Properties & Investments Ltd v. Commissioner Ofincome Taxreported At,(2015) 373 Itr 673 (Sc

IN THR HIGH COURT OF KARNATAKA AT BENGALURU DATEKED THIS THE DAY OF MAY 2016 PRESENT THR HON’BLE MR.JUSTICE JAYANT PATEL AND THR HON’BLE MR.JUSTICE B.SRBBNIVASKH GOWDA INCOME TAX APPEAL NO.5607 OF 201 BBRHIWEE 1.PR. COMMISSIONER OF INCOME TAXCR BUILDINGSQUEENS ROADBANGALORE |CR BUILDINGSQUEENS ROADBANGALORE | ? DY. COMMISSIONER OF INCOME TAX ~CIRCLE 4(1)BANGALORE |CIRCLE 4(1)BANGALORE | _APPRLLANTS (BY SRI.E.I.SANMATHI, ADVOCATE)| AN): MR.SYHRD MOHAMMBD SHABBIR NO.4, Lil FLOORZKRNITH CHAMBERSANJANBYA TRMPLE STRBBT OHHK LALBAGH ROAD WILSON GARDEN HOSUR ROADBANGALORE - 560027|PAN: ALKBPS4940C —_ RBSPONDEBN THIS ITA [IS FILEDUNDER SEKC.260-A OF INCOMETAX|ACT|1961,ARISING|OUTORORDERDATED:30/04/2015.PASSEDIN|ITANO.1264/BANG/2014, FOR THE ASSESSMENT YEAR:A2Q005-2006 PRAYING TO DECIDE THE FORBGOINQUESTION OF LAW AND / OR SUCH OTHERQUESTIONS OF LAW AS MAY BE FORMULATED BY)THR HON'BLE COURT AS DBBMBD FIT AND SHKTASIDE THE APPELLATE ORDER DATED: 30/04/2015.PASSED BY THE ITAT, B’ BENCH, BENGALURU, IN)APPEAL PROCEEDINGS NO. ITA NO. 1264/BANG/2014.FOR ASSESSMENT PERIOD 2005-06 AS SOUGHI FOR|IN THIS APPEAL AND TO GRANT SUCH OTHER RELIEFAS DEEMED FIT, IN THE INTEREST OF JUSTICE. THIS ITA COMING ON FOR ADMISSION THIS DAY,JAYANT PATEL J., DELIVERED THE FOLLOWING: JUDGMENT Theappellants-Revenuehave|preferredthepresent appeal by raising the following substantialquestions of law: “WhetherOnthefactsandinthe|circumstances of the case, the Tribunal erred|in holding that the income of the assessee|has to be treated income from house property|and not as income from business even when|the assessing authority rightly treated income|of|aSsSSCSS€asbusinessincomesince.assessee had systematically involved in the|business of letting out industrial sheds with|all facilities and carried out composite activity|of constructing sheds and letting out for|business purpose alone which was_ soleintention of assessee?” 2. We have heard Mr.E.I.Sanmathi, learnedCounsel appearing for the appellants-Revenue. 3. The contention raised on behalt ot theappellants-Revenue was that as the Assessing Officerand the appellate authority both found that the regular activity of the assessee was construction and letting outindustrial sheds and the rental income derived from theindustrial sheds could not be treated as the ‘income|from house property and it can only be considered as.Income from business’. He also submitted that the'|§assessee has also taken loan for construction of anotherproperty and the interest is also debited. Under thesecircumstances, the Income Tax Appellate Tribunal(hereinafter referred to as ‘tthe Tribunal’ for the sake ofbrevity) ought not to have held that the income is to betreated as the ‘Income from house property’ and not the‘business income’. 4. The learned Counsel relied upon the decision ofthis Court in case oftCommissioner of Income Tax Vs.Velankani Information Systems (P.) Ltd.reported at.(2013) 218 TAXMAN OO88 (Karnataka)|and another.decision of the Apex Court in the case ofChennat Properties & Investments Ltd. Vs. Commissioner ofIncome Taxreported at,(2015) 373 ITR 673 (SC) o. We may record that the Tribunal while dealing|with the aforesaid aspect at paragraphs 6.3.1 to 6.3.9.has observed thus: 4. The learned Counsel relied upon the decision ofthis Court in case oftCommissioner of Income Tax Vs.Velankani Information Systems (P.) Ltd.reported at.(2013) 218 TAXMAN OO88 (Karnataka)|and another.decision of the Apex Court in the case ofChennat Properties & Investments Ltd. Vs. Commissioner ofIncome Taxreported at,(2015) 373 ITR 673 (SC) o. We may record that the Tribunal while dealing|with the aforesaid aspect at paragraphs 6.3.1 to 6.3.9.has observed thus: "6.3.1 We have heard the rival contentions and|perused and carefully considered the material on)record; including the judicial decisions cited and|relied upon. We find from the details placed on|record by the assessee that he has been offering to|tax the rental income received from the letting out ofthese properties as ‘Income from House Property ‘Since Assessment Yeaqr 2003-04 onwards and thesame has been accepted by the Department. Thelearned Authorised Representative has also drawn|our attention to pages 54 and 57 of the Paper Book|filed on 4.3.2015, which is the assessment order)passed under Section 143(3) rws 147 of the Act forAssessment Year DVOO7-O8 at.2?1.129.2010 in tassessee’s own case, wherein the Department has|assessed the rental income received from letting out| of the assessee’s properties as ‘Income from House|Property’. In this view of the matter from the facts|on record it appears to be quite evident that when)the intention of the assessee is to earn rental income|from letting out of properties, then the same income|ought to be assessed as income from house property|and not as income from business. 