Dynacon Equipments Pvt. Ltd., CHENNAI V. ACIT Corporate Circle 1(4), CHENNAI

ITA 2172/CHNY/2018

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 5921 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 4 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-11-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Assessment Year: 2006-2007
• Appeal Filed On: 20-07-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SRINIVASA RAO VANA
• Assessee Lawyers: D ANAND
• Keywords: Business income; Depreciation; Business expenditure; Opportunity of being heard; Cost of acquisition; Tangible material; Difference of opinion; Change of opinion; Capital Gains
• Section: 143(3); 143(1); 147; 27; 148; 28

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH: CHENNAI , $ % .. ' , ) * BEFORE SHRI RAMIT KOCHAR , ACCOUNTANT MEMBER AND SHRI DUVVURU R.L.REDDY , JUDICIAL MEMBER ITA NOS.2172 & 2263/CHNY/2018 )+ + /ASSESSMENT YEARS: 2006-07 & 2009-10 M/S.DYNACON EQUIPMENTS PVT. LTD., 188, POONAMALLEE HIGH ROAD, GROUND FLOOR, MIDDLE BLOCK, KILPAUK, CHENNAI-600 010. V . THE ASST. COMMISSIONER OF INCOME TAX, CORPORATE CIRCLE-1(4), CHENNAI-600 034. [PAN: AABCD 2124 N ] ( . /APPELLANT) ( /0. /RESPONDENT) . 1 / APPELLANT BY : MR.D.ANAND, ADV. /0. 1 /RESPONDENT BY : MR.SRINIVASA RAO VANA, JCIT 1 /DATE OF HEARING : 21.11.2019 1 /DATE OF PRONOUNCEMENT : 21.11.2019 / O R D E R PER RAMIT KOCHAR, ACCOUNTANT MEMBER : THESE TWO APPEALS FILED BY ASSESSEE ARE DIRECTED A GAINST COMMON APPELLATE ORDER DATED 22.05.2018 PASSED BY LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-1, CHENNAI (HEREINAFTER CALLED THE CIT(A)), IN ITA NO.62 & 119/CIT(A)-1/2009-10 & 2011-12 FOR ASSESSME NT YEARS (AYS) 2006-07 & 2009-10 RESPECTIVELY , THE APPELLATE PROC EEDINGS BEFORE LEARNED CIT(A) HAD ARISEN FROM SEPARATE ASSESSMENT ORDERS DATED 11.12.2009 & 23.11.2011 RESPECTIVELY PASSED BY LEAR NED ASSESSING OFFICER ITA NOS.2172 & 2263/CHNY/2018 :- 2 -: (HEREINAFTER CALLED THE AO) U/S.143(3) READ WITH SECTION 147 OF THE INCOME-TAX ACT, 1961 (HEREINAFTER CALLED THE ACT) FOR AY: 2006-07 AND UNDER SECTION 143(3) OF THE 1961 ACT FOR AY: 2009- 10 , RESPECTIVELY . COMMON ISSUES ARE INVOLVED IN BOTH THE APPEALS FILE D BY ASSESSEE FOR THESE TWO AYS AND HENCE BOTH THESE APPEALS ARE HEA RD TOGETHER AND DISPOSED OFF BY THIS COMMON ORDER. 2. THE GROUNDS OF APPEAL RAISED BY ASSESSEE IN MEM O OF APPEAL FILED WITH INCOME-TAX APPELLATE TRIBUNAL, CHENNAI (HEREIN AFTER CALLED THE TRIBUNAL) FOR AY: 2006-07 AND 2009-10 RESPECTIVELY , READS AS UNDER:- GROUNDS OF APPEAL FOR THE AY: 2006-07 1. THE ORDER OF THE LEARNED COMMISSIONER OF INCO ME TAX (APPEALS)-1, CHENNAI, IS WRONG, ILLEGAL AND IS OPPOSED TO LAW AND FACTS OF THE CASE . 2. THE LEARNED ASSESSING OFFICER ERRED IN RE-OPEN ING THE ASSESSMENT WITHOUT ANY ADDITIONAL TANGIBLE MATERIAL TO SHOW THAT INCOME HA S ESCAPED ASSESSMENT. THE NOTICE UNDER SECTION 148 DATED 9.01.2009 WAS BASED ON INCOME RET URNED BY THE APPELLANT VIDE HIS ROI. 3. THE LEARNED ASSESSING OFFICER OUGHT TO HAVE SEE N THAT THE ASSESSEE HAS FURNISHED FULL AND TRUE PARTICULARS OF ITS INCOME AT THE TIME OF O RIGINAL ASSESSMENT WITH REFERENCE TO INCOME ALLEGED TO HAVE ESCAPED ASSESSMENT AND THAT THE ASSESSMENT CANNOT BE VALIDLY REOPENED UNDER SECTION 147 OF THE ACT, EVEN WITHIN FOUR YEAR, MERELY ON THE BASIS OF CHANGE OF OPINION. 4. THE LEARNED CIT(A) ERRED IN LAW IN CONFIRMING TH E INCOME DERIVED BY THE APPELLANT FROM LETTING OUT ITS BUILDING AND SALES INCOME AS INCOME FROM OTHER SOURCES. 5. THE LEARNED CIT(A) ERRED IN LAW IN TAXING THE IN COME ON ACCOUNT OF SALE AS INVENTORY AS INCOME FROM OTHER SOURCES AND CONSEQUENTLY DISALLOW ED THE APPELLANT CLAIM OF EXPENDITURE. 