9911796707
TMI Blog1996 (3) TMI 538X X X X Extracts X X X X X X X X Extracts X X X X ..... h April, 1984. The main objects of the assessee-company was to carry on the business of leasing, hiring, selling, letting, hire purchase and hire purchase financing of all types of plant and machineries, industrial and office equipments, appliances, vehicles, land and buildings, real estates, movable and immovable properties and assets acquired for manufacturing, processing, mining, transportation, electricity generation, shipping, construction, etc. One of the objects of the company was also to carry on business as an investment company. The assessee purchased by an agreement dated 26th June, 1984, three flats in a building called Dashineshwar situated at 10 Hailey Road, New Delhi, for a consideration of ₹ 15,92,500. This money was given to it by its holding company Suryodaya Investment Trading Co. Ltd. as loan free of interest. All these three flats numbering 30, 31 and 32 and measuring 2,000 sq. ft., 1,450 sq. ft. and 1,450 sq. ft. respectively, were let out to one of its sister concerns Lohia Machines Ltd. for a compensation of ₹ 36,000 per year. During the previous year relevant to the assessment year 1987-88 the assessee-company had received a security deposit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s part of the trading receipts and should be brought to tax under the head `Business'. 6. Before us, the learned counsel for the assessee has reiterated the contentions as made out before the Commissioner (Appeals) and reliance has been placed on the various decisions like the following : Seth Banarsi Das Gupta v. Commissioner (1977) 106 ITR 559 (All) Commissioner v. Indermani Jatia (1970) 77 ITR 133 (All) New Savan Sugar Gur Refinning Co. Ltd. v. Commissioner (1969) 74 ITR 7 (SC) CEPT v. Shri Lakshmi Silk Mills Ltd. (1951) 20 ITR 451 (SC) Sultan Brothers Pvt. Ltd. (1964) 51 ITR 353 (SC) Commissioner v. National Storage Pvt. Ltd. (1963) 48 ITR 577 (Bom) Commissioner v. National Storage Pvt. Ltd. (1967) 66 ITR 596 (SC) Apart from the above, he has cited some 28 cases, list of which is enclosed along with the written submissions and placed on file. 7. The Commissioner (Appeals) has relied on the decision of the Supreme Court in the case of East India Housing Land Development Trust Ltd. v. Commissioner (1961) 42 ITR 49 (SC) and rejected the claim of the assessee. He also observed that the various case law relied upon by the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from those of ordinary house-owner turning to profitable account the property of which he is the owner, the income derived is income from property chargeable under section 9 irrespective of whether the operations are carried on by a company one of whose objects or even the sole object is to indulge in the activity of earning income from house property. Thus, where house property is given on lease or licence basis for earning income therefrom, the true character of the income derived is income from property falling under section 9. The said character is not changed and the income does not become income from trade or business if the hiring is inclusive of certain additional services such as heating, cleaning, lighting or sanitation, which are relatively insignificant and only incidental to the use and occupation of the tenements. 11. Even though the above case was decided by the Hon'ble Bombay High Court against the Revenue on the ground that the subject which was hired out was a complex one, the above principle still holds good. Further, the case was affirmed by the apex Court in the case of National Storage Pvt. Ltd. (supra) reported in (1967) 66 ITR 596 (SC). In the ligh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ence if the assessee was a company which had been incorporated with the object of buying and developing landed properties and promoting and setting up 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 markets would not be taxed as Business income under section 10 of the Act, to which a more detailed reference would be made hereafter, but under section 9 of the Act. A concrete instance of this type is afforded by the case of East India Housing Land Development Trust Ltd. v. Commissioner (1961) 42 ITR 49 (SC).'' The Court went on to observe that in that case, there was no finding that the company was the owner of the property in question and so, it was not considered whether the income was assessable under the head `Property'. 13. In the instant case, there is a definite finding that the assessee owns three flats and so the income derived by letting out those three flats are assessable under the head `Property'. In this context, the Supreme Court's decision in the case of Karanpura Development Co. Ltd. v. Commissioner (1962) 44 ITR 362 (SC) is also releva ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ike factories, godowns and theatres which were clearly commercial assets and they were leased out either when there was lull or a temporary suspension of the main activity or the subject-matter of the lease was a complex one where the assessee rendered many other services. In some cases, the question involved was not whether the income was assessable under the head `House property' or `Business' but whether it was assessable under the head `Business' or `Other sources'. So, we are of the view that the cases on which the assessee has relied on are distinguishable and the facts of the present case are squarely governed by the ratio of the decision of the apex Court in the case of East India Housing Land Development Trust Ltd. (supra) and also the decision of the Bombay High Court in the case of National Storage Pvt. Ltd. (supra), which is also affirmed by the Hon'ble Supreme Court. So, we have to hold that the income in the present case is assessable under the head `Property' and not `Business'. This ground is rejected. 16. The next common ground is that the Commissioner (Appeals) erred in reducing the loss or income by not granting allowances and rel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or this year, there is no question of including such notional interest at all. Even for the other two assessment years 1987-88 and 1988-89, including such notional interest in the annual letting value is contrary to the decided cases in this regard. In this context, the learned counsel for the assessee has relied upon the following decisions : 1. Dewan Daulatrai Kapoor v. New Delhi Municipal Committee (1980) 122 ITR 700 (SC) 2. Mrs. Sheila Kaushish v. Commissioner (1981) 131 ITR 435 (SC) 3. Amolak Ram Khosla v. Commissioner (1981) 131 ITR 589 (SC) 4. Commissioner v. Satya Co. Ltd. (1994) 75 Taxman 193 (Cal). In the light of the above decisions, the learned counsel for the assessee argued that there was no basis at all for determining the annual value of the property by including the notional interest on the interest-free deposits received from the lessee. He has also argued that where the actual compensation received is less than the municipal rateable value, it is only the actual compensation received that can be taken into account. 20. The learned Departmental Representative, on the other hand, argued that where the amount received is more than the munic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the annual value has to be taken as the annual rateable value determined by the Delhi Municipal Committee. In the present case, we are of the view that the value for which the property might reasonably be expected to let from year to year within the meaning of section 23(1) (a) is not less than the municipal rateable value and, as such, the Commissioner (Appeals) was correct in giving the direction that the annual value should be taken at ₹ 58,212 which is the municipal rateable value. 23. We do not find any merit in the contention of the Revenue that the Commissioner (Appeals) has entertained additional evidence. The learned Departmental Representative mentioned that the alleged additional evidence was the fact that the municipal rateable value was ₹ 58,212. We are of the view that this evidence was required by the Commissioner (Appeals) for the proper disposal of the appeal and so he was entitled to take into consideration the municipal rateable value under the provisions of rule 46A(4) of the Income-tax Rules. However, in case, the municipal rateable value is higher for any of the years then, ₹ 58,212 which is the figure adopted by the Commissioner (Ap ..... X X X X Extracts X X X X X X X X Extracts X X X X
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