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TMI Blog2016 (12) TMI 751X X X X Extracts X X X X X X X X Extracts X X X X ..... disallowing Income from business (Warehousing Receipts) treat as Income from House property. 2. On the fact and in the circumstances of the case and in law of the learned Commissioner of Income Tax (Appeals)-I, Pune has not considered the following expenses. 1) Bank Interest on Loan for construction of godown. 2) Gram Panchayat Tax paid on godown. 3. The learned Authorized Representative for the assessee at the outset pointed out that the issue arising in the present appeal is squarely covered by the order of Tribunal in related party's case. He pointed out that the assessee had received the divided area of warehouse on the dissolution of partnership firm as in the case of Mr. Ramdas T. Khutwad and others. 4. Briefly, in the facts of the case, the assessee had declared income of ₹ 13,61,470/- in the return of income filed for the instant assessment year. The assessee belonged to a family whose members were engaged in letting out warehouses. The Assessing Officer noted that in the case of family concern i.e. M/s. Jaibhavani Warehousing Co. for the assessment year 2008-09, income from letting out of warehouse was assessed as house property, reject ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... warehousing facilities and was also providing other facilities and incurring other expenditure for carrying on the said activity of warehousing, then the income was to be assessed under the head 'Income from business'. However, the case of Revenue on the other hand, is that the said income received by the assessee is pursuant to giving the space on hire as per the terms of lease deed and no other activity was being carried out and hence, the same is to be assessed as 'Income from house property'. The Revenue in this regard has placed heavy reliance on the ratio laid down by the Pune Bench of Tribunal in the case of Nutan Warehousing Company Pvt. Ltd. (supra), which matter travelled up to Hon'ble High Court, which in turn, had set aside the matter to the file of Assessing Officer. 11. After the matter was set aside to the file of Assessing Officer by the Hon'ble High Court in the case of Pune Bench of Tribunal in Nutan Warehousing Company Pvt. Ltd. v. DCIT (supra), the matter was decided against the assessee by the Assessing Officer which was confirmed by the CIT(A). However, the Pune Bench of Tribunal in M/s. Nutan Warehousing Company Pvt. Ltd. v. DCI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 97 ought to have been considered, but has not been considered by the Tribunal, cannot be brushed aside as without substance. Be that as it may, during the course of the hearing of these proceedings we have considered the earlier judgment of the Tribunal. Ex facie, a perusal of the earlier judgment would show that that the Tribunal has not made a reference to the detailed terms and conditions of the warehousing agreements entered into by the assessee or to the lease agreement by which the factory came to be leased out. Consequently, upon considering the position in this regard counsel appearing on behalf of the assessee has fairly stated that the assessee would not consider that the earlier decision of the Tribunal be regarded as binding. In so far as the decision which is impugned in these proceedings is concerned, the Tribunal has basically relied upon the lease agreement dated March 18, 2001, between the assessee and Hindustan Lever. It is on the basis of the terms of the lease agreement that the Tribunal arrived at a conclusion that the primary purpose of the assessee was to let out the factory and that the income that was derived therefrom could not consequently be regarded as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shall also be with respect to the disallowance that has been effected under section40A(ii)of the Income-tax Act, 1961. In view of the order of remand, it is not necessary for this court to express any view one way or the other on the questions of law involved. The appeal is accordingly disposed of. No costs. 33. We find the AO after considering the submission of the assessee, which have already been narrated in the preceding paragraphs, treated the lease rental received by the assessee from the lease of 68,000 sq.ft of the factory to Hindustan Lever Ltd. as 'income from house property' and treated the warehousing activities carried out by the assessee on the remaining warehouses as 'business income' which has been upheld by the Ld. CIT(A). 34. It is the submission of the Ld. Counsel for the assessee that the main objects to be pursued as per the memorandum of association are construction of warehouses for storage of agricultural goods. Provisions of Bombay Warehousing Act, 1959 are applicable to the assessee company. It is also his submission that the AO was required to examine the terms of the lease deed and decide whether leasing activity is subservie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... employees of the Company or to others and upon such terms as the Company may think proper. 37. From the statement showing year-wise details of total receipts as per profit and loss account, warehousing charges and service charges from Hindustan Lever Ltd. etc. a copy of which is placed at page 212 of the paper book, we find the details are as under:- F.Y. Total Rcpts as Per P L Warehousing charges Lease Rent From HLL % of Lease Rent to Total Receipts Warehousing charges received from HLL % of warehsg ch. Received from HLL to the total warehsg ch. A B=C+D C D E = (D/B)*100 F G = (F/C)*100 2000 - 01 10,313 ,426.00 7,598 ,434.00 2,714,992.00 26.32 4,836,240.00 63.65 2001- 02 17,686,971.33 11,817,5 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing has been included as taxable service. 40. We find an identical issue had come up before the Hon'ble Supreme Court in the case of M/s. Chennai Properties (Supra). In that case, the assessee company was incorporated under the Indian Companies Act. Its main object was to acquire the properties in the City of Madras and let out these properties. The assessee had let out the said properties and the rental income received therefrom was shown as income from business in the return filed by the assessee. However, according to the AO since the income was received from letting out of the properties it was in the nature of rental income. He therefore treated the rental income as 'income from house property'. In appeal the Ld. CIT(A) allowed the appeal of the assessee by holding that such rental income is 'income from business'. The Tribunal upheld the action of the CIT(A). On further appeal by the revenue the Hon'ble High Court vide order dated 05-09-2002 allowed the appeal filed by the revenue holding that income derived by letting out of the properties would not be 'income from business' but can be assessed only as 'income from house property. