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TMI Blog2011 (8) TMI 488X X X X Extracts X X X X X X X X Extracts X X X X ..... property and not income from business" 3. The facts giving rise to these appeals, as we have gathered from the order of the Income Tax Appellate Tribunal, Allahabad, in deciding the Income Tax Appeals relating to Assessment Years 1989-90, 1990- 91, 1992-93 and 1993-94, are as follows:- "The assessee is carrying on business of import and sale of scientific instruments. The assessee also earned commission on sale of scientific goods manufactured by foreign companies and others. The assessee purchased premises No. 82 on 8th floor, Sakhar Bhawan, Nariman Point, Bombay in 1982. The assessee was having Regional Office, but by Memorandum of Understanding dated 7th November 1987, the assessee gave the property to Citibank on Leave and Licence basis. As per clause 3 of Memorandum of Understanding dated 7th November 1987, licence fee was payable at the rate of Rs. 1,50,000 per month and, therefore, annual licence fee of the building was Rs. 18,00,000. The building was occupied by the Citbank with effect from 6th February 1988. Subsequently, by agreement dated 4th November 1988, licence fee was fixed at Rs. 25,000 for the first two years. The assesee declared income from the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ining the annual letting value of the property. The AO, therefore, assessed the income from property No. 82 (8th floor), Sakhar Bhavan, Nariman Point, Bombay under the head 'Income from house property' and determined the annual letting value of the property at Rs. 22,70,497 as mentioned at page 13 of the assessment order. In first appeal, the CIT (A) considered the income from property as business income. The CIT (A) has discussed the reasons for his conclusion in paragraphs 15 and 16 of his order dated 23.9.1991. The Revenue felt aggrieved and filed appeal before the Tribunal". 4. The Tribunal relied upon CIT vs. Smt. Indermani Jatia [77 ITR 133 (Alld)]; O.R.M. M.S.P.S.V. Firm vs CIT [63 ITR 404 (SC)] and CIT vs National Storage Pvt Ltd [66 ITR 597 (SC)] and recorded findings in para 29 as follows:- "In view of the various decisions cited in the preceding paragraphs 11 to 22 it is clear that the assessee is deriving income from property No. 82, 8th floor, Sakhar Bhavan, Nariman Point, Bombay as owner of the property. Therefore the income from 82, 8th floor, Sakhar Bhavan, Nariman Point, Bombay is to be computed under the head 'Income from house ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .R. Agarwal submits that since the company continued to run its of the business and arrangement was made with the City Bank in the business interest of the company, the letting out of the building, was by way exploitation of the business assets, for making profit. He relies upon Para 3 (e) of the Memorandum of Association of the appellant company, which authorized the Company to purchase or otherwise acquire or dispose of by sale, lease or hire any other business or factory, or moveable or immoveable property, or any rights and privileges, which may be deemed necessary or convenient for the purposes of the Company's business. Clause 3 (e) of the Memorandum of Association of the Company is quoted hereunder:- "(e) To purchase or otherwise acquire or dispose of by sale, lease or hire any other business or factory, or moveable or immoveable property, or any rights and privileges, which may be deemed necessary or convenient for the purposes of the Company's business; and to amalgamate in part or whole, or to effect any other arrangement with any other business or concern, if conducive to the better working of the Company." 7. Sri R.R. Agarwal, has relied upon jud ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... come-Tax vs. New India Industries Ltd [(1993) 201 ITR 208 (Gujarat)] 4. Commissioner of Income-Tax and another vs. Mysore Intercontinental Hotels P. Ltd [(2010) 322 ITR 116 (Karnataka)] 5. Mangla Homes P Ltd vs. Income Tax Officer and others [(2010) 325 ITR 281 (Bombay) 9. We need not discuss all the judgements relied upon by the learned counsel for the department, as the principle of income from property is an income of profit and gain of business, or profit and gain from the house property have been clearly laid down by the Supreme Court. The test laid down by the Supreme Court in Universal Plast Ltd (Supra) case have been followed, in almost all the subsequent judgements. We may however refer to judgement in Mangla Homes P Ltd vs. Income Tax Officer and others [(2010) 325 ITR 281 (Bombay)]. 10. In Mangla Homes P. Ltd (Supra), the appellant - a private limited company was incorporated with the object of dealing in properties. The main object of the company, as contained in the memorandum of association, was to carry on business of dealing and investment in properties, flats, warehouses, shops, commercial and residential houses, and the ancillary ob ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be seen is whether the asset is being exploited commercially by the letting out or whether it is being let out for the purpose of enjoying the rent. The distinction between the two in a narrow one hand has to depend on certain facts peculiar to each cases. Pure and simple. Commercial asset like machinery, plant, tools, industrial sheds on godowns having high business potential stand on a different fooling from assets like land or building. (iv) If an assessee derived income from a commercial assets which is capable of being use as a commercial asset, then it is income from his business. Whether he uses that commercial asset himself for lets it out to somebody else to be used. The asset would not cease to be commercial asset simply because temporarily it was put out of use or it was let out to another person for his use. (v) So long as the Commercial asset is capable of being exploited as such, its income is business income irrespective of the manner in which the asset is exploited by the owner of the business. He entitled to exploit it to his best advantage and be may do so either by using it himself personally or by letting it out to somebody else. (vi) If ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs Ltd vs. CIT [227 ITR 172 (S.C.)], Sultan Brothers Pvt Ltd vs. CIT [51 ITR 353 (S.C.)], Commercial Properties Ltd [AIR 1928 Cal 456], East India Housing and Land Development Trust Ltd vs CIT. [42 ITR 19 (S.C.)], Punjab National Bank Ltd vs. CIT [141 ITR 886 (Del)], CIT vs. Indian Metal and Metallurgical Corporation [215 ITR 424 (Mad.)], CIT vs. Arvindkumar Odhavij [213 ITR 551 (Bom)], and other cases, it did not apply the principle laid down by the Supreme Court in Universal Plat Ltd (Supra) to the facts of the present case. 13. If we apply the tests laid down by the Supreme Court in Universal Plast Ltd, to the facts of the present case, we find that all the assets of the business were not rented out by the appellant company. It was doing the main business of manufactures, imports, purchases and dealing in scientific apparatus, chemicals, chemical products, articles of glass, metal, wood, paper etc., more or less connected with science, as given clause 3 (a) of the memorandum of association. Out of the three properties at Mumbai, the property in dispute was being used for its Regional Office. In the interest of the company, it decided to let out one of its properties, to ..... X X X X Extracts X X X X X X X X Extracts X X X X
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