TMI Blog2021 (12) TMI 139X X X X Extracts X X X X X X X X Extracts X X X X ..... income from house properties . CIT(A) after considering relevant facts has rightly directed the AO to assess income derived from letting out of properties under the head income from house property. Hence, we are inclined to uphold findings of the Ld. CIT(A) and dismiss appeal filed by the Revenue. - ITA No. 3324/Chny/2019 - - - Dated:- 30-11-2021 - SHRI MAHAVIR SINGH, VICE PRESIDENT AND SHRI G. MANJUNATHA, ACCOUNTANT MEMBER Appellant by : Shri. AR V Sreenivasan, Addl. CIT Respondent by : Shri. D. Anand, Advocate ORDER PER G. MANJUNATHA, ACCOUNTANT MEMBER: This appeal filed by the Revenue is directed against the order passed by the learned Commissioner of Income Tax (Appeals)-15, Chennai, dated 18.10.2019 and pertains to assessment year 2014-15. 2. The Revenue has raised the following grounds of appeal: 1. The order of the Ld. CIT(A) is contrary to the law and facts of the case. 2. The Ld. CIT(A) erred in allowing the relevant income i.e. letting out of the warehouse properties on rent, under the head House Property when the primary source of income of the assessee in the business of providing warehouse property on rent. 2.1. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee the following facts needs to be considered: a) ln the `Notes forming part of Financial statement' under the head `A. Background, the assessee has stated as follows: SN Damani lnfra private Limited was incorporated under part lx of companies Act 1956, on March 30, 2010. It was formed to convert the erstwhile partnership firm M/s SN Damanim Enterprises into a private Limited company. The company is engaged primari.ly in the business of providing warehouse or property on rent. b) Currently the only source of Income is lease income. There is no other income. The lease income mainly comes from letting out of warehouses. This income is not just letting out of its properties. The income comes from providing warehousing services. Kind attention is invited to the website content of the assessee provided in Annexure A to this order. c) ln the case of Chennai Properties (supra) the Honb'le SC considered SLt(fan Brothers (P.) Ltd. v. CIT 51 lTR 353 and observed as follows 1.n Para 10: No doubt in Sultan Brothers P. Ltd.'s case (supra), Constitution Bench judgment of this Court has clarified that merely an entry in the object clause showing a p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the conclusion that it is a case of warehousing business and therefore, would fall only under the head business Income . In the present case also not only the objects but also the activities of the assessee goes to prove that the assessee is in warehousing business and infrastructure goes to prove that the assessee is in warehousing business and infrastructure industry. This is evident from verification of P L where security charges, lease rent payments for leased in properties, repairs and maintenance warehouse, advertisement charges, business promotion, consultancy charges, conference expense, medical expenses, professional fee and salary to securities were charges. All these expenditures are partly related to warehouse directly and partly to common administrative expenses to run the business of warehouse and infrastructure. g) The assessee constructed one IT Park at Karapakkam, Chennai as evident from the fixed asset schedule. The assessee lets out the same to Scope International Marg, an IT enabled Service Company. 2.5 Decision: In this instant case of the assessee the only source of income is from warehousing services. The company s one of the objective ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me Court in the case of Chennai Properties and Investments Ltd vs CIT, (supra) where main objective of the company is letting out of premises, whereas in the present case, the assessee is into simple letting out premises on monthly rental without providing any amenities to the tenants, which is not in the nature of systematic business activity. Therefore, he opined that rental income derived by the assessee from letting out of premises is assessable under the head income from house property, but not under the head income from business. Therefore, he directed the AO to accept income declared by the assessee under the head income from house property. The relevant findings of the Ld. CIT(A) are under: 6.3 I have perused the decision of CIT(A)-15, Chennai in the case of M/s. Singhvi Developers Pvt. Ltd. in the order vide ITA No. 271/2016- 17/CIT(A)-15 dated 28.02.2019. The relevant portion of the CIT(A)'s order is reproduced hereunder: 4.3.1. The only issue contested in appeal is the AO's assessment of rental income from letting out of property owned by the appellant company under the head, Business Income' offer rejecting the appellant s claim that it shoul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it is not the main objective of the appellant company. Perusal of the lease deed also reveals that the appellant did riot treat the property as business asset and did not render amenities to the tenants. Although the above documents were furnished before the Assessing Officer, the AO has not controverted the same. The AO s only observation is that the rental income is the only source of income for the appellant company. I do not agree with the AO s conclusion that, just because rental income is the only source for the appellant company, this same must be assessed as business become. 