TMI Blog2015 (6) TMI 638X X X X Extracts X X X X X X X X Extracts X X X X ..... had come to an end and the assessee entered into a fresh agreement with British High Commission again establishes the case of the assessee, that it is involved in a systematic and organized activity of leasing out its premises, which in turn are not owned by the assessee. In the totality of the above facts and circumstances we hold that the lease rent received by the assessee is assessable as income from business in the hands of the assessee and the related expenditure has to be allowed in the hands of the assessee. The AO shall accordingly compute the income in the hands of the assessee in line with our directions after affording reasonable opportunity of hearing to the assessee. This ground of appeal, which was restored back to the file of the Tribunal by the Hon'ble High Court is allowed. - Decided in favour of assessee. Disallowance of recruitment and staff training expenses and salary paid to Shri Naval Kumar - Held that:- As decided in assessee’s own case relating to assessment year 2003-04 it is held an overall appreciation of the evidence and explanation submitted on behalf of the assessee, we are of the view that the assessee has failed to explain and substantiate that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Staff Recruitment staff Training Expenses of ₹ 15,27,872/- without considering the facts circumstances of the case. 3. Both the appeals relating to the same assessee on similar issue were heard together and are being adjudicated by this consolidated order for the sake of convenience. 4. The issue arising in the present appeal is in relation to assessability of leave and licence income received by assessee and whether the same has to be assessed as profit and gains of business or as income from other sources. The Tribunal, in the first round of appeal, vide order dated 31st October, 2008 had appreciated the facts of the case wherein the assessee under an agreement dated 16.11.2000 styled as leave and licence agreement granted licence to M/s. American Express Bank Ltd. to use the premises of which it was the lessee. The licence fee was fixed at `13,66,875/- as quarterly licence fee. The said premises along with fixtures and fittings were licensed to the party for a period of three years commencing from 01.01.2001 and expiring on 31.12.2003. The Assessee had declared the said licence fee as income from business and claimed certain expenses against it. On the other ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Hon'ble High Court are as under: - 2. The appeal pertains to assessment year 2003-04. The issue before the Tribunal on the first question was whether income received from licensing of immovable property belonging to the assessee can be assessed as income from business or as income from other sources. The assessee submitted that from assessment years 1993-94 to 2000-01 the returned income treating the rental/licensing income as assessable under the head of profit and gains of business was accepted by the Revenue. For assessment years 1993-04 and 2001-02 the assessments were completed under section 143(3) whereby the Assessing Officer had accepted the submission that the licence fees received by the assessee were business income. The Court is informed that this was brought to the notice of the Tribunal. The assessee submits that no distinguishing features were brought before the Tribunal by the Revenue to justify a different treatment for the assessment year in question. In these circumstances, we are of the view that the Tribunal may be requested to reconsider its decision having due regard to the circumstances which are pointed out. We, however, clarify that we have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itted to perform business of taking on lease and earning income from the same. It had taken premises on lease which in turn was sublet to M/s. American Express Bank. The issue arising before us is in relation to assessability of such lease income earned by the assessee. The claim of the assessee before the authorities below and even before us is that such income being in continuation of its object as per the Memorandum of Association, is to be assessed as business income in its hands. Whereas the case of the Revenue is that assessee was engaged in subletting of the property, which in turn it had obtained on lease and hence the income arising there from is assessable in the hands of the assessee as income from other sources, since the assessee was not the owner of the property. The assessee had entered into lease agreement with American Express Bank in the earlier year and admittedly the rental income declared by the assessee was assessed as business income in the hands of the assessee after allowing the related business expenditure claimed. The said decision was accepted by the authorities below from assessment year 1993-94 onwards for which the assessment was completed under secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee on lease and had been further sublet by it is a systematic and organized activity of carrying on its business. Undoubtedly, assessee was not the owner of the premises but was only a lessee of the premises, which in turn had been sublet by the assessee with the intention of exploiting the same and the receipts arising there from are assessable in the hands of the assessee as income from business and the necessary related expenditure has to be allowed as deduction in the hands of the assessee. 12. The Hon'ble Supreme Court in the case of Chennai Properties and Investment Ltd. (supra) has appreciated the facts before it, wherein the assessee had acquired properties in the city of Madras and in turn let out those properties and the rental income received by it was shown as income from business, it was held that where main object of the assessee company as per its Memorandum of Association was to acquire properties and to let out those properties as well as make advances upon the security of land and building, then it was held that what we emphasis is that holding the aforesaid properties and earning income by letting out these properties is the main objective of the com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ew to interpret the activities. In support of the aforesaid proposition, number of judgments of other jurisdictions, i.e. Privy Counsel, House of Lords in England and US Courts were taken note of. The position in law, ultimately, is summed up in the following words: - As has been already pointed out in connection with the other two cases where there is a letting out of premises and collection of rents the assessment on property basis may be correct but not so, where the letting or sub-letting is part of a trading operation. The diving line is difficult to find; but in the case of a company with its professed objects and the manner of its activities and the nature of its dealings with its property, it is possible to say on which side the operations fall and to what head the income is to be assigned. 13. The Apex court also noted the fact that in Sultan Brothers (P) Ltd. (supra) the Constitution Bench had clarified that merely an entry in the object clause showing a particular object would not be determinative factor to arrive at a conclusion whether the income has to be treated as income from business and such question would depend upon the circumstances of each case, i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... identical to the issue in ground No. 1 before the Tribunal in ITA No. 4977/Mum/2006 and our decision in ITA No. 4977/Mum/2006 is applicable mutatis mutandis to ground of appeal No. 1 in ITA 3033/Mum/2010, hence the said ground is allowed. 16. Now coming to the ground of appeal No. 2 raised by assessee in ITA No. 3033/Mum/2010. The learned A.R. for the assessee fairly pointed out that the issue arising in the present appeal is squarely covered against the assessee in view of the order of the Hon'ble High Court in the case the assessee. 17. We find that similar issue of disallowance of recruitment and staff training expenses and salary paid to Shri Naval Kumar arose before the Tribunal in assessee s own case relating to assessment year 2003-04. The Tribunal vide para 12 of its order held as under: - 12. We have considered the rival submissions. Mr. Naval Kumar was sent abroad in education in November, 2000. As early as 19th June 2000, the Board considered the falling and competitive industry of textile business and decided to diversify into electronic media and computer related activity for printing. In this Board resolution, there is no mention with regard to carrying ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ard for training in printing technology; and that the same would benefit the business of the assessee, in our view has not been established by the assessee. The plea of the assessee remains unsubstantiated. As already stated the purpose for which a person was to be sent abroad as expressed in the board resolution dated 19.6.2000 and the explanation of the assessee before the Assessing Officer in its letter dated 28.11.2005 is different. The plea taken in letter dated 28.11.2005 is an after thought and a vain attempt to substantiate the claim for deduction. As far as the action of the Revenue in allowing the very same expenses in A.Y. 2001-02 is concerned, we notice that the explanation given by the assessee before the Assessing Officer does not highlight all the aspects which have been brought out by the Assessing Officer in the order of the assessment in the present A.Y. It is well settled that principles of res-judicata does not apply in income tax proceedings. The assessee has to establish that the expenditure claimed by him is wholly and exclusively for the business which it was carrying on. Decision in the case of Sakal Papers Pvt. Ltd. (supra) is on different facts and the su ..... X X X X Extracts X X X X X X X X Extracts X X X X
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