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2015 (7) TMI 471 - ITAT KOLKATA

2015 (7) TMI 471 - ITAT KOLKATA - TMI - Change of head of income from 'Íncome from business and profession’ to 'Íncome from House property’ - Held that:- In the present case, the assessee was neither absolute owner nor had surplus own capital. It was providing complex services. Accordingly, in the facts and circumstances of the present case and the decisions as relied upon by the ld. Counsel for the asessee we are of the view that the assessee being partnership firm was having warehousing busine .....

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s been fully explained by the assessee by way of confirmations given by said 4 persons. Under such circumstances, the loan of ₹ 20 lakhs appearing in the balance sheet cannot be treated as unexplained. The ld.CIT(A) has rightly deleted the addition so made by the AO. We find no infirmity in the impugned order of the ld.CIT(A). We uphold the same. - Decided in favour of assessee. - I.T.A Nos. 973 to 979/Kol/2012,I.T.A No. 883/Kol/2012 - Dated:- 1-7-2015 - Shri Mahavir Singh & Shri B.P.J .....

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ress most of the grounds except common ground no.3, which is identical in all the appeals for all the assessment years under consideration. 4. Ground no.3 for the assessment year 2003-04 is reproduced herein below:- 1. For that in the facts and circumstances of the case, the ld.AO was unjustified in treating the business income of the assessee-firm as Income from House Property. The ld.CIT(A) was unjustified in confirming the action of the AO. 5. Since the assessee has not pressed the other grou .....

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for the assessee was allowed to argue the appeal filed for the assessment year 2003-04, where the facts of the case are narrated by the ld.CIT(A) in his order at pages 6-10. The same are reproduced herein below for the sake of convenience. Page 6-10 of the ld.CIT(A) s order for AY 2003-04:- 5. Ground no.4 is regarding change of head of income from Íncome from business and profession to Íncome from House property . The assessing officer observed that assessee had shown receipt of r .....

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33(6) to several tenants. From the replies given by them it was found that they had paid simple rent to the assessee and no services were provided . The TDS form issued by them also described the payment as rent only. It was also observed by the assessing officer that the assessee firm was not carrying out any business and only receipts credited in the P & L were on account of rent. Considering all these facts, the assessing officer treated the rental income received by the assessee as Incom .....

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upport the contention that under such circumstances the income from hiring out the commercial assets is to be treated as business income. It was also informed that subsequently the appellant had carried out tea blending activity, income from which was shown in the return from A.Y 2006-07. After considering the submission, my predecessor accepted the view of the appellant. In this he was guided by the decision of Calcutta High Court in the case of CIT vs. Ajmera Industries Pvt. Ltd 103 ITR 245 (C .....

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e by the tribunal to be re-decided on merits. Therefore the matter has been re-examined. My ld. Predecessor, vide letter no.CIT(A)-XXXIII, KOL/Dutta properties/09-10 dtd 26/08/2009 had asked the view point of the department in the matter. The assessing officer has submitted his report vide letter no.ITO/W-53(1)/Kol/Appeal/09-10 dated 03/09/2009. On the issue under consideration, it has been stated by the assessing officer that the appellant was owner of the godown and godown space was given on r .....

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IT 106 ITR 559,557-558(All), in which Hon ble High Court had given guiding principles to determine whether an asset is commercial assets or not. It has been explained by the High Court that every asset which is once used as business asset or capable of being so used cannot be regarded as commercial asset. For that the asset must be used in a running business. If there is no business, the asset ceases to be commercial asset. In a situation where the asset was leased out without accepting it in bu .....

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t an asset is naturally born commercial asset. The assessing officer also relied upon the decision of Gujarat High Court in the case of CIT vs. New India Industries Ltd 201 ITR 208(Guj). It was held in that case that when an assessee ceases to use land or building as commercial assets either himself or even through others the income derived by him by letting out the same would more appropriately fall under the head Income from house property , as it is not factum of his business or commercial ac .....

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ts are for a fairly long period of tenancy. For example, agreement with M/s. Wright India Ltd, M/s. Eureka Forbes Ltd, M/s. Lalji Mehrotra. M/s. Premier Trading Co are for the tenure of six, nine, ten and eight years respectively. The terms and condition of the agreements do not state that the appellant shall provide any specialized service to the tenants. Rather, the agreements appear to be for simple letting out of property without any add on services. In fact, the apex court, while deciding t .....

