If an issue decided consistently in a particular manner for earlier assessment years than rental income from factory building is to be treated as business income

IN THE INCOME TAX APPELLATE TRIBUNAL

(DELHI BENCH `C’: NEW DELHI)

BEFORE SHRI U.B.S. BEDI, JUDICIAL MEMBER AND

SHRI A.N. PAHUJA, ACCOUNTANT MEMBER

ITA Nos.4782 & 4783/Del./2011

(Assessment Years: 2004-05 & 05-06)

ACIT, Circle 12(1),

New Delhi

(Appellant)

Vs.

HB Estate Developers Ltd.,

H-72, Connaught Circus, New Delhi.

(PAN/GIR No.AAACH3122M)

 (Respondent)

Assessee by: Shri Santosh Kumar Aggarwal, Adv.

Revenue by: Shri Sat Pal Singh, Sr.DR

ORDER

PER U.B.S. BEDI, J.M

These appeals of the Revenue are directed against separate orders passed by the CIT (A)-VIII, New Delhi, both dated 09.08.2011, relevant to assessment years 2004-05 & 05-06. These appeals involve identical facts and similar issues, therefore, were heard together and being disposed of by a single order for the sake of convenience.

2. In the appeal for assessment year 2004-05, besides challenging treating the income from ‘house property from lease rental’ as income from business instead of treating the same as ‘income from house property’ as treated by the Assessing Officer, the department has also challenged in deleting the disallowance of Rs.3,01,156/- on  account of brokerage expenses and of Rs.21,71,207/-, on account of building maintenance and repairs and deleting the disallowance of Rs.5,11,101/- on account of administrative expenses and issues except first issue which are stated to be consequential.

3. At the very outset, Ld.Counsel for the assessee submitted that similar issues were there in assessment year 2006-07 before ITAT, ‘C’ bench, New Delhi in I.T.A. No.2286/Del./2010, in which deletion ordered by CIT(A), has been confirmed vide its order dated 24.1.2011, in which the lease rental of Rs.17,69,646/- was assessed as business income instead of ‘income from house property’, while following earlier decision of ITAT in I.T.A No.872/Del./2007 for assessment year 2002-03 dated 26.09.2008. The CIT(A) has followed the decision for the assessment year 2006-07 to allow the appeal of the assessee vide order dated 9.8.2011 (which is challenged before us). Since issue is covered in favour of the assessee by the earlier decision of the tribunal which has been followed by CIT(A) and there is also Hon’ble Delhi High Court judgment in CIT vs. Neo Poly Pack(P) Ltd., 245 I.T.R. 492(Del.), which has also been noted and followed by ITAT ‘C’ bench, New Delhi while deciding the appeals of the Revenue in assessee’s own case for assessment years 2002-03 and 06-07. Therefore, appeal of the Revenue is liable to be dismissed, which may be dismissed.

4. The Ld.DR could not controvert this factual aspect that it is a covered matter, has just relied upon the order of Assessing Officer.

5. After hearing both the sides, considering the material on record as well as precedents relied upon, we find that issues raised in these appeals are covered in favour of the assessee by not only ITAT decision in the case of the assessee, but also by the Delhi High Court judgments as relied upon by the Ld.Counsel and CIT (A) has followed these decisions to decide the issue in favour of the assessee and relevant portion of ITAT order as contained in paras. 8 & 9 for assessment year 2002-03 is reproduced as under:

“8. `We have heard the submissions of both the parties and perused the material available on record and the judgments cited by both sides. We find that the judgment of Hon'ble Apex Court rendered in the case of East India Housing and Land Development Trust Ltd. (supra) is not applicable in the present case because the facts are different. In that case, the assessee purchased land and set up market therein. Some stalls remained occupied by the same occupants and the remaining shops/stalls were occupied by a shifting class of occupants. Under these facts, it was held by Hon'ble Apex Court that the character of income was not altered merely because some stalls were occupied by the same occupants and the remaining stalls were occupied by shifting class of occupants. In the present case, the facts are different and hence this judgment is not applicable in the present case. Similarly, the Tribunal judgment rendered in the case of Atmaram Properties Pvt. Ltd. (supra) is not applicable in the present case because the facts are different. Facts in that case are noted by the Tribunal in para No.7, as per which, the property in question could not be treated as stock in trade and there was no possibility of any construction thereon in view of NDMC and L&DO stand in that case. It is also noted that there was no activity in respect of property which could be construed as business activity under the law.

