TaxTMI 
TaxTMI 
TaxTMI 
2020 (7) TMI 216
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....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. 3.1 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 apart from above, all expenses incurred for operating the plant were reimbursed by Apollo. It has been stated that after the expiry of 8 years the aforesaid arrangement had been renewed under various agreements, as stated here in under....
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....Tax (Appeals) is also erred in not appreciating the fact that the Revenue did not accept the findings of the Tribunal for assessment years 2011-12 to 2013-14 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. It is prayed that the orders of the learned Commissioner of Income Tax (Appeals) be reversed and that of the Assessing Officer restored. 7. For these and other grounds that may be urged at the time of hearing, it is requested that the order of the Commissioner of Income Tax(Appeals) may be set aside and that of the Assessing Officer restored." 6. The learned Departmental Representative relied on the grounds raised. The learned AR submitted that the issue in question is squarely covered by the order of the Tribunal in assessee's own case for assessment years 2012-2013 to 2013- 2014 (supra). 7. We have heard the rival submissions and perused the m....
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....quired share in PTL. Coming to the investment of Rs. 70 crores in the plant 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 fi....
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....e considering the claim of the assessee 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....
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....ial 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 been held as under: "The ld. DR poi....
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....y 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 the appellant under the arrangement had been provided in clause 6 of the agreement which stipulates as under: "6 In addition to payment of lease rental as aforesaid, ATL will reimburse to PTL actual expense....
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....tal(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 evident that, Assessing Officer has allowed expenditure under the heads bad debts, advertisements, salaries, etc. incurred in the course of business of the appellant company. However, the Assessing Officer in the preceding year namely assessment year 2009-10, has allowed only expenditure incurred under the head depreciation of Rs. 9,05,673/-, rates and taxes of Rs. 7,37,564/-, insurance of Rs. 9,31,398/- and rent paid of Rs. 7,06,750/- u/s. 57(iii) of the Act. Thus, Assessing Officer himself has made a depa....
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....iven 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 Association and therefore, the income earned by the assessee should be treated as income earned from House Property. He, therefore, submitted that the impugned judgment is just legal and proper and therefore, these appeals should be dismissed. 9. Upon hearing the learned counsel and going through the judgments cited by the ld. Counsel, we are of the view that the law laid down by this Court in the case of Chennai Properties (supra) shows the correct position of law and looking at the facts of the case in question, the case on hand is squarely covered by the said ....
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....ion 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 company whether or not having objects altogether or in part similar to those of the company." 8.20 Thus even as per the judgment of Apex Court in the case of Rayala Corporation (P) Ltd. (supra) and Chennai Properties and Investments Ltd. (supra) which are subsequent to the decisions of Tribunal holding income to be income from other sources, the income from arrangement with Apollo is business income. 8.21 Moreover it is also seen that the Assessing Officer has invoked section 56(2)(ii) of the Act and not section 22 of the Act which reads as under: "56(2) In particular, and without prejudice to the generality of th....
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....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 out be in a condition to be used as a commercial asset by the assessee himself was not correct." 8.24 Following the above, in the above case of Cit v. Vikram Cotton Mills :td. 169 ITR 597 (SC) it was held that when the intention was not to part with the assets, but to lease it out for a temporary period as a part of exploitation, it could not be said that no business was carried on and the income derived by the Company from letting out the machinery was only rental income. There was never any act indicating that the company never intended to carry on the business in the future. Also in the case of CIT v. Mysore Wine Products Ltd. 370 ITR 102 (Kar), it was concluded as under: ....
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....t 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 order passedpassed for the next year. In that case, the court may ultimately adopt the same view which had been adopted on the earlier occasion; but if a new ground is urged, the court may have to consider it on merits, because, strictly speaking the principle of res judicata may not apply to such a case. That in fact, is the effect of the decision of this court in the Amalgamated Coalfields Ltd. and Anr. V. the Janapada Sabha, Chhindwara (1963) supp. 1 SCR 172. In our opinion, the said general observations must be read in the light of the import fact that the order which was challenged in the second writ petition was in relation to a different period and not for the same period as was covered by the earlier petition." But a....
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....7-08. 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 history of the appellant and applying to the principle of consistency. The Hon'ble Court following the judgment of Chennai Properties and Investments Ltd. (supra) and the fact that Memorandum of Association of appellant was not considered held that income is taxable as business income. It was held therein as under: "15. There is another aspect of the matter. Though the appellant had relied on the Memorandum in support of its contention that it was carrying out business by letting out the property, however, neither the Assessing Officer nor the Tribunal, which had recorded the submission of the appellant in paragraph 2 of its order had considered the issue at all from that angle. Since the CIT(A) while allowing the appeal of the appellant had referred to the Memorandum....