6. THE LEARNED CIT(A) ERRED IN LAW IN DISALLOWING T HE APPELLANTS CLAIM FOR DEDUCTION UNDER 24(1)(B) TOWARDS INTEREST PAID IN RESPECT OF LOAN TAK EN FOR ACQUISITION OF THE PROPERTY. 7. THE LEARNED CIT(A) ERRED IN RESTRICTING THE CLAIM OF EXPENDITURE TOWARDS ON ACCOUNT OF PROPERTY TAX PAYMENT TO RS.8,09,545/- AS AGAINST TH E CLAIM OF RS.12,94,380/-. FOR THESE AND OTHER GROUNDS THAT MAY BE RENDERED AT THE TIME OF HEARING IT IS MOST HUMBLY PRAYED THAT THE HON'BLE TRIBUNAL MAY BE PLEASED TO ALLOW THE APPELLANTS APPEAL AND THUS RENDER JUSTICE. GROUNDS OF APPEAL FOR THE AY: 2009-10 1. THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-1, CHENNAI, IS WRONG, ILLEGAL AND IS OPPOSED TO LAW AND FACTS OF THE CASE . ITA NOS.2172 & 2263/CHNY/2018 :- 3 -: 2. THE LEARNED ASSESSING OFFICER ERRED IN RE-OPENING THE ASSESSMENT WITHOUT ANY ADDITIONAL TANGIBLE MATERIAL TO SHOW THAT INCO ME HAS ESCAPED ASSESSMENT. THE NOTICE UNDER SECTION 148 DATED 9.01.2009 WAS BASED ON INC OME RETURNED BY THE APPELLANT VIDE HIS ROI. 3. THE LEARNED ASSESSING OFFICER OUGHT TO HAVE SEEN THAT THE ASSESSEE HAS FURNISHED FULL AND TRUE PARTICULARS OF ITS INCOME AT THE TIME OF O RIGINAL ASSESSMENT WITH REFERENCE TO INCOME ALLEGED TO HAVE ESCAPED ASSESSMENT AND THAT THE ASSESSMENT CANNOT BE VALIDLY REOPENED UNDER SECTION 147 OF THE ACT, EVEN WITHIN FOUR YEAR, MERELY ON THE BASIS OF CHANGE OF OPINION. 4. THE LEARNED CIT(A) ERRED IN LAW IN CONFIRMING TH E INCOME DERIVED BY THE APPELLANT FROM LETTING OUT ITS BUILDING AS INCOME FROM OTHER SOURCE S AS AGAINST THE CLAIM OF THE APPELLANT UNDER THE HEAD INCOME FROM HOUSE PROPERTY. 5. THE LEARNED CIT(A) ERRED IN LAW IN DISALLOWING T HE APPELLANTS CLAIM FOR DEDUCTION UNDER 24(1)(B) TOWARDS INTEREST PAID IN RESPECT OF LOAN TAK EN FOR ACQUISITION OF THE PROPERTY. FOR THESE AND OTHER GROUNDS THAT MAY BE RENDERED A T THE TIME OF HEARING IT IS MOST HUMBLY PRAYED THAT THE HON'BLE TRIBUNAL MAY BE PLEA SED TO ALLOW THE APPELLANTS APPEAL AND THUS RENDER JUSTICE. 3. FIRST WE SHALL TAKE UP APPEAL FILED BY ASSESSEE WITH TRIBUNAL FOR AY: 2006-07. AT THE OUTSET, LEARNED COUNSEL FOR THE ASS ESSEE SUBMITTED THAT ASSESSEE DOES NOT WANT TO PURSUE GROUND NOS.2 & 3 C HALLENGING RE- OPENING OF CONCLUDED ASSESSMENT BY AO U/S.147 OF TH E 1961 ACT ON LEGAL GROUNDS AND PRAYERS WERE MADE BY LEARNED COUNSEL FO R ASSESSEE TO DISMISS GROUNDS NUMBER 2 AND 3 OF ITS APPEAL FOR AY : 2006-07 , AS NOT BEEN PRESSED. THE LEARNED COUNSEL FOR ASSESSEE MAD E ENDORSEMENT IN THE APPEAL FILE THAT ASSESSEE DID NOT WANT TO PERSUE LE GAL CHALLENGE TO REOPENING OF THE CONCLUDED ASSESSMENT U/S 147 OF TH E 1961 ACT AND PRAYERS ARE MADE BY LEARNED COUNSEL FOR THE ASSESSE E BEFORE THE BENCH TO THAT EFFECT THAT THE SAID GROUND NUMBER 2 AND 3 MAY BE DISMISSED AS NOT BEING PRESSED. THE LD.DR DID NOT OPPOSE DISMISSAL OF GROUND NOS.2 & 3 RAISED BY ASSESSEE IN MEMO OF APPEAL FILED WITH TRI BUNAL. AFTER HEARING CONTENTIONS OF BOTH THE PARTIES AND PERUSING THE M ATERIAL ON RECORD, WE DISMISS GROUND NOS.2 & 3 RAISED BY ASSESSEE IN MEMO OF APPEAL FILED WITH ITA NOS.2172 & 2263/CHNY/2018 :- 4 -: TRIBUNAL FOR AY: 2006-07, AS NOT BEING PRESSED. WHI LE DISMISSING GROUND NO. 2 AND 3, IT IS OBSERVED THAT RE-OPENING OF THE CONCLUDED ASSESSMENT BY AO U/S 147 OF THE 1961 ACT WAS DONE WITHIN 4 YEA RS FROM THE END OF THE ASSESSMENT YEAR AND ORIGINALLY NO ASSESSMENT WA S FRAMED BY REVENUE U/S.143(3) OF THE ACT AND RETURN OF INCOME WAS ORIGINALLY PROCESSED U/S.143(1) OF THE 1961 ACT. THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF ACIT V. RAJESH JHAVERI STOCK BROKERS PRIVATE LIMITED REPORTED IN (2007) 291 ITR 500(SC) GETS AP PLICABLE AS NO OPINION WAS INITIALLY FORMED BY THE AO AS RETURN OF INCOME WAS ORIGINALLY PROCESSED U/S 143(1) OF THE 1961 ACT AND NO SCRUTIN Y ASSESSMENT WAS FRAMED BY THE AO U/S 143(3) OF THE 1961 ACT. IT IS OBSERVED THAT REOPENING OF THE CONCLUDED ASSESSMENT WAS DONE BY T HE AO BY INVOKING PROVISIONS OF SECTION 147 OF THE 1961 ACT WITHIN FO UR YEARS FROM END OF ASSESSMENT YEAR AND HENCE PROVISO TO SECTION 147 OF THE 1961 ACT IS NOT APPLICABLE. WE ORDER ACCORDINGLY. 