TMI Blog2015 (9) TMI 852X X X X Extracts X X X X X X X X Extracts X X X X ..... wholly and exclusively for commercial expediency. it earning and was revenue in nature. Since compensation was paid by the appellant, the landlord of the premises, to obtain possession from the lessee/tenant so as to earn a higher rental income, it had arisen out of business necessity and commercial expediency. Since there was no question of acquiring a property it cannot be said that the payment made was for having a benefit of enduring nature. Rather the compensation was paid to the existing tenants to have their portions vacated to have new tenants with higher rent and thus to have a higher rental income which was a business activity permitted by the Memorandum.Assessing Officer has to assess the income of an assessee after considering whether the figure in the return is taxable or not and then to determine the tax in accordance with law. In determining the same, a decision has to be reached on the issue raised. Unless a decision is reached, it cannot be said that the issue was adjudicated or decided. Keeping these principles of law as formulated by the Courts in mind, the finding by the Assessing Officer and Tribunal that declaring the rental income under the head "income f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ompany within the meaning of the Companies Act, 1956. The main objects specified in its Memorandum of Association (for short Memorandum ) is to acquire and develop properties and to deal with the same by way of sale, lease, letting out, etc. The appellant acquired premises No.6, Royd Street, Kolkata (hereinafter referred to as the said premises ) comprising land and buildings. The appellant raised two new constructions on the said premises at a substantial cost after demolishing some of the existing buildings. One of the new constructions was sold to different buyers and the profit and loss arising therefrom was assessed under the head business . Portions of the second new construction were let out to different tenants. The appellant states that in April 1988, an area of 3310 sft. on the ground floor of the second new construction was given on lease to Yogi Industries Private Limited (hereinafter referred to as the said lessee ) at a monthly rent of ₹ 5000/- plus actual outgoings. The lease rent was to be revised every five years. The said lessee made an interest-free deposit of ₹ 6,62,000/- and had the right to sub-lease. The said lessee paid the monthly rent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ustified in law in holding that merely because the appellant had been declaring the rental income under the head house property , there was no justification for assessing the same under a different head of income. Submission was that the Tribunal failed to consider that res judicata did not apply to income tax proceedings and an assessment for particular year was final and conclusive between the parties only in relation to that year. It was submitted that the Tribunal failed to consider that there was no litigation or controversy between the appellant and the Department as regards the head of assessment of the rental income in the earlier years inasmuch as the appellant had itself shown the income under the head house property . The Tribunal failed to consider that as the appellant had itself shown the rental income under the head house property , the Assessing Officer simply accepted the head under which the appellant offered the income to be assessed. The Tribunal did not consider that since there was no prior adjudication as regards the head of assessment of the rental income, it was open to the appellant to claim in the assessment year in question that the rental income was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Agricultural Income-Tax, Trivandrum v. Bombay Burmah Trading Corporation Ltd.: 131 ITR 154, 6) Radhasoami Satsang v. CIT: 193 ITR 321 (SC), 7) CIT v. Auto Distributors: 210 ITR 222 (Cal), 8) CIT v. Oberoi Hotels P. Ltd: (2011) 334 ITR 293 (Cal), 9) Airports Authority of India v. CIT (Delhi): (2012) 340 ITR (Delhi (FB), 10) Chennai Properties and Investments Ltd. v. Commissioner of Income- Tax: (2015) 373 ITR 673 (SC) and 11) CIT v. Bhaskar Mitter: 73 Taxman 437 (Cal), Mr. M.P. Agarwal, learned advocate for the respondent submitted that since there is a clear finding by the Assessing Officer that in the earlier years the assessee had itself shown the rental income under the head income of house property and the facts being same, there was no occasion for assessing the rental income of the assessee under the head business income . Since all along the petitioner had returned the income from house property and the Assessing Officer accepted it, it cannot be said that returns are not complete as there was no adjudication. As 85% of the income, the main source, was from house property, it cannot be contended that income was not from house property. Though in a Income Tax proceedin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erty of every description and to sell, lease let out, hire transfer and deal in any manner of such estates and properties (Emphasis supplied) Admittedly the appellant had all along offered for assessment the rental income under the head house property . In this assessment year the position is no different. However in this assessment year the assessee had claimed ₹ 53,50,000 paid as compensation an admissible deduction under the head business expenditure . The Assessing Officer found that the appellant had made payment of the said sum to two tenants for securing vacant possession of