E IN INCOME TAX APPELLATE TRIBUNAL E BENCH, MUMBAI BEFORE SHRI C. N. PRASAD, JUDICIAL MEMBER AND SHRI RAMIT KOCHAR, ACCOUNTANT MEMBER ./I.T.A. No.4579/Mum/2012 ( [ [ / Assessment Year : 2008-09) Soham Trading and / Assistant Commissioner of Inve stments Private Limited Income Tax-7 (2) v. Mahalaxmi Ind ustrial Estate Mumbai Ground Floor, L.J.Road No.1 Mahim(West) Mumbai- 400016 . /PAN : AABCS4422J ( /Appellant) .. ( / Respondent) Assessee by Shri S C Tiwari & Ms. Rutuja N. Pawar Revenue by : Shri Sanjeev Kashyap,DR / Date of Hearing : 02-08-2016 /Date of Pronouncement : 07-10-2016 / O R D E R PER RAMIT KOCHAR, Accountant Member This appeal, filed by assessee company, being ITA No. 4579/Mum/2012, is directed against appellate order dated 27th December, 2011 passed by learned Commissioner of Income Tax (Appeals)- 13, Mumbai (hereinafter called CIT(A) ), for assessment year 2008- 09, appellate proceedings before learned CIT(A) arising from assessment order dated 30th November , 2010 passed by learned Assessing Officer (hereinafter called AO ) u/s 143(3) of Income Tax Act,1961 (Hereinafter called Act ). 2 ITA 4579/Mum/2012 2. grounds of appeal raised by assessee company in memo of appeal filed with Income Tax Appellate Tribunal, Mumbai (hereinafter called Tribunal ) read as under:- 1. Under facts and circumstances of case and in law, learned Commissioner(Appeals) [ for short Ld. CIT(A) ] has erred in confirming action of Learned Assessing Officer [ for short Ld. AO ] in treating legitimate business income in form of Leave & License fees and Maintenance & Amenities charges received as Income from other sources . 2. Under facts and circumstances of case and in law, Ld. CIT(A) has erred in treating business loss on sale of securities under Portfolio Management Service as short term capital loss and enhanced assessment without affording real opportunity real opportunity of being heard in matter. 3. Under facts and circumstances of case and in law, Learned CIT(A) has erred in enhancing assessment by disallowing Depreciation allowed by Learned Assessing Officer ( for short Ld. AO) of Rs.1,71,006/- without affording real opportunity of being heard in matter. 3. brief facts of case are that assessee is engaged in business of premises service provider on leave and license basis. It also provides amenities. filing of this appeal is delayed by 11 days and condonation of delay in filing appeal is sought by assessee vide affidavit dated 16-07-2013 of Mr. Nimesh L. Joshi, Managing Director of assessee company which is placed in file , wherein it is submitted by said Mr. Nimesh L. Joshi that appeal was delayed by 11 days due to his illness during relevant period . ld DR did not raised any objection to delay. delay of 11 days in filing appeal late is condoned and appeal is being heard on merits. 4. It was observed by AO that assessee has taken on lease premises owned by M/s Mahalaxmi Engineering Company Private Limited and sub- 3 ITA 4579/Mum/2012 leased same property to M/s G E Countrywide Consumers and Financial Services Limited and received income in form of maintenance charges of Rs.46,51,200/- and leave and license fees of Rs.72,38,430/-from sub- lease and shown under head profit and gains from business and profession . AO show caused assessee as to why same should not be brought to tax under head income from other sources . assessee submitted before AO that there are two separate agreements for providing license and amenities / services to occupants of premises and this complex process of providing space solutions having ingredient of business activities. assessee submitted before AO that this nature of business of assesssee is premises service provider which includes services of providing electricity, use of lifts, uninterrupted supply of water, maintenance of staircases and common areas, watch and ward facilities which constitute complex business activities. accounts are audited under provisions of Section 44AB of Act whereby auditors have treated entire activity as business operations. assessee submitted that it incurred salary , telephone, electricity and other expenses such as audit fees, legal fees , bank charges, ROC fees etc. which reflects that assessee is primarily carrying on business activities. It was submitted that if expenses fall under specific head of income , then same cannot be brought to tax under residuary head u/s. 56 of Act . assessee relied upon decision of Hon ble Supreme Court in case of (1960) Bihar State Bank v. CIT 39 ITR 114(SC). It was submitted before AO that character and nature of income, according to common notions of practical men has to be determined and accordingly charged to tax under specific head of income relying on decision in case of Nalinikant Mody v. Narayan Row 61 ITR 428(SC) , CIT v. New India 201 ITR 208, Gopi v. CIT 225 ITR 320. 