Case Law 46 DTR 136 (Hyd) required

[sujittalukder]

Dear Friends,
Can anyone please provide the detail case law of the following:

G. Rahguram (2010) 46 DTR 136 (Hyd.)

related to Section  48 of Income tax Act,1961

I searched for the same but failed to found the same.

Regards
Sujit Talukder

[Harshavardhana Datar]

http://mediafire.com/?xsvqlnydgm1mc5x

Link is attached. Copy paste was not possible. I don't have DTR citation but found parallel citation

[ashutosh majumdar]

Here you go (pdf copy is annexed as attachment)


DEPUTY DIRECTOR OF INCOME TAX vs. G. RAGHURAM
ITAT, HYDERABAD 'A' BENCH
G.C. Gupta, Vice President & Chandra Poojari, A.M.
ITA Nos. 6, 7 & 67 to 70/Hyd/2010; Asst. yrs. 2005-06 & 2006-07
30th April, 2010
(2010) 134 TTJ (Hyd) 87 : (2010) 39 SOT 406 : (2010) 46 DTR 136
Legislation referred to
Section 22, 2(47), 28(i), 48, 56(2)(iii),
Case pertains to
Asst. Year 2005-06, 2006-07,
Decision in favour of
Revenue
Income from house property—Vis-a-vis income from other sources—Letting out of
building with amenities—While leasing out the building the assessee entered into two
agreements with tenant, one towards the rent of the building, and the other towards
providing the amenities—AO is justified in going beyond the documents to find out real
intention of the parties by ignoring the apparent and AO has to remove the facade to
expose the real intention of the parties—Keeping in view the nature of activities of the
tenant, the amenities are provided by the assessee to exploit the property in most
profitable manner—Without these amenities, the bare building is of no use, which is a
common feature in any property—Therefore, just because there is something beyond the
bare structure that is being provided, it cannot be said that these amenities are not part
of the property itself—However, since these amenities are not separate assets such as
plant and machinery, the provisions of s. 56(2) do not apply—On the facts of the case, it
is clear that the assessee as the owner of the building was only exploiting the property
as owner by letting out the same and realizing income by way of rent—Such rental
income was liable to be assessed under the head 'Income from house property
Held :
Most of the items are common in nature which are to be provided to software companies to carry
out their day-to-day work by the landlord, without these they cannot function. Keeping in view the
nature of activities of the tenant, the amenities are provided by the assessee to exploit the
property in most profitable manner. In the present case, the assessee made separate lease
agreements in order to help the assessee in tax planning only, the lease from the lessee's point of
view is only for the property as a whole. This is evident from the following : (a) the TDS certificates
clearly show that the entire payments made by tenant S is towards rent—a simple composite
payment done every month; (b) the assessee in spite of repeated requests, could not furnish the
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details of the assets on which lease receipts was being shown and depreciation was being claimed.
The only thing that assessee could produce was that the interiors of the property was done by SDE
Engineers and going by general trends, the amount charged was put as 60 per cent to equipment
and what furniture was leased out, on which the income from other sources was being shown; (c)
the agreement of providing the interiors was done with SDE Engineers which is the same entity
with whom the assessee had entered into development of the property, i.e., the property developer
was providing for the interiors, this proves the point that the amenities which are being stated as
leased out separately are in fact nothing separate but are part of the property, integral to make the
property viable for being used as a commercial building; (d) the building itself is the amenity being
provided here and that is why the agreement for lease of amenities prescribes the lease amount in
terms of square feet—Rs. 15 per sq. ft. per month, which is the same rate at which the property
lease was also agreed upon. Without these amenities, the bare building is of no use, which is a
common feature in any property. For a property to be used as residential, certain kinds of some
amenities and fixtures would be required or else people cannot inhabit it—such as kitchen,
ventilations, electrical fittings etc. and the same goes for a commercial property—without some
amenities such as provision for air-conditioning and cabins, it cannot be useful for any purpose.
Therefore, just because there is something beyond the bare structure that is being provided, it
cannot be said that these amenities are not part of the property itself. However, since these
amenities are not separate assets such as plant and machinery, the provisions of s. 56(2) do not
apply here. Though the assessee entered into separate agreements, these agreements cannot be
acted upon as foolproof documents. When the apparent is not real, one has to see the actual
background of the situation.
(Para 8)
The assessee made two agreements one for let out of the property and another for providing
amenities and there is a doubt in the mind of the AO regarding the correctness of the income
declared by the assessee as 'income from house property' and 'income from business'. He has
treated the entire income as 'income from house property'. Admittedly, the authorities have the
freedom to go beyond the documents to find out the real intention of the parties. In this case,
though there are two agreements the real intention of the parties to a document is different what
appears from it ex facie. Since there is a doubt, then the AO is justified in going beyond the
documents to find out the real intention of the parties by ignoring the apparent has to be and has
always been conceded. In this circumstance, the AO has to remove the facade to expose the real
intention of the parties cleverly cloaked and the actual agreement cannot be given effect. The only
bona fide document to be acted upon not otherwise. There is a serious doubt and also it is shocking
the conscious of the Bench, whether the assessee is getting hire charges equal to the rental
amount for providing amenities. It cannot be real one and AO is required to see the actual rental
value of the property in that place and bring that amount to tax under the head 'Income from
house property'. As such, in the present case, the AO came to the correct conclusion that real
rental value was bifurcated into two separate incomes viz., one is rental income of house property
and another is hire charges of the equipment. Further, in the case of letting of the machinery, plant
or furniture, s. 56(2)(iii) is applicable, but only letting of building with certain amenities, this
provision is not applicable and in that event, the income from letting out was chargeable under the
head 'Income from house property'. Further, no precise test can be laid out to ascertain whether
income referred to by whatever nomenclature, lease amount, rent or licence fee received by an
assessee from leasing or letting out of assets would fall under the head 'Profits and gains of
business or profession' and it has to be determined from the point of view of a businessman in that
business depending upon the facts and circumstances of each case and there is no readymade
jacket formula. One has to see the intention of the assessee whether the letting was the doing of a
