TMI Blog2019 (5) TMI 684X X X X Extracts X X X X X X X X Extracts X X X X ..... 12-2013 and 2013-2014. 2. The common issue is raised in these appeals. Hence, they were heard together and are being disposed off by this consolidated order. 3. The solitary issue that is raised in these appeals is whether the CIT(A) is justified in holding that the lease rent received by the assessee should be assessed under the head `income from business instead of `income from other sources assessed by the Assessing Officer. 4. Brief facts of the case are as follows: The assessee company was incorporated on 29.10.1999 under the Companies Act 1956 to engage in the business of manufacturing of tyres. However on account of poor financial viability the assessee-company incurred losses. The entire net worth was eroded and was thus declared as a sick company under the Sick Industrial Companies Act, 1956 ( SICA ). Further on 17.04.1995 a rehabilitation scheme was prepared and sanctioned by Board for Industrial and Financial Reconstruction ( BIFR ). Under the scheme it was provided that Apollo would take over the assessee-company by subscribing to equity shares of assessee-company. It was further provided tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assess the lease rent received by the assessee as `income from business . The CIT(A) also relied on the order of the ITAT in assessee s own case for the immediately preceding assessment year, viz., 2010-2011. 6. Aggrieved by the orders of the CIT(A), the Revenue has filed these appeals before the Tribunal. Identical grounds are raised in these appeals and they read as follows:- 1. The order of the Commissioner of Income Tax (Appeals)-I, Kochi in Appeal No.ITA 69/R-4/CIT(A)- II/2013-14 dated 13/02/2017 for the Assessment Year 2011-12 is opposed to law, weight of evidence, facts and circumstances of the case. 2. The learned Commissioner of Income Tax (Appeals) erred in holding that the amount of lease rent should be taxed as Income from Business , overlooking the fact that the business of the assessee ceased to exist. 3. The learned Commissioner of Income Tax (Appeals) ought to have appreciated that the Hon'ble ITAT had held the impugned lease rent as income taxable under the head Income from Other Sources in A. Ys.2004-05 to 2009-10. 4. The learned Commissioner of Income Tax (Appeals) is also er ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppellant company in the instant year. 8.2 This issue came up for the first time before the Coordinate Bench of Tribunal in assessment years 1996-97 and 10997-98 and by a common order dated 14/12/2004, it was held as under: 19. Now coming to the merit on the basis of the facts brought hereinabove, we are of the view that the issue has to go in assessee s favour. It is to be seen that the agreement is irrevocable for period of 8 years. As rightly contended by the learned authorized representative of the assessee, the assessee as an corporate entity, it continues to exist. The share value of the assessee has gone up. Merely additional account of ₹ 110 crores has been invested by way of shares by ATL does not mean that the existence of the PTL has been diluted. The ATL has acquired share in PTL. Coming to the investment of ₹ 70 crores in the plant and machinery, the assessee s representative submitted that the investments are reflected in the books of accounts of ATL. Mere change of administrative level officers/directors, as rightly contend by the representative of the assessee, does not mean that the corporate existence itself is disappea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessment years from 1998-99 to 2003-04. It was only when the appeal for AY 2007-08 came up that the coordinate bench held that such an income was held to be assessable under the head income from other sources . It was held by an order dated 3.4.2012 as under: 6. We have heard the rival contentions and carefully perused the material on record. There cannot be any dispute that the question whether the assessee is having an intention to revive its business activity is a question of fact and the same is required to be considered every year on the basis of the facts and circumstances prevailing in that year. Accordingly, we are of the view that the decision rendered by the Tribunal in the earlier years cannot have binding effect in subsequent years. The undisputed facts are that the assessee has leased out its plant and machinery in the year 1995. Hence, while considering the claim of the assessee for the years ending 31.3.1996 and 31.3.1997, the Tribunal held that there is nothing on record to show that the assessee had to present intention to revive its business at appropriate time, as the gap between the year of closure and the years under co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the same is required to be considered every year on the basis of the facts and circumstances prevailing in that year. Accordingly, we are of the view that the decision rendered by the Tribunal in the earlier years cannot have binding effect in subsequent years. The undisputed facts