2017 (6) TMI 1274 - AT - Income Tax

Warehouse rent income - Business income - Held that - As decided in assessee s own case for AY 2007-08 the assessee is not providing warehousing service to one or two fixed customers. There is number of customers to whom warehousing service is provided. Apart from that the godwown control of the assessee; customer had no right of occupancy. As per the definition of business u/s 2(13) of the Act, business include adventure or concern in the nature of trade. The word adventure implies a calculative risk and systematic pattern and operation involved in a trade or practice that will fulfill the instant case of the assessee. It is providing round the clock service to the clients from various aspects from letting out of goods, their security etc. will definitely fall within the purview of business income. We also find from the order of the id. CIT(A) that the A.O. has accepted the claim of the assessee and treated the income as business income in assessment years 2005-06 & 2006-07. - decided in favour of assessee.

Summary

Issues:
1. Treatment of warehouse rent income as business income.
2. Compliance with Rule 46A of the Income Tax Rules, 1962.

Analysis:

Issue 1: Treatment of warehouse rent income as business income
The appeal by Revenue contested the order of Commissioner of Income Tax (Appeals) regarding the treatment of warehouse rent income of ?62,56,664 under the head business income. The Tribunal noted that the assessee was engaged in a complex commercial activity beyond mere letting out premises for warehousing. The income received was for providing business service facilities rather than rental income. The Tribunal emphasized that the assessee was not providing warehousing services to fixed customers but to numerous clients, indicating a business operation. Referring to the definition of business under section 2(13) of the Act, the Tribunal concluded that the activities undertaken by the assessee fell within the purview of business income. The Tribunal also highlighted that the Assessing Officer had previously accepted similar claims of the assessee for other assessment years. Therefore, the Tribunal upheld the order treating the income as business income, dismissing the Revenue's appeal on this ground.

Issue 2: Compliance with Rule 46A of the Income Tax Rules, 1962
The second ground of appeal raised by Revenue pertained to the allowance of all expenses by the Commissioner of Income Tax (Appeals) without complying with Rule 46A of the Income Tax Rules, 1962. Rule 46A mandates that if additional evidence is accepted by the Commissioner of Income Tax (Appeals), the Assessing Officer must be given an opportunity for cross-examination or clarification regarding the genuineness of such evidence. The Tribunal observed that no additional evidence was accepted by the Commissioner of Income Tax (Appeals) in the present case. As a result, the Tribunal dismissed the Revenue's argument of a violation of Rule 46A, stating that since no additional evidence was accepted, there was no breach of the rule. Therefore, the Tribunal rejected this ground of appeal by the Revenue.

In conclusion, based on the precedent set by the Tribunal in the assessee's own case for a previous assessment year, the Tribunal found no merit in the Revenue's appeal. Consequently, the Tribunal dismissed the appeal by Revenue, affirming the order of the Commissioner of Income Tax (Appeals) regarding the treatment of warehouse rent income as business income and the compliance with Rule 46A of the Income Tax Rules, 1962.