requisite enquiries.

with the view taken by the ld. PCIT. All possible enquiries

were made by the AO during the assessment proceedings, as

discussed. The Tribunal, in the assessee's own case, for

assessment years 2009-10 and 2010-11, vide order dated

23.05.2016, passed in ITA Nos. 902/CHD/2013 and

1127/CHD/2014, decided the issue in favour of the

assessee, holding that the deduction had been regularly

claimed and allowed by the AO in the earlier years; that

however, the same had been denied during those years, i.e.,

assessment years 2009-10 and 2010-11, for the only reason

that it was a licence fee and not rent; that the assessment

order and computation chart pertaining to the Financial

Years 2002-03 to 2006-07 showed that the assessee had

ITA 360/CHD/2023 A.Y. 2018-19 8 declared similar income as income from house property and

the deduction u/s 24(a) of the Act had been claimed, which

had been allowed in all the years while completing scrutiny

assessment; that for assessment year 2007-08 also, vide

order dated 22.02.2011, the CIT(A) had allowed a similar

claim of the assessee; that the assessee had shown the

receipt as income from house property in order to claim

deduction u/s 24(a) of the Act; that this income was received

on account of booths given to different parties to sell its

products only, for which the assessee had charged licence

fee and the CIT(A) had allowed the claim of the assessee;

that the CIT(A)’s said order for assessment year 2007-08 had

attained finality, since it had not been challenged by the

Department; that there was no difference in the facts across

the years and as such, the authorities could not take a

different view in the other years; that it was, thus, clear that

the question of deduction u/s 24(a) of the Act had been

examined in the earlier years and since there was no change

in the activities of the assessee, in order to maintain

consistency, the Revenue could not be permitted to take a

difference view in the matter; that the intention of the

assessee was to gain rent and not to derive business income,

ITA 360/CHD/2023 A.Y. 2018-19 9 since the main business of the assessee was manufacture of

milk products; that the assessee was not in the business of

letting out of the booths to various parties; that so, the

income earned by the assessee from letting out of the booths

could not be considered as income from business. The

Tribunal placed reliance on ‘CIT Vs Neo Poly Pack (P) Ltd.”,

246 ITR 497 (Del) and “Sheetal Khurana Foods (P) Ltd. Vs

ITAT & others (2011) 335 ITR 1 (P&H), wherein it was held by

the jurisdictional High Court that if the business of the

assessee has nothing to do with the running of the

properties and the renting is an isolated transaction to earn

property income, the mere fact that such income will result

in reduction of business loss, is not enough to hold that

appeal filed under the head of ‘business income’ and that

one of the determining factors may be whether the

transaction is a normal part of the business of the assessee;

the Tribunal held that in fact the main business of the

assessee was manufacture of milk products and to sell them

out and the turnover of the assessee was in crores of rupees.

of the assessee remains much the same as that in the earlier

years. This being so, the AO, in our considered opinion, was

ITA 360/CHD/2023 A.Y. 2018-19 10

correct in following the Tribunal decision (supra) in the

assessee's own case. The AO is found to have carried out

adequate enquiry during the assessment proceedings and he

acted well within law in following the Tribunal decision in

assessee's case for the earlier years.

grievance sought to be raised by the assessee, the same is

hereby accepted. The order under appeal is found to be a

result of a mere change of opinion entertained by the ld.

PCIT, as correctly contained on behalf of the assessee. The

said order passed by the ld. PCIT is, accordingly, reversed

and it is held that the assessment order dated 19.02.2021 is

neither erroneous nor prejudicial to the interests of the

Revenue. Ordered accordingly.

Order pronounced in the Open Court on 23.02.2024.

Sd/- Sd/- (VIKRAM SINGH YADAV) (AAKASH DEEPJAIN) ACCOUNTANTMEMBER VICE PRESIDENT “Poonam”

ITA 360/CHD/2023 A.Y. 2018-19 11

आदेश क� �ितिलिप अ�ेिषत/ Copy of the order forwarded to : 1. अपीलाथ�/ The Appellant 2. ��यथ�/ The Respondent 3. आयकर आयु�/ CIT 4. िवभागीय �ितिनिध, आयकर अपीलीय आिधकरण, च�डीगढ़/ DR, ITAT, CHANDIGARH 5. गाड� फाईल/ Guard File आदेशानुसार/ By order, सहायक पंजीकार/ Assistant Registrar