M/s. Shrinath Warehousing Co., Pune V. Assistant Commissioner of Income-tax,

ITA 1017/PUN/2014

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 0445 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 6 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-11-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2003-2004
• Appeal Filed On: 15-05-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ANIL CHAWARE
• Assessee Lawyers: D R BARVE
• Keywords: Business income; Additional evidence
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A , PUNE PUNE BENCH A , PUNE , , BEFORE MS. SUSHMA CHOWLA, JM AND SHRI ANIL CHATURVEDI, AM . / ITA NO. 613 /PN/20 1 4 / ASSESSMENT YEAR: 20 0 1 - 02 . / ITA NO S . 1017 TO 1020 /PN/201 4 / ASSESSMENT YEAR S : 2003 - 04, 2005 - 06, 2006 - 07 & 20 0 8 - 0 9 / ASSESSMENT YEAR S : 2003 - 04, 2005 - 06, 2006 - 07 & 20 0 8 - 0 9 M/S. SHRINATH WAREHOUSING CO., S/NO.139, PHURSUNGI, TAL. HAVELI, DI ST. PUNE - 412308 . / APPELLANT PAN: AA EFS2598H VS. THE ASST. COMMISSIONER OF INCOME TAX , CIRCLE 4, PUNE / CIRCLE 4, PUNE . / RESPONDENT / APPELLANT BY : S /S HRI NIKHIL PATHAK & D.R. BARVE / RESP OND ENT BY : SHRI ANIL CHAWARE / DATE OF HEARING : 20 . 1 0 .201 6 / DATE OF PRONOUNCEMENT: 18 . 1 1 .201 6 / ORDER PER SUSHMA CHOWLA, JM: OUT OF THIS BUNCH OF APPEAL S FILED BY THE ASSESSEE, ONE APPEAL I S AGAINST ORDER OF CIT( A ) - II , PUNE , DATED 27 . 11 .201 3 RELATING TO ASSESSMENT YEAR 2001 - 02 AGAINST THE ORDER PASSED UNDER SECTION 143(3) R.W.S. 254 OF THE INCOME TAX ACT, AGAINST THE ORDER PASSED UNDER SECTION 143(3) R.W.S. 254 OF THE INCOME TAX ACT, ITA NO . 613 / PN /201 4 ITA NO S . 1017 TO 1020 /PN/201 4 M/S. SHRINATH WAREHOUSING CO. 2 1961 (IN SHORT THE ACT) . THE REMAINING APPEALS ARE AGAINST CONSOLIDATED ORDER OF CIT (A) - II, PUNE, DATED 23.01.2014 RELATING TO ASSESSMENT YEAR S 20 03 - 04, 2005 - 06, 2006 - 07 & 2008 - 09 AGAINST RESPECTIVE ORDER S PASSED UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT) . 2. THIS BUNCH OF APPEALS RELATING TO THE SAME ASSESSEE ON IDENTICAL ISSUE WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS CONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE. HOWEVER, REFERENCE IS BEING MADE TO THE FACTS AND ISSUES IN ITA NO.613/PN/2014 TO ADJUDICATE THE ISSUE. 3 . THE ASSESSEE IN ITA NO. 61 3 /PN/201 4 , RELATING TO ASSESSMENT YEAR 2001 - 02 HAS RAISED THE FOLLOWING GROUNDS OF APPEAL : - 1. THE APPELLANT FIRM IS PREFERRING 2ND (TIME) APPEAL BEFORE THE HON'BLE INCOME - TAX APPELLATE TRIBUNAL (ITAT) PUNE TO SEEK THE JUSTICE AGAINST THE ORDER PASSED BY THE LEARNED COMMISSIONER OF INCOME - TAX (APPEALS) - II, PUNE FOR THE APPEAL ORDER NO.PN/CIT (A) - 11/ ACIT,CIR - 4,PN/152/ 2011 - 12 DATED 27.11.2013 WHICH IS POSTED ON 30 TH JANUARY, 2014 AND RECEIVED BY DATED 27.11.2013 WHICH IS POSTED ON 30 TH JANUARY, 2014 AND RECEIVED BY THE ASSESSEE ON 31 ST JANUARY, 2014. 2. THE LEARNED COMMISSI ONER OF INCOME - TAX (CIT) (APPEALS) - II, PUNE, HAS ERRED IN IGNORING THE FACT THAT THE APPELLANT FIRM HAD CONSTRUCTED THE WAREHOUSE AS A COMMERCIAL COMPLEX AND CONDUCTED THE SYSTEMATIC BUSINESS ACTIVITIES TO EARN THE PROFITS AND THEREFORE NECESSARILY IT WAS AN ESTABLISHED BUSINESS INCOME. 3. ON THE FACTS AND CIRCUMSTANCES, THE LEARNED CIT ( APPEALS ) - II , PUNE HAS ERRED IN HOLDING THAT THE INCOME WAS FROM HOUSE PROPERTY WHEREAS IN REALITY IT WAS THE INCOME FROM BUSINESS. THE RECEIPTS INCLUDED CHARGES FOR SECU RITY SERVICES, EPBX , PROVIDING LABOUR FOR LOADING & UNLOADING OF MATERIAL AS WELL AS ARRANGING VEHICLES FOR TRANSPORTATION AND OTHER OFFICE - ADMINISTRATIVE FACILITIES ETC. APART FROM CHARGES FOR PREMISES. FURTHER IT IS IGNORED THAT THE PARTNERS CAME TOGETH ER TO RUN THE ACTIVITY AS BUSINESS, THE LOCAL AUTHORITY HAD RECOVERED THE PROPERTY TAXES AS COMMERCIAL PREMISES, A REGULAR BUSINESS LICENCE IS OBTAINED TO RUN IT AS WAREHOUSING BUSINESS, THE ELECTRICITY BOARD HAS ALSO CHARGED IT WITH COMMERCIAL RATES. IT I S SUBMITTED THAT THE SAME MAY PLEASED BE ALLOWED AS BUSINESS INCOME. 4. THE LEARNED CIT ( APPEALS ) - II , PUNE HAS GIVEN WEIGHTED IMPORTANCE TO THE FINDINGS OF HIS PREDECESSOR, WHO HAS PASSED THE A P PELLATE ORDER(S) FOR ASSESSMENT YEAR(S) 2000 - 01, 2003 - 04 AND 2004 - 05. BEING AN INDEPENDENT ORDER ITSELF, HE SHOULD HAVE CONSIDERED THE SUBMISSIONS SEPARATELY ON ITS MERITS WITHOUT ANY PREJUDICE THOUGHT. ITA NO . 613 / PN /201 4 ITA NO S . 1017 TO 1020 /PN/201 4 M/S. SHRINATH WAREHOUSING CO. 3 5. THE LEARNED CIT ( APPEALS ) - II , PUNE , HAS IGNORED THE VARIOUS JUDICIAL DECISIONS SUBMITTED SQUARELY COVERING TH E SAME FACTS AS OF THE APPELLANT WHERE IN IT WAS HELD THAT THE INCOME IS FROM BUSINESS ONLY. 6. WITHOUT PREJUDICE TO THE ABOVE, ALTERNATIVELY IF IT IS HELD THAT THE INCOME IS FROM HOUSE PROPERTY, THEN IN THAT CASE KEEPING CONSISTENCY WITH THE DECISION OF LEARNED CIT ( APPEALS ) - II, PUNE FOR THE ASSESSMENT YEAR 2000 - 2001, ADDITIONAL EXPENSES INCURRED TOWARDS SECURITY CHARGES MAY PLEASE BE ALLOWED. 