M/S Intime Properties Limited,, ... vs Assessee

M/s Intime Properties Ltd. vs. Commissioner of Income-tax - (Formerly knonw as Intime II, Hyderabad Properties Pvt. Ltd.), Hyderabad PAN - AABC 15676 H (Appellant) (Respondent)

Assessee by : Shri Arvind Sonde Revenue by : Shri D. Sudhakar Rao

Date of hearing 10-02-2015 Date of pronouncement 18-03-2015

O RDE R

PER SAKTIJIT DEY, J.M.:

This appeal of assessee is directed against order dated 28/03/2014 passed u/s 263 of the Act of ld. CIT(A)-II, Hyderabad setting aside the assessment order passed for AY 2009-10.

2. Briefly the facts are, assessee an Indian company is engaged in the business of real estate and development and leasing of properties. For the AY under consideration, assessee filed its return of income on 27/09/2009 declaring loss of Rs. 10,32,00,788. Assessee's return of income was subjected to scrutiny and AO in course of scrutiny assessment proceeding, examined the books of account and other informations as called for and after verifying them, completed the assessment by assessment order dated 27/12/2011 determining the total loss at Rs. 9,95,09,291. Ld. CIT in exercise of 2 ITA No. 1037/Hyd/2014 M/s Intime Properties Ltd.

power u/s 263 of the Act, while examining the assessment record of assessee for the AY under consideration was of the view that assessment order passed u/s 143(3) is erroneous and prejudicial to the interests of revenue on the following issues:

i) The assessee claimed an amount of Rs. 2,99,86,056 towards maintenance and repairs under the head income from house property. As the assessee is in the business of development and maintenance of Software Technology Park the entire rental income and service income derived thereon is incidental to the business and as such the same has to be treated as business income. Therefore the amounts paid by the clients of the assessee for use of the STP would be in the nature of commercial activity assessable under the business. Hence, the expenditure claimed towards maintenance and repair needs to be disallowed.

ii)Schedule 16 of profit & loss account shows that the assessee has paid Rs. 2041.34 lakhs towards finance cost and Rs.

1572.22 lakhs was capitalized. Hence, the expenditure towards finance cost to be allowed to the extent of Rs. 469.12 lakhs only. As the assessee claimed interest to the extent of Rs. 1026.35 lakhs against the actual amount of Rs. 469.12 lakhs, the excess claim of finance cost of Rs. 557.23 needs to be disallowed."

Accordingly, he issued a notice to assessee to show cause as to why assessment order shall not be revised. In reply to the said show cause notice, assessee submitted its reply in writing as well as through oral submissions in course of the revision proceeding.

3. As far as the first issue is concerned, it was submitted by assessee that the company has been incorporated with the main object to carry on the business of developers of land, building, immovable properties and real estates by constructing, reconstructing, altering, improving, decorating, furnishing and maintaining industrial parks, growth centres, offices, flats, houses, factories, warehouses, buildings with a view to establish and provide office space, infrastructure and other facilities for information technology and information technology enabled entities and other 3 ITA No. 1037/Hyd/2014 M/s Intime Properties Ltd.

business, trade, manufacture or process. It was submitted, to the extent of the activities carried out by assessee in pursuance to its objects, therefore, it does answer the description of being engaged for the business of developing and operating and maintenance of industrial park. However, for the purpose of taxation of income received by assessee from its business of operating and maintenance of industrial park, it would be subject to the framework established by section 14 of the Act. In this context, it was submitted by assessee, income received by assessee from its tenants was split into two components; i) lease rental from the premises and ii) facility management charges towards maintenance and up keep of the industrial park and charges for fit outs. Assessee relying upon a number of judicial precedents submitted that the income received from letting out/leasing of property has to be taxed under the head 'income from house property' notwithstanding with the fact that assessee is solely incorporated for running the business of letting property on hire. Therefore, assessee has rightly offered the income from leasing rental as income under the head 'house property' whereas income received from facility management and fit out were offered to tax as business income.