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cisions cited in his order, the case, whose facts come closest to the facts in the appellant s case is Saheli Trading Co. (supra). However, a vital difference is that, in that case the assessee was carrying out business activity and during the period of temporarily lull in the business, the asset was given on rent. On the other hand, in the appellant case, the business of tea blending had admittedly not commenced till the end of the year under consideration and in fact for several subsequent yea .....

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t period is to be taxed according to its nature under the appropriate head of income. For example interest earned on surplus fund deployed in pre-operative period is taxed under the head income for other sources as held by the apex court in the case of Tuticorin Alkali Chemicals & Fertilizers Ltd. Vs. CIT 227 ITR 172(SC). While delivering the above decision, the apex court has categorically state that if before commencement of its business as assessee lets out its house property, the rent in .....

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sion in the case of Ajmera industries Pvt. Ltd (supra) is concerned, its ratio, in my opinion, does not assist the appellant. In that case, rent was derived from factory as well as non-factory building. The Hon ble court observed that since manufacturing had not commenced, the rent from factory could not be called business income. However, since as per finding of facts, the business was otherwise being carried out, rent from non-factory building was treated as business income. In the appellant s .....

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e while hiring out the assets and also lists period for which the assets are hired out to be a relevant factor in ascertaining the intention. As mentioned earlier, in the appellant s case the tenancy agreement are for fairly long tenure of six to ten years and thus the intention prima-facie is of letting out of owned property and not temporary exploitation of commercial asset. In my opinion, the decisions cited by the assessing officer in his report, viz. Seth Banarasi Das Gupta (supra) and New .....

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al partnership deal (before being amended subsequently), it is seen that the business activity mentioned therein is tea blending and packaging and not constructing and letting out of godowns. The same is the position in respect of the original trade license obtained by the appellant. The original license was for tea blending & packaging , which was got amended to tea blending, packaging & warehousing during FY 2006-07 only i.e after the end of the year under consideration. Thus prima fac .....

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the hotel building developed by it and given on rent was not considered by the Supreme Court as business income. 5.6 In view of that detailed discussion made above, I am constrained to differ from the view taken by my ld. predecessor and hold that income derived from letting out of godown is to be taxed under the head Íncome from House property . The action of assessing officer in this regard is accordingly upheld. Further, since the income is to be assessed as income from house property, .....

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ome under the head Income from House Property and Profit and gains from business or profession has been decided by the ld. CIT(A) in the first round in favour of the assesee. Matter travelled to ITAT Kolkata, who remanded the matter to the ld.CIT(A) on legal issue to decide the limitation point afresh in view of the decision of the ITAT Kolkata Benches. Therefore, in the circumstances and facts of the case the issue relating to the income earned by the assessee has attained finality that the inc .....

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es, truck parking, place for truck drivers halt etc. Therefore, relying on the decisions of various courts of law and distinguishing the decisions by the ld.CIT(A) in the impugned order prayed to treat the same as income under the head Business or Profession . 9. The ld.DR on the other hand, has relied upon the order of the ld.CIT(A) and that of the AO. 10. We have heard the rival submissions and perused the material available on record. It was stated that the assessee itself is a partnership fi .....

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gent etc. Reference of the same can be made from CIT(A) s order dated 25-06-07, Trade License issued by Maheshtala Municipality and Reconstituted Partnership deed dated 31st May 1998, which were submitted for at Annexures A(p 1-8), B(p 9) & C(p 10-21) respectively. It is submitted by the ld. Counsel for the assessee that M/s. Dutta Properties are the lessee of the property and not the absolute owners. For carrying on the business as per said deed 31st May 1998, the assessee took on lease lan .....

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rship firm was inter-alia renting the warehouse, which was constructed on leasehold land. The ld. Counsel for the assessee further submitted that in the FY 1998-99 relevant to AY 1999-2000, the assessee firm took a loan of ₹ 20 lakhs for construction of godown/shed and total cost incurred on such construction (asbestos shed) as at 31.03.1999 which was ₹ 24,36,500/-. Reference was made to audited accounts of the firm as per enclosed Annexure D page 22-28). In the said year, it had rec .....

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arges, electricity charges, truck parking, place for truck drivers halt etc. There existed only one single entrance to the warehouse and keys of such entrance gate was lying in the custody of M/s. Dutta Properties. The assessee has shown all along such rental charges as Profits and Gains from business and profession since 1999-2000. However, for the first time while passing assessment order for a.y 2003-04, the AO took a view that such rental charges should have been treated as Income from House .....

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w for the sake of convenience:- Considering the above facts and judicial pronouncements, the AO is directed to treat the godown rent as business income of the appellant. It is however found that the various expenses as claimed in the P/L account were not examined by the AO to ascertain as to whether all these expenses were correctly claimed and were laid out wholly and exclusively for the purpose of appellant s business. For example, the assessee was unable to explain the necessity & relevan .....