4. GROUND NO.1 RAISED BY ASSESSEE IN MEMO OF APPEAL FILED WITH TRIBUNAL FOR AY: 2006-07 IS GENERAL IN NATURE AND IS HEREBY DISMISSED.WE ORDER ACCORDINGLY. 5. NOW COMING TO ONE OF THE EFFECTIVE ISSUE IN THIS APPEAL FILED BY ASSESSEE WITH TRIBUNAL RAISED VIDE GROUND NUMBER 4 BY ASSESS EE IN MEMO OF APPEAL FILED WITH TRIBUNAL FOR AY:2006-07 . BRIEFLY STATED FACTS OF THE CASE ARE THAT THE ASSESSEE WAS ENGAGED IN THE BUSINESS OF FABRICA TION WORK AND MANUFACTURE OF BULK HANDLING EQUIPMENTS. HOWEVER, A FORESAID BUSINESS OF ITA NOS.2172 & 2263/CHNY/2018 :- 5 -: THE ASSESSEE WAS ADMITTEDLY DISCONTINUED AND STOOD CLOSED SINCE 2001. THE ASSESSEE HAD NOW LET OUT FACTORY LAND OWNED BY IT ALONG WITH BUILDING THEREON , LOCATED AT NO. 9 INDUSTRIAL AREA II, MARAIMALAI NAGAR, INDUSTRIAL COMPLEX , MARAIMALAI NAGAR-603209 , ALO NG WITH 2 GENERATORS TO ONE M/S. STANADYNE AMALGAMATIONS (P) LTD. FOR A PERIOD OF 6 YEARS FROM 01.02.2004 TO 31.01.2010 ON A MONTHLY RENTAL O F RS. 2,05,000/- (MONTHLY RENTAL WILL GO UP BY 25% EFFECTIVE FROM 01 .02.2007 ONWARDS) , VIDE LEASE DEED DATED 01.02.2004. THE ASSESSEE HAS FILED COPY OF LEASE DEED DATED 01.02.2004 WITH TRIBUNAL WHICH IS PLACED IN FILE. THE ASSESSEE HAS TREATED SAID RENTAL INCOME AS BUSINESS INCOME U NDER THE HEAD PROFITS AND GAINS FROM BUSINESS OR PROFESSION , WHILE FIL ING RETURN OF INCOME WITH REVENUE. BUT, HOWEVER, SAID RENTAL INCOME WAS ASSE SSED BY AO UNDER THE HEAD INCOME FROM OTHER SOURCES, WHILE FRAMING ASSESSMENT U/S 143(3) READ WITH SECTION 147 OF THE 1961 ACT. THE LD.CIT(A) HAS UPHELD ASSESSMENT ORDER PASSED BY AO.THE LEARNED CIT(A) WH ILE PASSING APPELLATE ORDER NOTED THAT IT IS THE ASSESSEE WHO H AD ITSELF OFFERED FOR TAX SAID RENTAL INCOME UNDER THE HEAD INCOME FROM HOUS E PROPERTY WHILE FILING RETURN OF INCOME FOR AY:2009-10 , BUT SAID I NCOME HOWEVER WAS AGAIN ASSESSED TO TAX BY AO FOR AY: 2009-10 UNDER T HE HEAD INCOME FROM OTHER SOURCES , WHILE FRAMING SCRUTINY ASSESSMENT U/S 143(3) OF THE 1961 ACT FOR AY: 2009-10. 6. AGGRIEVED BY AN APPELLATE ORDER PASSED BY LEARNE D CIT(A) FOR AY: 2006- 07, THE ASSESSEE HAS FILED AN APPEAL BEFORE THIS T RIBUNAL . THE LD. ITA NOS.2172 & 2263/CHNY/2018 :- 6 -: COUNSEL FOR ASSESSEE OPENED ARGUMENTS BEFORE THE BE NCH AND SUBMITTED THAT THIS RENTAL INCOME CANNOT BE BROUGHT TO TAX UN DER THE HEAD INCOME FROM OTHER SOURCES. IT WAS FAIRLY SUBMITTED BY LE ARNED COUNSEL FOR THE ASSESSEE THAT SAID INCOME OUGHT TO HAVE BEEN BROUG HT TO TAX UNDER THE CORRECT HEAD OF INCOME VIZ. INCOME FROM HOUSE PRO PERTY AS THERE ARE SEPARATE HEADS OF INCOME SPECIFIED UNDER SECTION 1 4 OF THE 1961 ACT FOR BRINGING TO TAX VARIOUS INCOMES OF THE TAX-PAYERS AND RENTAL INCOME IS TO BE BROUGHT TO TAX UNDER THE HEAD INCOME FROM HOUSE PROPERTY. IT WAS SUBMITTED THAT FACTORY LAND ALONG WITH BUILDING THE REON AND 2 GENERATORS WERE GIVEN ON LEASE FOR A PERIOD OF SIX YEARS ON MO NTHLY RENTAL OF ` 2,05,000/- , AS ASSESSEES OWN BUSINESS STOOD DISC ONTINUED AND CLOSED SINCE 2001 ONWARDS AND THUS TO EARN RENTAL INCOME , THIS PROPERTY CONSISTING OF FACTORY LAND AND BUILDING THEREON ALO NG WITH TWO GENERATORS WERE GIVEN ON LONG TERM LEASE OF SIX YEARS . IT WAS SUBMITTED THAT PREDOMINANT PURPOSE AND INTENTION FOR GIVING ON LEA SE SAID PROPERTY ALONG WITH GENERATORS ON LEASE IS TO EARN LEASE REN T OF RS. 2,05,000/- PER MONTH AND NOT TO DO ANY SYSTEMATIC /ORGANIZED BUSIN ESS ACTIVITIES. THE