ITXA375.13.doc IN HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION rt INCOME TAX APPEAL NO. 375 OF 2013 ou Commissioner of Income Tax-12, ] 1st floor, Room No.121, Aayakar Bhavan, ] M.K. Road, Mumbai 400 020 ] ... Appellant C Versus M/s. Sane & Doshi Enterprises, ] 12, Ali Chambers, Tamarind Lane, ] Fort, Mumbai 400 023. ] ... Respondent h WITH INCOME TAX APPEAL NO. 5313 OF 2010 ig WITH INCOME TAX APPEAL NO. 5592 OF 2010 WITH H INCOME TAX APPEAL NO. 6230 OF 2010 WITH INCOME TAX APPEAL NO. 6232 OF 2010 WITH y INCOME TAX APPEAL NO. 6234 OF 2010 WITH ba INCOME TAX APPEAL NO. 1498 OF 2011 WITH INCOME TAX APPEAL NO. 1504 OF 2012 om WITH INCOME TAX APPEAL NO. 418 OF 2013 WITH INCOME TAX APPEAL NO. 675 OF 2013 B Mr. P.C. Chhotaray for Appellants in all appeals. Mr. S.C. Tiwari with Ms. Natasha Mangat for Respondents in all appeals. SRP 1/49 ::: Uploaded on - 24/04/2015 ::: Downloaded on - 15/02/2016 10:18:44 ::: ITXA375.13.doc CORAM : S.C. DHARMADHIKARI & A.K. MENON, JJ. rt THURSDAY, 9TH APRIL, 2015 ou ORAL JUDGMENT : [Per S.C. Dharmadhikari, J.] C 1. These appeals were heard together and are being disposed of by common order. That is because common questions and submissions are raised by parties. h 2. ig Both sides agree that for sake of convenience, facts in H Income Tax Appeal No.5313 of 2010 can be referred to. respondent-assessee before us is common to all appeals and it is engaged in real estate business and constructed commercial y ba complex viz. May Fair Tower. It is stated to be partnership firm registered under Indian Partnership Act, 1932. It filed its return of om income for assessment year 2000-01 dated 25 th October, 2000, declaring total income at Rs.5,51,81,680/- including rental income of Rs.45,57,272/- and claimed deduction under section 24(a) of B Income Tax Act,1961 (hereinafter referred to as IT Act ) of Rs.11,39,318/-. This claim of assessee was not accepted by SRP 2/49 ::: Uploaded on - 24/04/2015 ::: Downloaded on - 15/02/2016 10:18:44 ::: ITXA375.13.doc Assessing Officer. Assessing Officer treated rental income as business income on ground that receipts from this property rt were on account of exploitation of commercial assets and as such, it is ou business profit of assessee. He further observed that assessee is engaged in business of construction of building with C view to sell same and not for leasing it. Thus, leasing of unsold units is integral part of its business. Hence income earned on h leasing was business income. assessment order was passed on 29 th March, 2006. ig H 3. assessee, aggrieved by this order, preferred appeal before Commissioner of Income (Appeals). Commissioner y passed order on 19th September, 2006 (Annexure C) partly allowing ba appeal. Commissioner concluded that claim of assessee of expenses of Rs.45,00,000/- should have been allowed. om Therefore, ground No.5 in Memo of Appeal before Commissioner and raised by assessee came to be accepted. B 4. Commissioner also accepted ground of assessee and pertaining to charge of rental income. Commissioner found SRP 3/49 ::: Uploaded on - 24/04/2015 ::: Downloaded on - 15/02/2016 10:18:44 ::: ITXA375.13.doc substance in assessee's grievance and held that this should be treated as income from house property. Thus, Grounds 2, 3 and 4 in rt Memo of Appeal came to be allowed Ground No.5 was also ou allowed. However, Assessing Officer's order to extent of disallowance of Rs.1,80,000/- as compensation amount was C confirmed. That is how Commissioner partly allowed appeal. h 5. We are not concerned with other aspect and particularly ig about compensation amount. It is common ground that we are concerned with Ground Nos.2, 3, 4 and 5 which have been allowed by H Commissioner. y 6. It is aggrieved by such order of Commissioner that ba Revenue approached Income Tax Appellate Tribunal and Bench at Mumbai by filing Income Tax Appeal No.6449/Mum/2006. By om impugned order dated 11th December, 2008, Tribunal proceeded to dismiss appeal. B 7. Mr. Chhotaray, learned counsel appearing on behalf of Revenue in support of these appeals tenders additional questions and SRP 4/49 ::: Uploaded on - 24/04/2015 ::: Downloaded on - 15/02/2016 10:18:44 ::: ITXA375.13.doc submits that these are additional substantial questions of law. That be taken into consideration and in addition to those proposed at pages 5 rt and 6 of paper-book by Revenue. ou 8. Mr. Chhotaray would also submit that there are some more C issues in addition to those referred hereinabove. Mr. Chhotaray submits that they arise in Income Tax Appeal No.1498 of 2011, which h pertains to assessment year 2006-07. Mr. Chhotaray submits that ig they arise from allowance as deduction under section 24(b) of IT Act as interest on borrowed capital. In Income Tax Appeal H No.1504 of 2012 and which pertains to assessment year 2007-08, this additional question of law would also arise according to Mr. y Chhotaray. Lastly, he would submit that in Income Tax Appeal ba No.418 of 2013 also, additional questions would arise. This appeal pertains to assessment year 2008-09. om 9. Thus, it is submitted by Mr. Chhotaray that following B questions are substantial questions of law : (a) Whether on facts and in SRP 5/49 ::: Uploaded on - 24/04/2015 ::: Downloaded on - 15/02/2016 10:18:44 ::: ITXA375.13.doc circumstances of case and in law, Hon'ble Income Tax Appellate Tribunal was justified in rt directing Assessing Officer to tax rental ou income of Rs.45,57 lakhs as 'income from house property' and to allow deduction u/s 24 ignoring C fact that income was received from business asset of unsold flats shown as closing stock? h (b) ig Whether on facts and in circumstances of case and in law, Hon'ble H Income Tax Appellate Tribunal was justified in directing Assessing Officer to allow claim of y expenses of Rs.45 lakhs on account of provision for ba incomplete work ignoring fact that there was no incomplete work in project as is evident from om fact that assessee has received rental income out of closing stock shown by him ? B (c) Whether rental income earned by SRP 6/49 ::: Uploaded on - 24/04/2015 ::: Downloaded on - 15/02/2016 10:18:44 ::: ITXA375.13.doc assessee is business income of assessee earned on account of exploitation of business assets or it rt was income from house property ? ou (d) Whether on facts and in C circumstances of case and in law, Hon'ble Income Tax Appellate Tribunal was justified in h treating rental income as income from house ig property without appreciating that assessee has maintained consolidated profit and loss account H treating rental receipts as part of business receipts? y ba (e) Whether on facts and in circumstances of case and in law, Hon'ble om Income Tax Appellate Tribunal was justified in treating rental income as income from house B property when assessee had not maintained any separate account in respect of income from house property and all that assessee has done SRP 7/49 ::: Uploaded on - 24/04/2015 ::: Downloaded on - 15/02/2016 10:18:44 ::: ITXA375.13.doc was to take out items of rental receipt and property taxes from consolidated profit and loss rt account for separate consideration without taking out ou corresponding proportionate expenses relatable to rented property in profit and loss account C and at same time has claimed huge statutory deduction available for computation of income from h house property under section 24(a). ig H 10. Mr. Chhotaray canvassed oral submissions and during course of these oral arguments submitted that appeals raise important question and of law. In each of these appeals, Tribunal y ba lost sight of fact that if firm carries on business of development in real estate and has constructed buildings comprising of units or flats om for sale, then, unsold