4. As far as the second issue of excess claim of finance charges is concerned, it was submitted by assessee that industrial park constructed by assessee consisted of 3 buildings. While construction of two buildings has been completed during AY 2009-10, 3 rd building was still under construction. During the FY 2008-09, assessee has incurred total finance cost of Rs. 2041.34 lakh, out of this approximately an amount of Rs. 136 lakh represented finance cost in relation to the facility management and operations of assessee and were charged to the profit & loss account. As far as balance cost is concerned, it was submitted that from accounting perspective the interest is allocated to each building, portion of this allocated amount up to the date of the respective building was put to use has been 4 ITA No. 1037/Hyd/2014 M/s Intime Properties Ltd.

capitalized to the cost of the said building. However, from income tax perspective, in accordance with the terms specified in section 24 interest attributable to buildings, which were put to use is fully claimed as deduction from rental income. Interest pertaining to the third building is capitalized to the said building. In support of its contention, assessee also furnished the following working:

Building Interest Treatment in books Treatment for income-tax No. attributable Capitalized Expensed Capitalized expensed #1 415.28 130.63 284.65 - 415.28 #2 448.85 400.73 48.12 - 448.85 #3 1,040.85 1,040.85 - 1,040.85 -

General 136.36 - 136.36 - 136.36 Total 2,041.34 1,572.22 469.12 1,040.85 1,000.49

It was submitted by assessee that assessment order cannot be considered to be erroneous on either issues so as to assume jurisdiction u/s 263 of the Act. So far as other condition i.e. prejudicial to the interests of revenue, it was submitted by assessee, even that condition is also not satisfied considering the fact that while assessee has claimed 30% deduction towards repairs and maintenance from the house property income, but, if it is to be considered as business income, then, assessee will be entitled to claim depreciation @ 10% on the total cost of assets of Rs. 300 crores which will be much more than 30% deduction claimed towards repair and maintenance. Moreover, any such computation of depreciation needs to be done from A.Y. 2007-08. Thus, there would no prejudice to the revenue, if the income is assessed as income from house property.

5. Ld. CIT after considering the submissions of assessee vis-à-vis facts and materials on record, observed that the main object of assessee is to carry on the business of developers of land, building, immovable properties and real estates by constructing, reconstructing, altering, improving, decorating, furnishing and 5 ITA No. 1037/Hyd/2014 M/s Intime Properties Ltd.

maintaining industrial parks, growth centres, offices, flats, houses, factories, warehouses, buildings with a view to establish and provide office space, infrastructure and other facilities for information technology and information technology enabled entities and other business, trade, manufacture or process. From the aforesaid object, ld. CIT observed, the profit motive of assessee is inherent. Ld. CIT observed, if assessee was simply letting out property, income would probably have fallen under the income from house property. However, return of income filed reveals, assessee on its own admission has shown the activities as builders/property developers. In the tax audit report also, it is indicated that assessee is in the business of real estate development and leasing of property. All the items of receipt and expenditure including lease rentals are subject to audit unlike simple letting out property. Therefore, merely because the entities occupying the premises, deduct TDS u/s 194-I, the character of the income cannot change. Ld. CIT observed, as per assessee's own admission, it approached the authorities at department of industry and obtained approval for the industrial park as part of its business activity with a view to obtain better returns from the commercial assets. Ld. CIT observed, AO even did not examine approval documents before completing assessment. It was observed by ld. CIT, as verified from the accounts, assessee has availed huge project term loan from the bank to construct the buildings. Assessee has spent huge sums as project support fees and also as business promotion expenses, which clearly show that assessee is engaged in systematic activity of building an industrial park and markets the space also by spending huge amounts. Therefore, it is a clear case of commercial exploitation of assets for the purpose of business. Ld. CIT observed, merely because assessee is recording entries for lease rent and facility management separately, the activities would not be distinct and separate. Because in reality without facility management, none would take the premises on lease as the units need strong infrastructural support without which the concept of industrial park 6 ITA No. 1037/Hyd/2014 M/s Intime Properties Ltd.

would itself be meaningless. Ld. CIT observed, AP Govt. had allotted land to M/s K. Raheja IT Park Ltd. , sister concern of assessee, with a clear stipulation that certain amount of jobs have to be created and in fact incentives were also to be granted for the employment generation, hence, the whole activity is nothing but business activity. According to ld. CIT, as AO did not examine any of these facts and accepted assessee's claim of house property income without any enquiry or verification, the view taken by him not being a judicious view cannot be held to be one of the possible views.

