TaxTMI 
TaxTMI 
2015 (5) TMI 432
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.... that the godowns, which he had let out, were being used by him for the business of export of tobacco, and whenever they were not in use, he had given them on lease to third parties and received rent therefrom. He, therefore, claimed before the authorities below, on the basis of Clause.3 of the partnership deed, that the godowns of the firm were let out, as provided for in the said deed and that being a part of their business, the rent received from the lessee should be treated as income from business. It has come on record that such income of the assessee for the earlier years i.e. 1990-91, 1991-92 was assessed as income from property on the ground that no business as such was carried on by the assessee during those years. The assessee had carried that order in appeal before the Commissioner of Income Tax (Appeals), who decided the matter in favour of the assessee treating the entire income as income from business. That order of the appellate authority was challenged by the Revenue before the Income Tax Appellate Tribunal (ITAT). Based on the order of the Appellate Tribunal, passed for the year 1991-92, the assessment for the year 1992-93, impugned in this appeal, was completed, t....
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....e appellant was a limited Company, which was owner of a certain building constructed on Plot No.7 on the Church Gate Reclamation in Bombay which it had fitted up with furniture and fixtures for being run as a hotel. By a lease dated August 30, 1949, the assessee had let out the building fully equipped and furnished to one Voyantzis for a term of six years from 09-12-1946 for running a hotel and for certain other ancillary purposes. The lease provided for a monthly rent of Rs. 5,950/- for the building and hire of Rs. 5,000/- for the furniture and fixtures. In this backdrop, the aforementioned question fell for consideration of the Supreme Court. One of the objects of the assessee- Company in Sultan Brothers Case (supra) was to acquire land and building and to turn the same into account by construction and reconstruction, decoration, furnishing and maintenance of them and by leasing and selling the same. The Supreme Court observed that the activity contemplated in the aforesaid object of the Company, assuming it to be a business activity, would not by itself turn the lease in the present case into a business deal. It also referred its judgment in East India Housing and Land Developme....
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....hat the assessee decided to go out of the business as far as this particular factory was concerned, the lease agreement was in fact a veiled agreement for lease-cum-sale and it could not be in the contemplation of the assessee, at the time of it entering into the license agreement, to retain the assets, any more as a commercial asset. In this backdrop, the High Court had framed the question Whether, on the facts and in the circumstances of the case, the Tribunal was correct in law in holding that the income received by the assessee by leasing out the factory was business income? This question was answered by the High Court in the negative-in favour of the Revenue and against the assessee. The Supreme Court while dealing with the case affirmed the decision of Calcutta High Court and held that the income of the assessee was not assessable as business income. 4.4. This Court in Commissioner of Income-Tax. v. Y.Narayana Murthy ((2004) 270 I.T.R. 275) considered the question whether, on the facts and in the circumstances of the case and in law, the Appellate Tribunal was justified in holding that letting out the godowns would amount to carrying on of business within the meaning of th....
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....ee as that of the income from the property and not from business. Consequently, it was held that the assessee was not entitled to registration or continuation of the same in terms of Section 185 (1)(a) of the Act. 4.5. In Commissioner of Income-Tax v. Veerabhadra Industries ((1999) 240 I.T.R. 5), this Court had taken the similar view, as was taken in Y.Narayana Murthy (supra) holding the single act of constructing godowns and letting it out cannot be treated as a business. The expression business contemplates continuous activity from year to year. There was no evidence that the assessee was continuing the activity of constructing godowns and letting them out from year to year. There was no material that it had constructed a godown in the relevant year. Therefore, the income from a simple letting out of the godown would not be treated as a business income for the purpose of Income-Tax Act. When once it was not business income, the question of availing of benefit under Section 185(1)(a) would not arise. 4.6. In East India Housing and Land Development Trust Ltd. (supra), the Supreme Court dealt with a case of a Company which was incorporated with the objects of buying and develo....
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....sel for the assessee, in support of his case, placed reliance on the following judgments: Commissioner of Income Tax v. National Storage Pvt. Ltd. Bombay , Commissioner of Income Tax-III v. Velankani Information Systems (P.) Ltd. (2013) 218 Taxman 88 , Commissioner of Income Tax v. Information Technology Park Ltd. Information Technology Park (2014) 369 ITR 460 (Karn) and Commissioner of Income Tax III v. M/s. NDR Warehousing Pvt. Ltd., Judgment of Madras High Court, dated 01.12.2014 and submitted that the income arising from letting out of the godowns is an income from business and not from property. 5.1. In National Storage Pvt. Ltd. Bombay (supra), the Supreme Court was considering the case of the distributors, who were required to store films only in godowns constructed strictly in conformity with the specifications laid down in the Film Rules and in a place to be approved by the Chief Inspector of Explosives, Government of India. The assessee, after purchasing a plot of land, constructed 13 units thereon. Each unit was divided into four vaults, having a ground floor for rewinding of films and an upper floor for storage of films. 12 units were meant for the Members of the Ind....