2021 (1) TMI 1117 - AT - Income Tax

Correct head of income - Rental receipts - assessable as Income from house property OR business income - HELD THAT - As the assessee has itself declared the very kind of receipt derived in the subsequent assessment years under the head business income only and therefore, it does not dispute the lower authorities action under challenge which has been the subject matter above extracted twin grounds. And more so, in view of hon ble apex court s decision in Chennai Properties Investment Ltd. 2015 (5) TMI 46 - SUPREME COURT and tribunal s decision in assessee s own case for A.Y. 2010-11 dated 11.7.2016. We decline the assessee s above two substantive grounds in foregoing terms therefore. Admission of assessee s additional ground - HELD THAT - We are of the opinion that the tribunal s jurisdiction continues right from filing of the appeal till final disposal u/s 254 of the Act. Their lordships landmark judgement in NTPC 1996 (12) TMI 7 - SUPREME COURT has clarified that this second appellate jurisdiction has to be taken in widest than in a narrower sense. We make it clear the hon ble jurisdictional high court s decision (supra); even if taken as directly dealing with the issue, came much prior in time. We thus go by the judicial hierarchy to decline the Revenue s objections regarding admission of asssessee s additional ground. We also quote this tribunal s decision All Cargo Global Logistics Ltd. Vs. DCIIT 2012 (5) TMI 466 - ITAT MUMBAI that we can very well entertain and admit an additional ground to determine the correct tax liability of an assessee provided the relevant facts are already on record. Higher and secondary education cess paid - eligible deduction u/s 37 r.w.s. 40(a)(ii) while computing income under the head profits and gains of business /profession - HELD THAT - We hold that the asssessee s paper book running clearly demonstrate that it had itself added back the education cess amount suo moto. Its further argument that we have to go by hon ble apex court s decisions dealing with central excise law also does not find favour with us in view of hon ble Bombay high court s decision in Sesa Goa Ltd. 2020 (3) TMI 347 - BOMBAY HIGH COURT specifically dealing with this plea onwards thereby concluding that a cess under the provisions of the Act is not to be taken as tax for the purpose of s.40(a)(ii) disallowance . Therefore we accept assessee s claim seeking to allow education cess and direct the Assessing Officer to finalise the consequential computation as per law. The assessee s instant additional substantive ground is allowed.

Summary

Issues Involved:
1. Classification of income from letting out immovable properties as business income or income from house property.
2. Allowability of education cess as a deduction under section 37 r.w.s. 40(a)(ii) of the Income Tax Act.

Issue 1: Classification of Income:
The appeal concerned the classification of the assessee's rental income of ?106,49,97,564 under either 'profits and gains of business or profession' or 'income from house property' as per section 28 of the Income Tax Act. The assessee had initially disputed the classification, but during the hearing, the representative acknowledged the consistent declaration of such income as 'business income' in subsequent assessment years. Referring to legal precedents, the tribunal declined the assessee's appeal, citing previous decisions and the assessee's own actions in subsequent years.

Issue 2: Allowability of Education Cess:
During the appeal, the assessee sought to raise an additional ground regarding the deduction of education cess paid amounting to ?23,93,221 under section 37 r.w.s. 40(a)(ii) of the Act. The assessee argued for the admission of this ground based on the tribunal's wide jurisdiction under section 254 of the Act. The Revenue objected to the belated claim, emphasizing the absence of such a claim in previous filings and audit reports. The Revenue contended that admitting the new ground would provide an undue advantage to the assessee and quoted legal precedents to support their objection.

The tribunal, after considering both parties' arguments, admitted the additional ground based on legal principles and merits. It cited the NTPC case to support its decision, emphasizing the wide jurisdiction of the tribunal. Regarding the allowability of education cess, the tribunal referred to relevant case laws and circulars to conclude that education cess is not included in the definition of 'tax' under section 40(a)(ii). The tribunal found that the relevant facts were on record, as demonstrated by the assessee's actions, and allowed the claim for education cess as a deduction. Consequently, the tribunal directed the Assessing Officer to finalize the computation accordingly, allowing the assessee's instant additional substantive ground.

In conclusion, the tribunal partially allowed the assessee's appeal by confirming the classification of income as business income and allowing the deduction for education cess. The decision was pronounced on 22nd January 2021.