2023 (2) TMI 293 - AT - Income Tax

Correct head of income - receipt from warehousing charges - income from house property or income from business - assessee is a state government company engaged in the business of warehousing - HELD THAT - As decided in assessee own case 2017 (12) TMI 669 - CHHATTISGARH HIGH COURT warehousing charges received by the assessee had rightly been offered by it to tax as its income from business. We, thus, in terms of our aforesaid observations set-aside the order of the CIT(Appeals) and direct the A.O to assess the warehousing charges received by the assessee under the head Income From Business . Decided in favour of assessee.

Issues Involved:
1. Validity of the order passed by the CIT(Appeals)-I, Raipur.
2. Classification of warehousing charges as "Income from house property" versus "Income from business."

Issue-wise
Detailed Analysis:

1. Validity of the Order Passed by CIT(Appeals)-I, Raipur:
The assessee challenged the order passed by the CIT(Appeals)-I, Raipur, dated 05.11.2018, which upheld the assessment order by the A.O under Sec. 143(3) of the Income-tax Act, 1961, for the assessment year 2014-15. The assessee contended that the order was "bad in law as well as on facts."

2. Classification of Warehousing Charges:
The primary contention revolved around whether the warehousing charges should be classified as "Income from house property" or "Income from business." The A.O had classified the income from warehousing under "Income from house property," which was upheld by the CIT(Appeals).

Arguments by the Assessee:
- The assessee, a state government company engaged in warehousing, argued that the income from warehousing was its business income, relying on the Supreme Court judgment in Chennai Properties and Investments Ltd. Vs. CIT (2015) 373 ITR 673 (SC).
- The assessee also cited the ITAT, Raipur Bench's decision in its own case for A.Y.2003-04 to 2008-09, where the income from warehousing was classified as business income.

Observations by A.O and CIT(Appeals):
- The A.O rejected the assessee's claim, stating that the principles of res judicata do not apply to income-tax proceedings, and the previous ITAT decision was not binding as it was challenged before the Hon'ble High Court of Chhattisgarh.
- The CIT(Appeals) supported the A.O's view, emphasizing that the corporation's primary purpose was to provide warehousing facilities, not to undertake the business of constructing buildings and renting them out. Hence, the income should be classified as "Income from house property."

Tribunal's Analysis:
- The Tribunal deliberated extensively on whether the warehousing charges should be taxed as business income or house property income.
- It referenced its prior decision in the assessee's case for A.Y. 2003-04 to 2008-09, where it was concluded that warehousing charges should be taxed as business income. The Tribunal noted the main functions and services provided by the assessee, differentiating between warehousing activities and mere property rental.
- The Tribunal cited the Karnataka High Court's decision in Karnataka State Warehousing Corp., which supported the classification of warehousing charges as business income.
- The Tribunal also referenced the Supreme Court's ruling in Chennai Properties and Investments Ltd., emphasizing that the nature of the assessee's activities and the systematic way in which warehousing was conducted justified classifying the income as business income.

Conclusion:
The Tribunal concluded that the warehousing charges received by the assessee should be classified as "Income from business." It set aside the order of the CIT(Appeals) and directed the A.O to assess the warehousing charges under "Income from business."

Final Judgment:
The appeal of the assessee was allowed, with the warehousing charges to be assessed as "Income from business." The order was pronounced under rule 34(4) of the Appellate Tribunal Rules, 1963, by placing the details on the notice board.

← Previous Next →