OCEAN STRUCTURES P LTD Vs. ASST COMMISSIONER OF INCOME TAX
HIGH COURT OF DELHI
OCEAN STRUCTURES (P) LTD
ASST. COMMISSIONER OF INCOME-TAX
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(1.) THIS appeal under Section 260a of the Income Tax Act, 1961 (the `act') is directed against the Order dated 29. 9. 2006 passed by the Income Tax Appellate tribunal (the `tribunal') in ITA No. 2847/del/2002 for the Assessment Year 1999-2000. The Tribunal reversed the Order dated 15. 4. 2002 passed by the Commissioner of Income Tax [the `cit (A)'] and held that the income earned by the Assessee should be charged to tax under Section 22, i. e. , under the head "income from house property" and not under Section 28 of the Act, i. e. , under the head "profits and gains of business"
(2.) THE Assessee constructed a building named 'ctc Plaza' on a plot of land measuring 1200 sq. yds. at F-43, Kilokri Ring Road, Ashram Chowk, New Delhi ('the premises' ). The Assessee entered into a licence agreement dated 30. 9. 1998 with M/s Chhabra Silk and Sarees, Chandni Chowk, New Delhi under which the licensee was permitted to use the premises for its business of dealing in sarees, garments, fabrics, etc. for a consideration which was to be a percentage of the sale proceeds.
(3.) THE Assessing Officer (AO), after discussing the terms of the licence, came to the conclusion that the Assesssee and the licensee were not independent entities but were closely connected to each other. The AO concluded that the licence agreement had been drafted in a manner to make the receipt of the income from the house property appear to be business income calculated as a percentage of the sales of the licensee. The AO, as a matter of fact, further found that during the Assessment Year in question, the shareholding pattern of the assessee company had undergone a sea change. The partners of the licensee firm m/s Chabbra Silk and Sarees were the majority shareholders with a controlling interest over the Assessee company. The AO concluded that "the receipt of income in the hands of assessee company is based on sale made by the licensee over which the assessee company would have no control had both the entities been independent commercial entities. " Based on these findings, the AO concluded that the income had to be charged as income from house property and not as business income.;
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