TMI Blog2016 (9) TMI 258X X X X Extracts X X X X X X X X Extracts X X X X ..... he finding of the furniture and fixture under reference forming an integral part of the building, so that it’s letting is, as admitted, incidental. That is, it is a case of a single letting and, therefore, the rent relatable to furniture and fixture is not ascertainable. Add to this, the fact that the property under reference is actually leased out, i.e., constitutes a source of income and, thus, a capital asset by definition, and the assessee’s case becomes untenable on facts – the leased house property constituting the assessee’s capital asset, yielding a regular source of income, and toward which the assessee has, in fact, expended no insubstantial sums. Juxtapose this with the settled position in law that the income assessable under a particular head of income is to be necessarily computed under that head only and in the manner provided under the relevant sections (Sultan Brothers (P.) Ltd. (1963 (12) TMI 4 - SUPREME Court); East India Housing & Land Development Trust Ltd. (2016 (3) TMI 1109 - ITAT RAJKOT)), and there can be no manner of any doubt that the assessee’s claim is not sustainable in law. Decided against the assessee. - I.T.A. No.3409/Mum/2013, I.T.A. No. 449 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elopment Co. Ltd. vs. CIT [1962] 44 ITR 362 (SC); CIT vs. Cocanada Radhaswami Bank Ltd. [1965] 57 ITR 306 (SC); Rajasthan State Warehousing Corporation vs. CIT [2000] 242 ITR 450 (SC); and CIT vs. Chugandas Co. [1965] 55 ITR 17 (SC). The ld. Departmental Representative (DR), besides seeking to distinguish the said reliance, relied on East India Housing Land Development Trust Ltd. vs. CIT [1961] 42 ITR 49 (SC). Assessee s Appeal (in ITA No. 3409/Mum/2013) 5. We have heard the parties, and perused the material on record. The primary facts are not in dispute. Income of the assessee s construction business and that derived from leasing activity is, both, returned and assessed as business income and income from house property respectively. That is, there is no dispute as regards the head of income where-under the lease rental income of the property/s under reference is properly assessable under the Act, i.e., as income from house property. So, however, the assessee claims that as certain furniture and fixture stands also leased along with, depreciation thereon be allowed as deduction. We are unable to appreciate the assessee s case as there is no provision fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rent would be assessed under the head income from other sources and depreciation would be allowable against such income either over period of lease term (i.e., 3 years) or at commercial rates or @ minimum 10% on the Amenities provided and the impact on total income would be negligible, if any. c. Alternatively, even if this amount of ₹ 21,45,127/- is disallowed then only 1/4th of expenditure towards Somerset building i.e., ₹ 5,36,282/- can be added to income. Balance 1/4th of expenditure relating to Citi Park Building will be reduced from Lease stock and stock on hand and 2/4th (i.e., 1/2th) expenditure relating to Crisil and Ventura buildings will be reduced from their respective WIP's. The same would therefore require being addressed and decided on merits. The assessee s plea raises two issues. Whether the furniture and fixture under reference is a part of the building/s, or independent of it? Example of the former would include doors and windows , inbuilt cupboards , kitchen cabinets , etc., i.e., which form an integral part of the building, provided for its user proper. Examples of the latter, on the other hand, would be: tables and chairs, separate cu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve its claims being on the assessee. This though would not be necessary or required in the present case. This is as the SOF, reproduced here-in-above, makes it abundantly clear that the letting of the furniture and fixture is incidental (to letting the building) (para 6(b) of SOF). Further, per para 6(c) thereof, as an alternative, a prayer is made for a proportionate allowance, i.e., qua building that is complete and not leased, while that leased or, as the case may be, under construction, being liable to be adjusted against the value of the leased stock and work-in-progress (WIP) respectively. The furniture and fixture in the present case is without doubt only an adjunct to the letting of the building, being in fact appropriated on an equal basis over the house properties under reference. We, therefore, have no hesitation in confirming the impugned disallowance; there being no scope for assessment of the proportionate rent, as contended, as income from other sources. Our decision rests, we may clarify, not on the inseparability of the two lettings, but on the finding of the furniture and fixture under reference forming an integral part of the building, so that it s letting is, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s case, relying on East India Housing Land Development Trust Ltd. (supra), is that classification of income under different heads of income, each with its own computation provisions, which are to be followed, also thereby limits the expenditure that can be availed there-against. That is, any income is liable to be classified under any of the six (five) distinct, mutually exclusive heads of income, and that where the income falls under a particular head, the fact that it may indirectly be covered by another head of income will not make it as income taxable under the latter head. Further, income falling under a specified head has to be computed for the purposes of tax in the manner provided by the appropriate sections. The reliance on Rajasthan State Warehousing Corporation (supra) is met by adverting to section 14A, since brought on the statute w.r.e.f. 01.4.1962. The decision is, in any case, rendered in the context of or on the premise of income being not taxable, which is not so in the instant case. Similarly, the reliance on Mukti Properties (P) Ltd. (supra) was also sought to be distinguished on facts. 