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2015 (10) TMI 400 - DELHI HIGH COURT

2015 (10) TMI 400 - DELHI HIGH COURT - TMI - Nature of Sum receive from TELCO - whether taxable under the head 'income from business' and not under the head 'income from house property'? - Assessee was engaged in the business of procuring Mercedes trucks from TELCO on behalf of its customers - Held that:- In the present case, it is plain from the agreement entered into between the Assessee and TELCO that it is the business of the Assessee as a whole that has been exploited by TELCO and not merel .....

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d, it is plain to the Court that what was being received by the Assessee from TELCO in terms of the agreement was a payment for commercial exploitation by TELCO and of the business assets of the Assessee not confined to 'house property'. It would, therefore, be erroneous to treat the entire income received from TELCO as income from house property as has been sought to be done by the AO.

There is no factual basis for coming to any other conclusion than the one arrived at by the CIT (A) .....

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garwal, Senior Standing Counsel, Ms Lakshmi Gurung, Junior Standing Counsel, Ms Radhika Gupta and Mr Abhishek Sharma, Advs ORDER 1. ITA No.14 of 2003 is an appeal by the Revenue against the order dated 26th March 2002 passed by the Income Tax Appellate Tribunal ('ITAT') in ITA No. 409/Del/97 for the Assessment Year ('AY') 1993-94. ITA No. 295 of 2006 is an appeal by the Revenue against the order dated 29th July 2005 passed by the ITAT in ITA No. 881/Del/2001 for the AY 1997-98. 2 .....

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omers. It also has a service station for servicing the vehicles and a workshop at Najafgarh Road in Delhi. The said workshop had the plant and machinery, equipment and tools. The business activities were being carried on with a number of employees and workers. 4. Disputes arose in the Sanghi family and suits were filed in this Court which were pending in the relevant time. Pending the disposal of the suits, the Assessee entered into an agreement dated 31st January 1992 with TELCO. The agreement .....

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inted. ii) They will provide the facility of telephone, electric and water connections duly serviced and connected. iii) They will appoint necessary staff required for proper cleaning and maintenance of the premises, two peons for office work necessary watch and ward staff for security of the premises. They will also employ necessary staff of mechanics, helpers etc. All these appointments and the works to be done will be in mutual consultation and to the satisfaction of Telco. iv) They will be r .....

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nce, entertainment, advertisements and publicity printing and postage etc. incurred by, on behalf at the instance of Telco. vi) They will have adequately insured the said premises as also such equipments, fittings or fixtures belonging to them as may be the part of the premises. vii) Any reconstruction or repairs of structural nature in respect of the said premises will be attended to by them. viii) They will be liable to reimburse or otherwise indemnify Telco in respect of any losses arising fr .....

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or damages unless caused by the staff of Supreme Motors; provide for insurance of the machinery, equipments and other articles in the premises. It was stated that the employees of Supreme Motors will work under the guidance and supervision of the staff of TELCO. The services and other charges required to be recovered from the customer for service rendered or replacement were to be billed and recovered by TELCO. 6. In consideration of the above facilities, TELCO was to pay the Assessee a sum of & .....

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000 was to be adjusted in a period of twenty four months. 7. The Assessing Officer ('AO') concluded that the payment received by the Assessee from TELCO should be treated as income from house property and not as business income. The explanation of the Assessee that the premises at Najafgarh, Delhi was a commercial asset was rejected by the AO). He held that the agreement was "nothing more than renting out of the premises". 8. The Commissioner of Income Tax (Appeals) [CIT (A)] i .....

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ercial asset idle, not only the premises were rented out, but all other services including machineries, fixtures, tools, equipments were rented out along with the permanent staff of the appellant company". The CIT(A) came to the conclusion that the income should be taxed as business income and not as income from house property. 9. The Revenue went in appeal before the ITAT. What weighed with the ITAT was the employees of the Assessee were also utilized by TELCO. Although all the employees w .....

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a Housing & Land v. CIT, West 1961 42 ITR 49 SC, Karanpura Development Co. Ltd. v. CIT(1962) 44 ITR 362 and the recent decision of this Court in CIT v. Ansal Housing Finance & Leasing Co.Ltd. (2013) 354 ITR 180. The Court also notices that there is a recent decision of the Supreme Court in Chennai Properties & Investment Ltd.(2015) 373 ITR 673 (SC) on the issue as to when the rental income earned by a company would be treated as business income. 11. While the aforementioned decisions .....

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