7. THE APPELLANT REQUEST FOR ADMISSION OF ADDITIONAL EVIDENCE, IF ANY, REQUIRED IN THE RESPECT OF THE GROUNDS O F APPEAL. 4. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE AT THE OUTSET POINTED OUT THAT THIS WAS THE SECOND ROUND OF PROCEEDINGS BEFORE THE TRIBUNAL AND THE ISSUE ARISING IN THE PRESENT APPEAL IS THE ASSESSABILITY OF INCOME ARISING FROM WAREHO USING ACTIVITY. HE FURTHER STATED THAT GROUND OF APPEAL NO.1 RAISED BY THE ASSESSEE IS NOT PRESSED IN ALL THE APPEALS. HOWEVER, THE ISSUE IS TO BE DECIDED AS RAISED UNDER GROUNDS OF APPEAL NO.2 AND 3 AS TO WHETHER THE WAREHOUSING ACTIVITIES ARE TO BE ASS ESSED AS INCOME FROM PROPERTY OR AS INCOME FROM BUSINESS. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE FURTHER POINTED OUT THAT THE GROUNDS OF APPEAL NO.4 TO 7 ARE ARGUMENTATIVE. HE FURTHER REFERRED TO THE PARTNERSHIP DEED EXECUTED ON 01.04 .1992 WHERE THE NATURE OF BUSINESS WAS WAREHOUSING ACTIVITY . T HE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE POINTED OUT THAT THE ISSUE NOW STANDS COVERED BY THE RATIO LAID DOWN BY THE HONBLE SUPREME COURT IN THE CASES OF M/S. RAYALA CORPORATION P VT. LTD. VS. ACIT IN CIVIL APPEAL NO.6437 OF 2016 VIDE JUDGMENT DATED 11.08.2016 AND PUNE BENCH OF TRIBUNAL IN M/S. NUTAN WAREHOUSING COMPANY PVT. LTD. VS. DCIT IN ITA NOS.1963 TO 1968/PN/2013, RELATING TO ASSESSMENT YEARS 2000 - 01, 2002 - 03 TO 2006 - 07, IN I TA NO.2130/PN/2013, RELATING TO ASSESSMENT YEAR 2001 - 02 AND IN ITA NO.361/PN/2014, RELATING TO ASSESSMENT YEAR 2008 - 09, VIDE ORDER DATED 30.09.2016 . OUR ATTENTION FURTHER WAS DRAWN TO PARA 3 OF CIT(A)S ORDER, WHEREIN IT IS MENTIONED THAT THE TRIBUNAL HAS SET ASIDE THE ORDER TO THE FILE OF ASSESSING ITA NO . 613 / PN /201 4 ITA NO S . 1017 TO 1020 /PN/201 4 M/S. SHRINATH WAREHOUSING CO. 4 OFFICER FOR DE NOVO ASSESSMENT FOLLOWING THE VERDICT OF HONBLE BOMBAY HIGH COURT IN THE CASE OF NUTAN WAREHOUSING CO. PVT. LTD. 5. THE LEARNED DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE ON THE OTHER HAND, RE LIED ON THE ORDER OF CIT(A). 6. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE GROUND OF APPEAL NO.1 RAISED BY THE ASSESSEE IS NOT PRESSED AND HENCE, THE SAME IS DISMISSED AS NOT PRESSED. 7. THE ISSUE ARISING VIDE GROUNDS OF APPEAL NO. 2 AND 3 AND THE LINKED GROUNDS OF APPEAL NO.4 TO 7 IS AGAINST THE ASSESSABILITY OF INCOME ARISING TO THE ASSESSEE FROM WAREHOUSING ACTIVITY. THE ASSESSEE HAD FILED THE RETURN OF INCOME DECLARING INCOME UNDER THE HEAD INCOME FROM BUSINESS FROM ITS WAREHO USING ACTIVITIES. INCOME UNDER THE HEAD INCOME FROM BUSINESS FROM ITS WAREHO USING ACTIVITIES. THE ASSESSEE BEFORE US WAS A PARTNERSHIP FIRM WHICH WAS CONSTITUTED VIDE ARTICLES OF PARTNERSHIP DATED 01.04.1992 AND THE OBJECTS OF IT WERE CONSTRUCTION AND ERECTION OF WAREHOUSES AND HENCE, T HE NATURE OF BUSINESS WAS WAREHOUSING ACTIVI TY. THE ASSESSMENT IN THE CASE WAS ORIGINALLY COMPLETED BY THE ASSESSING OFFICER UNDER SECTION 44 OF THE ACT BY COMPUTING THE INCOME UNDER THE HEAD INCOME FROM PROPERTY, WHICH WAS CONFIRMED BY THE CIT(A). THE TRIBUNAL VIDE ORDER DATED 30.04.2010 HAD SE T ASIDE THE SAME TO THE FILE OF ASSESSING OFFICER FOR DE NOVO ASSESSMENT FOLLOWING THE RATIO LAID DOWN BY THE BOMBAY HIGH COURT IN THE CASE OF NUTAN WAREHOUSING CO. PVT. LTD. (SUPRA). THE RE - ASSESSMENT PROCEEDINGS FOR THE YEAR UNDER CONSIDERATION WERE INI TIATED, IN VIEW OF THE SAID DIRECTIONS OF THE TRIBUNAL AND THE ASSESSMENT WAS COMPLETED IN THE HANDS OF ASSESSEE BY ASSESSING THE SAID INCOME AS INCOME FROM PROPERTY. THE CIT(A) ITA NO . 613 / PN /201 4 ITA NO S . 1017 TO 1020 /PN/201 4 M/S. SHRINATH WAREHOUSING CO. 5 APPLIED THE RATIO LAID DOWN BY THE BOMBAY HIGH COURT IN THE CASE OF NUTAN W AREHOUSING CO. PVT. LTD. (SUPRA). W AREHOUSING CO. PVT. LTD. (SUPRA). 8 . THE ISSUE ARISING IN THE CASE OF NUTAN WAREHOUSING CO. PVT. LTD. WAS DECIDED AGAINST THE ASSESSEE, AGAINST WHICH AN APPEAL WAS FILED BEFORE THE HONBLE BOMBAY HIGH COURT, WHICH IN TURN, REMITTED THE ISSUE BACK TO THE T RIBUNAL TO RE - ADJUDICATE THE ISSUE. HOWEVER, THE PUNE BENCH OF T RIBUNAL IN M/S. NUTAN WAREHOUSING COMPANY PVT. LTD. VS. DCIT IN ITA NOS.1963 TO 1968/PN/2013, WAREHOUSING COMPANY PVT. LTD. VS. DCIT IN ITA NOS.1963 TO 1968/PN/2013, RELATING TO ASSESSMENT YEARS 2000 - 01, 2002 - 03 TO 2006 - 07, IN ITA NO.2130/PN/2013, RELATING TO ASS ESSMENT YEAR 2001 - 02 AND IN ITA NO.361/PN/2014, RELATING TO ASSESSMENT YEAR 2008 - 09, VIDE ORDER DATED 30.09.2016 HAS IN TURN RELIED ON THE LATEST DECISION OF THE HONBLE SUPREME COURT IN M/S. RAYALA CORPORATION PVT. LTD. VS. ACIT (SUPRA) AND HAVE DECIDED T HE ISSUE IN FAVOUR OF THE ASSESSEE HOLDING THAT WAREHOUSING RECEIPTS ARE TO BE TAXED AS IN FAVOUR OF THE ASSESSEE HOLDING THAT WAREHOUSING RECEIPTS ARE TO BE TAXED AS BUSINESS INCOME. THE RELEVANT FINDINGS OF TRIBUNAL IN M/S. NUTAN WAREHOUSING COMPANY PVT. LTD. VS. DCIT (SUPRA) ARE AS UNDER: - 32. WE