2019 (9) TMI 1057 - AT - Income Tax

Tribunal Upholds Decisions: Income from Properties as Business Profits; Genuine Investment; Parking Fee Addition Deleted.

The Tribunal upheld the CIT(A)'s decisions in favor of the assessee on all issues. It classified the income from letting out commercial properties as ... Correct head of income - income earned from letting out various shops/stalls in shopping malls - income from “profits and gains from business and profession” or “income from house property” - HELD THAT:- Where the assessee company developed shopping malls and business centers on properties owned by it and let out same by providing host of facilities in said business centre, income derived there from was business income, as held in the case of A.C.I.T. - VS- STELLER DEVELOPER (P.) LTD. [2015 (8) TMI 460 - ITAT MUMBAI] Again, where the assessee's main objects were acquiring, constructing, operating and maintaining of multiplexes, business centres, etc., income derived from such activities is to be treated as business income and not income from house property as held by the Coordinate Bench of ITAT Mumbai in the case of SHREEJI EXHIBITORS -VS- A.C.I.T. [2015 (8) TMI 886 - ITAT MUMBAI]. Therefore, it is settled law that the income earned by the assessee from letting out various shops/stalls in shopping malls constructed by them is to be treated as business income and not as income from house property. Addition u/s 68 - whether creditor was having creditworthiness to substantiate her investment in share capital/premium worth - HELD THAT:- AO accepted the claim of the assessee in A.Y. 2011-12, in respect of share capital/premium of ₹ 90,00,000/-, therefore balance claim of ₹ 1,50,00,000/- in the assessment year under consideration is also genuine, as there is no change in the facts and in the nature of amount. We note that it is a well settled legal position that factual matters which permeate through more than one assessment year, if the Revenue has accepted a particular view or proposition in the past, it is not open for the Revenue to take a entirely contrary or different stand in a later year on the same issue, involving identical facts unless and until a cogent case is made out by the Assessing Officer on the basis of change in facts We are of the view that the above cited precedents on principle of consistency are squarely applicable to the assessee under consideration. Therefore, we note that there is no infirmity in the order passed by the ld CIT(A). We note that the identity of the Share Capital Subscriber, Mrs. Davina Mary Lyngwa is not in dispute, since she had identified herself before held AO in compliance to summons under Section 131 of the Act, issued to her. The fact that the notice under Section 133(6) of the Act calling for information from her as well as summon issued under Section 131 were well served upon her at her residential address at D/o Late Sh. F.G. Franklin, Mission Compound Road, Mawkhar, Shillong-02. Even the Ld. AO had not disputed the identify of Mrs. Davina Mary Lyngwa. Further, Mrs. Davina Mary Lyngwa had duly confirmed the investment made by her during the above assessment year in the shares of the Assessee Company. Details of investments, including the investments made during the above assessment year, that the said share capital subscriber, Smt. Davina Mary Lyngwa, is a person of considerable means. The fact that she had got 7 properties at various places in Meghalaya apart from Guest Houses etc. has not been disproved by the Ld AO. Apart from this, Mrs. Davina Mary Lyngwa had also confirmed her sources of income, during the course of deposition. Addition on account of parking fees - as during the assessment proceedings the AO treated 20% of parking fees on account of personal expenses and added to the total income of the assessee - HELD THAT:- We note that assessment of the assessee was carried out by the AO under section 143 (3) of the Act, and not under section 144 of the Act, therefore, without rejecting the books of account of the assessee, the adhoc disallowance to the tune is not permitted. Therefore, we do not find any infirmity in the order passed by the learned CIT(A), his order on this issue is hereby accepted and the grounds of Revenue are dismissed. Issues Involved:1. Classification of income from letting out property as 'profits and gains from business and profession' versus 'income from house property'.2. Deletion of addition of Rs. 1,50,00,000/- regarding the creditworthiness and identity of the creditor.3. Deletion of addition of Rs. 54,120/- on account of parking fees.Detailed Analysis:Issue 1: Classification of Income from Letting Out PropertyFacts and Arguments:- The assessee filed its return of income for AY 2012-13, declaring total income as Nil. During scrutiny, the AO noticed that the assessee had shown income from house property under 'Income from business or profession'.- The AO issued a show cause notice, and the assessee replied, stating that the income from letting property on hire should be treated as business income based on its Memorandum of Association (MOA) and the nature of activities carried out.- The AO rejected the assessee's contention, citing various case laws, and treated the income as 'income from house property'.Tribunal's Findings:- The Tribunal noted that the assessee was engaged in the business of letting out commercial properties, and its MOA supported this activity.- The Tribunal emphasized that the intention behind exploiting the property commercially was crucial. Since the assessee provided various services and amenities, the income derived was rightly classified as business income.- The Tribunal referred to several case laws, including PFH Mall & Retail Management Ltd. and Steller Developer (P.) Ltd., which supported the classification of such income as business income.Conclusion:- The Tribunal upheld the CIT(A)'s decision to treat the income of Rs. 1,15,81,078/- as 'profits and gains from business and profession'.Issue 2: Deletion of Addition of Rs. 1,50,00,000/- Regarding Creditor's CreditworthinessFacts and Arguments:- The AO questioned the genuineness, creditworthiness, and identity of the creditor, Smt. Davina Mary Lyngwa, who invested Rs. 1,50,00,000/- in the assessee company.- The AO noted discrepancies and doubted the source of funds, suggesting that the assessee used the creditor to introduce bogus share capital and premium.Tribunal's Findings:- The Tribunal observed that the identity of the creditor was not in dispute, and she had confirmed her investment during her statement under Section 131.- The Tribunal noted that the creditor had substantial financial strength and capacity, owning multiple properties and having a significant annual income.- The Tribunal highlighted the principle of consistency, noting that the AO had accepted a similar investment from the same creditor in the previous assessment year (AY 2011-12).Conclusion:- The Tribunal upheld the CIT(A)'s decision to delete the addition of Rs. 1,50,00,000/-, affirming the genuineness of the investment.Issue 3: Deletion of Addition of Rs. 54,120/- on Account of Parking FeesFacts and Arguments:- The AO treated 20% of parking fees as personal expenses and added it to the total income of the assessee.- The CIT(A) deleted the addition, stating that the business receipts of the assessee were considered as rental income, and 100% of the parking fees had already been offered as business income.Tribunal's Findings:- The Tribunal noted that the assessment was carried out under Section 143(3) and not under Section 144, meaning that without rejecting the books of account, an adhoc disallowance was not permitted.Conclusion:- The Tribunal upheld the CIT(A)'s decision to delete the addition of Rs. 54,120/- on account of parking fees.Final Judgment:- The appeals of the Revenue were dismissed, and the order of the CIT(A) was upheld in all respects.