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TaxTMI 
TaxTMI 
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2019 (10) TMI 1002
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....ltan Brothers Pvt. Ltd. Vs. C.I.T. (1964) 51 ITR 353 (S.C.) and the Division Bench judgment of this Hon'ble Court passed in CIT v. Goel Builders 331 ITR 344 (All.), the Tribunal below was justified in holding that the receipts of the appellant were income from house property/ other sources and not business income? (b) Whether, in view of the decisions In Radhasaomi Satsang v. CIT 193 ITR 321 (SC) and in ACIT Vs. D.M. Brothers (2010) 44 DTR 13 (All.), the decision of the Tribunal below in discarding the treatment of the receipts of the appellant as business income for Assessment Year 2005-06 and in all subsequent assessment year's till A.Y. 2013-2014 (except assessment year's under appeals) is legally justified?" 4. The assessee is a partnership firm, which was constituted w.e.f. 01.07.2004, while the deed forming partnership is dated 01.11.2004. According to the deed, the object of the assessee firm is to venture into real estate business and allied activities such as leasing/ sub leasing, maintaining properties on maintenance contract etc. It was subsequent to formation of partnership firm, that assessee acquired leasehold rights over a commercial property measuring....
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....23.01.2012 by CIT (A), aggrieved by the said order a Second Appeal was preferred before the ITAT which was also rejected by order dated 14.08.2013, which is impugned before this Court. Pursuant to the order of this Court, assessee filed copies of the partnership deed, as well as the three agreements executed between the assessee -appellant and GAIL. 7. Sri Rahul Agarwal, learned counsel appearing for the assessee submitted that the assessee firm is in the business of real estate and allied activities such as leasing and subletting, maintaining properties on contracts. He further submitted that the three agreements executed between the appellant and GAIL indicates that they were supplemental/ incidental to each other and were part of one composite transaction and should not be read in isolation as done by the taxing authorities. He further submitted that GAIL being a Government organisation does not enter into tenancy agreement with private parties without protracted negotiations and usually does not conclude a transaction within a space of a week or 10 days, as in the present case the property was obtained by assessee on 17.11.2004 and was let out on 30.11.2004, which indicates th....
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....tible conclusion that in this case, letting of the properties is in fact is the business of the assessee. The assessee, therefore, rightly disclosed the income under the head "Income from business". It cannot be treated as "Income from the house property". We, accordingly, allow this appeal and set aside the judgment of the High Court and restore that of the Income Tax Appellate Tribunal. No orders as to costs." 11. Reliance has also been placed on a judgment of the Division Bench of this Court in case of Hotel Arti Delux (Pvt.) Ltd. vs. Assistant Commissioner of Income Tax [2014] 227 Taxman 119 (All.) wherein this Court held as under:- "15. From the recital of the lease deed it is evident that only the building was leased out along with a lift, tubewell and electrical fittings. These cannot be treated as plant and machinery but would be treated as amenities, which are necessary for the use of any building. We find that the appellant had not placed any material on record to show that the building had peculiar amenities with which the building could be treated as a "plant" and not a building simplicitor. No material has been brought on record to indicate that the building had pec....
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....ithout the other ? As we have discussed hereinbefore that it is composite table space let out to various occupants, the amenities granted to those occupants including the user of the furniture and fixtures are attached to such letting out and the last question, in view of the same, must be answered in the negative. Applying the said test we hold that by the said agreement the parties have intended that such letting out would be an inseparable one. 8. Hence, we hold that the prime object of the assessee under the said agreement was to let out the portion of the said property to various occupants by giving them additional right of using the furniture and fixtures and other common facilities for which rent was being paid month by month in addition to the security free advance covering the entire cost of the said immovable property. In view of the facts and law discussed above we hold that the income derived from the said property is an income from property and should be assessed as such." 13. In case of Raj Dadarkar and Associates Vs. Assistant Commissioner of Income Tax, [2017] 81 Taxmann.com 193 (SC), the Supreme Court held that object clause contained in partnership deed w....
