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TMI Blog2024 (8) TMI 1079X X X X Extracts X X X X X X X X Extracts X X X X ..... eclared any income for providing additional facilities to the occupiers of the premises and those aspects have not been considered by AO in the impugned assessment order. Therefore, the rental income declared by the assessee deserves to be assessed as a house property income and not as a business income. The rental income declared by the assessee has been accepted as a house property income in two scrutiny assessments, i.e. A.Ys. 2012-13 2013-14. In subsequent years, such income has been accepted under section 143(1). It suggests that in the earlier years as well as in subsequent years, the stand of the assessee has been accepted. It was accepted by AO in the present A.Y. also, in the first round but in the second round of proceeding on the strength of the order passed under section 263, ld. Assessing Officer did not accept. The principle of consistency is fully applicable in the present case. Thus, we are of the view that rental income declared by the assessee deserves to be assessed as an income from house property. The finding of the ld. Assessing Officer that such income is to be assessed as a business income is vacated - AO is directed to treat such income as an income from ho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s.- CIT reported in (2015) 373 ITR 673 (SC). He set aside the assessment order and directed the ld. Assessing Officer to re-adjudicate this issue. The conclusion of the ld. CIT in this order reads as under:- 6. After having considered the position of law and facts and circumstances of the instant case, the assessment order passed by the AO is found to be erroneous and prejudicial to the interest of revenue in accordance with the Explanation 2 below section 263(1) of the Act. As a result, the assessment order passed by the AO is set aside in respect of only the point stated in para 2 above. The Assessing Officer is directed to initiate fresh assessment proceedings and carry out necessary verification and take action accordingly after verification of the correctness of the claim of the assessee. The Assessing Officer must also provide reasonable opportunity to the assessee company to produce documents evidences which it may choose to rely upon for substantiating its own claim. Thereafter a fresh assessment order may be passed in accordance with the relevant provisions of law . 5. The assessee did not file appeal against the order of ld. Commissioner and it attained finality. 6. In co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g factor was not the ownership of land or leases, but nature of activity of the operations in the relation to the same. (iv)It is also evident from the judgment of Hon ble Supreme Court in the case of Chennai Properties and Investment Ltd. Vs CIT (2015) 56 Taxmann.com 456 that the entire income was through letting out of the two properties namely, Chennai House and Firhavin Estate and there is no other income except the income from letting out of these two properties, which is similar in the case of the assessee also, as the assessee has also mainly rental income from letting out of properties situated at Gaziabad. (v) Therefore, after considering the decision of Hon ble Supreme Court in the case of Chennai Properties Investment Ltd. and submission of the assessee, it is clear that the only income of the assessee was income from let out property to management institutions and collected rent as well as service charges for the same. Thus rental income is hereby treated as Income from Business Profession instead of Income from House Property as claimed by the assessee. 7. Appeal to the ld. CIT(Appeals) did not bring any relief to the assessee. 8. While impugning the orders of revenue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... circumstances of each case, if the activity is being carried out in an organized manner with a motive to earn business profit, then it is to be assessed as a business income. In the case of assessee, no such objectives are there in the Memorandum of Association. In the ancillary activities, it is one of the objectives. He took us through the observations of the ld. Assessing Officer, wherein the activities required to be undertaken by the assessee in its Memorandum were being noticed. According to the ld. Counsel for the assessee, the main objective of the assessee-company was to carry on the business of all kinds of engineering products including financing, manufacturing, selling or in any other form. Thus, according to him, basically ld. Commissioner ought to have not taken cognizance under section 263. 12. Ld. Counsel for the assessee further contended that this judgment of the Hon ble Supreme Court in the case of Chennai Properties Investment Limited has been subsequently considered by the Hon ble Supreme Court itself. In the case of Raj Dadarkar Associates -vs.- ACIT, Central Circle-46 reported in [2017] 394 ITR 592 (SC) and the Hon ble Supreme Court has itself propounded the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Sr. D.R. We have taken note of the order passed by the ld. Commissioner under section 263. A perusal of section 263 would indicate that it authorizes the ld. Commissioner to either himself determine the taxable income of an assessee or relegate the issue for further inquiry to the ld. Assessing Officer. In the present case, the ld. Commissioner did not exercise the first option. He simply set aside the issue to the ld. Assessing Officer for re-consideration. Therefore, even if that order was not challenged, it has not resolved the issue. The ld. CIT kept the issue open for adjudication by the ld. Assessing Officer. Therefore, this argument of the ld. D.R. that in pursuance of the ld. CIT s order, ld. Assessing Officer has to assess the income as a business income is concerned, it is an incorrect argument at the end of the revenue. The ld. CIT has not categorically decided the issue for assessing the house property income as a business income. 