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2016 (10) TMI 1005 - AT - Income TaxIncome from business - Warehousing Receipts - Nature of income - Income from House property OR busniss income - Held that - Hon ble Supreme Court in M/s. Rayala Corporation Pvt. Ltd. Vs. ACIT (2016 (8) TMI 522 - SUPREME COURT ) had held that in the facts of the said case where the assessee company had only one business and that was of leasing its property and earning rent therefrom; on such factual aspect it was held that rental income was taxable under the head Profits & Gains of business and profession . It was further held by the Hon ble Supreme Court that where the business of company was to lease its property to earn rent and therefore the income so earned was to be treated as its Business income . Following the said ratio laid down by the Hon ble Supreme Court and in view of the ratio laid down by the Pune Bench of Tribunal in M/s. Nutan Warehousing Company Pvt. Ltd. Vs. DCIT (2006 (8) TMI 286 - ITAT PUNE-A ) thus hold that the warehousing receipts are to be assessed as Income from business in the hands of assessee
Issues Involved:
1. Classification of warehousing receipts as 'Income from Business' or 'Income from House Property'. Issue-wise Detailed Analysis: 1. Classification of Warehousing Receipts: The primary issue in this case was whether the warehousing receipts should be classified as 'Income from Business' or 'Income from House Property'. The assessee argued that the income from warehousing should be treated as business income since they provided additional services beyond just renting out space. However, the Revenue contended that the income should be classified as 'Income from House Property' as the primary activity was letting out the premises. Facts of the Case: The assessee had been engaged in the business of warehousing for several years and had declared warehousing receipts as business income. The Assessing Officer (AO) observed that the receipts were subject to tax deduction under section 194I of the Income-tax Act, 1961, under the head 'Rent'. The AO noted that the assessee failed to provide sufficient evidence of additional services and expenses, thus classifying the income as 'Income from House Property'. This was upheld by the Commissioner of Income Tax (Appeals) [CIT(A)], who relied on the precedent set by the Pune Bench of Tribunal in the case of Nutan Warehousing Company Pvt. Ltd. Arguments and Judgments: The assessee cited recent Supreme Court judgments in M/s. Rayala Corporation Pvt. Ltd. vs. ACIT and Chennai Properties & Investments Ltd. vs. CIT, which supported the classification of such income as business income. The Tribunal in the second round of Nutan Warehousing Company Pvt. Ltd. vs. DCIT also ruled in favor of classifying warehousing receipts as business income, taking into account the Supreme Court's decisions. Tribunal's Findings: The Tribunal noted that the assessee's primary business was warehousing, as indicated by their partnership deed and the nature of their operations. The Tribunal emphasized that the dominant activity was warehousing and that leasing was incidental and subservient. The Tribunal also observed that the assessee provided essential services such as supervision, loading, unloading, handling, security, and transportation, which substantiated the claim of business income. The Tribunal relied on the Supreme Court's rulings, which stated that if leasing is part of the business operations, the income should be classified as business income. Conclusion: The Tribunal concluded that the warehousing receipts should be assessed as 'Income from Business' based on the dominant nature of the assessee's activities and the provision of additional services. The Tribunal reversed the CIT(A)'s order and directed the AO to treat the income as business income for the relevant assessment years. The appeals for the subsequent years and related cases were similarly decided in favor of the assessee, following the same reasoning. Final Order: All the appeals of the assessee were allowed, and the warehousing receipts were directed to be assessed as 'Income from Business'. The order was pronounced on October 14, 2016.
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