Ropar Distt. Cooperative Milk Producers Union Ltd., Mohali V. DCIT, Mohali

ITA 1127/CHANDI/2014

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 9980 (ITAT-CHANDIGARH)
• Duration Of Justice: 1 year(s) 5 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-05-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 17-02-2016
• Assessment Year: 2010-2011
• Appeal Filed On: 19-12-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: S K MITTAL
• Keywords: Business income; Rule of consistency; Question of law
• Section: 143(3); 133(6); 37(1); 37

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH, CHANDIGARH BEFORE SHRI H.L.KARWA, VICE PRESIDENT AND MS. RANO JAIN, ACCOUNTANT MEMBER ITA NO.902/CHD/2013 (ASSESSMENT YEAR : 2009-10) AND ITA NO.1127/CHD/2014 (ASSESSMENT YEAR : 2010-11) ROPAR DISTT. COOPERATIVE MILK VS. THE D. C.I.T., PRODUCERS UNION LTD. CIRCLE 6(1), MILK PLANT MOHALI. MOHALI. PAN: AAAAT5977G APPELLANT BY : SHRI M.R. SHARMA RESPONDENT BY : SHRI S.K. MITTAL, DR DATE OF HEARING : 06.04.2016 DATE OF PRONOUNCEMENT : 23.05.2016 O R D E R PER H.L.KARWA, V.P. : THESE TWO APPEALS FILED BY THE SAME ASSESSEE ARE DIRECTED AGAINST THE SEPARATE ORDERS OF LEARNED COMMISSIONER OF INCOME TAX, CHANDIGARH DATED 8.7.2 013 AND 15.10.2014 FOR ASSESSMENT YEARS 2009-10 AND 201 0- 11 RESPECTIVELY, PASSED UNDER SECTION 250(6) OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT). 2 ITA NO.902/CHD/2013 : 2. THE ISSUES INVOLVED IN THESE APPEALS ARE COMMON AND THE APPEALS WERE HEARD TOGETHER AND ARE BEING DISPOSED OFF BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. 3. FIRSTLY, WE WILL TAKE UP ITA NO.902/CHD/2013, RELATING TO ASSESSMENT YEAR 2009-10. 4. GROUND NO.1 OF THE APPEAL IS GENERAL IN NATURE AND, HENCE NO COMMENTS ARE BEING OFFERED. 5. GROUND NO.2 OF THE APPEAL READS AS UNDER : 1. THAT THE ORDER OF THE ASSESSING OFFICER AS UPHE LD BY THE COMMISSIONER OF INCOME TAX (APPEALS) CHANDIGARH DISALLOWING CLAIM OF RS. 5.08,208/- ON ACCOUNT OF REPAIR EXPENSES U/S 24 OUT OF THE RENTAL INCOME @ 30 % OF RS. 18,94,025/- DECLARED BY THE APPELLANT IS BAD IN LAW AND NEEDS TO BE SET ASIDE. 6. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT THE ASSESSEE IS A COOPERATIVE SOCIETY REGISTERED WITH R EGISTRAR OF COOPERATIVE SOCIETIES, PUNJAB. THE ASSESSEE IS ENGAGED IN THE PURCHASE OF RAW MILK AND MANUFACTURING OF MI LK PRODUCTS AND SALE OF GOODS MANUFACTURED OUT OF IT. DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE C LAIMED DEDUCTION OF RS.5,68,208/- UNDER SECTION 24(A) OF T HE ACT IN RESPECT OF THE INCOME UNDER THE HEAD INCOME FRO M HOUSE PROPERTY, DECLARED AT RS.13,25,817/-. THE AS SESSEE HAS RECEIVED THIS INCOME FROM LETTING OUT OF BOOTHS TO DIFFERENT PARTIES TO SELL ITS PRODUCTS. THE ASSES SING 3 OFFICER NOTED THAT LETTING OUT OF BOOTHS IS INTEGRA L PART OF SELLING OUT OF ASSESSEES PRODUCTS BY THE TENANTS, THEREFORE, HE OPINED THAT THIS INCOME DOES NOT FALL UNDER THE HEAD RENTAL INCOME FROM HOUSE PROPERTY BUT IT WAS A BUSINESS INCOME. HE, THEREFORE, REQUIRED THE ASSES SEE TO EXPLAIN AS TO WHY ITS CLAIM REGARDING RENTAL INCOME SHOULD NOT BE REJECTED. IN RESPONSE TO THE ABOVE QUERY, T HE ASSESSEE SUBMITTED HIS REPLY ON 2.11.2011. IN ITS REPLY, THE ASSESSEE INTER-ALIA SUBMITTED THAT DURING THE Y EAR UNDER CONSIDERATION, IT HAD RECEIVED RS.18,94,025/- AS LEASE/RENTAL INCOME FROM VARIOUS PERSONS, WHO WERE RUNNING MILK BOOTHS, WHICH WERE ON LEASE WITH THE ASSESSEE AND THIS INCOME WAS BEING REGULARLY RECEIV ED AND OFFERED TO TAX BY THE ASSESSEE UNDER THE HEAD INCO ME FROM HOUSE PROPERTY. THE ASSESSEE FURTHER SUBMITTED TH AT SINCE THE INCOME IS FROM HOUSE PROPERTY, AS SUCH DEDUCTIONS CLAIMED WERE STATUTORY. THE ASSESSEE AL SO SUBMITTED THAT DURING THE ASSESSMENT YEAR 2007-08, SIMILAR CLAIM WAS MADE BY THE ASSESSEE, WHICH WAS REJECTED BY THE ASSESSING OFFICER, HOWEVER, ON APPE AL, THE CIT (APPEALS) ALLOWED THE CLAIM OF THE ASSESSEE. I T WAS ALSO BROUGHT TO THE NOTICE TO THE ASSESSING OFFICER BY THE ASSESSEE THAT NO APPEAL WAS PREFERRED AGAINST THE AFORESAID ORDER OF THE CIT (APPEALS) AND AS SUCH, T HE SAME HAS ATTAINED FINALITY. THE ASSESSING OFFICER CALLE D FOR FURTHER INFORMATION FROM THE ASSESSEE WITH RESPECT TO THE HOUSE PROPERTY INCOME. ACCORDING TO THE ASSESSING OFFICER, THE ASSESSEE DID FURNISH REQUISITE INFORMA TION 4 VIDE ITS LETTER DATED 16.11.2011 AND LETTER DATED 22.11.2011 RESPECTIVELY. THE ASSESSING OFFICER NOT ED THAT IN THE BOOKS OF ACCOUNT, THE ASSESSEE HAD SHOWN ABO VE INCOME UNDER THE HEAD LICENCE FEES AND NOT UNDER THE HEAD RENTAL INCOME. THE ASSESSING OFFICER FURTHE R OBSERVED THAT THE ORIGINAL OWNERSHIP OF LAND AND BO OTHS VESTED WITH THE CHANDIGARH ADMINISTRATION AND NOT W ITH THE ASSESSEE, WHICH WAS SUBSEQUENTLY TRANSFERRED TO MUNICIPAL CORPORATION, CHANDIGARH. THE ASSESSING O FFICER FURTHER NOTED THAT THE ASSESSEE WAS MAKING PAYMENT OF RENT WITH RESPECT TO THESE BOOTHS TO MUNICIPAL CORPORATION, CHANDIGARH. ACCORDING TO THE ASSESSIN G OFFICER, THE OWNERSHIP OF LAND AND BOOTHS WAS NOT O F THE ASSESSEE. HE HAS ALSO OBSERVED THAT LETTING OUT OF BOOTHS WAS NOT AN INDEPENDENT PHENOMENON BUT WAS CLOSELY RELATED TO THE BUSINESS ACTIVITIES OF THE ASSESSEE, WHICH WAS SELLING OUT OF MILK AND MILK PRODUCTS MANUFACTU RED BY IT. THE ASSESSING OFFICER HAS ALSO OBSERVED THA T THE ASSESSEE ENTERED INTO AGREEMENTS WITH DIFFERENT PER SONS, VIDE WHICH BOOTHS WERE LET OUT. ONE OF THE AGREEME NTS EXECUTED BETWEEN THE ASSESSEE AND TENANTS, READS AS UNDER : 1. THE AGREEMENT MADE THIS 2 ND DAY OF APRIL IN THE YEAR OF 2003 BETWEEN THE ROPAR DISTT. COOP. MILK PRODUCERS UNION LTD., MILK PLANT, MOHALI HEREINAFTER REFERRED TO AS THE DAIRY (WHICH EXPRESSION SHALL UNLESS REPUGNANT TO THE CONTEXT OF MEANING SHALL INCLUDE THE SUCCESSORS) OF THE ONE PART AND MRS. RADHA 5 RANI HEREINAFTER REFERRED TO AS THE LICENSEE OF THE OTHER PART. 1. WHEREAS THE DAIRY HAS AGREED TO SELL MILK AND MILK PRODUCTS TO THE LICENSEE FOR SELLING THE SAME TO THE PUBLIC AND WHEREAS THE LICENSEE HAS AGREED TO SELL THE SAME ON THE TERMS AND CONDITIONS HEREIN CONTAINED. 