TaxTMI 
TaxTMI 
2018 (10) TMI 1514
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....e Income Tax Act (hereafter as "the Act"). 2. The brief facts are that the original assessment was completed in the cases of both the petitioners i.e. ADI and AHR, on 31.12.2009 at Rs. 24,03,030/- and Rs. 5,73,28,357/- respectively under Section 143(3) of the Act. The CIT subsequently set aside the assessment invoking its powers under Section 263 and directed the AO to assess their lease income from the rental/lease of shops and other spaces in the hotel assessees hands after making proper inquires and verifications. During these proceedings, the AO noticed that the ADI had projected lease and license charges of Rs. 29,18,07,201/- including lease rental of Rs. 6,27,84,240/- relating to leasing of retail spaces in Ambience Hotel, Gurgaon. He further noticed that the space in question was owned by AHR but the assessee i.e. ADI showed its income from letting out the shop and spaces in its hand on the basis of the agreement between ADI and AHR. The consideration for that agreement was Rs. 75 crores. The AO therefore, concluded that since the income of Rs. 6,40,78,420/- was a lease rental and had been taxed in the hands of the owner i.e. ADI, the provisions of Section 22 of the Act wer....
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....rofits on their coming into existence attract tax at that point and the revenue is not concerned with the subsequent application of the profits." 16. In view of what has been discussed above, we are of the considered view that the assessee, ADIPL in this case is not entitled for relief being beneficial owner on the basis of the judgment of Poddar Cement Pvt. Ltd. (supra) which is not applicable to the facts and circumstances of the case rather an agreement (supra) between AHRPL and ADIPL is a camouflage particularly in the face of the admitted fact that AHRPL being owner of property in question claimed TDS of Rs. 1,09,32,212/- without offering corresponding income for taxation to evade the payment of tax to the state exchequer. So, we find no illegality or perversity in the findings returned by ld. CIT (A) in the impugned order dated 01.10.2013 under challenge vide ITA No.355/Del/2014. However, when substantive addition qua the same amount of Rs. 6,27,84,240/- has already been made in case of AHRPL, there is no question confirming the protective addition of Rs. 6,27,84,240/- in case of ADIPL by the ld. CIT (A) because one income cannot be taxed twice. So, ITA Nos.354/Del/2014 & 35....
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....apparent on record in the findings returned by the Tribunal. Moreover, issue involved is decided on the basis of facts, evidence collected by the lower Revenue authorities and the case law relied upon by the assessee was found to be not applicable to the facts and circumstances of the case. 5. So far as question of incorporating the word "camouflage" in para 16 of the order dated 07.07.2017 passed by the Tribunal in ITA No.355/Del/2017 &354/Del/2017 as pointed out by the ld. AR for the assessee is concerned, the same has been used in furtherance of the discussion made in the preceding paras and is in no way intended to cause harm to the business reputation of the assessee. Considering the aforesaid facts and legal position, we find no merits in the misc. applications filed by the assessee, hence the same are hereby dismissed." 7. It is contended on behalf of the petitioner that the Act does not clothe the taxing authority with any jurisdiction to rewrite the terms of the agreement, which plainly in this case did not suggest that the parties, were dealing with each other in any manner other than at arm's length. Furthermore, there is no suggestion of any collusion between th....
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....ication. It was submitted that the ITAT pointedly ignored and overlooked several authorities cited by the petitioners. He relied upon the authority of Honda Siel Ltd. (supra) which held inter alia as follows: "The purpose behind enactment of section 254 (2) is based on the fundamental principle that no party appearing before the Tribunal, be it an assessee or the Department, should suffer on account of any mistake committed by the Tribunal. This fundamental principle has nothing to do with the inherent powers of the Tribunal. One of the important reasons for giving the power of rectification to the Tribunal is to see that no prejudice is caused to either of the parties appearing before it by its decision based on a mistake apparent from the record. "Rule of precedent" is an important aspect of legal certainty in rule of law. That principle is not obliterated by section 254 (2) of the Income-tax Act, 1961. When prejudice results from an order attributable to the Tribunal's mistake, error or omission, then it is the duty of the Tribunal to set it right. Atonement to the wronged party by the court or Tribunal for the wrong committed by it has nothing to do with the concept of inh....
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....me Tax v. Hansraj Gupta, 137 ITR 195 (Delhi) and held that the amounts were properly taxable in the hands of AHR and not in the hands of ADI. Learned counsel relied upon the terms of the agreement which were extracted by the Tribunal in its impugned order and submitted that the refundable deposit was an interest free deposit, for an initial period of three years, extendable for a total period of 10 years. This meant that the owner enjoyed the benefit of substantial amount of Rs. 75 crores in lieu of permitting the annual letting, to be diverted to AHR. 13. It was highlighted that ADI even after showing lease income, declared loss for the year under consideration whereas AHR showed profits. The AO subsequently held that the amount was properly taxable in the hands of the owner. The CIT in fact used the word "tax avoidance". In these circumstances, the finding of the Tribunal that the agreement was a camouflage, could not be said to be unwarranted. It was submitted that the Honda Siel Ltd. (supra) had no application to the circumstances of the case because the ITAT considered all possible arguments - as is evident from the express reference to Poddar Cement Pvt. Ltd. (supra) in its ....
