9911796707
TMI Blog2012 (11) TMI 323X X X X Extracts X X X X X X X X Extracts X X X X ..... ct in holding that the depreciation claimed on motor cars purchased and used in Iraq is allowable to the assessee? 3) Whether on the facts and in the circumstances of the case, the learned ITAT is correct in holding that the expenses claimed by the assessee under the heads provisions for completed expenses and expenses incurred on completed project is allowable even though the Department has not accepted the system of accounting followed by the assessee? 4) Whether the assessee was liable to pay income tax on the annual letting value of unsold flats owned by it under the head "income from house property"? 5) Whether the deduction permitted to the assessee under Section 32AB on interest income, was justified in the circumstances of the case?" 6) Whether the assessee could validly claim 100% depreciation on shuttering and scaffolding, for purchase of parts or sections of such equipments? 2. At the outset, counsel for the parties submit that the first three questions have been answered in a previous judgment of the Court, dated 25th September, 2012 in ITR 112-113/1997, in favour of the assessee. In this view of the matter, since identical facts are involved in these appeals, in r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t was submitted that unlike in the case cited, i.e. Azimganj Estates, the assessee in the present case did not actually let out the vacant flats; it was not even in the business of renting out its flats, unlike in the case of East India Housing and Land Development Trust v CIT (1961) 42 ITR 49 = (2002-TIOL-420-SC-IT), or in Sultan Brothers v CIT 54 ITR 353. Learned counsel submitted that letting out vacant or other properties was not part of the business or objectives of the assessee, and its case stands on a better footing than the other judgments, because in fact the assessee did not derive an income as a result of letting out. Counsel underlined that income tax is a levy on the income received, and not only notional calculations. In other words, the levy of income tax is for receipts, and not for notional amounts. It is also argued, in the alternative, that the flats cannot be taxed on the basis of their ALV, notionally because the owner is an occupant, and such occupation is in the course of, and for the purpose of business, as a builder. 6. This Court has considered the submission of parties. In East India Housing and Land Development Trust (supra), the assessee, incorporated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... operties not with the view to leasing them as property but to selling them or turning them to account even by way of leasing them out as an integral part of its business cannot be said to treat them as landowner but as trader The cases which have been cited in this case both for and against the assessee Company must be applied with this distinction properly borne in mind. In deciding whether a company dealt with its properties as owner, one must see not to the form which it gave to the transaction but to the substance of the matter. The Californian Copper Syndicate case ((1904) 5 T. C. 159) illustrates vividly dealings with mineral rights and concessions by a company as part of the objects of its business, or, in other words, in the doing of the business. The Calcutta cases and the case of Fry v. Salisbury House Estate Ltd.( 1930 A. C. 432) illustrate the contrary Proposition. There, the property, though dealt with by a company intending to do business, was dealt with as landowner. The intention in those cases was not to derive profit by business done with those properties but to derive .income by renting them out Where a Company acquires properties which it sells or leases out wit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ote and develop market thereon. It would also make no difference if the assessee was a company which had been incorporated with the object of buying and developing landed properties and promoting and setting no markets thereon. The income derived by such a company from the tenants of the shops and stalls, constructed on the land for the purposes of setting up market, would not be taxed as "business income" under section 10 of the Act..." 9. Again, in the case of Commissioner of Income Tax v Vikram Cotton Mills Ltd. AIR 1988 SC 460, it was observed that whether a particular income is income from business or from investment must be decided according to the general commonsense view of those who deal with those matters in the particular circumstances and the conduct of the parties concerned. In O. Rm. Sp. Sv. Firm vs Commissioner of Income-Tax 1960 (39) ITR 327 (Mad) the Madras High Court held that: "Under the Indian Income-tax Act, 1922, the income of an assessee is one and section 7 to 12 of the Act direct the modes in which the income-tax is to be levied. No one of those sections can be treated to be general or specific for the purpose of any particular source of income. They are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sing them as property but to selling them or turning them to account even by way of leasing them out as an integral part of the business, cannot be said to treat them as landowner but as trader." 11. This court is conscious about indivisibility of the levy of income tax, which are neither general or specific for the purpose of any source of income, as held in United Commercial Bank Ltd. v. CIT [1957] 32 ITR 688, where the Supreme Court observed that: "No one of those sections can be treated to be general or specific for the purpose of any one particular source of income; they are all specific and deal with the various heads in which an item of income, profits and gains of an assessee falls. These sections are mutually exclusive and where an item of income falls specifically under one head it has to be charged under that head and no other." 12. Likewise, in CIT v. Chugandas and Co. [1965] 55 ITR 17 it was held that business income was broken up under different heads under the Income-tax Act only for the purpose of computation of the total income and by that break up the income did not cease to be the income of the business. Therefore, the court observed that: "The heads describe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e) but on a notional basis, i.e. ALV and that it is therefore not sanctioned by law, in the opinion of the Court is meritless. ALV is a method to arrive at a figure on the basis of which the impost is to be effectuated. The existence of an artificial method itself would not mean that levy is impermissible. Parliament has resorted to several other presumptive methods, for the purpose of calculation of income and collection of tax. Furthermore, application of ALV to determine the tax is regardless of whether actual income is received; it is premised on what constitutes a reasonable letting value, if the property were to be leased out in the marketplace. If the assessee's contention were to be accepted, the levy of income tax on unoccupied houses and flats would be impermissible - which is clearly not the case. 14. As far as the alternative argument that the assessee itself is occupier, because it holds the property till it is sold, is concerned, the Court does not find any merit in this submission. While there can be no quarrel with the proposition that "occupation" can be synonymous with physical possession, in law, when Parliament intended a property occupied by one who is carryin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wered in favour of the assessee, and against the revenue. 18. The last question pertains to admissibility of 100% depreciation for plant. The assessee had claimed it was eligible for such benefit, in respect of each section of tabular scaffolding, used in its construction business. The AO on the other hand allowed 33% depreciation, holding that each section did not qualify for plant and the entire scaffolding and shuttering had to be taken as plant for the purpose of 100% depreciation only if its total cost was below Rs.5000/-. The CIT (Appeal) and ITAT however, reversed this view. Both the Appellate Commissioner and the ITAT took note of previous orders of the Tribunal. 19. Learned counsel for the Revenue contended that the depreciation granted was incorrect as Courts have to apply durability and functionality test if something is durable and not inter-connected or inter-dependent and has functional independent utility this alone can it be said to constitute "Plant". Reliance was placed upon the decision reported as CIT Vs. Vijaya Enterprises 332 ITR 235. Counsel for the Revenue emphasised that the Andhra Pradesh High Court specifically rejected a similar claim by builder for e ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
