TaxTMI 
TaxTMI 
2024 (12) TMI 1799
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....ated 17/12/2019 for A.Y. 2017-18. 2. At the outset, all the appeals have same nature of facts and common issue. So, ITA No. 3859/Mum/2024 (assessee's appeal) and ITA No.3918/Mum/2024 (revenue's appeal) are taken as lead case. 2.1 The following grounds are taken by the parties:- ITA No.3859/Mum/2024 (Assessee's appeal) "1(a). On the facts and in the circumstances of the case and in law, the learned CIT(A) erred in confirming brokerage paid to M/s K. Raheja Realty Pvt Ltd restricted to 2% brokerage expenditure paid and excess @1% which works out to Rs.1,12,02,841/-. 2(a). On the facts and in the circumstances of the case and in law, the learned CIT(A) erred in confirming the disallowance on merits considering the Annual Letting Value of unsold flats which is closing stock of the appellant, treated as "Income from House Property." 2(b). On the facts and in the circumstances of the case and in law, the learned CIT(A) erred in not following jurisdictional ITAT decisions including appellant's own case which squarely apply to the facts of the appellant's case, which are as under:- (i) Ferani Hotels Pvt. Ltd v/s ACIT, Central Circle-4(1), Mumbai....
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....r and/or vary any of the grounds of appeal before or at the time of hearing." 3. Brief facts of the case are that the assessee is a hotelier, promoter and builder and pay brokerage to M/s K Raheja Realty Pvt Ltd (in short, 'KRRPL'). The assessee is also doing business as hotelier in Tamil Nadu. During the impugned assessment year, the assessee paid the brokerage @3% to KRRPL for selling of immovable properties. The assessee continued its deal more than 10 years with the said party. On going through the Balance Sheet of the assessee, the ld. AO noticed that inventories amount to Rs. 536,43,44,222/- which consists of finished goods amount to Rs. 307,73,03,792/-and after deducting the parking amount to Rs. 5,41,214/- the balance works out to Rs. 307,67,62,578/- which is treated as stock of the unsold and unoccupied property. During the assessment proceedings, the Ld.AO has restricted the brokerage payment to KRRPL from 3% to 2%. The determination of percentage of commission was fully relied on the his last order for A.Y. 2015-16 where he relied on the order of the TPO who has made adjustment to the brokerage amount toRs.87,35,269 being excess of brokerage paid @0.87% and restricted....
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....ear 1991-92 is Rs. 9,38,510 and for the assessment year 1992-93 is Rs. 14,65,880 and the said assessment orders have been placed on record. (v) Under the Central Board of Direct Taxes Circular No. 6-P, dated July 6, 1968, it is stated that no disallowance is to be made under section 40A(2) in respect of the payments made to the relatives and sister concerns where there is no attempt to evade tax. In view of the aforesaid admitted facts we are of the view that the Tribunal was correct in coming to the conclusion that the Commissioner of Income-tax (Appeals) was wrong in disallowing half per cent. commission paid to the sister concern of the assessee during the assessment years 1991-92 and 1992-93. The learned advocate appearing for the appellant was also not in a position to point out how the assessee evaded payment of tax by the alleged payment of higher commission to its sister concern since the sister concern was also paying tax at higher rate and copies of the assessment orders of the sister concern were taken on record by the Tribunal. We, therefore, answer the above question of law raised in these appeals 6 in the affirmative and dismiss the above ap....
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....Section 40A(2) of the Act. The brokerage payments were made to KRRPL on last ten (10) years for facilitating the sale of flats and other immovable properties, which form an integral part of the assessee's ongoing business activities. During the assessment proceedings, the Ld. AO did not present any evidence to substantiate restrictions on the payment of brokerage. He only relied on the observation of the TPO related last assessment year i.e. 2015-16. Furthermore, the payment of brokerage constituted the income of the recipient party, and both the assessee and the recipient fall under the jurisdiction of the same assessing officer. As such, there is no indication of any revenue loss to the department. The assessee adequately responded to all queries raised by the revenue authorities, and no discrepancies were identified. Even at the appellate stage, the addition was confirmed solely on the basis of the AO's observations, without presenting any relevant evidence to show that the brokerage payments exceeded the market value. We find that the observations of the Hon'ble Bombay High Court in the case of Indo Saudi Services (Travel) Pvt. Ltd. (supra) and the decision....
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.... and holding properties from such source would be its "business income" and not its income under the head "house property". He further relied on decision of the Hon'ble High Court of Gujarat in the case of CIT Vs. Neha Builders (P) Ltd. (2008) 296 ITR 661 (Guj), wherein it was observed that if the business of the assessee is to construct property and sell it or to construct and let out the same, then any income derived from the immovable properties held by it as its stock-in-trade cannot be assessed under the head "Income from house property". The Hon'ble High Court while concluding as herein above, had observed as under: "8. True it is, that income derived from the property would always be termed as income from the property, but if the property is used as 'stock-in-trade', then the said property would become or partake the character of the stock, and any income derived from the stock, would be 'income' from the business, and not income from the property. If the business of the assessee is to construct the property and sell it or to construct and let out the same, then that would be the 'businesses and the business stocks, which may include m....
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.... the head "Income from House Property." The core issue to be addressed is whether the income in question falls within the purview of Section 22 read with Section 23, i.e., "Income from House Property," or whether it should be considered under Section 28 as "Income from Business." In this regard, we respectfully observe that the Hon'ble Supreme Court in the case of Chennai Properties & Investments Ltd.(supra) has emphasized that the tax treatment of rental income hinges upon the business objectives and activities of the taxpayer. The Hon'ble Apex Court held that if the primary purpose of a business is letting out properties, the rental income arising therefrom must be categorized as "Income from Business," diverging from the general presumption of taxing such income under "Income from House Property." The nature and intent of the activities must therefore be evaluated in determining the appropriate classification. This position has also been upheld by the Hon'ble Gujarat High Court in Neha Builders (P) Ltd.(supra), where it was held that in cases where an assessee is engaged in the business of constructing and selling properties, and the unsold properties are included as closing ....