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TMI Blog2022 (12) TMI 541X X X X Extracts X X X X X X X X Extracts X X X X ..... sion of Sultan Brother [ 1963 (12) TMI 4 - SUPREME COURT] relied upon by the Ld. AO has already been distinguished by the Apex Court in Chennai Properties (Supra). As noted above, the property was let out by the assessee as per defined business objectives and lease rent earned by the assessee is rightly disclosed as business income. As we have held that the income from letting out of property is assessable under the head Income from Business the expenses incurred by the assessee towards interest and processing charges are allowable as deduction u/s 37(1) of the Act. We sustain the order of the Ld. CIT(A) and reject the grounds raised by the Revenue. - I.T.A No.8026/Del/2019 - - - Dated:- 2-12-2022 - Shri G.S. Pannu, Hon ble President And Shri Challa Nagendra Prasad, Judicial Member For the Assessee : Shri Ajay Wadhwa, Adv. For the Revenue : Shri Vivek Verma, CIT DR ORDER PER C.N. PRASAD, J.M. This appeal is filed by the Revenue against the order of Ld. Commissioner of Income Tax (Appeals)-9, New Delhi dated 15.07.2019 for the AY 2015-16. The Revenue in its appeal raised the following grounds: 1. On the facts and circumstances of the case, the L ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee has borrowed long term loan of Rs.83.36 crores from M/s Tupelo Properties Pvt. Ltd. which is the holding company of the assessee. The Assessing Officer observed that the property purchased by the assessee which has 95% stake in the property was let out to Shri Rajiv Rattan who has 5% stake in the property for a monthly rent of Rs.90 lakhs. As per the leave and license agreement dated 01.10.2014 the rental income received by the assessee was shown under the head Income from Business . 5. In view of the above and based on some reports in the newspapers that Shri Rajiv Rattan has purchased property the Assessing Officer was of the view that an arrangement of purchase of property in the name of assessee company was made by Shri Rajiv Rattan by paying entire consideration provided by Shri Rajiv Rattan and the possession of the property has been given to the beneficial owner of the property by the leave and license agreement. The Assessing Officer examined the purchase of property in the light of the provisions of prohibition of Benami Property Transaction Act, 1988. The Assessing Officer observed that the total value of 95% of share of the property acquired in the name of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which shows that there is a direct nexus between the money provided by Shri Rajiv Rattan for the purchase of the property. v) The Assessing Officer further stated that no explanation has been given as to why the property has been purchased in the joint name with Shri Rajiv Rattan when he is neither a director nor a shareholder in the assessee company and why a leave and license agreement has been entered into with Shri Rajiv Rattan at a sum of Rs. 90 lakhs per month despite the fact that he is not occupying the property but still paying the rent to the assessee company. Leave and license agreement also have many errors, the assessee company has been shown to be absolute owner of the property in the agreement. vi) The Assessing Officer further stated that the leave and license agreement is a colorable device and that Shri Rajiv Rattan is not residing in the property and the assessee company has merely lent its name for the property whereas the beneficial owner for the property is none other but Sri Rajiv Rattan. Hence, according to the Assessing Officer, the interest and processing charges of Rs.11,58,06,398/- are not allowable as business expenditure since the property d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nged by the assessee company i.e, loans from Bank of India and from its holding company, which have been duly recorded in its books of account. It also comes out from the supporting documents that in case of default in repayment of the loan, it is the property of the company which could be attached and sold and monies shall be recovered there from. Hence, it cannot be said that the source of funds to the extent of 95% of the property belong to Shri. Rajiv Rattan. They belong to the assessee company. iii) According to the Ld.CIT(A), 75% of funds were borrowed by the assessee company from the bank against hypothecation of the property and the remaining were borrowed from its holding company and the issuance of the debentures. iv) The Ld.CIT(A) further stated that the property was let out to Shri Rajiv Rattan on fair market rent and not without consideration or on nominal rentals and the leave and license does not replace the title of the property. v) Hence, Shri Rajiv Rattan is paying rent for the use of the property on the basis of its fair market value rentals. vi) Leave and license agreement along with its addendum was also examined by the Ld.CIT(A) and no erro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... other sources and the interest and processing charges were incurred wholly and exclusively for the purpose of business and they are allowable expenses u/s 37(1) of the Act. 12. Before us, the Ld. DR strongly supported the orders of the Assessing Officer. The Ld. DR further submits that the home loan sanctioned were only for residential purposes and not