HAVE CONSIDERED THE RIVAL ARGU MENTS MADE BY BOTH THE SIDES, PERUSED THE ORDERS OF THE AO AND CIT(A) AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. WE HAVE ALSO CONSIDERED THE VARIOUS DECISIONS CITED BEFORE US. THE ONLY DISPUTE IN THE ABOVE GROUNDS IS REGARDING THE TREATMENT OF T HE LEASE INCOME FROM HINDUSTAN LEVER LTD. AS INCOME FROM HOUSE PROPERTY OR AS BUSINESS INCOME. WE FIND THE HONBLE HIGH COURT WHILE SETTING ASIDE THE ISSUE TO THE FILE OF THE AO HAS OBSERVED AS UNDER : THE QUESTION AS TO WHETHER THE INCOME WHICH IS R ECEIVED BY THE ASSESSEE FROM THE TRANSACTION WHICH HAS BEEN ENTERED INTO IN RESPECT OF THE IMMOVABLE PROPERTY IN QUESTION SHOULD BE TREATED AS INCOME FROM HOUSE PROPERTY OR AS INCOME FROM BUSINESS WOULD HAVE TO BE RESOLVED ON THE BASIS OF THE WELL SETTLED TESTS LAID DOWN IN THE LAW IN DECIDED CASES. WHAT IS MATERIAL IN SUCH CASES IS THE PRIMARY OBJECT OF THE ASSESSEE WHILE EXPLOITING THE PROPERTY. IF THE PRIMARY OR THE DOMINANT OBJECT IS TO LEASE OR LET OUT PROPERTY, THE INCOME WHICH IS DERIVED FROM THE PRO PERTY WOULD HAVE TO BE REGARDED AS INCOME FROM HOUSE PROPERTY. CONVERSELY IF THE DOMINANT INTENTION OF THE ASSESSEE IS TO EXPLOIT A COMMERCIAL ASSET BY CARRYING ON A COMMERCIAL ACTIVITY, THE INCOME THAT IS RECEIVED WOULD HAVE TO BE T REATED AS I NCOME FROM B USINESS . WHAT HAS T O BE DEDUCED IS TO WHETHER THE LETT I NG OUT OF THE PROPERTY CONS TIT U T ES A DOMINAN T ASPECT OF T HE TRANSACTION OR OUT OF THE PROPERTY CONS TIT U T ES A DOMINAN T ASPECT OF T HE TRANSACTION OR WHE T HER IT WAS SUBSERV I ENT TO THE MAIN BUSINESS OF THE ASSESSEE OF CA R RY I NG OUT WAREHOUSING ACTIV I T I ES . ITA NO . 613 / PN /201 4 ITA NO S . 1017 TO 1020 /PN/201 4 M/S. SHRINATH WAREHOUSING CO. 6 THE F I RST SUBMISS I ON WHICH HAS BEEN URGED ON BEHALF OF T HE ASSESSEE , TO THE EFFECT THAT THE DECISION OF THE TR I BUNA L RENDERED ON MARCH 19 , 2001 FOR THE EFFECT THAT THE DECISION OF THE TR I BUNA L RENDERED ON MARCH 19 , 2001 FOR THE ASSESSMENT YEA R S 1994 - 95 , 1 995 - 96 AND 1 996 - 97 OUGH T T O HAVE BEEN CONSIDERED, BUT HAS NOT BEEN CONS I DERED BY THE TRIBUNAL , CA NNOT BE BRUSHED AS I DE AS WITHOUT SUBSTANCE. BE THAT AS IT MAY , DURING THE COURSE OF THE HEARING OF THESE PROCEEDINGS WE HAVE CONSIDERED THE EARLIER J UDGMENT OF THE TRIBUNA L . E X FACIE , A PERUSA L OF THE EA R L I ER JUDGMEN T WOU L D SHOW T HAT THAT THE T R IBUNAL HAS NOT MADE A REFERENCE TO THE DE T AILED T ERMS AND COND ITI ONS OF THE WAREHOUSING AGREEMENTS ENTE R ED I NTO BY THE ASSESSEE OR TO THE LEASE AGREEMENT BY WHICH THE FAC T ORY CAME TO BE LEASED OUT . CONSEQUENTLY, UPON CONSIDERING THE POSITION IN THIS REGARD COUNSEL AP PEARING ON BEHALF OF THE ASSESSEE HAS FAIRLY STATED THAT THE ASSESSEE WOU L D NOT CONSIDER THAT THE EAR LI ER DEC I SION OF THE TRIBUNAL BE REGARDED AS BINDING . IN SO FAR AS THE DEC I S I ON WH I CH I S I MPUGNED I N THESE PROCEED I NGS IS CONCE R NED , T HE TR I BUNA L HAS BAS I C A LL Y RELIED UPON THE LEASE AGREEMENT CONCE R NED , T HE TR I BUNA L HAS BAS I C A LL Y RELIED UPON THE LEASE AGREEMENT DATED MARCH 18 , 2001, BETWEEN THE ASSESSEE AND HINDUSTAN LEVER . IT IS ON THE BASIS OF THE TERMS OF THE LEASE AGREEMENT THAT THE TRIBUNAL ARRIVED AT A CONCLUSION THAT THE PRIMARY PURPOSE OF THE ASSESSEE WAS T O LET OU T TH E FACTORY AND THA T THE I NCOME T HAT WAS DER I VED THEREFROM COU L D NOT CONSEQUENT L Y BE REGARDED AS INCOME FROM BUS I NESS . THE SUBMISSION OF THE ASSESSEE IS THAT THE TE R MS ON WHICH THE ASSESSEE ENTERED INTO WAREHOUSING AGREEMENTS HAVE NOT BEEN CONSIDERED AT AL L I N T H E DECIS I ON OF T HE TRIBUNA L . NOW , A PERUSAL OF THE DEC I SION OF T HE TRIBUNA L WOU L D SHOW THA T T HE TR IBUNA L NOTED T WO DEC I S I ONS OF THE TR I BUNA L , T HE FIRS T IN VORA WAREHOUSING P . LTD . V . ASST . CIT [1999] 70 ITO 518 (MUM) (SMC) WHERE THE RENT WHICH WAS RE ALI Z ED FROM WAREHOUSING ACTIVITY WAS HELD TO BE ASSESSABLE AS BUSINESS INCOME AND THE SECOND IN THE CASE OF V . N . RUKARI V . ITO IN ITA NO. 84 / PN / 2001 I N WH I CH T HE TRIBUNA L HELD THA T THE I NCOME V . ITO IN ITA NO. 84 / PN / 2001 I N WH I CH T HE TRIBUNA L HELD THA T THE I NCOME WHICH WAS R EA LI ZED F R OM WAREHOUS I NG ACTIVI T Y WOULD BE ASSESS - AB L E AS I NCOME F R OM HOUSE PROPERTY . THE TR I BUNAL FOLLOWED A DECIS I ON OF T HE MADRAS H I GH COURT I N CIT V. INDIAN WAREHOUSING INDUSTRIES LTD. [2002] 258 ITR 93 AND WAS OF T HE VIEW THA T THE FAC T S OF T HAT CASE WERE IDENT I CAL , IN HOLD I NG THAT THE I NCOME RECEIVED F ROM THE LEASING OF THE WARE - HOUSE WAS ASSESSABLE AS INCOME FROM HOUSE PROPERTY . EX FACIE, THEREFORE , THE TERMS OF THE WAREHOUSING AGREEMENT WERE NOT CONSIDERED BY THE TRIBUNAL . MERELY STYLING AN AGREEMENT AS A WAREHOUS I NG AG R EEMENT WOU L D NO T BE CO N CLUS I VE OF THE NA T URE OF THE T RANSAC TI ON S I NCE IT I S FOR THE TR I BUNAL TO DE T ERM I NE AS T O WHE T HER THE TRANSACTION WAS A BARE LETT I NG OUT OF THE ASSET