M/S. SAHNEY KIRKWOOD PVT LTD, MUMBAI V. THE ADDL CIT RG 10(2), MUMBAI

ITA 1235/MUM/2008

• Counselvise Citation: [2009] 115 COUNSELVISE.COM (IT) 1635 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 8 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-10-2009
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: E
• Next Hearing Date: 27-10-2009
• Assessment Year: 2004-2005
• Appeal Filed On: 19-02-2008
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: MRS VANDANA SAGAR
• Assessee Lawyers: RONAK G DOSHI
• Keywords: Business income

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL E BENCH: MUMBAI BEFORE SHRI PRAMOD KUMAR, ACCOUNTANT MEMBER AND SHRI V D RAO, JUDICIAL MEMBER ITA NO 1235/MUM/2008 (ASSESSMENT YEAR: 2004-05) SAHNEY KIRKWOOD PVT LTD, 27, KIROL VIDYAVIHAR (WEST), MUMBAI -400 086 PAN: AAACS 5304 A VS ADDL CIT- RANGE 10(2) , MUMBAI APPELLANT RESPONDENT APPELLANT BY: SHRI RONAK G DOSHI RESPONDENT BY: MRS VANDANA SAGAR ORDER PER PRAMOD KUMAR 1. BY WAY OF THIS APPEAL, DIRECTED AGAINST THE CIT (A)S ORDER DATED 19TH DECEMBER 2007, FOR THE ASSESSMENT YEAR 2004-05, THE FIRST GRIEVANCE RAISED BY THE ASSESSEE IS AS FOLLOWS:- GROUND I 1.1 ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE COMMISSIONER OF INCOME TAX (APPEALS) X MUMBAI [TH E CIT (A)] ERRED IN UPHOLDING THE ACTION OF THE ASSISTANT COMMISSIONER OF INCOME TAX, 10(2), MUMBAI (THE AO) IN ASSESSING INCOME FROM LETTING OUT OF PREMISES AT VIDYAVIHAR AS INCOME FROM HOUSE PROPERTY INSTEAD OF BUSINESS INCOME. 1.2 HE FAILED TO APPRECIATED AND OUGHT TO HAVE HELD THAT INCOME FROM COMMERCIAL EXPLOITATION OF IDLE ASSETS WHICH ADMITT EDLY WERE USED IN THE PAST AS BUSINESS ASSET OUGHT TO BE ASSESSED AS BUSINESS INCOME. 1.3 HE FAILED TO APPRECIATE AND OUGHT TO HAVE HELD THAT THE BUILDING WAS CONSTRUCTED ON LEASEHOLD LAND AND THAT INCOME FROM ITS LETTING HAD BEEN ASSESSED UNDER THE HEAD BUSINESS INCOME IN THE EARL IER ASSESSMENT YEAR. 1.4 THE APPELLANT, THEREFORE, PRAYS THAT THE AO BE DIRECTED TO ASSESSEE THE INCOME FROM LETTING OF SUCH PREMISES AS BUSINESS IN COME. 2. THE LEARNED REPRESENTATIVES FAIRLY AGREED THAT T HE ISSUE IS COVERED BY THE TRIBUNALS ORDER IN THE ASSESSEES OWN IN ITA NOS 5837 TO 5842/M/2006 FOR ITA 1235/M/2008 SAHNEY KIRKWOOD PVT LTD 2 ASSESSMENT YEARS 1998-99 TO 2003-04 VIDE ORDER DATE D 18.5.2007 AND PARA 16 OF THIS ORDER IS RELEVANT WHICH IS AS FOLLOWS:- 16. WE HAVE DULY CONSIDERED THE RIVAL CONTENTIONS