9911796707
TMI Blog2021 (12) TMI 1213X X X X Extracts X X X X X X X X Extracts X X X X ..... the Income Tax Appellate Tribunal (Cochin Bench) from independent orders made in Tax Appeals preferred by the assessee. The details of the appeals, the assessment years etc. are stated thus: Sl.No. Assessment year Date of Assessment order Appeal before CIT (Appeals) and date of disposal IT Appeal in High Court 1 1996-1997 28.3.2002 Appeal No.ITA-19/R-2/E/CITII/02-03 dated 28.8.2003 ITA No.757 of 2009 2 2003-04 28.7.2005 Appeal No.ITA 74/R-II/E/CITII/05-06 dated 7.2.2006 ITA No.483/2009 3 1998-99 29.12.2003 Appeal No.ITA-58/R-2/E/CITII/03-04 dated 3.9.2004 ITA No.758/2009 4 1997-98 17.3.2003 Appeal No.ITA-3/R-11/E/CITII/03-04 dated 28.8.2003 ITA No.860/2009 5 2001-02 16/01/2004 Appeal No.ITA-69/R-2/E/CITII/03-04 dated 3.9.2004 ITA No.903/2009 6 2000-01 16.12.2004 Appeal No.ITA-41/R-2/E/CITII/04-05 dated 11.2.2005 ITA No.929/2009 7 2002-03 17.12.2004 Appeal No.ITA 42/R-2/E/CITII/04-05 dated 11.2.2005 ITA No.1046/2009 8 1999-2000 15.12.2004 ITA-40/R-2/E-CIT-II/04-05 dated 11.2.2005 ITA No.1482/2009 3. The substantial questions of law raised in the batch of appeals deal with the exercise of jurisdiction by the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee made over the plant operation to ATL for manufacturing tyres. Thus the plant and machinery etc. were given in lease by assessee to ATL for the eight years stipulated in scheme. In the instant batch of appeals, this Court is considering the circumstances, clauses between the assessee and ATL, consequences/conclusion thereof for a period of eight years ending with 31.3.2004. 5. On 29.11.1996, the assessee filed return of income for the assessment year 1996-97, declaring taxable income as 'nil'. The assessee arrived at taxable income as 'nil' by setting off the brought forward unabsorbed losses of the preceding assessment years against the current years by computing income of Rs. 6,61,75,914/- received from ATL as income from business. On 30.12.1998, the assessment was completed under section 143(3). The assessment was completed by treating the lease rent received from Apollo Tyres Ltd. amounting to Rs. 6,61,75,914/- as income from business of the assessee. Thereafter the AO issued notice dated 23.3.2001 and reopened the assessment under Section 148 of the Act. The proposed re-assessment principally was on the ground that the income received as lease rent from A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n. 1. Whether, on the facts and in the circumstances of the case, is not the reassessment completed under the main provision within four years, in accordance with law. 2. Whether on the facts and in the circumstances of the case should not the Tribunal have applied the ratio of the decision of the Supreme Court reported in 129 taxmann 72 in CIT v Forainer France. 3. Whether, on the facts and in the circumstances of the case and also for the factual reasons highlighted in paragraph 5(a) to (f) of the statement of the case, the Tribunal is right in law and fact in holding that the assessee "is existing", "it continues to exist" and the leave for a limited period of 8 years?" and are not the above findings wrong, baseless, unsupported by material evidence against facts and perverse? 4. Whether, on the facts and in the circumstances of the case and also for the reasons highlighted in paragraph 5(a) to (f) of the statement of the case the Tribunal is right in law and fact in holding that "there is nothing on record to show that the assessee had no present intention to revive its business at an appropriate time" and is not the finding wrong, perverse, quixotic and perverse? 5. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ess purpose of the assessee but the income received by way of lease/rent, is a passive receipt received by the assessee for substantially letting the land, buildings, available plant etc. of the assessee in favour of ATL. Inability to do the business by the assessee is projected by inviting our attention to additional investment agreed to be made by ATL for modernising the then existing plant and machinery in the premises of the assessee. Section 14 deals with the heads of income and income derived by the assessee is profit and gain of business or profession of the assessee. The permissible deductions or expenses available while computation of income from the business are covered by Sections 28 to 44 of the Act. Without doing business or any activity, passive receipt recognised in the books of accounts of assessee, cannot be treated as income by way of profit and gains of business/profession of the assessee. The acceptance of case of assessee would facilitate deductions under Sections 28 to 44 of the Act irrespective of doing business. He prays for answering substantial question Nos. 3 to 5 in favour of revenue and against the assessee. 