business or to exploitation of his property by an owner. The assessee when exploited the property
to derive rental income it has to be held that the income realized by him by way of rental income
from a building if the property with other asset attached to the building to be assessed as 'income
from house property' only. The only exceptions are cases where the letting of the building is
inseparable from letting of the machinery, plant and furniture. In such cases, it has to be held that
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the rental would not have been realized but for the letting out of the machinery, plant or furniture
along with such building and therefore, rental received for the building is to be assessed under the
head 'Income from other sources'. In the present case, on the facts of the case, it is clear that the
assessee as the owner of the building was only exploiting the property as owner by letting out the
same and realizing income by way of rent. Such rental income was liable to be assessed under the
head 'Income from house property.' The various assets let out to the tenants are incidental to
letting out the building being integral part of the letting.—Sultan Bros. (P) Ltd. vs. CIT (1964) 51
ITR 353 (SC) distinguished.
(Para 9)
Conclusion :
Assessee had let out the building with some basic amenities and without these amenities, the bare
building is of no use, which is a common feature in any property and therefore entire rental income
was assessable as income from house property.
In favour of :
Revenue
Capital gains—Computation—Sale of land in consideration of constructed area received
from builder—Assessee and children owners of land were allocated an area of 99,702 sq.
ft. in the superstructure constructed on the said land by building developer—Real
consideration received by the assessee in lieu of the land forgone by him is only the cost
of construction of proposed building to the extent of which falls to the assessee in the
ultimately constructed area and not the market value of such share of constructed area
which may be after the completion of the construction
Held :
The consideration for the transfer of capital asset is what the transferor receives in lieu of the
assets he parts with and therefore, the very asset transferred or parted with and full value of
consideration cannot be construed as having a reference to the market value of asset transferred
and the said expression only means that full value of the asset received by the transferor in
exchange for the capital asset transferred by him. Since the development agreement specifies that
certain part of constructed area shall be surrendered to the owner by the builder on the completion
of the contract and the value of the constructed area to be transferred to the assessee to be
considered as consideration received and as such full value of consideration is only the cost of
construction of proposed building to the extent of which falls to the assessee in the ultimately
constructed area and not the market value of such share of constructed area which may be after
the completion of the construction. One does not find any infirmity in the order of the AO.—Smt.
Vasavi Pratap Chand vs. Dy. CIT (2004) 90 TTJ (Del) 217 : (2004) 89 ITD 73 (Del) followed.
(Para 10)
Conclusion :
Assessee had sold land to the builder-developer and only the cost of construction of proposed
building allotted to the assessee in the ultimately constructed area and not the market value of
such share of constructed area, has to be reckoned as consideration for the purpose of
computation of capital gains.
In favour of :
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Revenue
Cases referred to
Attukal Shopping Complex (P) Ltd. vs. CIT (2002) 178 CTR (Ker) 469 : (2003) 259 ITR 567 (Ker)
Lallu Bros. Trust vs. Asstt. CIT (ITA No. 528/Hyd/2005, dt. 7th March, 2008)
Smt. Shanta Vidyasagar Annam (ITA No. 885/Hyd/2003, dt. 9th June, 2006)
T.V. Sundaram Iyengar & Sons Ltd. vs. CIT (1959) 37 ITR 26 (Mad)
Counsel appeared :
B. Senthil Kumar, for the Appellant : K. Vasant Kumar, for the Respondent
ORDER
by the bench :
These six appeals preferred by the Revenue are directed against different orders passed by the CIT
(A)-VI, Hyderabad and pertains to asst. yrs. 2005-06 and 2006-07. Since common issues are
involved in all these appeals they are clubbed together, heard together and disposed of vide these
common orders for the sake of convenience.
2. The first common ground in all these appeals are that the CIT(A) erred in holding the income
received as lease rentals towards the amenities and furniture and fixtures is to be assessed under
the head 'Other sources' and accordingly, the depreciation is to be allowed from the income so
arrived. Since the assessee is unable to furnish the details of furniture and fixtures, the question of
allowing depreciation does not arise.
3. The next common ground in ITA Nos. 6, 7 and 69/Hyd/2010 are that the CIT(A) erred in
considering the fact that the real consideration received by the assessee in lieu of the land forgone
by him is the superstructure and therefore, the same should be considered as sale consideration
instead of the market value of the land.
4. In this case, the brief facts of the case are that the assessee filed return of income along with
her son and daughter owned land situated at survey No. 12 of Kondapur Village, Hyderabad. The
said land was given to M/s SDE Engineers Ltd., on development basis. Accordingly, the assessee
along with her son and daughter were all allocated an area of 99,702 sq. ft. in the superstructure
constructed on the said land by the developer. All these three persons put together their share
purchased from the developer an area of 7,328 sq. ft. in order to become the owners of first,
second, sixth and eighth floors of the superstructure which was subsequently named as 'SDE
Prameela Techno Park'. The said building was leased out to M/s Satyam Services Ltd. by the
assessee along with her son and daughter. Since Satyam Computer Services Ltd., requires further
modifications on the bare structure, it appears that a loan has been obtained by the three persons
along with the developer M/s SDE Engineers Ltd., and with the loan proceeds the bare structure as
per their requirement. While leasing out the building the assessee entered into two agreements
with the tenant, one towards the rent of the building, and the other towards the amounts for
providing the amenities for the same building. Accordingly, the rental income received as per the
first agreement is being offered as income from the house property and the other amounts
received by the assessee towards amenities were offered under the head 'Income from business'.
From the income offered under the head 'business' the assessee deducted interest paid on the loan
taken and depreciation on the amenities, treating the said amenities as 'furniture, plant and
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machinery'. The assessee received as its share in lieu of the land forgone by them. Since the land
owner has relinquished his rights on the land forgone, the AO treated it as a transfer under s. 2
(47) of the IT Act. Accordingly, capital gain was computed. Regarding the applicability of s. 2(47),
there is no dispute. However, considering the value of sales consideration, according to the
assessee, the market value of the land as to the date of the transfer is to be considered instead of

