IN THE INCOME TAX APPELLATE TRIBUNAL

DELHI BENCH “E”, NEW DELHI

BEFORE SHRI H.S. SIDHU, JUDICIAL MEMBER

AND
SHRI ANADI N. MISHRA, ACCOUNTANT MEMBER

ITA Nos. 4550-4553/Del/2014

A.YRS.2005-06, 2006-07,
2007-08 & 2010-11
DCIT, CENTRAL CIRCLE-13(1), M/S NEW DELHI HOTELS LTD.,
ROOM NO. 212, CR BUILDING, VS. The Hotel Ambassador, Sujan Singh
IP ESTATE, NEW DELHI Park,
New Delhi – 110 003
(PAN: AAACN0592R)
(APPELLANT) (RESPONDENT)

Department by : Sh. Umesh Chander Dubey, Sr. DR

Assessee by : Sh. Anoop Sharma, Adv.

Date of Hearing : 27-07-2016

Date of Order : 29-07-2016

ORDER

PER BENCH

The Revenue has filed these four appeals against

the separate impugned orders passed by the Ld. Commissioner of

Income Tax (Appeals-XVI), New Delhi relevant for assessment years

2005-06, 2006-07, 2007-08 and 2010-11. Since the issues involved in

these appeals are common and identical, hence, the appeals were heard
 ITA NO. 4550-4553/DEL/2014

together and are being disposed of by this common order for the sake of

convenience, by dealing with ITA No. 4550/Del/2014 (AY 2005-06).

2. Since the grounds in all the four appeals are common, hence, we

are reproducing the following grounds of appeal of ITA No. 4550/Del/2014

only, for the sake of brevity.

“1. On the facts and circumstances of the case and in law,

the Ld. CIT(A) has erred in treating the rental income of

the assessee as “Business Income” instead of “Income

from House Property” by not appreciating the fact that

the assessee is accounting the unsold flats as its stock

in trade.

2. On the facts and circumstances of the case and in law,

the Ld. CIT(A) has erred in ignoring the fact that the

assessee is in the business of developing building and

construction of flats since the time of its inception.

Therefore, any profit arises out of the sale of building

and flats or renting out is to be assessed as business

income.

3. On the facts and circumstances of the case and in law,

the Ld. CIT(A) has erred in relying on the High Court

decision in assessee’s own case in earlier year ignoring

the fact that the department has not accepted the

decision of the Hon’ble High Court on merits.

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However, in the light of the CBDT’s Instruction No.

3/2011 due to low tax effect did not contest in the

Hon’ble Supreme court.

4. The appellant craves to be allowed to add any fresh

grounds of appeal and / or delete or amend any of the

grounds of appeal.

3. The facts in brief are that the assessee had e-filed its original

Return of income declaring income of Rs. 1,62,45,512/- on 19.10.2015.

The same was processed u/s. 143(1) of the Income Tax Act, 1961

(hereinafter referred as the Act) on 20.9.2008 at the declared returned

income. Assessment u/s. 143(3) of the Act was made on 19.3.2007 at

total income of Rs. 1,62,65,510/- On perusal of the assessment records,

it was noticed by the AO that there were discrepancies / wrong claims

made by the assessee, in its income from house property. Accordingly,

notice u/s. 148 of the Act, was issued on 28.3.2012 and served upon the

assessee on 30.3.2012, after recording reasons for the same on

28.3.2012 and approved by the appropriate authorities. In compliance of

the notice u/s. 148 of the Act, the assessee filed its reply dated 7.6.2012

and requested that the original return filed u/s. 139(1) on 27.10.2007

may be treated as filed in response to this notice.

