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TMI Blog2017 (10) TMI 1080X X X X Extracts X X X X X X X X Extracts X X X X ..... , the appeal of the assessee for Assessment Year 2010-11 is taken as the lead case in order to note the relevant facts and adjudication thereof. 3. The appeal in Assessment Year 2010-11 is directed against the order of the CIT(A)-28, Mumbai dated 10.11.2016, pertaining to the Assessment Year 2010-11, which in turn has arisen from the order passed by the Assessing Officer dated 28.03.2013 under section 143(3) of the Income Tax Act, 1961 (in short 'the Act'). 4. The relevant facts are that the appellant is a partnership firm, and in terms of its Partnership Deed, a copy of which has been placed in the Paper Book at pages 1 to 7, its business is stated to be that of running of Department store in the name of "Asiatic Department Store". On being asked to detail out its activities, assessee responded to the Assessing Officer and stated that it was engaged in conducting a Department store at Industrial Assurance Building, Ground floor, Veer Nariman Road, Opp. Churchgate Station, Mumbai 400 020 and Asiatic Polyclinic Building, Ground floor, V.N. Road, Mumbai 400 020. The assessee explained that it had allotted each department or counter to third parties to bring their material for sale ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6/-, thereby showing net profit of Rs. 89,734/- as 'business income', the Assessing Officer arrived at the quantum of income assessable under the head 'income from house property' at Rs. 1,02,61,635/- based on the market rent of the property as reduced by the rent paid to LIC. 6. The assessment so made by the Assessing Officer was carried in appeal before the CIT(A) challenging the same on varied Grounds, on facts and in law. The CIT(A) has affirmed the conclusion of the Assessing Officer. The CIT(A) noted the invoking of Sec. 27(iiib) r.w.s. 269UA(f) of the Act. The CIT(A) noted that assessee has been in possession of the property as a tenant of LIC of India for more than 50 years and, therefore, on an application of Sec. 27(iiib) r.w.s. 269UA(f) of the Act, assessee was to be deemed as owner of the property for the purposes of taxation. Therefore, according to the CIT(A), the income derived by the assessee from the counter-holders was for allowing the use of the property and thus assessable as rental income under the head 'income from house property'. Another aspect noted by the CIT(A) was that the agreement with LIC of India showed that the premises were usable by the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... different counter holders who own the goods that are sold whereas the assessee is responsible for collection of sales proceeds as well as packaging and delivery of goods. The assessee is earning income by way of Commission relatable to the quantum of sales effected by each of the counter holders apart from earning from the packaging of goods, as also the difference in rate of foreign exchange wherever the clients have paid for the sales in foreign exchange. The moot question is whether the aforesaid streams of income, which ostensibly are flowing from running of the Departmental store can be said to be assessable as 'business income', as contended by the assessee. 10. Before proceeding further, we may refer to the seminal features of the case which would have a bearing on the determination as to whether the aforesaid income derived by the assessee-firm is to be treated as income from business or it is to be treated as rental income from house property. At the time of hearing, it has been explained by the learned representative that the assessee-firm has entered into separate but similar agreements with the different counter holders and one such agreement was also placed before us ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment and it does not confer any right of tenancy or sub-tenancy on the counter holders. As per the agreement, it is the duty of the assessee to provide the necessary furniture at such place as is appropriate to run the Department store. Apart from the aforesaid features, the assessee also made a detailed note on the activities carried out by it, which have indeed been reproduced by the Assessing Officer in para 5.3 of his order. The relevant discussion therein reveals that the activities and responsibilities of the assessee in conducting the business of Department store; that the cash collection counters for receiving the sale proceeds was manned by the staff of the assessee; that the assessee was providing the facility for packing the goods and delivery; that the entire packaging material was being supplied by the assessee at its own cost; and, that the packaging facility is managed by the staff of the assessee. Assessee is also providing printed bill books to each of the counter holder at its own cost. Assessee is also providing the watch and ward facility, including opening and closing the Department store is done by its staff. The telephone