the space occupied by them. The Assessing Officer rejected that contention of the appellant by holding that as it had shown the rental income as Income from house property , only deductions as laid down in section 24 of the Act would be allowed and since the payment was made for acquiring a benefit of enduring nature, the expenditure was considered as capital expenditure and thus disallowed. This view was affirmed by the Tribunal by holding inter alia, as under:- We find that the assessee in the preceding years throughout has declared the rental income under the head Income from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... I find that the sum of ₹ 50 lakhs received by way of compensation has been declared as a revenue receipt chargeable to tax. Hence, considering all materials facts, I hold the compensation of ₹ 53,50,000/- as an admissible deduction. The A.O. is directed to delete the disallowance. Thus, while the Assessing Officer and the Tribunal had disallowed the claim of the appellant on the ground that it had consistently shown the rental income under the head Income from House Property , the CIT(A) after considering the object's clause of the Memorandum and observing that an assessee is within its rights to avail of the statutory deductions under the law, held that the income from rent constituted the appellant's business income and had allowed deduction. The question is since the assessee had all along shown the rental income as income from house property , applying the principle of consistency, whether the Assessing Officer and the Tribunal were justified in holding it as income from house property or as contended by the appellant, as there was no prior adjudication or decision as regards the head of assessment of the rental income, it was open to the Appellan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iness and the compensation of ₹ 53,50,000/- paid by it for obtaining possession from lessee/tenant, so as to earn a higher income, as an admissible revenue deduction, inspite of Memorandum permitting the appellant to carry on business by letting out properties, the Assessing Officer and the Tribunal ruled otherwise. Since the object in the Memorandum permitted the appellant to carry on business in letting out properties and as 85% of the income of the appellant was by way of deriving rent and lease rentals, in our view the income from rent constituted the business income of the appellant. Since compensation of ₹ 53,50,000/- was paid by the appellant, the landlord of the premises, to obtain possession from the lessee/tenant so as to earn a higher rental income, it had arisen out of business necessity and commercial expediency. Since there was no question of acquiring a property it cannot be said that the payment made was for having a benefit of enduring nature. Rather the compensation was paid to the existing tenants to have their portions vacated to have new tenants with higher rent and thus to have a higher rental income which was a business activity permitted by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... des the appellant from calming deduction cannot be accepted as Memorandum permitted it to carry on business of letting out properties and indisputably it was carrying on business in letting out properties and in carrying on such trading activity had paid compensation. The observation of the Tribunal that the appellant had all along, including in this assessment year, had shown the income under Income from house property cannot be a ground for denial of the deduction as in the earlier assessment years never an occasion arose for adjudication or decision on the said issue. Thus the conduct of the appellant cannot be called approbate and reprobate since in CIT v. V.MR. P. Firm, Muar (supra) it was held that As in the case of estoppel, it cannot operate against the provisions of a statute. If a particular income is not taxable under the Income-tax Act, it cannot be taxed on the basis of estoppel or any other equitable doctrine. Equity is out of place in tax law; a particular income is either exigible to tax under the taxing statute or it is not. If it is not, the Income-tax Officer has no power to impose tax on the said income. Had there been an adjudication on the said issue, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case in hand as therein assessee was not the owner and the building was taken on sublease. In Azimganj Estate Pvt Ltd. (supra) the subject matter was whether the income derived from letting out the unsold flats was income from house property and not business income which is not the case in hand. Since Memorandum of the appellant company was not considered, the judgment in CIT v. Estate of Omprakash Jhunjhunwala (supra) or the judgment in Sultan Brothers Private Ltd. (supra) does not further the case of the revenue as Supreme Court therein held that Whether a particular letting is business has to be decided in the circumstances of each case and each case has to be looked at from a businessman's point of view to find out whether the letting was the doing of a business or the exploitation of his property by an owner which the Assessing Officer and the Tribunal failed to do. The judgment in Chloride India Limited (supra) is not applicable as it is evident from the facts that the assessee had taken vacant possession of the property on lease, whereas in the case in hand the assessee is the owner of the property. The judgment in E.I.D. Parry (India) Ltd (supra) is inapplicable ..... X X X X Extracts X X X X X X X X Extracts X X X X
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