TaxTMI 
TaxTMI 
2018 (11) TMI 127
X X X X Extracts X X X X
X X X X Extracts X X X X
....foresaid issue are more or less common in all the appeals, for the sake of brevity, we will discuss the facts as involved in ITA no.7011/ Mum./2014, for the assessment year 2007-08. 3. Brief facts are, the assessee a company is a builder and developer and is in real estate business. For the impugned assessment year, the assessee filed its return of income on 29th October 2007, declaring total income of Rs. 2,09,11,640. The return of income filed by the assessee was selected for scrutiny and after verifying the books of account and other documents, the Assessing Officer completed the assessment under section 143(3) of the Income Tax Act, 1961 (for short "the Act") vide order dated 24th December 2009, determining the total income at Rs. 2,17,41,730. Subsequently, the Assessing Officer being of the opinion that leave and license fee received by the assessee should be assessed as income from business, instead of income from property, re-opened the assessment under section 147 of the Act by issuing a notice under section 148 of the Act on 30th March 2012. During the re-assessment proceedings, when the Assessing Officer called upon the assessee to explain why the leave and license fee s....
X X X X Extracts X X X X
X X X X Extracts X X X X
....sed as income from house property considering the ratio laid down in the judicial precedence cited by the assessee. Therefore, ultimately, the learned Commissioner (Appeals) concluded that the rental income received by the assessee has to be treated as income from house property. Accordingly, he deleted the addition made by the Assessing Officer. 5. The learned Departmental Representative (D.R.) relying upon the observations of the Assessing Officer submitted, while completing the original assessment the Assessing Officer has not examined the issue relating to the proper head under which the rental income is to be assessed. Therefore, he submitted, there being no change of opinion, re-opening of assessment under section 147 of the Act is valid. In support of his contention, the learned Departmental Representative relied upon the decision of the Hon'ble Gujarat High Court in CIT v/s Neha Builders Pvt. Ltd., [2008] 296 ITR 661 (Guj.). 6. So far as the merits of the issue is concerned, the learned Departmental Representative submitted, since the assessee is holding the property as stock-in-trade and is in the business of leasing out property, the rental income derived by the ass....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d, in assessment year 2009-10 the Assessing Officer while completing the assessment under section 143(3) of the Act has accepted the rental income received by the assessee as income from house property. Therefore, a different stand cannot be taken by the Department in other assessment years. Finally, the learned Authorised Representative submitted, while completing the original assessment under section 143(3) of the Act the Assessing Officer after examining the issue has accepted assessee's claim of house property income. He submitted, in the absence of any other tangible material, the Assessing Officer could not have re-opened the assessment on the basis of very same material available at the time of original assessment. He submitted, even though the re-opening of assessment is within the period of four years, however, the Assessing Officer cannot exercise his power under section 147 of the Act on a mere change of opinion just to change the head of income from income from house property to income from business. Thus, he submitted, the re-opening of assessment under section 147 of the Act is also invalid. In this context, he relied upon the decision of the Hon'ble Supreme Court....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... observe, the AO has treated the income generated from leave and license fee as income from business primarily for the reason that the unsold flats have been shown as stock-in-trade in the books of the assessee. In our view, accounting entry or accounting treatment given by the assessee in its books of account is not conclusive. What is required to be examined is the intention of the assessee whether to exploit the property as owner or engage itself in an organized and systematic activity of constructing, developing and building house property and giving them on lease along with other services for earning rental income. As can be seen from the objects of the assessee as contained in the Memorandum and Articles of Association, the primary object of the assessee is not to construct, develop and lease them out for earning rental income but to engage itself as real estate developer. Therefore, as it appears from the facts on record, the business of the assessee is not letting out properties for earning rental income. In case of Chennai Properties and Investment Ltd. (supra) the Hon'ble Supreme Court held the income derived from letting out of property as business income only becaus....
X X X X Extracts X X X X
X X X X Extracts X X X X
....not find any reason to interfere with the decision of the learned CIT(A). Accordingly, grounds raised are dismissed. 10. The only issue arising in Departmental appeal in ITA No. 5944/Mum/2012 for A.Y. 2009-10 relates to allowance of assessee's claim of deduction under Section 24(b) of the Act on account of interest on borrowed capital. 11. The brief facts of the case are, for the impugned assessment year the assessee filed its return of income on 27.09.2009 declaring total income of Rs. 3,46,39,786/-. In the course of assessment proceedings, the AO noticed that while computing the income from house property the assessee has claimed deduction of Rs. 1,08,60,299/- under Section 24(b) of the Act towards interest and pre-payment charges. After calling for necessary details from the assessee and examining those AO found that as per the sanction letter from HDFC Bank the loan was obtained subsequent to leasing out of the property. Therefore, he called upon the assessee to explain why interest payment should not be disallowed. In response to the query raised by the AO it was submitted by the assessee that initially the assessee had borrowed Rs. 15 crores in the year ending 31.03.2005 fo....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... observations of the AO. 13. The learned A.R. strongly supporting the decision of the learned CIT(A) submitted that on wrong assumption of facts the AO has disallowed the deduction claimed by the assessee. The learned A.R. drawing our attention to the sanction letter dated 25.03.2004 issued by the HDFC bank submitted that the loan of Rs. 15 crores was sanctioned for construction of house. He submitted, the assessee took further loan of Rs. 7 crores as on 31.03.2006 and the outstanding loan payable by the assessee stood at Rs. 15 crores. He submitted, on 01.07.2006 the assessee entered into a loan agreement with the HDFC bank under which the outstanding loan payable by the assessee was converted to a new loan. To substantiate such fact the learned A.R. drew our attention to different clauses of the loan agreement, a copy of which is placed at page 79 of the Paper Book. The learned A.R. submitted, in realty the assessee did not receive any fresh loan but the old outstanding loan availed by the assessee for construction purpose was termed as new loan. Thus, he submitted, the learned CIT(A) was justified in allowing the claim of the assessee. Without prejudice to the aforesaid submiss....