TaxTMI 
TaxTMI 
2026 (4) TMI 1697
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.... case and result of the same should be applicable mutatis mutandis to the appeals under consideration. 3. Coming to ITA No.6797/M/2025 it is observed that in this case, the Assessee by filing its original return of income on dated 29.11.2016 declared a loss of (-) Rs.87,39,38,861/- which was subsequently revised vide revised return dated 21.03.2018 declaring total income at (-) Rs.87,39,38,861/-. The return filed by the Assessee was selected for scrutiny and accordingly statutory notices were issued to the Assessee, in response to which the Assessee filed the relevant details. 4. Perusing the details filed by the Assessee, the Assessing Officer (AO) observed that the Assessee was formed with a primary objective of real estate development and during the year under consideration was engaged in the business of providing its property on lease and various services. Further, the Assessee continues the developing commercial, retail and entertainment complexes and offered its income on sale of property development on the basis of 'percentage completion method'. 5. The AO by perusing the profit and loss account observed that the Assessee during the year under consideration has clai....
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....9,487/- 6,58,52,538/- 2,43,27,789/- 4,15,24,749/- Legal and professional 2,83,54,596/- 1,15,37,485/- 13,47,611/- 1,01,89,874/- Employee's remuneration 11,52,91,981/- 4,69,12,307/- 86,76,874/- 3,82,35,433/- Advertisement and sales promotion 16,12,42,680/- 6,56,09,646/- 4,79,823/- 6,51,29,823/- Misc and other 1,42,49,680/- 57,98,195/- - 57,98,195/- Security charges 3,89,98,426/- 1,58,68,460/- - 1,58,68,460/- Total disallowance 42,26,89,957/- 20,80,72,417/- 3,48,32,097/- 17,67,46,525/- 11. The AO thus, on the aforesaid reasons, disallowed the amount of Rs.17,67,46,525/- in total by passing the assessment order. 12. The Assessee therefore, being aggrieved with the decision of the AO in making the aforesaid disallowance, challenged the same by filing first appeal before the ld. Commissioner, who vide impugned order deleted the additions in part, and therefore, Revenue being aggrieved has preferred the instant appeal. 13. The ld. D.R. in support of Revenue's appeal, more or less claimed that the decision of the AO in making the aforesaid additions/disallowances, is based on the pec....
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.... claim of expense & thereby violating provisions of I.T. Act, 1961?. 2. Whether on the facts and in the circumstances of the care and in law, the La CIT(A) was justified in deleting the disallowance of Rs. 1,01,89.874/- on account of legal & professional fees, ignoring the fact that these expenses were directly relatable to leasing activity and appropriately allocable to income from house property? 3. Whether on the facts and in the circumstances of the case und in law, the Id CIT(A) was justified in deleting the disallowance of 3,82,35,433/- on account of salary and director's remuneration, without appreciating that staff were primarily engaged in property management and tenant-related functions, intrinsically linked to rental income for which assessee has already claimed standard deductions u/s 24(a) of the Act? 4. Whether on the facts and in the circumstances of the case and in law, the Lit. CITA was justified in restricting the disallowance on account of advertisement und soles promotion expenses to Rs. 24 lakh only, without appreciating the fact that these expenses were incurred mainly for tenant acquisition, occupancy retention and enhancing ren....
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....es. Out of the said amount the Assessee has suo moto disallowed a sum of Rs.2,43,27,789 as the same was pertaining to building and the balance expenses is claimed under the head "Income from Business or Profession". The rationale behind claiming the balance expenses under the head "Income from Business or Profession" are as follows: These are all legitimate business expenses incurred by the applicant for various business purposes; The applicant is in receipt of maintenance recoveries as CAM charges from the tenants, which have been duly offered to tax under the head business income and accordingly, the corresponding expenditure incurred to provide such CAM services should also be allowable under the head "Income from Business or Profession". Further it is also important to note that the applicant is not responsible for the repairs inside the leased premise i.e. the shop in the mall." 18. The ld. Commissioner by considering the peculiar facts of the case, submissions of the Assessee and the observations of the AO in the context of the addition under consideration, observed that the similar issue has also arose in the case of Assessee's holding company 'the Phoen....