10. Senior Adv.Mr.Joseph Markose argues that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1988) 169 ITR 597)], Rayala Corporation Pvt. Ltd. v Asst. Commissioner of Income Tax (2016) 386 ITR 500(SC)], Chennai Properties and Investments Ltd. v Commissioner of Income Tax (2015) 373 ITR 673 (SC)], Commr. of Income Tax, Thiruvananthapuram v M/s Oberon Edifices and Estates (P) Ltd. (2019 KHC 279), CIT & Anr. v Mysore Wine Products Ltd. (2015) 373 ITR 102]. He concludes by arguing that the Tribunal for recording a finding in favour of assessee has taken over all view of the admitted circumstances, statutory scheme to which the assessee was a party, the conditions in the agreement between the assessee and ATL. Therefore the findings of fact recorded by the Tribunal that the income of lease rental from ATL to assessee qualifies the meaning of profit or gain of business of the assessee are tenable. In other words, the argument points out the limitation in fact and law in the appeal filed by the revenue under Sec.260A of the Act. 11. Let us before examining the rival contentions state the gist of consideration in the subject orders by the authorities under the Act. Firstly the Assessing Officer adverted to the judgment of the Supreme Court in Universal Plast Limited (supra) and d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to make the manufacturing viable, the induction of a few directors from ATL in Board of the assessee is merely change in administration and of administrative officers, such changes could not be understood as the existence of assessee as corporate entity has disappeared or the assessee ceases to exist. The taking over of the manufacturing activity by ATL is not to take over the assessee company. The consideration of future happening of reviving the business by assessee is not a circumstance in the facts of the case. Finding is recorded that the lease rental receipt is income of business of the assessee. Substantial Question Nos.3 to 5: 13. From a reading of the decisions of Supreme Court in Commissioner of Excess Profits Tax, Bombay City v Shri Lakshmi Silk Mills Ltd. [1951] 20 ITR 451 (SC)], Commissioner of Income Tax, Lucknow v Vikram Cotton Mills Ltd. [1988] 169 ITR 597 (SC)] and Universal Plast Limited v Commissioner of Income Tax, Calcutta [1999] 237 ITR 454 (SC)] the following parametres or criterion could be noted as follows: 1) Shri Lakshmi Silk Mills Ltd. i) "It makes no difference what an assessee does with a commercial asset belonging to him. The assessee may use it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rdinary prudent businessman or as in England, it used to be "man on the top of the platform omnibus" or "director's arm chair.". If, on that test, a plausible conclusion has been drawn, no objection can be taken. (emphasis supplied) 3) Universal Plast Limited and others "In the light of the above discussion, the propositions may be summarised as follows: (i) No precise test can be laid down to ascertain whether income (referred to by whatever nomenclature, lease amount, rents, licence fee) received by an assessee from leasing or letting out of assets would fall under the head 'Profits and Gains of business or profession'; (ii) It is a mixed question of law and fact and has to be determined from the point of view of a businessman in that business on the facts and in the circumstances of each case including true interpretation of the agreement under which the assets are let out; (iii) Where all the assets of the business are let out, the period for which the assets are let out is a relevant factor to find out whether the intention of the assessee is to go out of business altogether or to come back and restart the same. (iv) If only or a few of the business ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee is revived and rehabilitated and alternatively inspite of working of the scheme, the affairs are not improving then the assessee considers other options. As held in Vikram Cotton Mills case these considerations or options are examined through the optics of an ordinary prudent businessman, a man on the top of the platform omnibus; directors arm chair. And from such optics a conclusion is arrived at to implement the business plan, then no objection to such a conclusion and computation of receipt as income from business could be taken. The word 'business' in Sec.14 of the Act is not a word of art, but a word of commercial implication. Therefore in any given year or situation, the activity claimed by the assessee is neither accepted through interpretative or expressive narrative of the activity claimed by the assessee, nor the claim for business income is refused through the prism of the revenue. The bottom line is the availability of assets, activities carried for exploiting the assets, that the assessee is not a mere onlooker at the activities in the company or a passive recipient of rent for utilization of facilities other than business assets. It is kept in view that net i ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
