Itta/60/2010 Of The Commissioner Of Income Tax v. M/S. Usha Kiran Movies Limited

IN THE HIGH COURT OF JUDICATURE, ANDHRA PRADESH AT HYDERABAD (Special Original Jurisdiction) PRESENT THE HON’BLE THE CHIEF JUSTICE SRI KALYAN JYOTISENGUPTA AND THE HON’BLE SRI JUSTICE SANJAY KUMAR INCOME TAX APPELALTE TRIBUNAL APPEAL NOs.31 OF 2007AND 60 OF 2010 DATED:6.2.2014 Between: The Commissioner of Income TaxHyderabad-I … Appellant And M/s. Usha Kiran Movies LimitedEenadu CompoundSomajigudaHyderabad … Respondent THE HON’BLE THE CHIEF JUSTICE SRI KALYAN JYOTISENGUPTA AND THE HON’BLE SRI JUSTICE SANJAY KUMAR I.T.T.A. NOs.31 OF 2007 AND 60 OF 2010 COMMON JUDGMENT: (per the Hon’ble the Chief Justice Sri Kalyan Jyoti Sengupta) I.T.T.A. NO.60 OF 2010 This appeal was admitted for hearing without formulatingsubstantial question of law as required to be done under Section 260-A of the Income Tax Act. After hearing the learned counsel for theparties, we are of the view, we would have formulated such questionshad we decided the matter in favour of the appellant. However, onperusal of the impugned judgment we noticed that even this case isnot fit for admission and the reasons for the aforesaid conclusion ofours are as follows: The short fact of the case is that the assessee respondent hasfiled a return for the assessment year 1995-96 showing nil incomeexplaining that there has been no income after commencement of thebusiness. The assessee started development of certain area formaking it suitable for development of infrastructure for shootinglocations. While doing so, there has been some rental income whichwas directly inter-linked with the above activity. Explaining all thesedetails, the return was filed and the Assessing Officer has acceptedsuch return. Therefore, we quote the relevant portion of the order ofthe Assessing Officer: “For the relevant previous year, the assessee was engaged indeveloping the Film project under the name and style of ‘Ramoji FilmCity’ at Anajpur, near Hyderabad. The business had not yet started. The assessee filed ‘NIL’ return of income on 30-11-1995. NoticeU/s.143(2) was issued. The case was represented by Shri G.Sambasiva Rao, CA. After examining the details, the income returnedis ‘accepted’.” The Revenue did not prefer any appeal against this order. However, the Commissioner of Income Tax, in exercise of jurisdictionunder Section 263 of the Income Tax Act, had reversed the aforesaidorder and directed that the aforesaid income would not have beencapitalized and it should have been brought to tax under the head‘income from other sources’. Being aggrieved by the aforesaid order of the revisionalauthority, an appeal has been preferred before the Tribunal. The learned Tribunal on fact found that the income derived bythe assessee herein was at the stage of development activities. Inother words, the income derived was having close and direct link withthe development activities. That fact finding of the learned Tribunal isas follows: “On a conspectus of the matter, we are of the view that theincome earned by the assessee was in the process of development ofthe project and therefore the factual matrix lend support to the claim ofthe assessee that the decision in the case of Bokaro Steels Ltd.(supra) is applicable to this case… …As could be seen from the reply given to the show causenotice, the assessee categorically stated that the lease rentals wereearned from the land which are developed for creating film shootingfacilities/locations and it is directly connected with the main activity ofthe assessee, i.e., development of infrastructure for shooting locations. Learned CIT has not controverted the submissions of the assessee butmerely stated in the order that unutilized land was utilized by the othergroup companies. In other words, the findings of the CIT were notbased on correct appreciation of facts.” …As could be seen from the reply given to the show causenotice, the assessee categorically stated that the lease rentals wereearned from the land which are developed for creating film shootingfacilities/locations and it is directly connected with the main activity ofthe assessee, i.e., development of infrastructure for shooting locations. Learned CIT has not controverted the submissions of the assessee butmerely stated in the order that unutilized land was utilized by the othergroup companies. In other words, the findings of the CIT were notbased on correct appreciation of facts.” In view of the aforesaid fact finding, which has not been said tobe perverse by the appellant, it is difficult to decide otherwise. Therefore, it has to be held that the income derived by the assessee isin the nature of capital one as it was connected with main activity. Accordingly, we think that this cannot be said to be income, as rightly held on fact finding by the Assessing Officer initially and thereafter bythe Tribunal. We noticed that the learned Tribunal has taken a correctview of the matter as the Commissioner of Income Tax has nojurisdiction to reopen this case, because one of the two possible viewswas taken by the Assessing Officer and such change of view cannotbe any ground to reopen the issue under Section 263 of the IncomeTax Act. Therefore, the Commissioner of Income Tax had passed theorder in total illegal exercise of jurisdiction and the learned Tribunalhas correctly upset the same. Accordingly, we do not find any merit in this appeal and the sameis accordingly dismissed. There will be no order as to costs.I.T.T.A. NO.31 OF 2007 Since the issue raised in this appeal is similar to the one raisedin the above appeal (ITTA No.60 of 2010) and the parties are same,present appeal is also dismissed in terms of the above said judgment. There will be no order as to costs. ________________________ K.J. SENGUPTA, CJ _______________________ SANJAY KUMAR, J 6.2.2014 bnr Note:L.R. Copy to be marked. (B.O) bnr