flats or units being given on lease by firm would not enable it to claim income derived therefrom as income from House property. Since business of firm is of development B and construction of property, then, this income and which is derived from stock of unsold units or flats is business income and ought to SRP 8/49 ::: Uploaded on - 24/04/2015 ::: Downloaded on - 15/02/2016 10:18:44 ::: ITXA375.13.doc be treated as such. Mr. Chhotaray's complaint was that by some jugglery or manipulation of accounts, assessee firm claimed rt income derived from this lease transactions as income generated ou from house property. That was not permissible. Mr. Chhotaray has submitted that in each of these matters, Tribunal lost sight of C fact that unsold units were given on rent / leave and licence for earning income therefrom. rental income from these unsold units h has been shown as income from house property and huge deduction ig has been claimed under section 24(a) of IT Act. However, H Assessing Officer noted that assessee firm was formed with specific object of construction of buildings with view to sell units therein and not letting out same. business transaction of y ba leasing of unsold units was thus nothing but transaction to generate business income. assessee maintains consolidated Profit & Loss om Account thereby combining its trading and rental receipts. However, to claim deduction as above, it has taken out rental receipts and property taxes and shown it under separate head of income from B house property. Assessing Officer noticed this and strongly commented on method of drawing up Profit & Loss Account SRP 9/49 ::: Uploaded on - 24/04/2015 ::: Downloaded on - 15/02/2016 10:18:44 ::: ITXA375.13.doc by assessee. He noted that certain expenditure like legal, professional and consultancy charges to tune of Rs.6,52,000/- and rt which pertains to rented property has been claimed as deduction ou again in computing business loss. This amounts to double deduction. If income from house property is subject matter of C deduction, then, no separate deduction can be claimed in respect of any individual item of expenditure pertaining to rented property. h 11. ig Mr. Chhotaray has relied upon these findings in Assessment H Officer's order and by referring to Partnership Deed dated 16 th March, 1999 (clause 6 page 3 of same), he would submit that upon examination of all this material, Assessing Officer rightly y ba concluded that rental income is taxable as business income. Profit & Loss Account was taken as starting point and that is how om income from rent and leasing house property was not treated as such, but as business income. B 12. assessee may have succeeded before Commissioner and Tribunal, but both missed point that for assessment years SRP 10/49 ::: Uploaded on - 24/04/2015 ::: Downloaded on - 15/02/2016 10:18:44 ::: ITXA375.13.doc 2002-03, 2003-04 and 2004-05, disallowance by Assessing Officer was in sum of Rs.97,48,551/-, Rs,99,23,274/- and rt Rs.1,08,34,876/-. This huge deduction under section 24(a) has been ou claimed and revenue implications are, therefore, enormous. Revenue, therefore, rightly asserted and by relying on case law that C exploitation of business assets would yield business income. Mr. Chhotaray has submitted that judgments of Hon'ble Supreme h Court in case of Commissioner of Income Tax vs. Maheshwari ig Devi Jute Mills (1965) 57 ITR 36; Universal Plast Ltd. vs. H Commissioner of Income Tax 237 ITR 454 and Commissioner of Income Tax vs. Vikram Cotton Mills Ltd. (1988) 169 ITR 597 and finally order passed by Hon'ble Madras High Court in y ba Commissioner of Income Tax vs. V.S.T. Motors Pvt. Ltd. (1996) 226 ITR 155 clinch issue. om 13. Mr. Chhotaray submits that tests have been laid down in case of Universal Plast Ltd. (supra). They have been correctly applied B by Assessing Officer. Mr. Chhotaray, therefore, submits that when conclusions of Assessing Officer were based on perusal SRP 11/49 ::: Uploaded on - 24/04/2015 ::: Downloaded on - 15/02/2016 10:18:44 ::: ITXA375.13.doc of Partnership Deed, nature of business of firm, method of maintaining accounts, then, they should not have been interfered rt with by both First Appellate Authority and Tribunal. Both ou have lost sight of fact that no separate accounts are maintained in respect of properties which have been let out yielding rental C income. One consolidated Profit & Loss account is prepared and on right side of which trade receipts and rent receipts appear. h expenses are common. No separate account of expenses was ig maintained in respect of property let out and from which rental H income is received. expenses pertaining to let out properties merged with other expenses. There is no bifurcation of expenses relating to properties let out for other business. It is this consolidated y ba account which was audited. apparent defect noted by Assessing Officer in assessment for year 2005-06 would go to om root of case. assessee never contended that rental income should be separated from trade receipts and that is why single consolidated account was maintained. B 14. If accounts are maintained in normal course treating SRP 12/49 ::: Uploaded on - 24/04/2015 ::: Downloaded on - 15/02/2016 10:18:44 ::: ITXA375.13.doc entire receipts including rental income as business receipts, then, there is no question of claiming deduction under section 24(a). rt problem arose when assessee abruptly deviated from ou accounting practice by taking out only two items rental receipts and property taxes from house property and claimed huge deduction under C section 24(a). For reasons that have been assigned by Revenue and noted hereinabove, particularly of non maintenance of separate h accounts and bifurcation that deduction was rightly disallowed. ig Mr. Chhotaray, therefore, submits that jugglery and manner in H which deduction was claimed indicated that assessee was not acting bona fide and rather claiming double deduction. y ba 15. Even in relation to this rental income, without prejudice and in alternative if this income is treated as income from house property, om then, figures adopted by assessee should not have been accepted straight away. Commissioner and Tribunal ought to have sent matter back to Assessing Officer to determine this B allowable part of expenditure and pertaining to letting out of premises. That is one more reason for which this Court should set SRP 13/49 ::: Uploaded on - 24/04/2015 ::: Downloaded on - 15/02/2016 10:18:44 ::: ITXA375.13.doc aside these concurrent orders. rt 16. Then Mr. Chhotaray addressed us on issue of interest paid as ou capital brought in by partners. He submits that interest paid on partners capital is claimed as deduction under section 24(b). C assessment years 2006-07, 2007-08 and 2008-09 for which these deductions have been claimed indicate as to how huge sums have been h mentioned. They are indicated at page 21 of written note ig submitted by Mr. Chhotaray. Though rental income was generated in H earlier assessment years, such deduction was not claimed for assessment years 2000-01, 2002-03, 2003-04, 2004-05 and 2005-06. Mr. Chhotaray submits that there are two commercial complexes y ba Mayfair-I and Mayfair-II. construction was completed in financial years 1999-2000 and 2001-2002 respectively. If om construction was carried out with contribution of capital by partners and interest paid on partners' capital as tabulated should be allowed, then, it is important to note that Assessing Officer's B order was set aside and this claim has been allowed by Commissioner without any deduction. matter has not been SRP 14/49 ::: Uploaded on - 24/04/2015 ::: Downloaded on - 15/02/2016 10:18:44 ::: ITXA375.13.doc examined by Tribunal also at