facility is also provided by the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... TR 362 (SC) wherein Hon'ble Supreme Court asserted that the deciding factor is not the ownership of the property in question, but the manner of activities carried out by the assessee and the nature of operations undertaken by the assessee in relation to the property. We may reproduce the following passage from the aforesaid judgment which has also been referred by the Hon'ble Supreme Court in its later judgment in the case of Chennai Properties & Investments Ltd., [2015] 56 taxmann.com 456 (SC) : "As has been already pointed out in connection with the other two cases where there is a letting out of premises and collection of rents the assessment on property basis may be correct but not so, where the letting or sub-letting is part of a trading operation. The diving line is difficult to find; but in the case of a company with its professed objects and the manner of its activities and the nature 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." 12. If one is to keep the aforesaid principles in mind, it would be evident that considering the activities undertaken by the assessee relating ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he manner of its activities and the nature of its dealing with the property so as to determine the question of assessing the income under the head 'house property' or 'business income', and not merely the ownership of the property. 14. Another aspect which has been canvassed by the Assessing Officer is that the sale and purchase of the goods have been undertaken by the respective counter holders and not by the assessee. It has also been emphasised by the Assessing Officer that the income has been earned by the assessee essentially from letting the counter holders use the premises; thus, it is assessable as 'income from house property'. In our considered opinion, it would be inappropriate to disregard the manner in which the assessee is carrying out the activities before deciding the issue. The view of the Assessing Officer that the sale and purchase has been undertaken by the counter holders is no ground to say the activities being undertaken by the assessee are not in the realm of business. In this context, we may refer to the judgment of the Hon'ble Bombay High Court in the case of Runwal Developers (P.) Ltd., [2011] 15 taxmann.com 196 (Bom.), wherein assessee was in the bus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o. 4, which reads as under :- "4. On the facts and in the circumstances of the case and in law the Hon'ble CIT(A) erred in upholding the action of Ld AO of not allowing the amount paid to LIC of Rs. 6.56 Lacs and the reasons assigned for doing so are wrong and contrary to the Income Tax and Rules made there under." 18. The grievance in this Ground is with regard to a disallowance of Rs. 6,56,799/- out of the rent paid to LIC of India. The Assessing Officer, and thereafter the CIT(A), have disallowed the claim on the ground that it was paid on 31.03.2009 and was thus relevant for Assessment Year 2009-10 and not for the assessment year under consideration. The claim of the assessee before the lower authorities has been that the liability crystallized during the previous year relevant to the assessment year under consideration and is thus an allowable deduction while computing the income earned for the assessment year under consideration. On this aspect, we find no clear finding by either of the lower authorities and, therefore, we remand this issue to the file of the Assessing Officer who shall examine the plea of the assessee of the liability having crystallized during the ye ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... parties that so far as the appeals of the assessee for Assessment Years 2007-08 to 2009-10 are concerned, the issues raised are similar to the appeal decided by us in the earlier paragraphs for Assessment Year 2010-11. Therefore, our decision therein shall apply mutatis mutandis in the said appeals also. 25. Insofar as appeal for the Assessment Year 2006-07 is concerned, herein also the primary dispute is with regard to the assessability of the income received by the assessee from running of Departmental store. That aspect of the matter is directed to be decided in the light of our decision in Assessment Year 2010-11. 26. Apart therefrom, in the Assessment Year 2006-07, the Assessing Officer disallowed a sum of Rs. 1,97,414/- representing interest paid to Partners. On this aspect, we find that though there was a specific Ground raised by the assessee before the CIT(A), and thus no specific adjudication has been made. Similar is the situation with regard to Ground of appeal no. 5 raised by the assessee in this appeal, which reads as under :- "5. On the facts and in the circumstances of the case and in law the Hon'ble CIT(A) erred in upholding the action of the Ld AO of disa ..... X X X X Extracts X X X X X X X X Extracts X X X X
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