8.2 We may, before proceeding to adjudicate the issue before us, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gard, it noted the precedents with regard to the distinguishing feature between income and capital , as well as the nature of the income being realised. In its words: Income does not include fixed capital or the realising of fixed capital by turning it into some other form of capital or money. Fixed capital is what the owner keeps in his possession but turns to profit; circulating capital, however, is turned over in the process of profitmaking. It may sometimes happen that in the process of production, fixed capital may be consumed or wasted, but that is a reduction of capital and not an expenditure in the business claimable as an allowance in the reduction of assessable income in the shape of profits of the business. [at pg. 368] Ownership of property and leasing it out may be done as a part of business, or it may be done as land owner. Whether it is the one or the other must necessarily depend upon the object with which the act is done. It is not that no company can own property and enjoy it as property, whether by itself or by giving the use of it to another on rent. Where this happens, the appropriate head to apply is income from property (s. 9), even though ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see firm, a dealer in securities, holding securities as stock-in-trade, discontinued its business on June 30, 1947. The income from securities for the year 1946-47 had been charged to tax under the Indian Income Tax Act, 1918 under the head of income Income from securities . The question was whether the interest on securities formed part of the assessee s business income for the purpose of exemption from tax u/s. 25(3) of the Indian Income Tax Act, 1922. The Hon ble Court held that there was no reason to restrict the condition of the applicability of the exemption u/s.25(3) only to income on which tax was payable under the head profits and gains of business, profession or vocation . The exemption u/s. 25(3) is general . The income tax is a single tax. By breaking up the income under different heads of income, the same does not cease to be the income of the business; the different heads of income being only the classification prescribed by the Act for computation of total income. That is, the heads do not exhaustively delimit the sources from which income arises. In Rajasthan State Warehousing Corporation (supra), the Apex Court again reiterated the general principles relati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to profit, or as a part of the circulating capital which is turned over in the process of profit-making. Using its words, whether the profit derived is by way of an owner or as a trader. It is only in the case of the latter, i.e., where the property forms part of the trading assets, that income by way of leasing, even if assessable as income from house property, could be said to bear the character of business income and, equally importantly, of the same, indivisible business of construction and sale or leasing. The line of distinction, it must be borne in mind, is clear, and is to be arrived at considering the entirety of the facts and circumstances the case. This is as income stands to be classified under the Act source-wise, i.e., on the basis of its defining origin and character. It is thus only where the source does not fully capture the intrinsic nature of the receipt that there is scope for income falling under one head of income as liable to be characterised as income covered also by another (head of income) and, which, therefore, could be said to be indirectly covered by the latter head of income, though would not make it assessable under that, latter head. The heads of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd the assessee s case becomes untenable on facts the leased house property constituting the assessee s capital asset, yielding a regular source of income, and toward which the assessee has, in fact, expended no insubstantial sums. Juxtapose this with the settled position in law that the income assessable under a particular head of income is to be necessarily computed under that head only and in the manner provided under the relevant sections ( Sultan Brothers (P.) Ltd. (supra); East India Housing Land Development Trust Ltd. (supra)), and there can be no manner of any doubt that the assessee s claim is not sustainable in law. We may next clarify that the facts in Mukti Properties (P) Ltd. (supra) are distinctively different. The expenditure under reference in that case was on administrative expenditure. Letting and providing maintenance services formed one segment of the assessee s - also carrying real estate business, activity. It was under such circumstances that 50% of the administrative expenditure was considered as relatable to the said business and, accordingly, allowable in computing business income. The impugned expenditure in the present case has no nexus whats ..... X X X X Extracts X X X X X X X X Extracts X X X X
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