LD.DR, ON THE OTHER HAND, RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW. 7. WE HAVE CONSIDERED RIVAL CONTENTIONS AND PERUSED THE MATERIAL ON RECORD. WE HAVE OBSERVED THAT ASSESSEE WAS EARLIER ENGAGED IN BUSINESS OF FABRICATION WORK AND MANUFACTURE OF BULK HANDLIN G EQUIPMENTS. THE ASSESSEES AFORESAID BUSINESS WAS ADMITTEDLY DISCON TINUED AND STOOD CLOSED SINCE 2001. THE ASSESSEE HAS LEASED FACTOR Y LAND ALONG WITH ITA NOS.2172 & 2263/CHNY/2018 :- 7 -: BUILDING THEREON AND TWO GENERATORS INSTALLED AT 9 INDUSTRIAL AREA II, MARAIMALAI NAGAR, INDUSTRIAL COMPLEX, MARAIMALAI NA GAR-603209 ON MONTHLY RENTAL OF RS. 2,05,000/- TO M/S.STANADYNE A MALGAMATIONS (P) LTD. FOR A PERIOD OF SIX YEARS FROM 01.02.2004 TO 3 1.01.2010 . THE MONTHLY RENTAL SHALL INCREASE BY 25% EFFECTIVE FROM 01.02.2007 . A COPY OF LEASE DEED DATED 01.02.2004 IS FILED BY ASSESSEE WITH TRIBUNAL WHICH IS PLACED ON RECORD IN FILE. A PERUSAL OF THE SAID LE ASE DEED CLEARLY SHOWS THAT PREDOMINANT OBJECTIVE OF THE ASSESSEE IS TO LE ASE OUT FACTORY LAND ALONG WITH FACTORY BUILDING CONSTRUCTED THEREON ALO NG WITH TWO GENERATORS TO EARN RENTAL INCOME. THERE IS NO INTENTION VISIBL E ON PERUSAL OF LEASE DEED TO UNDERTAKE ORGANIZED AND SYSTEMATIC BUSINESS ACTIVITIES BY ASSESSEE AND IN OUR CONSIDERED VIEW THE INCOME IS T O BE BROUGHT TO TAX UNDER THE HEAD INCOME FROM HOUSE PROPERTY. THE A SSESSEE BUSINESS OF FABRICATION WORK AND MANUFACTURE OF BULK HANDLING E QUIPMENTS STOOD DISCONTINUED SINCE 2001 AND HENCE THIS ASSETS WERE LYING IDLE WHICH WAS LEASED ON RENT. THE ASSESSEE HAS VOLUNTARILY DECLAR ED SAID RENTAL INCOME FOR AY:2009-10 UNDER THE HEAD INCOME FROM HOUSE P ROPERTY . THERE ARE DIFFERENT HEADS OF INCOME PRESCRIBED UNDER SECTION 14 OF THE 1961 ACT AND VARIOUS INCOMES EARNED BY TAX-PAYERS ARE TO BE ASS ESSED UNDER THE CORRECT HEAD PRESCRIBED FOR BRINGING THAT INCOME TO TAX. THE INCOME WHICH COULD NOT BE BROUGHT TO TAX UNDER ANY OF THE PRESCR IBED HEADS OWING TO NATURE OF THE INCOME, IS THEN BROUGHT TO TAX UNDER THE RESIDUARY HEAD NAMELY INCOME FROM OTHER SOURCES. THE HONBLE SUP REME COURT IN THE CASE OF RAJ DADARKAR & ASSOCIATES V. ACIT, CC-46, I N CIVIL APPEAL ITA NOS.2172 & 2263/CHNY/2018 :- 8 -: NOS.6455-6460 OF 2017 VIDE JUDGMENT DATED 09.05.201 7 REPORTED IN (2017) 81 TAXMANN.COM 193(SC) HAD ELABORATELY DISCU SSED AS TO UNDER WHAT CIRCUMSTANCES RENTAL INCOME IS TO BE BROUGHT T O TAX UNDER THE HEAD INCOME FROM HOUSE PROPERTY OR UNDER THE HEAD PRO FITS AND GAINS FROM BUSINESS OF PROFESSION , IN THIS DECISION THE HON BLE SUPREME COURT HAS DISTINGUISHED ITS OWN DECISIONS IN THE CASE OF CHEN NAI PROPERTIES & INVESTMENTS LTD. V. CIT REPORTED IN (2015) 373 ITR 673(SC) AND RAYALA CORPORATION PRIVATE LIMITED V. ACIT REPORTED IN (20 16) 386 ITR 500 (SC) TO EXPLAIN THE PARAMETERS TO BE SEEN WHILE BRINGING TO TAX RENTAL INCOME UNDER THE HEAD INCOME FROM HOUSE PROPERTY OR UNDE R THE HEAD PROFIT AND GAINS FROM BUSINESS OR PROFESSION. IT IS OBSER VED BY HONBLE SUPREME COURT THAT FACTS OF EACH CASE ARE TO BE SEEN TO DET ERMINE WHAT IS THE CORRECT HEAD OF INCOME UNDER WHICH RENTAL INCOME IS TO BE BROUGHT TO TAX. THE SAID DECISION OF HONBLE SUPREME COURT IN THE C ASE OF RAJ DADARKAR & ASSOCIATES (SUPRA) IS REPRODUCED HEREUNDER: 10 . WE HAVE CONSIDERED THE AFORESAID SUBMISSIONS OF C OUNSEL FOR THE PARTIES IN THE LIGHT OF LEGAL PROVISIONS CONTAINED IN THE ACT. WE MAY RE MARK AT THE OUTSET THAT IT IS NOT IN DISPUTE THAT HAVING REGARD TO THE TERMS AND CONDITI ONS ON WHICH THE LEASEHOLD RIGHTS WERE TAKEN BY THE APPELLANT IN AUCTION, CONSTRUCTED THE MARKET AREA THEREUPON AND GAVE THE SAME TO VARIOUS PERSONS ON SUB-LICENSING BASIS, THE APPELLANT WOULD BE TREATED AS DEEMED OWNER OF THESE PREMISES IN TERMS OF