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2007 (6) TMI 235 - AT - Income TaxClassification of income from hire charges of Janak Theatre - Business receipts Or under the head 'Income from house property' - HELD THAT - The case of the assessee falls within the situation as envisaged at Sl. No. 3 as in the present case all the assets of the business owned by the assessee have been leased out. If such is a situation then the period for which the assets are let out is a relevant factor. It has already been pointed out that the period of lease is short and thereafter the intention of the assessee is relevant to find out that whether assessee intents to get out of business altogether or he is intended to come back and restart the same. From the facts it is clear that after leasing out the property the assessee had come back to its business and had restarted the same. Thus, the assessee has fulfilled both these factors/tests and, therefore, applying the ratio of aforementioned decision of Hon'ble Supreme Court in the case of Universal Plast Ltd 1999 (3) TMI 15 - SUPREME COURT . it is to be held that such income was assessable as income from business. Thus, the Tribunal upheld the CIT(A)'s decision to treat the hire charges as 'Profit and gains of business or profession', emphasizing the temporary nature of the lease and the assessee's intention to continue its business. The Tribunal also stressed the importance of consistency in tax assessments and found that the judicial precedents cited by the assessee were applicable to the facts of the case.
Issues Involved:
1. Classification of income from hire charges of Janak Theatre. 2. Consistency in assessment approach by the department. 3. Applicability of judicial precedents to the facts of the case. Summary: Issue 1: Classification of Income from Hire Charges of Janak Theatre The primary issue was whether the hire charges received by the assessee from leasing Janak Theatre should be classified as 'Income from house property' or 'Profit and gains of business or profession'. The Assessing Officer treated the receipts as income from house property, while the CIT(A) directed that they be treated as business receipts. The Tribunal upheld the CIT(A)'s decision, noting that the theatre was leased temporarily due to difficult market conditions and the poor health of the Director. The Tribunal emphasized that the assessee had resumed its business activities after the lease period, indicating an intention to continue the business. Issue 2: Consistency in Assessment Approach The assessee argued that in previous and subsequent years, similar income was assessed as business income, and there was no material change in facts to warrant a different treatment for the year under consideration. The Tribunal agreed, citing judicial precedents that emphasize consistency in tax assessments unless there is a significant change in circumstances. The Tribunal referred to cases like CIT v. Neo Poly Pack (P.) Ltd. and Radhasoami Satsang v. CIT to support this view. Issue 3: Applicability of Judicial Precedents The Tribunal considered various judicial precedents to determine the correct classification of income. It relied on the decision in CIT v. Northern India Theatres (P.) Ltd., which held that income from leasing a cinema for a short period should be treated as business income if the assessee retains control over the business operations. The Tribunal also referred to the Supreme Court's decision in Universal Plast Ltd., which provided a framework for determining whether income from leasing business assets should be classified as business income. The Tribunal concluded that the facts of the case aligned with these precedents, supporting the assessee's claim. Conclusion: The Tribunal upheld the CIT(A)'s decision to treat the hire charges as 'Profit and gains of business or profession', emphasizing the temporary nature of the lease and the assessee's intention to continue its business. The Tribunal also stressed the importance of consistency in tax assessments and found that the judicial precedents cited by the assessee were applicable to the facts of the case.
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