for commercial purpose and that too for individuals. The Ld. DR submits that Shri Rajiv Rattan funded the loan from the property through holding company to assessee and the leave and license agreement entered into by the assessee company with Shri Rajiv Rattan for letting out of the property and the possession given to Shri Rajiv Rattan is nothing but allowing the beneficial owner to take possession of the property and the leave and license agreement is only a colourable device. The ld. DR vehemently contended that the acquisition of the property in the assessee company s name is a benami transaction and the property de-facto belongs to Shri Rajiv Rattan. He contended that Shri Rajiv Rattan is a sole owner of the property in as much as he owns the holding company which in turn owns the assessee company who provided the loan to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sing Officer Contentions of Assessee 1. The Ld. AO alleged that the transaction of purchase of property is a benami transaction and the assessee is Benamidar. His allegations are on the basis of following assumptions: a. Loan has been sanctioned to Rajiv Rattan, mentioning the assessee company as co-applicant. Para 2.8, page of the Assessment Order. - Loan could not have been disbursed to the assessee company. In fact issued to Shri Rajiv Rattan only. Para 2.9, page 3 of Assessment Order. b. News articles/media reports. c. It is apparent that there has been an arrangement of purchase of property in the name of assessee company with entire consideration provided by Sh. Rajiv Rattan and vide leave and license agreement, the possession of the property has been given to the beneficial owner of the property. Para 2.14, page 4 of the Assessment Order. d. There has been direct nexus between the payment made by the assessee company and the funds provided by Sh. Rajiv Rattan wither through loan through its subsidiary company or home loan. Para 2.14(i), page 5 of the Assessment Order. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the property and its ownership. In home loan, loan is generally not disbursed to the applicant but is directly paid by the bank to seller and the bank also take into its custody original sale deed unless the loan is completely repaid. Refer sanction letter attached. - In this case also, pay orders were directly paid by the bank to the seller and original conveyance deed was taken into its custody by it which specifically mentions the % of ownership of the assessee and Mr. Rattan in the property. In this case 75% of the consideration was financed by the bank. Refer sanction letter attached. - In fact, overdraft facility given by the bank for Rs. 45 crores (star home loan) shows that the loan was granted to the company only and this facility was given considering the business of the company. Refer sanction letter and page 12 of the paper book. Therefore, it is incorrect to say that the loan was issued to Mr. Rattan only and not to the assessee. b. Even otherwise, most of the companies obtain loans on the guarantee of its directors/shareholders and in case of default by the company, the entire loan is recovered from such director/guarantor. In those ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion was paid by the assessee for its share; (iii) the benefit of the property is being enjoyed by the assessee by earning rental income; (iv) no mala-fide intentions behind purchasing and financing the property in joint name. The decision was taken to get in venture jointly considering the reputation and experience of the Mr. Rattan. - The burden of proving of benami nature of transaction lies on the person who alleges the transaction to be benami Binapani Paul Vs. Pratima Ghosh (2007) 6 SCC 100 - Mere financial assistance for purchase of property cannot convert a bona-fide transaction to a benami transaction Smt. P. Leelavathi vs. V. Shankarnarayana Rao (Civil appeal no. 1099 of 2008) - Even otherwise, the property was purchased before 01.11.2016 i.e., prior to the operation of Amendment Act, 2016 and, therefore, proceedings cannot be initiated under the Benami Act, - Supreme Court Union of India Anr. vs. M/s Ganpati Dealcom Pvt. Ltd. (Civil Appeal No. 5783 of 2022) dated 23.08.2022 C. With respect to the errors pointed out by the Ld. AO in the leave and license agreement: a. The errors pointed out by the Ld. AO in the agreement was due ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oyed by it by way of rentals. A Benami transaction is one where neither the consideration is paid nor the benefits of the property are enjoyed by the person in whose name the property is acquired/registered. This is not such a case. Ld. Counsel for the assessee took us through the sanction letter and the loan statement of the home loan taken for purchase of property to bring home the point that the home loan was not disbursed to Shri Rajiv Rattan only but to the co-borrowers and the drafts were directly paid by the bank to the sellers and the bank also took custody of the original sale deed till the loan is repaid. The bank financed approx. 