O R WHETHE R T HE ASSESSEE WAS CARRYING ON A COMMERCIAL ACTIVITY INVOLVING WAREHOUSING OPERATIONS . S I NCE THE TR I BUNAL HAS NOT CONS I DERED TH I S ASPECT OF THE CASE , WE ARE OF THE VIEW THAT IT WOULD BE APPROPR I A T E AND PROPER TO SET AS I DE THE DEC I SION OF T HE TR I BUNA L AND TO REMAND THE P R OCEED I NGS BACK TO THE ASSESS I NG OFFICER FOR A FRESH DETERMINATION AND ASSESSMENT IN ACCORD ANCE WITH LAW . WE ORDER ACCORDINGLY . UPON REMAND, I T I S C L ARIFIED THAT THE ASSESSING OFFICER SHALL NOT CONSIDER HIMSELF TO BE BOUND BY THE DECISION OF THE TRIBUNAL DATED MARCH 19 , 2001 FOR THE ASSESSMENT YEARS 1994 - 95 , 1995 - 96 AND 1996 - 97 , IN V I EW OF T HE CO NCESS I O N I N THOSE TERMS WH I CH HAS BEEN MADE DURING THESE PROCEED I NGS BY THE ASSESSEE. I N ORDER TO FACIL I TATE A FRESH EXERCISE BEING CARRIED OUT IN TERMS OF THE ORDER PASSED BY THIS COURT , THE IMPUGNED ORDER OF THE TRIBUNAL DATED AUGUST 31 , 2006 I S SET ASID E . HOW - EVER , IT IS CLARIFIED THAT AL L THE RIGHTS AND CONTENTIONS OF THE ASSESSEE AND THE REVENUE ON ALL ASPEC T S OF THE CASE ON THE MER IT S ARE KEPT OPEN . THE O R DER OF R EMAND , I T I S CLAR I F I ED SHA LL ALSO BE WITH RESPECT TO THE DISA L LOWANCE THAT OF R EMAND , I T I S CLAR I F I ED SHA LL ALSO BE WITH RESPECT TO THE DISA L LOWANCE THAT HAS BEEN EFFEC TED UNDER SECTION 4 0A(II) OF THE I NCOME - TA X ACT , 1961 . IN ITA NO . 613 / PN /201 4 ITA NO S . 1017 TO 1020 /PN/201 4 M/S. SHRINATH WAREHOUSING CO. 7 VIEW OF THE ORDER OF REMAND , IT IS NOT NECESSARY FOR THIS COURT TO EXPRESS ANY VIEW ONE WAY OR THE OTHER ON THE QUEST I ONS OF LAW INVOLVED . THE APPEA L I S ACCORDINGLY D I SPOSED OF . NO COS T S . ACCORDINGLY D I SPOSED OF . NO COS T S . 33. WE FIND THE AO AFTER CONSIDERING THE SUBMISSION OF THE ASSESSEE, WHICH HAVE ALREADY BEEN NARRATED IN THE PRECEDING PARAGRAPHS, TREATED THE LEASE RENTAL RECEIVED BY THE ASSESSEE FROM THE LEASE OF 68,000 SQ.FT OF THE FACTORY TO HINDUSTAN LEVER LTD. AS INCOME FROM HOUSE PROPERTY AND TREATED THE WAREHOUSING ACTIVITIES CARRIED OUT BY THE ASSESSEE ON THE REMAINING WAREHOUSES AS BUSINESS INCOME WHICH HAS BEEN UPHELD BY THE LD.CIT(A). 34. IT IS THE SUBMISSION OF THE LD. COUNSEL FOR THE ASSESSEE THAT THE MAIN OBJ ECTS TO BE PURSUED AS PER THE MEMORANDUM OF ASSOCIATION ARE CONSTRUCTION OF WAREHOUSES FOR STORAGE OF AGRICULTURAL GOODS. PROVISIONS OF BOMBAY WAREHOUSING ACT, 1959 ARE APPLICABLE TO THE ASSESSEE COMPANY. IT IS ALSO HIS SUBMISSION THAT THE AO WAS REQUIRE D TO EXAMINE THE TERMS OF THE LEASE DEED AND DECIDE WHETHER THE AO WAS REQUIRE D TO EXAMINE THE TERMS OF THE LEASE DEED AND DECIDE WHETHER LEASING ACTIVITY IS SUBSERVIENT TO THE WAREHOUSING ACTIVITY OR NOT. FURTHER, IF GOING BY THE VERSION OF THE AO, 69% OF THE TOTAL RECEIPTS/TOTAL AREA IS MEANT FOR WAREHOUSING ACTIVITY, IN THAT CAS E, THE AO SHOULD HAVE ACCEPTED THAT LEASING ACTIVITY IS SUBSERVIENT TO WAREHOUSING ACTIVITY THAT BEING THE DOMINANT ACTIVITY OF THE ASSESSEE. 35. FROM THE VARIOUS DETAILS FURNISHED BY THE ASSESSEE IN THE PAPER BOOK, WE FIND THE MAIN OBJECTS TO BE PURSUED BY THE ASSESSEE COMPANY ON ITS INCORPORATION ARE AS UNDER : III. OBJECTS : THE OBJECTS FOR WHICH THE COMPANY IS ESTABLISHED ARE : MAIN OBJECTS OF THE COMPANY TO BE PURSUED BY THE COMPANY ON ITS INCORPORATION ARE : INCORPORATION ARE : A (1)(A) TO CARRY ON THE BUSINESS OF W AREHOUSING, COLD STORAGE AND REFRIGERATION IN ALL ITS BRANCHES AND ACTIVITIES AND SPHERE. (B) TO CARRY ON THE BUSINESS OF STORAGE OF FERTILIZERS, INSECTICIDES, QUALITY SEEDS, AGRICULTURAL AND HORTICULTURAL EQUIPMENT, TOOLS AND MACHINERY. (C) TO CARRY ON THE BUSINESS OF QUALITY SEEDS AND DEVELOP QUALITY SEEDS, ACQUIRE SUITABLE LANDS AND CARRY ON AGRICULTURE. (D) TO PRODUCE MATERIAL AND FERTILIZERS AND INSECTICIDES AND ACQUIRE AGENCY IN THE ABOVE LINES AND ACT AS COMMISSION AGENTS. AGENCY IN THE ABOVE LINES AND ACT AS COMMISSION AGENTS. (E) TO ACT AS CLEARING AND FORWARDING AGENTS OF THE AFORESAID PRODUCTS. (F) TO PROVIDE FACILITIES AND GODOWNS FOR PROPER AND SAFE STORING OF VALUABLE AGRICULTURAL AND HORTICULTURAL PRODUCE AND TO PROVIDE GOODS AND SERVICES OF ALL KINDS IN CONNECTION THERE WITH. (G) TO PROVIDE GODOWNS AND WAREHOUSING FACILITIES FOR GOODS OF ALL DESCRIPTION OF AGRICULTURAL AND ALLIED PRODUCTS. 36. SIMILARLY, THE OBJECTS INCIDENTAL OR ANCILLARY TO THE ATTAINMENT OF THE MAIN OBJECTS INCLUDE THE FOLLOWING : 2. TO PURCHASE, ERECT, ESTABLISH OR OT HERWISE ACQUIRE AND EQUIP 2. TO PURCHASE, ERECT, ESTABLISH OR OT HERWISE ACQUIRE AND EQUIP WAREHOUSING GODOWNS, ADDITIONAL COLD STORAGE PLANTS OR UNIT FOR THE ITA NO . 613 / PN /201 4 ITA NO S . 1017 TO 1020 /PN/201 4 M/S. SHRINATH WAREHOUSING CO. 8 BUSINESS OF THE COMPANY AS MAY DEEM DESIRABLE AND TO BUILD AND ERECT THE NECESSARY STRUCTURES OR BUILDINGS TO HOUSE THE SAME. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18. TO LET ON LEASE OR ON HIRE THE WHOLE OR ANY PART OF THE REAL AND PERSONAL PROPERTY OF THE COMPANY ON SUCH TERMS AS THE COMPANY SHALL DETERMINE, TO ENTER INTO SUCH ARRANGEMENTS AS THE COMPANY MAY THINK PROPER WITH ANY PUB LIC AUTHORITY FOR BUILDINGS, CHAWLS AND TENEMENTS AS THE PROPERTY OF THE COMPANY OR ON THE PROPERTY OF OTHERS OR TO LET THE SAME EITHER TO THE EMPLOYEES OF THE COMPANY OR TO OTHERS AND UPON SUCH TERMS AS THE COMPANY MAY THINK PROPER. 37. FROM THE STATEME NT SHOWING YEAR - WISE DETAILS OF TOTAL RECEIPTS AS PER PROFIT AND LOSS ACCOUNT, WAREHOUSING CHARGES AND SERVICE CHARGES FROM HINDUSTAN AND LOSS ACCOUNT, WAREHOUSING CHARGES AND SERVICE CHARGES FROM HINDUSTAN LEVER LTD. ETC. A COPY OF WHICH IS PLACED AT PAGE 212 OF THE PAPER BOOK, WE FIND THE DETAILS ARE AS UNDER : F.Y. TOTAL RCPTS AS PER P&L WAREHOUSING CHARGES LEASE RENT FROM HLL % OF LEASE RENT TO TOTAL RECEIPTS WAREHOUSING CHARGES RECEIVED FROM HLL % OF WAREHSG CH. RECEIVED FROM HLL TO THE TOTAL WAREHSG CH. A B=C+D C D E = (D/B)*100 F G = A B=C+D C D E = (D/B)*100 F (F/C)*100 2000 - 01 10,313 , 426.00 7,598 , 434.00 2,714,992.00 26.32 4,836,240.00 63.65 2001 - 02 17,686,971.33 11,817,590.33 5,869,381.00 33.18 11,066,970.00 93.65 2002 - 03 19,580,172.66 13,910,172.66 5,670,000.00 28.96 11,390,112.00 81.88 2003 - 04 20 , 431,251.63 13,647,5 01.63 6,783,750.00 33 . 20 11,760,877.50 86.18 2004 - 05 19,776 , 426.00 12,858,926.00 6,917,500.00 34.98 12,279,750.00 95.50 2005 - 06 21,521,078.50 14,570,078 . 50 6,951,000.00 32.30 11,342,060.00 77.84 38. A PERUSAL OF THE ABOVE BREAK UP OF THE LEASE RENT AL INCOME FROM HINDUSTAN LEVER LTD AND VARIOUS OTHER PARTIES VIS - - VIS THE MAIN OBJECTS OF THE ASSESSEE COMPANY SHOW THAT WAREHOUSING ACTIVITY IS THE DOMINANT ACTIVITY AND LEASING OUT BEING INCIDENTAL IS SUBSERVIENT. 39. WE FIND MERIT IN THE SUBMISSION OF THE LD. COUNSEL FOR THE ASSESSEE THAT THE ASSESSEE HAS CONSTRUCTED SEVERAL SHEDS FOR INDUSTRIAL AND WAREHOUSE PURPOSES WHICH PROVES THAT THE LEASING IS DONE FOR EXPLOITATION OF THE COMMERCIAL ASSET. WE ALSO FIND FORCE IN THE SUBMISSION OF THE LD. COUNSE L FOR THE ASSESSEE THAT THE ASSESSEE HAS NOT MERELY LEASED OUT THE 4 WALLS OF THE WAREHOUSE. IT HAS ALSO PROVIDED ESSENTIAL AND NECESSARY SERVICES OF SUPERVISORY, LOADING AND UNLOADING, HANDLING, SECURITY, TRANSPORTING ETC. TO ALL THE CLIENTS INCLUDING T HE HINDUSTAN LEVER LTD. ON DAILY BASIS DURING WORKING HOURS. THE ASSESSEE HAS HINDUSTAN LEVER LTD. ON DAILY BASIS DURING WORKING HOURS. THE ASSESSEE HAS INCURRED EXPENDITURE ON ELECTRICITY, MAINTENANCE, STAFF ETC. WHICH PROVES THAT ITA NO . 613 / PN /201 4 ITA NO S . 1017 TO 1020 /PN/201 4 M/S. SHRINATH WAREHOUSING CO. 9 LEASING IS A COMPLEX ACTIVITY DIRECTLY LINKED WITH THE MAIN WAREHOUSING ACTIVITY. THEREFORE, IT I S SUBSERVIENT TO THE WAREHOUSING ACTIVITY. FURTHER, SINCE PLOTS HAVE BEEN ACQUIRED ON LEASE AS WELL AS PLOTS OWNED BY THE ASSESSEE ARE USED FOR CONSTRUCTING THE WAREHOUSES THE SAME CLEARLY PROVES THE COMMERCIAL USE OF THE WAREHOUSE. FURTHER, THE ASSESSEE IS LIABLE TO PAY SERVICE TAX ON THE SERVICE OF STORAGE AND WAREHOUSING SINCE SERVICE OF STORAGE AND WAREHOUSING HAS BEEN INCLUDED AS TAXABLE SERVICE. 40. WE FIND AN IDENTICAL ISSUE HAD COME UP BEFORE THE HONBLE SUPREME COURT IN THE CASE OF M/S. CHENNAI PROPERTIES (SUPRA). IN THAT CASE, THE ASSESSEE COMPANY WAS INCORPORATED UNDER THE INDIAN COMPANIES ACT. ITS MAIN OBJECT WAS TO ACQUIRE THE PROPERTIES IN THE CITY OF MADRAS AND LET OUT THESE PROPERTIES. THE ASSESSEE HAD LET OUT THE SAID PROPERTIES AND THE RENTAL INCOME RECEIVED THEREFROM WAS SHOWN AS INCOME FROM BUSINESS IN THE RETURN FILED BY THE ASSESSEE. HOWEVER, ACCORDING TO THE AO SINCE THE INCOME WAS RECEIVED FROM LETTING OUT OF THE PROPERTIES IT WAS IN THE NATURE OF RENTAL INCOME. HE THEREFORE TREA TED THE RENTAL INCOME AS INCOME FROM HOUSE PROPERTY. IN APPEAL THE LD.CIT(A) ALLOWED THE APPEAL OF THE ASSESSEE BY HOLDING THAT SUCH RENTAL INCOME IS INCOME FROM BUSINESS. THE TRIBUNAL UPHELD THE ACTION OF THE CIT(A). ON FURTHER APPEAL BY THE REVENU E THE HONBLE HIGH COURT VIDE ORDER DATED 05 - 09 - 2002 ALLOWED THE APPEAL FILED BY THE REVENUE HOLDING THAT INCOME DERIVED BY LETTING OUT OF THE PROPERTIES WOULD NOT BE INCOME FROM BUSINESS BUT CAN BE ASSESSED ONLY AS INCOME FROM HOUSE PROPERTY. THE ASSE SSEE FILED APPEAL BEFORE THE HONBLE SUPREME COURT. THE HONBLE SUPREME COURT ALLOWING THE APPEAL FILED BY THE ASSESSEE HELD THAT LETTING OF THE PROPERTIES INFACT IS THE BUSINESS OF THE ASSESSEE AND THEREFORE THE ASSESSEE HAS RIGHTLY DISCLOSED INCOME UNDE R THE HEAD INCOME FROM BUSINESS. THE RELEVANT OBSERVATION OF THE HONBLE SUPREME COURT READ AS UNDER : FROM THE AFORESAID FACTS, IT IS CLEAR THAT THE QUESTION WHICH IS TO BE DETERMINED ON THE FACTS OF THIS CASE IS AS TO WHETHER THE INCOME DERIVED BY DETERMINED ON THE FACTS OF THIS CASE IS AS TO WHETHER THE INCOME DERIVED BY T HE COMPANY FROM LETTING OUT THIS PROPERTY IS TO BE TREATED AS INCOME FROM BUSINESS OR IT IS TO BE TREATED AS RENTAL INCOME FROM HOUSE PROPERTY. WE HAVE HEARD THE LEARNED 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. 