FULL TEXT OF THE ITAT JUDGEMENT
Assessee is in appeal before the Tribunal against order of the ld. CIT(A)-1, Vadodara dated 23.1.2015 passed for the Asstt.Year 2012-13.
2. At the outset, it was brought to my notice that appeal of the assessee is barred by limitation. Registry of the Tribunal has pointed out delay of 540 days in filing appeal by the assessee before the Tribunal. Subsequently, assessee has filed an application for condonation of delay. In the application, assessee interalia stated that Shri Prakash N. Patel, director of the assessee-company, who was in-charge of the accounts and taxation matters was hospitalised due to cardiac illness and other related health complication. Because of that, he was to be admitted in the hospital from time to time and he could not attend in day-to-day affairs of the company. In support of this fact, the assessee filed copies of medical reports and treatment card of the hospital along with application for condonation of delay. It was only after improvement of his health and after resumption of office, he could notice that appeal against order of the ld. CIT(A) dated 23.10.2015 was left out, and if not challenged in further appeal then it would have cascading impact on the subsequent assessment years also. Therefore, assessee contacted tax consultant to challenge this adverse order. The ld.counsel for the assessee submitted delay was caused due to reason beyond control of the assessee, and therefore, the delay may be condoned in the interest of justice, equity and fair play.
3. On the other hand, the ld.DR objected to the condonation of day in filing of the appeal before the Tribunal. He further submitted that assessee being corporate body would have adequate manpower to look after its affairs in the absence of key person, and he therefore, submitted delay of more than one year should not be condoned.
4. I have duly considered rival contentions and gone through the record. Sub-section 5 of Section 253 contemplates that the Tribunal may admit an appeal or permit filing of memorandum of cross-objections after expiry of relevant period, if it is satisfied that there was a sufficient cause for not presenting it within that period. This expression “sufficient cause” employed in the section has also been used identically in sub-section 3 of section 249 of Income Tax Act, which provides powers to the ld. Commissioner to condone the delay in filing the appeal before the Commissioner. Similarly, it has been used in section 5 of Indian Limitation Act, 1963. Whenever interpretation and construction of this expression has fallen for consideration before Hon’ble High Court as well as before the Hon’ble Supreme Court, then, Hon’ble Court were unanimous in their conclusion that this expression is to be used liberally. We may make reference to the following observations of the Hon’ble Supreme court from the decision in the case of Collector Land Acquisition Vs. Mst. Katiji & Others, 1987 AIR 1353:
“1. Ordinarily a litigant does not stand to benefit by lodging an appeal late.
2. Refusing to condone delay can result in a meritorious matter being thrown out at the very threshold and cause of justice being defeated. As against this when delay is condoned the highest that can happen is that a cause would be decided on merits after hearing the parties.
3. “Every day’s delay must be explained” does not mean that a pedantic approach should be made. Why not every hour’s delay, every second’s delay? The doctrine must be applied in a rational common sense pragmatic manner.
4. When substantial justice and technical considerations are pitted against each other, cause of substantial justice deserves to be preferred for the other side cannot claim to have vested right in injustice being done because of a non-deliberate delay.
5. There is no presumption that delay is occasioned deliberately, or on account of culpable negligence, or on account of mala fides. A litigant does not stand to benefit by resorting to delay. In fact he runs a serious risk.
6. It must be grasped that judiciary is respected not on account of its power to legalize injustice on technical grounds but because it is capable of removing injustice and is expected to do so.”
5. Similarly, I would like to make reference to authoritative pronouncement of Hon’ble Supreme Court in the case of N. Balakrishnan Vs. M. Krishnamurthy (supra). It reads as under:
“Rule of limitation are not meant to destroy the right of parties. They are meant to see that parties do not resort to dilatory tactics, but seek their remedy promptly. The object of providing a legal remedy is to repair the damage caused by reason of legal injury. Law of limitation fixes a life-span for such legal remedy for the redress of the legal injury so suffered. Time is precious and the wasted time would never revisit.
During efflux of time newer causes would sprout up necessitating newer persons to seek legal remedy by approaching the courts. So a life span must be fixed for each remedy. Unending period for launching the remedy may lead to unending uncertainty and consequential anarchy. Law of limitation is thus founded on public policy. It is enshrined in the maxim Interest reipublicae up sit finis litium (it is for the general welfare that a period be putt to litigation). Rules of limitation are not meant to destroy the right of the parties. They are meant to see that parties do not resort to dilatory tactics but seek their remedy promptly. The idea is that every legal remedy must be kept alive for a legislatively fixed period of time.
