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TMI Blog2019 (3) TMI 331X X X X Extracts X X X X X X X X Extracts X X X X ..... e from retail spaces and retail shops owned by assessee, which was collected by M/s.Ambience Developers and Infrastructure Pvt.Ltd. by virtue of agreement dated 31/03/2008 - HELD THAT:- Section 60 contemplates income arising to transferee which should be taxed in the hands of transferor in the event there is no actual transfer of assets from which such income accrued. This fiction under section 60 operates irrespective of whether the concerned transfer is irrevocable or not. Thus essential condition is that there should be no transfer of asset from which such income arises. There are various decisions of Hon’ble Supreme Court and Hon’ble High Court’s, wherein, relation of property from which income arises has been considered to be an essential condition for applicability of section 60. Unable to concur with argument advanced by Ld.AR for taxing rental income received from leased premises in the hands of M/s.Ambience Developers and Infrastructure Pvt.Ltd., when such assets are owned and held by assessee. The exception argued by Ld.AR is no longer available to assessee, by virtue of strict interpretation of section 60-63 of the Act. Uphold view of CIT (A) that income from leas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t tenable in law and on facts. (b) The appellant craves leave to add, alter or amend any/all of the grounds of appeal before or during the course of the hearing of the appeal. ITA No. 6767/Del/2015 (Assessee s appeal) AY: 2010-11 On the facts and circumstances of the case the learned CIT (A) has erred:- 1. In not accepting the lease rentals received from retail spaces of Ambience Hotels and Resorts Pvt. Ltd. (AHRL) and offered for taxation in its hands under an agreement in lieu of interest free deposit of ₹ 75 crores given to AHRL and treating the same income in the hands of AHRL. 2. In not accepting the concept of beneficial ownership of the property in possession and enjoyment as held by the apex court in CIT V. Podar Cement Pvt. Ltd. (1997) 226 ITR 625 (SC) and Jodha Mai Kuthiala (RB) V. CIT (1971) 82 ITR 570 (SC). 3. In not recognizing that section 60 is not applicable, if the income is derived not from transfer of assets but by reason of the right to manage and carry on business. 4. In ignoring the fact that the appellant company had acquired an overriding title over the income from leasing of retail spaces of AHRL under an agr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ordinary course of business giving it right to manage its assets and carry on the business of leasing. The agreement is bona fide and unambiguous and creates certain legal rights and obligations which have been acted upon. 5. In disregarding the terms and conditions of the said agreement which gave right to ADIPL to exploit its assets against a consideration for a limited duration which has not been found to be false or collusive. 6. In confirming the disallowance of ₹ 5,56,000/- u/s 14A r.w. Rule 8D(2)(iii) made by the Assessing Officer when no direct or indirect expenditure has been incurred A by the appellant in earning the dividend income from investment which is carrying from earlier year. The appellant craves leave to add, modify, substitute, alter or delete any of the grounds of appeal on or before the date of hearing. It is observed that in all these appeals common issues are involved and facts are identical. Cross appeals pertain to assessment year 2010-11 in case of Ambience Hotels and Resorts Pvt.Ltd. 2. Brief facts of the case are as under: ITA No. 6413/Del/2015(Revenues appeal) (A.Y: 2009-10) 2.1. Original assessment was c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be allowed from said lease income, as these expenses were added back to assessee to its income. 4. Aggrieved by order of Ld.CIT (A) revenue is in appeal before us now. 5 . Ld.CIT DR placed reliance upon order of Ld.AO. He submitted that arrangement has been entered into by assessee with its sister concern, wherein right to receive rental income from retail shop and retail spaces have been given to assessee, against which assessee paid interest-free deposit of ₹ 75 lakhs. Ld.CIT DR strongly objected to arrangement of such kind by placing reliance upon section 60 of the Act, wherein without transfer of assets, income arising therefrom will be chargeable in the hands of transferor, and will be included in total income of transferor. It has been submitted by Ld. CIT.DR that, rental income in hands of assessee would amount to application of profits. She then submitted that de facto owner of property should be taxed in respect of rental income subject to deductions allowable, and merely because an overriding title has been created by virtue of an agreement entered into between assessee and the de facto owner of property, would not relieve de facto o wner from its li ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be effective from the date of this Agreement or the date of the Agreement for Taking Possession for Fit Out(s) entered into with tenants/occupants of the various retail spaces comprising the Said Space or any part thereof by the First Party, whichever is earlier. 4. That the Second Party shall be entitled to receive the monthly rent or other charges/including the arrears of rent / charges if any from the tenants or persons in occupation of their respective portion in the Said Space in its own name and all these tenants/occupants shall be deemed to be the tenants/ occupants of the Second Party and the Second Party shall have the right to receive the rent or charges from them during the currency of this Agreement and also to deal/negotiate with the said tenants occupants in the manner the Second Party deem fit and proper. 