75% of the purchase price of the property and also gave an over draft facility to the assessee company for a sum of Rs.34 crores and therefore according to the ld. Counsel, it is incorrect to say that the loan was issued to Shri Rajiv Rattan and not to the assessee company. Besides, the bank as per the sanction letter, bank statements and other documentations recognized the assessee company as 95% owner of the property. The ld. counsel gave an example wherein directors/shareholders routinely give guarantees to the bank for loans taken by the com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ame and the decision to take the property jointly was taken considering the reputation and experience of Mr. Rajiv Rattan. 18. He further contended that it is settled law that the burden of proving that transaction is Benami lies on the person who alleges it to be. He placed reliance on the decision of Hon ble Supreme Court in the case of Binapani Paul vs. Pratima Ghosh (2007) 6 SCC 100. Mere financial assistance in purchase of property cannot convert a bona fide transaction in a Benami transaction and placed reliance on the decision of Hon ble Supreme Court in the case of Smt. P. Leelavathi vs. V. Shankarnarayana Rao (Civil appeal no. 1099 of 2008) and also cited recent decision of Hon ble Supreme Court in the case of Union of India Anr. Vs. M/s Ganpati Dealcom Pvt. Ltd. (Civil Appeal No. 5783 of 2022) to mention that even otherwise the property was purchased before 01.01.2016, i.e, prior to the operation of Amendment Act, 2016 and therefore, proceedings cannot be initiated under the Benami Act. 19. The Ld. Counsel of the assessee further contested the claim of the Department that Rajiv Ratan was using his own money for repair and renovation of the property by taking us th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the immovable property and, therefore, the income from letting out of property is assessable under the head Income from Business and not under the head Income from House Property . 23. According to the Ld. Counsel for the assessee, the main object of the assessee company includes, inter-alia, renting of properties and to manage them. The decision to purchase the property in joint name and letting it out was a mutual business decision of the assessee company and Mr. Rajiv Rattan and, the Assessing Officer cannot step into the shoes of the businessman and dictate how business decisions should be made. The ld. counsel further contented that the loan was sanctioned by the bank after considering the documentations and the ownership of the property and in fact gave an overdraft facility to the assessee company on the basis of such home loan. The category under which the loan has to be given is a decision that is purely of the bank and whether bank gives loan as a home loan or as a commercial loan, has no bearing on the nature of the income under the Income Tax. For obtaining loan, the assessee would try for the best terms in terms of rate, tenure and other benefits, regardless of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shareholder holding 99.9% in the assessee s holding company i.e., M/s Tupelo Properties. The said property was purchased for a consideration of Rs.217 crores which is the fair market value on 23.06.2014 and the source of funds for purchase of property were as under: Particulars Amount (Rs.) i) Home Loan from Bank of India (Diamond home loan) 118.125 crores ii) Home loan from Bank of India (star home loan with OD Facility) 45 crores iii) Loan taken from holding company 55 crores Copy of sale deed is placed at page no. 33-51 of the paper book and payment schedule along with the relevant bank statements, cheques and sanction letter of the loans are placed at page no. 119-126 of the paper book. Share to the extent of 95% in the property was recorded by the assessee in its books of the account under the head inventories and the corresponding loan liability was also recorded. Repair/renovation and furnishing work of existing building was also carried out which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in its books of accounts. Further, the AO has also reiterated the source of the purchase consideration, which is already disclosed in the books of accounts of the appellant and also submitted during assessment proceedings. Basis the above, the AO has attempted to classify the purchase of the property by the appellant company as a Benami Transaction. However, a perusal of the Benami Act shows that there exist two basic premises on which a transaction is to be evaluated. Section 2(9) of the Benami Act defines a Benami Transaction as follows: benami transaction means, - (A) A transaction or an arrangement- (a) Where a property is transferred to , or is held by, a person, and the consideration for such property has been provided, or paid by, another person; and (b) The property is held for the immediate or future benefit, direct or indirect, of the person who has provided the consideration, Except when the property is held by- (i) A Karta, or a member of a Hindu undivided family, as the case may be, and the property is held for his benefit or benefit of other members in the family and the consideration for such property has been provided or pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... proceedings. Thus, the source of purchase consideration as noted by the AO is the same as what has been explained and accounted for by the appellant company. As stated above, the facts regarding ownership of the property by the appellant company and Sh. Rajiv Rattan are also disclosed in the registered sale deed. The proof of ownership of significant portion of the property by the appellant company is not only