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....ame of that company. However there is no concept of ownership of income*. The Income belongs to the person having rightful ownership of the property. Therefore, this argument of the assessee is also not acceptable. 10. Thus, keeping in view he provisions of law and in view of the judgment of the Hon'ble Delhi High Court in the case of CIT vs Hans Raj Gupta (Supra) the rental income of Rs. 6,27 ,84,2.40/- from letting out the shops and retail space of the assesee is charged to tax the assessee's hands. Assessee's total income is computed accordingly. 11. After considering the facts and circumstances of the case and in view of the above observations, the income of the assesee is computed as under: Total Income as per order u/s 250/143(3) Rs.205,615/- Income from house property (as discussed) Rs.6,27,84, 240/- Deduction u/s 24 Rs.1,88,35,272/-/- Rs.4,39,48,968/- 12. Assessee's total income is, accordingly, assessed at Rs. 4,41,54,580/-* Credit for prepaid taxes is allowed. Detailed computation of tax and interest is given in the enclosed ITS-150 which is part of this order. Issue no....
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....il ~pc;1ces and to receive and appropriate to its own account all receipts and receivables from leasing of the said space to AIDPL against the payment of Rs. 75 crores, which was given by AIDPL to AHRL as interest free refundable deposit. Accordingly, the lease rentals of the said space of AHRL amounting to Rs. 6,27,84,240/- was shown as income by AIDPL in its return of income for the assessment year under consideration while the same was not shown by AHRL in its return of income under the said agreement dated 31.03.2008. On the basis of the facts of the case mentioned above, it is an undisputed fact that the retail spaces/shops owned by AHRL in the ground floor and-part of the first floor not transferred to ADIPL, whereas the income from these properties in the form of "lease rent" was transferred to ADIPL. The facts of this case are directly in league with the provisions laid down in section 60 of the I.T. Act, 1961. According to this section, where there is a transfer of "income" without the "transfer of the asset", the income is to be assessed in the hands of the transferor company, i.e. AHHL. AHRL has alienated or assigned the source of income i.e. lease rentals so that the in....
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.... dismissing the appeal, was erroneous. In Honda it was held that the power of rectification was conferred upon the ITAT to ensure that "no prejudice is caused to either of the parties appearing before it by its decision based on a mistake apparent from the record." The Supreme Court relied on the "Rule of precedent" and added that "When prejudice results from an order attributable to the Tribunal's mistake, error or omission, then it is the duty of the Tribunal to set it right." 18. Since the Appellate Commissioner and the ITAT relied on Section 60 and held that income had been diverted under a revocable transfer or arrangement, it would be useful to notice that provision- as well as Section 63, in this regard. They are extracted as follows: "60. Transfer of income where there is no transfer of assets- All income arising to any person by virtue of a transfer whether revocable or not and whether effected before or after the commencement of this Act shall, where there is no transfer of the assets from which the income arises, be chargeable to income-tax as the income of the transferor and shall be included in his total income." ***************** &....
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....d Party and the Second Party shall have the right to receive the rent or charges from them during the currency of this Agreement and also to deal/negotiate with the said tenants occupants in the manner the Second Party deem fit and proper." 20. It is evident that the agreement is not indefinite; it confers a right to receive rentals, for which a consideration of Rs. 75 crores was paid. The agreement could be rescinded, after 3 years, by giving back the deposit; the arrangement could not exceed 10 years in all. Clause 4 stated, significantly, that AHR's tenants were deemed to be that of ADI. 21. In Dalmia Cement (supra) the owner of two cement factories situated in Pakistan, by an agreement in writing dated 24-7-1962 agreed to sell and transfer to one Maneckji, its properties and assets in Pakistan represented in the two factories. Subsequent to the agreement, the parties entered into a supplemental agreement on 211-1962. The assessee in its return of income for AY 1964-65 on 30-6-1964 recorded the total income as Rs. 24 lakhs odd but later revised it downwards to Rs. 1.4 lakh; the same pattern was repeated for AY 1965-66, reflecting a loss of Rs. 2.45 lakh. The original return di....
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....As a matter of fact the profit stands diverted to the purchaser in terms of and in accordance with the agreement dated 24-7-1962 read with the supplemental agreement dated 2-11-1962 and the date of actual transfer of the factory in question which, in fact, had taken place on 30-9-1964 does not alter the situation. The income stands diverted by an overriding title as a matter of fact even before the accrual." 23. It is immediately clear that what weighed with the Supreme Court was the fact that the parties had expressly agreed that the transfer would be effective from the anterior date in 1962, and not the actual date of completion of sale. These singular facts, in the opinion of the court, made all the difference- there was a clear sale; the parties agreed the effective date to be an anterior one. However, in this case, the express terms of the agreement clearly showed that the arrangement was finite and also revocable (by one year's notice and refund of deposit). Pertinently, the judgments that the petitioner now relies on, apart from Dalmia (i.e Rungamatee Tea & Industries, Poddar Cement, Arvind Narottam) were all cited and considered by the CIT (A) after the AO's order, on rema....