3.1 The Assessee company was formed in 1968 with the object of

carrying on the business of Builder and Developers. The Company

developed the projects like New Delhi House and Mercantile House at

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Connaught Place, Heritage City at Gurgaon (in collaboration with Unitech

Ltd.) At present the company has main object of all kinds of construction

work and sale / purchase of properties. Notice u/s. 142(1) of the Act was

issued on 4.6.2012 and u/s. 143(2) on 8.6.2012 and served upon the

assessee by Regd. Post. In response to the same, Assessee’s Authorised

Representative attended the assessment proceedings and filed the details

from time to time. Thereafter, AO observed that it is clear that the letting

out of unsold flats in Mercantile House from which the assessee derives

income from rent has a definite and indentifiable nexus with the business

of the assessee. Hence, the said income has to be assessed as ‘Income

from Business’ and not as income from ‘House Property’. Accordingly,

deduction claimed by the assessee u/s. 24 of the Act amounting to

Rs. 40,86,258/- was disallowed and added to the income of the assessee

and assessed the income of the assessee at Rs. 2,03,51,768/- by passing

the assessment order u/s. 143(3) of the Act on 18.3.2013.

4. Being aggrieved with the aforesaid assessment order, assessee

appealed before the Ld. CIT(A), who vide impugned order dated

23.5.2014 has allowed the deduction and accordingly allowed the appeal

of the Assessee.

5. Now the Revenue is aggrieved against the impugned order and filed

the present appeal before the Tribunal.

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6. At the time of hearing Ld. DR relied upon the order of the AO and

reiterated the contentions raised by the Revenue in the grounds and

requested that addition made by the AO may be upheld.

7. On the contrary, Ld. A.R. of the assessee relied upon the order of

the ld. CIT(A). He draw our attention towards the Hon’ble High Court

judgment dated 17.5.2013 passed in ITA No. 238-240/Del/2013 in the

case of assessee titled as New Delhi Hotels Ltd. vs. ACIT wherein the

Hon’ble High Court has allowed the deduction to the assessee which was

later followed by the Ld. CIT(A) in his impugned order. Accordingly, he

requested that by following the Hon’ble High Court of Delhi judgment

dated 17.5.2013, as aforesaid, and by upholding the Ld. CIT(A)’s order,

Appeal of the Revenue may be dismissed.

7. We have heard both parties and perused and considered the

relevant records available with us especially the impugned order passed

by the Ld. CIT(A). We find that Ld. First Appellate Authority has

elaborately discussed the issue in dispute by considering the submissions

of the assessee and adjudicated the issue in dispute vide para no. 4.1 to

4.2 at pages 3 to 5 in his impugned order. The said relevant para 4.1 to

4.2 of the impugned order is are reproduced as under:-

“4.1 I have carefully considered the submissions of the

A/R of the appellant company, the facts of the case as

well as the findings of the A.O. Ground no. 1 of appeal

is general in nature and not pressed for by the

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appellant. Therefore, no adjudication is called for. In

ground no. 2 of appeal the plea of the appellant is that

AO has erred in treating the rental income of the

appellant as 'business income' instead of 'income from

house property'. The assessee company was formed in

1968 with the object of carrying on the business of

Builder and Developers. The company developed the

projects like New Delhi House and Mercantile House at

Cannaught Place, Heritage City at Gurgaon. The

company has main object of all kinds of construction

work and sale/purchase of roperties. The assessee has

shown unsold flats as its stock-in-trade as per Schedule

6 of Balance Sheet and rent from unsold fl.ats at

Mercantile House, Connaught Place was shown as

Income from House Property. The assessee has earned

income of Rs. 1,88,23,077/- from letting out of the said

property and after claiming deduction uls 24 of Rs.

40,86,258/- and payment of house tax of Rs.

52,02,219/-, an income of Rs. 95,34,600/- was declared

as income from House Property. AO observed that as

the assessee is a builder and is engaged in the business

of buying and selling of property, the income from

letting of the assets held as stock in trade should be

treated as business income instead of income from

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House Property. Therefore, AO held that the deduction

u/s 24 claimed by the assessee is not admissible. AO

observed that since the flats are in the nature of stock-

in-trade, income relating thereto should be assessed as

business income. Therefore, income from rent of

property is treated by the AO as business income and

the deductions claimed uls 24 of the IT Act, 1961

amounting to Rs. 40,86,258/- is added back to the

income of the assessee.

