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TMI Blog2021 (12) TMI 139X X X X Extracts X X X X X X X X Extracts X X X X ..... assessed as income from "House Property", basically by WT holding that the assessee did not provide any amenities nor rendered any service. 2.2. The Ld. CIT(A) ought to have appreciated the decision of the Hon'ble Supreme Court in the case of M/s Rayala Corporation Pvt. Ltd. [2016] 72 taxmann.com 255 (Mad)(HC) wherein held that income earned from an activity of leasing property and earning rent, to be brought to tax under the head of "Business Income". 2.3. The Ld. CIT(A) ought to have appreciated the decision of the Hon'ble jurisdictional High Court in the case of M/s NDR Warehousing Pvt. Ltd. [2015] 60 taxmann.com 255 (Mad)(HC) wherein held that in case of warehousing business, Th'T the income earned would fall under the head of ``Business Income". 3. For these and other grounds that may be adduced at the time of hearing. It is prayed that the order of the Ld. CIT(A) may be set aside and the order of the Assessing Officer be restored." 3. The brief facts of the case are that the assessee is in the business of providing warehouse and supply chain solution, filed its return of income for assessment year 2014-15 on 29.09.2014, declaring total income of Rs. 8, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rom business and such a question would depend upon the circumstances of each case, viz., whether a particular business is letting or not. This is so stated in the followi.ng words: "We think each case has to be looked at fr6m 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. We do not further think that a thing can by its very nature be a commercial asset. A commercial asset is only an asset used in a business and nothing else, and business may be carried on which practically all things. Therefore, it is not possible to say that a particular activity is business because it is concerned with an asset with which trade is commonly carried on. We find nothing in the cases referred, to support the proposition that certain assets are commercial assets in their very nature. In this case the assessee viewed its assets as providing ware housing solution and supply chain management and not merely as house property as evident from website content used for marketing its business. To exploit its warehouse the assessee uses commercial assets like logo (copied and pasted below from assessee's web ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Company. Hence it is concluded that the income received by assessee is assessable under the head income from business and profession. Hence the standard deduction claimed by the assessee is disallowable however the expenditures claimed in the P&L and Depreciation though not claimed by the assessee is allowed. The income is computed as follows: Business income: Profit before Tax : 11,66,72,573 Add: Depreciation As per CO Act : 93,60,735 Interest on TDS : 32,550 Interest on IT : 78,857 Donations : 11,175 Land expenses : 39,386 Loss on SPM Assets : 99,421 : 96,22,949 Less: Depreciation as per IT Act: 1,52,54,651 : 1,52,54,651 Business Income : 11,10,40,046 Assessable income : 11,10,40,046 Returned income : 8,48,87,075 Difference in income : 2,61,41,796 " 4. Being aggrieved by the assessment order, the assessee preferred an appeal before the CIT(A). Before the Ld. CIT(A), the assessee has reiterated its submissions made before the AO and argued that rental income derived from let out of premises is assessable under the head house property, but not under the head income from business or p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sing out of properties. The AR has pointed out that in the case of Chennai Properties and Investments Ltd., the main objective of the company was letting out of properties, whereas it is not so in the appellant's case. For the same reason, the appellant's case is distinguishable from the apex court's decision in the case of Rayala Corporation Pvt. Ltd. The AR has contended that only when as assessee treats the leased out assets as business asset and is in the business of letting out of properties, the rental income can be considered as business income. The AR has pointed out that in all those decisions, wherein the income was assessed under the head, 'Business Income' the assessee would have rendered several amenities to the tenants and the properties would have been managed as business assets. In the appellant's case, the asset was not treated as business assets, etc, and no amenities were rendered to the tenants. 4.3.3. I have perused the following particulars furnished by the appellant's AR which was already considered by the AO in the assessment order. (a) Memorandum and Articles of Association of the appellant company, (b) Lease deed dated 07-03-2013 between the appel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t since assessee had acquired leasehold right in land for more than 12 years, it was to be regarded as 'deemed owner' of premises by virtue of section 27 (iiib) - Accordingly, income earned from letting out shops and stalls was taxed under head 'income from house property' - Tribunal as well as High Court upheld order of Assessing Officer - Whether since assessee had not established that it was engaged in any systematic or organized activity of providing service to occupiers of shops/stalls, mere fact that object clause of partnership deed mentioned that business of assessee was to take premises on rent and to sub-let same, was not sufficient to conclude that income in question was taxable as business income - Held, yes - Whether, therefore, impugned order passed by authorities below was to be confirmed - Held, yes [Paras 16 and 18] [In favour of revenue] 4.3.7 In the aforesaid decision, the apex court has held that a clause in the objects of an assessee, is not a conclusive proof to determine its activity and whether an assessee is into a business activity or not is to be determined on facts. In the aforesaid decision, the apex court has referred to the decision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... accept the appellant's declaration of rental income under the head, 'House Property' and to allow statutory deduction of 30% u/s 24(a) of the IT Act. The appellant's grounds are allowed. Since the income is to be assessed under the head - House Property, the depreciation allowed by the AO on their property should be withdrawn." 5. The Ld. DR submitted that the Ld. CIT(A) has erred in directing AO to assess rental income under the head income from house property by relying order of Commissioner of Income Tax (Appeals) -15, Chennai in the case of M/s. Singhvi Developers Pvt Ltd. in ITA No. 271/2016-17 dated 28.02.2019, without comparing facts of the present case to facts considered by the Ld. CIT(A) in the above case. The Ld. DR further submitted that the Hon'ble Supreme Court in the case of M/s. Rayala Corporation Pvt. Ltd., (2016) 72 Taxmann.com 255 (Mad), very clearly held that income earned from an activity of leasing property and earning rent, to be brought to tax under the head income from business. The Hon'ble jurisdictional High Court in the case of M/s. NDR Warehousing Pvt. Ltd., vs CIT (2015) 60 Taxmann.com 255 (Mad), held that in the case of warehousing business, income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Chennai Properties & Investments Ltd. vs CIT, (supra), where, it was held that if main objects of the assessee is to own, develop and letting out properties, then rental income derived from said activities is assessable under the head 'income from business'. 8. We have given thoughtful consideration to reasons given by the AO in light of various arguments advanced by the assessee, in light of main objects of the assessee, and we ourselves do not subscribe to the reasons given by the AO to assess rental income derived from letting out properties under the head 'income from business or profession' for simple reason that the assessee's main object is warehouse and supply chain solutions, which is different from letting out of properties on rent. Further, the assessee did not render any amenities to the tenant so as to hold rental income under the head income from business or profession. The AO has not brought on record any evidence to substantiate his view of rental income to be assessed under the head income from business or profession, except stating that the main object of the assessee is into own and let out property on rental income. But in particular, the AO has not brought ..... X X X X Extracts X X X X X X X X Extracts X X X X
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