SECTION 27(IIIB) OF THE ACT. WE MAY POINT OUT THAT THE HIGH COURT TOOK NOTE OF THE PROVISIONS OF SECTION 27(IIIB) AS WELL AS SECTION 269UA(F) OF THE ACT WHICH READS AS UNDER: 'SECTION 27(IIIB) - A PERSON WHO ACQUIRES ANY RIGHT S (EXCLUDING ANY RIGHTS BY WAY OF A LEASE FROM MONTH TO MONTH OR FOR A PERIOD NOT EXCEE DING ONE YEAR) IN OR WITH RESPECT TO ANY BUILDING OR PART THEREOF, BY VIRTUE OF ANY SUCH TRANSACTION AS IS REFERRED TO IN CLAUSE (F) OF SECTION 269UA, SHALL BE DEEMED TO BE THE OWN ER OF THAT BUILDING OR PART THEREOF; SECTION 269UA(F) - 'TRANSFER', (I) IN RELATION TO ANY IMMOVABLE PROPERTY REFERRED TO I N SUB-CLAUSE (I) OF CLAUSE (D ), MEANS TRANSFER OF SUCH PROPERTY BY WAY OF SALE OR E XCHANGE OR LEASE FOR A TERM OF NOT ITA NOS.2172 & 2263/CHNY/2018 :- 9 -: LESS THAN TWELVE YEARS, AND INCLUDES ALLOWING THE P OSSESSION OF SUCH PROPERTY TO BE TAKEN OR RETAINED IN PART PERFORMANCE OF A CONTRACT OF THE NATURE REFERRED TO IN SECTION 53A OF THE TRANSFER OF PROPERTY ACT, 1882 ( 4 OF 1882). EXPLANATION.FOR THE PURPOSES OF THIS SUB- CLAUSE, A LEASE WHICH PROVIDES FOR THE EXTENSION OF THE TERM THEREOF BY A FURTHER TERM OR TERMS SHALL BE DEEMED TO BE A LEASE FOR A TERM OF NOT LESS THAN TWELVE YEARS, IF THE AG GREGATE OF THE TERM FOR WHICH SUCH LEASE IS TO BE GRANTED AND THE FURTHER TERM OR TERMS FOR WHI CH IT CAN BE SO EXTENDED IS NOT LESS THAN TWELVE YEARS ; (II) IN RELATION TO ANY IMMOVABLE PROPERTY OF THE NATURE REFERRED TO IN SUB-CLAUSE (II ) OF CLAUSE (D), MEANS THE DOING OF ANYTHING (WHETHER BY W AY OF ADMITTING AS A MEMBER OF OR BY WAY OF TRANSFER OF SHARES IN A CO- OPERATIVE SOCIETY OR COMPANY OR OTHER ASSOCIATION OF PERSONS OR BY WAY OF ANY AGREEMENT O R ARRANGEMENT OR IN ANY OTHER MANNER WHATSOEVER) WHICH HAS THE EFFECT OF TRANSFER RING, OR ENABLI NG THE ENJOYMENT OF, SUCH PROPERTY.' 11 . THEREAFTER, THE HIGH COURT POINTED OUT THE CIRCUM STANCES UNDER WHICH THE MARKET DEPARTMENT OF MHAD HAD AUCTIONED THE MARKET AREA WH EREIN THE APPELLANT WAS THE SUCCESSFUL TENDEROR; THE BMC PERMITTED SUB-LETTING OF THE SHOPS AND STALLS IN STILT PORTION; THE APPELLANT WAS PERMITTED TO CARRY OUT A DDITIONS AND ALTERATIONS WHICH HE DID; THE MANNER IN WHICH THE APPELLANT AFTER MAKING NECESSARY CONSTRUCTIONS SUB- LICENSED TO VARIOUS TYPES OF TRADERS ETC. ON THAT B ASIS, THE HIGH COURT CONCLUDED THAT READING OF VARIOUS CLAUSES HARMONIOUSLY AS PER THE WHICH THE RIGHTS WERE GIVEN TO THE APPELLANT IN THE SAID PROPERTY, POINTED OUT TOWARDS THE APPELLANT ACQUIRING RIGHTS IN OR IN RESPECT OF THE BUILDING OR PART THEREOF, WHICH R IGHTS WERE CLEARLY TRACEABLE TO SECTION 269UA(F) OF THE ACT. 12 . AS POINTED OUT ABOVE, THE AFORESAID CONCLUSION IS NOT EVEN DISPUTED BY THE LEARNED COUNSEL FOR THE APPELLANT. THE SUBMISSION WAS, AS N OTED ABOVE, EVEN IF THE APPELLANT IS DEEMED OWNER OF THE PREMISES IN QUESTION, SINCE THE LETTING OUT THE PLACE AND EARNING RENTS THEREFROM IS THE MAIN BUSINESS ACTIVITY OF TH E APPELLANT, THEN THE INCOME GENERATED FROM SUB-LICENSING THE MARKET AREA AND EA RNED BY THE APPELLANT SHOULD BE TREATED AS INCOME FROM BUSINESS AND NOT INCOME FROM THE HOUSE PROPERTY. HIS SUBMISSION WAS THAT THE DOMINANT TEST HAS TO BE APP LIED AND ONCE IT IS FOUND THAT DOMINANT INTENTION BEHIND THE ACTIVITY WAS THAT OF A BUSINESS, THE RENTAL INCOME WOULD BE BUSINESS INCOME. IN SUPPORT, MR. AGARWAL REFERRE D TO THE FOLLOWING TWO JUDGMENTS: (I) CHENNAI PROPERTIES AND INVESTMENTS LTD. V. CIT [2015] 373 ITR 673/231 TAXMAN 336/56 TAXMANN.COM 456 (SC) . (II) RAYALA CORPORATION (P.) LTD. V. ASSTT. CIT [2016] 386 ITR 500/243 TAXMAN 360/72 TAXMANN.COM 149 (SC) . 