A court knows that refusal to condone delay would result foreclosing a suitor from putting forth his cause. There is no presumption that delay in approaching the court is always deliberate. This Court has held that the words “sufficient cause” under Section 5 of the Limitation Act should receive a liberal construction so as to advance substantial justice vide Shakuntala Devi lain Vs. Kuntal Kumari [AIR 1969 SC 575] and State of West Bengal Vs. The Administrator, Howrah Municipality [AIR 1972 SC 749]. It must be remembered that in every case of delay there can be some lapse on the part of the litigant concerned. That alone is not enough to turn down his plea and to shut the door against him. If the explanation does not smack of mala fides or it is not put forth as part of a dilatory strategy the court must show utmost consideration to the suitor. But when there is reasonable ground to think that the delay was occasioned by the party deliberately to gain time then the court should lean against acceptance of the explanation. While condoning delay the Could should not forget the opposite party altogether. It must be borne in mind that he is a looser and he too would have incurred quiet a large litigation expenses. It would be a salutary guideline that when courts condone the delay due to laches on the part of the applicant the court shall compensate the opposite party for his loss.”
6. I do not deem it necessary to re-cite or recapitulate the proposition laid down in other decisions. It is suffice to say that the Hon’ble Courts are unanimous in their approach to propound that whenever the reasons assigned by an applicant for explaining the delay, then such reasons are to be construed with a justice oriented approach.
7. In the light of the above, if I examine explanation of the assessee, then it would reveal that the delay in filing the appeal was caused due to major reason being that key person who is looking after the accounts and taxation matters has been hospitalized for cardiac treatment from time to time. This has disconnected him from attending day-to-day work of the assessee-company. To support this fact, assessee has also filed copies of various medical reports and documents from the hospital. The submission of the assessee that if the adverse order of the ld.CIT(A) was remained unchallenged, then it would have cascading effect on the subsequent years also. I am of the view that the reasons narrated by the assessee for delay in filing appeal before he Tribunal cannot be simply bruised aside or ignored. No assessee would opt to give away its legal right by deliberately making delay, more so, when he would not gain anything by not filing the appeal in time, therefore, in the interest of justice and fair play, I condone the delay and proceed to decide the appeal on merit.
8. In the appeal, the assessee has raised as many as five grounds, but sole issue involved in these grounds is that the ld.CIT(A) has erred in treating the income of the assessee under the head “income from other sources” instead of “business income”.
9. Brief facts of the case are that assessee is engaged in the business of film exhibition. It has filed its return its return of income on 19.9.2012 declaring total loss of Rs.(-)30,24,753/-. The case of the assessee was selected for scrutiny assessment and notice under section 143(2) was issued and served upon the assessee. The AO has noticed that though the assessee stated to be engaged in the business of film exhibition, but no film exhibition activity was carried out. The source of its income was from leasing out multiplex to M/s. PVR Ltd., and M/s.Jubilant Food Works Ltd. In the year under consideration, the assessee has shown total receipts of Rs.1,09,61,877/-and profit before tax of Rs.34,03,249/-. According to the AO since the lessees have deducted TDS under section 194I of the Act, the income it has earned was in the nature of rental income, the same was to be treated under the head “income from house property” but and not under “business income: as claimed by the assessee. The AO accordingly calculated income of the assessee at Rs.43,94,534/- under the head “income from house property” and Rs.1,01,877/- under the head “income from other sources” and thus determined total income at Rs.44,96,410/-. Having been aggrieved by this order of the AO, the assessee went in appeal before the first Appellate Authority. Before the ld.CIT(A), assessee has filed written submissions which has been reproduced by the CIT(A) from page nos.3 to 9 of the impugned order. Before the ld.CIT(A) assessee has also filed lease agreements along with supporting annexures. The ld.CIT(A) found that assessee was in fact running multiplex, but due to stoppage of its activity, premises along with machineries & furniture were given on lease to M/s.PVR Ltd. and also a part of food court to M/s.Jubilant Food Works Ltd. These assets were reflected in the block of assets mentioned in the lease agreement. He observed that assessee has stopped its business activity, and given its properties on lease to the above parties. He however observed that since letting out of the property was inseparable from the letting out of the furniture & fixtures and plants & machineries, therefore, such rental income was to be taxable under the had “income from other sources” instead of “income from house property” for which the ld.CIT(A) relied upon the judgment of Hon’ble Supreme Court in the case of Univeral Plast Ltd., 103 taxman 493 (SC). The ld.CIT(A) directed the AO to treat the income of the assessee under the head “income from other sources and not under the head “income from house property”. Not satisfied with this order of the ld.CIT(A), assessee is in further appeal before the Tribunal.