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....d into an agreement with GAIL and the receipts at the hand of assessee pursuant to the agreements is assessable under the head 'income from business or income from house property or income from other sources'. 18. The contention of the assessee hinges around two facts, firstly that AO has already taken a view while making assessment for the assessment year 2005-06 that income is assessable under the head 'income from business' and therefore maintaining consistency the Assessing Officer should have not taken a different view for the subsequent assessment year, and the second ground of attack being that the assessee firm is in the business of real estate and allied activities and the three agreements executed were supplemental and incidental to each other and are part of one composite transaction and should not be read in isolation, further the property acquired by the assessee was for letting, as such the same being income from business and cannot be assessed under the heading 'income from house property or income from other sources'. 19. The first question raised by the appellant-assessee regarding the maintenance of consistency by the assessing authority,....
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....ision takes place in a subsequent lis where the prcedential value of the decision is called in question. No one can dispute that in our judicial system it is open to a court of superior jurisdiction or strength before which a decision of a Bench of lower strength is cited as an authority, to overrule it. This overruling would not operate to upset the binding nature of the decision on the parties to an earlier lis in that lis, for whom the principle of res judicata would continue to operate. But in tax cases relating to a subsequent year involving the same issue as an earlier year, the court can differ from the view expressed if the case is distinguishable or per incuriam. The decision in State of U.P. v. Union of India related to the year 1988. Admittedly, the present dispute relates to a subsequent period. Here a coordinate Bench has referred the matter to a large Bench. This Bench being of superior strength, we can, if we so find, declare that that the earlier decision does not represent the law. None of the decisions cited by the State of U.P. are authorities for the proposition that we cannot, in the circumstances of this case, do so. This preliminary objection of the Sta....
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....r courts from entertaining issues on the same cause of action, whereas cause of action for each assessment year is distinct. In the case in hand, the AO for assessment year 2005-06 had accepted claim of the assessee without examining relevant records, as well as without recording any finding on the issue in question. Thus, for subsequent year, the claim of assessee cannot be accepted without examining records and material, and AO after examining the records came to conclusion and took a view that receipts at the hand of assessee was to be assessed under income from house property and income from other sources and not business income. In Commissioner of Income Tax vs. British Paints India Ltd., Supreme Court while interpreting Section 145 of the Act held that even if the assessee had adopted a regular system of accounting, it was the duty of the Assessing Officer to consider whether correct profits and gains would be deduced from the account so maintained. Relevant portion are extracted hereasunder:- "Section 145 of the Income Tax Act, 1961 confers sufficient power upon the officer-nay it imposes a duty upon him-to make such computation in such manner as he determines for deducing....
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....nt case, the AO found sufficient materials and changes in the year under consideration, as he after examining the relevant clauses of agreements formed an opinion that the property was taken on lease for giving it on rent to GAIL. Further, Section 2(13) defines business, which includes any trade, commerce or manufacture or adventure or concerned in the nature of trade, commerce or manufacture. In the present case no business activity was being carried out by the assessee as business is a continuous and systematic activity carried on with a view to earn profit. 24. Further, the records of the assessee revealed that only one person was employed, which cannot go on to establish the fact that any business activity was being carried out by the appellant, and the premises was only let out to GAIL pursuant to the agreement and was thus rightly assessed by the Assessing Officer under the heading 'income from house property and income from other sources'. 25. Now adverting to the second question, whether the assessing authority was justified in treating the receipt of the appellant-assessee as income from house property and income from other sources other than income from business....
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....Trust Ltd. v. Commissioner of Income-tax where it was observed that "the income derived by the company from shops and stalls is income received from property and falls under the specific head described in Section 9. The character of that income is not altered because it is received by a company formed with the object of developing and setting up markets." Now the cases on which learned counsel for the appellant specially relied were cases of the letting out of plant and machinery, in some instances along with the factory buildings in which they had been housed. In all of them, except one, which we will presently mention, the assessee had previously been operating the factory or mill as a business and had only temporarily let it out as it was not convenient for him at the time to carry on the business of running the mill or factory. In these circumstances, it was held that by letting out the plant, machinery and building the assessee was still conducting a business though not the business of running the mill or factory. Learned counsel for the appellant also relied on certain clauses in the lease and a clause in the memorandum of the appellant company to show that the lease amou....