13 . BEFORE DEALING WITH THE RESPECTIVE CONTENTIONS, W E MAY STATE, IN A SUMMARY FORM, SCHEME OF THE ACT ABOUT THE COMPUTATION OF THE TOTA L INCOME. SECTION 4 OF THE ACT IS THE CHARGING SECTION AS PER WHICH THE TOTAL INCOME OF A N ASSESSEE, SUBJECT TO STATUTORY EXEMPTIONS, IS CHARGEABLE TO TAX. SECTION 14 OF THE ACT ENUMERATES FIVE HEADS OF INCOME FOR THE PURPOSE OF CHARGE OF INCOME TAX AND COMPUTATION OF TOTAL INCOME. THESE ARE: SALARIES, INCOME FROM HOUSE PROPERTY, PR OFITS AND GAINS OF BUSINESS OR PROFESSION, CAPITAL GAINS AND INCOME FROM OTHER SOU RCES. A PARTICULAR INCOME, THEREFORE, HAS TO BE CLASSIFIED IN ONE OF THE AFORE SAID HEADS. IT IS ON THAT BASIS RULES FOR ITA NOS.2172 & 2263/CHNY/2018 :- 10 -: COMPUTING INCOME AND PERMISSIBLE DEDUCTIONS WHICH A RE CONTAINED IN DIFFERENT PROVISIONS OF THE ACT FOR EACH OF THE AFORESAID HEA DS, ARE TO BE APPLIED. FOR EXAMPLE, PROVISIONS FOR COMPUTING THE INCOME FROM HOUSE PROP ERTY ARE CONTAINED IN SECTIONS 22 TO 27 OF THE ACT AND PROFITS AND GAINS OF BUSINESS OR PROFESSION ARE TO BE COMPUTED AS PER THE PROVISIONS CONTAINED IN SECTIONS 28 TO 44DB OF THE ACT. IT IS ALSO TO BE BORNE IN MIND THAT INCOME TAX IS ONLY ONE TAX WHICH IS LEVIE D ON THE SUM TOTAL OF THE INCOME CLASSIFIED AND CHARGEABLE UNDER THE VARIOUS HEADS. IT IS NOT A COLLECTION OF DISTINCT TAXES LEVIED SEPARATELY ON EACH HEAD OF THE INCOME. 14 . THERE MAY BE INSTANCES WHERE A PARTICULAR INCOME MAY APPEAR TO FALL IN MORE THAN ONE HEAD. THESE KIND OF CASES OF OVERLAPPING HAVE F REQUENTLY ARISEN UNDER THE TWO HEADS WITH WHICH WE ARE CONCERNED IN THE INSTANT CA SE AS WELL, NAMELY, INCOME FROM THE HOUSE PROPERTY ON THE ONE HAND AND PROFITS AND GAINS FROM BUSINESS ON THE OTHER HAND. ON THE FACTS OF A PARTICULAR CASE, INCOME HAS TO BE EITHER TREATED AS INCOME FROM THE HOUSE PROPERTY OR AS THE BUSINESS INCOME. TESTS WHICH ARE TO BE APPLIED FOR DETERMINING THE REAL NATURE OF INCOME ARE LAID DOWN IN JUDICIAL DECISIONS, ON THE INTERPRETATION OF THE PROVISIONS OF THESE TWO HEADS . WHEREVER THERE IS AN INCOME FROM LEASING OUT OF PREMISES AND COLLECTING RENT, NORMAL LY SUCH AN INCOME IS TO BE TREATED AS INCOME FROM HOUSE PROPERTY, IN CASE PROVISIONS O F SECTION 22 OF THE ACT ARE SATISFIED WITH PRIMARY INGREDIENT THAT THE ASSESSEE IS THE OWNER OF THE SAID BUILDING OR LANDS APPURTENANT THERETO. SECTION 22 OF THE ACT MA KES 'ANNUAL VALUE' OF SUCH A PROPERTY AS INCOME CHARGEABLE TO TAX UNDER THIS HEA D. HOW ANNUAL VALUE IS TO BE DETERMINED IS PROVIDED IN SECTION 23 OF THE ACT. 'O WNER OF THE HOUSE PROPERTY' IS DEFINED IN SECTION 27 OF THE ACT WHICH INCLUDES CER TAIN SITUATIONS WHERE A PERSON NOT ACTUALLY THE OWNER SHALL BE TREATED AS DEEMED OWNER OF A BUILDING OR PART THEREOF. IN THE PRESENT CASE, THE APPELLANT IS HELD TO BE 'DEEM ED OWNER' OF THE PROPERTY IN QUESTION BY VIRTUE OF SECTION 27(IIIB) OF THE ACT. ON THE OTHER HAND, UNDER CERTAIN CIRCUMSTANCES, WHERE THE INCOME MAY HAVE BEEN DERIV ED FROM LETTING OUT OF THE PREMISES, IT CAN STILL BE TREATED AS BUSINESS INCOM E IF LETTING OUT OF THE PREMISES ITSELF IS THE BUSINESS OF THE ASSESSEE. 15 . WHAT IS THE TEST WHICH HAS TO BE APPLIED TO DETER MINE WHETHER THE INCOME WOULD BE CHARGEABLE UNDER THE HEAD 'INCOME FROM THE HOUSE PR OPERTY' OR IT WOULD BE CHARGEABLE UNDER THE HEAD 'PROFITS AND GAINS FROM BUSINESS OR PROFESSION', IS THE QUESTION. IT MAY BE MENTIONED, IN THE FIRST INSTANCE, THAT MERELY BECAU SE THERE IS AN ENTRY IN THE OBJECT CLAUSE OF THE BUSINESS SHOWING A PARTICULAR OBJECT, WOULD NOT BE THE DETERMINATIVE FACTOR TO ARRIVE AT A CONCLUSION THAT THE INCOME IS TO BE TRE ATED AS INCOME FROM BUSINESS. SUCH A QUESTION WOULD DEPEND UPON THE CIRCUMSTANCES OF EAC H CASE. IT IS SO HELD BY THE CONSTITUTION BENCH OF THIS COURT IN SULTAN BROS. (P ) LTD. V. CIT [1964] 51 ITR 353 (SC) AND WE REPRODUCE THE RELEVANT PORTION THEREOF: '7. 