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operty . However, the ld.CIT(A) has set aside the case to AO to verify the genuineness of expenses claimed against the business income. Against the said order, the assessee and department filed appeal to ITAT and the ITAT vide order dated 07-11- 08 set aside the aforesaid order of CIT(A) to verify whether the assessment order was barred by limitation. The ITAT did not go into the issue whether the rental income will be covered under Income from house property or under Profits and Gains from busi .....

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te of the objection of the assessee to the order of the ld.CIT(A) on this issue. It is also that the Revenue in its Appeal has challenged the order of the ld.CIT(A) on the ground that the ld.CIT(A) had accepted additional evidence in violation of the provisions of Rule 46A of the I. T Rules. It is also observed that the ld.CIT(A) has required the AO to examine the claim of expenses and thus he restored the issue to the AO which is not within his power u/s. 251 of the Act as amended w.e.f 1-6- 01 .....

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ld.CIT(A) with the direction that the validity of the assessment order on the ground of limitation should be decided afresh in view of the discussion above. Since the matter is being set aside to ascertain the validity of the assessment order all other grounds of appeal by the assessee and cross appeal by the Revenue cannot be considered by us at this stage. The ld. CIT(A) is, therefore, directed to consider the submissions of the assessee and provide proper opportunity to the Assessing Officer .....

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limit and further held that rental income received by the assessee was to be treated as Income from House Property . 11. We further find that the ld.CIT(A) in this case has relied upon the decisions of the Hon ble Apex Court in the case of Shambhu Investment (P) Ltd Vs. CIT reported in 263 ITR 143(SC) and Sultan Brothers P. Ltd Vs. CIT reported in 51 ITR 353(SC) and concluded that respective income shall be treated as income from house property. In the case of Sambhu Investment (P) Ltd (supra) .....

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s commercially carrying on business. Therefore, the case relied upon by the ld.CIT(A) in the case of Shambhu Investment (P) Ltd (supra) is distinguishable and cannot help the revenue. 11.1 The Hon ble SC in the case of Sultan Brothers (supra) held that in that case the appellant was not provided any service, but that was merely a case for letting out of the property. But in the present case the assessee has been providing security charges, electricity charges, truck parking, place for truck driv .....

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ovable of property, cannot be sole criterion for assessment of such income as income from house property and it is necessary to dig further to find out what are the primary objects of the assessee while exploiting property. If it is found that main intention is for simply letting out of property or any portion thereof, then income must be assessed as income from house property but if main intention is found to be exploitation of immovable property by way of commercial activities, then income mus .....

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56 taxman.com 456(SC) as relied upon by the ld. Counsel for the assessee before us by way of his written submission, it was held that where the main objects of the company was to acquire properties and to earn income by letting out same, the said income was to brought to tax as business income and not as income from house property . The ld.DR while arguing the matter has relied upon the judgments of Hon ble SC in the case of Karanpura Development Co. Ltd Vs. CIT reported in 44 ITR 362(SC) & .....

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ice oriented facilities and the income was derived by way of property rights. However, in the present case, the assessee was neither absolute owner nor had surplus own capital. It was providing complex services. Accordingly, in the facts and circumstances of the present case and the decisions as relied upon by the ld. Counsel for the asessee mentioned herein above, we are of the view that the assessee being partnership firm was having warehousing business and local trade license authorities have .....

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n the issues are also allowed. ITA No. 883/Kol/202 A.Y 1999-2000(by the revenue) 12. In this appeal, the revenue has raised the following grounds of appeal:- 1. That in the facts and circumstances of the case, the ld.CIT(A) has erred in deleting the addition made by the AO on account of unsecured loan of ₹ 20 lacs without the facts of the case. 2. That in the facts and circumstances of the case, the ld.CIT(A) has erred in deleting the addition made by the AO on account of unsecured loan of .....

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ns namely Sri K.Dutta & Sons ₹ 6,00,000/-, Sri Saroj Rani Bansal ₹ 4,00,000/-, R.D Bansal ₹ 6,00,000 and Baisali Bansal ₹ 4,00,000/-. The assessee has also produced their (said persons) confirmations. But the AO found that as per confirmation etters, the said loans were not given to the assessee firm, it was given to M/s. Dutta Tea Belnders. Thus, the AO treated the said loan of ₹ 20 lakhs as unexplained. 14. The ld.CIT(A) vide para 6.2 of his order has allowed .....

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