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....as also challenged the said order of the then CIT (A) before the Hon'ble Tribunal, who vide order dated 15.01.2019 passed in ITA nos. 3991-3994/Mum/2018, ultimately upheld the order of the then ld. CIT (A), by observing and holding as under:- "29. As the facts and circumstances during the year under consideration are parimateria, respectfully following the order of the Tribunal in assessee's own for the A.Y. 2009-10 and 2010-11, which has also been relied by the Id. CIT(A) while deleting the addition, we do not find any reason to interfere in the order of the id. CIT(A) in deleting the said addition. Accordingly, we uphold the same." 20. We further observe that the Hon'ble Coordinate Bench of the Tribunal in the Assessee's holding company as observed by the ld. Commissioner in the impugned order, has perused the leave and license agreement of the said holding company and noted its observations in para 54 of the order passed for the AYs 2009-10 and 2010-11, which clearly substantiates that the holding company of the Assessee has made recoveries in relation to regular cleaning of common areas, security services for the common areas, repairs and maintenance of the comm....
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....case and observe that facts and issues as involved in the Assessee's holding company were pari-materia with the case of the Assessee and the AO merely made the addition on the ground that each year is a distinct and separate and the Department has already challenged the decisions of the Hon'ble Tribunal in the Assessee's holding cases and therefore, the addition on the basis of previous assessments, is liable to be made. Whereas, it is a fact that the Hon'ble Tribunal has also dealt with identical issue and decided in favour of the Assessee's holding company and by taking cognizance of such fact/decision of the Hon'ble Tribunal, the predecessor of the ld. Commissioner has also decided the issue in favour of the Assessee's holding company in the cases pertaining to AYs 2011-12 to 2014-15. Further, the ld. Commissioner in the instant case not only respectfully followed the decision of the Hon'ble Tribunal but also arrived at factual findings in the context of the issue involved, independently. We even otherwise, do not find any material and/or reason to contradict the decision of the ld. Commissioner in allowing the claim of the Assessee qua expenditure on account of 'repairs and mai....
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....business and profession. There was no tangible evidence before the Assessing Officer to show that the above expenses were specifically incurred for earning income from house property. However, expenses in relation to the property consultant M/s Jones Lang Lasalle Meghraj Pro Consultants Pvt Ltd may be considered as related to the renting as well as the business income of the assessee as being held by the CIT(A) Mumbai in the case of assessee for AY 2008-09 It is to be noted that the said expense has been completely disallowed by the AO in the order. Thus in the ratio of income receipts, we allocate expenses paid Jones Lang Lasalle Meghraj Property Consultants Pvt. Ltd., as attributable for earning income from house property. 70. From the record, we found that during the year under consideration, the Ld. AO had disallowed the 38.16% of expenditure treating the same incurred towards House Property Income. Accordingly, we direct the Assessing Officer to allocate the professional expenses relating to M/s Jones Lang Lasalle Meghraj Pro Consultants Pvt. Ltd in the same ratio. Accordingly, we direct the Assessing Officer to disallow an amount of Ps. 44,82,146/- (38.16% of Rs. 1,1....