2. NOW THEREFORE IT IS HEREBY AGREED BY AND BETWEEN THE PARTIES AS FOLLOWS: - THE DAIRY SHALL ALLOT THE LICENSEE A CONSTRUCTED MILK BOOTH WHITE WASHED AND/OR PAINTED BY THE DAIRY SITUATED AT SECTOR 7B, CHANDIGARH ON THE LAND ALLOTT ED BY THE UNION TERRITORY ADMINISTRATION CHANDIGARH. THE LICENSEE SHALL BE RESPONSIBLE FOR THE PROPER UP - KEEP AND MAINTENANCE OF THE MILK BOOTH AND SHALL ALSO COMPENSATE THE DAIRY FOR ANY LOSS DUE TO DAMAG E TO THE STRUCTURE OF THE MILK BOOTH. 3. THE LICENSEE WOULD PAY RS. 1000/- PER MONTH LICENSE FEE OF MILK BOOTH. THIS LICENSE FEE WOULD BE INCREASED B Y 5% EVERY YEAR, ON THE LAST LICENSE FEE PAID. BESIDES THIS, THE LICENSEE SHALL ALSO PAY GROUND RENT/LEASE MONEY OF THE LAND WHERE BOOTH IS SITUATED TO THE UNION TERRI TORY ADMINISTRATION, CHANDIGARH OR CONCERNED AUTHORITIES, I F DEMANDED BY THEM AT ANY STAGE. 4. THE LICENSEE SHALL HAVE TO BUY ONE BOTTLE COOLER AS PER SPECIFICATIONS OF THE DAIRY. THE DAIRY WILL AR RANGE INSTALLATION OF ELECTRIC METER. THE LICENSEE WILL BE RESPONSIBLE FOR THE MAINTENANCE OF ELECTRIC METER I N GOOD CONDITION, FOR THE PAYMENT OF DUE ELECTRIC CHARGES AND IN CASE OF ANY DEFAULT; THE LOSS CAUSED WOULD BE DEDUCTED FROM THE SECURITY OF THE LICENSEE . THE SECURITY OF THE LICENSEE WILL BE RELEASED ONLY AFTE R HE PRODUCES NOTHING DUE CERTIFICATE FROM THE ELECTRI CITY AUTHORITY CONCERNED. 6 5. THE DAIRY RESERVES THE RIGHT TO TERMINATE THE AGREEMENT IN CASE IT FINDS IT DIFFICULT OR PREJUDIC IAL TO ITS INTEREST OR IN CASE THERE IS A CHANGE IN THE POLI CY OF THE DAIRY REGARDING THE SALE OF MILK AND MILK PRODUCTS. 6. THE LICENSEE WILL HIMSELF SEE THE FEASIBILITY OF H IS BUSINESS, THE DAIRY DOES NOT TAKE ANY RESPONSIBILITY WHATSOEVER ABOUT THE SALE VOLUME OR THE COMMERCIAL FEASIBILITY OF THIS VENTURE. THE BENEFIT OF THIS AGREEMENT IS PERSONAL TO THE LICENSEE AND HE SHALL NOT UNDER ANY CIRCUMSTANCES TRANSFER WHOLLY OR PARTLY BENEFIT OF THIS AGREEMENT TO ANY OTHER PERSONS. 7. THE DAIRY WILL SELL ONLY VERKA MILK AND MILK PRODUCTS TO THE LICENSEE AT PRICES TO BE FIXED BY THE DIARY FRO M TIME TO TIME AND THE LICENSEE SHALL SELL THE SAME TO THE PUBLIC AT THE PRICES TO BE FIXED BY THE DAIRY FR OM TIME TO TIME. THE LICENSEE WILL SELL VERKA MILK AND MILK PRODUCTS, THROUGHOUT THE DAY ACCORDING TO THE CONVENIENCE OF THE CUSTOMERS. THE MILK BOOTH WOULD HAVE A SIGN BOARD/PRICE BOARD ETC. AS SPECIFIED BY THE DAIRY. 8. THE LICENSEE WILL PAY THE PRICE OF MILK AND MILK PRO DUCTS TO BE SUPPLIED TO HIM EVERY DAY IN THE BANK NOTIFIED/MILK PLANT BY CASH/DRAFT IN ADVANCE AND THE LICENSEE WILL ENSURE THAT SUFFICIENT AMOUNT IS MAINTAINED BY THEM AT ALL TIMES TO COVER THE QUANTITY OF MILK/MILK PRODUCTS INDENTED. IF THE PAYMENT IS NOT SO MADE AS PROVIDED THEREIN, THE DAIRY SHALL BE ENTITLED TO TERMINATE THE AGREEMENT FORTHWITH. 9. IN CASE, THE UNION TERRITORY ADMINISTRATION, CHANDI GARH FOR ANY REASON, ORDER THE ALLOTTED LAND TO BE VACAT ED, THEN THIS AGREEMENT SHALL STAND AUTOMATICALLY TERMINATED AND THE LICENSEE SHALL HAVE TO VACATE THE MILK BOOTH IMMEDIATELY. NO COMPENSATION ON THIS ACCOUNT WILL BE PAID TO THE LICENSEE BY THE DAIRY. 7 10. THE LICENSEE WILL NOT SELL ANY OTHER PRODUCT, EXCEPT MILK/MILK PRODUCTS INCLUDING ICE CREAM OTHER THAN SUPPLIED BY THE DAIRY WITHOUT THE WRITTEN CONSENT O F MANAGING DIRECTOR, MILK PLANT MOHALI. THE LICENSEE S HALL ABIDE BY ALL INSTRUCTIONS AND DIRECTIONS, ISSUED BY T HE DAIRY FROM TIME TO TIME. 11. THE MILK IN POUCHES WILL BE SUPPLIED IN TRAYS TO T HE LICENSEE AT THE PREMISES, AT THE TIME CONVENIENT TO TH E DAIRY, ON THE BASIS OF INDENT PLACED BY THE LICENSEE AT LEAST ONE DAY IN ADVANCE. THE DAIRY WILL TRY TO MEET T HE DEMAND PLACED BY THE LICENSEE BUT THE REGULARITY AND/OR CERTAINTY OF SUPPLY OF THE QUANTITY INDENTED FROM THE DAIRY IS NOT GUARANTEED. THE LICENSEE WILL BE ISSUED ADEQUATE NUMBER OF TRAYS AGAINST WHICH MILK POUCHES IN TRAYS WILL BE SUPPLIED. 12. THE DAIRY SHALL ACCEPT ONLY MILKFED/R.M.U STAMPED/MARKED TRAYS. LICENSEE SHALL GET THESE EMPTY TRAYS FROM DAIRY AGAINST PAYMENT AS FIXED BY THE DAIRY FROM TIME TO TIME. 13. THE LICENSEE SHALL MAINTAIN STORAGE AND COOLING FOR SALE TO THE PUBLIC AT HIS OWN EXPENSES. THE LICENSEE WILL ALSO CLEAN THE EMPTY TRAYS AND SHALL MAINTAIN HYGIENIC STANDARDS AT HIS PREMISES. 14. THE DAIRY WILL SUPPLY MILK AND MILK PRODUCTS OF THE REQUISITE QUALITY. ONCE THE MILK AND MILK PRODUCTS AR E DELIVERED TO THE LICENSEE, IT WILL BE THE RESPONSIBILIT Y OF THE LICENSEE TO MAINTAIN THE SAME QUALITY OF MILK AND MILK PRODUCTS SUPPLIED TO HIM FOR SALE TO THE CUSTOME RS. THE TITLE OF THE MILK AND MILK PRODUCTS WILL PASS TO T HE LICENSEE IMMEDIATELY ON THE DELIVERY. 15. THE LICENSEE SHALL STRICTLY COMPLY WITH THE UNION TERRITORY ADMINISTRATION, CHANDIGARH FOR OTHER LAWS, RULES AND REGULATIONS, ORDERS AND DIRECTIONS AND ALSO INSTRUCTIONS, ORDERS AND DIRECTIONS ISSUED BY THE DAIRY 8 THAT ARE IN FORCE FROM TIME TO TIME REGARDING MAINTENANCE OF STRICT STANDARDS OF CLEANLINESS OF THE PREMISES. 