TaxTMI 
TaxTMI 
2019 (5) TMI 684
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....to engage in the business of manufacturing of tyres. However on account of poor financial viability the assessee-company incurred losses. The entire net worth was eroded and was thus declared as a sick company under the Sick Industrial Companies Act, 1956 ("SICA"). Further on 17.04.1995 a rehabilitation scheme was prepared and sanctioned by Board for Industrial and Financial Reconstruction ("BIFR"). Under the scheme it was provided that Apollo would take over the assessee-company by subscribing to equity shares of assessee-company. It was further provided that; a) Apollo will operate plant on an irrecoverable lease of eight years in consideration of lease rental of Rs. 45.50 crores for 8 years; b) Entire production to be sold in brand name of Apollo; c) Apollo to invest for modernization and expansion of plant d) No retrenchment of employees of plant; e) VRS for employees of sale office and head office. 4.1 Pursuant to the above, according to the assessee for the period 1.4.1995 to 31.3.2003, the plant was under joint operation of Apollo and assessee. Under the arrangement, assessee received a sum of Rs. 5.65 crores annually; and a....
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....e from Business", overlooking the fact that the business of the assessee ceased to exist. 3. The learned Commissioner of Income Tax (Appeals) ought to have appreciated that the Hon'ble ITAT had held the impugned lease rent as income taxable under the head "Income from Other Sources" in A. Ys.2004-05 to 2009-10. 4. The learned Commissioner of Income Tax (Appeals) is also erred in not appreciating the fact that the Revenue did not accept the findings of the Tribunal for assessment years 1996-97 to 2003-04 and appeals u/s.260A filed by the Revenue are pending on substantial questions of law in similar issues. 5. The learned Commissioner of Income Tax (Appeals) ought to have applied the provisions of section 56(2)(ii) in its spirit and substance and held the impugned lease rent as chargeable to tax under the head "Income from Other Sources" as laid down u/s.56(1)(U) of the Act. 6. The case laws relied upon by the CIT(Appeals) are distinguishable on facts, since a particulars case has to be viewed on its own factual matrix and applying other cases in generality is farfetched and devoid of any logic. 7. It is prayed that the orders of the ....
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....and machinery, the assessee's representative submitted that the investments are reflected in the books of accounts of ATL. Mere change of administrative level officers/directors, as rightly contend by the representative of the assessee, does not mean that the corporate existence itself is disappeared. The stand of the revenue that the word used "take over does not support the revenue's case. It is for a limited period of 8 years. The direction of BIFR is to the effect that the production is by PTL and the entire production shall be lifted by ATL. The payment to the staff is made by PTL. The welfare schemes are also containing and operated by PTL. All these indicate that PTL is existing. The Kerala Government has supplied the electricity to PTL as per order dated 29/8/1995. The agreement by KSEB is with PTL. All these indicates that the existence of PTL as contended by the revenue does not ceased to exist." 20. If there is no intention to continue the business and it is let out, then of course it cannot be treated as income from business. If the assessee because of certain difficulties, i.e. either by financially or for some other reasons is let out the land, plant....
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....essee for the years ending 31.3.1996 and 31.3.1997, the Tribunal held that there is nothing on record to show that the assessee had to present intention to revive its business at appropriate time, as the gap between the year of closure and the years under consideration at that point of time was very narrow. However, we are concerned with the assessment year 207-08 and we have to consider the facts and circumstances prevailing as on 31.3.2007. By that date, about 12 years have passed and hence we are in agreement with ld. DR that the assessee has not brought on record any material to show that it has intention to revive the business activities. Though the ld. AR submitted that steps are being taken to revive the business yet we are unable to accept his contention for want of supporting materials. Accordingly, in our view, the Ld. CIT(A) was not correct in placing reliance on the decision of the Tribunal without appreciating the facts prevailing in the year under consideration. Accordingly, we reverse the order of the Ld. CIT(A) and restore the view of the Assessing Officer." Similar view has been expressed for A.Y. 2004-05 to 2006-07 and 2008-09 to 2009-10." ....
