TaxTMI 
TaxTMI 
2015 (9) TMI 852
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....0,000/- paid by it for obtaining possession from lessee/tenant so as to earn a higher income is an admissible revenue deduction and the purported findings of the Tribunal to the contrary are arbitrary, unreasonable and perverse?" The facts are set out hereinafter. The appellant is a public limited company within the meaning of the Companies Act, 1956. The main objects specified in its Memorandum of Association (for short "Memorandum") is to acquire and develop properties and to deal with the same by way of sale, lease, letting out, etc. The appellant acquired premises No.6, Royd Street, Kolkata (hereinafter referred to as "the said premises") comprising land and buildings. The appellant raised two new constructions on the said premises at a substantial cost after demolishing some of the existing buildings. One of the new constructions was sold to different buyers and the profit and loss arising therefrom was assessed under the head "business". Portions of the second new construction were let out to different tenants. The appellant states that in April 1988, an area of 3310 sft. on the ground floor of the second new construction was given on lease to Yogi Industries Private Limit....
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....venue preferred appeal before the Tribunal. The Tribunal by the impugned order dated December 14, 2004 allowed the appeal of the revenue. Mr J.P. Khaitan, learned senior advocate appearing for the appellant submitted that the Tribunal was not justified in law in holding that merely because the appellant had been declaring the rental income under the head "house property", there was no justification for assessing the same under a different head of income. Submission was that the Tribunal failed to consider that res judicata did not apply to income tax proceedings and an assessment for particular year was final and conclusive between the parties only in relation to that year. It was submitted that the Tribunal failed to consider that there was no litigation or controversy between the appellant and the Department as regards the head of assessment of the rental income in the earlier years inasmuch as the appellant had itself shown the income under the head "house property". The Tribunal failed to consider that as the appellant had itself shown the rental income under the head "house property", the Assessing Officer simply accepted the head under which the appellant offered the income ....
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.... Bharat Sanchar Nigam Ltd. v. Union of India: (2006) 3 SCC 1, 2) CIT v. V. MR. P. Firm, Mura (SC) : 56 ITR 67, 3) S. G. Mercantile Corporation P. Ltd. v. CIT: 83 ITR 700 (SC), 4) Empire Jute Co. Ltd v. CIT (SC): 124 ITR 1, 5) Commissioner of Agricultural Income-Tax, Trivandrum v. Bombay Burmah Trading Corporation Ltd.: 131 ITR 154, 6) Radhasoami Satsang v. CIT: 193 ITR 321 (SC), 7) CIT v. Auto Distributors: 210 ITR 222 (Cal), 8) CIT v. Oberoi Hotels P. Ltd: (2011) 334 ITR 293 (Cal), 9) Airports Authority of India v. CIT (Delhi): (2012) 340 ITR (Delhi (FB), 10) Chennai Properties and Investments Ltd. v. Commissioner of Income- Tax: (2015) 373 ITR 673 (SC) and 11) CIT v. Bhaskar Mitter: 73 Taxman 437 (Cal), Mr. M.P. Agarwal, learned advocate for the respondent submitted that since there is a clear finding by the Assessing Officer that in the earlier years the assessee had itself shown the rental income under the head "income of house property" and the facts being same, there was no occasion for assessing the rental income of the assessee under the head "business income". Since all along the petitioner had returned the income from house property and the Assessing Officer accepted it,....
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....e and develop, promote, pulldown, rebuild enlarge and extend repairs and renovate houses, buildings, land, factories, bungalows, godowns sheds, flats, hotels markets, firms, warehouses and other properties or anyother kind of estates or property of every description and to sell, lease let out, hire transfer and deal in any manner of such estates and properties" (Emphasis supplied) Admittedly the appellant had all along offered for assessment the rental income under the head "house property". In this assessment year the position is no different. However in this assessment year the assessee had claimed Rs. 53,50,000 paid as compensation an admissible deduction under the head "business expenditure". The Assessing Officer found that the appellant had made payment of the said sum to two tenants for securing vacant possession of the space occupied by them. The Assessing Officer rejected that contention of the appellant by holding that as it had shown the rental income as "Income from house property" , only deductions as laid down in section 24 of the Act would be allowed and since the payment was made for acquiring a benefit of enduring nature, the expenditure was considered as capita....
