TMI Blog2022 (10) TMI 77X X X X Extracts X X X X X X X X Extracts X X X X ..... PREME COURT] and Raj Dadarkar Ass [ 2017 (5) TMI 586 - SUPREME COURT] all of which find place in the assessee s paper-book. Decided against assessee. - I.T.A. No. 75/JAB/2019 - - - Dated:- 29-9-2022 - Shri Sanjay Arora, Hon‟Ble Accountant Member And Shri Manomohan Das, Hon'ble Judicial Member For the Appellant : Shri Sapan Usrethe, Advocate For the Respondent : Shri Ravi Mehrotra, Sr. DR ORDER PER SANJAY ARORA, AM: This is an appeal by the Assessee directed against the Order by the Commissioner of Income Tax (Appeals)-1, Bhopal ( CIT(A) for short) dated 28/06/2019, dismissing the assessee s appeal contesting his assessment under section 143(3) of the Income Tax Act, 1961 ( the Act hereinafter) dated 25/03/2016 for Assessment Year (AY) 2013-14. 2. The sole issue arising in the instant appeal is the head of income under which the rental from his house property let by the assessee to M.P. Warehousing and Logistics Ltd. for storage purposes is assessable to tax under the Act. While the assessee claims it to be business income, in the view of the Revenue, it is income from house property, assessable u/s. 22. The issue, which appears to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the purpose of any business or profession being carried on by him, income from which is chargeable to tax u/s. 28. Further, as clarified, the direct, or more so, source would determine the head of income, and not one under which the income may indirectly fall. The issue as to the head of income qua house property would thus have to in each case be decided on the basis of this framework. Letting, per se , as explained in CIT v. National Storage (P.) Ltd . [1963] 48 ITR 577 (Bom) (since affirmed in [1967] 66 ITR 596 (SC)), which thus becomes a means of realizing the annual value of a house property and, thus, is integral to it s ownership, is not business under the Act. The proposition, as we shall presently see, remains undiluted to date. Even if therefore the exploitation of property is one of the objects for which a company is formed, it may not, as clarified in East India Housing Land Development Trust Ltd. (supra), be assessable as business income. That the property being exploited is being used for commercial purposes would again matter little. This stands reiterated in Sultan Brothers (P.) Ltd. v. CIT [1964] 51 ITR 353 (SC), a constitution bench decision by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8 ITR 93 (Mad), relied upon by the Tribunal in Nutan Housing Society Pvt. Ltd. v. ITO [2007] 106 TTJ 137 (Pune), relied upon by the AO. 2.3 There may, however, be a case where letting of property (real estate) is itself being carried on by the assessee as his business, i.e., letting amounts to business? This assumes significance as in that case, ownership becomes incidental and integral to the business, which thus becomes the immediate source of income. Implicit in the concept, and an incident, of business, is a set of activities, i.e., something more and beyond letting, which is an incident of ownership alone, so that the provision of property is a part of or an incidence of that business. That the house property is fully equipped, viz. with furniture, electrical fittings, lifts, etc., as was the case in Sultan Bros . (supra), would only be a case of a composite letting, in which case the rent from building and that from other assets as business income. Subject of course to the lettings being not inseparable, in which latter case, for which the Hon ble Court devised a test, the entire rent would be assessable either as business income or as income from other sources. Then ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent Trust Ltd. (supra); Karanpura Development Co. Ltd. (supra); and Sultan Brothers Pvt. Ltd. (supra), which are in agreement, sum up, to our mind, the law in the matter, which is then to be applied to the facts of the case at hand. The only exception to the income by way of letting of his house property by the assesee being assessable as income from house property is thus where it is by way of an inseparable letting along with other assets, which exception is carved by the statute itself, or where the income derived is from carrying on an adventure or concern in the nature of trade, again, a matter of fact . This explains both our observation at the beginning of the discussion that the matter is a mixed question of fact and law (para 2), as well as the varying decisions in different cases. This understanding of law gets also vindicated by the reiteration of law, after a review of judicial precedents, by the Apex Court per its recent decision in Raj Dadarkar Associates v. Asstt. CIT [2017] 394 ITR 592 (SC). The findings by the Tribunal in Nutan Housing Society Pvt. Ltd . (supra), reproduced at para 1.8 (pg.3) of the assessment order, also project largely this understan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd by the Tribunal in Nutan Housing Society (supra), and as indeed in Raj Dadarkar Ass . (supra). The facts and their analysis 3.1 We may next advert to the facts of the case, on which, i.e., given the law, the decision in a particular case must turn on. To begin with, the warehousing receipt is from a single warehouse which, as it appears from the balance-sheet as on 31/03/2013 (PB pgs.42-44), is the only warehouse and, further, completed during the relevant year. Further, there is nothing to show if the warehouse is anything more than house property simpliciter. For example, if any equipment/s is installed therein; temperature regulators, etc. which would make it a special purpose vehicle (building), as an auditorium or a factory, to be used only for a defined purpose, or to make it a case of a composite letting, i.e., where the land and building and the plant and machinery are let together, as was found in Sultan Bros . (supra). No such assets are referred to in the hire agreement (PB pgs. 29-41) or even found in the assessee s balance-sheet. Further, though the hire agreement does point to sanitation and security services to be provided by the assessee, as Sh. Usr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... illary services, there is scope for income from such services, where in the nature of adding value, being computed separately. No occasion for the same arises in the instant case in the absence of any supportive services. Other Arguments 4.1 Shri Usrethe also relied on sec. 35AD(8)(c), defining specified business , which includes setting up and operating a warehouse facility for storage of agricultural produce . The provision, he would explain, though being in relation to a capital allowance, yet, inasmuch as it regards the letting of a warehousing as business income, makes it clear that the law regards the warehouse letting income as business, with indeed codes being allotted to different businesses, i.e., by the Department itself, to be used while filing the return of income (PB pgs. 49-50). The argument, though persuasive, would not be of assistance to the assessee. Business stands defined in s. 2(13) in an inclusive manner, case law on which is legion. The common thread, even as apparent from the bare language of the defining provision, as also explained by the Bench during hearing, is the conduct of activity of trade, commerce or manufacture or in the nature thereo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and followed the order for the earlier year. That is, unless found distinguishable on facts or in view of the changed position of law. There is, it needs to be appreciated, no estoppel against law. Needless to add, there is no such finding; not even a whisper to the earlier assessment, nor indeed any finding in the matter in the order for AY 2014-15. Being, thus, sans any finding and sub silentio on this aspect, how could the same, then, bind the AO for the current year, whose finding/s, rather, stands since merged with that by the first appellate authority. Further, being without any finding in the matter, explaining the reason for a change in stand in the assessment for AY 2014-15, given the definite finding in the immediately preceding year, would make it per incuriam . In CIT vs. Kohinoor Tobacco Products Pvt. Ltd . [1998] 234 ITR 785 (MP), the Hon'ble jurisdictional High Court regarded an assessment of letting income from warehousing as business income, i.e., instead of as house property income, without enquiry, as per se erroneous and prejudicial to the interests of the Revenue. That is to say, the assessment (for AY 2014-15), relied upon, is itself erroneous and ..... X X X X Extracts X X X X X X X X Extracts X X X X
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