TaxTMI 
TaxTMI 
TaxTMI 
2015 (6) TMI 638
X X X X Extracts X X X X
X X X X Extracts X X X X
....ources" instead of income under the head "profits and gains of business or profession", under which furnished premises were given on Leave & Licence to the Licensee. He further erred in making the following observation in his order: The transaction of leasing and sub-leasing undertaken by the appellant is an isolated transaction and the same is not carried on by the appellant on regular or systematic basis." (para 3.2, page 3). Further, the assessee in ITA No. 3033/Mum/2010 had raised similar issue vide ground of appeal No. 1, which reads as under: - "1. On the fact and circumstances of the case as well as in Law, the Learned CIT(A) has erred in confirming the action of the Assessing Officer in treating the Business Income as Income From Other Sources without considering the facts & circumstances of the case." The Assessee is also in appeal in assessment year 2005-06 on another issue as per ground of appeal No. 2, which reads as under: - "2. On the fact and circumstances of the case as well as in Law, the Learned CIT(A) has erred in confirming the action of the Assessing Officer in disallowing the claim of expenses on account of Staff Recruitment & staff Training Ex....
X X X X Extracts X X X X
X X X X Extracts X X X X
....greement had been entered into by the assessee with the British Deputy High Commission, Mumbai. As per the Tribunal this was an act of subletting by the assessee and even the list of fixtures and fittings provided to the licensee in the premises do not find place in the leave and licence agreement and even otherwise provisions of such items would not make the income in question as business income. 6. The Hon'ble High Court (supra), on an appeal filed by the assessee, noted that assessee had returned the income from assessment year 1993-94 to 2000-01 treating rental/incensing income as assessable under the head 'profits and gains of business', which in turn was accepted by the Revenue. It is also noted by the Hon'ble High Court that assessment for assessment years 1993-94 to 2001-02 were completed under section 143(3) of the Act and the income was assessed in the hands of the assessee as income from business. In the absence of any distinguishing features brought in the case, the Hon'ble High Court directed the Tribunal to reconsider its decision having due regard to the circumstances of the case. The relevant findings of the Hon'ble High Court are as under: - "2. T....
X X X X Extracts X X X X
X X X X Extracts X X X X
....g with assessment order relating to assessment year 2001-02 placed at pages 32 to 49 of the paper book. The learned A.R. for the assessee further referred to the observation of the Tribunal in para 4 in which it was accepted that as per the object clause of Memorandum Association of the assessee, the assessee, in order to its business activities can take on lease and earn income on releasing the same. It was further pointed by him that the Hon'ble Supreme Court in the case of Chennai Properties & Investment Ltd. vs. CIT reported in 56 taxmann.com 456 on similar facts, laid down the proposition that where as per the object clause in the Memorandum of Association, was to acquire and hold properties which in turn were let out, then the income arising from such letting out was assessable in the hands of the assessee as income from business. 9. On the other hand, the learned D.R. for the Revenue placed reliance on the order passed by the CIT(A). 10. We have heard the rival contentions and perused the record. In the facts of the present case assessee, as per its object clause in the Memorandum of Association, was permitted to perform business of taking on lease and earning income f....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tances of the case. 11. In the facts of the present case assessee had leased out the premises to American Express Bank Ltd. w.e.f. October 1992. The said lease agreement continued upto 31.03.2003 and was in application during the financial year 2002- 03, i.e. in the year which is in appeal before us. The said leasing of the premises by the assessee was as per the objects provided in Memorandum of Association. A perusal of the earlier order passed by the Tribunal in assessee's own case reflects that the Tribunal, vide para 4 of its order had acknowledged that under clause 53, 109, 129 and 131 of the object clause (other objects) of Memorandum of Association of the assessee, assessee was permitted to pursue the business of taking on lease and earning income from the same. Where it is the intention of the assessee to lease out various premises and then sublet the same on leave and licence basis to different parties, then such activity carried on by the assessee in line with its objects is business activity undertaken by the assessee. The income arising from such exploitation of the assets which had been taken by the assessee on lease and had been further sublet by it is a systematic ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... leasing out of the coal fields to the collieries and other companies was the business of the assessee. The income which was received from letting out of those mining C.A. No. 4494/2004 etc. 5 Page 6 leases was shown as business income. Department took the position that it is to be treated as income from the house property. It would be thus, clear that in similar circumstances, identical issue arose before the Court. This Court first discussed the scheme of the Income Tax Act and particularly six heads under which income can be categorised / classified. It was pointed out that before income, profits or gains can be brought to computation, they have to be assigned to one or the other head. These heads are in a sense exclusive of one another and income which falls within one head cannot be assigned to, or taxed under, another head. Thereafter, the Court pointed out that the deciding factor is not the ownership of land or leases but the nature of the activity of the assessee and the nature of the operations in relation to them. It was highlighted and stressed that the objects of the company must also be kept in view to interpret the activities. In support of the aforesaid proposition,....
X X X X Extracts X X X X
X X X X Extracts X X X X
....as income from business in the hands of the assessee. Another aspect to be kept in mind is that during the year under consideration, i.e. at the close of the year on 31.03.2003 the agreement with American Express Bank had come to an end and the assessee entered into a fresh agreement with British High Commission again establishes the case of the assessee, that it is involved in a systematic and organized activity of leasing out its premises, which in turn are not owned by the assessee. In the totality of the above facts and circumstances we hold that the lease rent received by the assessee is assessable as income from business in the hands of the assessee and the related expenditure has to be allowed in the hands of the assessee. The AO shall accordingly compute the income in the hands of the assessee in line with our directions after affording reasonable opportunity of hearing to the assessee. This ground of appeal, which was restored back to the file of the Tribunal by the Hon'ble High Court is allowed. 15. The issue in ground of appeal No. 1 raised by the assessee in ITA No. 3033/Mum/2010 is identical to the issue in ground No. 1 before the Tribunal in ITA No. 4977/Mum/2006....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d., UK, cost of the towel was high and therefore to have inhouse printing Mr. Naval Kumar was sent for training abroad. The assessee has filed various correspondences between itself and overseas buyers and Max Imaging Systems Limited. These documents are at page No. 112 to 181 of the assessee's paper book. The correspondence, which is after November, 2000 when Mr. Naval Kumar was sent to USA, in our view will not help the case of the assessee. The position as it prevailed prior to Mr. Naval Kumar being sent to abroad alone have to be looked into. Documents at page No. 137 to 182 related to the period prior to Mr. Naval Kumar being sent abroad. In these correspondences, there is nothing to indicate that towels were sent abroad for printing and because of high cost of printing abroad, the assessee could not explore or do export business. Correspondences only show that towels were being sent abroad and printing was done on the same through Max Imaging Systems Ltd., UK. The plea of the assessee that because of the high cost of printing abroad, it explored possibility of sending Mr. Naval Kumar aboard for training in printing technology; and that the same would benefit the business of t....