6. As far as assessee's contention that there is no prejudice cause to the revenue even if it is assessed as house property income because assessee otherwise would have been eligible to claim depreciation in case it is treated as business income, ld. CIT observed that the claim of additional depreciation would not be available to assessee as it is not producing any article or thing nor engaged in generation or distribution of power. Besides, the prime assets of assessee are buildings, which do not fall under the definition of plant. Ld. CIT, therefore, held that as AO has not examined the issue and also assessee's claim, assessment order is not only erroneous but prejudicial to the interests of revenue. As far as the second issue relating to finance cost is concerned, ld. CIT observed that AO has not made any verification to allow the correct amount. Accordingly, ld. CIT set aside the assessment order and directed AO as under:

"5. In light of the above, it is held that the order of the AO passed u/s 143(3) is erroneous and prejudicial to the interests of revenue. It is also held that the income from lease rentals is 'business income' and not income from 'house property'. The AO may compute the income accordingly and allow the necessary deductions, if the assessee is otherwise eligible for the same. Regarding the issue of finance cost, details submitted by the assessee need to be verified with reference to books of account, hence, the matter is set aside to the file of the AO for proper verification and appropriate decision as per law a fter giving an opportunity of being heard to assessee."

7 ITA No. 1037/Hyd/2014 M/s Intime Properties Ltd.

7. Being aggrieved, assessee is before us raising the following grounds:

"Ground 1: Erroneous and Prejudicial order 1.1 The ld. CIT erred in holding that the assessment order dated December 27, 2011, passed by the AO u/s 143(3) of the Act is erroneous and prejudicial to the interests of revenue although the twin conditions required to be fulfilled for exercising the jurisdiction are not satisfied.

1.2 The ld. CIT erred in observing that since the appellant is not entitled to a deduction u/s 32(iia) of the Act, the assessment order is prejudicial to the interests of revenue although the appellant did not make any such claim in its return of income nor this formed the basis of the show cause notice invoking jurisdiction u/s 263 of the Act.

Ground 2: Business income Vs. Income from house property

2.1 The ld. CIT erred in holding that rental income earned on letting out the immovable property is to be assessed as business income and not as income from house property as returned by the appellant and accepted in the assessment proceedings.

Ground 3: Depreciation on assets

3.1 Without prejudice to Ground 2, in case the income of the appellant is classified as business income instead of income from house property, the appellant ought to have been allowed depreciation in respect of its assets, including the buildings and fittings and machinery therein.

Ground 4: Depreciation in respect of finance cost

4.1 The ld. CIT erred in coming to conclusion that the appellant did not furnish specific details in respect of the claim for deduction of the interest cost although appropriate submissions were made by the appellant in respect of the same.

The appellant prays, for the following relief:

a) The Hon'ble Tribunal be pleased to hold that the assessment order dated December 27, 2011 is not erroneous and prejudicial 8 ITA No. 1037/Hyd/2014 M/s Intime Properties Ltd.

to the interests of revenue and hence the CIT was not justified in exercising the jurisdiction u/s 63 of the Act.

b) The Hon'ble Tribunal be pleased to hold that rental receipts are assessable as 'income from house property and not as business income.

c) The Hon'ble Triunal be pleased to allow the deduction in respect of the finance cost."

