1. This appeal has been filed by the assessee against the order of CIT(A)-34, New Delhi dated 28.11.2018 for AY 2014-15.
2. The learned authorized representative of the assessee (AR) submitted that the assessee does not press ground no. 1 hence the same is dismissed as not pressed. Ground no. 4 & 5 of assessee are of general in nature which requires no adjudication. Remaining effects grounds 2 & 3 are as follows:-
Ground no. 2 of assessee
3. Apropos ground no. 2 the learned AR submitted that the ld. CIT(A) has erred in upholding the addition of Rs. 5,76,000/- made by the Assessing Officer on account of disallowance of 30% deduction claimed by the assessee company under the head income from house property against rent for fixture, fittings and amenities being part of permanent structure of the property and treating the rent received under the head income from other sources. The learned AR submitted that the assessee claimed the rental income from use the amenities as income from house property which was allowed by the Assessing Officer in AY 2012-13 and for AY 2013-14 the ld. CIT(A) allowed the appeal of the assessee and directing the Assessing Officer to treat the same as income from house property by following the judgment of Hon’ble Calcutta High Court in the case of CIT vs. Shambhu Investment P. Ltd. 249 ITR 47 (Cal.) therefore claim of assessee for immediately succeeding present assessment year 2014-15 under identical facts and circumstances deserves to be allowed.
4. The learned counsel precisely reiterated assessee’s written submissions dated 2.03.2023 and submitted that as per various judgments and orders of Hon’ble Supreme Court & High Court and co-ordinate benches of the Tribunal including judgment in the case of Sultan Bros. Pvt. Ltd. vs. CIT 51 ITR 353, judgment of Hon’ble Karnataka High Court in the case of CIT vs. Velankani Information Systems P. Ltd. 265 CTR 250 (Kar.) and orders co-ordinate bench of the Tribunal at Allahabad in the case of ITO vs. P.N. Shukla [1985] 14 ITD 105 (All.) and at Hyderabad in the case of DDIT vs. Shri G. Raghuram ITA No. 6/Hyd/2010, submitted that where the assessee made to agreements one for let out of the property and another for providing amenities and there is a doubt in the mind of the assessing officer regarding the correctness of the income declared by the assessee as ‘income from house property’ and income from business. He has treated the entire income i.e. as ‘income from house property’.
5. The ld. Senior DR supported the orders of the authorities below and contended that the principle of res judicata does not apply to the tax proceedings therefore merely because the assessee was allowed claim in AY 2012-13 & 2013-14 does not automatically make entitle the assessee for the same claim in subsequent AY 2014-15. Drawing our attention towards relevant part of orders of the authorities below particularly para 5.6 to 5.10 of first appellate order the ld. Senior DR submitted that the Assessing Officer as well as ld. CIT(A) were right and justified in treating the rental income from amenities as income to be taxed under the head income from other sources and the Assessing Officer was correct in disallowing the propionate deduction thereon u/s. 24(a) of the Act. The ld. Senior DR lastly prayed that the ground no. 2 of assessee may kindly be deleted upholding the disallowance.
6. On careful consideration of above submissions, first of all, from the written submissions of the assessee, we note following factual matrix of the issue, which has not been controverted by the learned Senior DR:-
2. The assessee had purchased a furnished residential flat at lump sum price of Rs. 1.75 crores including the value of common amenities, facilities and fittings and fixtures, vide Agreement to Sell dated 23.03.2009. The agreement is attached at Pages 31 - 57 of the Paper-Book, the relevant extracts contained at Pg 36 of the Paper Book are reproduced hereunder:
"The Lump Sum Purchase price of Rs.1,75,10,270/- also includes the proportionate price of the common/limited common areas and facilities appurtenant to the said flat, the nature, extent and description of which common/limited common areas and facilities are more particularly described in the Third Schedule hereunder written.