16. THE DAIRY SHALL HAVE THE AUTHORITY FOR THE INSPECTION OF LICENSEE PREMISES, ITS VEHICLES AND COLLECTION OF SAMPLES OF MILK AND MILK PRODUCTS AT ANY TIME FOR CHECKING QUANTITY AND QUALITY BY ITS REPRESENTATIVE AND/OR B Y THE UNION TERRITORY ADMINISTRATION, CHANDIGARH AND OTHER STATUTORY AND/OR ADMINISTRATIVE AUTHORITIES CONCERNED. IN THE EVENT OF VARIATION BEING FOUND IN THE QUANTITY AND QUALITY OF MILK SOLD BY T HE DAIRY, IT SHALL BE ENTITLED TO TERMINATE THE AGREEME NT FORTHWITH. THIS WILL BE WITHOUT PREJUDICE LIKE AGAINST THE LICENSEE. 17. ONCE MILK OR MILK PRODUCTS ARE DELIVERED BY THE DA IRY TO THE LICENSEE, THE DAIRY WILL NOT ACCEPT BACK ANY UNS OLD OR SPOILED MILK AND MILK PRODUCTS FROM THE LICENSEE UNDER ANY CIRCUMSTANCES. 18. THE LICENSEE SHALL COMPLY WITH ALL THE LEGAL REQ UIREMENTS IN CONNECTION WITH THE SALE OF MILK/MILK PRODUCTS OF MATTERS CONNECTED WITH OR INCIDENTAL THERETO. 19. THE CONSUMER'S COMPLAINT, IF ANY, WILL BE IMMEDIA TELY FORWARDED TO THE GENERAL MANAGER OF THE DAIRY BY TH E LICENSEE SO THAT IT IS ATTENDED TO PROMPTLY. IN ANY INSTANCES WHERE IT IS ESTABLISHED THAT THE COMPLAINT IS ON ACCOUNT OF LICENSEE NEGLIGENCE, THE LICENSEE SHALL BE REQUIRED TO MAKE GOOD THE LOSSES TO THE CONSUMER AND/OR TO THE DAIRY AS THE CASE MAY BE. THE DECISION OF THE MANAGING DIRECTOR SHALL BE FINAL AND BINDING IN THIS CASE. 20. ANY BREAKAGE, LEAKAGE, DAMAGE ETC OCCURRING AT THE LICENSEE PREMISES OR IN HIS CUSTODY, SHALL BE LICENSEE RESPONSIBILITY. 9 21. THEDAIRY RESERVES THE RIGHT TO APPOINT WITHOUT P RIOR NOTICE AT ANY TIME, ANY NUMBER OF LICENSEE IN THE ALLOTTED/ADJOINING/CONTIGUOUS AREA IN WHICH THE LICENSEE IS OPERATING AND THE LICENSEE SHALL HAVE NO OBJECTION AND SHALL NOT BE ENTITLED FOR ANY COMPENSAT ION DAMAGES ETC. FROM THE DIARY. 22. THE LICENSEE SHALL HAVE NO RIGHT TO ACTION AGAINST THE DAIRY FOR NON SUPPLY, DELAY, SHORTAGE, IRREGULARITY ETC. IN THE DELIVERY OF MILK AND MILK PRODUCTS DUE TO ANY R EASON WHATSOEVER. 23. THE DAIRY RESERVES THE RIGHT TO TERMINATE THE AGREEMENT IN CASE THE DAIRY DECIDES TO START A CO- OPERATIVE CONSUMER SOCIETY OR ITS OWN BOOTH. 24. IF THE LICENSEE BREACHES ANY OF THE TERMS AND CONDITIONS OF THIS AGREEMENT AND/OR VIOLATES THE INSTRUCTIONS/DIRECTIONS/ORDERS ISSUED FROM TIME TO TIME OR IN ANY WAY ACTS AGAINST THE INTEREST OF THE DAIRY OF ACTS IN ANY MANNER WHICH MAY ADVERSELY EFFECTS THE DAIRY'S BUSINESS OR COMMITS ANY ACT WHICH IS INCOMPUTABLE WITH THE CONTINUANCE OF THIS AGREEMENT, THE DAIRY SHALL TERMINATE THIS AGREEMENT FORTHWITH WITHOUT ANY NOTICE AND WITHOUT ASSIGNING ANY REASONS AND FURTHER THE DAIRY MAY WITHHOLD DUE KING WITH THE DAIRY AND PAYABLE TO THE LICENSEE FOR REIMBURSEMENT O F ANY LOSS OR DAMAGE WHICH THE DAIRY MAY HAVE SUFFERED OR IS LIKELY TO SUFFER FOR THE SAID ACT ON TH E PART OF THE LICENSEE. 25. IT IS MADE ABSOLUTELY CLEAT HERE THAT THIS AGRE EMENT IS A COMMERCIAL AGREEMENT AND NOT ONE OF EMPLOYMENT AND RELATIONSHIP OF EMPLOYER-EMPLOYEE DOES NOT EXIS T BETWEEN DAIRY AND THE LICENSEE. THE LICENSEE THEREFORE, IS NOT TO BE CONSIDERED AS AN EMPLOYEE O F THE MILK UNION ROPAR. 10 26. IF ANY DISPUTE OR DIFFERENCES OF OPINION SHALL ARISE AT ANY TIME BETWEEN THE PARTIES IN RESPECT OF THIS AGREEMENT OR CONCERNING ANYTHING WHEREIN CONTAINED OR ARISING OUT OF THIS AGREEMENT OR AS TO THE RIGHT S, LIABILITIES OR AS TO THE RECOVERY OF ANY AMOUNT THE SAME SHALL BE REFERRED TO THE SOLE ARBITRATION OF T HE MANAGING DIRECTOR. THE PUNJAB STATE COOP. MILK PRODUCERS FEDERATION LTD. CHANDIGARH AND THE DECISION OF THE ARBITRATOR SHALL BE FINAL AND BINDING ON THE PARTIES. 7. FROM THE ABOVE AGREEMENT, THE ASSESSING OFFICER OBSERVED THAT THE BOOTHS WERE NOT LET OUT TO THE TE NANTS FOR RUNNING THEIR OWN BUSINESS ACTIVITIES OR THEIR CHOICE OR AS THEY INTENDED. HE FURTHER OBSERVED THAT THE TEN ANTS HAVE NO RIGHT TO SELL THE PRODUCTS OF ANY OTHER AGE NCY OTHER THAN THAT OF THE ASSESSEE UNLESS PERMITTED T O DO SO BY THE ASSESSEE. ACCORDING TO THE ASSESSING OFFICE R, CONTROL OVER THE BUSINESS OF THE TENANTS VESTED WIT H THE ASSESSEE. THUS, THE ASSESSING OFFICER CONCLUDED T HAT THE INCOME EARNED FROM LETTING OUT OF BOOTHS DOES NOT F ALL WITHIN THE DEFINITION OF HOUSE PROPERTY. ACCORDI NG TO HIM, THE LETTING OUT BOOTHS IS INDIVISIBLE AND INTE GRAL PART OF CARRYING OUT OF BUSINESS ACTIVITIES OF THE ASSES SEE. HE, THEREFORE, DISALLOWED THE AMOUNT OF RS.5,68,208 CLA IMED BY THE ASSESSEE AS DEDUCTION UNDER SECTION 24(A) OF THE ACT. 8. AGGRIEVED BY THE ORDER OF THE ASSESSING OFFICER , THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE TH E LEARNED CIT (APPEALS) AND THE LEARNED CIT (APPEALS) VIDE 11 HIS ORDER DATED 8.7.2013 UPHELD THE ORDER OF ASSES SING OFFICER ON THIS ISSUE AND, HENCE THE ASSESSEE IS AP PEAL BEFORE THE TRIBUNAL. 9. WE HAVE HEARD THE RIVAL SUBMISSIONS AND HAVE ALSO PERUSED THE MATERIALS AVAILABLE ON RECORD. AT THE VERY OUTSET, SHRI M.R.SHARMA, LEARNED COUNSEL FOR T HE ASSESSEE POINTED OUT THAT THE INCOME OF RS.18,94,02 5/- HAS BEEN RECEIVED BY THE ASSESSEE FROM VARIOUS MILK BOOTHS (APPROXIMATELY 102 BOOTHS), WHICH WERE LET O UT BY THE ASSESSEE TO VARIOUS DEALERS OF MILK. THE LEARN ED COUNSEL FOR THE ASSESSEE VEHEMENTLY ARGUED THAT DEDUCTION HAS BEEN REGULARLY CLAIMED AND ALLOWED BY THE ASSESSING OFFICER IN EARLIER YEARS. HOWEVER, THE S AME HAS BEEN DENIED DURING THE YEAR UNDER CONSIDERATION AND THE ONLY REASON GIVEN BY THE REVENUE AUTHORITIES IS THA T IT IS A LICENSE FEE AND NOT RENT, WHEREAS FACTUALLY THE SAM E IS INCOME FROM HOUSE PROPERTY ONLY. BEFORE US, THE AS SESSEE SUBMITTED THE COPIES OF ASSESSMENT ORDERS ALONGWITH COMPUTATION CHART FOR THE FINANCIAL YEARS 2002-03, 2003- 04, 2004-05, 2005-06 AND 2006-07. ON PERUSAL OF TH E ASSESSMENT ORDERS AND THE COMPUTATION CHART PERTAIN ING TO ABOVE YEARS, IT IS CLEAR THAT DURING THE SAID YE ARS ALSO, THE ASSESSEE HAD DECLARED SIMILAR INCOME