8. At the outset, ld. AR submitted that as far as ground Nos. 1, 2 &3 are concerned, they are covered by the decision of ITAT, Hyderabad Bench in case of assessee's sister concern M/s K. Raheja IT Park (Hyderabad) P. Ltd. in ITA Nos. 1038, 1039 & 1040 vide order dated 07/11/2014 wherein the Tribunal set aside the order passed u/s 263 of the Act on identical reasoning. In this context, ld. AR specifically referred to paras 16 to 22 of the order of the Tribunal. Further explaining, ld. AR submitted, assessment order cannot be held either erroneous or prejudicial to the interests of revenue - for the very same reasons on which ITAT in case of M/s K. Raheja IT Park (Hyderabad) P. Ltd. (supra) upheld the assessment order. Ld. AR submitted, if at all, ld. CIT's view that income from lease rental is to be treated as business income, is to be accepted, then, assessee would be entitled for claim of depreciation on the business assets i.e. building which would be much more than deductions claimed towards repairs and interest from house property income. In this context, he referred to the working of unabsorbed depreciation in case income is treated as business income. Thus, it was submitted by ld. AR that both in the matter of jurisdiction as well as on merit, order passed u/s 263 cannot be sustained.

9. As far as the second issue relating to difference in finance cost is concerned, ld. AR referring to working of finance cost submitted that finance cost claimed under house property is not claimed under business. Ld. AR submitted, in course of revision proceeding, assessee has submitted not only working of the financial cost, but, also demonstrated that actually there is no such difference as pointed 9 ITA No. 1037/Hyd/2014 M/s Intime Properties Ltd.

by ld. CIT. However, without examining the working submitted by assessee, ld. CIT has set aside the assessment order and directed AO to verify again. Ld. AR submitted, ld. CIT has not given any specific finding with regard to alleged excess claim made by assessee, on the other hand, direction given by ld. CIT is a general direction in the nature of roving and fishing enquiry, which is not permitted u/s 263. In this context, ld. AR relied on the decision of Hon'ble Bombay High Court in case of CIT Vs. Gabriel India Ltd., 203 ITR 108. Ld. AR submitted, there is no conclusive finding by ld. CIT that AO has failed to apply his mind or conduct any enquiry. In these circumstances, exercise of power u/s 263 is totally invalid.

10. Ld. DR, on the other hand, though, supported the order of ld. CIT, but he submitted, as far as ground Nos. 1, 2 & 3 are concerned, they are more or less covered by the decision of ITAT in case of M/s K. Raheja IT Park (supra). As far as second issue in Ground No. 4 is concerned, ld. DR submitted that ld. CIT has only directed AO to examine the issue with reference to the books of account and no prejudice is caused to assessee as a result of such direction.

11. We have considered the submissions of the parties and perused the orders of revenue authorities as well as other materials on record. The first issue is exercise of jurisdiction u/s 263 whether is valid or not. As can be seen, assessee in its accounts as well as return filed for the impugned AY, has shown the income earned from industrial park in two categories, i.e., lease rentals from letting out of the industrial park to entities was shown as income from house property and management and facilities fee have been shown as business income. AO while completing assessment u/s 143(3) has accepted such claim of assessee. However, ld. CIT has held the assessment order to be erroneous and prejudicial to the interests of revenue on the ground that lease rental should have been assessed as business income and not as income from house property.

10 ITA No. 1037/Hyd/2014 M/s Intime Properties Ltd.

12. The issue whether a particular income is to be assessed as house property income or business income will depend upon the fact of each case as divergent views are available on this issue. Whether lease rental is to be assessed as house property income or business income is a debatable issue on which more than one view is possible. Therefore, if AO has taken a view in treating lease rental as house property income, and such view is one of the possible view and is also supported by judicial precedents, then, the assessment order passed cannot be said to be erroneous, even assuming that there may be some prejudice to revenue. Therefore, as one of the conditions for invoking jurisdiction u/s 263 is not satisfied, the impugned order of ld. CIT cannot be sustained. In this context, it is relevant to refer to the observations made by the coordinate bench while dealing with similar issue arising out of order passed u/s 263 in case of assessee's sister concern M/s K. Raheja IT Park Hyderabad (P) Ltd. (supra), which is extracted hereunder for convenience:

"16. Apart from the above, even on merits, we are of the opinion that the order of A.O. is neither erroneous nor prejudicial to the interests of Revenue so as to revise the same under section 263. Assessee has been consistently offering the incomes under the head "Income on House Property" as far as the receipts of rents are concerned and under the head "Business" as far as the service fee and management fee on maintenance are concerned. Not only in the impugned years, even in earlier years also, the incomes were accepted as such. Since the Ld. CIT cannot revise those orders, these orders are not subject matter of proceedings u/s 263 and therefore, the issues are concluded therein accepting assessee's contention. On the rule of consistency also, it cannot be modified in a later year. However, it is not on rule of consistency alone. As seen from the orders passed by the authorities at the time of assessment, they have accepted the bifurcation of rental income and services income and rental income was accepted under the head "House Property". As rightly pointed out by assessee in the submissions before the Ld. CIT that assessing incomes under head Business was not prejudicial to the interests of revenue considering that a higher claim of depreciation was allowable on the properties when compared to 30% allowance for repairs on the incomes assessed, we agree that the orders are not prejudicial to the interest of Revenue.

11 ITA No. 1037/Hyd/2014 M/s Intime Properties Ltd.

17. Ld. CIT erred in relying only on the ITAT order in the case of Global Tech Park P. Ltd., ACIT (supra) wherein the Coordinate Bench relied on the judgment of Hon'ble Karnataka High Court in the case of Balaji Enterprises vs. CIT 225 ITR 471. As seen from the judgment of Hon'ble Karnataka High Court the facts in the said case were that assessee firm even though constituted to carry on business of dealing in real estate and setting up, development and exploitation of commercial complex in market, they have not owned the property but were developing the properties obtained on lease hold or on free hold basis and further leasing the properties after development to the lessees. In those facts of the case, the incomes are correctly held as assessable under the head "Business". Further, in the said case of Global Tech Park P. Ltd., (supra), the incomes received were composite incomes for both leasing as well as maintenance and A.O. has not bifurcated them at all. In that case construction and maintenance of industrial park was indeed held as 'business activity'. However, in order to arrive whether a particular income is to be assessed under "House Property or Business" there are many aspects which require examination. First of all, one has to enquire whether assessee is owner of the property or not. Thereafter, assessee's nature of activities are to be analysed vis-à-vis the activities/agreements entered by assessee with reference to various lessees and to verify whether rental income is separately received or as a composite rent but bifurcated by assessee. The terms of agreement, the period of lease, the conditions of lease etc., also required to be examined. Therefore, in order to take a decision whether a particular income is to be assessed under the head "House Property" or under the head "Business" many more facts are required to be examined. In this case, neither the A.O. nor the Ld. CIT examined any of these aspects, but decided simply on the principles of law. Therefore, we are unable to give any finding about the correctness of the action of either A.O. or Ld. CIT in coming to a particular conclusion whether the income is assessable under 'House Property' or 'Business' in the absence of facts in these years.

18. However, as far as the law is concerned, the Hon'ble Supreme Court as early as 42 ITR 49 in the case of East India Housing and Land Development Trust Ltd., vs. CIT on the following facts held as under :

"The appellant company, which was incorporated with the objects of buying and developing landed properties and promoting and developing markets, purchased 10 bighas of land in the town of Calcutta and set up a market therein. The question was whether the income realized from the tenants of the shops and stalls was liable to be taxed as "business Income" under section 10 of the Income Tax Act or as income from property under section 9.

12 ITA No. 1037/Hyd/2014 M/s Intime Properties Ltd.

Held that the income derived by the company from shops and stalls is income received from property and falls under the specific head described in s. 9. The character of that income is not altered because it is received by a company formed within object of developing and setting up markets. Nor because of the fact that the company was required to obtain a licence from the Calcutta Municipality to maintain sanitary and other services and for that purpose had to maintain a staff and to incur expenditure did the income become "profits or gains" from business within the meaning of section 10. Nor was the character of the income altered merely because some stalls were occupied by the same occupants and the remaining stalls were occupied by a shifting class of occupants. The primary source of income from the stalls was the occupation of the stalls, and it was a matter of little moment that the occupation which was the source of the income was temporary.