10. Before me, the ld.counsel for the assessee reiterated its submissions made before the Revenue authorities below. He further submitted that as per the memorandum of association, the main objects inter alia include leasing, letting on hire of entertainment and recreation facilities, cinema threatres etc. The objects incidental or ancillary for achievement of main objects have also contained in clause (B)-1 of the Memorandum. The ld.counsel for the assessee reiterated that assessee-company has entered into Operation & Management Agreement with PVT Ltd. for the business of multiplex Complex with all the amenities, furniture & fixtures and plant & machineries. It has developed infrastructure keeping in mind the requirement of multiplexes business. The intention of the assessee-company was also to lease the different portion of different franchises for their outlets, and thereby commercially exploit its infrastructure, which is different from normal land owner whose intention would be to earn rental income. He relied upon the judgment of Hon’ble Gujarat High Court in the case of CIT Vs. Tirupati Organizers P.Ltd., ITA No.2663 of 2013 and others.
11. In the next fold of contention, the ld.counsel for the assessee submitted that alleged lease agreement, in other words, Operation and Management Agreement was executed on 6.3.2007. Under this agreement the assessee has been showing business income. The first assessment order was passed in the Asstt.year 2008-09 on 30.9.2010 under section 143(3)of the Act. The AO has taken cognizance of this fact, and treated the income of the assessee under this agreement as business income. Same status in scrutiny assessment was allowed to be continued in the Asstt. Years 2010-11 and 2011-12. In other words, this is the first assessment year after this agreement, and income of the assessee was treated in earlier four years as business income. On the strength of Hon’ble Supreme Court decision in the case of CIT Vs. Excel Industries Ltd., 358 ITR 295 (SC), the ld.counsel for the assessee submitted that once a consistent view is being taken in favour of the assessee on a question of fact, then different view would not be taken by the department without very convincing reasons. He pointed out that in this decision, Hon’ble Supreme Court has made reference to its earlier decision rendered in the case of Radhasoami Satsang Vs. CIT, 193 ITR 321 (SC). He further drew my attention towards Article-3 of Management and Operation agreement and appraised me about the revenue cost sharing. He also pointed out that all other taxation liability viz. entertainment tax etc. was borne by the assessee. It was also submitted that the ld.CIT(A) has not concurred with the AO, rather expressed third opinion, i.e. in the first assessment order after the agreement, the AO treated the income from this activity as a business income. This view was followed by four assessing officers in the subsequent years, while the ld.AO in the present assessment proceedings adopted a different view that income is to be assessed under the head “house property income”. The ld.CIT(A) did not concur with the AO, and held that income is to be assessed under the head other sources. There is no gain even for the Revenue for changing this character, because under section 57(iii) the assessee would get all relatable expenditure for earning this income, if it is assessed under the head income from other sources. According to the ld.counsel for the assessee in this year, there is hardly any tax implication, but he has unnecessarily changed the business structure of the assessee for the subsequent year.
12. On the other hand, the ld.DR relied upon orders of the ld.Revenue authorities. He pointed out that the ld.CIT(A) has considered all aspects before holding that income from the leasing out of Cinema complex deserves to be assessed as income from other sources.
13. I have duly considered rival submissions and gone through the orders of the Revenue authorities. The question before us is, whether the receipts derived from leasing out of the cinema hall, along with furniture & fixtures, plant & machineries and other amenities, was “business income” as contended by the assessee or “income from other sources” as treated by the Department. Adverting to various aspects, I would like to take cognizance of the finding recorded by the AO in the Asstt.Year 2008-09 as well as 2010-11. The AO in both these years took cognizance of the fact that this complex has been given on lease. The finding of the ld.AO read as under:
(3.0) The assessee-company is engaged in film exhibition business and running Multiplex cinema hall, ‘The assessee has given the complex on lease to PVR Ltd w.e.f, 16.3.2007. The assessee received lease income during the previous year. The assessee have shown total receipts at Rs.1,78,85,414/- during the year. The details filed by the assessee are verified and kept on record. After perusing the details furnished by the assessee and discussion with authorised representative of the assessee, the following issues arose.
“(3.0) The assessee-company is engaged in film exhibition business and running Multiplex cinema hall. The assessee has given the complex on lease to PVR Ltd w.e.f. 16.3.2007. The assessee received lease income during the previous year. The assessec have, shown total receipts at Rs. 1,56,52,757/- during the year. The details filed by the assessee are verified and kept on record. After perusing the details furnished by the assessee and discussion with authorized representative of the assesstv, the following issues arose.”
