MARWAR TEXTILES AGENCY PVT LTD Vs. ITO 5 2 3
INCOME TAX APPELLATE TRIBUNAL
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K.C. Singhal, Judicial Member -
(1.) THOUGH various grounds have been raised by the assessee but the effective ground is one i.e., whether charges received by the assessee from different parties on account of user of the property owned by the assessee are assessable under the "income from house property" or under head "profits and gains from business or profession".
(2.) Briefly stated, the facts are that the assessee is the owner of an immovable property situated at Pedder Road, Mumbai. This property, as per the assessee, was initially used for the purpose of its business of textile. However, on discontinuance of the said business, the company decided to allow the use of the property to other persons along with facilities like telephone etc., as per resolution dated 15.12.1993. Subsequently, the said premises was allowed to be used by various companies of assessee's group w.e.f. 1.4.1994 at a fixed monthly charge provided in the agreement. The copy of agreement with West Coast Paper Mills Ltd., is placed on record. It is stated that all the agreements are similarly worded though monthly charges are different, perhaps, depending upon the area used by the occupants. For the year under consideration, the assessee declared the income of Rs. 52,575/- under the head 'business income'. The relevant details are given below.
Statement showing yearwise recovery of establishment charges made
The Assessing Officer processed the return Under Section 143(1) of the Income-tax Act, 1961 (the Act). Subsequently, notice Under Section 148 was issued as, according to the Assessing Officer, the income should have been declared under the head 'income from house property'. In re-assessment proceedings, the Assessing Officer noted that this issue is under litigation since assessment year 1995-96 and the matter is pending before the High Court. He, therefore, treated the charges received by the assessee as rent from house property and consequently, determined the income from house property at Rs. 5,23,226/-. The other income was dividend income of Rs. 1168/-only which was exempt Under Section 10(33) of the Act. On appeal, the CIT(A) noted that in assessment years 1997-98 and 1998-99, the Tribunal had decided the issue in favour of the assessee by holding that income was in the nature of business income. However, he held that income was assessable under the head 'income from house property' in view of the latest judgement of hon'ble Supreme Court in the case of Shambhu Investment (P) Ltd. 263 ITR 143 (SC). Aggrieved by the same, the assessee is in appeal before the Tribunal.
The learned Counsel for the assessee vehemently assailed the orders of the CIT(A) by submitting - (i) that after the closure of earlier business carried on by the assessee, it was decided that the office premises should be exploited by way of running a business centre. Our attention was invited to the resolution passed by the Board of Directors on 15.12.1993 wherein it was resolved that its premises be made available along with facilities including telephone, etc., for office use on such terms and conditions as may be deemed fit. He also drew our attention to one of the agreements executed on 4th January, 1994 wherein West Coast Paper Mills Ltd., was allowed to use the premises of the assessee along with the facilities i.e., use of office equipments, telephones, vehicles, etc., against fixed charge of Rs. 5,000/- per month; (ii) no specific area was allotted to the occupant and ultimate control over the property remained with the assessee; and (iii) it is not a case of letting out of property since no tenancy is created under the agreement. The agreement was merely leave & licence agreement. In support of his submissions, he relied on the decision of Gujarat High Court in the case of Saptarshi Services Ltd., 265 ITR 379 as well as the decision of the Tribunal in the case of PFH Mall & Retail Management Ltd. 298 ITR (AT) 371 (Kol) for the proposition that income derived from the activity of running of a business centre or exploitation of property for commercial use must be assessed as business income under the head "profits and gains from business or profession". He also relied on the decision of hon'ble Supreme Court in the case of Karnani properties Ltd., 82 ITR 547 wherein it was held that service charges received by the assessee on account of supply of electric current, provisions of hot and cold water, scavenging and lift services etc., were assessable as business receipts.
(3.) ON the other hand, the learned DR has referred to the decision of hon'ble Supreme Court in the case of Shambhu Investment (P) Ltd. 263 ITR 143 (SC) wherein it was held that income derived from letting out the furnished accommodation is assessable under the head 'income from house property' and not as 'business income'. He also relied on the decision of hon'ble Supreme Court in the case of East India Housing and Land Development Trust Ltd. 42 ITR 49 wherein it has been held that even in the case of an assessee engaged in the business of developing the market, the income from letting out has to be assessed as income from house property being the specific head.;
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