UNDER THE HEAD INCOME FROM HOUSE PROPERTY AND THE DEDUCTION UNDE R SECTION 24(A) OF THE ACT HAS ALSO BEEN CLAIMED, WHI CH HAS BEEN ALLOWED IN ALL THE YEARS WHILE COMPLETING THE ASSESSMENT UNDER THE PROVISIONS OF SECTION 143(3) O F THE 12 ACT. IT IS ALSO CLAIMED THAT THE ASSESSEE WAS RECE IVING RENTAL INCOME FROM VARIOUS MILK BOOTHS EARLIER TO F INANCIAL YEAR 2002-03 ALSO. THE LEARNED COUNSEL FOR THE ASS ESSEE ALSO INVITED OUR ATTENTION TO THE ORDER OF THE CIT (APPEALS) DATED 22.2.2011, PASSED IN ASSESSEES CASE FOR ASSE SSMENT YEAR 2007-08, WHEREIN THE CIT (APPEALS) ALLOWED SIM ILAR CLAIM OF THE ASSESSEE. IN THAT YEAR, THE ASSESSEE CLAIMED DEDUCTION OF RS.4,62,584/- UNDER SECTION 24(A) OF T HE ACT. IT IS ADMITTED THAT IN THE ASSESSMENT YEAR 2007-08, THE ASSESSEE HAD RECEIVED RS.15,41,948/- AS LICENSE FE ES. THE ASSESSEE HAD SHOWN THIS RECEIPT UNDER THE HEAD INCOME FROM HOUSE PROPERTY IN ORDER TO CLAIM DEDU CTION UNDER SECTION 24(A) OF THE ACT. THIS INCOME WAS RE CEIVED ON ACCOUNT OF BOOTHS GIVEN TO DIFFERENT PARTIES TO SELL ITS PRODUCTS ONLY FOR WHICH HE HAD CHARGED LICENSE FEES AND ALSO THAT THERE WAS NO CHANGE IN FACTS FROM PREVIOU S YEARS, THEREFORE, THE LEARNED CIT (APPEALS) ALLOWED THE CLAIM OF THE ASSESSEE. THE LEARNED COUNSEL FOR THE ASSESSEE ALSO BROUGHT TO OUR NOTICE THAT THE REVENU E HAS NOT CHALLENGED THE ORDER OF THE CIT (APPEALS) FOR T HE ASSESSMENT YEAR 2007-08 BY WAY OF APPEAL, AND THUS THE SAID ORDER HAS ATTAINED THE FINALITY. THE LEARNED COUNSEL FOR THE ASSESSEE FURTHER SUBMITTED THAT THERE IS NO MATERIAL CHANGE IN FACTS OF THE PRESENT CASE AS COM PARED WITH THE FACTS OF ASSESSMENT YEAR 2007-08 OR WITH T HE FACTS OF THE EARLIER YEARS. THEREFORE, THE AUTHORIT IES BELOW WERE NOT JUSTIFIED IN TAKING A DIFFERENT VIEW IN TH IS YEAR. IT IS WELL SETTLED THAT STRICTLY SPEAKING, RES-JUDI CATA DOES 13 NOT APPLY TO INCOME TAX PROCEEDINGS BUT THE RULE OF CONSISTENCY DOES APPLY IN INCOME TAX PROCEEDINGS. IN THE INSTANT CASE, THE RENTAL INCOME RECEIVED BY THE ASS ESSEE SINCE LONG FROM VARIOUS MILK BOOTHS WAS BEING TREAT ED AS INCOME FROM HOUSE PROPERTY AND THE ASSESSMENTS WE RE FRAMED UNDER SECTION 143(3) OF THE ACT. IN THE ASS ESSMENT YEAR 2007-08, THE LEARNED CIT (APPEALS) HAS TREATED SUCH INCOME AS INCOME FROM HOUSE PROPERTY AND THE REVE NUE HAS NOT CHALLENGED THE SAID ORDER IN APPEAL AND THE ORDER HAS ATTAINED THE FINALITY. THUS, IT IS CLEAR THAT THE QUESTION OF DEDUCTION UNDER SECTION 24(A) OF THE AC T HAD BEEN EXAMINED IN EARLIER YEARS AND SINCE THERE IS N O CHANGE IN THE ACTIVITIES OF THE ASSESSEE, THEREFORE , IN ORDER TO MAINTAIN THE CONSISTENCY, THE REVENUE COUL D NOT BE PERMITTED TO TAKE A DIFFERENT VIEW IN THE MATTER . WHILE TAKING SUCH A VIEW, WE ARE FORTIFIED BY THE DECISIO N OF THE HON'BLE DELHI HIGH COURT IN THE CASE OF CIT VS. NE O POLY PACK (P) LTD. (2000) 246 ITR 492 (DEL). IN THE SAI D CASE, THE RENTAL INCOME FROM THE FACTORY BUILDING OWNED B Y THE COMPANY WAS BEING ASSESSED UNDER THE HEAD BUSINESS FOR ALL THE EARLIER YEARS STARTING FROM THE ASSESSMENT YEAR 1984-85 ONWARDS WAS SOUGHT TO BE ASSESSED AS INCOME FROM HOUSE PROPERTY FOR THE ASSESSMENT YEAR 1989- 90. THE HON'BLE HIGH COURT HELD AS UNDER : HELD, THAT THE DOCTRINE OF RES JUDICATA DOES NOT APPLY TO INCOME-TAX PROCEEDINGS SINCE EACH ASSESSMENT YEAR IS INDEPENDE NT OF THE OTHER BUT WHERE AN ISSUE HAD BEEN DECIDED CONSISTENTLY IN A PARTICULAR MANNER FOR EARLIER ASSESSMENT YEARS, FOR THE SAKE O F CONSISTENCY THE 14 SAME VIEW SHOULD CONTINUE TO PREVAIL FOR SUBSEQUENT YEARS UNLESS THERE IS MATERIAL CHANGE IN THE FACTS. SINCE IN TH E INSTANT CASE THERE WAS NO SINGLE DISTINGUISHING FEATURE PROMPTING A DIFFERENT VIEW THE INCOME WAS LIABLE TO BE ASSESSED AS BUSINESS INCOME . NO QUESTION OF LAW AROSE FROM THE ORDER OF THE TRIBUNAL. 10. IN VIEW OF THE ABOVE, THE ORDERS OF THE LOWER AUTHORITIES ON THIS ISSUE ARE NOT TENABLE AND, HENC E ARE LIABLE TO BE SET ASIDE. 11. THE ANOTHER CONTENTION OF THE LEARNED COUNSEL FOR THE ASSESSEE WAS THAT THE MAIN OBJECT OF THE AS SESSEE IS TO MANUFACTURE MILK PRODUCTS AND SALE OF GOODS MANUFACTURED OUT OF IT. IT IS APPARENT FROM THE RE CORDS THAT THE ORIGINAL LEGAL OWNERSHIP OF LAND AND BOOTH S THEREON VESTED WITH THE CHANDIGARH ADMINISTRATION, WHICH WAS SUBSEQUENTLY TRANSFERRED TO MUNICIPAL CORPORATI ON, CHANDIGARH. THE ASSESSEE IS MAKING PAYMENT OF RENT IN RESPECT OF THESE BOOTHS TO MUNICIPAL CORPORATION CHANDIGARH. HOWEVER, THE ASSESSEE LET OUT THE BOOT HS TO DIFFERENT VENDORS. IN OUR OPINION, THE INTENTION O F THE ASSESSEE WAS TO EARN RENT AND NOT TO DERIVE BUSINES S INCOME, AS WE HAVE ALREADY OBSERVED HEREINABOVE THA T THE MAIN BUSINESS OF THE ASSESSEE IS TO MANUFACTURE MIL K PRODUCTS. AS PER THE COMPUTATION OF INCOME FOR THE ASSESSMENT YEAR UNDER CONSIDERATION, THE ASSESSEE H AD SHOWN INCOME FROM BUSINESS AT RS.5,24,52,907/- AND THE RENTAL INCOME RECEIVED DURING THE YEAR UNDER CONSIDERATION WAS AT RS.18,94,025/-. THUS, IT IS C LEAR THAT THE ASSESSEE IS NOT IN THE BUSINESS OF LETTING OUT THE 15 BOOTHS TO VARIOUS PERSONS. THE MAIN BUSINESS OF TH E ASSESSEE IS TO MANUFACTURE MILK PRODUCTS. IN OUR O PINION, THE INCOME EARNED BY THE ASSESSEE FROM LETTING OUT OF BOOTHS CANNOT BE CONSIDERED AS INCOME FROM BUSINESS . IN THE CASE OF SHEETAL KHURANA FOODS (P) LTD. VS. I.T .A.T. & OTHERS (2011) 335 ITR 1 (P&H), THE FACTS OF THE CAS E WAS THAT THE ASSESSEE RECEIVED INCOME FROM LETTING OUT OF A BUILDING BUT SOUGHT TO TREAT THE INCOME AS BUSINESS INCOME. HOWEVER, THE ASSESSING OFFICER TREATED THE INCOME AS RENTAL INCOME. THE ORDER OF THE ASSESSIN G OFFICER WAS UPHELD BY THE APPELLATE AUTHORITIES BEC AUSE IT WAS FOUND THAT