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....ecord any material to show that it has intention to revive the business activities. Though the ld. AR submitted that steps are being taken to revive the business yet we are unable to accept his contention for want of supporting materials. Accordingly, in our view the ld. CIT(A) was not correct in placing reliance on the decision of the Tribunal without appreciating the facts prevailing in the year under consideration. Accordingly, we reverse the order of the ld. CIT(A) and restore the view of the Assessing Officer. 6. The question whether the assessee is having an intention to revive its business activity is a question of fact and the same is required to be considered every year. Though the ld. AR claimed that the Government licences are still continuing in the assessee's own name, it has not proved the claim of the assessee that it had an intention to revive the business." 8.6 From the aforesaid it is apparent that order for AY 2004-05 relies upon the order for A.Y. 2007-08 to hold that income is taxable as income from other sources. 8.7 Before us the ld. AR has pointed out that for AY 2007-08 by an order dated 20.07.2012 u/s. 254(2) of the Act, it has b....
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....appellant company which sum stands reimbursed by Apollo. Moreover under the agreement itself the aforesaid expenditure is to be incurred by appellant and reimbursed by Apollo as the nature of the arrangement is of joint operation of the plant. The relevant portion of the agreement dated 14.11.2007 is extracted hereunder: "Whereas both ATL and PTL carried out the joint operations as above for the period of eight years from 1.4.195 to 31.3.2003 and subsequently extended the same upto 31st March 2006 from time to time. Whereas by an agreement dated 22nd May, 2006 the parties had agreed to execute the lease of the premises for a period of four years for Rs. 15 crores per annum w.e.f. 1st April, 2006. Whereas ATL has approached PTL that its has plans to make further investments in the plant of PTL and is desirous to extend the period of lease and have a firm eight years lease. Whereas both the parties are desirous of continuing the lease operations arrangement for the present Whereas PTL has requested ATL to enhance the lease rental and security deposit with effect from 1st October, 2007 which ATL has agreed." 8.11 The obligation of ....
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.... Payment to statutory auditors 1.47 1.47 Xii) Legal and professional charges 25.39 7.17 xiii) Printing, stationery, postage, telegram & telephone etc. 4.69 4.69 xiv) Re-imbursement towards utilization of computer and other ATL facilities 34.45 34.45 xv) Lease premium of lease hold land written off - - xvi) Miscellaneous expenses 0.72 0.72 xx) Total(A) = (I+II 1 05.25 87.03 xxi) Depreciation 8.24 - xxii) Interest and bank charges 646.26 - xxiii) Expenditure incurred in connection with gift of shares to the CEO of its subsidiary towards his contribution in developing health care constribution 945.69 - Total (B) = xxi+xxii+xxiii) 1600.19 - Additional item claimed in computation of income xxiv) Bad debts written off 139.79 139.79 xxv) Doubtful advances written off 23.23 23.23 Xxvi Profit on sale of assets 8.60 8.60 Total (C) = (xxiv + xxv + xxvi) 171.62 171.62 Total (D) = (A+B+C) s1877.06 259.35 8.14. Having regard to the above, it is evide....
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....emises and collection of rents the assessment on property basis may be correct but not so, where the letting or sub-letting is part of trading operation. The dividing line is difficult to find; but in the case of a company with its professed objects and the manner of its activities and the nature of its dealings with its property, it is possible to say on which side the operations fall and to what head the income is to be assigned." "8. On the other hand, the learned counsel appearing for the respondent - Revenue made an effort to justify the reasons given by the High Court in the impugned judgment. The learned counsel also relied upon the judgment delivered by this Court in the case of M/s. S.G. Mercantile Corpn. (P) Ltd. v. CIT, Calcutta (1972) 1 SCC 465. According to him, the important question which would arise in all such cases is whether the acquisition of property for leasing and letting out all the shops and stalls would be essentially a part of business and trading operations of the assessee. According to the learned counsel appearing for the Revenue, leasing and letting out of shops and properties is not the main business of the assessee as per Memorandum of Asso....