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....lt with by the Hon'ble Tribunal in the Assessee's holding company cases were/are dissimilar to the present case of the Assessee. Even otherwise, we do not find any material and/or reason to contradict the findings of the ld. Commissioner on the issue under consideration. Thus, on the aforesaid analyzations, the decision of the ld. Commissioner is liable to be upheld. Hence, the decision of the ld. Commissioner in deleting the addition of Rs.1,01,89,874/- on account of 'legal and professional expenses' and /or issue under consideration is upheld. Resultantly, Ground no.2 raised by the Revenue stands dismissed. 31. Coming to the Ground no.3/ issue /addition of Rs. 3,82,35,433/- on account of 'Employees Remuneration, it is observed that the AO made such addition, applying the proportion received on the house property income to the total income @ 40.69% and therefore, the Assessee being aggrieved also challenged the said addition before the ld. Commissioner and during the appellate proceedings, has claimed as under: "The applicant has also employed various supervisory staff for maintaining the Mall. As per terms of the sample agreement discussed above, the liability to main....
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....for earning rental income. Accordingly, disallowance under the head staff cost is restricted to Rs. 12.00 lacs. " 33. It is also a fact that, the Hon'ble Tribunal in the Assessee's holding company, vide order dated 15.11.2019 in ITA nos. 3991 to 3994/Mum/2018 restricted the addition by following the judgment of the Hon'ble Tribunal in Assessee's holding company for the AY 2009-10 and 2010-11, by observing and holding as under: "26. As the facts and circumstances during the year under consideration are pari-materia, respectfully following the order of the Tribunal in assessee's own for the A.Y. 2009-10 and 2010-11, which has also been relied by the Id. CIT(A) while restricting the addition, we do not find any reason to interfere in the order of the Id. CIT(A) in restricting the said addition, Accordingly, we uphold the same." 34. The ld. Commissioner further observed that the Hon'ble Tribunal in the Assessee's holding company, also noted its observation in para 54 of such order, which clearly substantiates that the holding company of the Assessee has made recoveries in relation to the regular cleaning of the common areas, security services for the common areas, re....
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....favour of the Assessee. 38. Hence, in our considered view, the order of the ld. Commissioner in deleting the addition under consideration is not only based on the factual findings but also based on the legal precedents. Even otherwise, the Revenue has failed to establish that the facts and issues involved in the cases dealt with by the Hon'ble Tribunal in the Assessee's holding company and by the predecessor of the ld. Commissioner in the Assessee's cases, were/are dissimilar to the present case of the Assessee. Even otherwise, we do not find any material and/or reason to contradict the findings of the ld. Commissioner on the issue under consideration. Thus, on the aforesaid analyzations, the decision of the ld. Commissioner is liable to be upheld. Hence, the decision of the ld. Commissioner in deleting the addition of Rs. 3,82,35,433/- on account of 'Employees Remuneration' and/or issue under consideration is upheld. Resultantly, Ground no.2 raised by the Revenue stands dismissed. 39. Coming to next Ground no.4/issue/addition of Rs.6,51,29,823/- being disallowance of 'advertisement and sales promotion expenses', we observe that the Assessee before the ld. Commissioner in the....
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....no. 51 & 52/M/2015 (supra) has also dealt with identical issue and addition and ultimately, restricted the disallowance to the extent of Rs.12,00,000/- by observing and holding as under: "Thus as per clause of lease agreement, the assessee is responsible for advertising its mall as over and above of rental charges Rs. 5 per sq feet is collected from the licensee. Further the recovery of such charges are offered for tax under the head business and profession in form of security charges. Therefore, if an income is earned under one head, then how can expenses relate to such income be disallowed and allowed under any other head. Accordingly, we do not find any justification for the disallowance of advertisement and sales promotion expenses. However, keeping in view the fact that such advertisement also helps the A.O. in getting regular tenants, we direct the AO to restrict the disallowance to the extent of Rs. 12 lacs. We direct accordingly." 41. We also observe that in the Assessee's holding company for the cases pertaining to AY 2011-12 to 2014-15, the similar issue arose and travelled up to the Hon'ble Tribunal, who vide order dated 15.11.2019 passed in ITA Nos. 3991 to ....