are that the assessee has leased out its plant and machinery in the year 1995. Hence, while considering the claim of the assessee for the years ending 31.3.1996 and 31.3.1997, the Tribunal held that there is nothing on record to show that the assessee had no present intention to revive its business at appropriate time, as the gap between the year of closure and the years under consideration at that point of time was very narrow. However, we are concerned with the assessment year 2007-08 and we have to consider the facts and circumstances prevailing as on 31.3.2007. By that date, about 12 years have passed and hence we are in agreement with ld. DR that the assessee has not brought o record any material to show that it has intention to revive the business activities. Though the ld. AR submitted that steps are being taken to revive the business yet we are unable to accept his contention f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... expenditure aggregating to ₹ 35.14 crores under the following heads which has been reimbursed by the Apollo: Sr. No. Particulars Amount (Rs. In lacs) I EMPLOYEES i) Salaries, wages and bonus 2,345.76 ii) Contribution to Provident and other funds 183.5 iii) Welfare Expenses 17.98 iv) Gratuity 138.93 v) Leave Encashment Provision Nil II MANUFACTURING ADMINISTRATIVE AND SELLING vi) Power and fuel consumption ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which ATL has agreed. 8.11 The obligation of the appellant under the arrangement had been provided in clause 6 of the agreement which stipulates as under: 6 In addition to payment of lease rental as aforesaid, ATL will reimburse to PTL actual expenses on account of the following also: a) Power of fuel b) Store and spares c) Repair and maintenance d) Personnel cost e) Expenses under any other head relatable to production manufacture of tyres/tubes. 8.12 It was specifically also agreed that appellant was responsible for compliance of all other statutory rules/regulations including labour, welfare, legislations pertaining to the employees/workmen employed by it and engaged in the manufacturing activities at the plant of PTL. It is a matter of record and undisputed that risk relating to operation of plant is also with appellant. 8.13 Thus having regard to the aforesaid factual position we are of the considered opinion that appellant is engaged in commercial exploitation of assets of the plant by way of operating the plant for manufacture of ty ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d conveyance expenses 1.66 1.66 x) Director s Fee 3.70 3.70 xi) Payment to statutory auditors 1.47 1.47 Xii) Legal and professional charges 25.39 7.17 xiii) Printing, stationery, postage, telegram telephone etc. 4.69 4.69 xiv) Re-imbursement towards utilization of computer and other ATL facilities 34.45 34.45 xv) Lease premium of lease hold land written off - - xvi) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 98/- and rent paid of ₹ 7,06,750/- u/s. 57(iii) of the Act. Thus, Assessing Officer himself has made a departure by allowing expenditure in the instant year which has been incurred wholly and exclusively for business of the appellant company. 8.15 Furthermore, even judicially speaking the Apex Court vide judgment rendered on 11.8.2016 in the case of Rayala Corporation (P) Ltd. vs. ACIT 386 ITR 500 held where a company had only one business i.e. leasing of property and earning rent therefrom that even if letting of property is not main business as per Memorandum of Association such income should be assessed as business income and not house property. In arriving at the above conclusion, the Hon ble Apex Court followed the judgment dated 9.4.2015 of Chennai Properties and Investments Ltd. vs. CIT 373 ITR 673 (SC) wherein it was held that if an assessee is having a house property and by way of business it is giving property on rent and if it is receiving rent from the said property as its business income, the said income, even if in the nature of rent, should be treated as Business Income because the assessee is having a business of renting his ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... we are of the view that the law laid down by this Court in the case of Chennai Properties (supra) shows the correct position of law and looking at the facts of the case in question, the case on hand is squarely covered by the said judgment. 10. Submissions made by the learned counsel appearing for the Revenue is to the effect that the rent should be the main source of income or the purpose for which the company is incorporated should be to earn income from rent, so as to make the rental income to be the income taxable under the head Profits and Gains of Business or Profession . It is an admitted fact in the instant case that the assessee company has only one business and that is of leasing its property and earning rent therefrom. Thus, even on the factual aspect, we do not find any substance in what has been submitted by the learned counsel appearing for the Revenue. 