- (1.) This order shall dispose of I T. A. Nos. 679 and 680 of 2008 as both the appeals have been filed by the same Assessee raising common questions.
(2.) Income-tax Appeal No. 679 of 2008 has been preferred by the Assessee under Section 260A of the Income-tax Act, 1961 (hereinafter referred to as ''the Act'') against the order dated January 11, 2008 passed by the Income-tax Appellate Tribunal, Amritsar Bench, Amritsar in I. T. A. No. 468(ASR)/ 20062, for the assessment year 2003-04, claiming the following substantial questions of law: (a) Whether the impugned order dated January 11, 2008 is sustainable in the eyes of law ? (b) Whether the Department can be permitted to take a different and contrary view in respect of the nature of income of the Appellant-company in the given facts and circumstances of this case ? (c) When any property is taken on lease for running a hotel and restaurant, and some portion of it is further let out for avoiding losses and expenditure, whether it can be said that this activity was not a business activity and income derived from sub-letting is not a business income ? (d) Whether the Income-tax Appellate Tribunal was justified in reversing the well reasoned order of the Commissioner of Income-tax (Appeals) ? (e) Any other substantial question of substantial law with the leave of the hon'ble court
(3.) The Assessee received income from letting out of a building but sought to treat the same as business income. However, the Assessing Officer treated the same as rental income relying upon a judgment of the hon'ble Supreme Court in Shambhu Investment P. Ltd. CIT J, 2003 263 ITR 143. The Commissioner of Income-tax (Appeals) reversed the said view and upheld the plea of the Assessee as follows: I have considered these submissions. The actions of the Appellant certainly partake of those of a businessman trying to minimise the expenditure reduce the losses due to non-completion of the hotel/ restaurant project. This is a finding of fact and is borne out by the above discussion. It is also a material fact that in the case of the jurisdictional High Court in Anand Rubber and Plastics P. Ltd., 1989 178 ITR 301, the lease period was even longer at even 19 years and yet the hon'ble Punjab and Haryana High Court held the letting out income as business income. The other distinguishing features, discussed earlier, also detract from applying the Supreme Court ruling in the case of Shambhu Investment P. Ltd. v. CIT, 2003 263 ITR 143. The Appellant has also pointed out that the cases relied upon by the Assessing Officer do not have similar facts and are distinguishable. I have already discussed earlier in this appellate order that the facts have to be viewed in totality. It is the motive, intention, and actual activity of the Appellant in dealing with the property that is relevant. There is also no choice but to acknowledge the fact that the Assessing Officer has made a major error in not noticing the fact that as per page 3 of the Assessing Officer's assessment order, the objectives of the company clearly include running a hotel/restaurant and serving food, drinks etc. The Appellant's action in applying for a pub licence, as evidenced from a copy of its application to the Excise and Taxation Department, in the year 2001, cannot also be brushed aside as it throws a clear light on its motives in running a hotel/restaurant and serving drinks. It is also a matter of fact that the Appellant in further leasing out only the upper floor (i.e. not the whole property) for a short limited period, and further agreeing to the restrictive lease conditions of removing its entire building (superstructure) on the expiry of the lease period, are the actions of a businessman in exploiting its property (asset), cutting its losses (expenses) and the tax treatment for the relevant year (assessment year 2003-04) in its books of account, support its stand and not of the Assessing Officer. The Appellant-company's application to the Excise and Taxation Department for a bar licence is a very relevant fact that has been not discussed by the Assessing Officer in the assessment order but directly supports the stand of the Appellant The jurisdictional Punjab and Haryana High Court ruling also support its stand, as discussed earlier. The Appellant's reliance on the case of CIT v. Bosotto Brothers Ltd, 1940 8 ITR 41 of the Madras High Court also supports its stand, as also in the case of CIT v. Shree Shew Shakti Mills P. Ltd., 1999 239 ITR 129 of the Calcutta High Court wherein the rental income from the superstructure on leasehold was held to be business income. Viewed in totality, all the facts support the stand of the Appellant. No house owner would leave a plot of land and then construct a building and agree to remove it on the conclusion of the relatively short lease period of 9 years. These activities partake instead of a business exploitation of an asset. It is also not necessary for the Appellant to have a number of activities or sources of income, as per the Assessing Officer, to prove that it is commercially exploiting one of the assets. There need be only one single asset for it to be exploited commercially and for the income to be assessed as income from business. In view of the above detailed discussion, the Assessing Officer's action in assessing the income as income from house property cannot be upheld. Hence, ground of appeal No. 2 is allowed and the Assessing Officer is directed to treat the income as business income.;