length. If deduction has not been claimed under section 24(b) in respect of this borrowed capital and rt suddenly such claim was made in assessment year 2006-07, then, ou Revenue was alerted. Assessing Officer disallowed it. explanation given for not making such claim initially cannot be C accepted. It is not satisfactory. If assets were treated as stock-in- trade and yet assessee proceeded to claim deduction in respect h of income generated from leasing out of flats / units as income ig from house property, then, this itself shows that conflicting claims H were made. If units constitute stock-in-trade of firm, then, dealing with such stock-in-trade would generate only business receipts. As same reasoning has been adopted to disallow y ba interest claim, then, conclusion of Assessing Officer should not have been interfered with. There was actually no interest expenditure om incurred on borrowed capital. All such claims were clearly after- thought. partnership capital could have been utilised for different purpose. There should be clear link between borrowed money B and construction on property. If no separate account is maintained in respect of let out property, then, there is grave doubt about SRP 15/49 ::: Uploaded on - 24/04/2015 ::: Downloaded on - 15/02/2016 10:18:44 ::: ITXA375.13.doc claim of assessee on deduction under section 24(b). For all these reasons he submits that such important issue having been missed rt by Commissioner and Tribunal, we should proceed to entertain ou this appeal and allow it. Mr. Chhotaray has pointed out in his written submissions as to how this claim had been elaborated throughout by C Revenue. They have highlighted conduct of assessee. For all these reasons he submits that Commissioner and Assessing h Officer were not in error with regard to this claim and their ig conclusions were based on settled legal principles. existence H of firm and independent of partners is principle which has been applied. If there is no such existence as distinct and understood in case of company, then, all more this Court must interfere y ba with order of Tribunal. om 17. Even with regard to third issue, Mr. Chhotaray submits that provision of expenses of Rs.45 lakhs made for alleged incomplete work should be allowed as deduction. This pertains to assessment B year 2000-01. This could not be allowed because Assessing Officer observed that there was no basis for such claim. Buildings SRP 16/49 ::: Uploaded on - 24/04/2015 ::: Downloaded on - 15/02/2016 10:18:44 ::: ITXA375.13.doc have been completed and let out and, therefore, there was no justification for this provision. new explanation was given before rt Commissioner of Income Tax (Appeals) and Tribunal which ou has been accepted by said authorities. Therefore, if they were inclined to take different view, they ought to have sent matter C back to Assessing Officer. h 18. Mr. Chhotaray's submissions have been countered by Mr. Tiwari ig appearing for assessee by pointing out that additional questions H which are proposed have never been subject matter of any arguments either before Commissioner or Tribunal. He submits that appeal before Tribunal was that of Revenue. Revenue y ba could have very well raised all these grounds and requested Tribunal to consider them. If none of these grounds and now om proposed during course of arguments have been taken up before Tribunal, then, this Court should not allow them to be raised for fist time. They do not arise from impugned orders. only B ground on which Assessing Officer's order was sought to be supported by Revenue before Tribunal was that rental income SRP 17/49 ::: Uploaded on - 24/04/2015 ::: Downloaded on - 15/02/2016 10:18:44 ::: ITXA375.13.doc was received from business assets and shown as closing stock. Therefore, additional two questions proposed for assessment year rt 2000-01, 2002-03 to 2005-06 and first two additional questions ou proposed for assessment year 2006-07 are identically worded but do not arise. In any event, non maintenance of separate Profit & Loss C account for rental income cannot be reason for denying deduction. These questions are based on clearly untenable and h erroneous premise that heads of income for purpose of assessment ig under Income Tax Act depend upon treatment given in H assessee's books of account. Mr. Tiwari submits that computation of income chargeable to income tax is question that has to be decided on touchstone of provisions of Income Tax Act, y ba 1961, as applicable to particular case. treatment given or not given in assessee's books of account does not decide assessee's om tax liability. In that regard, reliance is placed on Kedarnath Jute Manufacturing Company Limited vs. Commissioner of Income Tax 82 ITR 363 and Sutlej Cotton Mills Ltd. vs. Commissioner of Income Tax, B 116 ITR 1. Mr. Tiwari submits that as far as assessment year 2006-07 onwards are concerned, there is no income from sale of apartments. SRP 18/49 ::: Uploaded on - 24/04/2015 ::: Downloaded on - 15/02/2016 10:18:44 ::: ITXA375.13.doc In none of assessment orders, Assessing Officer has found any fault with Profit & Loss account of respondent-assessee rt because in return of income, income from house property has ou been separately computed. Now, different question cannot be proposed by Revenue. C 19. Mr. Tiwari also points out that as far as assessment year h 2006-07 is concerned for which additional question is proposed, it ig is submitted that upto year 2005-06, premises were reflected as H stock-in-trade because respondent-assessee was carrying out sale of apartments also. From 2006-07 onwards all apartments have been let out on rent and there is no trading income. For this reason, y ba deduction of interest under section 24(b) of Act has been claimed from assessment year 2006-07 onwards and not in earlier years. om Tribunal has duly noted this fact. Mr. Tiwari also relies upon Indian Partnership Act, 1932 and particularly section 13 thereof to submit that interest on capital and taken from partners is B permissible. law does not oblige assessee to use his own funds for carrying out business and it can also be carried out with SRP 19/49 ::: Uploaded on - 24/04/2015 ::: Downloaded on - 15/02/2016 10:18:45 ::: ITXA375.13.doc borrowed funds. Similarly, assessee's own funds can be utilised for non business purposes. It is only when certain amounts are rt designated as repayment or borrowed funds from partner, ou assumption as made by Revenue cannot be made. In these circumstances, Tribunal was in no error in rejecting this ground of C Revenue. Mr. Tiwari was at pains to point out that Revenue has substituted main questions in Income Tax Appeal No.675 of h 2013 and Income Tax Appeal No.775 of 2013 because counsel for ig Revenue realises that for these two assessment years, there is no H closing stock. Similar, substitution is called for assessment year 2006- 07 also in Income Tax Appeal No.1498 of 2011. In circumstances, Mr. Tiwari would submit that this Court should only focus on main y ba question and which is objection of Revenue for treating income generated by leasing of unsold flats or units as income om from house property. It is submitted that Revenue persists in making such arguments and in that regard reliance is placed by Mr. Tiwari on order passed by this Court in case of Mangala B Homes Private Limited vs. Income Tax Officer & Ors. 325 ITR 281 and judgment of Hon'ble Supreme Court in case of East SRP 20/49 ::: Uploaded on - 24/04/2015 ::: Downloaded on - 15/02/2016 10:18:45 ::: ITXA375.13.doc India Housing and Land Development Trust Ltd. vs. Commissioner of Income Tax (1961) 42 ITR 49. Mr. Tiwari submits that reliance on rt Universal Plast (supra) by Revenue is misconceived. There ou leasing