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 ESTATE BOTH IN CHENNAI AND TO LET OUT THOSE PROPERTIES AS WE LL AS MAKE ADVANCES UPON THE SECURITY OF LANDS AND BUILDINGS OR OTHER PROPERTIES OR ANY INTEREST THEREIN. WHAT WE EMPHASISE 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 WHICH ACCRUED AND WAS ASSESSED IN THE SAID RETURN WAS FROM LETTING OUT OF THESE PROPERTIES. IT IS SO RECORDED AND ACCEPTED BY THE ASSESSING OFFICER HIMSELF IN HIS ORDER. IT TRANSPIR ES THAT THE RETURN OF A TOTAL INCOME OF RS.244030 WAS FILED FOR THE ASSESSMENT YEAR IN QUESTION THAT IS ASSESSMENT YEAR 1983 - 1984 AND THE ENTIRE INCOME WAS THROUGH LETTING OUT OF THE AFORESAID TWO PROPERTIES NAMELY, CHENNAI HOUSE AND FIRHAVIN ESTATE. T HUS, THERE IS NO OTHER INCOME OF THE ASSESSEE EXCEPT THE INCOME FROM LETTING OUT OF THESE TWO PROPERTIES. WE HAVE TO DECIDE THE ISSUE KEEPING IN MIND THE AFORESAID ASPECTS. ITA NO . 613 / PN /201 4 ITA NO S . 1017 TO 1020 /PN/201 4 M/S. SHRINATH WAREHOUSING CO. 10 WITH THIS BACKGROUND, WE FIRST REFER TO THE JUDGMENT OF THIS COURT IN EAST INDIA H OUSING AND LAND DEVELOPMENT TRUST LTD.'S CASE 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 PROPERTIES AND PROMOTING AND DEVELOPING MARKETS. THUS, THE MAIN O BJECTIVE OF THE COMPANY WAS TO DEVELOP THE LANDED PROPERTIES INTO MARKETS. IT SO HAPPENED THAT SOME SHOPS AND STALLS, WHICH WERE DEVELOPED BY IT, HAD BEEN RENTED OUT AND INCOME WAS DERIVED FROM THE RENTING OF THE SAID SHOPS AND STALLS. IN THOSE FACTS, THE QUESTION AROSE FOR CONSIDERATION WAS: WHETHER THE RENTAL INCOME THAT IS RECEIVED WAS TO BE TREATED AS INCOME FROM THE HOUSE PROPERTY OR THE INCOME FROM THE BUSINESS. THIS COURT WHILE HOLDING THAT THE INCOME SHALL BE TREATED AS INCOME FROM THE HOUSE PROPERT Y, RESTED ITS DECISION IN THE CONTEXT OF THE MAIN OBJECTIVE OF THE COMPANY AND TOOK NOTE OF THE FACT THAT LETTING OUT OF THE PROPERTY WAS NOT THE OBJECT OF THE COMPANY AT ALL. THE COURT WAS THEREFORE, OF THE OPINION THAT THE CHARACTER OF THAT INCOME WHICH WAS FROM THE HOUSE PROPERTY HAD NOT ALTERED BECAUSE IT WAS RECEIVED BY THE COMPANY FORMED WITH THE OBJECT OF DEVELOPING AND SETTING UP PROPERTIES. BEFORE WE REFER TO THE CONSTITUTION BENCH JUDGMENT IN THE CASE OF SULTAN BROTHERS (P) LTD., WE WOULD BE WELL ADVISED TO DISCUSS THE LAW LAID DOWN AUTHORITATIVELY AND SUCCINCTLY BY THIS COURT IN 'KARANPURA DEVELOPMENT CO. LTD. V. COMMISSIONER OF INCOME TAX, WEST BENGAL' [44 ITR 362 (SC)]. THAT WAS ALSO A CASE WHERE THE COMPANY, WHICH WAS THE ASSESSEE, WAS FORMED WITH THE OBJECT, INTER ALIA, OF ACQUIRING AND DISPOSING OF THE UNDERGROUND COAL MINING RIGHTS IN CERTAIN COAL FIELDS AND IT HAD RESTRICTED ITS ACTIVITIES TO ACQUIRING COAL MINING LEASES 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 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 BU SINESS 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 A CT AND PARTICULARLY SIX HEADS UNDER WHICH INCOME CAN BE CATEGORISED / 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 THE COMPANY MUST ALSO BE KEPT IN VIEW TO INTERPRET THE ACTIVITIES. IN SUPPORT OF THE AFORESAID PROPOSITION, NUMBER OF JUDGMENTS OF OTHER JURISDICTIONS, I .E. PRIVY COUNSEL, HOUSE OF LORDS IN ENGLAND AND US COURTS WERE TAKEN NOTE OF. THE POSITION IN LAW, ULTIMATELY, IS SUMMED UP IN THE FOLLOWING WORDS: - 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. ITA NO . 613 / PN /201 4 ITA NO S . 1017 TO 1020 /PN/201 4 M/S. SHRINATH WAREHOUSING CO. 11 AFTER APPLYING THE AFORESAID PRINCIPLE TO THE FACTS, WHICH WERE THERE BE FORE THE COURT, IT CAME TO THE CONCLUSION THAT INCOME HAD TO BE TREATED AS INCOME FROM BUSINESS AND NOT AS INCOME FROM HOUSE PROPERTY. WE ARE OF THE OPINION THAT THE AFORESAID JUDGMENT IN KARANPURA DEVELOPMENT CO. LTD.'S CASE SQUARELY APPLIES TO THE FACTS OF THE PRESENT CASE. NO DOUBT IN SULTAN BROTHERS (P) LTD.'S CASE, CONSTITUTION BENCH JUDGMENT OF THIS COURT HAS CLARIFIED THAT MERELY AN ENTRY IN THE OBJECT CLAUSE SHOWING A PARTICULAR OBJECT WOULD NOT BE THE DETERMINATIVE FACTOR TO ARRIVE AT AN CONCLUSIO N WHETHER THE INCOME IS TO BE TREATED AS INCOME FROM BUSINESS AND SUCH A QUESTION WOULD DEPEND UPON THE CIRCUMSTANCES OF EACH CASE, VIZ., WHETHER A PARTICULAR BUSINESS IS LETTING OR NOT. THIS IS SO STATED IN THE FOLLOWING WORDS: - WE THINK EACH CASE HAS TO BE LOOKED AT FROM A BUSINESSMAN'S POINT OF VIEW TO FIND OUT WHETHER THE LETTING WAS THE DOING OF A BUSINESS OR THE EXPLOITATION OF HIS PROPERTY BY AN OWNER. WE DO NOT FURTHER THINK THAT A THING CAN BY ITS VERY NATURE BE A COMMERCIAL ASSET. A COMMERCIAL ASSET IS ONLY AN ASSET USED IN A BUSINESS AND NOTHING ELSE, AND BUSINESS MAY BE CARRIED ON WITH PRACTICALLY ALL THINGS. THEREFORE, IT IS NOT POSSIBLE TO SAY THAT A PARTICULAR ACTIVITY IS BUSINESS BECAUSE IT IS CONCERNED WITH AN ASSET WITH WHICH TRADE IS CO MMONLY CARRIED ON. WE FIND NOTHING IN THE CASES REFERRED, TO SUPPORT THE PROPOSITION THAT CERTAIN ASSETS ARE COMMERCIAL ASSETS IN THEIR VERY NATURE. WE ARE CONSCIOUS OF THE AFORESAID DICTA LAID DOWN IN THE CONSTITUTION BENCH JUDGMENT. IT IS FOR THIS REAS ON, 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 ARRIVE AT IRRESISTIBLE CONCLUSION THAT IN THIS CASE, LETTING OF THE PROPERTIES IS IN FACT IS THE BUSINESS OF THE ASSESSEE. THE ASSESSEE THEREFORE, RI GHTLY 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. 