TaxTMI 
TaxTMI 
2017 (7) TMI 1371
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....d the following grounds of appeal:- "GROUND I: License Fees assessable under the head 'Profits and Gains of Business or Profession' and not "Income from House Property". 1. On the facts and in the circumstances of the case and in law, the Learned CIT(A) erred in upholding the action of the Deputy Commissioner of Income Tax, Range - 24 & 26, Mumbai ('the A.O') in assessing the license fees received from the composite letting of property under the head 'Income from House Property". 2. She failed to appreciate and ought to have held that: a. The aforesaid property has been let out along with furniture, fixtures and other amenities from the A.Y. 2002-03 and have since been assessed under the head Profits and Gains of Business or Profession. There has not been any change in the activity of the Appellant during the captioned Assessment Year. In absence of change in facts, the license fees cannot be assessed under the head Income from House Property; b. the mere fact that the Appellant has not expanded her business activity cannot be a basis to treat the income as Income from House Property; 3. The Appellant, prays ....
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....aves leave to add, amend, alter and/or delete any/all of the above grounds of appeal." 2. Briefly stated, the facts of the case are that the assessee had filed her return of income declaring total income of Rs. 24,14,498/- on 30.09.2009, which was processed as such u/s. 143(1) of the 'Act'. That pursuant to the search & seizure proceedings conducted at the residential/business premises of the assessee and her group concerns on 30.11.2010, the assessee in compliance to notice u/s. 153A filed her return of income for A.Y. 2009-10 on 05.03.2012, declaring total income at Rs. 32,44,002/-. 3. That during the course of the assessment proceedings, it was observed by the A.O that the assessee who was in receipt of rental income from letting of flats alongwith furniture and fixture, was showing the same as her 'business income' under the head 'Leave and license income'. It was further observed by the A.O that no bifurcated details in respect of the rent charged by the assessee for flats and furniture & fixture was separately available. The A.O not being satisfied with the claim of the assessee that the income from letting of the flats was liable to be booked un....
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....nterest bearing borrowed funds by the assessee for making of investment towards purchase, construction and carrying out interiors of the property, was in itself a strong indicator that the assessee was carrying on a business venture; (iii). the composite letting of property alongwith services/facilities, furniture, fixture and white goods etc., could not be assessed as 'Income from house property'; (iv). the facts involved in the case of the assessee were distinguishable as against those which were involved in the case before the Hon'ble Apex Court in Shambu Investment (supra); and (v). that even if the receipts from composite letting were not to be assessed as 'business income', then the same could only be brought to tax under Sec. 56(2)(iii). 4. The A.O after deliberating on the contentions of the assessee, however, did not find favour with the same. The A.O holding a strong conviction that the income received by the assessee by way of license fees from the composite letting activity was liable to be brought to tax under the head 'Income from house property', thus rejected the claim of the assessee that the same was rightly reflected by her under th....
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.... during the course of the search proceedings, nor the same were ever produced by the assessee during the course of the assessment proceedings. (iv). That though the assessee had stated that the license fees received by her on account of complex commercial services provided to the lessees was far greater than the license fees which was being received by any person in the locality, however, except for the said hollow statement of the assessee, no supporting documents were placed on record during the course of the assessment proceedings. (v). That as per the 'Leave and license Agreement', the licensee was allowed to bring furniture and fixture and make alterations and repairs, therefore, the claim of the assessee that the activities carried on by her were akin to a star category hotel, were clearly dislodged. (vi). That though the assessee had claimed that complex commercial activities were being provided by her, however, as no evidence was placed on record to substantiate the said factual position, therefore the assessee failed to clear the test laid down in the case of Shambu Investment (supra). (vii). That though the 'Leave and licens....
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....y subjected the rental receipts to tax under the head 'Income from house property'. The assessee further on merits tried to impress upon the CIT(A) that as the activity under consideration was being carried out by her regularly, consistently and in any organized manner, with the purpose to earn profits, therefore, the same clearly constituted a 'business activity', and resultantly the income therefrom was liable to be assessed as 'business income'. The assessee reiterating the submissions raised before the A.O, therein averred that as the utilization of interest bearing borrowed funds was a strong indicator of business trait, therefore, the activity of construction of flats etc. by the assessee by using interest bearing funds, therein fortified her claim that she was carrying on a business venture. The assessee further in order to drive home her contention that the income from the composite letting out had rightly been reflected by her as business income, therein submitted before the CIT(A) that the activities relating to acquisition of leasehold rights in land/entering into development agreement, purchasing TDR, engaging contractors, constructing building, ....