The purchase price is, however, inclusive of the approximate value of the Common Amenities and Facilities as described in Annexure "D" and the appropriate value of the fittings and fixtures specifications as per details given in Annexure "E"
3. The said flat along with amenities was initially let out to Tata Sky Limited and rent received therefrom, was offered to tax under the head "Income from House Property" in the Return of Income for A. Y. 2012-13.
4. Likewise, after expiry of the tenancy with Tata Sky Limited, the assessee entered into a Rent Agreement with Mr. Vikram Kaushik (referred hereinafter as "Lessee") vide Rent Agreement dated 09.05.2011, fixing the rent for use of premises at Rs.1,70,000/-per month.
5. In addition to the said Rent Agreement for use of premises, the assessee also entered into a simultaneous agreement of even date i.e. 09.05.2011, with the same Lessee for use of amenities in the premises, fixing the rent of Rs. 1,60,000/- per month. The amenities forming integral part of the property were mentioned at Annexure-A of the use of amenities agreement. Refer Page 11 of the supplementary Paper-Book, which is reproduced hereunder for ready reference:
"Annexure 'A' - Agreement for Provision of Amenities dated 9th May, 2011
List of Amenities
A- Appliances / Furniture / Fixtures
1. A Modular Kitchen with Hob & Electric Chimney;
2. Dual Sink with single drain board and Cabinets;
3. All Bedrooms to have built in Wardrobes and Ceiling Fans;
4. Exhaust Fans in all Toilets and Kitchen;
5. Clothes Dryer;
6. Washing Machine;
7. Storage Water Geysers in all Toilets;
8. Refrigerator cum Freezer;
9. Four Air Conditioners in Living and Dining-Room;
1. Italian Marble flooring throughout the Penthouse;
2. Aluminum Windows;
3. False Ceiling,
4. Arranging for permission for display the company's name in the building directory at the security desk and reception of the said building "Ansal Heights". The company's name shall be displayed as per standard format prescribed by the Developer Ansal Housing & Construction Limited;"
6. The rent received for use of premises as also for amenities was offered to tax under the head "Income from House Property" after claiming deduction under section 24 of the Act in the return of income for the AY 2012-13, which was accepted by the assessing officer in the assessment completed under section 143(3) of the Act, for that year.
7. In assessment for A.Y 2013-14, while the rental income for use of property was accepted by the Assessing Officer as taxable under the head "Income from House Property", however brought to tax the rental income from use of amenities to be 'income from other sources', on the ground that the same was not 'income from house property', being segregated vide separate agreement towards use of amenities.
8. On further appeal, the CIT(A) reversed the action of assessing officer and affirmed the declaration by the assessee, while following the ratio emanating from the decision of Calcutta High Court in the case of CIT v. Shambhu Investment Pvt. Limited: 249 ITR 47, against which Civil Appeal was dismissed by Hon'ble Supreme Court in the case reported at 263 ITR 143.
9. The aforesaid decision of the CIT(A) stands accepted in as much as, no further appeal against the said order was filed before the Hon'ble Tribunal. In other words, the treatment of declaring rental income for use of amenities as income under the head house property stood accepted in the first two A. Ys. i.e. AY 2012-13 and 2013-14.
10. Akin to the stand taken by the Assessing Officer in assessment for Assessment Year 2013-14, in the impugned assessment order for A.Y. 2014-15 also, the Assessing Officer adopted a similar stand of treating rental income from use of amenities as 'Income from Other Sources' instead of Income from House Property', thereby resulting in disallowance of Standard Deduction of 30% amounting to Rs.5,76,000/- claimed by the assessee under section 24(a) of the Act.
11. On further appeal, the CIT(A) unlike the order for the last Assessment Year i.e., A.Y. 2013-14, took a different stand and upheld the action of the Assessing Officer in treating rental income from use of amenities as Income from Other Sources'. The CIT(A) distinguished the cases relied upon by the assessee to the effect that the premises and amenities were inseparable, as one cannot be used without the other, on the ground that the rent agreement in the case of assessee was separate.