Income-tax is undoubtedly levied on the total taxable income of the taxpayer and the tax levied is a single tax on the aggregate taxable receipts from all the sources; it is not a collection of taxes separately levied on distinct heads of income. But the distinct heads specified in s. 6 indicating the sources are mutually exclusive and income derived from different sources falling under specific heads has to be computed for the purpose of taxation in the manner provided by the appropriate section. If the income from a source falls within a specific head set out in s. 6, the fact that it may indirectly be covered by another head will not make the income taxable under the latter head".

18.2. Thereafter, the Hon'ble Supreme Court has another occasion to re-visit the issue in the case of Karnani Properties Ltd., vs. CIT, West Bengal 82 ITR 547 wherein the Hon'ble Supreme Court considered the facts and held as under.

" The assessee-company owned house properties, popularly known as Karnani Mansion in Park Street, Calcutta. The said Karnani Mansion consists of numerous residential flats and over a dozen shop premises. All those were let out to different tenants on a monthly rental basis. The tenants in respect of each of the flats and shops let out had to make a monthly payment which included charges for electric current, for use of lifts, for the supply of hot and cold water, for the arrangement for scavanging, for providing watch and ward facilities as well as other amenities. The Tribunal further found that the assessee-company purchases from the Calcutta Electric Supply Corporation high voltage A.C. current in bulk, converts the same into low voltage A.C. current in the company's own power house within the premises and supplies the power to its tenants. It also maintains a separate water pump-house and a boiler for the supply of hot and cold water to the tenants. The 13 ITA No. 1037/Hyd/2014 M/s Intime Properties Ltd.

company further provided for the benefit of tenants, electric lifts working day and night. The further finding of the Tribunal was that for all these purposes the assessee-company maintains a large number of permanent staff. The company claimed that the entire receipts from the tenants should be treated as income from business as it had been formed for carrying on the business of letting out flats and shops. The Income Tax Officer rejected its claim but split the receipts into two parts, one part being treated as rent and the other as "income from other sources" taxable under section 12 of the Income Tax Act, 1922. The Appellate Tribunal held that the second part was assessable as income from business under section 10. Neither the department nor the assessee contended that the part was assessable under section 9. On a reference the High Court held that the latter part of the receipts was also assessable as income from property under section 9. On appeal to the Supreme Court :

Held, reversing the decision of the High Court, (i) that the department having all along proceeded on the basis that the income of the assessee was from two different sources, it should not have been allowed by the High Court to change its case ;

(ii) that, on the facts, the services rendered by the assessee to its tenants were the result of its activities carried on continuously in an organized manner, with a set purpose and with a view to earn profits; those activities were business activities and the income arising therefrom was assessable under section 10.

When the question to the High Court speaks of "on the facts and in the circumstances of the case:, it means on the facts and circumstances found by the Tribunal and not facts and circumstances that may be found by the High Court on a reappraisal of the evidence. In the absence of a question whether the findings were vitiated for any reason being before the High Court, the High Court has no jurisdiction to go behind or question the statement of fact made by the Tribunal."

18.3. Thus the issue decided by the Hon'ble Supreme Court in the above case was that services income was assessable as income from business, but there is no dispute with reference to 'Rent' being assessed under the head " Income from House property". The Hon'ble Supreme Court in the case of S.G. Mercantile Corporation Pvt. Ltd., vs. CIT 83 ITR 700 (SC) on the following facts held as under :

"The assessee company was incorporated in January, 1955. One of the objects specified in its memorandum of association was to 14 ITA No. 1037/Hyd/2014 M/s Intime Properties Ltd.

take on lease or otherwise acquire and to hold, improve, lease or otherwise dispose of land, houses and other real and personal property and to deal with the same commercially. Within less than two weeks of its incorporation the company took on lease a market place for an initial term of 50 years, undertaking to spend Rs. 5 lakhs for the purpose of remodeling and repairing the structure on the site. It was also given the right to sublet the different portions. The appellant's activity during the period covered by the assessment years 1956-57 to 1958-59 consisted of developing the property and letting out portions thereof as shops, stalls and ground spaces to shopkeepers, stallholders and daily casual market vendors. The question was whether the appellant's income from subletting the stalls was assessable as business income under section 10 of the Income Tax Act, 1922, or as income from othe sources under section 12 :