[sujittalukder]

Thanks to duo for the text of the case.
May I know any online service or website which provides ITR/DTR/ wise etc. the case laws?
Regards
Sujit Talukder

[satishcgarg]

 you can find out the case laws on taxpundit.org

Satish

[sujittalukder]

you can find out the case laws on taxpundit.org

Satish

Thank you Satish for the reply. But the case law (and some others too) are not there in the mentioned site. Also only ITR/DTR/ITD is available and not CTR/SOT/TTJ/Taxman etc.
Any other site known to you?
Regards
Sujit Talukder

[ashutosh majumdar]

Well, if you are a practicing professional then it is best to invest in the CTR CD. Doesn't cost much and is worth its weight in gold because your entire library of case laws, circulars, notifications etc is on one little CD.

If you want online access, then Taxman, Taxindiaonline, Lexsite & Manupatra are good options.

If you are a casual user and want free access, then it is a bit of a hit & miss. A lot of groping around the dark. If it is a popular judgement, you are likely to find it on the web; if it is an obsure one, you have to rely on the generosity of strangers.

[sujittalukder]

Thank you Mr Majumdar for the reply.
No I am casual user as mentioned by you. The case laws required by me for doing official works only. Though taxpundit or google search serves the purpose most of the time only in certain cases I have to come to this forum. Anyway, if I need help then I will come here in future and I am sure people like you would help me to sort the out the matter.
regards
Sujit Talukder