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TMI Blog1998 (11) TMI 669X X X X Extracts X X X X X X X X Extracts X X X X ..... rticles of Association of the assessee company. The main object of the company as mentioned in its Memorandum of Association is found at page 22 according to which its main object, inter alia, is to establish, build, construct, purchase or otherwise acquire take on lease or sub-lease, run, conduct and operate warehouses, cold storage, dry storage and to provide facilities for storage of commodities, articles, things, preparation of all kinds and description, storage, godowns etc. It is clear that constructing inter alia of warehouses and doing business with those warehouses is one of the main objects of the assessee-company. In my understanding business can be conducted in many ways. Even leasing out the business assets and getting the leas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessment under this section and in no case does the Act regard income from ownership of buildings as profits of business. The Assessing Officer also took note of the ratio of East India Housing Land Development s case (supra) wherein it is said to have been stated that even a company incorporated with the object of promoting and developing markets was assessable under this section (section 22) and not under section 28 in respect of the rental income of markets, shops and stalls owned by it. Therefore he declined to entertain the claim of depreciation as claimed and treated the receipts as Property Income out of which he allowed 1/6 towards repairs and brought to tax the rest of receipts as Income from Property. In this way he compute ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ilitate for the Lorries coming and going in order to load and unload into the warehouses, and take out the goods from the warehouses. Special flooring is also put up in warehouses in order to enable to store steel and other hardware materials etc. Special security is arranged to safeguard the properties stored inside the warehouses. Therefore he argued that the Warehouses Complex represents assessee s building with which he is carrying on business. He had cited a decision of the Gujarat High Court in the case of CIT v. New India Industries Ltd. [1993] 201 ITR 208. Pages 3 to 6 of the Paper Book represent the sample bills given to the parties after receiving rents towards user of the warehouses. At page No. 3, the receipt was given on 30-11- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... each case has to be decided on its own facts and circumstances. (2)Whether an income falls under one head or another has to be decided according to the common notions of a practical and reasonable men, for the Act does not provide any guidance in the matter. (3)In each case, what is to 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 is a narrow one and has to depend on certain facts peculiar to each case. Pure and simple commercial assets like machinery, plant, tools, industrial sheds or godowns having high business potentials stand on a different footing from assets like land or building. (4 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9) even though the company may be doing extensive business otherwise. But a company formed with the specific object of acquiring properties 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. 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. Where a company acquires properties which it sells or leases out with a view to acquiring other properties to be dealt with in the same manner, the company is not treating them as properties to be enjoyed in the shape of r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of its business and therefore the rental income was business income. Hence the earlier losses could set off. High Court confirmed the view of the Tribunal. Further apart from the decision of the High Court, Supreme Court held that the High Court was right in its view that the income derived by the respondent (assessee-company) by way of lease rent letting out of its assets was assessable to tax under the head Profits and gains of business . While rendering this decision the Hon ble Supreme Court kept in mind the principle laid down to CEPT v. Shri Lakshmi Silk Mills Ltd. [1951] 20 ITR 451 and CIT v. Calcutta National Bank Ltd. [1959] 37 ITR 171 . The Hon ble Supreme Court further held the following : Whether a particular income is inc ..... X X X X Extracts X X X X X X X X Extracts X X X X
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