16. Now we take the main issue i.e. whether rental income of the assessee has to be assessed as a house property income or a business income. As far as the issue is concerned, we deem it appropriate to take note the judgment of the Hon ble Ju ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... able space together with the furniture and fixtures. Hence, this question should be answered in the affirmative. (B) Was it the intention to make the letting of the two practically one letting (page 363) : From a plain reading of the agreement, it appears that the intention of the parties to the said agreement is clear and unambiguous by which the first party has allowed the second party to enjoy the said table space upon payment of the comprehensive monthly rent. Hence, this question should be answered in the affirmative. (C) Would one have been let alone, and a lease of it accepted, without the other (page 363)? As we have discussed hereinbefore that it is composite table space let out to various occupants, the amenities granted to those occupants including the user of the furniture and fixtures are attached to such letting out and the last question, in view of the same, must be answered in the negative. 14. Applying the said test we hold that by the said agreement the parties have intended that such letting out would be an inseparable one. 15. Hence, we hold that the prime object of the assessee under the said agreement was to let out the portion of the said property to various ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... us take note of the relevant discussion made by the Hon ble Supreme Court in this case, which reads as under:- (16) In view thereof, the object clause, as contained in the partnership deed, would not be the conclusive factor. Matter has to be examined on the facts of each case as held in Sultan Bros. (P) Ltd. case. Even otherwise, the object clause which is contained in the partnership firm is to take the premises on rent and to sub-let. In the present case, reading of the object clause would bring out two discernible facts, which are as follows: (a) The appellant which is a partnership firm is to take the premises on rent and to sub-let those premises. Thus, the business activity is of taking the premises on rent and sub-letting them. In the instant case, by legal fiction contained in Section 27(iiib) of the Act, the appellant is treated as deemed owner . (b) The aforesaid clause also mentions that partnership firm may take any other business as may be mutually agreed upon by the partners. 17) In the instant case, therefore, it is to be seen as to whether the activity in question was in the nature of business by which it could be said that income received by the appellant was to b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the entire income of the appellant was through letting out of the two properties it owned and there was no other income of the assessee except the income from letting out of the said properties, which was the business of the assessee. On those facts, this Court came to the conclusion that judgment of this Court in Karanpura Development Co. Ltd. v. CIT, (1962) 44 ITR 362 was applicable and the judgment of this Court in East India Housing and Land Development Trust Ltd. v. CIT, (1961) 42 ITR 49 was held to be distinguishable. In the present case, we find that situation is just the reverse. The judgment in East India Housing and Land Development Trust Ltd. which would be applicable which is discussed in para 8 of Chennai Properties Investments Ltd. case and the reproduction thereof would bring home the point we are canvassing: 8. With this background, we first refer to the judgment of this Court in East India Housing and Land Development Trust Ltd. case [East India Housing and Land Development Trust Ltd. v. CIT, (1961) 42 ITR 49 (SC)] 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 proper ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ill show profit, only then his business will be accepted separately. Apart from mentioning the judgment of the Hon ble Supreme Court in all the reasoning pointed out by him, he has not highlighted the aspect as to how earning of rental income is being carried out by the assessee in an organized manner. He has not highlighted that apart from giving the property on rent, assessee has provided certain other facilities. As far as collection of service charges is concerned, i.e. part of statutory requirement, but the assessee has not declared any income for providing additional facilities to the occupiers of the premises and those aspects have not been considered by the ld. Assessing Officer in the impugned assessment order. Therefore, the rental income declared by the assessee deserves to be assessed as a house property income and not as a business income. 20. Apart from the above, it is pertinent to note that in earlier years, the rental income declared by the assessee has been accepted as a house property income in two scrutiny assessments, i.e. A.Ys. 2012-13 2013-14. In subsequent years, such income has been accepted under section 143(1). It suggests that in the earlier years as wel ..... X X X X Extracts X X X X X X X X Extracts X X X X
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