4.2 It is seen that identical addition was made by the

AO in A Y 2004-05, 2008-09 and 2009-10. In the above

assessments, AO disallowed the claim of deduction u/s

24 and rent from property held as stock-in-trade was

treated as business income as against appellant's claim

of the same as Income from House Property. Ld. CIT(A)

allowed the appeal of the assessee and upheld the claim

of the assessee that the rental income is to be treated

as Income from House Property. On further appeal by

the department Hon'ble ITAT upheld the view of the AO.

On appeal by the assessee against the decision of ITAT,

Hon'ble Delhi High Court in ITA 238/2013, 23912013

and 240/2013 in decision dt. 17.05.2013 for the AY

2004-05, 2008-09 and 2009-10 upheld the view of the

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ld. CIT(A) that rental income should be assessed under

the head Income from House Property as under :-

"4. The Tribunal held that it would fall under the

head of "profits and gains from business and

profession", whereas it is the appellant/assessee's

contention that it would fall within the head

"income from house property". It appears that

this issue is no longer debatable in view of the

decision in the case of CIT v Ansal Housing

Finance & Leasing Co. Ltd. decided on 31.10.2012

in ITA No. 18/1999. That decision has,

subsequently, been followed in CIT v. Discovery

Estates Pvt. Ltd (in ITA Nos. 1089/11 and

1090/2011) and CI v. Discovery Holding Pvt.

Ltd.(in ITA No. 1097/2011) decided on

18.02.2013. One of the questions raised in

Discovery Estates Pvt. Ltd and Discovery Holding

Pvt. Ltd (supra) was "whether the Income-tax

Appellate Tribunal was right in holding that the

rental income should be assessed in the income

from the business and not under the head

"income from house property"?" This court

answered that question in the negative by ITA

Nos. 238/13,239/13&240/13 Page 2 of 4 following

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the decision in the case of Ansal Housing Finance

& Leasing Co. Ltd (supra).

5. Mr Maratha appearing on behalf of the revenue

contended that Ansal Housing Finance & Leasing

Co. Ltd (supra) was a decision where the question

was with regard to deemed rent on the basis of

annual letting value (ALV) whereas in the present

appeals, the issue is with regard to the actual rent

received in respect of flats let out by the

appellant/assessee. However, we find that in

Discovery Estates Pvt. Ltd and Discovery Holding

Pvt. Ltd (supra) the issue was in the backdrop of

actual rent receipts and not on the basis of

deemed rent. Therefore, the decision of this court

in Discovery Estates Pvt. Ltd and Discovery

Holding Pvt. Ltd (supra) would govern the present

case also.

6. Consequently, while framing the question as to

whether the Income-tax Appellate Tribunal was

right in holding that rental income should be

assessed under the head of "profits and gains

from business and profession" and not under the

head "income from house property", we answer

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the same in the negative. We may add, however,

that the learned counsel for the appellant had also

taken the plea of consistency ITA Nos.

238/13,239/13&240/13 Page 3 of 4 but, we have

not examined the same as it was not necessary

for us to do so because of the position indicated

above.

7. These appeals are allowed as above."

A the facts and circumstances are identical,

therefore, respectfully following the decision of

Hon'ble Delhi High Court it is held that the rental

income should be assessed as Income from House

Property. Therefore, AO is not justified in treating

the above income as business income and AO is

directed to allow deductions claimed by the

appellant u/s. 24. The appeal is allowed in the

ground.”

