2017 (12) TMI 669 - HC - Income Tax

Nature of income - falling under income to business or income from house property - premises for the purpose of carrying out its obligations under warehousing transaction - Held that - The transactions are such that they have to be treated as one where the respondent carries on its activity of warehousing and in the course of such activity, utilizes its premises for the purpose of carrying out its obligations under warehousing transaction. Those do not contain the salient features of lease of immovable property and cannot be considered as one falling purely as utility of house property to generate income as such. We arrive at this conclusion on the basis of the findings rendered by the Tribunal through which it has reversed decision of the first appellate authority and the assessing authority after duly adverting and considering the relevant facts and materials and by assimilating the nature of the transaction of the assessee-corporation. The concept of letting of a property by an owner is clearly distinct in business parlance and commercial parlance from utilizing the premises available to a person for carrying out the activity of letting such premises to use, in the course of its activity, particularly warehousing. In this view of the matter, we are guided by the principles of law laid down in Sultan Brothers (1963 (12) TMI 4 - SUPREME Court) and we cannot but conclude that the findings rendered by the Tribunal essentially rest as mixed question of law and facts. - Decided against revenue

Summary

Issues involved:
1. Whether the activity of the respondent-assessee could be treated as generating income from business or generating income from house property for assessment under the Income-tax Act, 1961.

Analysis:
The High Court heard appeals filed by the Revenue regarding the assessment years from 2003-04 to 2008-09. The respondent-assessee, Chhattisgarh State Warehousing Corporation, was under scrutiny to determine if its activities should be classified as generating income from business or house property for tax assessment. Both parties presented arguments citing various court decisions to support their positions.

The primary issue was whether the High Court should interfere with the Tribunal's decision that reversed the first appellate court's ruling, determining that the income derived by the respondent-assessee should be classified as business income rather than income from house property. The Tribunal's order extensively discussed the nature of the respondent's activities, its business operations, and the contractual rights and obligations involved in its transactions. The Tribunal concluded that the income should be considered as business income based on the reasoning provided in its order.

The High Court considered the nature of the respondent's transactions as a mixed question of fact and law. It emphasized that the respondent's activities, governed by statutory authority, primarily involved warehousing transactions and did not align with the characteristics of lease of immovable property. The Court relied on the Tribunal's findings, which overturned the decisions of the lower authorities after thorough examination of the facts and materials related to the respondent's transactions.

Referring to the judgment in Sultan Brothers (P.) Ltd. v. CIT [1964] 51 ITR 353 (SC), the High Court highlighted the distinction between letting a property as a business activity and utilizing premises for conducting business operations like warehousing. The Court concluded that the Tribunal's findings were a mix of law and facts, indicating no substantial question of law for the Revenue to challenge. Consequently, the High Court dismissed the appeals filed by the Revenue.

In summary, the High Court upheld the Tribunal's decision, determining that the respondent's income should be treated as business income rather than income from house property based on the nature of its transactions and activities. The Court emphasized the importance of considering the business perspective in such assessments and found no grounds for the Revenue to appeal the decision.