out factory as distinguished from factory building was in issue. Whether income from that should be assessed under C head profits and gains of business or profession or income from other sources was further aspect under consideration. In that h decision Hon'ble Supreme Court did not consider as to whether ig such income could be termed as income from house property. H Therefore, parameters relating to income from other sources would not apply. For all these reasons, it is submitted that Revenue appeals are in nature of seeking re-appreciation and re-appraisal y ba of factual materials and, therefore, they deserve to be dismissed. om 20. We have, with assistance of learned counsel appearing on both sides, perused Memo of Appeals and which are stated to be raising above questions. They are common to all and, B therefore, Revenue as also assessee's counsel pointed out that we need not separately refer to each and every Memo of Appeal and SRP 21/49 ::: Uploaded on - 24/04/2015 ::: Downloaded on - 15/02/2016 10:18:45 ::: ITXA375.13.doc its annexures. Thus, we are not required to refer to all Memos of Appeal and individual facts therein or view taken by rt authorities under I.T. Act simply because points or questions ou raised are common to all of them. We have noted not only rival stands as emerging from oral arguments, but from written C submissions only because Mr. Chhotaray submits that enormity of Revenue and impact of view taken by Tribunal on other h matters requires us to give in-depth consideration. If this order has ig become rather bulky, then reasons for same are obvious. H 21. Tribunal had before it, appeal of Revenue and which according to Revenue challenges order of Commissioner y ba and Income Tax (Appeals) on various grounds. three grounds which have been projected and emphasised pertain to treatment of om total income as income from house property and allowing deduction under section 24 ignoring fact that income was received from business asset (unsold flats) shown as closing stock. other B was direction of Commissioner to Assessing Officer to allow claim of expenses of Rs.45 lakhs on account of provision for SRP 22/49 ::: Uploaded on - 24/04/2015 ::: Downloaded on - 15/02/2016 10:18:45 ::: ITXA375.13.doc incomplete work. Tribunal noted rival contentions. It found that there is no dispute that assessee was engaged in construction rt business and has constructed commercial property known as May ou Fair Tower. unsold portion of property was let out and assessee earned rental income therefrom. Tribunal found that if C rental income earned by assessee could be treated as business income as claimed by Revenue, or income from house property, is h issue which has been repeatedly raised and considered. ig identical issue, according to Tribunal, was raised before H Hon'ble Supreme Court in case of East India Housing and Land Development Trust Ltd. vs. Commissioner of Income Tax (1961) 42 ITR 49. Hon'ble Supreme Court held in that case that assessee y ba company was incorporated with object of also developing landed properties. construction of shops and stalls on purchased lands om was made and these were let out to different tenants. question arose as to whether rental income received by assessee is income from house property or business income. Hon'ble B Supreme Court, according to Tribunal, concluded that income received from tenants or shops and stalls by assessee company is SRP 23/49 ::: Uploaded on - 24/04/2015 ::: Downloaded on - 15/02/2016 10:18:45 ::: ITXA375.13.doc liable to be taxed as property income and not as business income. In relation to that, Hon'ble Supreme Court further held that income rt from tenants of shops and stalls is income from house property and ou distinct head specified in erstwhile Income Tax Act of 1922 could be pressed into service. These are mutually exclusive claims of C deduction. character of rental income is not altered just because it was received by company formed with object of developing and h setting up markets or because occupants are not permanent. ig H 22. Then Hon'ble Supreme Court decisions and rendered later than this judgment in East India (supra) have been referred by Tribunal including some of High Court judgments and y ba parameters laid down therein. Tribunal found that Commissioner examined this issue in detail. Para 2.23 of om Commissioner's order with specific references to legal provisions have been reproduced in Tribunal's order. Commissioner held that assessee has constructed building of which it is owner and B received income from letting out some portion of this house property. It continued to receive same even till date of passing of SRP 24/49 ::: Uploaded on - 24/04/2015 ::: Downloaded on - 15/02/2016 10:18:45 ::: ITXA375.13.doc order by Commissioner. Commissioner referred to some of decisions and held that rental income has been shown as rt income from house property by assessee-company. matter ou was viewed differently by Assessing Officer. However, Tribunal decisions and judgments of Hon'ble Supreme Court C and some of High Courts and referred by Commissioner dealt with identical claim. If assessee company is engaged in h business of construction and real estate development and it earned ig income in form of rent from tenants / lessees to whom H property was let out, then, whether property is held as stock-in- trade or otherwise is not what is material. real and main issue is whether this income is earned in capacity as trader or in y ba capacity of owner of premises. If property belongs to assessee and part of it which was unsold has been let out, then, om income generated therefrom has been treated as income from house property. Commissioner's order, therefore, was confirmed by Tribunal. Tribunal held that since correct tests and parameters B have been applied and facts and circumstances in assessee's case are identical to some of decisions rendered by Hon'ble SRP 25/49 ::: Uploaded on - 24/04/2015 ::: Downloaded on - 15/02/2016 10:18:45 ::: ITXA375.13.doc Supreme Court, then, there is no legal infirmity in findings of Commissioner. rt ou 23. If Tribunal also had before it Profit & Loss account and it referred to treatment given by assessee therein, then, we do C not find how Revenue can complain otherwise. h 24. We have before us copy of judgment of Hon'ble ig Supreme Court in case of East India Housing (supra). There, H appellant company which was incorporated with object of buying and developing landed properties and promoting and developing markets, purchased 10 bighas of land in town of Calcutta and set y ba up market therein. question was whether income realised from tenants of shops and stalls was liable to be taxed as om business income under section 10 of Income Tax Act, 1922, or as income from property under section 9. After rival contentions were noted, this is what Hon'ble Supreme Court has held : B appellant contends that because it is company formed with object of promoting and developing markets, its income derived from shops and stalls is liable to be taxed under section 10 of SRP 26/49 ::: Uploaded on - 24/04/2015 ::: Downloaded on - 15/02/2016 10:18:45 ::: ITXA375.13.doc Income-tax Act as profits or gains of business and that income is not liable to be taxed as income from property under section 9 of Act. appellant is rt undoubtedly, under provisions of Calcutta Municipal Act, 1951, required to obtain licence from Corporation of Calcutta and to maintain sanitary ou and other services in conformity with provisions of that Act and for that purpose has to maintain staff and to incur expenditure. But, on that account income derived from letting out property belonging to C appellant does not become profits or gains from business within