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.... caused into the income-tax records of the principal recipient of the impugned compensation namely, M/s. Yogi Industries Pvt. Ltd. which was paid a sum of Rs. 50 lakhs. From the asstt. records of M/s. Yogi Industries Pvt. Ltd. I find that the sum of Rs. 50 lakhs received by way of compensation has been declared as a revenue receipt chargeable to tax. Hence, considering all materials facts, I hold the compensation of Rs. 53,50,000/- as an admissible deduction. The A.O. is directed to delete the disallowance." Thus, while the Assessing Officer and the Tribunal had disallowed the claim of the appellant on the ground that it had consistently shown the rental income under the head "Income from House Property", the CIT(A) after considering the object's clause of the Memorandum and observing that an assessee is within its rights to avail of the statutory deductions under the law, held that the income from rent constituted the appellant's business income and had allowed deduction. The question is since the assessee had all along shown the rental income as "income from house property", applying the principle of consistency, whether the Assessing Officer and the Tribunal were justi....
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.... the appellant as there was no change in the facts of the case during the relevant assessment year. Though the appellant had claimed that the rental income earned by the appellant assessable under the heard "business" and the compensation of Rs. 53,50,000/- paid by it for obtaining possession from lessee/tenant, so as to earn a higher income, as an admissible revenue deduction, inspite of Memorandum permitting the appellant to carry on business by letting out properties, the Assessing Officer and the Tribunal ruled otherwise. Since the object in the Memorandum permitted the appellant to carry on business in letting out properties and as 85% of the income of the appellant was by way of deriving rent and lease rentals, in our view the income from rent constituted the business income of the appellant. Since compensation of Rs. 53,50,000/- was paid by the appellant, the landlord of the premises, to obtain possession from the lessee/tenant so as to earn a higher rental income, it had arisen out of business necessity and commercial expediency. Since there was no question of acquiring a property it cannot be said that the payment made was for having a benefit of enduring nature. Rather t....
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....eeping these principles of law as formulated by the Courts in mind, the finding by the Assessing Officer and Tribunal that declaring the rental income under the head "income from house property" precludes the appellant from calming deduction cannot be accepted as Memorandum permitted it to carry on business of letting out properties and indisputably it was carrying on business in letting out properties and in carrying on such trading activity had paid compensation. The observation of the Tribunal that the appellant had all along, including in this assessment year, had shown the income under "Income from house property" cannot be a ground for denial of the deduction as in the earlier assessment years never an occasion arose for adjudication or decision on the said issue. Thus the conduct of the appellant cannot be called approbate and reprobate since in CIT v. V.MR. P. Firm, Muar (supra) it was held that "As in the case of estoppel, it cannot operate against the provisions of a statute. If a particular income is not taxable under the Income-tax Act, it cannot be taxed on the basis of estoppel or any other equitable doctrine. Equity is out of place in tax law; a particular income is ....
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....e cases of acquisition of property where the respective assessees had acquired a right to a property. The judgment in CIT v.Hemraj Mahabir Prosad (P) Ltd. (supra) is inapplicable to the facts of the case in hand as therein assessee was not the owner and the building was taken on sublease. In Azimganj Estate Pvt Ltd. (supra) the subject matter was whether the income derived from letting out the unsold flats was income from house property and not business income which is not the case in hand. Since Memorandum of the appellant company was not considered, the judgment in CIT v. Estate of Omprakash Jhunjhunwala (supra) or the judgment in Sultan Brothers Private Ltd. (supra) does not further the case of the revenue as Supreme Court therein held that "Whether a particular letting is business has to be decided in the circumstances of each case" and "each case has to be looked at from a businessman's point of view to find out whether the letting was the doing of a business or the exploitation of his property by an owner" which the Assessing Officer and the Tribunal failed to do. The judgment in Chloride India Limited (supra) is not applicable as it is evident from the facts that the as....