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....e flats since the number of flats are the same since more than a decade. If the appellant were into a business then the activity should have grown quantitatively. Further though the appellant has stated that she provides number of services which includes use of gymnasium, swimming pool, housekeeping facilities, gardeners etc and also provides the services of plumber, gardener, liftman and so on, it is a fact that no evidence documentary or otherwise have been provided to evidence the provision of such services. Neither during the course of assessment proceedings nor during the course of appellate proceedings could the appellant produce any material to prove the provision of various services and amenities as claimed. Therefore, I concur with the finding of the A.O. that the appellant fails the test of exploitation of immovable property by way of complex commercial activities. In this context it is pertinent to refer to the order of the Hon'ble ITAT in PFH Mall and Retail Management Ltd. v. ITO (2008) 298 ITR (80)(KOL) where on the basis of finding of fact that the assessee was providing various services and facilities for the occupant such as security system, cleaning and mainte....
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....(P) Ltd. (2000) 245 ITR 492 (Del). It was submitted by the ld. A.R that the Hon'ble High Court of Delhi in the aforementioned case had held that though each assessment year is independent of the other and the doctrine of res judicata does not strictly apply to income-tax proceedings, but where an issue had been considered and decided consistently in a number of earlier assessment years in a particular manner, then for the sake of consistency, unless there is some material change in the facts, the same view should continue to prevail in subsequent years. It was submitted by the ld. A.R that in the aforesaid case the Hon'ble High Court observing that there was not a single distinguishing feature in the assessment year in question which could have prompted the A.O to take a view different from that arrived at in the preceding years, had thus dismissed the appeal of the revenue. The ld. A.R. further took us through the order of the A.O and submitted that as it remained as a matter of a conceded fact that the income earned by the assessee from composite letting out of flats alongwith furniture & fixtures was its predominant source of income, thus it could only be brought to tax ....
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....ched with such letting, therefore, the provisions of Sec. 56(2)(iii) were not attracted. The ld. D.R relying on the orders of the lower authorities, therein submitted that the income from the letting of the property had rightly been held to be assessable in the hands of the assessee under the head 'Income from house property'. The ld. D.R in support of his contention that the income derived by the assessee from the composite letting of the property was liable to be assessed under the head 'Income from house property', therein placed reliance on the judgment of the Hon'ble Supreme Court in the case of Sultan Brothers (P) Ltd. v. CIT (1964) 51 ITR 353 (SC), wherein the Hon'ble Apex Court had held that now when the covenants of the lease did not reveal that the lessor was rendering any services or doing any business at all, but rather, the same could safely be characterized as ordinary covenants used in the case of lease of a furnished building, therefore, the income received by the assessee could not be brought to tax as the letters 'business income'. The ld. D.R drawing force from the aforesaid judgment of the Hon'ble Apex Court, therein submitted....
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....wned 3 fully furnished residential units in Bhojwani Enclave, viz. Flat No. 21, 41 and 71, situated on ground floor, 2nd floor and 5th floor, respectively, in the Unit 1 of Bhojwani Enclave, since 31.03.2006, had thereafter not acquired/constructed any new property, which fact in itself dislodged her aforesaid claim. The ld. D.R thus in the backdrop of his aforesaid contentions therein submitted that the income of the assessee from the letting of the property, as held by the lower authorities, was liable to be assessed under the head 'Income from house property'. It was averred by the ld. D.R that the appeal of the assessee lacked any merit and was liable to be dismissed. 8. We have heard the authorised representatives for both the parties, perused the orders of the lower authorities and the material produced before us. We have given a thoughtful consideration to the facts of the case and are of the considered view that the assessee who owns 3 fully furnished residential units in Bhojwani Enclave, viz. Flat No. 21, 41 and 71, situated on the ground floor, 2nd floor and 5th floor, respectively, in the Unit 1 of Bhojwani Enclave, therein claims to be in receipt of composit....
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....tc., had therein even carried out certain disallowances relatable to the said business of the assessee. Thus to be brief and explicit, the A.O by resorting to the aforesaid exercise, had after deliberating at length on the nature of the aforesaid activity of the assessee as regards letting out of furnished flats alongwith rendering of services to the occupants, thus can safely be concluded to have consistently accepted the claim of the assessee that she was carrying on the business activity of composite letting out of furnished flats, alongwith rendering of a host of services to the occupants. We further find that in the regular assessments framed by the A.O u/s. 143(3) for the year under consideration, viz, A.Y. 2009-10, as well as the subsequent years, the A.O had initially accepted the claim of the assessee and therein assessed the activity of composite letting out of furnished flats, as the business income of the assessee. We find that pursuant to the search and seizure action conducted u/s. 132 of the 'Act' on 30.11.2010 at the premises of Sameer Bhojwani Group wherein the assessee was also covered, assessment in the case of the assessee for the immediately preceding y....