meaning of section 6 and 10 of Income-tax Act. By section 6 of Income-tax Act following six different heads of income are made chargeable : (I) salaries, (2) interest on securities, (3) h income from property (4) profits and gains of business, profession or vocation, (5) income from other sources ig and (6) capital gains. This classification under distinct heads of income, profits and gains is made having regard to sources from which income is derived. H Income-tax is undoubtedly levied on total taxable income of taxpayer and tax levied is single tax on aggregate taxable receipts from all sources; it is not collection of taxes separately levied on distinct y heads of income. But distinct heads specified in section 6 indicating sources are mutually exclusive ba and income derived from different sources falling under specific heads has to be computed for purpose of taxation in manner provided by appropriate section. If income from source falls within om specific head set out in section 6, fat that it may indirectly be covered by another head will not make income taxable under latter head. income derived by company from shops and stalls is income received from property and B falls under specific head described in section 9. character of that income is not altered because it is received by company formed with object of developing and setting up markets. In United Commercial Bank Ltd. v. Commissioner of Income-tax, SRP 27/49 ::: Uploaded on - 24/04/2015 ::: Downloaded on - 15/02/2016 10:18:45 ::: ITXA375.13.doc this court explained after exhaustive review of authorities that under scheme of Income-tax Act, 1922, heads of income, profits and gains enumerated rt in different clauses of section 6 are mutually exclusive, specific head covering items of income arising from particular source. ou In Fry v. Salisbury House Estates Co. Ltd. company formed to acquire, manage and deal with block of buildings, having let out rooms as C unfurnished offices to tenants,was held chargeable to tax under Schedule to Income Tax Act, 1918, and not Schedule D. company provided staff to operate lifts and to act as porters and watch and protect building; and also provided certain services h such as heating and cleaning to tenants at additional charge. taxing authorities sought to ig charge income from letting out of rooms as receipts of trade chargeable under Schedule D, but that claim was negatived by House of Lords holding that H rents were profits arising from ownership of land assessable under Schedule and that same could not be included in assessment under Schedule D as trade receipts. y In Commercial Properties Ltd. v. ba Commissioner of Income-tax, income derived from rents by company whose sole object was to acquire lands, build houses and let them to tenants and whose sole business was management and collection of rents from om said properties, was held assessable under section 9 and not under section 10 of Income-tax Act. It was observed in that case that, merely because owner of property was company incorporated with object of owning property, incidence of income derived from property owned could not be regarded B as altered; income came more directly and specifically under head property than income from business. SRP 28/49 ::: Uploaded on - 24/04/2015 ::: Downloaded on - 15/02/2016 10:18:45 ::: ITXA375.13.doc income received by appellant from shops is indisputably income from property; so is income from stalls from occupants. character of rt income is not altered merely because some stall remain occupied by same occupants and remaining stalls are occupied by shifting class of occupants. ou primary source of income from stalls is occupation of stalls, and it is matter of little moment that occupation which is source of income is temporary. income-tax authorities were, in our C judgment, right in holding that income received by appellant was assessable under section 9 of Income-tax Act. appeal, therefore, fails and is dismissed h with costs. 25. ig We do not find that emphasis by Mr. Chhotaray and on H certain aspects which allegedly missed and escaped attention of Tribunal would enable us to take any different view. Even if what y has been emphasised by Mr. Chhotaray is taken into account, what ba underlying test and as evolved throughout is whether income has been derived from property. treatment given in books of om account as stock-in-trade would not, therefore, alter character or nature of income as held by Hon'ble Supreme Court. If B there is test and which is in field and emerging from repeated judgments rendered either by Hon'ble Supreme Court or by other High Courts, then, even if Mr. Chhotaray's additional questions are SRP 29/49 ::: Uploaded on - 24/04/2015 ::: Downloaded on - 15/02/2016 10:18:45 ::: ITXA375.13.doc taken into account, different conclusion cannot be reached. Mr. Chhotaray was at pains to rely on certain judgments and wherein, rt according to him, treatment given to income would be ou decisive. C 26. Let us now refer to some of judgments. main emphasis of Mr. Chhotaray was on judgment of Hon'ble Supreme Court h in case of Universal Plast Ltd. vs. Commissioner of Income-tax ig (1999) 237 ITR 454. There, facts emerging from judgment H itself denote that assessee set up factory styled as UPL Factory for carrying on business of manufacturing PVC sheets and allied products. assessee suffered losses for two years. It then entered y ba into agreement styled as leave and licence agreement with M/s. Leatherite Industries Limited for period of seven years commencing om on 30th March, 1977. This was agreement containing renewal clause and further stipulations. They would denote that licencee was to pay licence fee in sum determined and twenty-five per cent B of net profit of factory in question with effect from 1 st April, 1977. For first three months which fell in accounting year SRP 30/49 ::: Uploaded on - 24/04/2015 ::: Downloaded on - 15/02/2016 10:18:45 ::: ITXA375.13.doc relevant to assessment year 1977-78, assessee received only licence fee of Rs.6,00,000/- as no profit was earned by licencee rt during this period. That amount was shown by assessee as part of ou business income. Income-tax Officer did not accept that it was business income and assessed same as income from other C sources. Commissioner of Income-tax (Appeals), however, accepted plea of assessee that it was its business income and h allowed appeal on 27th April, 1985. Revenue unsuccessfully ig appealed against order of appellate authority before Income H Tax Appellate Tribunal. However, Tribunal drew up statement of case and referred questions of law which have been reproduced in Supreme Court judgment. These two questions of law are whether y ba Tribunal was correct in holding that income received by assessee by leasing out factory was business income. Similarly, in om Andhra Pradesh case, whether leasing out of godowns and letting of factory with machinery constituted business income of assessee or not. It is in relation to these questions that rival B contentions have been noted and thereafter judgments of Supreme Court in field. It is thereafter that propositions have SRP 31/49 ::: Uploaded on - 24/04/2015 ::: Downloaded on - 15/02/2016 10:18:45 ::: ITXA375.13.doc been summarised and which read as under : (1) no precise test can be laid down to ascertain rt whether income (referred to by whatever nomenclature, least,amount, rents, licence fee) received by assessee ou from leasing or letting out of assets would fall under head Profits and gains of business or profession ; (2) it is mixed question of law and fact and has to be determined from point of view of businessman C in that business on facts and in circumstances of each case, including true interpretation