7. On being asked by the bench the learned Senior DR in all fairness, submitted that to the best of his knowledge there is no any further action by the department in AY 2012-13 & 2013-14 on account of claim of assessee allowed by the Assessing Officer and ld. CIT(A) respectively for these years. Further, from the reading of order of the authorities below under challenge, we also note that the Assessing Officer has not controverted that the premises consisting of land & building and above noted amenities was rented to Mr. Vikram Kaushik under two separate lease agreements viz one for premises and other for amenities both dated 09.05.2011 and said premises and amenities were in separable and could be used together only by the owner or lessee as the case may be. At this juncture, we find it necessary and appropriate to take respectful cognizance of the judgment of Hon’ble High Court of Kerala in the case of Dr. P.A Varhese vs. CIT 80 ITR 180 (Ker.) wherein it was held that under an agreement with export promotion counsel, assessee leased out building owned by him and agreed to provide necessary partition, lavatories, air conditioner, closets, fluorescent tubes, water & electric meters etc. were forming party of building therefore the rental income there from has to be treated together as income from house property.
8. Further, more the ITAT Allahabad bench in the case of ITO vs. P.N Shukla (supra) the co-ordinate bench held that the amount of rent paid for the use of fixtures and fittings has to be treated as income from house property in the hands of assessee/lessor. The identical issue was placed for adjudication before ITAT Hyderabad Bench in the case of DDIT vs. Shri. G. Raghuram (supra) wherein akin to the present case there were two separate agreements one for letting out property and another for providing amenities and the Tribunal under identical facts and circumstances held as follows:-
9. The annual rent in a case when the property is let throughout the year is the actual rent received or receivable by the owner. When the amount of the actual rent received or receivable by the owner, is known that would constitute the basis for determining the annual value and it is that value which will have to form the basis for determining the income from house property and for allowing deduction from income from house property to the extent is permitted under the other provisions of the Act. In the present case, the assessee made two agreements one for let out of the property and another for providing amenities and there is a doubt in the mind of the assessing officer regarding the correctness of the income declared by the assessee as ‘income from house property’ and income from business. He has treated the entire income i.e. as ‘income from house property’. Admittedly, the authorities have the freedom to go beyond the documents to find out the real intention of the parties. In this case, though there is two agreements the real intention of the parties to a document is different what appears from it ex facie. Since there is a doubt, then the assessing officer is justified in going beyond the documents to find out real intention of the parties by ignoring the apparent has to be and has always been conceded. In this circumstance, the assessing officer has to remove the façade to expose the real intention of the parties cleverly cloaked and the actual agreement cannot be given effect. The only bona fide document to be acted upon not otherwise. There is a serious doubt and also it is shocking the conscious of the Bench, whether the assessee is getting hire charges equal to the rental amount for providing amenities. It cannot be real one and assessing officer required to see the actual rental value of the property in that place and bring that amount into tax under the head ‘income from house property. As such, in the present case, the assessing officer came to the correct conclusion that real rental value was bifurcated into two separate income viz., one is rental income of house property and another is hire charges of the equipment. Further, in the case of letting of the machinery, plant or furniture, sec.56(2) (iii) of the Act is applicable, but only letting of building with certain amenities, this provision is not applicable and in that event, the income from letting out was chargeable under the head ‘income from house property’. The hire charges said to have been collected for the purpose of providing amenities and the rent for the building not come under the purview of sec.56(2)(iii) of the Act. The word ‘plant’ cannot be liberally construed so as to include all items noted in Annexure I appearing elsewhere in the order, within the ambit of the word ‘plant’. It is not possible to give such a wide construction as suggested by the learned counsel for the asessee. In the case of Sultan Brothers Pvt.Ltd. v. CIT 51 ITR 353 (SC) what was let out to the tenant was a building fitted up with the furniture and fixtures, for being run as a hotel. Therefore, the Supreme Court held that since the