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TMI Blog2015 (6) TMI 1089X X X X Extracts X X X X X X X X Extracts X X X X ..... of the assessee under the head income from business after allowing the claim of expenditure in respect of the expenses and depreciation on assets. - ITA Nos. 6251/Mum/2012, 6253/Mum/2012 - - - Dated:- 17-6-2015 - SHRI R. C. SHARMA, ACCOUNTANT MEMBER AND Ms. SUSHMA CHOWLA, JUDICIAL MEMBER Appellant by : Shri S.C. Tiwari Ms. Priyanka J. Maru Respondent by : Shri Neil Philip O R D E R PER SUSHMA CHOWLA, JM: Both these appeals filed by the Assessee are against separate orders of the CIT(A)-13, Mumbai dated 12.07.2012 and 10.01.2011 relating to Assessment Years 2006-07 2008-09 respectively against order passed under section 143(3) of the I.T. Act. 2. Both the appeals relating to the same assessee on similar issue were heard together and are being disposed by this consolidated order for the sake of convenience. The Assessee has raised following grounds of appeal as per ITA No. 6251/Mum/2012:- i) Under the facts and circumstances of the case and in law, the learned Commissioner (Appeals) [for short Ld CIT(A) ] has erred in confirming the action of Learned Assessing Officer [for short Ld. AO ] in treating the legitimate business income in the for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... table to the original ground of appeal raised by the assessee is admitted for adjudication. 7. The issue arising in the present appeal is in relation to the assessment of the business income received by the assessee on account of leave and license fees and whether the same is to be assessed as income from business or as income from other sources. We take up appeal in ITA No. 6253/Mum/2012 for adjudicating the issue. 8. Briefly in the facts of the present case the assessee had taken the property on lease which in turn was sub-leased to M/s. Rediff.com India Ltd. The assessee received leave and license fee of ₹ 80,61,097/- and maintenance charges of ₹ 51,52,529/- which was declared as income from business. The assessee was show caused to explain as to why the said income should not be treated as income from other sources. The contention of the assessee was that it was the only activity carried out by the assessee under which the leased premises were in turn sub-leased to the lessee and also services of providing electricity, use of lift, uninterrupted supply, services of water, maintenance of staircase and common areas, and watch and ward facilities were also provid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... where the sole activity of the assessee was to take a property on lease and then sub-lease the same, on leave and license fees, the income arising there from is assessable under the head income from business or income from other sources. We find that similar issue of assessment of lease income in the hands of company arose before the Tribunal in Bhuvan Leasing Infrastructures LLP Vs. ITO in ITA No. 4977/Mum/2006 and 3033/Mum/2010 relating to Assessment Years 2003- 04 and 2005-06. The Tribunal vide judgment dated 10.06.2015 after considering the factual aspect and in turn relying on the ratio laid down by the Hon ble Suprme Court in Chennai Properties and Investments Ltd. (supra) held as under:- 10. We have heard the rival contentions and perused the record. In the facts of the present case assessee, as per its object clause in the Memorandum of Association, was permitted to perform business of taking on lease and earning income from the same. It had taken premises on lease which in turn was sublet to M/s. American Express Bank. The issue arising before us is in relation to assessability of such lease income earned by the assessee. The claim of the assessee before the authorit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2-03, i.e. in the year which is in appeal before us. The said leasing of the premises by the assessee was as per the objects provided in Memorandum of Association. A perusal of the earlier order passed by the Tribunal in assessee s own case reflects that the Tribunal, vide para 4 of its order had acknowledged that under clause 53, 109, 129 and 131 of the object clause (other objects) of Memorandum of Association of the assessee, assessee was permitted to pursue the business of taking on lease and earning income from the same. Where it is the intention of the assessee to lease out various premises and then sublet the same on leave and licence basis to different parties, then such activity carried on by the assessee in line with its objects is business activity undertaken by the assessee. The income arising from such exploitation of the assets which had been taken by the assessee on lease and had been further sublet by it is a systematic and organized activity of carrying on its business. Undoubtedly, assessee was not the owner of the premises but was only a lessee of the premises, which in turn had been sublet by the assessee with the intention of exploiting the same and the receipt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t took the position that it is to be treated as income from the house property. It would be thus, clear that in similar circumstances, identical issue arose before the Court. This Court first discussed the scheme of the Income Tax Act and particularly six heads under which income can be categorised / classified. It was pointed out that before income, profits or gains can be brought to computation, they have to be assigned to one or the other head. These heads are in a sense exclusive of one another and income which falls within one head cannot be assigned to, or taxed under, another head. Thereafter, the Court pointed out that the deciding factor is not the ownership of land or leases but the nature of the activity of the assessee and the nature of the operations in relation to them. It was highlighted and stressed that the objects of the company must also be kept in view to interpret the activities. In support of the aforesaid proposition, number of judgments of other jurisdictions, i.e. Privy Counsel, House of Lords in England and US Courts were taken note of. The position in law, ultimately, is summed up in the following words: - As has been already pointed out in connectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee entered into a fresh agreement with British High Commission again establishes the case of the assessee, that it is involved in a systematic and organized activity of leasing out its premises, which in turn are not owned by the assessee. In the totality of the above facts and circumstances we hold that the lease rent received by the assessee is assessable as income from business in the hands of the assessee and the related expenditure has to be allowed in the hands of the assessee. The AO shall accordingly compute the income in the hands of the assessee in line with our directions after affording reasonable opportunity of hearing to the assessee. This ground of appeal, which was restored back to the file of the Tribunal by the Hon'ble High Court is allowed. 14. In the facts of the present case before us, though in the objects of Memorandum of Association it is not mentioned that the assessee would take any premises on lease and would in turn sublease the same on leave and license basis, but the intention of the assessee to exploit the asset leased by it is clear from the activity carried on by the assessee. As referred to by us in paras hereinabove, the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X
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