- (1.) WE have heard Sri R.R. Agarwal, learned counsel for the appellant. Sri A.N. Mahajan appears for the respondents.
(2.) IN these Income-tax Appeals under S. 260A IT Act, the appellant has raised the following substantial question of law : "Whether on the facts and in the circumstances of the case and on a true interpretation of agreement dt. 4th Nov., 1988 and the Memorandum of Association of the assessee company (cl. 3e), the Tribunal was legally correct in holding that the income earned by the assessee from leasing out on leave and licence fee the premises in question namely Premises No. 82, 8th Floor, Sakhar Bhawan, Nariman Point, Bombay should be assessed as income from property and not income from business ? The facts giving rise to these appeals, as we have gathered from the order of the Tribunal, Allahabad, in deciding the income-tax appeals relating to asst. yrs. 1989-90, 1990-91, 1992-93 and 1993-94, are as follows : "The assessee is carrying on business of import and sale of scientific instruments. The assessee also earned commission on sale of scientific goods manufactured by foreign companies and others. The assessee purchased premises No. 82 on 8th floor, Sakhar Bhawan, Nariman Point, Bombay in 1982. The assessee was having Regional Office, but by Memorandum of Understanding dt. 7th Nov. 1987, the assessee gave the property to Citibank on Leave and Licence basis. As per cl. 3 of Memorandum of Understanding dt. 7th Nov., 1987, licence fee was payable @ Rs. 1,50,000 p.m. and, therefore, annual licence fee of the building was Rs. 18,00,000. The building was occupied by the Citbank w.e.f. 6th Feb., 1988. Subsequently, by agreement dt. 4th Nov., 1988, licence fee was fixed at Rs. 25,000 for the first two years. The assesee declared income from the property under the head 'Business Income' but the AO assessed the annual letting value of the property at Rs. 22,70,497 as under : JUDGEMENT_929_TLALL0_2011s1.htm This computation of annual income has been given at p. 12 of the assessment order. The assessee has received deposit of Rs. 12,60,000 as per Memorandum of Understanding dt. 7th Nov., 1987. This advance deposit of Rs. 12,60,000 was received by the assessee as advance free of interest which was to be adjusted by Citibank during last six months of the terms of agreement. Similarly, amount of Rs. 5,10,000 was received by the assessee free of interest from the Citibank being six months compensation in advance relating to the compensation payable during 9th and 10th year as per agreement dt. 4th Nov., 1998. Under the agreement dt. 4th Nov., 1988, the licence fee @ Rs. 25,000 per month was determined for the first two years as against licence fee of Rs. 1,50,000 p.m. determined by Memorandum of Understanding dt. 7th Nov., 1987 with the Citibank. Presumably, the AO calculated the interest @ 15 per cent on the amount of Rs. 12,60,000 received as interest free advance under Memorandum of Understanding dt. 7th Nov., 1987 and the amount of Rs. 5,10,0000 received under agreement dt. 4th Nov., 1988 by the assessee company from the Citibank. The interest @ 15 per cent was calculated by the AO for the purpose of determining the municipal value of the property No. 82 (8th floor), Sakhar Bhavan, Nariman Point, Bombay for the purpose of determining the annual letting value because the assessee has received interest free advance from the Citibank. The assessee also received an amount of Rs. 1,07,50,000 by a separate agreement of the same date-4th Nov., 1988 as mentioned by the AO in the assessment order and this amount of Rs. 1,07,50,000 was also free of interest. Therefor? the AO calculated 15 per cent on the amount of Rs. 1,07,50,000 as the benefit enjoyed by the assessee for the purpose of determining the annual letting value of the property. The AO, therefore, assessed the income from property No. 82 (8th floor), Sakhar Bhavan, Nariman Point, Bombay under the head 'Income from house property' and determined the annual letting value of the property at Rs. 22,70,497 as mentioned at p. 13 of the assessment order. In first appeal, the CIT(A) considered the income from property as business income. The CIT(A) has discussed the reasons for his conclusion in paras 15 and 16 of his order dt. 23rd Sept., 1991. The Revenue felt aggrieved and filed appeal before the Tribunal".
(3.) THE Tribunal relied upon CIT vs. Smt. Indermani Jatia (1970) 77 ITR 133 (All); O.RM.M.SP.SV. Firm vs. CIT (1967) 63 ITR 404 (SC) and CIT vs. National Storage (P) Ltd. (1967) 66 ITR 596 (SC) and recorded findings in para 29 as follows : "In view of the various decisions cited in the preceding paras 11 to 22 it is clear that the assessee is deriving income from property No. 82, 8th floor, Sakhar Bhavan, Nariman Point, Bombay as owner of the property. Therefor? the income from 82, 8th floor, Sakhar Bhavan, Nariman Point, Bombay is to be computed under the head 'Income from house property' and not under the head 'Income from business'. The cases relied upon by the assessee's counsel are not applicable to the facts of the case of the assessee before the Tribunal." ;