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DCIT. Circle 6 (1) , New Delhi Versus Mayar India Ltd.

2016 (8) TMI 903 - ITAT DELHI

Income from letting of property - income from business and not as income from house property - Held that:- In the present case, the asset is a commercial asset, has not been controverted by the Revenue. The property under consideration let out by the assessee is a commercial property, which can only be exploited commercially, the income earned therefore, on account of letting, deserves to be taxed as income from business and not as income from house property. - If an assessee derived income .....

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oited commercially and the income earned there from, on account of letting, deserves to be taxed as income from business. - Decided in favour of the assessee - I.T.A. No.4123/Del/2005 - Dated:- 13-7-2016 - SHRI N. K. SAINI, ACCOUNTANT MEMBER AND SMT. BEENA A. PILLAI, JUDICIAL MEMBER For The Appellant : Shri P. Dam Kanunjna, Sr. DR For The Respondent : Shri Mukesh Kumar Bansal, CA ORDER PER BEENA A. PILLAI, JM: The present appeal raised by the Revenue, has been taken up with the directions of Hon .....

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material/evidence. Therefore, an erroneous order has been passed. 17. In view of the aforesaid discussion, we answer the second substantial question of law quoted above in negative i.e. in favour of the appellant-Revenue and against the assessee and an order of remit is passed to the tribunal to decide the issue in question afresh and give a finding on the nature, character and type of letting, examine the contentions of the parties with reference to the material on record including the written .....

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igh Court in assessee s case, it is observed that Hon'ble High Court has directed the issue to be considered in the light of ratio expounded by Hon'ble Supreme Court in the case of Universal Plast Ltd. Vs CIT reported in 237 ITR 454. 3. It is observed form the records placed before us that the assessee is engaged in the business of indenting and trading of import and sales of timber. The assessee was using property at Okhla Industrial Area as commercial asset. The assessee then shifted i .....

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rities below was that, as the assessee has shifted its branch office to Mayar Tower, the industrial property at Okhla Industrial Area had become surplus which was exploited by the assessee, subjecting it to lease agreement. The assessee was also getting maintenance charges from the tenant for proper upkeep of the building as per the maintenance agreement entered into between the parties. 3.1 Ld. CIT(A) agreed with the submissions made by the assessee and directed the Assessing Officer to conside .....

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e light of decision passed by Hon'ble Supreme Court in the case of Universal Plast Ltd. (supra). 4. We have perused the orders of authorities below as well as the arguments presented by both the sides. Hon'ble Supreme Court in the case of Universal Plast Ltd. (supra) has laid the following propositions: (i) No general principle could be laid down which is applicable to all cases and each case has to be decided on its own facts and circumstances. (ii) Whether an income falls under one hea .....

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, tools, industrial sheds on godowns having high business potential stand on a different fooling from assets like land or building. iv) If an assessee derived income from a commercial assets which is capable of being used as a commercial asset, then it is income from his business. Whether he uses that commercial asset himself for lets it out to somebody else to be used. The asset would not cease to be commercial asset simply because temporarily it was put out of use or it was let out to another .....

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e accrual of business income. (vii) When the assessee has stopped doing business altogether and when the asset ceases to have the character of business or commercial asset's, it becomes a capital asset. Qua such asset, the assessee is not carrying on any business. As the owner of the asset, he may exploit such asset but, in such circumstances, income which he receives is no longer business income but income from property owned by him and, hence, "income from house property". (viii) .....

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rings income to him but it is his investment in property or his ownership of property which brings income to him. In such cases, leasing of property itself is the activity. It is leased with a view to produce income, a transaction quite apart from the ordinary business activities of the assessee. (ix) In the descending whether an assessee dealt with its property as owner or as a businessman or as a prudent man of commerce. One must see not the form which it gave to the transaction but to the sub .....

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he assessee." 4.1 It has been submitted by the Ld. A.R. that the industrial property at F-83, Okhla was used by assessee for its printing press business since 1986. The Ld. A.R. submitted that assessee had temporarily shut down the activity of printing press as it had shifted its branch office to Mayar Tower. Ld. A.R. submitted that the assessee had let out the industrial property temporarily for a period of 3 years, except for one room on the first floor which was retained by the assessee, .....

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by way of exploitation of business assets, for making profit. The asset was let out, while carrying out other business activity. There was nothing on record to show that the assessee had sold away the properties or abandoned its business. In the circumstances, in order to exploit business assets, assessee shifted its Branch Office. In this commercial venture, the assessee received a higher income regularly from its commercial assets, which was used to maintain the premises. There is no dispute t .....

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of productive/commercial/industrial assets since their inception. The assets included factory buildings, land appurtenant thereto along with functional plant and machineries. Therefore, there cannot be any case that the nature of the assets has been Changed. The commercial assets exploited by the assessee for the purpose of its business remained the same and its character has not been converted into a house property or non commercial asset. 4.5 Further, on perusal of the lease agreement, placed .....

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s agreement. Such option shall be exercised by the lessee 60 days before the date of the expiry of the Agreement. The lessee also undertakes to hand-over vacant and peaceful possession of the said premises after expiry of 6 years from the date of the Agreement i.e. 24th day of August, 2006. After the initial period of 3 yeas a fresh lease deed will be executed. 4.6 It has been submitted by the Ld. A.R. that on expiry of this agreement the assessee has neither extended lease with the same party n .....

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he case of ITO Vs Ultra Vision Associates, for the Assessment Year 1010-11 New Delhi 2011-12. This Tribunal vide order dated 09.03.2016, on similar facts, has allowed the claim of rental income to be taxed under t he head income from business by relying upon the decision of Hon'ble Supreme Court in the case of Universal Plast Ltd. (supra). The Hon'ble Supreme Court in Universal Plast Ltd. (supra), has held that if business assets are let out temporarily while assessee is carrying out oth .....

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of the assessee was of printing press and the assets let out by the assessee were used to carry on the activity of printing press. The property has been temporarily leased to M/s. AFL Ltd. for a period of 3 years only. 5.1 Hon'ble Supreme Court in Universal Plast Ltd. (supra) has laid down various tests to determine the head of income under which the rental income is to be assessed. These tests inter alia lays down the principle that when an assessee derives income from a commercial asset a .....

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nsideration let out by the assessee is a commercial property, which can only be exploited commercially, the income earned therefore, on account of letting, deserves to be taxed as income from business and not as income from house property. 5.3 If an assessee derived income form a commercial assets which is capable of being use as a commercial asset, then it is income from his business. Whether he uses that commercial asset himself for lets it out to somebody else to be used. The asset would not .....

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any. It was doing the main business of manufactures, imports, purchases and dealing In scientific apparatus, chemicals, chemical products, articles of glass, metal, wood, paper etc., more or less connected with science, as given in clause 3(a) of the Memorandum of Association. Out of the three properties in Mumbai, the property in dispute was being used for its Regional Office. In the interest of the company, it decided to let out one of its properties, to the City Bank, by way of exploitation o .....

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