building was let along with the furniture and fixtures, the provisions of sec.56(2) (iii) would be applicable and the income from building should be assessed under the head ‘other sources’. But according to the fact arising in the present case, plant and machinery or furniture was not hired by the assessee along with the building. Therefore, the decision of the apex court in Sultan Bros case supra, will not be applicable to the facts of the present case. Thus, on a plain reading of sec.56(2) (iii) of the Act, in the light of the facts of the case, we hold that conclusion reached by the CIT(A) is not correct. Further, no precise test can be laid out to ascertain whether income referred to by whatever nomenclature, lease amount, rent or licence fee received by an assessee from leasing or letting out of assets would fall under the head ‘profit and gains of business or profession and it has to be determined from the point of view of a businessman in that business depending upon the fact and circumstances of each case and there is no readymade jacket formula. The ratio laid down by one case cannot be applied or fit to the facts of the present case. We have to see the intention of the assessee whether the letting was the doing of a business or to exploitation of his property by an owner. The assessee when exploited the property to derive rental income it has to be held that the income realized by him by way of rental income from a building if the property with other asset attached to the building to be assessed as ‘income from house property’ only. The only exceptions are cases where the letting of the building is inseparable from letting of the machinery, plant and furniture. In such cases, it has to be held that the rental would not have been realized but for the letting out of the machinery, plant or furniture along with such building and therefore, rental received for the building is to be assessed under the head ‘income from other sources’. In the present case, on the facts of the case, it is clear that the assessee as the owner of the building was only exploiting the property as owner by letting out the same and realizing income by way of rent. Such rental income was liable to be assessed under the head ‘income from house property.’ The various assets let out to the tenants are incidental to letting out the building being integral part of the letting. Accordingly, we reverse the order of the CIT(A) and restore that of the assessing officer. This ground of the revenue is allowed.
[Emphasis applied by underlining]
9. It is also pertinent to observed that, we are in complete agreement with the contention of the ld. Senior DR that the principle of res judicata does not apply to the tax proceedings. At the same time we cannot ignore other related principle i.e. rule of consistency which has to be respected by the tax authorities until unless there is any new or different facts and circumstances for different assessment years are discernable. This principle has emerged from the judgment of Hon’ble Supreme Court in the case of Radaswami Satsang 193 ITR 321 (SC) wherein their Lordship speaking for the apex court held that, what is decided in one year may not apply in the following year but where a fundamental aspect permeating through the different assessment years has been found as a fact one way or the other and parties have allowed that position to be sustained by not challenging the order, it would not be at all appropriate to allow the position to be changed in a subsequent year. Since, undisputedly facts and circumstances of AY 2012-13 & 2013-14 are identical and similar therefore rule of consistency again supports the claim of assessee that the rental income from amenities has to be treated as income from house property and assessee is eligible for claim of deduction u/s. 24(a) of the Act accordingly ground 2 of assessee is allowed.
Ground no. 3 of assessee
10. Apropos this ground the ld. Senior DR did not controvert rather candidly agreed to the submission of ld. AR based on the judgment of Hon’ble jurisdictional High Court of Delhi in the case of ACB India Ltd. vs. CIT 235 taxmann.com 22 (Del.) and order of the Special bench of the Tribunal in the case of ACIT vs. Vireet Investment (P.) Ltd. 58 ITR (T) 313 (Delhi- Trib.) (SB), that the investment which did not yield any exempt income are not to be considered and only those investment which yield or brought exempt income to the assessee are to be considered for computing disallowance under rule 8D of the Income Tax Rules 1962. Therefore ground no. 3 of assessee is allowed for statistical purposes with the direction to the Assessing Officer that the disallowance under Rule 8D of the Rules, for arriving the average value of investment, only those investment are to be considered which yielded exempt income during the year. Accordingly, ground no. 3 of assessee is allowed in the manner as indicate above.
11. In the result, appeal of assessee is partly allowed on ground no. 2 and partly allowed for statistical purposes on ground no. 3.