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....purpose of any of the business which the company is expressly or by implication authorized to carry on or which are usually supplied or dealt in by persons engaged in any such businesses or which may seem to the company capable of being conveniently on in connection with the above or otherwise calculated directly or indirectly to enhance the value of any of the property and rights of the company for the time being. 17. To amalgamate, enter into partnership, or into any arrangement for sharing profits union of interest, co-operation, joint adventures, or reciprocal concessions or for limiting competition with any person or company carrying on or engaged in or about to carry on or engage in any business or transaction which the company is authorized to carry on or engage in or which can be carried on in conjunction therewith or which is capable of being conducted so as to directly or indirectly benefit the company. 20. To sell lease mortgage or otherwise dispose off the property, assets or undertaking of the company or any part thereof for such consideration as the company may think fit, and in particular shares stock debentures or other securities of any other comp....
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....siness when for the time being it could not itself run it and that the dyeing plant had not ceased to be a commercial asset of the business and the sum representing the rent for five months received from the lessee by the assessee was, therefore, income from business and was chargeable to excess profits tax. It was thereafter concluded as under: "If a commercial asset was not capable of being used as such, then its being let out to others did not result in an income which was the income of the business, but it could not be said that an asset which was acquired and used for the purpose of the business ceased to be a commercial asset of that business as soon as it was temporarily put out of use or let out to another person for use in his business or trade. The yield of income by a commercial asset was the profit of the business irrespective of the manner in which that asset was exploited by the owner of the business. He was entitled to exploit it to the best advantage and he might do so either, by using it himself personally or by letting it out to somebody else. The view that in order to constitute business income, the commercial asset must at the time it was let o....
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....efrom ought to be treated as business income. 8.26 We are also of the opinion that disclosure in the financial statement as "other income" or there is one segment of the assessee is an irrelevant consideration. It is well settled principle that treatment in books of accounts is not determinative of the nature and taxability of income as held in the case of Tuticorin alkali Chemicals and Fertilizers Ltd. v. CIT 227 ITR 172 (SC) and Kedarnath Jute Mfg. Co. Ltd. v CIT 82 ITR 363 (SC). 8.27 For the sake of completeness, it is stated that it is well settled law that if there is a new ground or a material change in the factual and legal position precedents do not have binding character. In the case of Bharat Sanchar Nigam Ltd. v UOI WP (Civil) 183/2003 (SC), it was noted as under: "Even if the said orders are passed under the same provisions of law, it may theoretically be open to the part to contend that the liability being recurring from year to year, the cause of action is not the same; and so even if a citizen's petition challenging the order of assessment passed against him for one year is rejected, it may be open to him to challenge a similar assessment o....
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....o take a different view. This mandate is subject only to the usual gateways of distinguishing the earlier decision or where the earlier decision is per incuriam. However, these are fetters only on a coordinate Bench which failing the possibility of availing of either of these gateways, may yet differ with the view expressed and refer the matter to a Bench of superior strength or in some cases to a Bench of superior jurisdiction." 8.29 In the instant case we have already highlighted the change in factual position and also the subsequent Apex Court judgments which have persuaded has to make an departure apart from the fact that a legal plea crucially determinative of the claim of the appellant had not been considered in the orders for AY 2004-05 and 2007-08. 8.30 We would like here to make a gainful reference to the case of Shyam Burlap Company Ltd. v. CIT 380 ITR 151 (Cal), where the assessee in the past history consistently shown rental income under the head "Income from House Property" which stood accepted as such. However for the first time in AY 1996-97 it claimed the income to be income from business which was negated by Tribunal, having regard to the past his....