Held : (i) that since the appellant-company was not the owner of the property or any part thereof, no question of making the assessment under section 9 arose ;

(ii) that the definition of "business" in section 2(4) was of wide amplitude and it could embrace within itself dealing in real property as also the activity of taking a property on lease, setting up a market thereon and letting out shops and stalls in the market;

(iii) that, on the facts, the taking of the property on lease and subletting portions thereof was part of the business and trading activity of the appellant and the income of the appellant fell under section 10 of the Act ; and

(iv) that where, as in this case, the income could appropriately fall under section 10 as being business income, no resort could be made to section 12.

The liability to tax under section 9 of the Income Tax Act, 1922, is of the owner of the buildings or land appurtenant thereto. In case the assessee is the owner of the buildings or lands appurtenant thereto, he would be liable to pay tax under section 9 even if the object of the assessee in purchasing the landed property was to promote and develop a market thereon. It would also make no difference if the assessee was a company which had been incorporated with the object of buying and developing landed properties and promoting and setting up market thereon.

The residuary head of income can be resorted to only if none of the specific heads is applicable to the income in question; it comes into operation only after the preceding heads are excluded."

15 ITA No. 1037/Hyd/2014 M/s Intime Properties Ltd.

18.4. Thereafter, the Hon'ble Supreme Court in the case of Sambhu Investments Pvt. Ltd., vs. CIT 263 ITR 143 also held that the prime object of the assessee shall to let out portion of the said property to various occupants by giving them additional right for using furnitures and fixtures and other common facilities and hence, income derived from the said property was an income taxable under the head 'Income from property'. The principles laid down in various decisions of Hon'ble Supreme Court were followed in various other decisions. Hon'ble Madras High Court in the case of CIT vs. Chennai Properties and Investments Ltd., 274 ITR 117, Hon'ble Bombay High Court in the case of Mangala Homes P. Ltd., vs. ITO 325 ITR 281 reiterated the same principles. Even the jurisdictional High Court in the case of PVG Raju Vs CIT 66 ITR 122 following the judgment of Apex Court in the case of East India Housing and Land Development Trust Ltd., (supra), held that a mere fact that the building or shops built with the specific object of forming, developing or setting-up a market did not change the character of income derived as owner of the property and by leasing the same. It was held that the income derived was to be held as income from house property and not income derived from business or profession.

19. In view of the prevailing judicial principles/ precedents on the issue, A.O. might have accepted the bifurcation of assessee receipts and offering the incomes under respective heads in the scrutiny orders passed. Therefore, it is to be considered that he has formed an opinion of accepting assessee's rental income under the head "Income from House Property" and allowing the claims as per that Head rather than allowing depreciation on assets, if it is converted to income from business. Since the A.O. formed an opinion not only in the impugned assessment years but also in earlier years, we are of the opinion that the Ld. CIT opinion that the same is to be assessed as business income will fall under the category of difference of opinion. If A.O. has taken one of the opinion available out of the two, the Ld. CIT cannot invoke jurisdiction under section 263. Provisions of section 263 does not permit substituting one opinion by another opinion. Therefore, the order of Ld. CIT cannot be sustained on the principles of 'erroneous' nature of A.O. order, as it is not erroneous.

