1985 (10) TMI 84 - HC - Income Tax

Court rules income from godown rental as 'Other sources,' not business income. Officer can change stance.

Baijnath Brijmohan And Sons Private Limited Versus Commissioner Of Income-Tax

Baijnath Brijmohan And Sons Private Limited Versus Commissioner Of Income-Tax - [1986] 161 ITR 234, 52 CTR 266 Issues Involved:1. Whether the income derived by the assessee company from letting out part of the office premises and godown on leave and licence basis was its income chargeable under the head 'Business'.2. Whether the Income-tax Officer was precluded from changing the stand taken in earlier assessment years regarding the nature of the income.Summary:Issue 1: Nature of Income from Letting Out PremisesThe primary issue was whether the income derived by the assessee company from letting out part of the office premises and godown on leave and licence basis was chargeable under the head 'Business'. The assessee, a private limited company incorporated in 1959, primarily dealt in mill-made cloth on a commission basis. It had taken certain office premises and a godown on hire, partitioned the godown into smaller units, and let out these premises on leave and licence basis. This activity was carried on since its incorporation, and the income from these sources was treated as business income up to the assessment year 1966-67. However, for the assessment year 1967-68, the Income-tax Officer treated this income as income from other sources, a decision upheld by the Appellate Assistant Commissioner and the Income-tax Appellate Tribunal.The Tribunal found no material to support the assessee's claim that the godown was taken on lease for carrying on a warehousing business. Factors considered included the small size of the godown (550 square yards) and the lack of steps taken by the assessee to extend its warehousing business despite deriving significant compensation income. The Tribunal concluded that the income from letting out the premises was chargeable under the head 'Other sources'.Issue 2: Change of Stand by Income-tax OfficerThe assessee contended that it was not open to the Income-tax Officer to change his stand in the assessment year 1967-68. However, the court noted that this contention was not raised before the Tribunal. The court also referred to the principle that the doctrine of res judicata does not apply to income-tax proceedings, as established in H. A. Shah & Co. v. CIT/EPT [1956] 30 ITR 618. The court emphasized that an earlier decision on the same question cannot be reopened if it was not arbitrary or perverse, arrived at after due inquiry, and no fresh facts were presented. The Tribunal found that the earlier view was patently unwarranted on the facts and that no prejudice was caused to the assessee by the change of stand.Conclusion:The court concluded that the income derived by the assessee from letting out the godown and part of the office premises was not business income but income from other sources. The court found support for this view in the judgment of Parekh Traders v. CIT [1984] 150 ITR 310 and the Supreme Court decision in East India Housing and Land Development Trust Ltd. v. CIT [1961] 42 ITR 49. The question referred was answered in the negative and against the assessee, with costs of the reference to be paid by the assessee.