7.1 After going through the findings of the Ld. CIT(A) as aforesaid, we

have seen that identical addition was made by the AO in AY 2004-05,

2008-09 and 2009-10. In the above assessments, AO disallowed the

claim of deduction u/s 24 and rent from property held as stock-in-trade

was treated as business income as against assessee’s claim of the same

as Income from House Property. Ld. CIT(A) allowed the appeal of the

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assessee and upheld the claim of the assessee that the rental income is to

be treated as Income from House Property. On further appeal by the

department ITAT upheld the view of the AO. On appeal by the assessee

against the decision of ITAT, Hon'ble Delhi High Court in ITA 238/2013,

239/2013 and 240/2013 in decision dt. 17.05.2013 for the AY 2004-05,

2008-09 and 2009-10 upheld the view of the ld. CIT(A) that rental income

should be assessed under the head Income from House Property as

under:

"4. The Tribunal held that it would fall under the

head of "profits and gains from business and

profession", whereas it is the appellant/assessee's

contention that it would fall within the head

"income from house property". It appears that

this issue is no longer debatable in view of the

decision in the case of CIT v Ansal Housing

Finance & Leasing Co. Ltd. decided on 31.10.2012

in ITA No. 18/1999. That decision has,

subsequently, been followed in CIT v. Discovery

Estates Pvt. Ltd (in ITA Nos. 1089/11 and

1090/2011) and CI v. Discovery Holding Pvt.

Ltd.(in ITA No. 1097/2011) decided on

18.02.2013. One of the questions raised in

Discovery Estates Pvt. Ltd and Discovery Holding

Pvt. Ltd (supra) was "whether the Income-tax

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Appellate Tribunal was right in holding that the

rental income should be assessed in the income

from the business and not under the head

"income from house property"?" This court

answered that question in the negative by ITA

Nos. 238/13,239/13&240/13 Page 2 of 4 following

the decision in the case of Ansal Housing Finance

& Leasing Co. Ltd (supra).

5. Mr Maratha appearing on behalf of the revenue

contended that Ansal Housing Finance & Leasing

Co. Ltd (supra) was a decision where the question

was with regard to deemed rent on the basis of

annual letting value (ALV) whereas in the present

appeals, the issue is with regard to the actual rent

received in respect of flats let out by the

appellant/assessee. However, we find that in

Discovery Estates Pvt. Ltd and Discovery Holding

Pvt. Ltd (supra) the issue was in the backdrop of

actual rent receipts and not on the basis of

deemed rent. Therefore, the decision of this court

in Discovery Estates Pvt. Ltd and Discovery

Holding Pvt. Ltd (supra) would govern the present

case also.

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6. Consequently, while framing the question as to

whether the Income-tax Appellate Tribunal was

right in holding that rental income should be

assessed under the head of "profits and gains

from business and profession" and not under the

head "income from house property", we answer

the same in the negative. We may add, however,

that the learned counsel for the appellant had also

taken the plea of consistency ITA Nos.

238/13,239/13&240/13 Page 3 of 4 but, we have

not examined the same as it was not necessary

for us to do so because of the position indicated

above.

7. These appeals are allowed as above."

7.2 In the background of the aforesaid discussions and respectfully

following the decision of Hon'ble Delhi High Court in assessee’s own case,

as aforesaid, we are of the view that Ld. CIT(A) has rightly held that the

rental income should be assessed as Income from House Property.

Therefore, AO is not justified in treating the above income as business

income and CIT was rightly directed to allow deductions claimed by the

appellant u/s. 24. In view of the above, we are of view that Ld. CIT(A)

has passed a well reasoned order which does not need any interference

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on our part, hence, we uphold the same and Dismiss the appeal filed by

the Revenue.

8. Following the consistent view, as aforesaid, ITA Nos. 4551 to

4553/Del/2014 (Ayrs. 2006-07, 2007-08 & 2010-11) filed by the

Revenue also stands dismissed.

9. In the result, all the 4 appeals of the Revenue are dismissed.

Order pronounced in the Open Court on 29/7/2016.

Sd/- Sd/-

[ANADI N. MISHRA] [H.S. SIDHU]

ACCOUNTANT MEMBER JUDICIAL MEMBER

Date 29/7/2016

“SRBHATNAGAR”
Copy forwarded to: -

1. Appellant -
2. Respondent -
3. CIT
4. CIT (A)
5. DR, ITAT TRUE COPY
By Order,

Assistant Registrar, ITAT, Delhi Benches

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