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TMI Blog2020 (2) TMI 458X X X X Extracts X X X X X X X X Extracts X X X X ..... udicial to the interest of the revenue, in the facts and circumstances narrated above, the usurpation of jurisdiction exercising revisional jurisdiction by the Principal CIT is null in the eyes of law and, therefore, we are inclined to quash the very assumption of jurisdiction to invoke revisional jurisdiction u/s 263 by the Principal CIT. Therefore, we quash the order of the Principal CIT dated 25.03.2019 being ab initio void. - Decided in favour of assessee - ITA No.1159/Kol/2019 - - - Dated:- 7-2-2020 - Shri A. T. Varkey, JM And Dr. A.L. Saini, AM For the Appellant : Shri A. K. Tibrewal, FCA For the Revenue : Dr. P. K. Srihari, CIT(DR) ORDER PER DR. A. L. SAINI, AM: The captioned appeal filed by the assessee, pertaining to Assessment Year 2014-15, is directed against the order passed by the ld. Principal Commissioner of Income Tax-3, Kolkata, dated 25.03.2019, u/s 263(3) of the Income Tax Act, 1961 (hereinafter referred to as the Act ). 2. The grounds of appeal raised by the assessee are as under: 1. That, on the facts and in the circumstances of the case, Ld. Pr. Commissioner of income Tax-3, Kolkata erred in assuming ju ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0,582/-. 4. Therefore, the ld Pr. CIT issued a show-cause notice dated 25.02.2019 requiring clarification and explanation from the assessee, about the above-noted issue. In response, the assessee submitted the written submissions before the ld Pr. CIT which is reproduced below: (i) The assessee company is the legal owner of the said property situated at Pattandu Agrahara Village, Krishnarajapuram Hobli, South Taluk, Bangalore and has been let out to Hewlett Packard India Software Operation Pvt. Ltd and Global e-Business Operations Pvt. Ltd since last several years. The rental income from the said property has all along been offered to tax under the head Income from House Property and assessed as such under scrutiny assessment (ii) It is submitted that the primary object clause of the Memorandum of Association does not state that the business of the Assessee is of renting of property. The Assessee Company has purchased the property with the intention of letting it out and to earn rental income from the same. (iii) We refer to the judgment of Hon'ble Calcutta High Court in the case of Shambhu lnvestment (P) Ltd. [2001] 249 ITR 47 (Cal) wherein the Hon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... est of revenue and thus, amenable to interference by Pr.CIT by invocation of revisionary power of the Act. In view of the facts stated above, the assessment Order passed by the A.O. has become erroneous and prejudicial to the interests of revenue which will called for intervention of the Section 263 of the Act. Therefore, ld PCIT has directed the AO to initiate fresh assessment proceedings and carry out necessary verification about the correctness of the claim of the assessee. 6. Aggrieved by the order of the ld. PCIT u/s 263 of the Act the assessee is in appeal before us. 7. Learned counsel for the assessee submitted before us that house property was rented out by the assessee company and earlier the said house property was used to be taxable under the head income from house property by the Department. The ld. Counsel submitted that for Assessment Years 2011-12 to 2013-14, the Assessing Officer framed the assessment u/s 143(3) of the Act and accepted that rental income under the head house property . The ld. Counsel submitted that the ld. PCIT was of the view that house property income should be assessed under the head business income instead of under the head ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vestigated the issue before him; then the order passed by the Assessing Officer can be termed as erroneous order. Coming next to the second limb, which is required to be examined as to whether the actions of the AO can be termed as prejudicial to the interest of Revenue. When this aspect is examined one has to understand what is prejudicial to the interest of the revenue. The Hon ble Supreme Court in the case of Malabar Industries (supra) held that this phrase i.e. prejudicial to the interest of the revenue has to be read in conjunction with an erroneous order passed by the Assessing Officer. Their Lordship held that it has to be remembered that every loss of revenue as a consequence of an order of Assessing Officer cannot be treated as prejudicial to the interest of the revenue. When the Assessing Officer adopted one of the courses permissible in law and it has resulted in loss to the revenue, or where two views are possible and the Assessing Officer has taken one view with which the CIT does not agree, it cannot be treated as an erroneous order prejudicial to the interest of the revenue unless the view taken by the Assessing Officer is unsustainable in law . 