AND GONE THROUGH THE RECORD CAREFULLY. THE EXPRESSION BUSINESS EMBRAC E IN ITS FOLD A BUNDLE OF ACTIVITIES CARRIED OUT SUBSTANTIALLY IN AN ORGANIZE D OR SYSTEMATIC WAY. THOUGH SOMETIME A SINGLE OR ISOLATED TRANSACTION CAN ALSO BE COVERED AS BUSINESS BUT THAT WOULD BE IN THE NATURE OF AN ADVENTURE IN TRA DE PROVIDED THE TRANSACTION BEAR CLEAR INDICIA OF THE TRADE. ACCORDING TO T HE ASSESSEE IT HAD STOPPED MANUFACTURING ACTIVITY IN 1990S. THERE IS NO EVIDE NCE ON THE RECORD WHICH CAN INDICATE THAT SUCH CLOSURE OF THE MANUFACTURING ACT IVITY WAS TEMPORARY. IF THE ASSESSEE HAD AN INTENTION TO RESTART THE MANUFACTUR ING ACTIVITY AND FOR A TRANSITORY PERIOD IT HAS LET OUT ITS COMMERCIAL ASS ET ONLY THEN ONE CAN UNDERSTAND THAT IT IS EXPLOITATION OF THE BUSINESS ASSET. APART FROM THIS ASPECT IT IS SIMPLE LET OUT OF A BUILDING, NOT ANY OTHER C OMMERCIAL EQUIPMENT, SUCH AS PLANT AND MACHINERY ETC. M/S. MIWL WAS NOT PAYING RENT FOR CARRYING OUT THE MANUFACTURING ACTIVITY IN THE PREMISES RATHER, IT H AS FURTHER LET OUT THE PROPERTY ON AN EXORBITANT RENT. THUS THE FACTS DO NOT SUGGEST THAT IT IS A SIMPLE COMMERCIAL EXPLOITATION OF THE COMMERCIAL AS SET. THE JUDGMENT RELIED UPON BY THE ASSESSEE IN THE CASE OF CIT VS. AJMERA INDUSTRIES IS CONCERNED, THE FACTS IN THAT CASE WERE TO THE EFFECT THAT ASSE SSEE HAD CONSTRUCTED SHEDS AND INSTALLED THEREIN HIGH TENSION WIRES AND TRANSF ORMERS. THE MANUFACTURING BUSINESS COULD NOT BE STARTED FOR WANT OF CERTAIN M ACHINERY FOR WHICH THE ASSESSEE HAD OBTAINED IMPORT LICENCE. IN THOSE CON DITIONS ASSESSEE HAD LET OUT THE FACTORY SHED AND CLAIMED THE RENTAL INCOME AS ASSESSABLE UNDER THE HEAD INCOME FROM BUSINESS. THE HONBLE HIGH COURT NEGATED THIS CLAIM OF THE ASSESSEE BUT HELD THAT INCOME IS ASSESSABLE UNDER S ECTION 56(2)(III) AS INCOME FROM OTHER SOURCES. IN THAT CASE THE ASSESSEE DEMO NSTRATED ITS INTENTION TO START THE BUSINESS BECAUSE IT HAD OBTAINED THE LICE NCE TO IMPORT THE MACHINERY, SOMEHOW MACHINERY COULD NOT BE IMPORTED DURING THE RELEVANT PERIOD AND, THEREFORE, THE FACTORY SHED WAS LET OUT. THE NEX T DECISION RELIED UPON BY THE ASSESSEE OF HONBLE SUPREME COURT IN THE CASE OF CO MMISSIONER OF EXCESS PROFITS TAX VS. SHRI LAKSHMI SILK MILLS LTD. IN THAT CASE ALSO THE ASSESSEE WAS MANUFACTURING SILK CLOTH AND ALSO INSTALLED A PLANT FOR DYEING SILK YARN AS A PART OF ITS BUSINESS. BECAUSE OF THE WAR IN 1943 IT COU LD NOT OBTAIN THE SILK YARN AND, THEREFORE, ASSESSEE