2016 (12) TMI 751 - AT - Income Tax

Warehousing Receipts - nature of income - income from business OR Income from House property - Held that - The issue is squarely by earlier order of Tribunal in the case of M/s. Jaibhavani Warehousing Co. v. ITO (2016 (10) TMI 1005 - ITAT PUNE) and erstwhile partner Mr. Ramdas T Khutwad and following the same parity of reasoning, it is held that the income is assessable in the hands of assessee as Income from business . - Decided in favour of assessee

Summary

Issues Involved:
1. Assessability of warehousing receipts as 'Income from business' or 'Income from house property'.
2. Consideration of expenses related to bank interest on loan for construction of godown and Gram Panchayat tax paid on godown.

Issue-wise Detailed Analysis:

1. Assessability of Warehousing Receipts:

The primary issue in this appeal is the classification of income derived from warehousing activities. The assessee declared income from warehousing as 'business income'. However, the Assessing Officer and CIT(A) treated it as 'Income from house property'. The CIT(A) relied on previous decisions in similar cases, particularly the case of M/s. Jaibhavani Warehousing Co., where the Tribunal had assessed such income as 'property income'.

The Tribunal in the current case referred to its earlier decision in ITA No. 1005/PN/2016 and ITA No. 1006/PN/2016, where it held that warehousing receipts are to be taxed as 'business income'. The Tribunal emphasized that the assessee was engaged in providing warehousing facilities and other related services, which constituted a business activity. The Tribunal also noted the reliance on the Supreme Court’s decision in M/s. Rayala Corporation Pvt. Ltd. v. ACIT, where it was held that rental income from leasing property, when it is the primary business of the company, should be treated as 'business income'.

The Tribunal concluded that the warehousing receipts in the present case should be assessed as 'Income from business', thereby allowing the assessee's appeal on this ground.

2. Consideration of Expenses:

The assessee argued that the CIT(A) erred in not considering certain expenses, specifically bank interest on a loan for the construction of the godown and Gram Panchayat tax paid on the godown. The Tribunal did not provide a separate detailed analysis for these expenses but implicitly allowed them by ruling in favor of the assessee on the primary issue of income classification. Since the income was to be treated as 'business income', related expenses would naturally be deductible under business income provisions.

Conclusion:

The Tribunal allowed the appeal of the assessee, holding that the warehousing receipts should be assessed as 'Income from business'. This decision was based on the consistent view taken in similar cases and the Supreme Court’s ruling in M/s. Rayala Corporation Pvt. Ltd. The Tribunal did not explicitly address the specific expenses but implied their deductibility by classifying the income as 'business income'.

Order Pronouncement:

The appeal of the assessee was allowed, and the order was pronounced on November 11, 2016.