Income Tax Appellate Tribunal - Kolkata
Sri Ganesh Properties(P)Ltd, Kolkata vs Department Of Income Tax on 16 January, 2015
आयकर अपील य अधीकरण, यायपीठ - "C" कोलकाता,
IN THE INCOME TAX APPELLATE TRIBUNAL "C" BENCH: KOLKATA
(सम )Before ी महावीर संह, यायीक सद य एवं/and ी शामीम याहया, लेखा सद य)
[Before Shri Mahavir Singh, JM & Shri Shamim Yahya, AM]
आयकर अपील सं या / I.T.A No.1312/Kol/2012
नधॉरण वषॅ/Assessment Year: 2006-07
Assistant commissioner of Income-tax, Vs. M/s. Sri Ganesh Properties (P) Ltd.
Circle-3, Kolkata. (PAN:AADCS8609M)
(अपीलाथ /Appellant) ( यथ /Respondent)
Date of hearing: 08.01.2015
Date of pronouncement: 16.01.2015
For the Appellant: Shri Sanjay, JCIT, Sr. DR
For the Respondent: Shri P. J. Bhide, FCA
आदेश /ORDER
Per Shri Mahavir Singh, JM :
This appeal by revenue is arising out of order of CIT(A)-I, Kolkata in Appeal No. 115/CIT(A)-1/Cir-3/08-09 dated 29.06.2012. Assessment was framed by ACIT,Circle-3, Kolkata u/s. 143(3) of the Income-tax Act, 1961 (hereinafter referred to as "the Act") for Assessment Year 2006-07 vide his order dated 12.09.2008.
2. The only issue in this appeal of revenue is against the order of CIT(A) directing the AO to assess the receipt of Rs.15,35,842/- under the head income from other sources earned on account of services as against assessed by the AO as income from house property. For this, revenue has raised following two grounds:
"1. That on the facts and circumstances of the case the Ld. CIT (A) erred in holding that the receipt of Rs.15,35,842/- are assessable under the head 'income from other sources' without appreciating the fact that mere absence of written agreement between tenant and the owner does not alter the character of rental income .
2. The Ld. CIT(A) erred in holding that the receipt of Rs.15,35,842/- are assessable under the head 'income from other sources' without appreciating the fact that in absence of electricity, sanitation, security etc., a place is not viable for carrying out any kind of activity."
3. We have heard rival submissions and gone through facts and circumstances of the case. Brief facts relating to the above issue are that the assessee is lessee of property at 12, 2 ITA No.1312/K/2012 M/s. Sri Ganesh Properties (P) Ltd. AY 2006-07 Lower Chitpur Road, Kolkata, 700 073. By Lease dated 14.02.1948 assessee took lease of the property from Maharajadhiraj Bahadur Sir Uday Chand Mahtab for a period of 66 years with an option of 33 years on various terms and conditions fully described in Lease Deed. At the time of entering into agreement, the building property was in a dilapidated condition and on the basis of expert opinion, the building was not repairable and new construction had to be made after demolition of old building. But the lesser was not having sufficient fund to construct the building and the assessee company being the lessee, agreed to reconstruct the building within 25 years of entering into agreement. Re-construction cost worked out by the Chartered Engineer was Rs. 12,00,000/- and lessee had to pay Rs.4,00,000/- to lesser towards cost of old and existing material and structure. As per lease agreement, the assessee has to pay monthly rent at various progressive rates commencing Rs. 2,000/- to Rs. 7,000/- per month as mentioned in the Lease Deed. The total area of the leasehold property was 8 Bighas, 15 Kattahs, 11 Chittaks and 18 Sq. ft. After Lease Agreement, out of the said property, 41 kattahs, 12 Chittaks of land as per land acquisition plan was acquired by the State of West Bengal for public purpose. We find from records that re-built building situated in the leasehold property consists of ground floor, 1st floor and partly 2 nd floor. The ground floor is completely used by various shop keepers, 1st floor is partly used for shops, offices, godowns and partly for residential purpose and 2nd floor is completely used for residential purpose. The assessee received rent from residential places, offices, godowns and shops. For receiving rent, there are agreements between assessee and tenants. In the ground floor, there are vacant places, during 6.00 a.m.to 10.00 a.m. and hawkers who are not tenants sell vegetables, fruits, fish and eggs etc. purely on temporary basis. The assessee company receives some amount from these hawkers for allowing them to sell goods in the open place on daily basis. The assessee declares these collection under the head - "Daily Hat and Hawker Collection". The assessee provides the following amenities to the hawkers, who on temporary basis sell vegetables, fruits, fish and eggs at the vacant place:-
1) Watch & Ward 2) Supply of water 3) Scavenging facilities 4) Toilet facilities 5) Drainage facilities 6) Electricity facilities
4. The assessee declared Income earned from residential complex, offices, 3 ITA No.1312/K/2012 M/s. Sri Ganesh Properties (P) Ltd. AY 2006-07 godowns and shops under the head "Income from House Property" and income received from hawkers who occupy open space on pure, temporary basis for sale of vegetables, fruits, fish and eggs etc. are shown under the head - "Income from Other Sources". Accordingly, the assessee apportioned/declared total receipt of income of Rs.56,03,828/- into two categories i.e. Rs.40,67,986/- under the head income from house property on account of monthly rentals and municipal tax collection, while a sum of Rs.15,35,852/- under the head income from other sources on account of collection from hat and hawker for electricity charges, documentation, licence fee etc. The AO treated the entire receipt as income from house property amounting to Rs.56,03,828/-. Aggrieved, assessee preferred appeal before CIT(A), who accepted the claim of assessee of bifurcation of gross receipt into two heads i.e. income from house property and income from other sources amounting to Rs.40,67,986/- and Rs.15,35,842/- respectively. Aggrieved, revenue came in appeal before Tribunal.
