TMI Blog2002 (1) TMI 270X X X X Extracts X X X X X X X X Extracts X X X X ..... ) (b) of the Income-tax Act as the income derived by the assessee cannot be said to be from any business carried on by the assessee. 5. The CIT(A) ought not to have allowed different appeals viz, the head of income and the status in the same appeal as the order passed by the Assessing Officer under section 185(1)(b) is an independent proceeding against which a separate appeal ought to have been filed. 6. ............... By its cross-objections in the appeal of the Revenue, the assessee merely supported the order of the CIT(A), and countered the above grounds of the Revenue. 3. The appellant-firm came into existence by a deed dated 1-4-1991. Clause 3 of the partnership deed, relating to the business of the assessee-firm, reads as under "3. The partnership shall be of constructing and letting out or leasing out temporary or permanent buildings, godowns or vacant spaces on daily or monthly basis, and to undertake transport operations and Agricultural farming and any other line of trade or business with the consent of the partners in future." The assessee-firm consists of three partners. The three partners of the assessee-firm were carrying on the same business with effect fr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ead "Income from business". Further as there is no activity of business the status of the assessee firm is to be treated as U.R.F. It is also to be pointed out that the Assessing Officer has failed to consider the assessee's application under sections 11 and 11A stated to have been filed on 30-3-1992. In the circumstances stated above, the order under section 143(3), dated 4-6-1993 for the assessment year 1992-93 is erroneous on facts and circumstances of the case and prejudicial to the interests of the revenue. The said assessment is therefore set aside with a direction to redo the same after giving necessary opportunity of being heard to the assessee. The Assessing Officer should also determine the status accordingly." 6. Pursuant to the above order of the CIT, the Assessing Officer passed an order under section 143(3), dated 8-1-1997 and another order dated 9-1-1997 under section 185(l)(b). By the former order, the Assessing Officer has computed the rental income of the assessee under the head 'property' as per the directions of the Commissioner in his order under section 263, and thus, restricted the allowance of deductions to those admissible under the head 'property'. He co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ified context was valid. For this proposition, he relied upon the following decisions- (1) CIT v. Rupa Traders [1979] 118 ITR 412 (Cal.) (2) CIT v. Hansa Agencies [1980] 121 ITR 147 (Bom.) (3) Patel Co. v. CIT [1986] 161 ITR 568 (Guj.) (4) Ansari Jewellers v. CIT [1987] 167 ITR 380(Raj.) (5) CIT v. K.H. Pandeya [1993] 202 ITR 705 (Pat.). On the merits of the case, the CIT(A) took the view that the rental income of the assessee should be assessed under the head 'business'. For this proposition, he relied upon clause (3) of the partnership deed dated 1-4-1994, which we have extracted hereinabove. According to him, the assessee's business itself was to commercially exploit the properties. He was of the view that the facts of the case before him are similar to those considered by the Apex Court in the case of S.G. Mercantile Corpn. (P.) Ltd. v. CIT [1972] 83 ITR 700. The CIT(A) also directed the Assessing Officer to grant registration to the assessee, as according to him, the rental income is assessable as business income. 8. Before me, the learned Departmental Representative reiterated the contentions made out in the grounds taken by the Revenue in this appeal. 9. As ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this context, he filed before us written submissions, which are identical to the grounds taken in the cross-objections, wherein reliance was placed on the decisions of the Apex Court in the case of S.G. Mercantile Corpn. (P.) Ltd.; and of the Madhya Pradesh High Court in the case of CIT v. Laxmi Rice Mills [1987] 164 ITR 571; and of the Hon'ble A.P. High Court in the case of CIT v. A.P Small Scale Industrial Development Corpn. [1989] 175 ITR 352. 12. in reply, the learned Departmental Representative countered by stating that the rental income of the assessee was Assessable under the head 'property' in the light of the decision of the Hon'ble Bombay High Court in the case of Parekh Traders v. CIT [1984] 150 ITR 310 and the decision of the Hon'ble A.P. High Court in the case of Guntur Merchants Cotton Press Co. Ltd. 13. The learned counsel for the assessee sought to distinguish the above cases relied upon by the learned Departmental Representative by stating that the land on which the assessee put up the construction, were taken on lease in 1982 only for a short-term of five years, even though the said lease had been renewed from time to time. 14. I am of the view that the cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e while the ownership of the site remained in the lessor, and the structures put up on the land were not seasoned structures but could be let out at least for five to six years, then the lease would still be assessed in respect of the income from such structures under section 9 of the Indian Income-tax Act, 1922 (corresponding to section 22 of the Income tax Act, 1961), as an income from property; Tinsukia Development Corpn. Ltd v. CIT (Appx.) applied." I am of the view that the assessee in the present case, is clearly the owner of the constructions put up on the lease-hold lands, and as such the rental income is assessable under the head 'property'. 15. The learned counsel for the assessee sought to argue that along with the lease of the construction, an air-conditioner was also let out and the agreement in respect of the lease of the building and the air-conditioner is a composite one, and the lease income in respect of these two properties cannot be separated. So, he tried to argue that the assessee has rendered some air-conditioning services, and so, the income is assessable under the head 'business'. The air-conditioner is reflected at an amount of Rs. 17,100 in the Balanc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Income-tax Act. The relevant comments of the Hon'ble High Court in the said decision, as per the head-note arc as under: "The classification of various heads of income under the Income-tax Act is only for the purpose of convenience of administration of the Act and the concept of 'business' as envisaged under the Income-tax Act cannot be imported into the determination of the question as to whether a group of individuals, by agreement, carry on business as a firm. While as a result of section 2(23) of the Income-tax Act, the concept of the Partnership Act has been imported into the Income-tax Act, there is no provision in the Partnership Act which imports into it the concept of the Income-tax law. Accordingly, because of the classification of income under several heads under the Income-tax Act, it cannot be stated that whatever is classified under the head 'Business' under the Income-tax Act alone could constitute business in the sense of the Partnership Act. Whatever may be the head of assessment under the Income-tax Act, so long as what was carried on by the firm could be classified as business in the sense of the Partnership Act, the firm could be entitled to registration if ..... X X X X Extracts X X X X X X X X Extracts X X X X
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