apparent directly from the sale deed but also apparent indirectly from the risk of default and repossession of the property, as in case of default of loan (constituting 70% of purchase consideration) the said property (in which the appellant company owns 95% share) would be repossessed by the bank. The role of Sh. Rajiv Rattan in the documents of loans, his control over the parent company of the appellant are also already documented in the books of accounts are in line with the role of a joint purchaser or property and have been justified in the written submissions by the appellant company. Further, there is no requirement for Sh. Rajiv Rattan being a substantial shareholder of the holding company, to become a director in the appellant company. Thus, there are no undisclosed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le Apex Court in the case of P. Leelavathi vs. V. Shankarnarayana Rao (2019) 6 SCALE 112 has held that even if payment is made by an outsider, that itself cannot be the sole consideration to classify the transaction as Benami. In the absence of any such evidence brought on record by the AO, this parameter is not satisfied. II. The nature and possession of the property, after the purchase: Here again, it is an undisputed fact that the property is let out for lease rent by the appellant to Sh. Rajiv Rattan. However, the ownership and proprietary possession of the property rests 95% with the appellant company and 5% with Sh. Rajiv Rattan, as per the registered sale deed. As per the terms of the leave and license agreement the temporary possession of the property rests with Sh. Rajiv Rattan in the capacity of a tenant, for which fair monthly rental of Rs.90,00,000/- is paid by him. Thus, the possession of Sh. Rajiv Rattan is for fair consideration, and not without consideration. In case the transaction was benami in nature, then the possession would rest with the beneficial owner without payment of fair consideration. It is noteworthy that possession under the leave and lic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the appellant company and Sh. Rajiv Rattan to claim the expenditure of interest on home loan, which would have otherwise not been allowed if the property would have been purchased only be Sh. Rajiv Rattan, it is noted that the AO has ignored that in the later case, Sh. Rajiv Rattan would also not be paying rental income to the appellant company. Further, the appellant has already submitted a tablular comparison of tax liabilities in both cases, which clearly show that there is no loss of revenue in the former scenario. It must also be noted that property taxes are higher in cases where properties are let out for rent. Thus, the overall tax liability is certainly higher in case of letting out of properties as compared to self occupancy. Here also, the parameter is not satisfied. IV. The position of the parties and the relationship, if any, between the claimant and the alleged benamidar: The relationship between the appellant company and Sh. Rajiv Rattan is duly disclosed in its books of accounts, which have been duly audited by independent statutory auditors. The nature of relationship and position of parties are duly disclosed in books of accounts, which are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was bonafide and for the purpose of business. Hence, the said transaction cannot be treated as benami in nature. 5.15 The remaining observations made by the AO in the assessment order are hereby dealt with as per the provisions of the Income Tax Act, 1961: A. As regards the observation made by the AO that the leave and license agreement is a colourable device to hide the real ownership of the entire property by Sh. Rajiv Rattan, it is noted that the AO has not brought any basis or motive on record to do so. It is not the case that the leave and license agreement is made for a miniscule amount, which is also not being paid by the lessee. The market rate of rent is regularly being paid by Sh. Rajiv Rattan to the appellant company and is duly recorded as business income in the books of accounts of the appellant company. Further, the AO has not brought out any loss of tax to the Revenue in the present arrangement vis- vis the arrangement proposed by the AO wherein the entire property would have been owned and held by Sh. Rajiv Rattan. This has also been tabulated by the appellant in its written submissions. B. The AO has made certain observations regarding neither treat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the name of the appellant company as the co-applicant. Thus, the loan documents mention the name of both legal owners of the property. Further, it is common parlance that mention of the appellant company as the co-applicant or the main applicant does not effect its legal title, as documented in the registered sale deed. F. The AO has also stated that the ownership of property in joint name creates restriction on sale, and hence cannot be shown as inventory. This objection is not only ill founded but also incorrect and erroneous. The appellant company may decide to purchase any share in property and show its relevant share as inventory in its books of accounts. The provisions of Income Tax Act do not prohibit disclosure of partly owned property as Inventory. The appellant company is free to sell or otherwise use its share in property as it commercially deems fit. Further, the