RENTED OUT THE SILK DYEING PLANT. IN THOSE FACTS THE HONBLE SUPREME COURT HAS HELD THAT ASSESSEES BUSI NESS OF MANUFACTURING SILK CLOTH WAS CONTINUING. ONLY A PART OF THE BUSINESS NAMELY THAT OF DYEING SILK YARN HAD TO BE TEMPORARILY STOPPED. INCOME FROM SU CH EXPLOITATION OF THE COMMERCIAL ASSET HAS BEEN HELD TO BE ASSESSED AS IN COME FROM BUSINESS. NO SUCH FACTS ARE AVAILABLE BEFORE US. THEREFORE, WE DO NOT SEE ANY GOOD REASON TO INTERFERE IN THE FINDING OF THE REVENUE AUTHORIT IES BELOW. 3. WE SEE NO REASON TO TAKE ANY OTHER VIEW OF THE M ATTER THAN THE VIEW SO TAKEN BY OUR ESTEEMED COLLEAGUES. ITA 1235/M/2008 SAHNEY KIRKWOOD PVT LTD 3 4. ACCORDINGLY GROUND 1 IS DISMISSED. 5. GROUND NO.2 IS NOT PRESSED AND SAME IS DISMISSED AS NOT PRESSED. 6. GROUNDS 3 TO 6 ARE AS FOLLOWS:- WITHOUT PREJUDICE TO ABOVE GROUND III 3.1 ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT (A) ERRED IN UPHOLDING THE ACTION OF THE AO IN HOLDING THAT T HE AGREEMENT BETWEEN THE APPELLANT AND MIWL A SHAM TRANSACTION. 3.2 HE FAILED TO CONSIDER THAT THE REAL TEST OF A S HAM TRANSACTION IS THAT THE LICENSOR, WHILST OSTENSIBLY GIVING THE PROPERTY ON LICENSE, CONTINUES TO CONTROL THE MANNER IN WHICH THE PROPERTY IS GIVEN TO THIRD PARTIES AND CONTROLS, OR RECEIVES, DIRECTLY OR INDIRECTLY, THE INCOME RECEIV ED BY THE LICENSEE FROM THIRD PARTIES. 3.3 THE APPELLANT THEREFORE PRAYS THAT IT CAN BE HE LD THAT THE ARRANGEMENT WITH MIWL IS GENUINE AND NOT SHAM TRANSACTION. WITHOUT PREJUDICE TO ABOVE. GROUND IV 4.1 ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT (A) ERRED IN UPHOLDING THE ACTION OF THE AO IN ASSESSING THE INCOME RECEIVED BY MIWL ON LEASED PREMISES AS INCOME OF THE APPELLANT. 4.2 HE FAILED TO APPRECIATE AND OUGHT TO HAVE HELD THAT THE APPELLANT AND MIWL ARE DISTINCT ENTITIES ASSESSABLE TO TAX. THE INCOME EARNED BY MIWL BY LETTING OUT PREMISES, TO THIRD PARTY, LEASED OUT BY THE APPELLANT TO MIWL WAS ASSESSED IN THE HANDS OF MIWL AND THUS IF THE SAME WAS TAXED IN THE HANDS OF THE APPELLANT, IT WOULD BE A CASE OF DOUBLE TAXATIO N. 4.3 THE APPELLANT PRAYS THAT THE A.O. BE DIRECTED N OT TO TAX THE INCOME RECEIVED BY MIWL IN THE HANDS OF THE APPELLANT. WITHOUT PREJUDICE TO ABOVE. GROUND V 5.1 ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT (A) ERRED IN UPHOLDING THE ACTION OF THE AO IN THE COMPOSITE RENT CHARGED BY MIWL FROM THIRD PARTIES AS THE BASIS FOR COMPUTING THE ANNUAL VALUE OF THE PROPERTY