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25-10-2018, AMBIENCE DEVELOPERS, Section 254(2), 2(47), HIGH COURT OF DELHI
Appeal No. - W.P.(C) 10572/2018 & CM Nos.41219-20/2018
Asstt. Year -
PER : S. RAVINDRA BHAT, J.
1. These two writ petitions – one by M/s Ambience Developers and Infrastructure Pvt. Ltd. (hereafter as “ADI”) – being W.P.(C)No.10572/2018 and the other by M/s Ambience Hotels and Resorts Pvt. Ltd. (hereafter as “AHR”) – being W.P.(C)No.10627/2018 challenge two common orders of the Income Tax Appellate Tribunal (hereafter as “ITAT”). The ITAT rejected- by the first impugned order (dated 07.07.2017, hereafter “the main order” or “main judgment”) the appeals filed before it; by the second impugned order (dated 13.08.2018) ITAT rejected the applications filed by the ADI and AHR under Section 254(2) of the Income Tax Act
(hereafter as “the Act”).
2. The brief facts are that the original assessment was completed in the cases of both the petitioners i.e. ADI and AHR, on 31.12.2009 at `24,03,030/- and `5,73,28,357/- respectively under Section 143(3) of the Act. The CIT subsequently set aside the assessment invoking its powers under Section 263 and directed the AO to assess their lease income from the rental/lease of shops and other spaces in the hotel assessees hands after making proper inquires and verifications. During these proceedings, the AO noticed that the ADI had projected lease and license charges of`29,18,07,201/- including lease rental of `6,27,84,240/- relating to leasing of retail spaces in Ambience Hotel, Gurgaon. He further noticed that the space in question was owned by AHR but the assessee i.e. ADI showed its income from letting out the shop and spaces in its hand on the basis of the agreement between ADI and AHR. The consideration for that agreement was `75 crores. The AO therefore, concluded that since the income of `6,40,78,420/- was a lease rental and had been taxed in the hands of the owner i.e. ADI, the provisions of Section 22 of the Act were to be invoked; the rental income was therefore, taxed in the hands of the owner AHR. The AO did not reduce the amount of `6,27,84,240/- from ADI’s income and assessed it in its hands, on protective basis by making a substantive addition in respect of the income of AHR. Thus, the AO assessed AHR’s total income at `4,41,54,580/- under Section 143(3) read with Section 263 of the Act. Both ADI and AHR appealed to the CIT who dismissed their pleas.
3. Aggrieved the said two assessees approached the ITAT. By its order dated 07.07.2017, the ITAT – after noticing the contentions made by the two assessees before it, and considering the agreement of 31.03.2008, entered into between two of them i.e. ADI and AHR, held as follows:
“14. When we peruse the recitals of the Agreement (supra) reproduced above particularly clause 4, it goes to unequivocally prove that the second party to the Agreement (supra) namely, ADIPL is entitled to receive the rent or the charges from the tenants/occupants during the currency of this agreement. When ADIPL has got rights and interest in the property in question by virtue of the Agreement (supra) w.e.f 31.03.2008 then it is estopped by its own act and conduct from showing the income from the rental of the shopsand rental space in its hands for the earlier period prior to 31.03.2008.
15. In the given circumstances, the ld. CIT (A) has rightly upheld the addition of Rs.4,39,48,968/- in the hands of AHRPL under the head income from house property by returning following findings :
“5.1.5. On perusal of the details on record, I find that the appellant company, ADIPL even after showing the above lease income in its hands, had declared loss for the year under consideration in its return, whereas the appellant company i.e. AHRL was running into profits. In my considered view, the entire arrangement was made by the appellant to avoid incidence of tax in its hands. Reliance is placed in the present case on the judicial pronouncement of the Hon’ble Apex court in the case of Smt. Tara Devi Aggarwal, which is clearly applicable in this case. ADIPL, a loss making company, i.e. the appellant company AHRL, a profit
making company in its return to be assessed in its hands in order to assist the appellant company to avoid tax payment. Section 60 is merely a declaratory of a principle which is well settled under the Income Tax law, namely, the profits on their coming into existence attract tax at that point and the revenue is not concerned with the subsequent application of the profits.”
16. In view of what has been discussed above, we are of the considered view that the assessee, ADIPL in this case is not entitled for relief being beneficial owner on the basis of the judgment of Poddar Cement Pvt. Ltd. (supra) which is not applicable to the facts and circumstances of the case rather an agreement (supra) between AHRPL and ADIPL is a camouflage particularly in the face of the admitted fact that AHRPL being owner of property in question claimed TDS of Rs.1,09,32,212/- without offering corresponding income for taxation to evade the payment of tax to the state exchequer. So, we find no illegality or perversity in the findings returned by ld. CIT (A) in the impugned order dated 01.10.2013 under challenge vide ITA No.355/Del/2014. However, when substantive addition qua the same amount of Rs.6,27,84,240/- has already been made in case of AHRPL, there is no question confirming the protective addition of Rs.6,27,84,240/- in case of ADIPL by the ld. CIT (A) because one income cannot be taxed twice. So, ITA Nos.354/Del/2014 & 355/Del/2015 filed by the assessee are hereby dismissed. Consequently, ITA No.413/Del/2014 filed by the Revenue is also dismissed having been become infructuous.”
4. The assessees had approached this court but withdrew the appeals on the plea that they had preferred rectification application and that in the event of their plea not