Itxa/1294/2012 Of Commissioner Of Income Tax - 2, Mumbai v. J.k.investors(Bom) Ltd

IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION INCOME TAX APPEAL NO.1294 OF 2012 The Commissioner of Income Tax-2-Versus-J.K.Investors (Bom) Ltd. ..Appellant ..Respondent ........... Mr. P .C.Chhotaray for the Appellant. ........... CORAM: S.C. DHARMADHIKARIAND A.A. SAYED, JJ. P.C.: DATE :- 27[th] NOVEMBER, 2014 This appeal by the Revenue challenges the order passed by the Income Tax Appellate Tribunal on 15th June, 2011 in Income Tax Appeal No.2731/Mum/2010. 2]The Tribunal in allowing the Appeal of the Asessee and dismissing that of the Revenue applied its earlier orders. The earlier orders of the Tribunal were in relation to the same issue and claim and pertaining to the identical Assessee. In the present case, the assessment year is 2006-07. 3]Mr. Chhhotaray would submit that this Appeal raises at least five substantial questions of law and which have been formulated from page 1/6 15 to 17 of the paper book. Each one of them may be stated to be covered by prior orders of this Court and that of the Tribunal but there are distinguishing features. 4]The distinguishing features are that the Assessee entered into two agreements or rather separate agreements, one styled as a lease agreement and the other agreement is for providing service and amenities. There are two agreements separately executed one for leasing the immovable property and other for provision of amenities and facilities. That there are two agreements itself raised a presumption that the Assessee has some design and motive one of which is to evade the taxes. The tax may be due and payable to the Department of Income Tax or to local bodies or to the State of Maharashtra but such agreements having been executed the distinction raises the substantial questions of law. 5]The order passed on the earlier occasion by this Court and Tribunal may not be straightway followed because there are several judgments of this Court and the Hon'ble Supreme Court which take a view that the above acts would denote that the income earned by the Assessee is from not lease or renting out a immovable property but from other sources. Therefore, this Appeal be admitted. 2/6 6]Mr. Chhotaray very fairly brought to our notice an order passed by this Court on 25th July, 2012 in Income Tax Appeal No.1089/2011. That challenged the order passed by the Tribunal on 9th September, 2010 in relation to assessment year 2004-05. He also brought to our notice another judgment of this Court which has been followed in this case, namely, the judgment of this Court in the case of Commissioner of Income Tax V/s. Bhaktawar Construction Pvt. Ltd. reported in 162 ITR 452. Thus, the execution of separate agreements is a matter considered by several Courts including Calcutta high Court according to Mr Chhotaray. He wanted us to take a different view and admit this Appeal so as to eventually distinguish the order passed on this issue on prior occasions or in relation to prior assessment years. 7]With the assistance of Mr. Chhotaray we have perused this Appeal paper book including the impugned order. We have perused the order passed in Income Tax Appeal No.1089/2011 dated 25th July, 2012. 8]In the order passed on 25th July, 2012 similar questions as are raised and termed as substantial questions of law were noted and considered. This Court was of the view that the Assessing Officer went about questioning the transactions merely because he found separate documents or agreements signed by parties. He found that the Assessee 3/6 2.itxa1294.12.doc 7]With the assistance of Mr. Chhotaray we have perused this Appeal paper book including the impugned order. We have perused the order passed in Income Tax Appeal No.1089/2011 dated 25th July, 2012. 8]In the order passed on 25th July, 2012 similar questions as are raised and termed as substantial questions of law were noted and considered. This Court was of the view that the Assessing Officer went about questioning the transactions merely because he found separate documents or agreements signed by parties. He found that the Assessee 3/6 2.itxa1294.12.doc claimed both rent income and service charges as 'income from house property' and offered the same for tax as 'income from house property'. In that case, the Assessing Officer passed an order enabling the rental income under the agreement in that behalf to be taxed as 'income from house property'. Insofar as the service charges and under separate document, he held that these were received but could not be styled as 'income from house property'. He assessed that under the head ?ncome from other sources 9]The Assessee went in Appeal before this Commissioner (First Appellate Authority) and the Commissioner decided in its favour. 10]The Revenue's Appeal was dismissed by the Tribunal that is how the Revenue approached this Court. 11]To our mind, there are absolutely no distinguishing features. Mr. Chhotaray would submit that if the services are provided by an agency and if that agency was receiving only a sum of Rs.1.54 lakhs and odd from the individual Assessee occupant, then, that alone could have formed part of the charges and receipt for provision of amenities and facilities. Under that head, the amount shown as Rs.1,23,00,000/- and odd, therefore, could not have been accepted in toto. The Assessing Officer rightly, 2.itxa1294.12.doc therefore, deleted the other amount meaning thereby, he granted Rs.1,54,000/- per annum or the entire year as the sum which was required to be incurred by the Assessee and, therefore, receivable from the lessee or licensor. 12]We are not able to accept this distinction because in the earlier order this Court expressly concluded that the concurrent findings that no services are being provided by the Assessee/member/licensor to the occupants, is incorrect and that service charges have to be incurred as part of rental income. That is a conclusion based on the judgment in the case of Commissioner of Income Tax V/s. Bhaktawar Construction Pvt. Ltd. (supra). The test to determine whether the service agreement was different from the rent agreement would be whether the service agreement could stand independently of the rent agreement. If the service agreement is dependent upon the rent agreement, then, that conclusion arrived at by the Tribunal was upheld by this Court. It is the contention of Mr. Chhotaray that the separate document or agreement is a stand alone or would survive, if there had been no lease or license agreement or after its termination. 13]There is no basis or foundation for this submission. If there was no lease in favour of a party in this case, there was no question of providing 13]There is no basis or foundation for this submission. If there was no lease in favour of a party in this case, there was no question of providing services to it. There is no factual material to hold that a fraud has been perpetrated on the Revenue by the parties. They colluded to evade the taxes by executing separate agreements although the component of service was mentioned in the lease agreement and the lease rent was all inclusive. No such foundation has been laid by the Revenue before the Authorities under Income Tax Act. In such circumstances, we do not find that any difference or distinction from the earlier facts and noted in this Court's order. If Assessee is the same, the facts are the same, then, judicial discipline require us to follow the earlier orders of this Court. Here, there is no question of applying any rule of consistency or the principle of res judicata. In Revenue matters that principle of res judicata has no application. However, when we find that in the absence of above features, the present Appeal does not raise any substantial question of law, then, we must apply and follow the earlier order. Precisely that has been done by us. 14]As a result of the above discussion, this Appeal fails. It is, accordingly, dismissed. No order as to costs. (A. A. SAYED, J.) (S.C. DHARMADHIKARI, J.) 6/6