UNDER SECTION 23(1) OF THE ACT. ITA 1235/M/2008 SAHNEY KIRKWOOD PVT LTD 4 5.2 THE APPELLANT PRAYS THAT THE AO BE DIRECTED TO COMPARE THE STANDARD RENT, MUNICIPAL VALUE AND THE ACTUAL RENT RECEIVED BY THE APPELLANT AND, THEREAFTER, DETERMINE THE ANNUAL VALUE U/S 23(1) OF THE ACT. WITHOUT PREJUDICE TO ABOVE. GROUND VI 6.1 ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT (A) ERRED IN UPHOLDING THE ACTION OF THE AO IN ADDING THE ENT IRE CREDIT IN PROFIT AND LOSS ACCOUNT OF MIWL IS THE RENTAL INCOME OF THE APPELLA NT. 6.2 THE APPELLANT PRAYS THAT THE AO BE DIRECTED TO COMPARE THE STANDARD RENT, MUNICIPAL VALUE AND THE ACTUAL RENT RECEIVED BY THE APPELLANT AND, THEREAFTER, DETERMINE THE ANNUAL VALUE U/S 23(1) OF THE ACT. 7. THE LEARNED REPRESENTATIVES FAIRLY AGREED THAT T HE ISSUE IS COVERED AGAINST THE ASSESSEE BY THE TRIBUNALS ORDER IN THE ASSESSEES OWN FOR ASSESSMENT YEARS 1998-99 TO 2003-04 VIDE ORDER DATED 18.5.2007. HOWEVER, TH E LEARNED COUNSEL FOR THE ASSESSEE VEHEMENTLY CONTENDS THAT THE TRIBUNAL HAS FELL IN ERROR IN PROCEEDINGS ON THE BASIS THAT THERE WAS SOME COMMON DIRECTORS IN T HE ASSESSEE COMPANY AND THE SISTER CONCERN TO WHICH THE PREMISES WAS GIVEN ON R ENT. HE INVITES OUR ATTENTION TO THE MISCELLANEOUS APPLICATION FILED BY THE ASSESSEE POINTING OUT DEFECTS IN THE TRIBUNAL ORDER. EVEN AS HE FAIRLY CONCEDES THAT TH E MISCELLANEOUS APPLICATION IS REJECTED BY THE TRIBUNAL, THE LEARNED COUNSEL PAINS TAKINGLY TOOK US THROUGH ORDERS OF THE TRIBUNAL AND MADE THE EFFORTS TO DEMONSTRATE, W HAT HE PERCEIVES AS, PATENT INCONSISTENCIES. LEARNED DEPARTMENTAL REPRESENTATI VE SUBMITS THAT THE ISSUE IS DIRECTLY COVERED BY THE TRIBUNAL DECISION AGAINST T HE ASSESSEE. THERE ARE NO GOOD REASONS TO DEVIATE FROM THE STAND TAKEN BY THE TRIB UNAL IN THE EARLIER YEARS. IT IS ALSO SUBMITTED THAT THE ARGUMENTS THAT ASSESSEE HAD ADVANCED AT THE TIME OF ORIGINAL HEARING WERE ADVANCED BEFORE THE TRIBUNAL, IN THE C OURSE OF ARGUMENTS OF MISCELLANEOUS APPLICATION FILED BY THE ASSESSEE, BU T THE TRIBUNAL HAS REJECTED THE SAME AND HELD THAT IT WAS AN EFFORT TO SEEK REVIEW OF THE ORDER. WE ARE THUS URGED TO CONFIRM THE ORDER OF THE AUTHORITIES BELOW AND D ECLINE TO INTERFERE IN THE MATTER. 