THE MAIN OBJECT OF THE ASSESSEE WAS TO MANUFACTURE AND MARKET FOOD ARTICLES AND NOT RENTIN G OF PROPERTY. IN THAT CASE ALSO, THE ASSESSEE TOOK THE PROPERTY ON LEASE AND IN TURN LET OUT FOR NINE YEAR S, WHICH WAS NOT ITS BUSINESS ACTIVITY. IN THE SAID CASE, T HE TRIBUNAL HELD THAT THE INTENTION OF THE ASSESSEE WA S TO EARN RENT AND NOT TO DERIVE BUSINESS INCOME. ON A PPEAL, THE HON'BLE JURISDICTIONAL HIGH COURT HELD AS UNDER : WE HAVE HEARD LEARNED COUNSEL FOR THE PARTIES. LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE INTENTION OF THE ASSESSEE IN LETTING OUT THE PROPERTY WAS TO MINIMISE ITS BUSINESS LOSS AND THUS TRANSACTION OF LETTING OUT COULD BE T REATED AS PART OF BUSINESS ACTIVITY OF THE ASSESSEE AS HELD BY THE CI T (APPEALS) APPEALS). LETTING OUT WAS FOR A TEMPORARY PERIOD, P ENDING OBTAINING OF PUB LICENCE BY THE ASSESSEE. IT WAS, THEREFORE, DIFFERENT FROM A TRANSACTION OF LETTING OUT OF PROPERTY WITH A VIEW TO EARN INCOME FROM THE PROPERTY. IN THESE CIRCUMSTANCES, THE VIEW TAKEN IN SHAMBHU INVESTMENTS CASE (SUPRA) SHOULD NOT HAVE B EEN FOLLOWED BY THE ASSESSING OFFICER AND THE TRIBUNAL. 16 LEARNED COUNSEL FOR THE REVENUE SUPPORTED THE VIEW TAKEN BY THE ASSESSING OFFICER AND THE TRIBUNAL. WE ARE UNABLE TO FIND ANY MERIT IN THE APPEAL. UNDER TH E SCHEME OF THE ACT, HEADS OF INCOME ARE MUTUALLY EXCLUS IVE. WHEN A PARTICULAR ITEM OF INCOME FALLS SPECIFICALLY UND ER ONE HEAD IT COULD NOT BE CHARGED UNDER ANY OTHER HEAD. IF INCOME FROM A SOURCE FALLS UNDER A SPECIFIC HEAD, THE FACT T HAT IT MAY INDIRECTLY BE COVERED BY ANOTHER HEAD IS NOT ENOUGH TO ATTRACT THE OTHER HEAD. [UNITED COMMERCIAL BANK LTD. VS. CIT (1957 ) 32 ITR 688 (SC), EAST INDIA HOUSING & LAND DEVELOPMEN T TRUST LTD. VS. CIT (1961) 42 ITR 49 (SC) AND CIT VS. D.P. SANDU BROS. CHEMBUR (P) LTD. (2005) 193 CTR (SC) 578 : (2005) 273 ITR 1 (SC)]. IN EAST INDIA HOUSING AND LAND DEVELOPMENGT TRUSTS CAS E (1961) 42 ITR 49 (SC) THE ASSESSEE WAS IN THE BUSINES S OF BUYING AND DEVELOPING LANDED PROPERTY INCLUDING DEVELOP MENT OF MARKETS. IT DERIVED INCOME BY LETTING OUT SHOPS AN D STALLS IN THE INTERREGNUM PENDING SALE OF THE SAID PROPERTY. CLA IM OF THE ASSESSEE THAT THE SAID INCOME WAS BUSINESS INCO ME WAS REJECTED AND THE SAME WAS HELD TO BE INCOME FROM PROP ERTY. RELYING UPON JUDGMENT OF HOUSE OF LORDS IN FRY VS. SA LISBURY HOUSE ESTATES CO. LTD. (1930) AC 432 AND JUDGMENT OF CALCUTTA HIGH COURT IN COMMERCIAL PROPERTIES LTD. VS. CI T (1928) ILR 55 (CAL), IT WAS HELD THAT INCOME FROM LETTING OUT WAS INCOME FROM PROPERTY UNLESS BUSINESS OF THE ASSE SSEE ITSELF WAS TO LET OUT THE PROPERTY. THE MERE FACT THA T LETTING OUT WAS INCIDENTAL TO ITS BUSINESS WILL NOT DEVIATE FROM TH E CHARACTER OF INCOME BEING INCOME FROM PROPERTY. IT W ILL BE APPROPRIATE TO MAKE A REFERENCE TO THE FOLLOWING OBSE RVATIONS IN THE SAID JUDGMENT (PAGE 51): 'THE APPELLANT CONTENDS THAT BECAUSE IT IS A COMPANY FORMED WITH THE OBJECT OF PROMOTING AND DEVELOPING MARKETS, ITS INCOME DERIVED FROM THE SHOPS AND STALLS IS LIABLE TO B E TAXED UNDER SECTION 10 OF THE IT ACT AS PROFITS OR GAINS OF BUSINESS AND THAT THE INCOME IS NOT LIABLE TO BE TAXED AS INC OME FROM PROPERTY UNDER SECTION 9 OF THE ACT. THE APPELLANT IS 17 UNDOUBTEDLY, UNDER THE PROVISIONS OF THE CALCUTTA MUN ICIPAL ACT, 1951, REQUIRED TO OBTAIN A LICENCE FROM THE CORP ORATION OF CALCUTTA AND TO MAINTAIN SANITARY AND OTHER SERVICES IN CONFORMITY WITH THE PROVISIONS OF THAT ACT AND FOR TH AT PURPOSE HAS TO MAINTAIN A STAFF AND TO INCUR EXPENDITURE. BU T, ON THAT ACCOUNT, THE INCOME DERIVED FROM LETTING OUT PROPERTY BELONGING TO THE APPELLANT DOES NOT BECOME PROFITS O R GAINS FROM BUSINESS WITHIN THE MEANING OF SECTIONS 6 AND 10 OF THE IT ACT. BY SECTION 6 OF THE IT ACT THE FOLLOWING SI X DIFFERENT HEADS OF INCOME ARE MADE CHARGEABLE : (1) SALARIES, (2) INTEREST ON SECURITIES, (3) INCOME FROM PROPERTY, (4) PR OFITS AND GAINS OF BUSINESS, PROFESSION OR VOCATION, (5) INCOME F ROM OTHER SOURCES AND (6) CAPITAL GAINS. THIS CLASSIFICATIO N UNDER DISTINCT HEADS OF INCOME, PROFITS AND GAINS IS MADE HAVING REGARD TO THE SOURCES FROM WHICH INCOME IS DERIVED. INCOME- TAX IS UNDOUBTEDLY LEVIED ON THE TOTAL TAXABLE INCOME OF THE TAXPAYER AND THE TAX LEVIED IS A SINGLE TAX ON THE AG GREGATE TAXABLE RECEIPTS FROM ALL THE SOURCES; IT IS NOT A COLLEC TION OF TAXES SEPARATELY LEVIED ON DISTINCT HEADS OF INCOME. B UT THE DISTINCT HEADS SPECIFIED IN SECTION 6 INDICATING TH E SOURCES ARE MUTUALLY EXCLUSIVE AND INCOME DERIVED FROM DIFFERENT SOURCES FALLING UNDER SPECIFIC HEADS HAS TO BE COMPUTED FOR T HE PURPOSES OF TAXATION IN THE MANNER PROVIDED BY THE APPROPRIATE SECTION. IF THE INCOME FROM A SOURCE FALLS WITHIN A SPECIFIC HEAD SET OUT IN SECTION 6, THE FACT THAT IT MAY INDIRECTLY BE COVERED BY ANOTHER HEAD WILL NOT MAKE THE INCOME TAXABLE UNDER THE LATTER HEAD. THE INCOME DERIVED BY THE COMPANY FROM SHOPS AND STALLS IS INCOME RECEIVED FROM PROPERTY AND FALLS UNDER THE SPECIFIC HEAD DESCRIBED IN SECTION . THE CHARACTER O F THAT INCOME IS NOT ALTERED BECAUSE IT IS RECEIVED BY A CO MPANY FORMED WITH THE OBJECT OF DEVELOPING AND SETTING UP M ARKETS. IN UNITED COMMERCIAL BANK LTD. VS. CIT (1957) 32 ITR 688 (SC) THIS COURT EXPLAINED AFTER AN EXHAUSTIVE REVIEW OF THE AUTHORITIES THAT UNDER THE SCHEME OF THE IT ACT, 1922 THE HEADS OF INCOME, PROFITS AND GAINS ENUMERATED IN THE DIFFERENT 18 CLAUSES OF SECTION 6 ARE MUTUALLY EXCLUSIVE, EACH SPECI FIC HEAD COVERING ITEMS OF INCOME ARISING FROM A PARTICULAR SOUR CE.' IN SHAMBHU INVESTMENTS CASE (2001) 249 ITR 47 (CAL), THE CALCUTTA HIGH COURT HELD ,AS UNDER (PAGE 52): 'TAKING A SUM TOTAL OF THE AFORESAID