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ;s case which has been relied upon by the High Court. That was a case where the company was incorporated with the object of buying and developing landed properties and promoting and developing markets. Thus, the main objective of the company was to develop the landed properties into markets. It so happened that some shops and stalls, which were developed by it, had been rented out and income was derived from the renting of the said shops and stalls. In those facts, the question arose for consideration was: whether the rental income that is received was to be treated as income from the house property or the income from the business. This court while holding that the income shall be treated as income from the house property, rested its decision in the context of the main objective of the company and took note of the fact that letting out of the property was not the object of the company at all. The court was therefore, of the opinion that the character of that income which was from the house property had not altered because it was received by the company formed with the object of developing and setting up properties. Before we refer to the Constitution Bench judgment in the cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ture of its dealings with its property, it is possible to say on which side the operations fall and to what head the income is to be assigned. After applying the aforesaid principle to the facts, which were there before the Court, it came to the conclusion that income had to be treated as income from business and not as income from house property. We are of the opinion that the aforesaid judgment in Karanpura Development Co. Ltd.'s case squarely applies to the facts of the present case. No doubt in Sultan Brothers (P) Ltd.'s case, Constitution Bench judgment of this Court has clarified that merely an entry in the object clause showing a particular object would not be the determinative factor to arrive at an conclusion whether the income is to be treated as income from business and such a question would depend upon the circumstances of each case, viz., whether a particular business is letting or not. This is so stated in the following words:- We think each case has to be looked at from a businessman's point of view to find out whether the letting was the doing of a business or the exploitation of his property by an owner. We do not further think that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under the Head Profits and gains of business or profession whereas the case of the Revenue is that as the income is arising from House Property, the said income must be taxed under the head Income from House Property . 1. The learned counsel appearing for the assessee submitted that the issue involved in these appeals is no more res integra as this Court has decided in the case of Chennai Properties and Investments Ltd. v. Commissioner of Income Tax 373 ITR 673 (SC) that if an assessee is having his house property and by way of business he is giving the property on rent and if he is receiving rent from the said property as his business income, the said income, even if in the nature of rent, should be treated as Business Income because the assessee is having a business of renting his property and the rent which he receives is in the nature of his business income. 2. According to the learned counsel appearing for the assessee, the afore-stated judgment in the case of Chennai Properties (supra) has referred to all the judgments on the subject and more particularly, the judgment in the case of Karanpura Development Co. Ltd. v. CIT [1962] 44 ITR 362 (SC) which has summ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erefore, the income earned by the assessee should be treated as income earned from House Property. He, therefore, submitted that the impugned judgment is just legal and proper and therefore, these appeals should be dismissed. 9. Upon hearing the learned counsel and going through the judgments cited by the learned counsel, we are of the view that the law laid down by this Court in the case of Chennai Properties (supra) shows the correct position of law and looking at the facts of the case in question, the case on hand is squarely covered by the said judgment. 10. Submissions made by the learned counsel appearing for the Revenue is to the effect that the rent should be the main source of income or the purpose for which the company is incorporated should be to earn income from rent, so as to make the rental income to be the income taxable under the head Profits and Gains of Business or Profession . It is an admitted fact in the instant case that the assessee company has only one business and that is of leasing its property and earning rent therefrom. Thus, even on the factual aspect, we do not find any substance in what has been submitted by the learned counsel appearing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at page 44 of the Paper Book. The assessee firm was thus, constituted to carry on the business of warehousing activities. The assessee has been carrying on the activity of warehousing since 1998-99 onwards. The income declared by the assessee under the head 'Income from business' has not been disturbed though the same was processed under section143(1)of the Act. For the first time, the assessment was made under section143(3)of the Act in assessment year 2008-09 and pursuant to the same, assessment proceedings for assessment years 2004-05 to 2006-07 were reopened under section147of the Act. For assessment year 2007-08, the income declared by the assessee has not been disturbed and even for assessment years 2009-10 and 2010-11, the same has been accepted. The Assessing Officer and CIT(A) had denied the claim of assessee, in view of the ratio laid down by the Pune Bench of Tribunal in the case of Nutan Warehousing Company Pvt. Ltd. (supra), which has now in the second round, been allowed in favour of the assessee. Further, the Hon'ble Supreme Court in M/s. Rayala Corporation Pvt. Ltd. v. ACIT (supra) had held that in the facts of the said case where the assessee company ha ..... 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