8. WE SEE SUBSTANCE IN THE PLEA OF THE LEARNED DEPA RTMENTAL REPRESENTATIVE. WE HAVE TAKEN THE NOTE OF THE FACT THAT THE TRIBUNA L HAS ANALYSE ALL THE RELEVANT FACTS AND COME TO A CONCLUSION THAT THE ARRANGEMENT ENTER ED INTO BY THE ASSESSEE WITH THE ITA 1235/M/2008 SAHNEY KIRKWOOD PVT LTD 5 SISTER CONCERN WAS A SHAM ARRANGEMENT AND AUTHORITI ES BELOW WERE QUITE JUSTIFIED IN HOLDING SO. THE RELEVANT OBSERVATIONS OF THE TRIBU NAL, WHICH WE MAY REFER TO FOR THE READY REFERENCE IS AS FOLLOWS:- 17. THE NEXT FOUR ISSUES AGITATED IN GROUND NO.3,4 ,5 & 6 ARE INTER CONNECTED WITH EACH OTHER. IN THESE GROUNDS OF APP EAL THE BASIC ISSUE RELATES TO THE DETERMINATION OF RATABLE VALUE OF THE PREMIS ES. THE ASSESSEE HAS PLEADED THAT LD. A.O HAS ERRED IN HOLDING THE LEAVE AND LICENCE AGREEMENT BETWEEN THE ASSESSEE AND M/S. MIWL AS SHAM TRANSACT ION. AFTER DOING SO THE LD. A.O HAS ERRED IN ASSESSING THE INCOME RECEIVED BY M/S. MIWL ON LEASED PREMISES AS INCOME OF THE ASSESSEE. IN THE OTHER CONNECTED ISSUES THE ASSESSEE HAS PLEADED THAT THE A.O HAS ERRED IN CONS IDERING THE COMPOSITE RENT CHARGEABLE BY M/S. MIWL FROM THIRD PARTIES AS THE BASIS FOR COMPUTING THE ANNUAL LETTING VALUE OF THE PROPERTY. ACCORDING TO THE ASSESSEE IF IT IS CONSTRUED THAT THE AGREEMENT BETWEEN THE ASSESSEE A ND MIWL IS SHAM TRANSACTION THE RATABLE VALUE OF THE PREMISES IS T O BE DETERMINED KEEPING IN VIEW THE MUNICIPAL VALUE AND THE ACTUAL RENT RECEIV ED BY THE ASSESSEE AND NOT BY MIWL. 18. THE LD. COUNSEL FOR THE ASSESSEE WHILE IMPUGNIN G THE ORDERS OF REVENUE AUTHORITIES BELOW CONTENDED THAT ON 29/5/95 THE ASS ESSEE HAD ENTERED A LEAVE AND LICENCE AGREEMENT WITH M/S. MIWL. THIS A GREEMENT IS IN CONFIRMATIVE WITH ALL LAWS APPLICABLE IN THE TRANSA CTION. THE A.O FAILED TO POINT OUT ANY INFIRMITY LEGAL OR ILLEGAL ATTRIBUTABLE TO THIS AGREEMENT. HE SIMPLY DISBELIEVED THE AGREEMENT ON THE GROUND THAT IT IS GOING TO RENDER TAX BENEFIT TO THE ASSESSEE. THE LEGAL DOCUMENT CANNOT BE IGNO RED SIMPLY FOR THE REASON THAT IT WILL GIVE SOME ECONOMIC DETERMENT OR PREJUD ICE TO THE INTEREST OF THE REVENUE. IF LAW PERMITS THE ASSESSEE TO LET OUT IT S PREMISES AND ASSESSEE IN ACCORDANCE WITH THE LAW LET OUT ITS PREMISES THEN S UCH TRANSACTION COULD NOT BE DOUBTED MERELY FOR THE REASON THAT IS BENEFICIAL TO THE ASSESSEE AND AGAINST THE INTEREST OF THE REVENUE. AFTER THIS AGREEMENT THE ASSESSEE WAS HAVING A SECURITY THAT IT WILL RECEIVE LICENCE FEES AMOUNTIN G TO RS.47,000/- PER MONTH APART FROM A DEPOSIT OF RS.29,50,000/-. THE RISK W HETHER SOMEBODY WOULD OCCUPY THE PREMISES OR NOT, FUTURE LITIGATION ETC. HAVE BEEN AVOIDED BY THE ASSESSEE BY ENTERING INTO SUCH AN