4.3.5. I have perused the decision of Hon ble Madras High Court in the case of Keyaram Hotels Pvt. Ltd. Vs. ACIT [2008] (300 ITR 118)(Mad.), which is briefly mentioned below. Section 22, read with section 28(i), of the Income-tax Act, 1961 - Income from house property - Chargeable as Assessment year 2001-02 Assessee - company was owner of a property and had earned income by letting it out - In its return of income, it had shown such income as business income - However, Assessing Officer assessed said leave income under head 'Income from house property' - Whether since on facts, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ss of letting out its properties. (c) The appellant did not render common amenities to the tenant so as to hold the rental income under the head, Business Income . (d) The AO has not brought on record and conclusive proof to substantiate assessment of rental income under the head, Business income . (e) The appellant has been consistently declaring rental income under the head, House Property . 4.3.9. From the above remarks and decisions relied on, I am of the considered opinion that the rental income declared by the appellant should be assessed under the head House Property and not under the head, Business Income . Therefore, the AO is directed to 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. 6.4 After perusing the appellant s submission with supporting documents and after perusal of the CIT(A) s decision in the case of M/ s Singhvi Developers Pvt. Ltd. mentioned above, I am convinced that the rental income received by the appellant is to be assessed under the head - Income from other sources as the appellan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... letting out of property for monthly rental without providing any amenities to the tenant and thus, the activity of simple letting out cannot be treated as a systematic business activity which is in the nature of trade and commerce. The Ld. AR further submitted that the Ld. CIT(A) has rightly distinguished decision of the Hon ble Supreme Court in the case of Chennai Properties and Investment Ltd vs CIT, (supra), in light of main objects of the company and held that in the case of Chennai Properties and Investments Ltd., the main object of company is to develop and let out properties, whereas, in the present case, it is a simple letting out of property on monthly rental. Therefore, he submitted that the Ld. CIT(A) has rightly apprised the facts in light of various evidences filed by the assessee to direct AO to assess income under the head income from house property and thus, order of the Ld. CIT(A) should be upheld. 7. We have heard both the parties, perused materials available on record and gone through orders of the authorities below. Admittedly, the main object of the assessee as per its Memorandum of Association is not into development and let out of properties. The assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t properties on rental income and further, the assessee is carrying out its objects by developing and letting out properties on rental income, it cannot be said that the assessee is into business of own, let out properties on rent. No doubt, the Hon ble Supreme Court in the case of Chennai Properties Investment Ltd vs CIT, (supra) has held that if main objects of the assessee company is into own, develop and let out properties on rent, then income derived from such activity should be assessed under the head income from business or profession . But, in the present case, the AO has failed to prove the fact that main object of the assessee is into own, develop and let out properties on rent. Therefore, rental income derived from letting out of properties cannot be assessed under the head income from business or profession in light of the ratio laid down by the Hon ble Supreme Court in the case of Chennai Properties Investments Ltd., vs CIT, (supra). 9. Be that as it may, in the latest decision of the Hon ble Supreme Court in the case of Raj Dadarkar and Associates vs ACIT (2017) 394 ITR 592 (SC), the Hon ble Apex Court has considered identical issue, and after considering it ..... X X X X Extracts X X X X X X X X Extracts X X X X
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