TMI Blog2010 (5) TMI 506X X X X Extracts X X X X X X X X Extracts X X X X ..... lowed - 6956/MUM/2008 - - - Dated:- 31-5-2010 - D. MANMOHAN, VICE PRESIDENT J, AND J. SUDHAKAR REDDY, ACCOUNTANT MEMBER J, Jitendra Sanghavi for the Appellant. Peeyush Jain for the Respondent. ORDER PER D. Manmohan, V.P. 1. This appeal, filed at the instance of the assessee-company, is directed against the Order dated18-9-2008 passed by the CIT(A)-IX, Mumbai and it pertains to the assessment year 2004-2005. 2. At the time of hearing, learned Counsel, appearing on behalf of the assessee submitted that though several grounds were urged before the Tribunal, assessee is not interested in pressing ground Nos. 1 and 4 and ground No. 7 is general in nature. We therefore, reject the aforementioned grounds and proceed to dispose of the other grounds in seriatim. 3. Vide ground No.2, assessee contends that the learned CIT(A) erred in confirming the assessment of conduction royalty amount of Rs.40,80,000/- and other income of Rs. 1,63,310/- as income from other sources . It was contended that it has to be considered under the head profits and gains from business . 4. Facts in short are that the assessee-company is engaged in the business of running ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e given the right to terminate the agreement by giving three months notice. There is also no clause permitting them to purchase the assets and facilities. It was therefore, contended that the income by way of conduction is assessable as business income. 6. Agreement having been entered into on 24-6-2002, Assessment year 2003-2004 was the first year in which income from the exploitation of the aforementioned commercial assets was offered to tax under the head business income whereas the Assessing Officer sought to tax the same as income from other sources . Learned CIT(A) has also upheld the order of the Assessing Officer for the assessment year 2003-2004. 7. For the same reasons, the Assessing Officer, for the year under consideration, observed that it was a case of letting out commercial assets without any intention to carry on the business or to revive the business and hence it is assessable to tax under the head income from other sources . On an appeal filed by the assessee, learned CIT(A) affirmed the Order of the Assessing Officer by referring to his predecessor s order for the assessment year 2003-2004. Therefore, assessee is in appeal before us. 8. At the time ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ting an outsider to carry on the business activities on their own with an agreement to pay a fixed monthly consideration, by whatever name called, has to be considered as income from house property/business income/income from other sources has to be decided on the well established principles laid down by the Apex Court from time to time. In the case of Shri Laxmi Silk Mills Ltd. 20 ITR 451 Apex Court observed that and general principle could be laid down which would be applicable to all cases and that each case must be decided on its own circumstances according to the ordinary commonsense principles . Similarly in the case of New Savan Sugar and Gur Refining Co. Ltd. v. CIT Calcutta (1969) 74 ITR 7 the Hon ble Court was concerned with a case of leasing out the company as a running concern for a period of 5 years with three options to renew by similar periods with an option to the assessee-company to terminate it in any year after the first two years. The lease provided that the existing machinery could not be removed by the lessee and the lessee would be entitled to set up additional machinery without interference from the lessor and to remove them on the termination of the l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 666/- each. Monthly royalty of Rs. l,70,000/- each is payable on or before 7th day of each and every succeeding month thereafter. Clauses in both the agreements are identical. Conductor is entitled to employ the present employees AUTOMAN or dispense with their services and to employ new employees . Conductor has to pay salary, wages and other statutory dues to the staff employed by them including payment of terminal benefits as and when the same becomes due. Conductors are also entitled to obtain registration certificates in respect of ESIC, Professional Tax etc., But such certificates should specify that conductor is conducting the business of Automan . 12. This agreement was placed before the ITAT, C Bench, Mumbai while prosecuting the appeal for the assessment year 2003-2004 and it was mainly highlighted that assessee was under an obligation to retain the tenancy agreement and to pay rent to the landlord apart from bearing a portion of electricity and water bill. It was also submitted that all the licenses were in assessee s name and since Directors were going abroad, business was given for a temporary period on rent. It was also contended that the intention as to whet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entered into consent terms because of which suits and notices of motion were, disposed of by the Hon ble Bombay High Court on 10-10-2002 whereby defendants admitted to have committed breaches of conducting agreement and security deposit agreement and agreed to handover the charge of the suit premises to the assessee though however it was ultimately agreed between the parties and accordingly ordered by the Hon ble Court that subject to accepting some modified terms of payment M/s. Sai Service Station Ltd. and M/s. Sai Automobile Sales Services Pvt. Ltd. shall be allowed to continue to carry on the business upto 30th June, 2011. Since consent terms are common in both the cases, following consent terms are extracted for immediate reference so as to appreciate as to whether facts were identical in this year or not: (4) At the request of the Defendants, and as and by way of concession, it is agreed between the parties and accordingly ordered by this Hon ble Court that on the defendants strictly observing the following terms and conditions, the decree be stayed upto 30th June. 2011, (a) The defendant will pay to the plaintiff a sum of Rs. 5,00,000/- within 3 days of filing th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thereon at the rate of 12% per annum from the date of default in refunding the security deposit till the date of the actual payment 14. To our mind, these facts were not brought to the notice of ITAT C Bench, Mumbai as well as Hon ble High Court of Judicature at Bombay while pleading the case of the assessee for the assessment year 2003-2004 and hence, the Tribunal as well as the Hon ble High Court has laid great stress on the fact that the agreement was only for 3 years. 15. During the course of hearing, the Bench called upon the Counsel to state the present state of affairs to which it was submitted that the Directors of Automan India Pvt. Ltd, are non-residents and they are in fact running some petrol pumps in USA and though they visit India regularly, till date business is run by M/s. Sai Service Station Ltd. and M/s. Sai Automobile Sales Services Pvt. Ltd. 16. It may be noticed that in respect of the assessment year 2003-2004 previous year ends on 31-3-2003 but surprisingly facts concerning the consent terms dated 10-10-2002 were not brought to the notice of ITAT, C Bench as well as the Hon ble High Court and hence, decision was rendered on the premise that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... w relied upon by the assessee have no application to the facts of the case whereas on the strength of settled principles of law on this issue it has to be held that the income earned by the assessee is assessable to tax under the head income from other sources and not as business income . We therefore, uphold the Order of the learned CIT(A) on this issue. 17. This leaves us with ground Nos. 5 and 6. The case of the assessee is that the learned CIT(A) erred in confirming the assessment on receipt of loan of Rs. 11,10,000/- as deemed dividend under section 2 (22) (e) of the Act. Learned Counsel submitted that an identical issue was decided in favour of tax payer by the Hon ble Bombay High Court in the case of Universal Medicare Private Ltd. (Income Tax Appeal No. 2264/2009 dated 22th March, 2010) as well as the decision of the ITAT, Mumbai, Special Bench in the case of ACIT v. Bhaumik Colour P. Ltd. (2009) 313 ITR 146. 18. Learned DR admitted that the aforecited case law are applicable to the facts of the instant case. Under these circumstances, we accept the plea of the assessee and direct the Assessing Officer to delete the addition of Rs. 11,10,000/-. 19. In the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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