AGREEMENT. FOR B UTTRESSING HIS CONTENTION THE LD. COUNSEL FOR THE ASSESSEE RELIED UPON THE DE CISION OF HONBLE SUPREME COURT IN THE CASE OF CWT BS. ARVIND NAROTTAM, 173 I TR 479, WHEREIN IT HAS BEEN HELD THAT IF TRUE EFFECT ON THE CONSTRUCTION O F THE DEED IS CLEAR THEN ALLEGATION OF TAX AVOIDANCE WOULD NOT BE A RELEVANT CONSIDERATION FOR GIVING THE TRUE EFFECT TO THE DEED. SIMILARLY THE ASSESSEE RE LIED UPON THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF UNION OF INDIA VS. AZADI BACHHAO ANDOLAN, 263 ITR 703. THE LD. COUNSEL FOR THE ASSE SSEE ALTERNATIVELY SUBMITTED THAT A.O HAS ERRED IN DETERMINING THE AN NUAL LETTING VALUE OF THE PROPERTY EQUIVALENT TO THE GROSS RENT RECEIVED BY T HE SISTER CONCERN. HE CONTENDED THAT ANNUAL LETTING VALUE OF THE PROPERTY IS TO BE TAKEN EQUIVALENT TO THE RATEABLE VALUE DETERMINED BY BMC. IN SUPPORT OF HIS CONTENTION HE RELIED ITA 1235/M/2008 SAHNEY KIRKWOOD PVT LTD 6 UPON CBDT CIRCULAR NO.204 DATED 24/7/76. HE FURTH ER CONTENDED THAT RENT PAID BY THE SUB-TENANT TO THE SISTER CONCERN WOULD NOT BE A RELEVANT FACTOR FOR DETERMINING THE ANNUAL LETTING VALUE OF THE ASSESSE E. IN SUPPORT OF HIS CONTENTION HE RELIED UPON THE DECISION OF HONBLE C ALCUTTA HIGH COURT IN THE CASE OF CIT VS. HEMRAJ MAHAVIR PRASAD, 279 ITR 522. HE FURTHER RELIED UPON THE DECISION OF ITAT IN THE CASE OF DCIT VS. SARDAR EXHIBITOR (2005) 1 SOT 918 (DEL). HE ALSO RELIED UPON THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF M.V. SONAVALA VS. CIT, 177 ITR 256. ON TH E OTHER HAND, LD. D.R RELIED UPON THE ORDERS OF THE REVENUE AUTHORITIES BELOW. 19. THE ARGUMENTS OF THE ASSESSEE THAT IT HAS EX PLOITED ITS ASSETS BY LETTING OUT THE PREMISES AND ITS TRANSACTION CARRIE D OUT BY EXECUTION OF A LEGAL DEED SHOULD NOT BE DOUBTED, PRIMA FACIE APPEARS TO BE SIMPLE AND ACCEPTABLE. BUT IF WE LOOK INTO SURROUNDING CIRCUMSTANCES THEN THINGS ARE NOT AS SIMPLE AS PUT UP BY THE ASSESSEE TO BELIEVE. THE LD. A.O AT PAGE NO.16 OF THE ASSESSMENT ORDER EXTRACTED THE RENOVATION WORK CARR IED OUT BY THE LESSEE I.E. SISTER CONCERN, THE DEPOSIT RECEIVED BY THE LESSEE FROM THE SUB-TENANT AND THE RENT PAID BY THE SUB-TENANT TO THE LESSEE. ALL TH ESE TRANSACTIONS INDICATE THAT M/S. MIWL IS A SISTER CONCERN. SOME OF THE DIREC TORS ARE COMMON WITH THE ASSESSEE. ACCORDING TO THE ASSESSEE LESSEE INCURRE D HUGE AMOUNT ON RENOVATION BUT FROM THIS FINDING OF THE A.O IT REVE ALED THAT LESSEE HAS TAKEN HUGE AMOUNT