possibility of a future conflict which may or may not arise if the joint owner of the property may or may not agree to sell his share is yet again irrelevant and cannot be used to discredit the bona fide of the transaction undertaken by the appellant company. G. Lastly, the decision of Hon ble Supre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and is not being reiterated herewith. It is admitted by the AO that these expenses pertain to the property purchased by the appellant. It is also noted that the said property is duly shown as inventory by the appellant in its books of accounts. Thus, the interest and processing charges having been incurred wholly and exclusively for the purpose of its business, are thus allowed. The disallowance of Rs. 11,58,12,598/- is hereby deleted. The issue of disallowance of interest and processing charges of Rs.11,58,12,598/- from the income from other sources becomes infructuous as the income has rightly been offered to tax as business income by the appellant 28. We observed that the AO has relied on the news clippings to state that Sh. Rajiv Rattan purchased the property, purchase of property by Rajiv Rattan is not inaccurate, as he is one of the joint owners of the property as per the registered sale deed. This fact is disclosed by the assessee company itself in its books of accounts. Further, the AO has also reiterated the source of the purchase consideration, which is already disclosed in the books of accounts of the assessee company. A property to be classified as benami, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion to be benami rests solely upon the person alleging it to be a benami transaction as held by the Hon ble Supreme Court in the cases of Mangathai Ammal vs. Rajeswari Others (Civil Appeal No. 4805 of 2019) and P. Leelavathi vs. V. Shankarnarayana Rao (2019) 6 SCALE 112. Hence, the transaction entered into by the assessee company cannot be classified as benami transaction and accordingly transaction of purchase of property and letting it out for business purpose was bona fide. Considering the objects of the assessee company, the purchase of property is rightly shown in the books as inventory . Since, Rajiv Rattan is also a joint purchaser, he is entitled to apply home loan. Mention of appellant s name as co- appellant does not effect its legal title. The provisions of Income Tax Act does not prohibit disclosure of partly owned property as inventory. 29. The assessee company had complete freedom and right to terminate the leave and license agreement. Relevant terms and conditions mentioned in the agreement are reproduced as under: 5.1.2 That the Licensor agrees that in case the Licensed Premises are transferred/sold by him to a prospective buyer takes place during the te ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... equipments, articles, items, assets and fit-outs and the Licensor shall not raise any hindrance/objection to the same . 30. A benami transaction is one where the person in whose name the property vests is not the real owner and the consideration for such property is provided by some other person for whose benefit such property is acquired by the ostensible owner. In this case the ownership pattern is clear, in as much as, 95% share in the property belongs to the assessee company while balance 5% share belongs to Shri Rajiv Rattan. Five percent of the consideration has been reimbursed by Sri Rajiv Rattan to the assessee company and the proof of the same is at page 185 of the paper book. Having acquired the property, the assessee company could have given it on rent to anybody and would have received the fair market rentals of Rs. 90 lakhs or around per month. By giving it to Shri Rajiv Rattan, nothing turns against the assessee company. More so, because the arrangement is a leave and license and that too only for a period of 10 months. It is not even a rent agreement which could have been for a much longer period or even for an indefinite period. It is not a case where rentals ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... person company . The Income Tax Act also in the definition of person under section 2(31) recognizes company as separate legal entity being a person which is distinct from the individual shareholder. 34. To the query of the ld. DR as to the source of repairs/renovations of the property, the ld. counsel had also brought in the fact that the same were met by the assessee company which also shows that the assessee company is seeking to maintain and protect its assets out of its own resources. On a query raised by the Bench, the revenue was unable to show that there was any intention of the assessee to defraud the Department. There can be no allegation as to the intention of the parties to enter into any sham transaction. Under these circumstances, we hold that the transaction cannot be said to be Benami. 35. One of the main objects of the assessee company is to rent and manage properties. The said objects are reproduced here as under: (A) THE MAIN OBJECTS TO BE PURSUED BY THE COMPANY ON ITS INCORPORATION ARE: 1. . 