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TMI Blog2010 (5) TMI 506X X X X Extracts X X X X X X X X Extracts X X X X ..... ess'. 4. Facts in short are that the assessee-company is engaged in the business of running Hyundai Authorized Service Station in which its main activity is of repairs and service of vehicles and sale of accessories, spares and related automobile services. The assessee-company is also having a showroom where they are having multi mall for sale of cars of different brands under one roof. Case of the assessee is that the Directors having gone out of country to temporarily lookafter their petrol pumps inUSA, business operations inIndia were temporarily suspended. Business premises was let out to M/s. Sai Service Station Ltd. and M/s. Sai Automobile Sales & Services Pvt. Ltd. and as per the agreements entered into on 24-6-2002 royalty was payable to the assessee-company @ Rs.1,70,000/- per month from each of the above two companies and the period of agreement was 3 years from 24-6-2002. Under the said agreement assessee had given its premises along with infrastructure located at Goregaon (West) to the aforementioned two companies permitting them to conduct business in the said premises along with infrastructure available therein. 5. These agreements are referred to as 'business condu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... year 2003-2004. Therefore, assessee is in appeal before us. 8. At the time of hearing, learned Counsel submitted that in respect of assessment year 2003-2004 Order of the Assessing Officer as well as CIT(A) was reversed by the ITAT, 'C' Bench, Mumbai (ITA. No. 4794/Mum/2006 dated28th November, 2008) and the Hon'ble jurisdictional High Court having dismissed the appeal filed by the Revenue against the Order of the Tribunal, it had reached finality. Therefore, atleast for the first three years it has to be treated as 'income from business'. Since appeal was taken-up for hearing by the ITAT in the year 2010, against the Order of the CIT(A) dated 18-9-2008, learned Counsel was called upon to explain the present state of affairs to appreciate as to whether the intention of the assessee was to revive the business or to merely let out the assets along with its licenses etc., In response thereto, learned Counsel submitted that though the initial agreement was for three years it was later revived for some more years but quickly added that in order to consider as to whether intention of the assessee was to revive the business or not, one has to take into account the circumstances that were ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rom the lessor and to remove them on the termination of the lease. The lessee was entitled to use the railway siding during the period of lease. The lessee was also responsible for all the running expenses of the sugar cane crushing and gur refining factory. Cumulative effect of various clauses of the deed was taken into consideration to come to the conclusion that the assessee therein is not concerned with the production of the factory and the intention of the assessee was to go out of the business altogether and thus lease income could not be assessed as "income from business" but as "income from other sources". These decisions were applied by the Hon'ble Bombay High Court in the case of Damodar Mangalji & Co. Pvt. Ltd. v. CIT (1994) 206 ITR 524. In the aforementioned cases the assessee-company was engaged in the business of mining, hiring of barges etc., Since assessee could not make much profit in the business he decided to change the mode of operation of the business of the barges by giving the barges on hire without crew and staff. Considering the circumstances of the case the Hon'ble High Court observed that the intention of the assessee was to part with the barges and the w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as also contended that the intention as to whether assessee has to revive its business or not, can be decided only by referring to various clauses of agreement. In the instant case, the agreement was for a period of three years only. Having regard to the facts placed before the Tribunal, the ITAT 'C' Bench, Mumbai observed that intention of the assessee was never to close down its business which can be gathered from the fact that it ensured thorough control over the business by retaining the licenses etc., in its name. Further, the duration of the agreement being only for three years, it was inferred that the intention of the assessee was not to close down its business. On an appeal filed by the Revenue, under section 260A of the I.T, Act/1961 the Hon'ble High Court of Judicature atBombay, (Income Tax Appeal No. 2342/2009 dated5th January, 2010) rejected the admission of the appeal on the ground that no substantial question of law arises and in this regard observed as under : "The Tribunal arrived at a finding of fact, after considering the terms of the agreement entered into between the assessee and the third party that the assessee had effectively kept control of the business to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs. 5,00,000/- within 3 days of filing these consent terms. (b) The defendant pays to the plaintiff a sum of Rs. 1.70.000/- (Rs. One lakh seventy thousand only) per month up to 30th June, 2005. a sum of Rs. 1995,000/- (Rs. One lakh ninety five thousand only) per month from 1st July, 2005 to 30th June, 2008 and a sum of Rs. 2,24,825/- (Rs. Two lakh twenty four thousand eight hundred and twenty five only) per month from 1st July 2008 to 30th June, 2011. It is clearly agreed that in the event of the defendant committing any two defaults in payment of the amounts the plaintiff shall have a right to adjust such payments out of the amount of security deposit and return the balance unadjusted Security Deposit, execute the decree passed in pursuance of these consent terms, provided that one month's notice is given by the plaintiff to the defendant after the default. (c) Pay the electricity bills, water bills, telephone bills, taxes, license fees and all other amounts that the defendant is liable to pay under the said Business Conducting Agreement (d) Abide by the terms, conditions and undertakings given hereunder. ** ** ** (6) In the event of Defendants wishing to ter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... agreement was only for three years whereas impliedly the assessee intended to discontinue carrying on business on its own and hence agreed on the consent terms so as to permit the parties to run the business for 9 long years with some conditions which may enable the parties (Conductors) to run the business even thereafter. The Order of the Hon'ble Bombay High Court in the case of CIT v. Mohiddin Hotels Pvt. Ltd. 284 ITR 229 was relied upon by ITAT, 'C' Bench, Mumbai wherein the narrow issue was as to whether it was property income or business income. It was not the plea of the Revenue that it is income from other sources. Since the Hon'ble Court was of the opinion that it was certainly not the property income, alternative contention of the assessee that it was business income was accepted. However, in this case overall circumstances lend support to the plea of the Revenue that the assessee-company handedover the business to the aforementioned two concerns with a view to earn fixed monthly income and the intention of reviving the business is not dominant. In fact assessee entered into tenancy agreement on the last date of the year 1999 (31-12-1999) which implies that the business, i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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