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INCOME TAX APPELLATE TRIBUNAL “C” BENCH: KOLKATA
I.T.A No.1193/Kol/2010 Assessment Year: 2005-06
M/s. Banjour Enterprises (P) Ltd. (Appellant) vs. Income-tax Officer (Respondent)
Date of Order: 02-03-2016
ORDER
Per Shri Mahavir Singh, JM: T
This appeal by assessee is arising out of order of CIT(A)-XXXII, Kolkata vide Appeal No. 218/CIT(A)-XXXII/08-09/12(2)/R&T/Kol dated 31.12.2009. Assessment was framed by ITO, Ward-12(2), Kolkata u/s. 143(3) of the Income Tax Act, 1961 (hereinafter referred to as “the Act”) for Assessment Year 2005-06 vide his order dated 23.11.2007.
2. The only issue in this appeal of assessee is against the order of CIT(A) confirming the action of AO in assessing the income from house property as against declared by the assessee as business income and also disallowing consequential interest to bank.
3. Briefly stated facts are that the assessee is a Private Ltd. co. incorporated with the object to start manufacturing/export of leather goods. Accordingly, the assessee company applied for land to WBSIC. The assessee was allotted land for the purpose of manufacturing and export of leather goods but unable to secure any export orders year after year. The assessee company also installed machineries in the factory premises and schedule of fixed assets is enclosed in assessee’s accounts. The assessee company let out part of its factory to its sister concern XL Enterprises Ltd. together with machinery and other equipments on rent. The assessee company filed its returns of income from AYs 1993-94 to 2004-05 claiming the income from letting out of this factory along with machineries and other equipments as income from business and which was accepted by revenue all along. But the AO in the relevant AY 2005-06 treated the rental income as income from house property and disallowed the claim of consequential expenses. Aggrieved, assessee preferred appeal before CIT(A), who confirmed the action of AO by stating that the assessee company is not in the business of renting out property and the assessee let out the factory premises because the same was not utilized by it for its own business. According to CIT(A), the intention of the assessee in renting out the factory premises was to earn rental income. Assessee before CIT(A) claimed that it has installed machineries and factory was running and production started but could not get export orders, hence, the factory was let out to XL Enterprises Ltd. According to CIT(A), as per Balance Sheet the total fixed assets was at Rs.44,81,217/- and land value was at Rs.38,33,330/- and according to him, the value of plant and machinery is a meager 5% of the value of factory premises. Further, according to CIT(A), tenants has issued TDS certificates clearly mentioning the nature of payment as rent. Hence, he treated the income of assessee as income from house property and confirmed the action of AO. Aggrieved, now assessee is in appeal before Tribunal.
4. We have heard Ld. Counsel for the assessee and gone through facts and circumstances of the case. Before us Ld. Counsel for the assessee argued that this factory premises along with machineries and other equipments were leased out to XL Enterprises Ltd. just to exploit the immovable property of the assessee by way of commercial activity and, therefore, in view of the decision of Hon’ble Calcutta High Court in the case of CIT Vs. Sambhu Investments Pvt. Ltd. (2001) 249 ITR 47 (Cal), the income is to be treated as business income and not from income from house property. Ld. Counsel for assessee also relied on the decision of Hon’ble Supreme Court in the case of Chennai Properties & Investments Ltd. Vs. CIT, Civil Appeal No. 4494 of 2004 dated 09.04.2015. We find that the assessee is declaring the income as business income from AY 1993-94 until AY 2004- 05 the same had accepted by revenue as income from business. The assessee has let out its factory premises along with machineries and equipments to XL Enterprises Ltd. On rent. No doubt the other party has deducted tax and in TDS certificate the nomenclature used as rent but the same is not decisive or determinative factor whether the income of the assessee is business income or income from house property. We find that Hon’ble Supreme court in the case of Chennai Properties & Investments Ltd., supra has observed as under:
“We 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.”
5. In the present case the assessee has started business of import and export after manufacturing of leather goods, for which purpose the land was allotted by WBSIC. The assessee was allotted land for the purpose of manufacturing and export of leather goods but unable to secure any export orders year after year. The assessee company also installed machineries in the factory premises and schedule of fixed assets is enclosed in assessee’s accounts. The assessee company let out part of its factory to its sister concern XL Enterprises Ltd. together with machinery and other equipments on rent. The assessee company filed its returns of income from AYs 1993-94 to 2004-05 claiming the income from letting out of this factory along with machineries and other equipments as income from business and which was accepted by revenue all along. The assessee company’s intention from the very beginning was to start business of export of leather goods for which constructed a factory building and installed machinery, which was eventually rented out for the reason that the assessee could not secure any export order year after year. It means the intention from the very beginning was not to let out the property but to carry out export business of leather goods. In such circumstances, the assessee declared its income all along from AYs 1993-94 to 2004-05, as income from business from letting out and the same was accepted by revenue as it is. In such circumstances, the revenue cannot change stand in this very year wherein there is no factual difference in the facts.
Accordingly, we allow this issue of assessee’s appeal. The consequential expenses will also be allowed including interest. Hence, the appeal of assessee is allowed.
6. In the result, appeal of assessee is allowed.
Order pronounced in the open court on 02.03.2016
(M. Balaganesh) (Mahavir Singh)
Accountant Member Judicial Member
TDS certificate nomenclature as rent not decisive or determinative factor if the income is business income or income from house property | 02-03-2016 |