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 BUS INESS 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 ASS ET USED IN A BUSINESS AND NOTHING ELSE, AND BUSINESS MAY BE CARRIED ON WITH PRACTICAL LY ALL THINGS. THEREFORE, IT IS NOT POSSIBLE TO SAY THAT A PARTICULAR ACTIVITY IS BUSIN ESS BECAUSE IT IS CONCERNED WITH AN ASSET WITH WHICH TRADE IS COMMONLY CARRIED ON. WE F IND NOTHING IN THE CASES REFERRED, TO SUPPORT THE PROPOSITION THAT CERTAIN ASSETS ARE COMMERCIAL ASSETS IN THEIR VERY NATURE.' ITA NOS.2172 & 2263/CHNY/2018 :- 11 -: 16 . IN VIEW THEREOF, THE OBJECT CLAUSE, AS CONTAINED IN THE PARTNERSHIP DEED, WOULD NOT BE THE CONCLUSIVE FACTOR. MATTER HAS TO BE EXAMINED ON THE FACTS OF EACH CASE AS HELD IN SULTAN BROS. (P) LTD. CASE (SUPRA) EVEN OTHERWIS E, THE OBJECT CLAUSE WHICH IS CONTAINED IN THE PARTNERSHIP FIRM IS TO TAKE THE PR EMISES ON RENT AND TO SUB-LET. IN THE PRESENT CASE, READING OF THE OBJECT CLAUSE WOULD BR ING OUT TWO DISCERNIBLE FACTS, WHICH ARE AS FOLLOWS: (A) THE APPELLANT WHICH IS A PARTNERSHIP FIRM IS TO TAK E THE PREMISES ON RENT AND TO SUB- LET THOSE PREMISES. THUS, THE BUSINESS ACTIVITY IS OF TAKING THE PREMISES ON RENT AND SUB-LETTING THEM. IN THE INSTANT CASE, BY LEGAL FICTION CONTAINED IN SECTION 27(IIIB) OF THE ACT, THE APPELLANT IS TREATED AS 'DEEMED OWNER'. (B) THE AFORESAID CLAUSE ALSO MENTIONS THAT PARTNERSHIP FIRM MAY TAKE ANY OTHER BUSINESS AS MAY BE MUTUALLY AGREED UPON BY THE PART NERS. 17 . IN THE INSTANT CASE, THEREFORE, IT IS TO BE SEEN AS TO WHETHER THE ACTIVITY IN QUESTION WAS IN THE NATURE OF BUSINESS BY WHICH IT COULD BE SAID THAT INCOME RECEIVED BY THE APPELLANT WAS TO BE TREATED AS INCOME FROM THE BUSI NESS. BEFORE US, APART FROM RELYING UPON THE AFORESAID CLAUSE IN THE PARTNERSHIP DEED T O SHOW ITS OBJECTIVE, THE LEARNED COUNSEL FOR THE APPELLANT HAS NOT PRODUCED OR REFER RED TO ANY MATERIAL. ON THE OTHER HAND, WE FIND THAT ITAT HAD SPECIFICALLY ADVERTED T O THIS ISSUE AND RECORDED THE FINDINGS ON THIS ASPECT IN THE FOLLOWING MANNER: '26. ON THIS ISSUE FACTS AVAILABLE ON RECORD ARE T HAT THE ASSESSEE LET OUT SHOPS/STALLS TO VARIOUS OCCUPANTS ON A MONTHLY RENT. THE ASSESSE E COLLECTED CHARGES FOR MINOR REPAIRS, MAINTENANCE, WATER AND ELECTRICITY. AS PER THE TERMS OF ALLOTMENT BY THE BMC, THE ASSESSEE WAS BOUND TO INCUR ALL THESE EXPENSES. THE ASSESSEE, IN TURN, COLLECTED EXTRA MONEY FROM THE ALLOTTEES. THE ASSESSEE COLLEC TED 20% OF MONTHLY RENT AS SERVICE CHARGES. SUCH SERVICE CHARGES WERE ALSO USED FOR PR OVIDING SERVICES LIKE WATCH AND WARD, ELECTRICITY, WATER ETC. THIS IN OUR OPINION W AS INSEPARABLE FROM BASIC CHARGES OF RENT. THE ASSESSEE HAS MADE BIFURCATION OF THE RECE IPT FROM THE, OCCUPIERS OF THE SHOPS/STALLS AS RENT AND SERVICE CHARGES. AS RIGHTL Y HELD BY THE ASSESSING OFFICER, DECISION OF HON'BLE SUPREME COURT IN THE CASE OF SH AMBU INVESTMENT PVT. LTD., 263 ITR 143 WILL APPLY. THE ASSESSEE HAS NOT ESTABLISHE D THAT HE WAS ENGAGED IN ANY SYSTEMATIC OR ORGANIZED ACTIVITY OF PROVIDING SERVI CE TO THE OCCUPIERS OF THE SHOPS/STALLS SO AS TO CONSTITUTE THE RECEIPTS FROM THEM AS BUSINESS INCOME. IN OUR OPINION, THE ASSESSEE RECEIVED INCOME BY LETTING OU T SHOPS/STALLS; AND THEREFORE, THE SAME HAS TO BE HELD AS INCOME FROM HOUSE PROPERTY.' 