5. We have heard rival submissions and gone through facts and circumstances of the case. We find that the assessee claimed that for earning this income which is shown under the head of income from other sources as it has to provide various facilities as stated herein above. The expenditure incurred by the assessee for providing the aforesaid facilities are deducted from the income earned under the head "Other Sources" to arrive at the net income. Since its inception, assessee has been following the same system for computing its total income and the same has been duly accepted by revenue in earlier years and also in subsequent years. But for the first time in this AY only AO assessed the entire income as income from house property.
We find that for earning income from hawkers, who are occupying open-space on purely and temporary basis, have no agreement with the assessee and they have not been provided with any specific built-up area. Hence, according to us, the amount received from hawkers on purely and temporary basis cannot be considered as rental income to be assessed as income from house property. The CIT(A) has rightly considered the proportionate bifurcation and considered the receipts from hawkers as income from other sources. We find no infirmity in the order of CIT(A).
6. Even otherwise, for the sake of principle of consistency, the Revenue all along 4 ITA No.1312/K/2012 M/s. Sri Ganesh Properties (P) Ltd. AY 2006-07 been accepting the receipts from hawkers as income from other sources, now, they cannot go back and assess the same as income from house property. For this we rely on the decision of Hon'ble Delhi High Court in the case of CIT Vs. Delhi Press Patra Prakashan Ltd. (No.2) (2013) 355 ITR 14 (Del). Wherein it has been held as under:
"The next controversy that needs to be addressed is whether it was open for the Assessing Officer to deny the benefit of section 80-I of the Act to the assessee having allowed the benefit to the assessee in the preceding three years. It is contended on behalf of the assessee that it was necessary for the Assessing Officer to be consistent with the assessment for the earlier years. The question as to the qualification of units Nos. 2 and 3 as industrial undertakings arose in the earlier years and the Assessing Officer had accepted that units Nos. 2 and 3 qualified for a deduction under section 80- I of the Act in the earlier years. By virtue of section 80-I(5) of the Act deduction under section 80-I of the Act was available to an assessee in the assessment year relevant to the previous year in which the industrial undertaking begins to manufacture or produce articles or things (such assessment year being the initial assessment year) and each of the seven assessment years immediately succeeding the initial assessment year. This necessarily implied once the issue as to eligibility under section 80-I of the Act was examined and allowed in the initial assessment, the same was allowable in the subsequent years also unless there was any material change in the succeeding years.
It is well settled law that the principles of res judicata do not apply to income-tax proceedings and assessment for each year is an independent proceeding. It is now equally well established that issues that have been settled and accepted over a period of time should not be revisited in subsequent assessment years in the absence of any material change which would justify the change in view.
The Supreme Court in the case of Radhasoami Satsang [1992] 193 ITR 321 (SC) has held that unless there is a material change in justifying the Revenue to take a different view the earlier view which has been settled and accepted of a several years should not be disturbed. The relevant extract from the said judgment is quoted below (page
329) :
"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 but 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.
On these reasonings in the absence of any material change justifying the Revenue to take a different view of the matter-and, if there was not change, it was in support of the assessee-we do not think the question should have been reopened and contrary to what had been decided by the Commissioner of Income-tax in the earlier proceedings, a different and contradictory stand should have been taken. We are, therefore, of the view that these appeals should be allowed and the question should be answered in the affirmative, namely, that the Tribunal was justified in holding that the income derived by the Radhasoami Satsang was entitled to exemption under sections 11 and 12 of the Income-tax Act of 1961."5 ITA No.1312/K/2012
M/s. Sri Ganesh Properties (P) Ltd. AY 2006-07 The decision of the Supreme Court in the case Radhasoami Satsang [1992] 193 ITR 321 (SC) was on the facts where the question as to the entitlement for exemption under section 4(3)(i) of the Indian Income-tax Act, 1922, had not been granted for the assessment year 1939-40. The assessee had challenged the assessment order which was accepted by the Appellate Assistant Commissioner who upheld the assessee's claim for exemption. This view was consistently followed by the successive Assessing Officers till 1963-64. In these circumstances, the Supreme Court held that the view that had been settled and accepted over a period of years should not be allowed to be disturbed.