11. the judgment relied upon by the learned counsel appearing for the as squarely covers the facts of the case involved in the appeals. The business of the company is to lease its property and to earn rent and therefore, the income so earned should be treated as its busine ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tribunal holding income to be income from other sources, the income from arrangement with Apollo is business income. 8.21 Moreover it is also seen that the Assessing Officer has invoked section 56(2)(ii) of the Act and not section 22 of the Act which reads as under: 56(2) In particular, and without prejudice to the generality of the provisions of sub-section (1), the following incomes, shall be chargeable to income-tax under the head Income from other sources , namely:- (ii) income from machinery, plant or furniture belonging to the assessee and let on hire, if the income is not chargeable to income-tax under the head Profits and gains of business or profession . 8.22 Section 56 of the Act being the residuary head of income under the frame work of the Act, can be resorted to only if an income is not chargeable under any other specific head of income. Section 56 of the Act which comes into play only if all other heads of income are excluded specifically. 8.23 The Apex Court has delved upon the issue in series of judgments. In the case of CEPT v. Shri Lakshmi Silk Mills Ltd. 20 ITR 4 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e intention was not to part with the assets, but to lease it out for a temporary period as a part of exploitation, it could not be said that no business was carried on and the income derived by the Company from letting out the machinery was only rental income. There was never any act indicating that the company never intended to carry on the business in the future. Also in the case of CIT v. Mysore Wine Products Ltd. 370 ITR 102 (Kar), it was concluded as under: In such circumstances, the income derived by way of lease rent from the letting out of its assets was assessable to tax under the head Profit and gains of business . Whether a particular income is income from business or from investment must be decided according to the general commonsense view of those who deal with those matters in the particular circumstances and the conduct of the parties concerned. In the above judgment it was noted that the Apex Court in the case of S.G. Mercantile Corpn. (P) Ltd. v. CIT has held that, the residuary head of income can be resorted to only if none of the specific heads is applicable to the income in question; it comes into operation only after the preced ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t may have to consider it on merits, because, strictly speaking the principle of res judicata may not apply to such a case. That in fact, is the effect of the decision of this court in the Amalgamated Coalfields Ltd. and Anr. V. the Janapada Sabha, Chhindwara (1963) supp. 1 SCR 172. In our opinion, the said general observations must be read in the light of the import fact that the order which was challenged in the second writ petition was in relation to a different period and not for the same period as was covered by the earlier petition. But as far as a challenge to the same assessment order is concerned, it was held:- that if constructive res judicata is not applied to such proceedings a party can file as many writ petitions as he likes and take one or two points every time. That clearly is opposed to considerations of public policy on which res judicata is based and would mean harassment and hardship to the opponent. Besides, if such a course is allowed to be adopted, the doctrine of finality of judgments pronounced by this Court would also be materially effected. We are, therefore, satisfied that the second writ petition filed by the appellant in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ments Ltd. (supra) and the fact that Memorandum of Association of appellant was not considered held that income is taxable as business income. It was held therein as under: 15. There is another aspect of the matter. Though the appellant had relied on the Memorandum in support of its contention that it was carrying out business by letting out the property, however, neither the Assessing Officer nor the Tribunal, which had recorded the submission of the appellant in paragraph 2 of its order had considered the issue at all from that angle. Since the CIT(A) while allowing the appeal of the appellant had referred to the Memorandum, it was incumbent on the part of the Tribunal to deal with the said Memorandum instead of denying deduction on the ground that the assessee in the preceding years throughout had declared the rental income under the head Income from house property . Though in Bharat Sanchar Nigam Ltd. (supra) it was held that the courts will generally adopt an earlier pronouncement of the law or a conclusion of fact unless there is a new ground urged or a material change in the factual position (paragraph 20) and though as evident from the or ..... X X X X Extracts X X X X X X X X Extracts X X X X
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