4 ITA 4579/Mum/2012 AO rejected contentions of assessee as it was held by AO that income from sub-leased assets does not come within purview of business income as act of taking single property on lease from related concern and giving same on sub-lease cannot be termed as business activity. It was observed by AO that assessee is not owner of premises and hence income cannot be included under head income from house property. Since income does not fall under any of heads of income, it will fall under residuary head of income from other sources , as was held by AO vide assessment order dated 30-11-2010 passed by AO u/s. 143(3) of Act. 4. Aggrieved by assessment order dated 30-11-2010 passed by AO u/s. 143(3) of Act, assessee filed first appeal with learned CIT(A), which appeal was dismissed by learned CIT(A) as assessee did not had any evidence to show that it is in business of letting out premises on commercial basis, vide appellate order dated 27-12-2011 passed by learned CIT(A). learned CIT(A) also disallowed depreciation on assets to tune of Rs.1,71,006/- since rental income and maintenance income has been assessed to tax as income from other sources , no depreciation is allowable u/s 57(2) of Act as depreciation does not relate to income from plant and machinery or furniture . 5. Aggrieved by appellate order dated 27-12-2011 passed by learned CIT(A), assessee filed second appeal with Tribunal. 6. learned counsel for assessee contended before Tribunal that assessee case is covered by decision of Mumbai Tribunal in case of sister concern of assessee namely Shreenath Balaji Computech Private Limited v. ACIT in ITA no. 6251 & 6253/Mum/2012 for assessment years 2006-07 and 2008-09 vide orders dated 17-06-2015. 5 ITA 4579/Mum/2012 assessee also relied upon decision of Hon ble Supreme Court in case of Chennai Properties and Investment Limited v. CIT in (2015) 373 ITR 0631(SC) and decision of Mumbai Tribunal in case of ITO v. Rasiklal & Co. reported in (2009) 119 ITD 61(Mum. Trib). 7. learned DR relied upon orders of learned CIT(A). 8. We have considered rival contentions and perused material on records including case laws relied upon. We have observed that assessee s is engaged in business as premises service provider on leave and license basis and also providing amenities. assessee s main income is on account of leave and license fees and maintenance and amenities fees . assessee is not owner of property and has taken property on lease from M/s Mahalaxmi Engineering Company Private Limited and sub-leased same property to M/s G E Countrywide consumer and Financial Services Limited and received income in form of maintenance charges of Rs. 46,51,200/- and leave and license fees of Rs.72,38,430/- from sub-lease. assessee has also claimed to be premises service provider which inter- alia included services of providing electricity, use of lifts, uninterrupted water supply, maintenance of staircases and common areas, watch and ward facilities . assessee having received maintenance and amenity charges for providing additional services to sub-lessee , which was in addition to sub-lease charges being leave and license fee received for occupation of said premises. said income was offered for tax by assessee as business income under head Profit and Gains from Business or Profession while Revenue assessed same as Income from Other sources on grounds that activity of taking single property on lease from related concern and giving same on sub-lease cannot be termed as business activity and since assessee is not owner of premises and hence same cannot be assessed to tax under head Income from 6 ITA 4579/Mum/2012 House Property . Since it did not fell under any of other specified head of income, Revenue brought to tax said income as Income from other sources which is residuary head of income . said assessment order of AO was upheld by learned CIT(A) on grounds that there is no evidence to show that assessee is in business of letting out of premises on commercial basis and hence income from same cannot be brought to tax under