This court in the case of CIT v. Lagan Kala Upvan [2003] 259 ITR 489 (Delhi), following the decision of the Supreme Court in the case of Radhasoami Satsang [1992] 193 ITR 321 (SC) has also held that where a particular view has been accepted by the Assessing Officer to several years the same cannot be permitted to be departed from unless there is some material facts that justified such a change. Similar view has been expressed by this court in the case of Modi Industries Ltd [2010] 327 ITR 570 (Delhi). In this case, while considering a claim of deduction made by an assessee under section 80J of the Act, this High Court held as under (page 573):
"The second question relates to the claim of the assessee for deduction under section 80J of the Income-tax Act in respect of its new unit, namely, 10 ton furnace division and steel unit 'B'. This case pertains to the assessment year 1976-77. A perusal of the order of the Assessing Officer would reveal that for the first time, claim under section 80J of the Act was made by the assessee in the assessment year 1973-74. The assessee was denied that claim by the Assessing Officer. For this reason, the Assessing Officer denied the claim in this assessment year as well, taking note of the fact that the matter pertaining to 1973-74 was pending before the Income-tax Appellate Tribunal.
It is a matter of record that the appeal filed by the assessee for the assessment year 1973-74 was allowed by the Income-tax Appellate Tribunal. The effect thereof was that the assessee was granted the requisite deduction under section 80J of the Act for the assessment year 1973-74. The Department has sought reference under section 256(1) of the Act which reference application was also rejected by the Tribunal. Likewise, for the assessment years 1974-75 and 1975-76, the claims of the assessee were allowed. The assessee, once given the deduction under section 80J of the Act is entitled to such a deduction for a period of five years. If the assessee has been allowed the benefit of section 80J in the last three preceding years, there is no reason to deny the same for the instant assessment year. We, therefore, answer this issue also in favour of the assessee and against the Revenue."
In the present case, the claim of the assessee under section 80-I of the Act was examined and allowed by the Assessing Officer for three years preceding the assessment year 1991-92. It is relevant to note that assessments in the earlier years, i.e., relating to the assessment years 1988-89, 1989-90 and 1990-91 has not been disturbed by the Assessing Officer and there has been no change that could justify the Assessing Officer adopting a different view in the assessment years 1991-92 and thereafter. As stated hereinbefore, in certain cases where the issues involved have attained finality on account of the subject matter of dispute having been finally adjudicated, the question of reopening and revisiting the same issue again in subsequent years would not arise. This is based on the principle that there should be finality in all legal proceedings. The Supreme Court in the case of Parashuram Pottery Works Co. Ltd. v. ITO [1977] 106 ITR 1 (SC) had held as under (page 10) :
6 ITA No.1312/K/2012M/s. Sri Ganesh Properties (P) Ltd. AY 2006-07 ". . . that the policy of law is that there must be a point of finality in all legal proceedings, that stale issues should not be reactivated beyond a particular stage and that lapse of time must induce repose in and set at rest judicial and quasi-judicial controversies as it must in other spheres of human activity."
In the facts of the present case, where although the Assessing Officer has allowed the assessee deduction under section 80-I of the Act in the preceding years, one may still have certain reservations as to whether the issue of eligibility of units Nos. 2 and 3 fulfilling the conditions has been finally settled, since the question has not been a subject matter of any appellate proceedings in the years preceding the assessment year 1991-92. However, there is yet another aspect which needs to be considered. By virtue of section 80-I(5) of the Act, deduction under section 80-I of the Act is available to an assessee in respect of the assessment year (referred to as the initial assessment year) relevant to the previous year in which the industrial undertaking begins to manufacture or produce articles or things, or to operate its cold storage plant or plants or the ship is first brought into use or the business of the hotel starts functioning or the company commences work by way of repairs to ocean-going vessels or other powered craft. Such deduction is also available for the seven assessment years immediately succeeding the initial assessment year. Surely in cases where an assessee is held to be eligible for deduction in the initial assessment year, the same cannot be denied in the subsequent assessment years on the ground of ineligibility since the set of facts which enable an assessee to claim to be eligible for deduction under section 80-I of the Act occur in the previous year relevant to the initial assessment year and have to be examined in the initial assessment year. In such cases, where the facts on the basis of which the deductions are claimed are subject matter of an earlier assessment year and do not arise in the current assessment year, it would not be possible for an Assessing Officer to take a different view in the current assessment year without altering or reopening the assessment proceedings in which the eligibility to claim the deduction has been established.