14. Similar is the situation in the Asstt.Year 2011-12. In these three assessment years, assessment orders have been passed under section 143(3) of the Act. In the Asstt.Year 2009-10, it appears that no scrutiny assessment was made because copy of that assessment order has not been placed on record. The Hon’ble Supreme Court in the case of Excel Industries Ltd. has propounded that if certain facts were allowed to be attained finality, then contradictory opinion on those very fact in other years ought not to be taken. The discussion made by the Hon’ble Supreme Court in this aspect deserves to be taken note of, which reads as under:
28. Secondly, as noted by the Tribunal, a consistent view has been taken in favour of the assessee on the questions raised, starting with the assessment year 1992-93, that the benefits under the advance licences or under the duty entitlement pass book do not represent the real income of the assessee. Consequently, there is no reason for us to take a different view unless there are very convincing reasons, none of which have been pointed out by the learned counsel for the Revenue.
29. In Radhasoami Satsang Saomi Bagh v. CIT  193 ITR 321/60 Taxman 248 (SC) this Court did not think it appropriate to allow the reconsideration of an issue for a subsequent assessment year if the same “fundamental aspect” permeates in different assessment years. In arriving at this conclusion, this Court referred to an interesting passage from Hoystead v. Commissioner of Taxation, 1926 AC 155 (PC) wherein it was said:
“Parties are not permitted to begin fresh litigation because of new views they may entertain of the law of the case, or new versions which they present as to what should be a proper apprehension by the court of the legal result either of the construction of the documents or the weight of certain circumstances. If this were permitted, litigation would have no end, except when legal ingenuity is exhausted. It is a principle of law that this cannot be permitted and there is abundant authority reiterating that principle. Thirdly, the same principle, namely, that of setting to rest rights of litigants, applies to the case where a point, fundamental to the decision, taken or assumed by the plaintiff and traversable by the defendant, has not been traversed. In that case also a defendant is bound by the judgment, although it may be true enough that subsequent light or ingenuity might suggest some traverse which had not been taken.”
30. Reference was also made to Parashuram Pottery Works Ltd. v. ITO  106 ITR 1 (SC) and then it was held: “We are aware of the fact that strictly speaking res judicata does not apply to income-tax proceedings. Again, each assessment year being a unit, what is decided in one year may not apply in the following year but where a fundamental aspect permeating through the different assessment years has been found as a fact one way or the other and parties have allowed that position to be sustained by not challenging the order, it would not be at all appropriate to allow the position to be changed in a subsequent year. On these reasonings in the absence of any material change justifying the Revenue to take a different view of the matter – and if there was no change it was in support of the assessee – we do not think the question should have been reopened and contrary to what had been decided by the Commissioner of Income Tax in the earlier proceedings, a different and contradictory stand should have been taken.”
31. It appears from the record that in several assessment years, the Revenue accepted the order of the Tribunal in favour of the assessee and did not pursue the matter any further but in respect of some assessment years the matter was taken up in appeal before the Bombay High Court but without any success. That being so, the Revenue cannot be allowed to flip-flop on the issue and it ought let the matter rest rather than spend the tax payers’ money in pursuing litigation for the sake of it.”
12. In the light of the above, if we examine the facts, then it would reveal that there are no justifiable reasons for the AO to change head of income in this year, and the finding of both the Revenue authorities are not sustainable. Apart from the above principle of consistency, let me have look to the lease agreement and other aspects. I would like to make reference towards Article 3.1 to 3.3 of the alleged lease agreement which provides revenue and cost. It reads as under:
“3.1 In consideration of the right to use the Multiplex Cinema for the Business Purpose conferred by DMPL on PVR, PVR shall pay to DMPL a fee of Rs. 10/- per admission ticket subject to monthly minimum guaranteed fee as under:
a) Rs. 6,00,000/- per month i.e. equivalent to 50% of the minimum monthly fee, for the initial two months of the term starting from 16.03.2007 to 15.05.2007;
b) Rs. 12,00,000/- per month starting from 16,05.2007.
3.2 The admission fee/monthly minimum guaranteed fee shall stand enhanced by 10% of the last paid Fee every three years.
3.3 The monthly fee shall be paid by PYR to DMPL, in advance on or before 7th day of each calendar month.
16. Next important factor is provision under the Memorandum of Association. It has been highlighted that one of the business, which could be explored by the assessee is to lease, convert, entertain and recreation facility. Whole object clause has been placed before me, and reads as under:
“1. To establish and carry on in India or elsewhere in the world the business to acquire, promote, run, manage, own, lease, convert, commercialize, handle,, operate, renovate, construct, maintain, improve, furnish, recondition, hire, let on hire, develop, consolidate, subdivide and organize, entertainment and recreation facilities, cinema theatres, night clubs, discotheques, places of amusement, video games, bowling alleys, theatrical and opera box offices, movie theatres, family recreation and also different types for entertainment like open theatres and musical cultural activities.”