head profits and gains from business or profession . We have observed that assessee s main objects in object clause of Memorandum and Articles of Association of assessee company (pb-I/page 1-30) did not specify that assessee would take any premises on lease and would in turn sub-lease same of leave and license basis , but intention of assessee to exploit asset leased by it is clear from activities carried on by assessee from perusal of its audited financial statements (pb-I/page 31-65) . assessee in our considered view is involved in systematic activity of exploiting its asset, which in turn it had taken on lease , is thus involved in carrying on business activity. Thus, income arising there from such business activity is to be assessed to tax in hands of assessee under head Profits and Gains from Business or Profession as income from business. assessee is entitled for claim of expenditure including depreciation of assets but not on building , as building was leased by assessee wherein assessee is not owner , as deduction against such business income . case of assessee is covered by decision of Mumbai Tribunal in case of Shreenath Balaji Computech Private Limited v. ACIT in ITA no. 6251/Mum/2012 and 6253/Mum/2012 vide orders dated 17-06-2015 wherein Tribunal held said income from leave and license fee as well maintenance charges as income from business to be brought to tax as Profit and Gains of Business or Profession and also allowed claim of depreciation on assets except on building which was leased by tax-payer in that case , as facts in 7 ITA 4579/Mum/2012 instant case are similar. Thus ground no. 1 and 3 are allowed. We order accordingly. 9. next ground being ground no 2 raised by assessee in memo of appeal filed with Tribunal is with respect to treatment by learned CIT(A) of business loss on sale of securities under Portfolio Management Services as short term capital loss by learned CIT(A) without affording opportunity of being heard to assessee on grounds that assessee has not brought on record any material to show how sale of securities is business loss and as such said loss was treated as short term capital loss by learned CIT(A). learned CIT(A) further held that AO has allowed short term capital loss against income from other sources while computing Gross Total Income . learned CIT(A) held that assessee is not entitled for set off of short term capital loss against any other head of income as per provisions of Section 71(3) of Act and hence set off of loss being short term capital loss of Rs.8,08,101/- was withdrawn and income was enhanced to that extent by learned CIT(A). assessee is aggrieved that learned CIT(A) enhanced assessment without affording opportunity of being heard to assessee. learned DR relied on orders of authorities below. power of learned CIT(A) is co-terminus with powers of AO which include power of enhancement of assessment by learned CIT(A) but principles of natural justice are to be adhered to and learned CIT(A) ought to have given proper opportunity of being heard to assessee in accordance with principles of natural justice before enhancing of assessment. Thus in order to do complete justice in matter, this issue is to be set aside and restored to file of learned CIT(A) to de-novo adjudicate issue on merits after affording opportunity of being heard to assessee. Needless to say that proper and sufficient opportunity of being heard shall be provided by learned CIT(A) to assessee in accordance with principles of natural justice in accordance with law. assessee will be 8 ITA 4579/Mum/2012 allowed to submit relevant evidences and explanations to substantiate and support its contentions in its defense. This disposes of ground no 2 raised by assessee in memo of appeal filed with Tribunal. We order accordingly. 10. In result, appeal filed by assessee in ITA No. 4579/Mum/2012 for assessment year 2008-09 is allowed as indicated above. Order pronounced in open court on 07th October, 2016. 07-10-2016 Sd/- sd/- (C.N. PRASAD) (RAMIT KOCHAR) JUDICIAL MEMBER ACCOUNTANT MEMBER Mumbai; Dated 07-10-2016 [ . . ./ R.K., Ex. Sr. PS /Copy of Order forwarded to : 1. / Appellant 2. / Respondent. 3. ( ) / CIT(A)- concerned, Mumbai 4. / CIT- Concerned, Mumbai 5. , , / DR, ITAT, Mumbai E Bench 6. [ / Guard file. / BY ORDER, //True Copy// / (Dy./Asstt. Registrar) , / ITAT, Mumbai Soham Trading and Investments Private Limited v. Assistant Commissioner of Income-tax-7(2), Mumbai