2019 (1) TMI 999 - AT - Income Tax

Correct head of income - income from leave and license charges and service charges - house property income V/S business income by the assessee - Held that - As decided in assessee s own case we find that this issue is covered in favour of assessee and against Revenue by the decision of Hon ble Supreme Court in the case of Chennai Properties and Investments Ltd. Vs. CIT 2015 (5) TMI 46 - SUPREME COURT the circumstances of the present case from which we arrive at irresistible conclusion that in this case, letting of the properties is in fact is the business of the assessee. The assessee therefore, rightly disclosed the income under the Head Income from Business. It cannot be treated as income from the house property - Decided in favour of assessee. Disallowance of set off of brought forward business loss - AO had held that since assessee had not carried out any other business activity except for earning rental income and service charge, which according to AO was treated as income under the head Income from House Property‟, therefore disallowed the set off of brought forward business loss by treating the business income as NIL. - Held that - CIT(A) while appreciating the facts of the present case had rightly considered that AO has erred in holding the amount as Brought forward Business Loss and disallowing the said amount, which represents the credit available u/s 115JAA and hence the disallowance of the said amount made by the A.O. was rightly set aside by directing AO to give the credit for the said amount u/s 115JAA of the Income-tax Act, 1961. - Decided against revenue

Issues Involved:
1. Deletion of addition of ?5,09,27,464/- house property income determined by the AO against the income/loss shown as business income by the assessee.
2. Reliance on the decision of the Apex Court in the case of M/s Chennai Properties and Investments, and whether the facts of the assessee company are distinguishable from that case.
3. Disallowance of the set-off of brought forward business loss of ?7,47,711/- of A.Y. 2010-11 & 2013-14 claimed by the appellant.
4. Request to set aside the order of the Ld. CIT(A) and restore that of the A.O.
5. General grounds for amending or adding grounds of appeal.

Issue-wise Detailed Analysis:

Ground No. 1 & 2:

These grounds are interconnected and relate to the deletion of the addition of ?5,09,27,464/- house property income determined by the AO against the income/loss shown as business income by the assessee. The Ld. AR for the assessee argued that these grounds are covered by the order of Hon’ble ITAT in ITA No. 1180/Mum2017 for AY 2013-14 in the assessee’s own case, where an identical ground was decided on merits. The Ld. DR agreed that the issue is covered in favor of the assessee.

The ITAT examined the material and found that the identical ground had been decided by the Coordinate Bench of Hon’ble ITAT in ITA No. 1180/Mum2017 for AY 2013-14. The CIT(A) had treated the income from lease as business income based on the decision of the Hon’ble Supreme Court in the case of Chennai Properties and Investments Ltd. Vs. CIT (2015) 56 Taxmann.com 456 (SC) and Shambhu Investment P. Ltd. Vs. CIT 263 ITR 143 (SC). The CIT(A) noted that the assessee company was in the business of building and leasing premises of special nature, and the income should be treated as business income, not as income from house property.

The ITAT also noted that in the assessee’s own case for AY 2010-11, ITA No. 261/M/2016, the income from lease and service charges was treated as business income. The ITAT upheld the CIT(A)’s decision, stating that the CIT(A) had rightly allowed the claim of the assessee and considered the income from leave and license charges and service charges as income from business. Accordingly, these grounds raised by the revenue were dismissed.

Ground No. 3:

This ground relates to the disallowance of the set-off of brought forward business loss of ?7,47,711/- of A.Y. 2010-11 & 2013-14 claimed by the assessee. The AO had disallowed the set-off, treating the business income as NIL since the income was considered under the head ‘Income from House Property’.

The CIT(A) noted that the amount of ?7,47,711/- represents the credit available u/s 115JAA of the Income-tax Act, 1961, and the disallowance made by the AO was incorrect. The CIT(A) directed the AO to give credit for the said amount u/s 115JAA of the Income-tax Act, 1961. The ITAT upheld the CIT(A)’s decision, finding no reason to interfere with the findings recorded by the CIT(A). This ground raised by the revenue was dismissed.

Ground No. 4 & 5:

These grounds raised by the revenue are general in nature and do not require specific adjudication.

Conclusion:

In the net result, the appeal filed by the revenue was dismissed with no order as to cost. The order was pronounced in the open court on 16th Jan, 2019.

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