9. As against this, we find that Ld CIT(A) has decided this issue in favour of the assessee on the basis of rule of consistency. It is noted by the Ld CIT(A) in para No.7 of his order that the Assessing Officer in scrutiny assessment order in the assessee’s own case for assessment year 2001-02 and 2003-04 has accepted the claim of the assessee that lease rental income is income from business. No difference in facts is pointed out by the Assessing Officer in the present year as compared to facts in assessment year 2001-02. As per the details of area sold out of leased out flats in the building at HB Twin Tower, New Delhi as appearing on a page No.3 of the paper book, we find that the area sold out in assessment year 2001-02 was 2672 sq. ft., out of which, 2369 sq. ft. was for those flats which were leased out. Similarly, in the present year total area sold out is 37864 sq. ft. and all these flats which were sold during the present year were leased out. In assessment year 2003-04, total area sold out is 2400 sq. ft. out of which 2000 sq. ft. was for those flats which were leased out. From the details for assessment year 2001-02 to 2007-08, we find that only two flats were sold from vacant flats i.e.303 sq.ft. in assessment year 2001-02 and 400 sq. ft. in assessment year 2003-04 and the remaining sales in all these years was of those flats which were leased out. In the light of these facts, the judgment of Hon'ble Delhi High Court rendered in the case of Neo Poly Pack Ltd. (supra) is squarely applicable in the present case because in that case it was held that , for the sake of consistency, the same view should continue to prevail for subsequent year also unless there is material change in the facts. In that case also, it was noted that rental income from the factory building owned by the assessee company was assessed under the head business in all the earlier years starting from assessment year 1984-85 onwards. The assessment year in dispute before Hon'ble Delhi High court was assessment year 1989-90 in which the Assessing Officer sought to assess the said income as income from house property. It is also noted by the Hon'ble Delhi High Court that there was no single distinguishing feature pointing a different view and hence the income was liable to be assessed as business income in view of rule of consistency. In the present case also, we find that not a single distinguishing feature has been pointed out by the Assessing Officer or by the Ld DR of the revenue in earlier assessment year and also in subsequent year wherein the claim of the assessee has been accepted by the Assessing Officer in scrutiny assessment that the lease rental income is assessable as business income. We, therefore, find no reason to interfere in the order of the Ld CIT(A) on this issue by respectfully following the judgment of Hon'ble Delhi High Court rendered in the case of CIT v. Neo Poly Pack Ltd. (supra). The other judgments cited by the Ld AR of the assessee are not relevant because we have decided this issue on the basis of rule of consistency. This ground of the revenue is rejected.”

6. Since, first issue in this case is a covered issue, therefore following the jurisdictional High Court decision and the ITAT, Delhi Bench decisions in the case of the assessee, we uphold the order of CIT(A). As such, we dismiss the appeal of the Revenue. The other issues are consequential as admitted by Ld.DR, therefore, not required to be adjudicated.

7. Since the appeal for assessment year 2004-05 has identical facts and common issues, with difference in amounts, therefore, following our order for assessment year 2003-04 as confirmed in earlier part of this order, we uphold the order of CIT (A) while applying the same basis and reasoning and dismiss the appeal of the Revenue for the assessment year 2005-06 also.

8. In the result, both the appeals filed by the department are dismissed.

Order pronounced in open court soon after the conclusion of the hearing on 12.04.2012.

                                                    Sd/-                                       Sd/-

                                          (A.N. PAHUJA)                    (U.B.S. BEDI)

                                  ACCOUNTANT MEMBER   JUDICIAL MEMBER

Dated: April 12, 2012

SKB

Copy of the order forwarded to:-

1. Appellant

2. Respondent

3. CIT

4. CIT (A)-VIII, New Delhi.

5. CIT (ITAT)

Deputy Registrar, ITAT