2010 (9) TMI 1161 - AT - Income Tax

Summary

Issues Involved:
1. Whether the rental receipts should be treated as business income or property income.
2. Application of the principle of consistency in income-tax proceedings.

Summary:

Issue 1: Treatment of Rental Receipts
The Revenue's appeal contested the CIT(A)'s direction to treat rental receipts of Rs. 18,83,616 as business income instead of property income. The assessee-company, formed in 1987, let out part of its cold storage to Bajaj Auto Ltd. and Maharashtra Scooters Ltd. since 1991. The rental income had consistently been assessed as business income under s. 143(3) of the IT Act, 1961. The AO, however, treated the rental income as "income from house property" for the assessment year 2003-04, citing the absence of agreements with the tenants and the settled position of law.

Issue 2: Principle of Consistency
The CIT(A) upheld the assessee's claim, emphasizing the principle of consistency in income-tax proceedings, despite the non-applicability of res judicata. The CIT(A) referenced the Supreme Court decisions in Radhasoami Satsang vs. CIT, CIT vs. Narendra Doshi, and CIT vs. Shivsagar Estate, noting that the AO had not provided any new facts to justify a departure from the earlier consistent treatment of the income as business income.

Tribunal's Analysis and Decision:
The Tribunal noted that the assessee had been consistently assessed under s. 143(3) as deriving business income from the rental of its cold storage. The AO's departure from this consistent treatment lacked new material facts or justification. The Tribunal referenced the case of the assessee's sister concern, Goel Builders, where similar rental income was treated as business income, a decision upheld by the Allahabad High Court. The Tribunal reiterated the principle of consistency, as established in Radhasoami Satsang vs. CIT, and found no justifiable reason for the AO's different view in the current year.

Conclusion:
The Tribunal upheld the CIT(A)'s order, maintaining that the rental receipts should be treated as business income, and dismissed the Revenue's appeal. The Tribunal emphasized the importance of consistency in tax assessments unless justified by significant changes in facts or circumstances.