17. During the course of hearing judgment of Hon’ble jurisdictional High Court in the case of CIT Vs. Tirupati Organizers P.Ltd.(supra) which has been relied upon by the ld.counsel of the assessee. In this case, the assessee entered into a joint business agreement with three other parties in which the assessee had to provide infrastructure, including electrical installation, lifts, plant & machinery, security system, canteen and house-keeping etc. The assessee also had undertaken responsibility for operation and maintenance of such facilities, and to provide skilled work force. In turn, the assessee would receive a guaranteed monthly amount of Rs.6,00,000/- or rupees one for inward carat of diamond. The AO treated such income of the assessee as income from house property. However, that view did not meet approval of the ld.Commissioner, who held that income of the assessee is to be assessed under the head “business income”. In that case also the AO has relied upon the judgment of Hon’ble supreme Court in the case of Shambhu Investment P.Ltd. reported in 263 ITR 143 wherein Hon’ble Supreme Court has upheld the decision of Hon’ble Kolkatta High Court. The Hon’ble Gujarat High Court has considered judgment of Hon’ble Supreme Court in the case of Shambhu Investment and held that in the present case, the income of the assessee is to be assessed under the head business income. The discussion made by the Hon’ble Gujarat High Court is worth to note. It reads as under:
“We notice that under some what similar background, when the Tribunal in case of Saptarishi Services [Supra] had held the income to be his business income and not from the house property, this Court had dismissed the appeal holding that no question of law arises. In such case, the assessee had taken certain piece of land on lease and thereupon put up construction of a commercial building with an idea of having a business center. Different portions of the building were given on rent to third parties and the assessee treated the rent as service charges under the head, “income from business and profession”. Assessee explained to the Assessing Officer that in addition to providing the premises, the assessee also provided several other facilitates; such as, services of lift, services of receptionists, secretarial services, data processing, conference room, etc. The Assessing Officer did not accept the contention and treated the income, derived from the house property. The Tribunal ultimately held in favour of the assessee and came to conclusion that, “..the director of M/s. Saptarashi Services (P) Limited are not related to the directors of M/s. Kohinoor Tabacco Products (P) Limited. The electricity charges from October 1, 1989 to March 31, 1990, were paid to M/s. Mohanlal Hargovandas who were one of the members of the service centre and M/s. Saptarshi Services (P) Limited reimbursed them later. The assessee is having EPABX machine which facilitates providing telephone services to the occupants of the service centre. Besides this, the assessee is providing various services to the occupants like services of lift, services of receptionists, secretarial services, data processing, conference room, etc. The object of the said complex is that facilities to be provided with the building. Thus the assessee is providing a working place along with the various facilities.”
Against such decision, Revenue’s appeal was dismissed by this Court.
The decision of Supreme Court in case of Sambhu Investment (P) Limited [Supra] was rendered in different facts-situation. In such case, the assessee was owner of immovable property. It occupied a portion thereof and let out the rest to be used as table space to occupants, with furniture and fixtures and lights and air-conditioners. For such purpose, tenants paid monthly rental; inclusive of charges. The High Court held that such income should be treated as “income from house property”. The Apex Court upheld this judgment.
In the present case, the facts are vitally different. The assessee had not rented out property but had allowed its use thereof for the purpose of joint venture business. In addition to the space with proper infrastructural facilitates, it also provides various other facilitates to be used for the purpose of diamond processing.”
18. On an analysis of all these facts, in the light of authoritative pronouncements of Hon’ble Gujarat High Court as well as Hon’ble Supreme Court in the case of Excel Industries (supra), I find that there is no justifiable reason for the AO to deviate from view taken in earlier years, in this year. Neither the AO nor the ld.CIT(A) has pointed out what are the changes in the facts and circumstances from the earlier years. Even otherwise, if looked from angle of Revenue sharing from operation of multiplex as well as other liabilities of the assessee, it would demonstrate that it was a business exploitation by the assessee, and it has only given a portion of the complex for a period of ten years to PVR. Therefore, its income ought to be assessed under the head business income. I allow the appeal of the assessee and set aside the finding of both the Revenue authorities. The ld.AO shall assess the income of the assessee under the head “business income”.
19. In the results, appeal of the assessee is allowed.
Order pronounced in the Court on 12th February, 2020 at Ahmedabad.