DECISIONS IT CLEARLY APPEARS THAT MERELY BECAUSE INCOME IS ATTACH ED TO ANY IMMOVABLE PROPERTY CANNOT BE THE SOLE FACTOR FO R ASSESSMENT OF SUCH INCOME AS INCOME FROM PROPERTY. WHAT HAS TO BE SEEN IS WHAT WAS THE PRIMARY OBJECT O F THE ASSESSEE WHILE EXPLOITING THE PROPERTY. IF IT IS F OUND APPLYING SUCH TEST THAT THE MAIN INTENTION IS FOR LET TING OUT THE PROPERTY OR ANY PORTION THEREOF THE SAME MU ST BE CONSIDERED AS RENTAL INCOME OR INCOME FROM PROPER TY. IN CASE, IT IS FOUND THAT THE MAIN INTENTION IS TO EXP LOIT THE IMMOVABLE PROPERTY BY WAY OF COMPLEX COMMERCIAL ACTIVITIES IN THAT EVENT IT MUST BE HELD AS BUSINESS INCOME.' AGAINST THE ABOVE JUDGMENT, THE APPEAL WAS DISMISSED BY HONBLE SUPREME COURT WITHOUT A SPEAKING ORDER BEI NG (2003) 263 ITR 143 (SC); (2003)184 CTR 91 (SC). IN CIT VS. ANAND RUBBER & PLASTICS (P) LTD. (1989) 77 CTR (P&H) 120 : (1989) 178 ITR 301 (P&H) RELIED UPON BY THE ASSESSEE THE RENTAL INCOME OF THE ASSESSEE WAS HELD B Y THE TRIBUNAL TO BE BUSINESS INCOME ON THE GROUND THAT EA RLIER THE PREMISES WERE BEING USED FOR RUNNING FACTORY BUT DU E TO HEAVY LOSSES PART THEREOF WAS LET OUT TEMPORARILY AS A COMMERCIAL ASSET. THIS COURT, 'ON THE PECULIAR FACTS', H ELD THAT NO QUESTION OF LAW AROSE. IN THE PRESENT CASE, THE VIEW TAKEN BY THE AO WHICH HAS BEEN UPHELD BY THE TRIBUNAL IS BASED ON THE FOLLOWI NG REASONS : (I) THE MAIN OBJECT OF THE COMPANY IS TO MANUFACTU RE AND MARKET THE FOOD ARTICLES AND NOT RENTING OF PROPER TY. 19 IT TOOK PROPERTY ON LEASE AND IN TURN LET OUT THE SAME FOR NINE YEARS WHICH WAS NOT ITS BUSINESS ACTIVITY; ( II) LETTING OUT WAS NOT TEMPORARY ARRANGEMENT BUT FOR 9 YEARS. INITIAL DURATION WAS THREE YEARS WHICH WAS EXTENDED FOR FURTHER THREE YEARS WITH 20 PER CENT ENHANCEMENT. INTENTION CLEARLY WAS TO EARN RENT AND NO T TO DERIVE BUSINESS INCOME. WHETHER THE INCOME FALLS UNDER THE HEAD OF BUSINESS INCOME OR INCOME FROM PROPERTY HAS TO BE DECIDED FR OM CASE TO CASE DEPENDING ON THE QUESTION WHETHER TRANSACTION INVOLVED BUSINESS ACTIVITY OR MERELY DERIVING RENTAL INCOME. ONE OF THE DETERMINING FACTORS MAY BE WHETHER THE TRANSACTION IS NORMAL PART OF BUSINESS OF THE ASSESSEE. IF BUSINESS OF THE ASSESSEE HAS NOTHING TO DO WITH THE RENTING OF PROPERTY AND R ENTING IS AN ISOLATED TRANSACTION TO EARN PROPERTY INCOME, MERE FACT THAT SUCH INCOME WILL RESULT IN REDUCTION OF BUSINESS LOS S IS NOT ENOUGH TO HOLD THAT IT WILL FALL UNDER THE HEAD OF BUSI NESS INCOME. IF THIS WAS TO BE THE SOLE TEST, EVERY RENTAL I NCOME OF A BUSINESSMAN HAS TO BE HELD TO BE BUSINESS INCOME WHI CH IS NOT THE STATUTORY SCHEME AS HELD BY THE HONBLE SUPREM E COURT PARTICULARLY IN EAST INDIA HOUSING & LAND DEVE LOPMENT TRUST LTD. VS. CIT (1961) 42 ITR 49 (SC). IN THE FACTS AND CIRCUMSTANCES, THE TRIBUNAL WAS RIGH T IN HOLDING THAT THE INCOME DERIVED BY THE ASSESSEE WA S FROM PROPERTY AND NOT BUSINESS INCOME. QUESTION (C) HAS TO BE ANSWERED AGAINST THE ASSESSEE. QUESTIONS (A), (B) AND (D) ARE CONSEQUENTIAL. 12. IN THE ABOVE JUDGMENT, THE HON'BLE JURISDICTIONAL HAS CLEARLY HELD THAT IF THE BUSINES S OF THE ASSESSEE HAS NOTHING TO DO WITH THE RENTING OF PROP ERTY AND RENTING IS AN ISOLATED TRANSACTION TO EARN PROP ERTY INCOME, THE MERE FACT THAT SUCH INCOME WILL RESULT IN REDUCTION OF BUSINESS LOSS, IS NOT ENOUGH TO HOLD T HAT IT 20 WILL FALL UNDER THE HEAD OF BUSINESS INCOME. HE HON'BLE HIGH COURT HAS ALSO POINTED OUT THAT ONE OF THE DETERMINING FACTORS MAY BE WHETHER THE TRANSACTION IS A NORMAL PART OF BUSINESS OF THE ASSESSEE. FOLLOWING THE DECISION OF THE HON'BLE JURISDICTIONAL HIGH COURT R EFERRED TO ABOVE, WE HOLD THAT THE INCOME FROM LETTING OUT OF BOOTHS WAS THE INCOME FROM PROPERTY, BECAUSE IT IS NOT THE MAIN BUSINESS ACTIVITY OF THE ASSESSEE TO LET O UT THE PROPERTY. IN FACT, THE MAIN BUSINESS OF THE ASSESS EE IS MANUFACTURING OF MILK PRODUCTS AND TO SELL THEM OUT AND THE TURNOVER OF THE ASSESSEE IS IN CRORES OF RUPEES . 13. VIEWED FROM ANY ANGLE, THERE WAS NO JUSTIFICATION IN TREATING THE DISPUTED RENTAL INCOM E AS INCOME FROM BUSINESS. ACCORDINGLY, WE ALLOW THIS G ROUND OF APPEAL AND DIRECT THE ASSESSING OFFICER TO ALLOW STATUTORY DEDUCTION TO THE ASSESSEE AS PER THE PROV ISIONS OF SECTION 24(A) OF THE ACT. 14. GROUND NO.3 OF THE APPEAL READS AS UNDER : 3. THAT THE ORDER OF THE ASSESSING OFFICER AS UPHE LD BY THE COMMISSIONER OF INCOME TAX (APPEALS) CHANDIGARH DISALLOWING RS.76,58,389/- U/S 80P(2)(D) BEING THE AMOUNT OF INTEREST RECEIVED BY THE APPELLANT FROM T HE PUNJAB STATE COOP MILK PRODUCERS FEDERATION LTD. ON I TS INVESTMENT AS LOANS IS BAD IN LAW AND IS AGAINST TH E JUDICIAL DECISIONS IN THIS BEHALF AND NEEDS TO BE SE T ASIDE. 21 15. THE ASSESSEE HAS CLAIMED DEDUCTION OF RS.78,04,322/- UNDER SECTION 80P(2)(D) OF THE ACT U NDER THE HEAD INTEREST INCOME RECEIVED ON INVESTMENTS WITH OTHER COOPERATIVE SOCIETIES. THE ASSESSING OFFICER NOTED THAT THE TRANSACTIONS OF THE ASSESSEE WITH OTHER COOPERATIVE SOCIETIES WERE IN THE NATURE OF TRADING OF GOODS ONLY AND NO FINANCIAL TRANSACTIONS WERE INVOL VED AT ALL. THE ASSESSING OFFICER FURTHER POINTED OUT THA T THE AMOUNT CLAIMED TO HAVE BEEN INVESTED BY THE ASSESSE E HAD NOT BEEN REFLECTED UNDER THE HEAD OF ANY OF THE FUN DS CREATED BY THE PUNJAB STATE COOPERATIVE MILK PRODUC ERS FEDERATION LTD., RATHER IT WAS REFLECTED UNDER THE HEAD SUNDRY CREDITORS. THE ASSESSING OFFICER ACCORDIN GLY DISALLOWED THE CLAIM OF THE ASSESSEE. 