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....me from business carried on by it, has been the subject-matter of consideration by this Court as well as by various High Courts and it would be useful to refer to the judgments of this Court bearing on the issue. In Commissioner of Excess Profits Tax v.. Shri Lakshmi Silk Mills Limited [1951] 20 ITR 451 (SC), the assessee-company was carrying on the business of manufacturing silk cloth and dyeing silk yarn. Due to lack of supply of silk yarn during the relevant period while keeping idle other plant and machinery, it let out dyeing plant for five months. The question which came up for consideration before this Court was whether the rent received from letting out the dyeing plant would fall under the head "Income from business" or "Income from other sources". If it was "Income from business", it would have been chargeable to excess profits tax; if not, the liability would not arise. Mahajan,J., speaking for the Court, observed that no general principle could be laid down which was applicable to all cases and each case had to be decided on its own circumstances. It was held that it was part of the normal activities of the assessee's business to earn money by making use of its mach....
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....ich only a part was under its occupation and the rest was let out to tenants. The question was whether the rent received from the tenants of the building was the business income of the company. The majority opinion was that realisation of rental income of the assessee was in the course of its business being in prosecution of one of its objects in its memorandum and was liable to be included in its business profits and was assessable to excess profits tax. That conclusion was reached on the premise that the term `business' as defined in that Act was wider than the definition of that term under the Income Tax Act. The minority, however, took a contrary view. In Sultan Brothers Private Ltd. vs. CIT, [1964] 51 ITR 353 (SC), the assessee constructed a building, fitted it up with furniture and fixtures and let it out on lease fully equipped and furnished for the purpose of running a hotel. The lease amount provided separately for running of the building and hire charges for furniture and fixtures. The question that fell for consideration was whether the rent income was business income taxable under the Income Tax Act, 1922? It was held that as the assessee never carried on any busi....
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....e High Court. The question which fell for determination was whether the rental income was assessable in the relevant assessment years as business income? The findings of the Tribunal were that on account of financial crisis, the company found it advantageous to let out the machinery on hire for a temporary period and the company was able to liquidate its liability at the end of the lease period and regained possession of its assets; the company did not sell or otherwise dispose of its assets; there was nothing on record to show that the company was formed to let out plant and machinery on hire. The Tribunal came to the conclusion that the maintenance of the assets meant that the Company had an intention to re-start the business and that the intention of the Company in letting out its assets was to exploit the commercial assets for the purpose of its business and therefore the rental income was assessable as business income. On reference, that conclusion was upheld by the High Court. On appeal to this Court, while affirming the decision of the High Court, it was noted that all relevant facts were correctly considered from the standpoint of an ordinary prudent businessman by the Trib....
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....pletely out in the cold". The High Court recorded the following findings (page 11): "Therefore, it can very well be presumed that at the time the licence agreement was entered into, the intention of the ultimate outright sell out was already there. The assessee was already committed to the licensee for such a sell-out at licensee's pleasure and there is no means of the assessee falling back from that commitment. Therefore, it can very reasonably be inferred that the assessee in the case decided to go out of business as far as this particular factory was concerned.. The lease agreement is in fact a veiled agreement for lease-cum-sale....We are of the opinion that the licensing is not meant to be a temporary stop gap exploitation of commercial assets. It could not be in the contemplation of the assessee at the time it entered into the licence agreement, to retain the assets any more as a commercial asset." 28. Thus, after having a close glance of the law laid down by the Apex Court in relation to the receipts at hands of assessee from letting out of any property pursuant to an agreement, whether amount to income from business or income from house property and income from oth....
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...., Loka Shikshana Trust vs. Commissioner of Income Tax [1975] 101 ITR 234. 31. As in case of hiring out of a property along with other articles, rights asserts etc. question which arises is whether the income derived is from house property, business or other sources. This was exclusively dealt by Bombay High Court in case of CIT vs. National Storage Pvt. Ltd. [1963] 48 ITR 577 (Bom.). This case was confirmed in 1967, 66 ITR 596 (SC). 32. For the purpose of income to be revenue in nature it must arise from the various sources as envisaged under the Act. One of such sources is business income, but to be a business income, volume, frequency, continuity, regularity and the intention of the assessee to carry on has to be seen, and where business itself has not come into existence, it cannot be considered to be a business income and therefore, cannot be a revenue receipt, as in the present case the agreement executed between the assessee and the GAIL was for leasing out the premises, secondly for furnishing of the area leased out and thirdly for maintaining the leased out area. 33. Only one staff was kept for the said purpose by the assessee, meaning thereby that no business activity ....