of agreement under which assets are let out. h (3) where all assets of business are let out, period for which assets are let out is relevant factor to find out whether intention of assessee is ig to go out of business or to come back and restart same. H (4) if only few of business assets are let out temporarily, while assessee is carrying out his other business activities, then it is case of exploiting business assets otherwise than employing them for his y own use for making profit for that business; but if business never started or has started but ceased with no ba intention to be resumed, assets also will cease to be business assets and transaction will only be exploitation of property by owner thereof, but not exploitation of business assets. om 27. We cannot ignore fact that when assessee was in business, set up factories and entire infrastructure for carrying out B certain manufacturing activities suffered losses and thereafter inducted third party as licencees therein to continue business. In that SRP 32/49 ::: Uploaded on - 24/04/2015 ::: Downloaded on - 15/02/2016 10:18:45 ::: ITXA375.13.doc really it was found that assessee generated income as licence fees and share in profits. Admittedly and undisputedly this was rt generated from factory and from godowns which have been ou given on leave and licence basis. It is in relation to that Supreme Court held that it is important to lay down precise test as to whether C income be given nomenclature, lease amount, rents, licence fee received by assessee from leasing or letting out of assets would fall h under head Profits and gains of business or profession . ig Pertinently Supreme Court held that it is mixed question of law H and fact and has to be determined from point of view of businessman in that business, on facts and in circumstances of each case, including true interpretation of agreement under which y ba assets are let out. Where all assets of business are let out, period for which assets are let out is relevant factor to find om out whether intention of assessee is to go out of business or to come back and restart same. B 28. We do not think that reliance by Mr. Chhotaray on this decision is well placed. tests which have been evolved by SRP 33/49 ::: Uploaded on - 24/04/2015 ::: Downloaded on - 15/02/2016 10:18:45 ::: ITXA375.13.doc Hon'ble Supreme Court and which are summarised and noted above themselves indicate that matter has to be approached by referring rt and taking into account facts and circumstances of each case. ou These are not general tests or rules which have been laid down. They have been evolved and that is how we do not think that reliance by C Revenue on this decision would carry matter any further. Equally, we do not think that any factual aspect and particularly on conduct h of assessee and treatment or non treatment in books of ig account would carry matter further. Eventually, character and H nature of income is determinative and decisive and it is not treatment that assessee gives it in its books of account which would enable us to come to any conclusion. If legal propositions y ba which have been invoked and deductions claimed are to be granted by applying tests evolved and parameters laid down, om governing conditions would be as to whether deduction is permissible given clear language of section or provision and whether that is applicable to facts and circumstances of given B case. Similarly, we do not think that reliance on judgment of Hon'ble Supreme Court in case of Commissioner of Income- SRP 34/49 ::: Uploaded on - 24/04/2015 ::: Downloaded on - 15/02/2016 10:18:45 ::: ITXA375.13.doc tax vs. Maheshwari Devi Jute Mills Ltd. would assist Revenue. Madras High Court case ought to be then noticed. There, rt assessee was company carrying on business as authorised dealers in ou Tata diesel vehicles in building on Mount Road in Madras. building consisted of three floors including ground floor. While C ground floor and first floor were used for assessee's business, second floor was let out to Government department. In h assessment years 1975-76 and 1976-77, assessee claimed that ig rental receipts in respect of second floor should be considered H under head business as entire property has been constructed with view to use same for purpose of its business and that surplus accommodation due to its shifting of branches outside Madras y ba was let out. Income-tax Officer rejected contention and treated this income as income from property disallowing deduction om claimed under head business towards repairs. matter was carried by assessee before Tribunal and it allowed claims. On reference by Tribunal, Hon'ble High Court of Madras B held that as building in question was commercial asset, assessee could exploit it either by itself or by letting it to others. SRP 35/49 ::: Uploaded on - 24/04/2015 ::: Downloaded on - 15/02/2016 10:18:45 ::: ITXA375.13.doc Therefore, in matter like this, fundamental position that had been asserted was whether particular building or premises was rt commercial asset or house property. If premises were ou commercial asset, then, income derived therefrom would amount to business income, otherwise it would be income derived from C property assessable under head Property income . If on facts, Tribunal found that this was commercial asset of assessee h used by it from very beginning as such, then, letting out of ig second floor premises and income derived by way of rent H therefrom was rightly assessable under head business income . In holding and taking above view, Hon'ble Madras High Court distinguished judgments and particularly in case of East India y ba Housing and Land Development Trust Ltd. We do not think that such view and essentially confined to facts of that assessee's case om would enable Court on Revenue in this matter to interfere with concurrent findings of Commissioner and that of Tribunal. Eventually, as Madras High Court held, fundamental position B had to be ascertained and that was whether particular building or premises was commercial asset or house property. SRP 36/49 ::: Uploaded on - 24/04/2015 ::: Downloaded on - 15/02/2016 10:18:45 ::: ITXA375.13.doc 29. We do not think that when Tribunal relied upon rt judgment of Hon'ble Supreme Court in case of East India ou Housing, it had committed any error of law or acted perversely. Therefore, assuming that we can allow any mixed questions to be C raised for first time, raising them does not enable Revenue to urge and contrary to what is held by Tribunal. h 30. ig position also appears to be identical in case dealt with H by Hon'ble Supreme Court in Commissioner of Income-tax v. Vikram Cotton Mills Limited. There as well, property came to be mortgaged and what was before Supreme Court was fact that y ba High Court, with approval of assessee and creditors evolved scheme where under business assets of assessee were om let out to M/s. General Fibres Dealers (P) Ltd. It is in that peculiar fact situation that Supreme Court took view and with regard to nature of income. We are of view that on essential B contentions raised before Tribunal and as elaborated or additionally proposed before us different view than one taken by SRP 37/49 ::: Uploaded on - 24/04/2015 ::: Downloaded on - 15/02/2016 10:18:45 ::: ITXA375.13.doc Tribunal is not possible. rt 31. Similarly, with regard to expenses claimed on account of ou incomplete work is concerned, Tribunal found that Assessing Officer observed that assessee has shown sale of 44,960 sq. C feet and remaining 76,106 sq. feet was shown as closing stock on which assessee claims to have earned rental income. It disallowed h Rs.45 lakhs as expenses incurred on that part of stock and added same to income of assessee. ig H 