16. WE HAVE HEARD THE RIVAL SUBMISSIONS. AT THE VERY OUTSET, SHRI M.R. SHARMA, LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT SIMILAR CLAIM OF THE ASSESS EE HAS BEEN ALLOWED IN EARLIER YEARS I.E. FROM ASSESSMENT YEAR 2003-04 TO 2007-08 AND HE, THEREFORE, SUBMITTED THA T THERE WAS NO JUSTIFICATION IN REJECTING THE CLAIM O F THE ASSESSEE IN THIS YEAR. THE LEARNED COUNSEL FOR THE ASSESSEE ALSO RELIED ON THE JUDGMENT OF THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. D OABA CO-OPERATIVE SUGAR MILLS LTD. (1998) 230 ITR 775 (P &H), WHEREIN THE HON'BLE JURISDICTIONAL HIGH COURT HAS H ELD AS UNDER : 22 SECTION 80P(2)(D) OF THE INCOME-TAX ACT, 1961 ALLOWS WHOLE DEDUCTION OF ANY INCOME BY WAY OF INTEREST OR DIVID ENDS DERIVED BY A CO-OPERATIVE SOCIETY FROM ITS INVESTME NT WITH ANY OTHER CO-OPERATIVE SOCIETY. THIS PROVISION DOE S NOT MAKE ANY DISTINCTION IN REGARD TO THE SOURCE OF THE INVESTMENT, BECAUSE THE SECTION ENVISAGES DEDUCTION IN RESPECT OF ANY INCOME DERIVED BY THE CO-OPERATIVE SOCIETY FR OM ANY INVESTMENT WITH A CO-OPERATIVE SOCIETY. IT IS IMMAT ERIAL WHETHER ANY INTEREST PAID TO THE CO-OPERATIVE SOCIE TY EXCEEDS THE INTEREST RECEIVED FROM THE CO-OPERATIVE BANK ON INVESTMENTS. THE REVENUE IS NOT REQUIRED TO LOOK INT O THE NATURE OF THE INVESTMENT WHETHER IT WAS FROM ITS SURPLU S FUNDS OR OTHERWISE. THE PROVISION DOES NOT INDICATE ANY SU CH ADJUSTMENT IN REGARD TO INTEREST DERIVED FROM THE CO -OPERATIVE SOCIETY FROM ITS INVESTMENT IN ANY OTHER CO-OPERATI VE SOCIETY. THEREFORE, DEDUCTION IS ALLOWABLE UNDER S ECTION 80P(2)(D) IN RESPECT OF INTEREST ON ACCOUNT OF INTE REST RECEIVED FROM ANY CO-OPERATIVE BANK WITHOUT ADJUSTI NG THE INTEREST PAID TO THE CO-OPERATIVE BANK. 17. IN OUR OPINION, THE ISSUE IS SQUARELY COVERED BY THE DECISION OF THE JURISDICTIONAL HIGH COURT, REFE RRED TO ABOVE. NO CONTRARY DECISION WAS BROUGHT TO OUR NOT ICE BY THE LEARNED D.R. RESPECTFULLY FOLLOWING THE JUDGME NT OF THE JURISDICTIONAL HIGH COURT, REFERRED TO ABOVE, W E ALLOW THIS GROUND OF APPEAL. 18. GROUND NO.4 OF THE APPEAL READS AS UNDER : 4. THAT THE ORDER OF THE ASSESSING OFFICER AS UPHE LD BY THE COMMISSIONER OF INCOME TAX (APPEALS) CHANDIGARH DISALLOWING RS.2,28,67,595/- BEING THE AMOUNT OF COMMISSION PAID TO OTHER COOPERATIVE 23 SOCIETIES CLAIMED U/S 37 IS BAD IN LAW AND NEEDS TO BE SET ASIDE. 19. DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAD PAID COMMISSION TO OTHER MILK UNIONS A S UNDER : NAME OF PARTY TO WHICH COMMISSION PAID GROSS AMOUNT THE PUNJAB STATE CO-OPERATIVE MILK FEDERATION CHANDIGARH (M.P. CHANDIGARH) 99,52,608 THE PUNJAB DISTRICT COOPERATIVE MILK PRODUCERS LTD. (MU, PATIALA) 1,24,13,900/- THE HOSHIARPUR DISTRICT COOPERATIVE MILK PRODUCERS LTD. (MU, HOSHIARPUR) 5,01,087/- TOTAL 2,28,67,595/- 20. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER REQUIRED THE ASSESSEE TO EXPL AIN THE NATURE OF SERVICES, ETC. RENDERED BY THE AFORESAID PARTIES, FOR WHICH COMMISSION WAS PAID. IN THIS REGARD, THE ASSESSEE CONTENDED THAT THE COMMISSION WAS PAID FOR UNDERTAKING THE BUSINESS AND IN THE INTEREST OF THE ASSESSEE. THE ASSESSEE FURTHER EXPLAINED THAT THE COMMISSION TO MILK UNION, PATIALA AND MILK UNION, HOSHIARPUR WAS PAID FOR EXPLOITING THE AREAS UNDER THEIR MILK SHED AREAS. THESE TWO UNIONS PROVIDED THE NECESSARY INFRASTRUCTURES INCLUDING THE VISIT OF DO CTORS, SUPPLY OF MEDICINES AND OTHER CONNECTED FACILITIES TO THE MILK PRODUCERS RESIDING IN THE RESPECTIVE MILK SHED AREAS. REGARDING MILK PLANT AT CHANDIGARH, IT WAS CONTENDE D BY THE ASSESSEE THAT VARIOUS BUSINESS TRANSACTIONS TOO K PLACE 24 WITH THIS PARTY. THE ASSESSING OFFICER ISSUED LETT ER UNDER SECTION 133(6) OF THE ACT TO THE ABOVE PARTIES TO T HE EFFECT THAT IF ANY SERVICE HAS BEEN RENDERED BY THEM TO TH E ASSESSEE. THE ASSESSING OFFICER NOTICED THAT CHANDI GARH PARTY DID NOT RESPOND TO THE LETTER SENT BY HIM. H OWEVER, THE ASSESSING OFFICER CAME TO THE CONCLUSION THAT T HE ASSESSEE COULD NOT SUBSTANTIATE ITS CLAIM THAT THE COMMISSION EXPENSES WERE BONAFIDE AND GENUINE AND H E ACCORDINGLY, DISALLOWED THE ENTIRE EXPENDITURE PAID ON THIS ACCOUNT. 21. ON APPEAL, THE LEARNED CIT (APPEALS) CONFIRMED HE DISALLOWANCE FOR THE REASONS STATED IN PARAS 6.3 AND 6.3.2 OF THE IMPUGNED ORDER AND, HENCE THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 22. WE HAVE HEARD THE RIVAL SUBMISSIONS AND ALSO PERUSED THE MATERIALS AVAILABLE ON RECORD. THE ASS ESSEE CLAIMED RS.2,28,67,595/- ON ACCOUNT OF COMMISSION P AID. THE ASSESSING OFFICER ASKED THE ASSESSEE TO EXPLAIN HE NATURE OF ACCOUNTS IN RESPECT OF WHICH COMMISSION W AS PAID TO THE ABOVE PARTIES. THE ASSESSING OFFICER A LSO REQUIRED THE ASSESSEE TO EXPLAIN THE NATURE OF SERV ICES RENDERED BY THE ABOVE PARTIES, FOR WHICH COMMISSION WAS PAID. IN THIS REGARD, THE ASSESSEE MADE FOLLOWING SUBMISSIONS : THAT COMMISSION HAS BEEN PAID FOR UNDERTAKING THE BUSINESS AND IN THE INTEREST OF THE ASSESSEE. SUCH P AYMENTS ARE PERMISSIBLE UNDER THE PROVISIONS OF SECTION 37 O F THE IT 25 ACT. THE OBSERVATION MADE IN THIS PARA NEEDS NO FUR THER EXPLANATION EXCEPT THE FACT ALREADY EXPLAINED AND PAY MENT HAVING BEEN MADE IN THE BEST INTEREST OF THE ASSESSE E AND THESE HAVE BEEN PAID TO OTHER COOPERATIVE SOCIETIES WHO HAVE ALSO SHOWN THE SAME IN ITS BOOKS OF ACCOUNTS AND TAXE S HAS BEEN PAID. 23. THE ASSESSING OFFICER HAS FOUND THE ABOVE REPL Y VAGUE AND UNSATISFACTORY BECAUSE THE ASSESSEE FAILE D TO HIGHLIGHT THE EXACT NATURE OF SERVICES PROVIDED BY OTHER COOPERATIVE SOCIETIES TO WHOM HUGE AMOUNT OF RS.2,28,67,595/- WAS PAID AS COMMISSION. UNDER THE PROVISIONS OF SECTION 37(1) OF THE ACT, THE ONUS WA S ON THE ASSESSEE, CLAIMING SUCH DEDUCTION TO ESTABLISH THAT SUCH PAYMENTS WERE MADE FOR SERVICES RENDERED. IT IS OB SERVED THAT MU, PATIALA STATED THAT IT GROOMED THE MILK SH ED AREAS, WHICH WERE LATER ON TRANSFERRED TO MU, ROPAR AND IN LIEU