10. Tak ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ew of the matter - and, if there was no 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 lncome-tax in the earlier proceedings, a different and contradictory stand should have been taken. We are of the view that the above cited precedents on principle of consistency are squarely applicable to the assessee under consideration, therefore order passed by AO is not erroneous. 11. We note that the object clause, as contained in the Memorandum and Articles of association of company, would not be the conclusive factor. Matter has to be examined on the facts of each case as held by the Hon ble Supreme Court in the case of Raj Dadarkar Associates vs. ACIT [2017] 81 Taxmann.com 193(SC) wherein the Hon`ble Supreme Court held as under: 13. Before dealing with the respective contentions, we may state, in a summary form, scheme of the Act about the computation of the total income. Section 4 of the Act is the charging Section as per which the total income of an assessee, subject to statutory exemptions, is chargeable to tax. Section 14 of the Act enumerates five head ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deemed owner of the property in question by virtue of Section 27(iiib) of the Act. On the other hand, under certain circumstances, where the income may have been derived from letting out of the premises, it can still be treated as business income if letting out of the premises itself is the business of the assessee. 15. What is the test which has to be applied to determine whether the income would be chargeable under the head income from the house property or it would be chargeable under the head Profits and gains from business or profession , is the question. It may be mentioned, in the first instance, that merely because there is an entry in the object clause of the business showing a particular object, would not be the determinative factor to arrive at a conclusion that the income is to be treated as income from business. Such a question would depend upon the circumstances of each case. It is so held by the Constitution Bench of this Court in Sultan Bros. (P) Ltd. v. CIT [1964] 51 ITR 353 (SC) and we reproduce the relevant portion thereof: 7. We think each case has to be looked at from a businessman's point of view to find out whether the letting was th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee, in turn, collected extra money from the allottees. The assessee collected 20% of monthly rent as service charges. Such service charges were also used for providing services like watch and ward, electricity, water etc. This in our opinion was inseparable from basic charges of rent. The assessee has made bifurcation of the receipt from the, occupiers of the shops/stalls as rent and service charges. As rightly held by the Assessing Officer, decision of Hon'ble Supreme Court in the case of Shambu Investment Pvt. Ltd., 263 ITR 143 will apply. The assessee has not established that he was engaged in any systematic or organized activity of providing service to the occupiers of the shops/stalls so as to constitute the receipts from them as business income. In our opinion, the assessee received income by letting out shops/stalls; and therefore, the same has to be held as income from house property. 18. The ITAT being the last forum insofar as factual determination is concerned, these findings have attained finality. In any case, as mentioned above, the learned counsel for the appellant did not argue on this aspect and did not make any efforts to show as to how the afores ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the context of the main objective of the company and took note of the fact that letting out of the property was not the object of the company at all. The Court was therefore, of the opinion that the character of that income which was from the house property had not altered because it was received by the company formed with the object of developing and setting up properties. 20. In Rayala Corporation (P) Ltd. (supra) fact situation was identical to the case of Chennai Properties Investments Ltd. (supra) and for this reason, Rayala Corporation (P) Ltd. (supra) followed Chennai Properties Investments Ltd. (supra) which is held to be inapplicable in the instant case. 21. For the aforesaid reasons, we are of the opinion that these appeals lack merit and are, accordingly, dismissed with cost. Therefore, we note that Assessing Officer has taken one of the possible views that the income should be assessable under the head income from house property , hence the order passed by the Assessing Officer u/s 143(3) dated 07.12.2016 is neither erroneous nor prejudicial to the interest of revenue. Since the order of the Assessing Officer cannot be held to be erroneous as ..... X X X X Extracts X X X X X X X X Extracts X X X X
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