14. When we peruse the recitals of the Agreement (supra) reproduced above particularly clause 4, it goes to unequivocally prove that the second party to the Agreement (supra), namely, ADIPL is entitled to receive the rent or the charges from the tenants/occupants during the currency of this agreement. When ADIPL has got rights and interest in the property ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hall be deemed to be the owner of that building or part thereof; (iiia) a person who is allowed to' take or retain possession of any building or part thereof in part performance of a contract of the nature referred to in section 53A of the Transfer of Property Act, 1882 2 (4 of 1882 ), shall be deemed to be the owner of that building or part thereof; (iiib) a person who acquires any rights (excluding any rights by way of a lease from month to month or for a period not exceeding one year) in or with respect to any building or part thereof, by virtue of any such transaction as is referred to in clause (f) of section 269UA, shall be deemed to be the owner of that building or part thereof;] (iv) annual charge means a charge to secure an annual liability, but does not include any tax in respect of property or income from property imposed by a local authority, or the Central or a State Government; (v) capital charge means a charge to secure the discharge of a liability of a capital nature; (vi) taxes levied by a local authority in respect of any property shall be deemed to include service taxes levied by the local authority in respect of the property. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ittedly, facts involved in this case are identical to that of appeals considered hereinabove. Both parties have referred to and relied upon same arguments, that has been advanced hereinabove. 13. We have perused submissions advanced by both sides in the light of the records placed before us. 13.1. We have already taken a view in aforestated appeals regarding taxability of rental income received from leased premises to be considered in the hands of M/s.Ambience Hotels and Resorts Pvt.Ltd. 13.2. Legislative history for enactment of section 60 would be relevant at this stage. Section 60-63 of the Act corresponds to section 16 (1) (c ) of 1922 Act. For doing so we refer to and rely upon commentary by Chaturvedi Pithisaria s to Income Tax Law given in Sixth Edition 2014 Volume 4, which is as under: Section 60 compared to section 16(1)(c) of the 1922 Act-Change in law:- Sections 60 to 63 of the 1961 Act correspond to section 16(1)(c) of the 1922 Act. Section 16(1)(c) had two limbs and three provisos. The first two Provisos merely defined the scope of some of the words and expressions used in section 16(1)(c) . Proviso 3 was really a proviso in the sense t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere fact that the recipient is constrained to apply it in a particular manner either under a statute or under certain contracts would not affect assessee's liability to tax. This is often expressed by saying that application or destination of profits or a charge which has been made upon them by previous agreement or otherwise is immaterial for the purpose of taxation. The above principle is statutorily enacted in section 60. A transfer of income alone without there being a transfer of the source of that income is a mere application of the income (CIT vs. Dr. Rameshwar Lal Pahwa, (1980) 123 ITR 681, 687-88 (Del). Also see Provat Kumar Mitter v. CIT, (1961) 41 ITR 624 (SC); CIT v. Smt. Nandiniben Narottamdas, (1983) 140 ITR 16, 26 (Guj)]. Also see, Diversion or application of income , u/s. 4, ante. The object underlying the provisions of section 60 is to meet with the device which was being adopted by the assessees by which while retaining the interest in the property, its income would be allowed to go to someone else, so that it is not taxed in the hands of the assessee. In such cases, even if the arrangement is made by which the income is received by someone else, by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act. 13.6. Accordingly ground No. 1-5 stands dismissed. 14. Ground No. 6 Ld.AO observed that, assessee made investment of ₹ 21,54,72,937/-, in shares during year under consideration. Keeping in view investment made, Ld.AO computed 0.5% of average investment and computed disallowance under section 14 A of the Act, read with Rule 8D, to the extent of ₹5,56,000/-. 15. Aggrieved by addition made by Ld.AO, assessee preferred appeal before Ld.CIT (A), who confirmed disallowance made by Ld.AO. 16. Aggrieved by order of Ld.CIT (A), assessee is in appeal before us now. 17. Ld.AR argued that, no expenditure has been incurred by assessee for making such huge investments. 18 . On the contrary, Ld.CIT.DR submitted that assessee received dividend amounting to ₹1,48,000/-, on investment in equity shares of M/s. Uflex Ltd. During the year, assessee made investment in its subsidiaries being, M/s.Aman Hospitality Pvt.Ltd., and Ambience Commercial Pvt.Ltd., amounting to ₹196,606,700/- and ₹ 1,19,39,600/- holding 100% equity. He submitted that assessee has not earned dividend from these investment. He placed reliance upon decision ..... X X X X Extracts X X X X X X X X Extracts X X X X
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