13. As far as the second issue relating to excess claim of interest is concerned, as can be seen from the facts and materials on record, in course of revision proceeding, assessee has submitted detailed working relating to apportionment of interest to house property 16 ITA No. 1037/Hyd/2014 M/s Intime Properties Ltd.

income as well as business income. As it appears, ld. CIT has not at all applied his mind to the working submitted by assessee. However, on perusal of the working submitted by assessee in course of revision proceeding, clearly demonstrate that actually there is no such excess claim as alleged by ld. CIT in the show cause notice. Ld. CIT while issuing the show cause notice u/s 263 has specifically alleged of excess claim of interest to the tune of Rs. 557.23 lakhs, but, ultimately he has not at all given any specific finding with regard to such allegation and has merely remitted the issue back to the file of AO for verification. It is to be noted the direction of ld. CIT in this regard is nothing but a general direction and in the nature of roving and fishing inquiry as ld. CIT has not brought any material on record to substantiate his allegation that assessee has claimed financial charges in excess. The Hon'ble Bombay High Court in case of CIT Vs. Gabriel India Ltd. (supra) held as under:

"9. From a reading of sub-s. (1) of s. 263 it is clear that the power of suo motu revision can be exercised by the Commissioner only if, on examination of the records of any proceedings under this Act, he considers that any order passed therein by the ITO is "erroneous in so far as it is prejudicial to the interest of the Revenue". It is not an arbitrary or unchartered power. It can be exercised only on fulfilment of the requirement laid down in sub-s. (1). The consideration of the Commissioner as to whether an order is erroneous in so far as it is prejudicial to the interests of the Revenue, must be based on materials on record of the proceedings called for by him. If there are no materials on record on the basis of which it can be said that the Commissioner acting in a reasonable manner could have come to such a conclusion, the very initiation of proceedings by him will be illegal and without jurisdiction. The Commissioner cannot initiate proceedings with a view to starting fishing and roving enquiries in matters or orders which are already concluded. Such action will be against the well-accepted policy of law that there must be a point of finality in all legal proceedings, that stale issues should not be reactivated beyond a particular stage and that lapse of time must induce repose in and set at rest judicial and quasi- judicial controversies as it must in other spheres of activity. [See Parashuram Pottery Works Co. Ltd. vs. ITO 1977 CTR (SC) 32 : (1977) 106 ITR 1 (SC)].

10. As observed in Sirpur Paper Mills Ltd. vs. ITO 1977 CTR (AP) 138 :

(1978) 114 ITR 404 (AP) by Raghuveer, J. (as his Lordship then was), 17 ITA No. 1037/Hyd/2014 M/s Intime Properties Ltd.

the Department cannot be permitted to begin fresh litigations because of new views they entertain on facts or new versions which they present as to what should be the inference or proper inference as of the facts disclosed or the weight of the circumstances. If that is permitted, litigation would have no end, "except when legal ingenuity is exhausted". To do so, is "to divide one argument into two and to multiply the litigation".

The observations of the Hon'ble Bombay High Court squarely apply to the facts of the present case. In the aforesaid view of the matter, as the conditions of section 263 are not satisfied, we are of the view that exercise of power u/s 263 in the present case is invalid. Accordingly, we set aside the impugned order of ld. CIT and restore the order passed by AO.

14. In the result, appeal of assessee is allowed.

Pronounced in the open court on 18 th March, 2015.

Sd/- Sd/- (P.M. JAGTAP) (SAKTIJIT DEY) ACCOUNTANT MEMBER JUDICIAL MEMBER

Hyderabad, Dated: 18 th March, 2015 kv Copy to:-

1) M/s Intime Properties Ltd., 1, Mindspace, Cyberabad, S No 64 (part), APIIC Software Layout, 1 st Floor, Titus Towers, Building No. 10, Madhapur, Hyderabad

2) CIT-II, Hyderabad

3) Addl. CIT(A), Range - 2, Hyderabad

4) The Departmental Representative, I.T.A.T., Hyderabad.

18 ITA No. 1037/Hyd/2014 M/s Intime Properties Ltd.

Description Date Intls 1. Draft dictated on Sr.P.S. 2. Draft placed befor e auth or Sr.P.S Draft pr opose d & placed bef ore the secon d AM 3 Mem ber 4 Draft discussed/appr oved b y second Mem ber VP 5 Appro ved Draft com es to the Sr.P.S./PS Sr.P.S. 6. Kept for pro nou ncem ent on Sr.P S. 7. File sent to the Bench Clerk Sr.P.S. 8 Date on which file go es to the Head Cle rk 9 Date of Dispatch of or der