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.... is not only based on the factual findings but also based on the legal precedents. Even otherwise, the Revenue has failed to establish that the facts and issues involved in the cases dealt with by the Hon'ble Tribunal in the Assessee's holding company were/are dissimilar to the present case of the Assessee. Even otherwise, we do not find any material and/or reason to contradict the findings of the ld. Commissioner on the issue under consideration. Thus, on the aforesaid analyzations, the decision of the ld. Commissioner is liable to be upheld. Hence, the decision of the ld. Commissioner in deleting the addition of Rs.6,51,29,823/- being disallowance of 'advertisement and sales promotion expenses' except as upheld to the extent of Rs. 24,00,000/- and/or issue under consideration, is upheld. Resultantly, Ground no.4 raised by the Revenue stands dismissed. 46. Coming to the Ground no.5/issue/addition of Rs. 37,98,195/-, which pertains to the disallowance made qua 'miscellaneous and other expenses', it is observed that the Assessee also challenged the instant addition and during the course of first appellate proceeding before the ld. Commissioner has claimed as under: "23.1....
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....nses by the Assessing Officer amounting to Rs.31,38,876/-." 48. Further, it is also a fact that the aforesaid judgment of the Tribunal has subsequently been followed by the Hon'ble Coordinate Bench of the Tribunal in the Assessee's holding company for the AYs 2011-12 to 2014-15 cases, in ITA Nos.3991 to 3994/Mum/2015 (supra) and allowed the identical claim/issue in favour of the Assessee by deleting the identical addition. 49. Thus, the ld. Commissioner, by considering the peculiar facts that the AO has made the addition under consideration on the identical grounds, as in the case of Assessee holding company, without establishing any contrary facts and findings. Further, the Hon'ble Tribunal in the Assessee's holding company has also considered the peculiar fact that the Assessee's holding company has made suo-moto disallowance qua office expenses and general expenses, in the ratio of income earned and therefore, no further disallowance was called for. The Ld. Commissioner further by considering peculiar facts that Assessee's holding company has made suo-moto disallowance qua office expenses and general expenses, in the ratio of income earned and therefore, no further disa....
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....come. The same is evident from the agreement submitted before your Honor at page nos. 1 to 64 of the paper book II. 24.3 It is also submitted that appellant is responsible for providing security in the common areas of the mall i.e. providing overall general security to the mall as a whole. It is to be noted that the appellant is not responsible for providing security inside the leased premises i.e. individual shops in the mall. It is the portion other than leased portion which is the responsibility of the appellant. And the appellant earns CAM charges for the same. Accordingly, the appellant vehemently contends that no portion of the security charges is allocable to income from house property, as the same to the lease house property is in no way responsibility of the appellant." 53. The ld. Commissioner by considering the peculiar facts and circumstances, the submission of the Assessee and decision of the AO on the issue under consideration and the judgment of the Hon'ble Tribunal in the Assessee's holding company cases decided on 06.10.2016 in ITA No.51 and 52/Mum/2015, ultimately decided the issue in favour of Assessee and /or deleted the identical addition by observi....
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....issioner also observed from the definition of 'common area' that the 'common area' does not include the area of the licensed premises. Thus, the genesis of the agreement entered by the Assessee's holding company and that by the Assessee is on the same footing. Further, similar recoveries of charges have been made by the Assessee vide leave and license agreements entered into by the Assessee with its tenants. Further, the nature of activities by both the companies are identical in all aspects. The AO has also made disallowance in the case of Assessee on similar lines as that made in the case of holding company and therefore, the order of the Hon'ble Tribunal, is squarely applicable to the Assessee's case as well. 58. Thus, the Ld. Commissioner on the aforesaid peculiar facts and circumstances, and respectfully following the judgments of the Hon'ble Tribunal, ultimately allowed the issue in favour of the Assessee and /or deleted the addition. Hence, in our considered view, the order of the ld. Commissioner in deleting the addition under consideration is not only based on the factual findings but also based on the legal precedents. Even otherwise, the Revenue has failed to establis....