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TMI Blog2023 (3) TMI 400X X X X Extracts X X X X X X X X Extracts X X X X ..... on denovo. Needless to say, that the ld. CIT(A) shall provide proper and adequate opportunity of being heard to the assessee in set aside proceedings - Appeal of the revenue is allowed for statistical purpose. - I.T.A. No. 612/Asr/2017 - - - Dated:- 24-2-2023 - DR. M. L. MEENA, ACCOUNTANT MEMBER AND SH. ANIKESH BANERJEE, JUDICIAL MEMBER For the Appellant : Sh. Hitendra Bhauraoji Ninawe, CIT DR. For the Respondent : Sh. Rohit Jain Ms. Manisha Sharma, Advs. ORDER Per : Anikesh Banerjee, JM: The instant appeal of the revenue was filed against the order of the ld. Commissioner of Income Tax (Appeals), J K, Jammu, [in brevity the CIT (A)] bearing appeal No. 288/2016-17 date of order 28.06.2017, the order passed u/s 250 (6) of the Income Tax Act 1961, [in brevity the Act] for A.Y. 2014-15.The impugned order was emanated from the order of the ld. Assistant Commissioner of Income Tax, Circle-3, Srinagar, (in brevity the AO) order passed u/s 143(3) of the Act date of order 14.12.2016. 2. The revenue has taken the following grounds: 1. The Ld. CIT (A) is in error in following ITAT decision treating the income of the assessee as business income and no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... below:- In the case of SakarialBalaBhai V/S ITO 1975 100/97 (Gujarat), it was held in the absence better way of estimating the rent of interest on cost of building and land may provide a reasonable basis for determining annual letting value of property. An amount of Rs. 57,79,46,941/- has been spent at the commencement of-the lease agreement with the flag ship company of the assessee group i.e. M/S Bharat Hotels Limited, logically taking into account the period of 10 years of the lease agreement as entered into 3rd Feb'1998 which has been revised in the year 2009-10. The amount of Rs. 57.79 Crores is taken as the base and considering the period of 10 years from the date of commencement of hotel business (as the hotel could not start) from the year 1998 itself due to heavy amounts spent the lessee. Accordingly this amount of Rs. 57,79,46,941/- is proportionally be considered to be spread over a period of 10 years thereby giving an amount of Rs. 5,77,94,694/- as the amount being actual market rent in the grab of investment in the building/property. The income from the house property is accordingly determined at Rs. 5,77,94,694/-as against the value of Rs. 50,00,000/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dated 08.12.2010. Thereafter, vide order dated 25.03.2014, reassessment under section 147 of the Act was completed at a total income of Rs.4,29,34,930/-. In this order, addition of Rs.5,70,94,694/- was made on account of alleged notional annual letting value of the property in question under sections 22, 23(1) and 24(a) of the Act. By virtue of order, dated 29.05.2015, the Id. CIT(A) confirmed the initiation of assessment proceedings under section 147 of the Act. On merits, the action of the AO in computing total notional annual letting values under section 23(1) of the Act was upheld by the Id. CIT(A).However, the method of determination of ALV, as adopted by the AO, was rejected. The Id. CIT(A) adopted 10% of the estimated cost of land and building as ALV. As such, the addition made by the AO on account of ALV, was reduced to amount of Rs.68,63,054/- and deduction therefrom @ 30% Was allowed to the assessee u/s 24 of the Act. The contention on behalf of the assessee is that in Chennai Properties and Investments Limited Vs. CIT , 373 ITR 673 (SC), it has been held that where in terms of the memorandum of association of company, the main object of such company is to' acquire ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income is to be treated as business income and not as income from house property. Let us examine Chennai Property Investment Limited (supra). 10. The assessee in Chennai Properties and Investment Limited (supra), was a company incorporated with its main object to acquire properties in the city of Madras and to let out those properties. The assessee had rented out such property. The rental income received therefrom was shown as income from business. However, the AO was of the opinion that since the income was received from letting out the property, it was in the nature of rental income. Therefore, the AO treated the income as income from house property. The Id. CIT(A) reversed the AO s action and directed the income to be treated as business income. The ITAT dismissed the appeal filed by the Department. The Hon ble High Court, reversed the Tribunal order, holding that the income derived by letting out the property would not be income from business, but, it could be assessed only as income from house property. The question before the Hon ble Supreme Court, therefore, was as to whether the income derived by the company from letting out the property was to be treated as inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ss of the assessee was to lease out the coal fields to the collieries and other companies; that the income deceived from letting out of those mining leases was shown as business income; and that the Department took the position that it was to be treated as income from house property. Recapitulating Karanpura Development Co. Ltd. (supra), it was observed that before income, profits and gains can be brought to computation, they have to be assigned to one or the Other head of income; that these heads are inclusive of one another and income which falls within one head cannot be assigned to, or taxed under another head; that therefore, the deciding factor is not the ownership of land or leases, but the nature of the activity of the assessee and the nature of the operations in relation to them; that the objects of the company must also be kept in view to interpret the activities; that where there is a letting out of premises and collection of rents the assessment on property position may be correct, but not so, where the letting out is part of a trading operation; that the dividing line is difficult to find, but in the case of a company with its professed objects and the manner of its ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ies Investments Ltd, vs Commissioner of Income tax, Central -III, Tamil Nadu, [2015] 56 taxmann.com 456 (SC). As per the ld. Counsel for assessee the order of Coordinate Bench of ITAT the order of Hon ble Apex court are squarely applicable to assessee. The assessee had accepted the nature of income as Income from House Property . So, there is no question about the change of the head of income in other stage. Considering the assessee s declaration in assessment, the Income from House Property cannot be treated as Income from Business in this impugned assessment year. The ld. AO correctly pointed out about the disparity in value of Annual Lease Rent in respect of licence fees received by the flagship company of the assessee. There is no res integra in the order of Coordinate Bench with the assessee as there is distinguishable fact. In the appeal order the observation of the ld. AO was not discussed properly. We find the order of the ld. CIT(A) is perverse. In our considered view, we set aside the order of the CIT(A) remit back the ground of the revenue to the CIT(A) for further adjudication denovo. Needless to say, that the ld. CIT(A) shall provide proper and adequate oppo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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