32. Commissioner found that in Profit & Loss account, assessee had offered profit of May Fair Tower I on basis y ba that construction work was substantially completed. entire sale proceeds of premises had been credited to Profit & Loss om Account. Further, proportionate cost of premises lying unsold with asssessee, including premises given on licence had already been taken to Profit & Loss account. There was proportionate B cost carried forward as closing stock which also included pro-rata provision for incomplete works. If expenses which are required to SRP 38/49 ::: Uploaded on - 24/04/2015 ::: Downloaded on - 15/02/2016 10:18:45 ::: ITXA375.13.doc be incurred and are allowable have been debited to Profit & Loss account in accordance with matching principle of accounting then rt entire provision for incomplete work amount had been actually ou paid, proportionate amount of provision of incomplete work of Rs.45 lakhs relating to unsold premises had been carried forward. C This explanation which was given by assessee was carefully examined and Commissioner being convinced with it, allowed h claim. Commissioner's factual findings have been reproduced in ig paragraph 15 of order passed by Tribunal and having H considered them as also rival contentions, eventually in paragraph 18, this is what Tribunal held : 18. Having carefully gone through Order of y lower authorities in light of rival submissions, we find that assessee has been following project ba completion method and on account of completion of major part of project, assessee worked out its profit and offered it to tax. In P & L account, he claimed provision of incomplete work of Rs.45 lakhs om relating to unsold premises. While calculating its closing stock, he has taken this figure of cost of provision of incomplete work of Rs.45 lakhs. It is undisputed fact that in case of project completion method project is deemed to have been completed on B its completion and sale of its 80%. remaining portion of 20% is under either renovation or under sale. common areas are generally renovated after completion of project. In this situation, making provision for incomplete work, cannot be called to be SRP 39/49 ::: Uploaded on - 24/04/2015 ::: Downloaded on - 15/02/2016 10:18:45 ::: ITXA375.13.doc incorrect system of accounting. More over, claim made by assessee were not doubted by Assessing Officer. He has simply disallowed claim of rt assessee on ground that provision of incomplete work should not have been made in impugned assessment year, without looking to facts that same ou cost of incomplete work was taken in closing stock. Keeping in view of facts of case, we are of opinion that CIT (A) has properly adjudicated issue in light of given facts and circumstances of case. C We, therefore, find ourselves in agreement with Order of CIT (A). Accordingly, we confirm same. h 33. We do not think that Assessing Officer's view having been ig interfered with in such scenario that any substantial question of law arises for our determination and consideration. Thus, appeals fail H on these two grounds. y 34. Then what remains for our consideration is argument of Mr. ba Chhotaray that Tribunal should not have granted deduction under section 24(b) of IT Act as interest on borrowed capital. In om relation to that what has been pointed out to us is that this question arises for assessment years which are subject matter of Income Tax B Appeal Nos.6234/2010, 1504/2012 and 418 of 2013. It is argued that these claims are huge and enormous. Tribunal ought not to have SRP 40/49 ::: Uploaded on - 24/04/2015 ::: Downloaded on - 15/02/2016 10:18:45 ::: ITXA375.13.doc granted them when conduct of assessee was mala fide. assessee claimed this deduction by giving conflicting versions. rt assessee could not have argued in one matter while claiming ou deduction under section 24(a) and adopted contrary position with regard to claim under section 24(b). argument is that C claim was made for first time in assessment year 2006-07. explanation given is that this claim was not made in initial years h because in those years stock-in-trade is completely unsatisfactory. ig If these were stock-in-trade, then, income derived therefrom was H definitely business income. 35. Section 24(b) of IT Act on which reliance is placed reads y thus : ba 24. Income chargeable under head Income from house property shall be computed after making following deductions, namely :- om (a) (b) where property has been acquired, constructed, repaired, renewed or reconstructed with B borrowed capital, amount of any interest payable on such capital. Provided that in respect of property referred to in sub- section (2) of section 23, amount of deduction shall SRP 41/49 ::: Uploaded on - 24/04/2015 ::: Downloaded on - 15/02/2016 10:18:45 ::: ITXA375.13.doc not exceed thirty thousand rupees : Provided further that where property referred to in rt first proviso is acquired or constructed with capital borrowed or after 1st day of April, 1999 and such acquisition or construction is completed within three ou years from end of financial year in which capital was borrowed, amount of deduction under this clause shall not exceed one lakh fifty thousand rupees. C 36. perusal thereof would indicate as to how deductions from income from house property are permissible. Income chargeable h under head Income from house property shall be computed after ig making deduction, namely, sum equal to 30% to annual value H and (b) where property has been acquired, constructed, repaired, renewed or reconstructed with borrowed capital, amount of any interest payable on such capital. proviso, and particularly y ba second proviso stipulates that where property referred to in sub- section (2) of section 23 is acquired or constructed with capital om borrowed on or after 1st April, 1999 and such acquisition or construction is completed within three years from end of financial year in which capital was borrowed, amount under B this claim shall not exceed Rs.1,40,000/-. This proviso and explanation thereafter has not been pressed into service. SRP 42/49 ::: Uploaded on - 24/04/2015 ::: Downloaded on - 15/02/2016 10:18:45 ::: ITXA375.13.doc 37. Tribunal in Income Tax Appeal No.3216/Mum/2009 for rt assessment year 2006-07 dealt with this ground of Revenue in ou paragraph 8.1 and 9. However, what is material to note is that Commissioner had rendered detailed findings and which came to be C confirmed by Tribunal. Tribunal found that in ground No.4 of appeal, non-allowing of deduction of interest amounting to h Rs.59,77,030/- on borrowed capital against income from house ig property was issue. argument was that this deduction was already allowed by Assessing Officer while assessing rental H income as business income. This ground was taken with view that rental income would be treated as income from house property and y then as natural corollary interest paid on amounts borrowed ba for construction of property should be allowed as deduction against rental income. Since ground Nos.1 and 2 pertained to om rental income and taxing same as income from house property that Commissioner held that in light of his findings and conclusions B on ground Nos.1 and 2, Assessing Officer should grant this claim of deduction of Rs.69,77,030/- as interest on borrowed capital. That is SRP 43/49 ::: Uploaded on - 24/04/2015 ::: Downloaded on - 15/02/2016 10:18:45 ::: ITXA375.13.doc conclusion which was before Tribunal and Tribunal found that assessee had earned substantial rental income and, therefore, rt interest on borrowed funds has to be allowed. Tribunal also ou perused Profit & Loss account and where closing stock was shown as Nil. Tribunal presumed that entire income is related C to premises which were let