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TaxTMI 
TaxTMI 
TaxTMI 
2015 (7) TMI 471
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....stified in confirming the action of the AO." 5. Since the assessee has not pressed the other grounds raised in all the appeals for all the assessment years under consideration, the same are dismissed being not pressed. 6. As regards ground no.3 pressed by the ld. Counsel for the assessee as reproduced herein above and which is common issue in all the appeals for all the assessment years under consideration, at the outset the ld. Counsel for the assessee prayed before us to allow him to argue the appeal for the assessment year 2003-04, which is a lead case to all the appeals. The ld. Counsel for the assessee was allowed to argue the appeal filed for the assessment year 2003-04, where the facts of the case are narrated by the ld.CIT(A) in his order at pages 6-10. The same are reproduced herein below for the sake of convenience. Page 6-10 of the ld.CIT(A)'s order for AY 2003-04:- " 5. Ground no.4 is regarding change of head of income from Íncome from business and profession' to Íncome from House property'. The assessing officer observed that assessee had shown receipt of rent from various persons which aggregated to Rs. 32,91,431/-. Such rent income was shown by the....
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....aside by the tribunal to be re-decided on merits. Therefore the matter has been re-examined. My ld. Predecessor, vide letter no.CIT(A)-XXXIII, KOL/Dutta properties/09-10 dtd 26/08/2009 had asked the view point of the department in the matter. The assessing officer has submitted his report vide letter no.ITO/W-53(1)/Kol/Appeal/09-10 dated 03/09/2009. On the issue under consideration, it has been stated by the assessing officer that the appellant was owner of the godown and godown space was given on rent and accordingly required to be taxed under the head 'Íncome from House property'. Regarding the appellant's claim of business income, it was stated that business consists of something which occupies attention and labour on part of owner with profit motive. Here it was case of simple letting out and the appellant derived periodic rents as per the tenancy agreements signed. The assessing officer referred to the decision of Allahabad High Court in the case of Seth Banarasi Das Gupta Vs. CIT 106 ITR 559,557-558(All), in which Hon'ble High Court had given guiding principles to determine whether an asset is commercial assets or not. It has been explained by the High Court that every....
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....Calcutta High Court reported in 249 ITR 47(Cal). , that even if certain services are provided which are incidental to letting out, it could not be said that the rental income would assume nature of business income and the income in such case is essentially 'Income from House Property'. So far as the decisions referred to by my ld. Predecessor are concerned, they are all distinguishable on facts. Out of the decisions cited in his order, the case, whose facts come closest to the facts in the appellant's case is Saheli Trading Co. (supra). However, a vital difference is that, in that case the assessee was carrying out business activity and during the period of temporarily lull in the business, the asset was given on rent. On the other hand, in the appellant case, the business of tea blending had admittedly not commenced till the end of the year under consideration and in fact for several subsequent years. It commenced only in the financial year 2005- 06. While the appellant may have acquired lease held land and constructed godowns for purpose of its tea blending business, but the undisputed fact is that no such activity was carried out till as late as FY 2005-06. For that reason, lett....
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....e tenancy agreement are for fairly long tenure of six to ten years and thus the intention prima-facie is of letting out of owned property and not temporary exploitation of commercial asset. In my opinion, the decisions cited by the assessing officer in his report, viz. Seth Banarasi Das Gupta (supra) and New India Industries Ltd (supra) appear to be more appropriate upon the facts of the appellant's case. Another argument made by the appellant in this regard was that it was systematically carrying out construction of godowns to exploit demand of godown space in the area and thus it was a business activity. Reliance was placed in this regard on the ratio given in the decision of Andhra Pradesh High Court in the case of CIT vs. Y. Narayan Murthy 270 ITR 275. In this regard, on going through the original partnership deal (before being amended subsequently), it is seen that the business activity mentioned therein is 'tea blending and packaging ' and not constructing and letting out of godowns. The same is the position in respect of the original trade license obtained by the appellant. The original license was for 'tea blending & packaging', which was got amended to tea blending, pack....