OF DEPOSITS FROM THE SUB-TENANTS. IT F ALSIFY THE CLAIM OF ASSESSEE THAT IT WAS NOT HAVING FUNDS TO RENOVATE THE PREMI SES SO THAT IT CAN FETCH MORE RENT AND ASSESSEE CAN AVOID ALL SORT OF LITIGA TION WITH THE ULTIMATE TENANTS. IF THE LESSEE CAN INVITE HUGE DEPOSIT IN LIEU OF TENANCY THEN IT INDICATE THAT PREMISES HAD POTENTIALITY. IT IS NOT SIMPLE B USINESS ACUMEN OF M/S. MIWL. IF THESE FACTS ARE SEEN CONVERSELY THEN IT S IMPLY SUGGEST THAT FOR A MAKE BELIEF ARRANGEMENT ASSESSEE HAS LET OUT ITS PR EMISES ON A NOMINAL RENT TO THE SISTER CONCERN AND THE SISTER CONCERN WITHOU T CARRYING OUT ANY SUBSTANTIAL ACTIVITY HAD EARNED HANDSOME AMOUNT OF RENT. THE DOCUMENTATION OF THE TRANSACTION MAY BE WITHIN THE PARAMETER OF THE LEGAL REQUIREMENT BUT THE TRUE IMPORT OF THE LEASE AGRE EMENT ONLY SUGGEST THAT THE ASSESSEE ADOPTED A COURSE TO AVOID THE TAX. THE N EXT PLANK OF THE ARGUMENT IS THAT THE SISTER CONCERN WAS RUNNING A BUSINESS C ENTRE AND, THEREFORE, RECEIVED HIGHER RENT. WE DO NOT FIND FORCE IN THIS CONTENTION OF THE LD. COUNSEL FOR THE ASSESSEE BECAUSE FOR RUNNING A BUSINESS C ENTRE ONE HAS TO CARRY OUT THE ACTIVITY IN AN ORGANIZED WAY WHEREBY AN EARMAR KED PREMISES IS BEING NOT PROVIDED TO ANY CONCERN FOR A LONG DURATION. THE C ONCERN WHICH IS RUNNING A BUSINESS CENTRE USED TO DEVELOP INFRASTRUCTURE FACI LITIES FOR THE PARTIES WHO COME THERE AND OPERATE THEIR ACTIVITIES. IN THAT S ITUATION NO ONE CAN APPROACH THE CONCERN AND ASK FOR A PARTICULAR AREA ALONG WIT H OTHER FACILITIES. THE TENANCY WOULD NOT BE CREATED IN FAVOUR OF THE PARTY WHO APPROACHED THE CONCERN RUNNING THE BUSINESS CENTRE. THEY HAV E A RIGHT TO USE THE PREMISES FOR A SHORT PERIOD. HERE IS NOT THE CASE LIKE THAT. THE SISTER CONCERN ALLEGEDLY LET OUT THE PREMISES TO ONE OR TWO CONCER NS FOR A LONG DURATION AND IN A WAY CREATED THE TENANCY RIGHT TO THE SUB-TENAN T. THERE ARE NO MAJOR FACILITIES PROVIDED BY THE SISTER CONCERN RATHER, I T HAD RECEIVED HUGE DEPOSITS FROM THE SUB-TENANT. THE SISTER CONCERN SIMPLY SUB -LET THE PREMISES. THE ITA 1235/M/2008 SAHNEY KIRKWOOD PVT LTD 7 ALLEGED STORY THAT SISTER CONCERN WAS RUNNING A BUS INESS CENTRE COULD NOT BE SUBSTANTIATED BY THE ASSESSEE. THUS AFTER GOING TH ROUGH THE FINDING OF LD. REVENUE AUTHORITIES BELOW IN DOUBTING THE TRANSACTI ON AS SHAM WE DO NOT FIND ANY ERROR IN THEIR FINDING. 