41. WE FIND SUBSEQUENT TO THE HEARING OF THE APPEAL BEFORE US THE HONBLE SUPREME COURT IN THE CASE OF M/S. RAYALA CORPORATION PVT. LTD. VS. ACIT VIDE CIVIL APPEAL NO.6437/2016 ORDER DATED 11 - 08 - 2016 FOLLOWING THE DECISION IN THE CASE OF M/S. CHENNAI PROPERTIES (SUPRA) HAS DECIDED AN IDENTICAL ISSUE BY HOLDING THAT WHERE THE BUSINESS OF THE COMPANY IS TO LEASE ITS PROPERTY AND TO EARN RENT, SUCH RENTAL INCOME HAS TO BE TREATED AS INCOME FROM PROFITS AND GAINS OF BUSINESS OR PROFES SION. THE RELEVANT OBSERVATIONS OF THE HONBLE SUPREME COURT READS AS UNDER : THE APPELLANT - ASSESSEE, A PRIVATE LIMITED COMPANY, IS HAVING HOUSE PROPERTY, WHICH HAS BEEN RENTED AND THE ASSESSEE IS RECEIVING INCOME FROM THE SAID PROPERTY BY WAY OF RENT. THE MAIN ISSUE IN ALL THESE APPEALS IS WHETHER THE INCOME SO RECEIVED SHOULD BE TAXED UNDER THE HEAD INCOME FROM HOUSE PROPERTY OR PROFIT AND GAINS OF BUSINESS OR PROFESSION. THE REASON FOR WHICH THE AFORESTATED ISSUE HAS ARISEN IS THAT THOUGH THE ASS ESSEE IS HAVING THE HOUSE PROPERTY AND IS RECEIVING INCOME BY WAY OF RENT, THE CASE OF THE ASSESSEE IS THAT THE ASSESSEE COMPANY IS IN BUSINESS OF RENTING ITS PROPERTIES AND IS RECEIVING RENT AS ITS BUSINESS INCOME, THE SAID INCOME SHOULD BE TAXED UNDER TH E HEAD PROFITS AND GAINS OF BUSINESS OR PROFESSION WHEREAS THE CASE OF THE REVENUE IS THAT AS THE INCOME IS ARISING FROM HOUSE PROPERTY, THE SAID INCOME MUST BE TAXED UNDER THE HEAD INCOME FROM HOUSE PROPERTY. ITA NO . 613 / PN /201 4 ITA NO S . 1017 TO 1020 /PN/201 4 M/S. SHRINATH WAREHOUSING CO. 12 1 . THE LEARNED COUNSEL APPEARING FOR THE AS SESSEE SUBMITTED THAT THE ISSUE INVOLVED IN THESE APPEALS IS NO MORE RES INTEGRA AS THIS COURT HAS DECIDED INVOLVED IN THESE APPEALS IS NO MORE RES INTEGRA AS THIS COURT HAS DECIDED IN THE CASE OF CHENNAI PROPERTIES AND INVESTMENTS LTD. V. COMMISSIONER OF INCOME TAX [2015] 373 ITR 673 (SC) THAT IF AN ASSESSEE IS HAVING HIS HOUSE PROPERTY AND BY WAY OF BUSINESS HE IS GIVING THE PROPERTY ON RENT AND IF HE IS RECEIVING RENT FROMTHE SAID PROPERTY AS HIS BUSINESS INCOME, THE SAID INCOME, EVEN IF IN THE NATURE OF RENT, SHOULD BE TREATED AS BUSINESS INCOME BECAUSE THE ASSESSEE IS HAVIN G A BUSINESS OF RENTING HIS PROPERTY AND THE RENT WHICH HE RECEIVES IS IN THE NATURE OF HIS BUSINESS INCOME. 2 . ACCORDING TO THE LEARNED COUNSEL APPEARING FOR THE ASSESSEE, THE AFORE - STATED JUDGMENT IN THE CASE OF CHENNAI PROPERTIES (SUPRA) HAS REFERRED TO ALL THE JUDGMENTS ON THE SUBJECT AND MORE PARTICULARLY, THE JUDGMENT IN THE CASE OF KARANPURA DEVELOPMENT CO. LTD. V. CIT [1962] 44 ITR 362 (SC) CASE OF KARANPURA DEVELOPMENT CO. LTD. V. CIT [1962] 44 ITR 362 (SC) WHICH HAS SUMMED UP AS UNDER: - 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 DIVIDING LINE IS DIFFICULT TO FIND; BUT IN THE CASE OF A COMPANY WIT H 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. 5. THE LEARNED COUNSEL ALSO SUBMITTED THAT T HE ASSESSEE IS A PRIVATE LIMITED COMPANY AND EVEN AS PER ITS MEMORANDUM OF ASSOCIATION ITS BUSINESS IS TO DEAL INTO REAL ESTATE AND ALSO TO EARN INCOME BY WAY OF RENT BY LEASING OR RENTING THE PROPERTIES BELONGING TO THE ASSESSEE COMPANY. RENTING THE PROPERTIES BELONGING TO THE ASSESSEE COMPANY. 6. THE LEARNED C OUNSEL ALSO DREW OUR ATTENTION TO THE FACT THAT THE HIGH COURT AND THE AUTHORITIES BELOW HAD COME TO A SPECIFIC FINDING TO THE EFFECT THAT THE ASSESSEE COMPANY HAD STOPPED ITS OTHER BUSINESS ACTIVITIES AND WAS HAVING ONLY AN ACTIVITY WITH REGARD TO THE LEA SING ITS PROPERTIES AND EARNING RENT THEREFROM. THUS, EXCEPT LEASING THE PROPERTIES BELONGING TO THE ASSESSEE COMPANY, THE COMPANY IS NOT HAVING ANY OTHER BUSINESS AND THE SAID FACT IS NOT IN DISPUTE AT ALL. 7. FOR THE AFORE - STATED REASONS, THE LEARNED C OUNSEL SUBMITTED THAT THE IMPUGNED JUDGMENT DELIVERED BY THE HIGH COURT IS NOT PROPER FOR THE REASON THAT THE HIGH COURT HAS DIRECTED THAT THE INCOME EARNED BY THE APPELLANT ASSESSEE SHOULD BE TREATED AS INCOME FROM HOUSE PROPERTY. APPELLANT ASSESSEE SHOULD BE TREATED AS INCOME FROM HOUSE PROPERTY. 