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....e took the land on lease and constructed warehouse with an intention of exploiting the asset on commercial basis and sub-letting the same. The assessee had provided various services like security charges, electricity charges, truck parking, place for truck drivers halt etc. Therefore, relying on the decisions of various courts of law and distinguishing the decisions by the ld.CIT(A) in the impugned order prayed to treat the same as income under the head 'Business or Profession'. 9. The ld.DR on the other hand, has relied upon the order of the ld.CIT(A) and that of the AO. 10. We have heard the rival submissions and perused the material available on record. It was stated that the assessee itself is a partnership firm vide partnership deed dated 01st April 1994. The assessee firm was formed for carrying on business of 'tea blending and packaging' and also acting as business importer, exporter, supplier and commission agent. Admittedly, no significant activities was done in the assesee firm up to AY 1998-99. Vide supplementary partnership deed dated 01st April 1998, the original deed was amended to carry on letting out of godown space on rental basis and to act as importer and expor....
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....nt order for a.y 2003-04, the AO took a view that such rental charges should have been treated as 'Income from House property' instead of 'Profits and Gains from business and profession'. Thereafter, the AO reopened assessment proceedings u/s. 148 for the AY 1999-2000, 2000-01, 2001-02, 2002-03, 2004-05 & 2005-06. Against the order for a.y 2003-04, the assessee filed an appeal to the ld.CIT(A) and the ld.CIT(A) vide an order dated 25-06-07 in Appeal No.159/CIT(A)-XXXIII/W 53(1)Cal/06-07 directed the AO to treat godown rent as business income of the of the assessee firm. Extracts of which are reproduced below for the sake of convenience:- "Considering the above facts and judicial pronouncements, the AO is directed to treat the godown rent as business income of the appellant. It is however found that the various expenses as claimed in the P/L account were not examined by the AO to ascertain as to whether all these expenses were correctly claimed and were laid out wholly and exclusively for the purpose of appellant's business. For example, the assessee was unable to explain the necessity & relevant of commission & brokerage expenses vis-à-vis the earning of rental income. Henc....
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....de the order of the ld.CIT(A) with the direction that the validity of the assessment order on the ground of limitation should be decided afresh in view of the discussion above. Since the matter is being set aside to ascertain the validity of the assessment order all other grounds of appeal by the assessee and cross appeal by the Revenue cannot be considered by us at this stage. The ld. CIT(A) is, therefore, directed to consider the submissions of the assessee and provide proper opportunity to the Assessing Officer on the additional evidence admitted by him if it is ascertained that the assessment order was passed within the limitation period and the original assessment was valid. The ld. CIT(A) should also decide the grounds of appeal before him himself after giving proper opportunity to the assessee and the Assessing Officer and should not restore any of the issues to the Assessing Officer." Later on CIT(A) passed an order on 20th March 2012 by concluding that assessment order was passed within statutory limit and further held that rental income received by the assessee was to be treated as 'Income from House Property'. 11. We further find that the ld.CIT(A) in this case has re....
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....ld that the assessee in that case has been providing host of services/facilities/amenities in said malls/business centres, it could be said that basic intention of assessee was commercial exploitation of its properties by developing them as shopping malls/business centres and, therefore, the same was held to be business income. 11.2 In the case of Chennai Properties & Investment Ltd Vs. CIT reported in 56 taxman.com 456(SC) as relied upon by the ld. Counsel for the assessee before us by way of his written submission, it was held that where the main objects of the company was to acquire properties and to earn income by letting out same, the said income was to brought to tax as business income and not as 'income from house property'. The ld.DR while arguing the matter has relied upon the judgments of Hon'ble SC in the case of Karanpura Development Co. Ltd Vs. CIT reported in 44 ITR 362(SC) & East India Housing & Land Development Trust Ltd Vs. CIT reported in (1961) 42 ITR 49. It was brought to our notice that both these said judgments were relied upon the Hon'ble Apex Court while passing order in the case of Chennai properties & Investments Ltd(supra). The ld.DR has also relied upon....