TMI Blog2014 (1) TMI 1413X X X X Extracts X X X X X X X X Extracts X X X X ..... owed - The rental income has to be treated as income from house property - The depreciation shall be allowed only when the assessee starts using the property for its business purposes - Decided against assessee. - ITA No. 3720/Mum/2009 & ITA No.2965/Mum/2010 - - - Dated:- 30-11-2011 - D.K. Agarwal And B. Ramakotaiah, JJ. For the Appellant : Shri Rajan R Vora For the Respondent : Shri D.S.Sunder Singh, DR ORDER:- PER BENCH : These are appeals by the assessee for the Assessment Years 2005-06 and 2006-07 against the orders of the CIT (A)XXXII Mumbai dated 19.03.2009 and 28.07.2009. The issue in these appeals is whether the income earned by the assessee by way of rents on leasing the property to be assessed as income from house property or income from business. The appeal for Assessment Year 2005-06 was filed belatedly by 10 days. After considering the affidavit and submission, the delay in filing the appeal is condoned. 2. Briefly stated, the assessee received rental income of ₹ 3.2 crores and claimed inter alia depreciation of ₹ 2.15 crores and ₹ 1.93 crores in the P L account. The Assessing Officer noticed that the assessee acquired commerci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been made quite clear. In that case, the assessee was the owner of the building and was only exploiting the property as owner by leasing out the same and realizing income by way of rent. Both the cases are quite evidently applicable to the facts of the case of the appellant. Hence, the nature of income under consideration would be nothing but Income from House Property . 5.9. The other case laws supporting the above prepositions are as under: (a) East India Housing and Land Development Trust Ltd. vs. CIT (42 ITR 49) (SC) (b) National Storage Pvt. Ltd. (66 ITR 596)(Bom.) (c) Universal Plast Ltd vs. CIT, 237 ITR 454 (SC) (d) Karanpura Development Company Ltd vs. CIT 44 ITR 362 (SC) (e) Karnani Properties Ltd vs. CIT, West Bengal, 82 ITR 47 (SC) (f) CIT vs. New India Industries Ltd., 201 ITR 208 (Guj.) 5.10. In view of the above detailed discussion I am of the opinion that income derived by the appellant from letting of its property at Andheri is in the nature of income from house property because the appellant has not derived his income through any commercial complex operations. The income derived ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... operty cannot be the sole factor for assessment of such income as income from property, what has to be seen is what was the primary object of the assessee while exploiting the property. If it is found applying such test that the main intention is for letting out the property or any portion thereof the same must be considered as rental income or income from property. In case it is found that the main intention is to exploit the immovable property by way of complex commercial activities in that event it must be held as business income . 4.2 The Supreme Court in the case of Universal Plast Limited (237 ITR 455), considering several decisions on the issue has laid down certain propositions in Para-12 which are reproduced as under: In the light of the above discussion, the propositions may be summarized as follows: (a) No precise test can be laid down to ascertain whether income (referred to by whatever nomenclature, lease amount, rents, license fee) received by an assessee from leasing or letting out of assets would fall under the head Profits and Gains of Business or Profession . (b) It is mixed question of law and fact and has to be determined from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... porary period till the time the same property can be put to use in its own business. 4.7 Reliance was placed on the decision of Supreme Court in the case of Vikram Cotton Mills Ltd (169 ITR 597), wherein the court has held that where the assessee leases its assets and the intention is to lease out the assets for a temporary period as a part of their exploitation, the lease rent derived from letting out the assets is assessable as business income. 4.8 Also in the case of Kohinoor Tobacco Products Ltd (283 ITR 162 (MP), the assessee had let out some of its godowns which were not immediately required by it due to reduction in bidi manufacturing business on account of labor problems. The High Court held that income from temporary letting of business premises to generate income with a view to keep them in good usable condition so that they can be exploited for the regular bidi manufacturing business of the assessee was assessable as business income and not as income from house property. 4.9 In the case of Sewari Chemicals (P) Ltd (1 SOT 549 Mum), the assessee let out its factory premises along with plant machinery for a short period of three years on leave and license basis duri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ers to another leave and license agreement dated 21.07.2003 and 08.09.2003. This indicates that the assessee has entered into leave and license agreement with the licensee for a longer period. Present agreement placed on record does indicate that the licensee was required to pay any revision of municipal tax even for an earlier period i.e. w.e.f. 21.07.2002. This agreement was upto 31.01.2009. This indicates that for a period of 7 years or more, the property was on leave and license basis. Hence it cannot be said that the property was given on temporary basis. As seen from the order of the concerned decree between the parties vide the order dated 3rd day of December, 2002, the assessee admitted to vacate the Nariman Point office by March 2010 only. The date of lease from 21.07.02 also indicate that property was leased prior to the date of decree ( 03-12- 02), so the reasons stated by assessee for non-occupation for own use is not employees resistance as submitted. Not only that, agreement do indicate that the assessee was not involved in day to day management or maintenance of the premises and except giving the property on leave and license basis, there are no complex commercial ..... X X X X Extracts X X X X X X X X Extracts X X X X
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