8. ON THE OTHER HAND , THE LEARNED COUNSEL APPEARING FOR THE RESPONDENT - REVENUE MADE AN EFFORT TO JUSTIFY THE REASONS GIVEN BY THE HIGH COURT IN THE IMPUGNED JUDGMENT. THE LEARNED COUNSEL ALSO RELIED UPON THE JUDGMENT DELIVERED BY THIS COURT IN THE CASE OF M/S. S.G. MERCANTILE CORPN. (P) LTD. V. CIT, CALCUTTA (1972) 1 SCC 465. ACCORDING TO HIM, THE IMPORTANT QUESTION WHICH WOULD ARISE IN ALL SUCH CASES IS WHETHER THE ACQUISITION OF PROPERTY FOR LEASING AND LETTING OUT ALL THE SHOPS AND STALLS WOULD BE ESSENTIALLY A PART OF BUSI NESS AND TRADING OPERATIONS OF THE ASSESSEE. ACCORDING TO THE LEARNED COUNSEL APPEARING FOR THE REVENUE, LEASING AND LETTING OUT OF SHOPS AND PROPERTIES IS NOT THE MAIN BUSINESS OF THE ASSESSEE AS PER MEMORANDUM OF ASSOCIATION AND THEREFORE, THE INCOME EAR NED BY THE ASSESSEE SHOULD BE TREATED AS INCOME EARNED FROM HOUSE PROPERTY. HE, THEREFORE, SUBMITTED THAT THE IMPUGNED JUDGMENT IS JUST LEGAL AND HE, THEREFORE, SUBMITTED THAT THE IMPUGNED JUDGMENT IS JUST LEGAL AND PROPER AND THEREFORE, THESE APPEALS SHOULD BE DISMISSED. ITA NO . 613 / PN /201 4 ITA NO S . 1017 TO 1020 /PN/201 4 M/S. SHRINATH WAREHOUSING CO. 13 9. UPON HEARING THE LEARNED COUNSEL AND GOING THROU GH THE JUDGMENTS CITED BY THE LEARNED COUNSEL, WE ARE OF THE VIEW THAT THE LAW LAID DOWN BY THIS COURT IN THE CASE OF CHENNAI PROPERTIES (SUPRA) SHOWS THE CORRECT POSITION OF LAW AND LOOKING AT THE FACTS OF THE CASE IN QUESTION, THE CASE ON HAND IS SQUAREL Y COVERED BY THE SAID JUDGMENT. 10. SUBMISSIONS MADE BY THE LEARNED COUNSEL APPEARING FOR THE REVENUE IS TO THE EFFECT THAT THE RENT SHOULD BE THE MAIN SOURCE OF INCOME OR THE PURPOSE FOR WHICH THE COMPANY IS INCORPORATED SHOULD BE TO EARN INCOME FROM RE NT, SO AS TO MAKE THE RENTAL INCOME TO BE THE INCOME TAXABLE UNDER THE HEAD PROFITS AND GAINS OF BUSINESS OR PROFESSION. IT IS AN ADMITTED FACT IN THE INSTANT CASE THAT THE ASSESSEE COMPANY HAS ONLY ONE BUSINESS AND THAT IS OF LEASING ITS PROPERTY AND EA RNING RENT THEREFROM. THUS, EVEN ON THE FACTUAL ASPECT, WE DO NOT FIND ANY SUBSTANCE IN WHAT HAS BEEN SUBMITTED BY THE LEARNED COUNSEL APPEARING FOR THE REVENUE. 11. THE JUDGMENT RELIED UPON BY THE LEARNED COUNSEL APPEARING FOR THE ASSESSEE SQUARELY COVER S THE FACTS OF THE CASE INVOLVED IN THE APPEALS. THE BUSINESS OF THE COMPANY IS TO LEASE ITS PROPERTY AND TO EARN RENT AND THEREFORE, THE INCOME SO EARNED SHOULD BE TREATED AS ITS BUSINESS INCOME. 12. IN VIEW OF THE LAW LAID DOWN BY THIS COURT IN THE CAS E OF CHENNAI PROPERTIES (SUPRA) AND LOOKING AT THE FACTS OF THESE APPEALS, IN OUR OPINION, THE HIGH COURT WAS NOT CORRECT WHILE DECIDING THAT THE INCOME OF THE ASSESSEE SHOULD BE TREATED AS INCOME FROM HOUSE PROPERTY. 13. WE, THEREFORE, SET ASIDE THE IMP UGNED JUDGMENTS AND ALLOW THESE APPEALS WITH NO ORDER AS TO COSTS. WE DIRECT THAT THE INCOME OF THE ASSESSEE SHALL BE SUBJECT TO TAX UNDER THE HEAD PROFITS AND GAINS OF ASSESSEE SHALL BE SUBJECT TO TAX UNDER THE HEAD PROFITS AND GAINS OF BUSINESS OR PROFESSION. 42. AS MENTIONED EARLIER, THE MAIN OBJECTS OF THE ASSESSEE C OMPANY IS TO CARRY ON THE BUSINESS OF WAREHOUSING, COLD STORAGE AND REFRIGERATION, TO PROVIDE FACILITIES AND GODOWNS FOR PROPER AND SAFE STORING OF VALUABLE AGRICULTURAL AND HORTICULTURAL PRODUCE AND TO PROVIDE GODOWNS AND WAREHOUSING FACILITIES FOR GOODS OF ALL DESCRIPTION OF AGRICULTURAL AND ALLIED PRODUCTS. SIMILARLY, THE OTHER OBJECTS OF THE ASSESSEE COMPANY ALSO PROVIDE TO LET ON LEASE OR HIRE THE WHOLE OR ANY PART OF THE REAL AND PERSONAL PROPERTY OF THE ASSESSEE COMPANY. WE, THEREFORE, RESPECTFULL Y FOLLOWING THE ABOVE TWO DECISIONS OF THE HONBLE SUPREME COURT CITED (SUPRA) HOLD THAT THE LEASE INCOME RECEIVED BY THE ASSESSEE ON ACCOUNT OF LET OUT OF THE WAREHOUSES/GODOWNS AS PROFITS AND GAINS FROM BUSINESS OR PROFESSION. WE THEREFORE SET ASIDE T HE ORDER OF THE CIT(A) AND DIRECT THE AO TO TREAT THE LEASE RENTALS RECEIVED BY THE ASSESSEE COMPANY FROM HINDUSTAN LEVER LTD. AS BUSINESS INCOME. 9 . THE ISSUE ARISING IN THE PRESENT APPEAL IS SQUARELY COVERED BY THE ORDER OF TRIBUNAL IN M/S. NUTAN WARE HOUSING CO. PVT. LTD. VS. DCIT (SUPRA) AND FOLLOWING THE SAME PARITY OF REASONING, WE HOLD THAT THE INCOME IS TO BE ASSESSED IN THE HANDS OF ASSESSEE AS INCOME FROM BUSINESS . H ENCE THE ORDER OF CIT(A) IS REVERSED AND THE ASSESSING OFFICER IS DIRECTED TO COMPUTE THE INCOME IN HANDS OF ITA NO . 613 / PN /201 4 ITA NO S . 1017 TO 1020 /PN/201 4 M/S. SHRINATH WAREHOUSING CO. 14 ASSESSEE AS INCOME FROM BUSINESS. THE GROUNDS OF APPEAL NO.2 TO 7 RAISED BY THE ASSESSEE ARE THUS, ALLOWED. 10 . THE ISSUES AND FACTS IN ITA NO S.1017/PN/2014 TO 1020/PN/2014 ARE IDENTICAL TO THE ISSUES AND FACTS IN ITA NO .613/PN/2014 AND OUR DECISION IN ITA NO.613/PN/2014 SHALL APPLY MUTATIS MUTANDIS TO ITA NOS.1017/PN/2014 TO 1020/PN/2014 . 1 1 . IN THE RESULT, ALL THE APPEALS OF ASSESSEE ARE ALLOWED. ORDER PRONOUNCED ON THIS 18 TH DAY OF NOVEMBER , 201 6 . SD/ - SD/ - ( ANIL CHATURVEDI ) ( SUSHMA CHOWLA ) / ACCOUNTANT MEMBER / JUDICIAL MEMBER / PUNE ; D ATED : 18 TH NOVEMBER , 201 6 . GCVSR / COPY OF THE ORDER IS FORWARDED TO : 1. / TH E APPELLANT ; 2. / THE RESPONDENT; 3. ( ) / THE C I T (A) - II , PUNE ; 4. / THE C I T - II , PUNE ; 5. , , / DR A , ITAT, PUNE; 6. / GUARD FILE . / BY ORDER , // TRUE COPY // / SR. PRIVATE SECRETARY , / ITAT, PUNE