out by assessee. Therefore, there is no reason to interfere with order of Commissioner. h 38. ig However, Mr. Chhotaray has invited our attention to Memo of Appeal in Income Tax Appeal No.1504 of 2012. He highlighted H substituted question of law and submits that there Commissioner had not granted such claim. y ba 39. In that regard, we have perused order passed by Commissioner on 30th July, 2010, copy of which is at Annexure C. om Commissioner in para 3.3. held that claim was made for interest under section 24(a) which was allowed without examining B basis of claim for interest. claim for interest falls under section 24(b) and which pertains to interest paid to partners from their capital. Commissioner held that relationship of borrower SRP 44/49 ::: Uploaded on - 24/04/2015 ::: Downloaded on - 15/02/2016 10:18:45 ::: ITXA375.13.doc and lender must come into existence before it can be said that any money is borrowed by one person from another. There must be real rt transaction of borrowing and lending in order to amount to any ou borrowing. Where there is no relationship of borrower and lender, no deduction is permissible towards interest. In instant case, C assessee's business was to construct flats or commercial units and sell them at profit. partners of firm had subscribed capital for h purpose of business and interest deduction to partner from business income has been allowed over years. ig partner's capital H contribution has not been made for purpose of acquiring property or construction of property for ownership and then for purpose of letting it out and earning house property income on it. It is only y ba because some flats remained unsold that these were let out and income from house property was earned. Commissioner placed reliance om on judgment of High Court of Allahabad in case of Manse Ram & Sons vs. Commissioner of Income Tax (1991) 54 Taxman 308. He held that assessee had borrowed amounts for business (banking B business) and was utilised for construction of properties, interest was not allowable deduction under section 24(i)(vi). Where assessee SRP 45/49 ::: Uploaded on - 24/04/2015 ::: Downloaded on - 15/02/2016 10:18:45 ::: ITXA375.13.doc was partner of firm and on dissolution of firm, it took over all assets and liabilities including building, another judgment was relied rt upon and rendered by High Court of Punjab & Harayana in ou case of Commissioner of Income Tax vs. Four Fields (P) Ltd. (1998) 96 Taxman 143 which held that no relationship of borrower and lender C had come into existence and deduction of interest on acquisition of building claimed against rental was disallowed. Thus, entire basis h was that there must emerge relationship of borrower and lender. ig Partnership Act was referred to and it was held firm's partners are H indistinguishable from one another. It is only by legal fiction that interest on capital is allowed as deduction from business income . No such legal fiction has been created under head Income from y ba house property . Since amount is held as not borrowing for purposes of section 24(b), question of nexus between capital om contribution of partners and its use for acquisition / construction of relevant properties is not relevant. He, therefore, confirmed order of Assessing Officer by such reasoning. B 40. While carrying matter to Tribunal, assessee SRP 46/49 ::: Uploaded on - 24/04/2015 ::: Downloaded on - 15/02/2016 10:18:45 ::: ITXA375.13.doc specifically urged that Commissioner erred in rejecting his claim without appreciating fact that interest is paid to partners on rt amount contributed by them and said amounts in this case had ou been utilised for purpose of construction of property from which appellant had earned rental income (ground No.2). It is C in relation to this ground that Tribunal held in paragraph 4 as under : h 4. We have heard arguments of both sides and also perused relevant material on record. Although ig learned DR has strongly supported impugned order of learned CIT(Appeals) confirming disallowance made by AO on account of H assessee's claim for deduction u/s 24(b) for interest paid on partners' capital account by relying on various reasons given in impugned order, learned counsel for assessee has filed written submission to y meet satisfactorily each and every point raised by learned CIT(Appeals) while confirming disallowance ba made by AO on account of assessee's claim for deduction u/s 24(b). Moreover, as rightly submitted by learned counsel for assessee, similar issue involved in immediately preceding year i.e. om assessment year 2006-07 was decided by learned CIT(Appeals) in favour of assessee in similar facts and circumstances and said decision of learned CIT(Appeals) giving relief to assessee has been upheld by Tribunal vide its order dated 20th April, 2010 passed in ITA No.3216/Mum/2009. As held by B Tribunal in said order, entire interest paid on partners' capital was related to premises which were let out by assessee and same, therefore, was allowable as deduction u/s 24(b) while computing income of assessee under head Income from SRP 47/49 ::: Uploaded on - 24/04/2015 ::: Downloaded on - 15/02/2016 10:18:45 ::: ITXA375.13.doc house property . Respectfully following said decision of Tribunal in assessee's own case for assessment year 2006-07, we direct AO to allow rt claim of assessee for deduction on account of interest paid on partners' capital u/s 24(b). ou 41. Tribunal held that if similar issue was involved in immediately preceding assessment year 2006-07 and there finding C was rendered in favour of assessee by Commissioner (Appeals), then, it was not possible to take different view h particularly because that finding of Commissioner was upheld by ig Tribunal by its order dated 20 th April, 2010. If facts and H circumstances in which claim arose were identical, then, Tribunal concluded that different view on facts was impossible. y 42. We do not think that any larger question or wider controversy ba needs to be determined. If matter was approached in this angle by Commissioner and in same factual backdrop, then, there is no om justification for taking contrary view. If two conflicting views of Commissioner were placed before Tribunal and Tribunal found that it had concurred with one of those views and that view with B which it concurred prevails, then, we do not think how Revenue can raise this issue. issue has been considered bearing in mind SRP 48/49 ::: Uploaded on - 24/04/2015 ::: Downloaded on - 15/02/2016 10:18:45 ::: ITXA375.13.doc typical factual background. If entire interest paid on partners' capital was related to premises which were let out by rt assessee but construction thereof came from contributions of ou partners, then, interest was due and payable to them. That interest was payable not only in terms of general principle of C partnership and highlighted in Indian Partnership Act, 1932, but also on broad consideration under section 24(b) of Income Tax h Act, 1961. If income is income from house property and that is ig deduction which could be granted from same we do not think that H Revenue should be permitted to raise this ground. Even otherwise, finding being consistent with factual position which is not disputed, then all more even this ground cannot be considered as y ba substantial question of law. We do not think any reference is required to detailed written submissions or case laws in this regard. om 43. As result of above discussion, each of these appeals by Revenue fail. They are dismissed. There shall be no order as to costs. B A.K. MENON, J. S.C. DHARMADHIKARI , J. SRP 49/49 ::: Uploaded on - 24/04/2015 ::: Downloaded on - 15/02/2016 10:18:45 ::: Commissioner of Income-tax -12 v. M/s. Sane & Doshi Enterprise