OF WHICH, IT WAS RECEIVING COMMISSION FROM MU, ROPAR. IN THIS REGARD, THE ASSESSING OFFICER OBSER VED THAT THE ORDER WAS ISSUED IN THE YEAR 1993 BY THE REGIST RAR, COOPERATIVE SOCIETIES, PUNJAB AND DEPUTY REGISTRAR, COOPERATIVE SOCIETIES, PATIALA, ROPAR AND LUDHIANA AND, THEREFORE, IT CANNOT BE SAID THAT THE COMMISSION/RO YALTY WAS PAYABLE IN PERPETUITY. THE ASSESSING OFFICER ALSO OBSERVED THAT THE ASSESSEE MADE COMMISSION PAYMENT TO MU, PATIALA AND NOT ROYALTY PAYMENT, WHICH IS ALTOG ETHER A DIFFERENT CONCEPT. HOWEVER, THE ASSESSING OFFICE R OBSERVED THAT MU, PATIALA CONFIRMED TO HAVE RECEIVE D THIS AMOUNT AS COMMISSION. ACCORDING TO THE ASSESSING OFFICER, HOWEVER,ION SUBSEQUENT REPLY, THIS WAS CHA NGED 26 TO ROYALTY, WHICH IS DEFINITELY AN AFTERTHOUGHT. R EGARDING MU, HOSHIARPUR, THE ASSESSING OFFICER NOTED THAT NO SERVICES WERE RENDERED TO THE ASSESSEE BY THIS MILK UNION AND NO EXPENSES WERE INCURRED. IN THE ASSESSMENT O RDER, THE ASSESSING OFFICER HAS ALSO POINTED OUT THAT AS PER THE ORDER OF ADDITIONAL M.D., MILK FED., THE ASSESSEE W AS NOT SUPPOSED TO MAKE COMMISSION PAYMENT TO MP, CHANDIGARH, EXCEPT THE PAYMENT OF TRADEMARK EXPENSE S, BUT STILL HUGE COMMISSION WAS PAID TO THE SAID PART Y. THE ASSESSING OFFICER HAS CATEGORICALLY OBSERVED THAT T HE MILK FED. HAS NOT PROVIDED ANY INFORMATION TO HIM. THE ASSESSING OFFICER HAS ALSO OBSERVED THAT INSPITE OF REPEATED REMINDERS AND REQUESTS, THE INFORMATION SO UGHT FROM MILK FED. WAS NOT FURNISHED. THE ONLY PLEA TA KEN BY THE LEARNED COUNSEL FOR THE ASSESSEE IS THAT TDS HA S BEEN DEDUCTED AND THE ABOVE PARTIES HAVE SHOWN THE COMMISSION INCOME. ALTERNATIVELY, THE LOWER AUTHOR ITIES SUBMITTED THAT THE AUTHORITIES BELOW HAVE NOT GIVEN SUFFICIENT OPPORTUNITY TO THE ASSESSEE TO EXPLAIN T HE EXACT NATURE OF ITS CLAIM. ACCORDING TO HIM, THE ASSESSE E HAD SUFFICIENT EVIDENCE TO PROVE THAT THE EXPENDITURE C LAIMED BY IT HAD BEEN INCURRED WHOLLY AND EXCLUSIVELY FOR ITS BUSINESS PURPOSES. CONSIDERING THE ENTIRE FACTS AN D CIRCUMSTANCES OF THE PRESENT CASE, WE THINK IT APPR OPRIATE TO SET ASIDE THE FINDINGS OF THE LEARNED CIT (APPEA LS) ON THIS ISSUE AND REMAND THE MATTER TO THE ASSESSING O FFICER WITH A DIRECTION TO DECIDE THE ISSUE AFRESH IN ACCO RDANCE WITH LAW, AFTER AFFORDING DUE AND REASONABLE OPPORT UNITY 27 OF BEING HEARD TO THE ASSESSEE. IT IS ALSO MADE CL EAR THAT THE ASSESSEE IS FREE TO PRODUCE RELEVANT EVIDENCE I N SUPPORT OF ITS CLAIM. WE MAY ALSO ADD HERE THAT TH E PLEA TAKEN BY THE ASSESSEE THAT TDS HAS BEEN DEDUCTED ON THE DISPUTED PAYMENTS, IS OF NO CONSEQUENCE, SINCE DEDU CTION OF TAX AT SOURCE OF ANY AMOUNT DOES NOT NECESSARILY ENABLE THE ASSESSEE TO CLAIM THAT AMOUNT AS EXPENDITURE. AS WE HAVE ALREADY OBSERVED HEREINABOVE THAT UNDER SECTIO N 37(1) OF THE ACT ONUS IS ON THE ASSESSEE, CLAIMING SUCH DEDUCTION TO ESTABLISH THAT SUCH PAYMENTS WERE MADE FOR SERVICES RENDERED. THE MERE DEDUCTION OF TDS IS NO T SUFFICIENT TO PROVE THAT THE AMOUNT IN QUESTION WAS INCURRED WHOLLY AND EXCLUSIVELY FOR THE BUSINESS PU RPOSES. WE DIRECT THE ASSESSING OFFICER TO PASS A SPEAKING ORDER IN ACCORDANCE WITH LAW. FOR STATISTICAL PURPOSES, GROUND NO.4 OF THE APPEAL IS ALLOWED. 24. THE GROUND NOS.2 AND 3 OF THE APPEAL ARE ALLOWED AND GROUND NO.4 IS ALLOWED FOR STATISTICAL PURPOSES. ITA NO.1127/CHD/2014 : 25. IN THIS APPEAL, THE ASSESSEE HAS RAISED FOLLOW ING GROUNDS : 1. THAT THE ORDER OF THE ASSESSING OFFICER AS UPHE LD BY THE COMMISSIONER OF INCOME TAX (APPEALS) CHANDIGARH IS BAD IN LAW AND IS AGAINST ALL THE CANNONS OF LAW A ND JUSTICE. 28 2. THAT THE ORDER OF THE ASSESSING OFFICER AS UPHEL D BY THE COMMISSIONER OF INCOME TAX (APPEALS) CHANDIGARH DISALLOWING CLAIM OF RS.5,35,995/- ON ACCOUNT OF REPAIR EXPENSES U/S 24 OUT OF THE RENTAL INCOME @ 30% OF RS.17,85,649/- DECLARED BY THE APPELLANT MORE SO WHEN THE MUNICIPAL CORPORATION CHANDIGARH HAS ALSO HELD THE SAME AS RENTAL COMMERCIAL PROPERTY AND COLLECTED SERVICE TAX THEREON I S BAD IN LAW AND NEEDS TO BE SET ASIDE. 3. THAT THE ORDER OF THE ASSESSING OFFICER AS UPHEL D BY THE COMMISSIONER OF INCOME TAX (APPEALS) CHANDIGARH DISALLOWING RS.79,33.232/- U/S.80P(2)(D) BEING THE AMOUNT OF INTEREST RECEIVED BY THE APPELLANT A COOPERATIVE SOCIETY FROM ANOTHER COOPERATIVE SOCIET Y I.E. THE PUNJAB STATE COOP MILK PRODUCERS FEDERATION LTD. ON ITS INVESTMENT IS BAD IN LAW AND IS AGAINST TH E JUDICIAL DECISIONS IN THIS BEHALF AND NEEDS TO BE SE T ASIDE. 4. THAT THE ORDER OF THE ASSESSING OFFICER AS UPHEL D BY THE COMMISSIONER OF INCOME TAX (APPEALS) CHANDIGARH DISALLOWING RS.1,87,71,572/- BEING THE AMOUNT OF COMMISSION PAID TO OTHER COOPERATIVE SOCIETIES CLAIMED U/S 37 MORE SO WHEN THE SAID COMMISSION HAS BEEN TREATED AS INCOME BY THE RECIPIENT COOPERA TIVE SOCIETY AND TAX HAS BEEN DEDUCTED AT SOURCE WHILE MAKING THE PAYMENT BY THE APPELLANT IS BAD IN LAW AND NEEDS TO BE SET ASIDE. 5. THAT THE APPELLANT CRAVES LEAVE TO ADD, ALTER AN D DELETE ANY OF THE GROUNDS OF APPEAL BEFORE THE FINAL HEARING OF THE APPEAL. 26. THE GROUNDS RAISED IN THIS APPEAL ARE SIMILAR TO THE GROUNDS RAISED IN ITA NO.902/CHD/2013, RELATING TO ASSESSMENT YEAR 2009-10 AND THE DECISION GIVEN IN I TA 29 NO.902/CHD/2013 SHALL APPLY TO THIS APPEAL ALSO WIT H EQUAL FORCE. 27. IN THE RESULT, BOTH THE APPEALS OF THE ASSESSE E ARE ALLOWED PARTLY AND PARTLY FOR STATISTICAL PURPO SES, AS INDICATED ABOVE. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 23 RD DAY OF MAY, 2016. SD/- SD/- (RANO JAIN) (H.L.KARWA) ACCOUNTANT MEMBER VICE PRESIDENT DATED : 23 RD MAY, 2016 *RATI* COPY TO: THE APPELLANT/THE RESPONDENT/THE CIT(A)/THE CIT/THE D R. ASSISTANT REGISTRAR, ITAT, CHANDIGARH