TMI Blog1997 (11) TMI 144X X X X Extracts X X X X X X X X Extracts X X X X ..... , was shown by the assessee at Rs. 28,10,344. In addition, the building constructed was also furnished with a view to carry on the business of sarees and ready-made garments, etc. The cost of furniture and fixtures, electrical installations and air-conditioning plant worked out to Rs. 17,34,230. Thus, the total cost of construction including the furniture, fixtures, etc., worked out to Rs. 45,44,594. 3. The assessee-company is a partner in M/s Kasat Creations having 40% shares of profit. The assessee-company rented out the shop premises to M/s Kasat Creations on a monthly rent of Rs. 40,000 including furniture and fixtures. Since the assessee-company had rented out the shopping premises to the firm, no capital was contributed by the company as partner A the registered firm. 4. The issue regarding the cost of construction was closely scrutinised by the Assessing Officer. He was not satisfied with the cost of construction as shown by the assessee-company. He was also not satisfied with the registered valuer's report according to which the cost of construction came to Rs. 27,97,000. Since the Assessing Officer was harbouring some doubts about the cost of construction, he made a re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... said Valuation Officer has taken the value of the construction as on 12-10-1995. The Valuation Officer therefore apparently erred in adopting the construction cost as on 12-10-1995 whereas factually the building was completed in 1992. Even the interior decoration work and other utilities were completed in the year 1992 and in fact the shop commenced its business activity in August, 1992. There was, therefore, no reason for the Valuation Officer to adopt the cost of construction as on 12-10-1995 for Income-tax purposes. 8. The learned counsel has also drawn our attention to the cost inflation index. He pointed out that as on 31-3-1992 the cost inflation index was 199. As on 31-3-1995 the said cost inflation index was 259. Thus, there was an inflation of about 60 points over and above the basic point of 199 which was prevailing as on 31-3-1992. In other words, there is an increase of 30%. in case the valuation at Rs. 27,97,000 shown by the assessee is increased by 30%, then the incremental value would be Rs. 8,39,000 and the total cost on the said basis as on 31-3-1995 would work out to Rs. 3 6,36,000 as against the cost of construction valued by the Valuation Officer at Rs. 33,14 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed the materials, etc. No deduction has also been allowed by the Assessing Officer on this count. The assessee had also pleaded before him that the total construction was 975 sq. mt. whereas the departmental valuer had arrived at cost of construction of 1158 sq. mt. Instead of dealing with the objections raised by the assessee, the Assessing Officer merely dismissed the same by observing: "The reasons given by the assessee thereby disputing the valuation made by the departmental valuer is not acceptable. He has not given the details regarding the purchase of material made along with the bills and moreover, the Valuation Officer has considered all the aspects and he has also discussed it in his report before valuing the said property. In the circumstances, I adopt the value as determined by the departmental valuer." Thus, it is clear that the Assessing Officer has mechanically accepted the report of the Valuation Officer without rebutting the serious and genuine issues raised by the assessee against the said valuation report. 12. Since the departmental valuer has valued the property as on 12-10-1995 the cost inflation index has to be taken into account while arriving at the co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aper book in which the main objects of the company are mentioned. Clause (1) of the main objects mentions that the company was authorised to carry on the business of textile traders and to deal in all varieties of textiles, ready-made garments, suiting, shirting, sarees and all variety of clothing whether in the form of clothing or in the form of ready-made garments and to sell, purchase, trade, import, export and to deal with all varieties of textiles and to establish wholesale, retail outlets of such trading in textiles and to deal in all such varieties of textiles, garments and to act as an intending agent, commission agent, delcreder agent, stockist, wholesaler, retailer, in all varieties of textile business. The object clause, according to the learned counsel, will fully demonstrate that the rental income from the shopping is a business income. The assessee-company is a 40% partner in the firm to which the premises have been rented out. The assessee, as one of the partners, is therefore utilising his commercial assets with the object of making profit and as such the income arising from such utilisation of the capital asset was business income. The learned counsel also drew our ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... premises was the business income of the assessee. 17. The learned counsel has also made the alternate submission. He has urged that the furniture and fixtures, etc., are inseparable from the building and, therefore, the entire rent should be assessed as income from other sources and depreciation as per law should be allowed. In this regard, the learned counsel has dealt with at length on the decision of the Bombay High Court in the case of CIT v. D.L. Kanl ere [1973] 92 ITR 535. He pointed out that when a building along with plant, machinery and furniture are inseparably let, income from such letting out should be assessed as income from other sources. According to the learned counsel, the issue is squarely covered by the aforesaid decision of the Mumbai High Court. 18. The learned counsel has also dealt at length regarding the scope of section 158B. He pointed out that such an addition is not contemplated as per the provisions of section 158BA(3). Thus, according to the learned counsel, both the additions are beyond the scope of section 158B. On this ground alone, the learned counsel urged, the assessee is entitled to the full relief. 19. The learned senior departmental rep ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es which are attached to the shopping premises. The sizeable expenditure of Rs. 17,34,230 was incurred by the assessee-company for such furniture, etc. We find from the facts that the furniture inside the shop consists of wallbuilt racks for storing of sarees, counters and show cases, cabins, etc. All these items of furniture are inseparably attached to the shop premises and therefore, in our view, the building and furniture, etc., are inseparably let out. In such a situation, income from such a rental can neither be assessed as business income nor under the head 'Income from property'. Whether a particular letting is business has to be decided in the circumstances of each case. In our view, each case has to be looked at from a businessman's point of view to find out whether the letting was doing of a business or exploitation of his property by an owner. A thing is not by its very nature a commercial asset. A commercial asset is only an asset used in a business and nothing else, and business may be carried on with practically all things. Therefore, it is not possible to say that a particular activity is business because it is concerned with an asset with which trade is commonly car ..... X X X X Extracts X X X X X X X X Extracts X X X X
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