9. WE SEE NO REASONS TO TAKE ANY OTHER VIEW OF THE MATTER THAN THE VIEW TAKEN BY OUR ESTEEM COLLEAGUES. RESPECTFULLY FOLLOWING T HE SAME WE URGED THE GRIEVANCE OF THE ASSESSEE AND UPHOLD THE FINDINGS OF THE AUTHORI TIES BELOW THAT PREMISES IN QUESTION WAS A SHAM ARRANGEMENT WITH THE AGREEMENT BETWEEN THE APPELLANT AND M/S. MIWL WAS A SHAM AGREEMENT AND HAS BEEN RIGHTLY DISREGARDED. 10. GROUNDS 3 TO 6 ARE THUS DISMISSED. 11. GROUND 7 READS AS FOLLOWS:- WITHOUT PREJUDICE TO ABOVE. GROUND VII 7.1 ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT (A) ERRED IN NOT DIRECTING THE AO TO GIVE APPROPRIATE CREDIT TO TAXES BY MIWL IN RESPECT OF RENTAL INCOME EARNED BY MIWL. 7.2 THE CIT (A) FAILED TO APPRECIATE THAT THE NECES SARY THAT THE NECESSARY CONSEQUENCE OF TREATING THE TRANSACTION AS SHAM A ND ASSESSING THE APPELLANT ON INCOME EARNED BY MIWL IS TO GIVE DUE CREDIT TO T AXES PAID BY MIWL IN THE HANDS OF THE APPELLANT. 12. THE LEARNED COUNSEL FOR THE ASSESSEE FAIRLY SUB MITS THAT THE CIT (A) HAD NO OCCASION TO DEAL WITH THE ABOVE GRIEVANCE AND, THER EFORE, PRAYS THAT THE MATTER BE RESTORED TO THE FILE OF THE CIT (A) WITH THE ADJUDI CATION ON THIS ISSUE. THE LEARNED DEPARTMENTAL REPRESENTATIVE DOES NOT OBJECT TO THE PRAYER. 13. IN VIEW OF THE ABOVE WE HEREBY REMIT THE MATTER SO FAR AS QUESTION OF GRANTING CREDIT TO THE TAXES MIWL IN RESPECT OF THE RENTAL I NCOME IS CONCERNED TO THE FILE OF THE CIT (A) WHILE DECIDING THE MATTER AFTER GIVING DUE AND FAIR OPPORTUNITY TO THE ASSESSEE IN ACCORDANCE WITH THE LAW BY WAY OF A SPE AKING ORDER, WE DIRECT SO. ITA 1235/M/2008 SAHNEY KIRKWOOD PVT LTD 8 14. GROUND NO.7 IS THUS ALLOWED FOR STATISTICAL PUR POSES. 15. IN THE RESULT, APPEAL IS PARTLY ALLOWED IN THE TERMS INDICATED ABOVE. PRONOUNCED IN THE OPEN COURT TODAY ON THE 29TH OCT OBER 2009. SD/- (V D RAO) JUDICIAL MEMBER SD/- (PRAMOD KUMAR) ACCOUNTANT MEMBER MUMBAI, DATE: 29TH OCTOBER 2009 COPY TO:- 1) THE APPELLANT. 2) THE RESPONDENT. 3) THE CIT (A)-X, MUMBAI. 4) THE CIT, MC- X, MUMBAI. 5) THE D.R. E BENCH, ITAT, MUMBAI. BY ORDER / / TRUE COPY / / ASSTT. REGISTRAR CHAVAN* I.T.A.T., MUMBAI ITA 1235/M/2008 SAHNEY KIRKWOOD PVT LTD 9 SR.N. EPISODE OF AN ORDER DATE INITIALS CONCERNED 1 DRAFT DICTATED ON 27.10.09 SR.PS 2 DRAFT PLACED BEFORE AUTHOR 28.10.09 SR.PS 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER JM/AM 5 APPROVED DRAFT COMES TO THE SR.PS SR.PS 6 KEPT FOR PRONOUNCEMENT ON SR.PS 7 FILE SENT TO THE BENCH CLERK SR.PS 8 DATE ON WHICH FILE GOES TO THE HEAD CLERK 9 DATE OF DISPATCH OF ORDER