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TMI Blog2016 (12) TMI 347X X X X Extracts X X X X X X X X Extracts X X X X ..... wed vide the impugned order dated 20.12.2010. 3. Aggrieved by the order of the CIT(A)-30, Mumbai dated 20.12.2010 for A.Y. 2006-07, the assessee has preferred this appeal raising the following concise grounds: - "1. The Commissioner of Income Tax (Appeals) [hereinafter called the CIT (A)] erred in not admitting additional evidences as submitted by the Appellant. 2. The CIT (A) erred in confirming the disallowing Rs. 50000 out of administrative expenses of Rs. 684372. 3. The CIT (A) erred in confirming treatment of the compensation of:- a. Rs. 480000 from leave and license of the Appellant's bakery (along with machinery and all amenities required for manufacturing bakery products) b. Rs. 240000 from leave and license of the Appellant's Shop (along with furniture, fixture & Kitchen Equipments required for running the shop for selling bakery products) situated at ground floor of building known as Prabhu Smaran under the head "Income from House Property" instead of income under the head "Income from Business" / "Income from Other Sources". 4. The CIT (A) erred in confirming disallowance of expenditure of Rs. 497486 in respect of Vasai Property [income taxed un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ances, we find no merit in the assessee's contentions that the additional evidence put forth was not admitted or considered by the learned CIT(A) and accordingly dismiss ground No. 1. 5. Ground No. 2 - Disallowance out of Administrative Expenditure - Rs. 50,000/- 5.1 In this ground, the assessee assails the learned CIT(A) in confirming the disallowance of Rs. 50,000/- out of administrative expenses of Rs. 6,84,372/-. According to the learned A.R. of the assessee all the administrative expenses were incurred for the purpose of the assessee's business except for a part of the residential telephone expenses of Rs. 32,817/-, donation of Rs. 14,000/- and previous year's expenses of Rs. 6,575/- which were already disallowed in the return of income. It is contended that the adhoc disallowance of Rs. 50,000/- made and confirmed by the authorities below was excessive and made without any proper reason being assigned for the same and therefore the same should be deleted or substantially reduced. 5.2 Per contra, the learned D.R. for Revenue placed strong reliance on the orders of the authorities below. 5.3.1 We have heard the rival contentions and perused and carefully considered the mate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... machinery and all amenities required for manufacture of bakery products), and (ii) the compensation of Rs. 2,40,000/- (@ Rs. 20,000/- p.m.) received from leave and licence of his shop (along with furniture, fixtures and kitchen equipments required for running the shop for sale of bakery products) is to be assessed under the head 'income from house property' instead of as 'income from other sources'/income from business as declared by the assessee. 6.1.2 According to the learned A.R. of the assessee the leave and licence agreements for the aforesaid two properties were dated 04.07.2003. Earlier there was no dispute with Revenue in regard to the assessee's declaration of this income as 'income from other sources' or income from business. It is only in the period under consideration, i.e. A.Y. 2006-07, that Revenue has disputed the assessee's proposition and assessed the aforesaid income as 'income from house property'. In the earlier A.Y. 2005-06, the assessee's declaration of this compensation from letting out of these properties as 'income from business' / 'income from other sources' has been accepted in scrutiny proceedings under section 143(3) of the Act vide order dated 18.12. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee entered into leave and licence agreements dated 04.07.2003 for letting out his bakery premises, alongwith all amenities for manufacture of bakery products @ Rs. 40,000/- p.m. and shop premises, alongwith furniture fixtures and kitchen equipments for running and sale of bakery products @ Rs. 20,000/- per month. As per the details brought out by the learned A.R. of the assessee and recorded at para 6.1.2 of this order (supra), there has been no dispute between Revenue and the assessee on this issue either before or after this year, i.e. 2006-07. It is only in this year that the assessee's claim that this income was 'income from business'/ 'income from other sources' was rejected and the authorities below have held that the income earned from letting out or leave and licence the assessee's bakery and shop was assessable as 'income from house property; placing reliance on the decision of the Hon'ble Calcutta High Court in Shambhu Investments Pvt. Ltd. (supra). It is not disputed that, both for the earlier A.Y. 2005-06 vide order under section 143(3) of the Act dated 18.12.2007 (at pg. 137-138 of paper book); for A.Y. 2007-08 under section 143(1) of the Act of the Act dated 