6.3.2 In the case of Chugandas and Co. (supra), theHon’ble Apex Court observed that “it must therefore|be held that even if an item of income is earned in|the course of business, it will not necessarily fall|within the head ‘Profit and Gains from Business‘|“and held that “if an assessee carries on the!business of purchasing and selling buildings, the|income earned from the properties so long as they|are owned by the assessee will be shown under the|head ‘Income from House Property’ and not under|the head ‘Profits and Gains from Business. | In the case on hand, even assuming for amovement that revenue is correct in coming to the|conclusion that the assessee being in the business| of real estate, the intent and purpose of the| investment in the subject building is to earn income|by way of profits and gains from business, even|then, going by the decision of the Hon’ble Apex|Court in the case of Chugandas (supra), theassessee being the owner of the building, the rentthat accrues or arises from such building of which|he is the owner and while he is the owner, shall beassessed as ‘Income from House Property’ and not|under the head, ‘Profits and Gains from Business. ’ 6.3.3 The Hon'ble Karnataka High Court in the caseof Bhoopalam Commercial Complex and Industries|Put.Ltd. (supra) following the decision of the Hon'ble|ApexCourtIn|theCAaASof|PodarCementsP.Ltd.(supra), held that despite the fact that the)assessee had as one of its objects the activity of|constructing commercial complexes and earning rent|therefrom, the fact that the rent is earned from out ofletting out of a property, the same has to be|necessarily taxed under the head ‘Income from|House Property’ and reversed the order passed by a)co-ordinate bench of this Tribunal in the said case. 6.3.4 In the case of Shambhu Investments Pvt.Ltd.(supra), the Hon’ble Apex Court confirmed the}decision of the Calcutta High Court, in the same|case, which had held that uf the intention of the|assessee was to earn income by letting out of a|property then such income has to be earned as)‘Income from House Propertu. * 6.3.4 In the case of Shambhu Investments Pvt.Ltd.(supra), the Hon’ble Apex Court confirmed the}decision of the Calcutta High Court, in the same|case, which had held that uf the intention of the|assessee was to earn income by letting out of a|property then such income has to be earned as)‘Income from House Propertu. * 6.3.5 In the factual matrix of the case on hand, it isclear that the intention of the assessee is to earn|rental income from letting out of the property and|therefore the same rental income ought to be|assessed as ‘Income from House Property’ and not|as ‘Income from Business’. In this context, we find|that the decisions of the Hon’ble Apex Court and the|Hon’ble High Court of Karnataka relied upon by the|assessee, are squarely applicable to the case on|hand and therefore hold that the rental income|earned by the assessee from out of letting out of|property is to be assessed as ‘Income from House|Property’ as declared by the assessee in the return)of income and not as ‘Income from business’ as held| by the authorities below. Consequently, the)grounds raised at S.Nos.3 & 4 are allowed”. The aforesaid shows that in respect of the very assesseefor the assessment year 2003-2004 onwards, the veryrental income was treated as the ‘income from house|property . Not only that, but in respect of theassessment year 2007-2008, the regular assessmentproceedings were undertaken and the order undersection 143(3) read with Section 147 of the Income TaxAct, dated 21.12.2010 was passed, whereby the rentalincome received from letting out the assessee’s propertywas treated as ‘Income from house property’. 6. Be it recorded that in the present case, the|assessment year was of 2005-2006, whereas for thesubsequent year as referred to hereinabove for 200/72008, the Department has accepted the rental income of the assessee as ‘income from the house property’. 7. Itis not the case of the appellants-Revenue that theaforesaid decision dated 21.12.2010 of the regularassessment for the assessment year 2007-08 has beencarried before the higher forum or a different view is.taken. Under the circumstances, when the aforesaid|stand of the department in respect of the very assesseefor the subsequent assessment year is accepted by theDepartment itself, the Tribunal has rightly found thatthe income cannot be treated as the ‘business income’. —It further shows that the Tribunal has relied upon thedecision of the Apex Court in case ofCIT Vs.Chugandas & Co.reported at(SS ITR 17) (SC), the|decisionoT KarnatakaHigh|Court1nCASEoT CommissionerofIncomeTaxVs.BhoopalamCommercial Complex & Industries (P) Ltd.reported|aT|(2003) 262 ITR 517as well as the decision otf Calcutta High Court in case ofShambhu InvestmentsPut. Ltd.reported at.263 ITR 143 8. As such, the question for giving treatment to.the income of the property of the assesee as that from‘Income from house property can be said as alreadyconcluded by aforesaid decision. The additional factualaspect is that for subsequent assessment year, the veryproperty is assessed as the ‘income from houseproperty’. Hence it cannot be said that any substantialquestion of law would arise for consideration, as soughtto be canvassed. 9. The decision upon which reliance has been.placed by the learned Counsel for the appellants-Revenue in case ofVelankani Information Systems (P) Ltd.(supra) andChennai Properties & Investments Limited(supra) cannot be made applicable to the facts|OT thepresentCasc,1nVIEW|OT the.peculiar circumstances in the present case that in respect of thevery assessee for the subsequent assessment years, therental income from the very property of the assessee is.treated as the ‘income from house property’. 10. Under the circumstances, the appeal is meritless and hence dismissed. JT/-| Sd/-.JU DGE Sd/-.JU DGE