2. To construct, acquire, hold/sell Builders, buildings, tenements and such other moveable and immovable Builders and to rent, let on hire an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erty. 38. In the case of Chennai Properties Investments Ltd. Vs. CIT (373 ITR 673) the Hon ble Apex Court considering the Constitution Bench judgment in the case of Sultan Brothers Pvt. Ltd. vs. CIT (51 ITR 353) held as under: 4. We have heard the Ld. Counsel for the parties on the aforesaid issue. Before we narrate the legal principle that needs to be applied to give the answer to the aforesaid question, we would like to recapitulate some seminal features of the present case. 5. The Memorandum of Association of the appellant-company which is placed on record mentions main objects as well as incidental or ancillary objects in clause III. (A) and (B) respectively. The main object of the appellant company is to acquire and hold the properties known as Chennai House and Firhavin Estte both in Chennai and to let out those properties as well as make advances upon the security of lands and buildings or other properties or any interest therein. What we emphasize is that holding the aforesaid properties and earning income by letting out those properties is the main objective of the company. It may further be recorded that in the return that was filed, entire income whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ases over large areas, developing them as coal fields and then sub-leasing them to collieries and other companies. Thus, in the said case, the leasing out of the coal fields to the collieries and other companies was the business of the assessee. The income which was received from letting out of those mining leases was shown as business income. Department 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 categorized/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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are conscious of the aforesaid dicta laid down in the Constitution Bench judgment. It is for this reason, we have, at the beginning of this judgment, stated the circumstances of the present case from which we arrive at irresistible conclusion that in this case, letting of the properties is in fact is the business of the assessee. The assessee, therefore, rightly disclosed the income under the head Income from Business . It cannot be treated as income from the house property . We, accordingly, allow this appeal and set aside the judgment of the High Court and restore that of the Income Tax Appellate Tribunal. No orders as to costs. 39. The Hon ble Delhi High Court in the case of Agya Ram vs. CIT (supra) (386 ITR 545) (Del.) held as under: 21. Questions (ii) and (iii) are next taken together for consideration. The factors that ought to have been taken note of by the ITAT were that the Assessee had consistently shown the licence fee as business income from AY 1982-83 onwards. The return for AY 1982-83 was picked up for scrutiny and an assessment order passed under Section 143(3) of the Act accepting the stand of the Assessee that the licence fee was in the nature of busin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ific clauses of the licence deed, the Court is satisfied that the income earned by the Assessee from the licence fee could not be characterised as rent and, therefore, income from house property. The Court is of the view that the AO and the ITAT were in error in coming to a contrary conclusion. They appear to have overlooked that the Assessee had consistently treated the licence fees collected as business income since AY 1982-83. In Commissioner of Income Tax v. Neo Poly Pack (P) Ltd. (2000) 245 ITR 492 (Del) in similar circumstances, applying the rule of consistency, the Court declined to frame a question of law urged by the Revenue that the licence fee earned by the owner of the property ought to be treated as income from house property and not business income. 27. For all the aforementioned reasons, Question Nos. (ii) and (iii) are also answered in the negative i.e. in favour of the Assessee and against the Revenue. The impugned order of the ITAT and the corresponding order of the AO on the above issues for the AYs in question are set aside. 40. The Hon ble Calcutta High Court in the case of Shyam Burlap Co. Ltd. vs. CIT (supra) held as under: - It is significant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f renting out of the properties as per its object in Memorandum of Association. This is also not in dispute before the lower authorities but the lower authorities have held that character of income is not altered because it is received by a company formed with the object of real estate development etc. Ld. Revenue authorities were of the view that as the income is subject to TDS u/s 1941 of the Act characterized as rent, it is chargeable to tax under the head income from house property. We find that provisions of section 1941 of the Act do not determine the characterization of income in the hands of the recipient. In the present case, the decision of the Hon ble Supreme Court in the case of Chennai Properties Investments Ltd. (supra) and Rayala Corporation (P) Ltd. (supra) covers the issue in favour of the assessee. Further Hon ble Bombay High Court in Pr. CIT Vs. City Centre Mall Nashik (P) Ltd. (2020) 121 taxmann.com 87/424 ITR 85 has also held that when main objects of assessee, over and above real estate development as main clause has renting of property therein and assessee is also providing certain other services as mentioned in Annexure B of leave and license agreement, in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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