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.... about the tax liability of an assessee during the subsequent years only if he establishes that facts for that particular year were distinguishable from the facts of the earlier years. In absence of a categorical finding about the distinguishing fact the AO's cannot take a new stand." 9. We have deliberated on the issue under consideration, and are of the considered view that though it remains as matter of fact that for adjudicating as to whether the income arising from the letting of a property is liable to be assessed as 'business income' or under the head 'income from house property', clear parameters had been laid down by the constitutional bench of the Hon'ble Supreme Court in the case of Sultan Brothers (P) Ltd. v. CIT (1964) 51 ITR 353, wherein the Hon'ble Apex Court had observed as under:- "12. We have earlier said that s. 12 can only apply if no other section is applicable, because it deals with the residuary head of income. Now sub-s. (4) of s. 12 only deals with certain allowances and it obviously proceeds on the basis that the income mentioned in it, namely, that from the building when inseparably let with plant, machinery or furn....
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....ex Court was further deliberated upon by the court in the case of Shambhu Investment (P) Ltd. v. CIT (2003) 263 ITR 143 (SC), while upholding the order of the Hon'ble High Court of Calcutta in the case of CIT v. Shambhu Investment (P) Ltd. (2001) 249 ITR 47 (Cal), wherein laying down the parameters for adjudicating as to whether the income derived by an assessee from letting out of furnished premises was liable to be assessed under the head 'Income from house property' or as 'business income', it was held as under:- "7. Taking a sum total of the aforesaid decisions if clearly appears that merely because income is attached to any immovable property cannot be the sole factor for assessment of such income as income from property, what has to be seen is what was the primary object of the assessee while exploiting the property. If it is found applying such test that the main intention is for letting out the property or any portion thereof the same must be considered as rental income or income from property. In case it is found that the main intention is to exploit the immovable property by way of complex commercial activities in that event it must be held as....
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....on'ble Supreme Court in the case of Radhsoami Satsang v. CIT: (1992) 193 ITR 321 (SC), wherein the Hon'ble Apex Court had observed as under:- "13. We are aware of the fact that strictly speaking res judicata does not apply to income-tax proceedings. Again, each assessment year being a unit, what is decided in one year may not apply in the following year hut 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. We further find that the Hon'ble High Court of Delhi relying on the aforesaid judgment of the Hon'ble Apex Court, had taken a similar view in the case of CIT v. A.R.J. Securities Printers (2003) 131 Taxmann 297 (Delhi) and therein held that where the fundamental aspect permeating through different assessment years had been found as a fact one way or the other, and the parties had allowed the position to sustain by not challenging the order, it would not be at all appropriate to allow the position to be cha....
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....ibe to the view arrived at by the lower authorities. We are of the considered view that now when it remains as a matter of fact that the income from the composite letting of the furnished flats by the assessee, had after thorough vetting and scrutinizing consistently accepted and assessed as 'business income' by the department in the earlier years while framing regular assessments, therefore, in the absence of any new facts emerging during the year under consideration, which could irrefutably dislodge the aforesaid view and therein justify a view to the contrary, such an inconsistent approach on the part of the A.O would not be permissible. We find that the reliance placed by the department on the judgment of the Hon'ble High Court of Bombay in the case of H.A. Shah and Co. v. CIT (1956) 30 ITR 618 (Bom) is distinguishable on facts. We find that in the aforesaid case the Hon'ble High Court had upheld the view arrived at by the A.O, for the reason that during the year under consideration certain documents justifying taking of such contrary view were made available on record. We are of the considered view that unlike the facts involved in the case before the Hon'b....
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.... 15. Briefly stated, the facts of the case are that the assessee had filed her return of income for A.Y. 2010-11 on 29.09.2010, declaring total income of Rs. 5,18,605/-. That subsequent thereto the assessee in compliance to notice u/s. 153A issued pursuant to the search & seizure proceedings conducted at her residential/business premises, therein filed her return of income on 05.03.2012, declaring the same income of Rs. 5,18,605/-. The case of the assessee was taken up for scrutiny assessment, wherein the A.O not being satisfied with the claim of the assessee that the income from letting of the flats was liable to be booked under the head 'business income', therein brought the same to taxes under the head 'Income from house property' and assessed the income of the assessee at Rs. 27,65,470/-. The order of the A.O was thereafter upheld by the CIT(A). The assessee being aggrieved with the order of the CIT(A) had thus carried the matter in appeal before us. 16. That at the very outset of the hearing of the appeal it was submitted by the Ld. A.R that the issues involved in the present appeal was identical to that involved in the aforementioned appeal of the assessee ....