In cases where deduction is granted under section 80-I of the Act, the applicability of the section is determined in the year in which the new industrial undertaking is established. The qualification as to whether any industrial undertaking fulfils the condition as specified under section 80-I of the Act has to be determined in the year in which the new industrial undertaking is established. Although the deduction under section 80-I of the Act is available for the assessment years succeeding the initial assessment year, the conditions for availing of the benefit are inextricably linked with the previous year relevant to the assessment year in which the new undertaking was formed. In such circumstances, it would not be possible for an Assessing Officer to reject the claim of an assessee for deduction under section 80-I of the Act on the ground that the industrial undertaking in respect of which deduction is claimed did not fulfil the conditions as specified in section 80-I(2) of the Act, without undermining the basis on which the deduction was granted to the assessee in the initial assessment year. This, in our view, would not be permissible unless the past assessments are also disturbed.
The Assessing Officers over a period of three years being assessment years 1988-89, 1989-1990 and 1990-1991 have consistently accepted the claim of the assessee for deduction under section 80-I of the Act and it would not be open for the Assessing Officer to deny the deduction under section 80-I of the Act on the ground of non- fulfillment of the conditions under section 80-I(2) of the Act without disturbing the assessment for the assessment years relevant to the previous year in which the units Nos. 2 and 3 were established.7 ITA No.1312/K/2012
M/s. Sri Ganesh Properties (P) Ltd. AY 2006-07 This view has also been accepted by a Division Bench of the Gujarat High Court in the case of Saurashtra Cement and Chemical Industries Ltd. [1980] 123 ITR 669(Guj). In that case, the Gujarat High Court held that where relief of a tax holiday had been granted to an assessee in an initial assessment year in which the conditions for grant of tax holiday had to be examined, denial of relief in the subsequent years would not be permissible without disturbing the assessment in the initial assessment year. The relevant extract from the decision of the Gujarat High Court in Saurashtra Cement and Chemical Industries Ltd. [1980] 123 ITR 669 (Guj) is quoted below (page 675):
"The next question to which the Tribunal addressed itself, and in our opinion rightly, was whether the Income-tax Officer was justified in refusing to continue the relief of tax holiday granted to the assessee- company for the assessment year 1968-69, in the assessment year under reference, that is, 1969-70, without disturbing the relief granted for the initial year. It should be stated that there is no provision in the scheme of section 80J similar to the one which we find in the case of development rebate which could be withdrawn in subsequent years for breach of certain conditions. No doubt, the relief of tax holiday under section 80J can be withheld or discontinued provided the relief granted in the initial year of assessment is disturbed or changed on valid grounds. But without disturbing the relief granted in the initial year, the Income-tax Officer cannot examine the question again and decide to withhold or withdraw the relief which has been already once granted."
The Division Bench of the Bombay High Court in the case of Paul Brothers [1995] 216 ITR 548 (Bom) has also adopted the view expressed by the Gujarat High Court in the case of Saurashtra Cement and Chemical Industries Ltd. [1980] 123 ITR 669 (Guj)."
Similarly, we are of the view that it is well settled law that the principles of res judicata do not apply to income-tax proceedings and assessment for each year is an independent proceeding. It is now equally well established that issues that have been settled and accepted over a period of time should not be revisited in subsequent assessment years in the absence of any material change which would justify the change in view. Hence in the present case also revenue all along had accepted the position of bifurcation of rental receipts into service charges and rent from letting out of premises, accordingly, we accept the plea of assessee that for the sake of consistency, the claim of bifurcation is accepted. Hence, we confirm the order of CIT(A) and the only issue of revenue's appeal is dismissed.
7. In the result, appeal of revenue is dismissed.
8. Order is pronounced in the open court on 16.01.2015 Sd/- Sd/-
शामीम याहया, लेखा सद य महावीर संह, यायीक सद य
(Shamim Yahya) (Mahavir Singh)
Accountant Member Judicial Member
Dated: 16 th January, 2015
8 ITA No.1312/K/2012
M/s. Sri Ganesh Properties (P) Ltd. AY 2006-07
व र ठ निज स चव Jd.(Sr.P.S.)
आदेश क त ल प अ े षतः- Copy of the order forwarded to:
1. अपीलाथ /APPELLANT - ACIT, Circle-3, Kolkata
2 यथ /Respondent - M/s. Shri Ganesh Properties (P) Ltd., 22B, Rabindra
Sarani, Kol-73
3. आयकर क मशनर (अपील)/ The CIT(A), Kolkata
4. आयकर क मशनर/ CIT Kolkata
5. वभा गय तनीधी / DR, Kolkata Benches, Kolkata
स या पत त/True Copy, आदेशानुसार/ By order,
सहायक पंजीकार/Asstt. Registrar.