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... held that income under the lease cannot be assessed under Section 10 of the Income Tax Act, 1922 as the income from the business. Regarding the question whether income can be assessed under Section 12 as an income from residuary sources or income from other sources, the observations of the Apex Court in paragraphs 13, 15 and 16 are relevant which are reproduced as under : "13. The next question is, does the present letting come within the terms of sub-section (4) of section 12? That provision requires two conditions, namely, that the furniture should be let and also buildings and the letting of the buildings should be inseparable from the letting of the furniture. Now here both furniture and building have no doubt been let. The question is: Are they inseparably let? The High Court does not appear to have answered this question for it was of the view that not only must the two be inseparably let out but also that "the primary letting must be of the machinery, plant or furniture and that together with such letting or along with such letting, there is a letting of buildings". The High Court held that the primary letting in the present case was of the building and, therefore, depriv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has to be held that it was intended that the lettings would be inseparable. This view also provides a justification for taking the case of the income from the lease of a building out of section 9 and putting it under section 12 as a residuary head of income. It then becomes a new kind of income, not covered by section 9, that is, income not from the ownership of the building alone but an income which though arising from a building would not have arisen if the plant, machinery and furniture had not also been let along with it." 14. It is abundantly clear from the above observations that the appellant's income is required to be assessed under Section 56 as contended by the assessee. As far as the answers to three questions, which are mentioned in paragraph 16 of the judgment in "Sultan Brothers (P) Ltd." (supra), quoted above, are concerned, there is no dispute amongst the learned Counsel appearing for the respective parties that answers to first two questions were in affirmative. In the present case, the dispute is regarding answer to the third question, namely would one have been let alone and a lease of it accepted without the other ? In our considered opinion, the answer t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her sources. The appeals are, accordingly, allowed. Consequently, the impugned order is set aside to that extent. The Assessing Officer is directed to assess the assessee's income accordingly in the light of the above observations." 6.3.3 Respectfully following the decision of the Hon'ble Bombay High Court in the case of Dudhsagar, which is factually similar to the case on hand and is squarely applicable, we hold that the income earned by the assessee from letting out of bakery alongwith equipments required to manufacture bakery products and shop alongwith furniture, fixture and kitchen equipments for running and sale of bakery products, is to be assessed as 'income from others sources'/'business income' as declared by the assessee and consequently reverse the orders of the authorities below holding the same to be exigible to tax under the head 'income from house property'. It is accordingly ordered. Therefore, ground No. 3 of the assessee's appeal is allowed. 7. Ground No. 4 - Claim for Expenditures 7.1 In this ground, the assessee has raised an alternate plea; that if the income of the assessee from letting out on leave and licence its bakery (alongwith equipments for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reamline Builders vide confirmation dated 31.12.2006 (copy placed at page 183 of paper book). Admittedly, the assessee has declared the capital gains on the transaction in A.Y. 2007-08 which has been accepted by Revenue vide order under section 143(1) of the Act dated 14.03.2009. 8.2.2 In the order of assessment for A.Y. 2006-07, the AO has discussed his views on the matter at paras 12 to 26 thereof. He was of the view that the surrender of tenancy rights in question has taken place as per provisions of section 2(47)(v) of the Act r.w.s. 53A of Transfer of Property Act and that the full consideration of Rs. 65 lakhs plus shop accrued to the assessee as on 27.05.2004 and is exigible to tax in A.Y. 2005-06. He held that 'although the LTCG on surrender of tenancy rights pertains to A.Y. 2005-06, to protect the interest of Revenue, the same is being taxed in A.Y. 2006-07, the current year on protective basis. This view of the AO was upheld by the learned CIT(A) in the impugned order. 8.2.3 We have carefully perused the provisions of section 2(47) of the Act and section 53 of the Transfer of Property Act. According to authorities below, in order to attract the provisions of section 53 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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