18 . THE ITAT BEING THE LAST FORUM INSOFAR AS FACTUAL DETERMINATION IS CONCERNED, THESE FINDINGS HAVE ATTAINED FINALITY. IN ANY CASE, AS ME NTIONED ABOVE, THE LEARNED COUNSEL FOR THE APPELLANT DID NOT ARGUE ON THIS ASPECT AND DID NOT MAKE ANY EFFORTS TO SHOW AS TO HOW THE AFORESAID FINDINGS WERE PERVERSE. IT WAS FOR THE APPELLANT TO PRODUCE SUFFICIENT MATERIAL ON RECORD TO SHOW THAT ITS ENTI RE INCOME OR SUBSTANTIAL INCOME WAS FROM LETTING OUT OF THE PROPERTY WHICH WAS THE PRIN CIPAL BUSINESS ACTIVITY OF THE APPELLANT. NO SUCH EFFORT WAS MADE. 19 . RELIANCE PLACED BY THE APPELLANT ON THE JUDGMENTS OF THIS COURT IN CHENNAI PROPERTIES & INVESTMENTS LTD. (SUPRA) AND RAYALA CO RPORATION (P) LTD. (SUPRA) WOULD BE OF NO AVAIL. IN CHENNAI PROPERTIES & INVESTMENTS LT D. (SUPRA) WHERE ONE OF US (SIKRI, J.) ITA NOS.2172 & 2263/CHNY/2018 :- 12 -: WAS A PART OF THE BENCH FOUND THAT THE ENTIRE INCOM E OF THE APPELLANT WAS THROUGH LETTING OUT OF THE TWO PROPERTIES IT OWNED AND THERE WAS NO OTHER INCOME OF THE ASSESSEE EXCEPT THE INCOME FROM LETTING OUT OF THE SAID PROPERTIES, WHICH WAS THE BUSINESS OF THE ASSESSEE. ON THOSE FACTS, THIS COURT CAME TO THE CONCLUSION T HAT JUDGMENT OF THIS COURT IN KARANPURA DEVELOPMENT CO. LTD. V. CIT [1962] 44 ITR 362 (SC) WAS APPLICABLE AND THE JUDGMENT OF THIS COURT IN EAST INDIA HOUSING & LAND DEVELOPMENT TRUST LTD. V. CIT [1961] 42 ITR 49 (SC) WAS HELD TO BE DISTINGUISHABLE. IN THE PRESENT CAS E, WE FIND THAT SITUATION IS JUST THE REVERSE. THE JUDGME NT IN EAST INDIA HOUSING AND LAND DEVELOPMENT TRUST LTD. (SUPRA) WHICH WOULD BE APPLI CABLE WHICH IS DISCUSSED IN PARA 8 OF CHENNAI PROPERTIES & INVESTMENTS LTD. CASE (SUPR A) AND THE REPRODUCTION THEREOF WOULD BRING HOME THE POINT WE ARE CANVASSING: '8. WITH THIS BACKGROUND, WE FIRST REFER TO THE JUD GMENT OF THIS COURT IN EAST INDIA HOUSING AND LAND DEVELOPMENT TRUST LTD. CASE [EAST INDIA HOUSING AND LAND DEVELOPMENT TRUST LTD. V. CIT, [1961] 42 ITR 49 (SC) ] WHICH HAS BEEN RELIED UPON BY THE HIGH COURT. THAT WAS A CASE WHERE THE COMPANY W AS INCORPORATED WITH THE OBJECT OF BUYING AND DEVELOPING LANDED PROPERTIES AND PROMOTI NG AND DEVELOPING MARKETS. THUS, THE MAIN OBJECTIVE OF THE COMPANY WAS TO DEVELOP TH E 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 WHICH 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 T REATED AS INCOME FROM THE HOUSE PROPERTY, 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 W AS NOT THE OBJECT OF THE COMPANY AT ALL. THE COURT WAS THEREFORE, OF THE OPINION THAT THE CH ARACTER OF THAT INCOME WHICH WAS FROM THE HOUSE PROPERTY HAD NOT ALTERED BECAUSE IT WAS R ECEIVED BY THE COMPANY FORMED WITH THE OBJECT OF DEVELOPING AND SETTING UP PROPERTIES. ' 20 . IN RAYALA CORPORATION (P) LTD. (SUPRA) FACT SITUA TION WAS IDENTICAL TO THE CASE OF CHENNAI PROPERTIES & INVESTMENTS LTD. (SUPRA) AN D FOR THIS REASON, RAYALA CORPORATION (P) LTD. (SUPRA) FOLLOWED CHENNAI PROPE RTIES & INVESTMENTS LTD. (SUPRA) WHICH IS HELD TO BE INAPPLICABLE IN THE INSTANT CAS E. 21 . FOR THE AFORESAID REASONS, WE ARE OF THE OPINION THAT THESE APPEALS LACK MERIT AND ARE, ACCORDINGLY, DISMISSED WITH COST. AFTER CONSIDERING THE AFORESAID DECISION OF HONBLE SUPREME COURT IN THE CASE OF RAJ DADARKAR AND ASSOCIATES(SUPRA) AND APPL YING THE RATIO OF THE AFORESAID DECISION TO FACTUAL MATRIX PREVAILING IN THE CASE BEFORE US, WE ARE OF THE CONSIDERED VIEW THAT RENTAL INCOME EARNE D BY THE ASSESSEE FROM LETTING OUT ITS FACTORY LAND AND BUILDING ALONG WIT H 2 GENERATORS IS TO BE BROUGHT TO INCOME-TAX UNDER THE HEAD INCOME FROM H OUSE PROPERTY , AS PREDOMINANT PURPOSE OF THE ASSESSEE WAS TO LET OUT ITS OWNED PROPERTY ITA NOS.2172 & 2263/CHNY/2018 :- 13 -: ALONG WITH 2 GENERATORS INSTALLED THEREIN WITH AN INTENTION TO EARN RENTAL INCOME AND NOT TO CARRY ON ANY ORGANIZED AND SYSTEM ATIC BUSINESS ACTIVITIES BY LETTING OUT THIS PROPERTY ALONG WITH 2 GENERATORS INSTALLED THEREIN. IN INCOME-TAX MATTERS, THE OBJECTIVE IS T O ASSESS CORRECT INCOME OF TAXPAYER FOR THE CORRECT ASSESSMENT YEAR CHARGEA BLE TO TAX IN THE CORRECT HANDS AS PER SCHEME OF THE 1961 ACT, WHICH INTER-ALIA INCLUDE ASSESSING CORRECT INCOME UNDER CORRECT HEAD OF INCO ME WITH AN ULTIMATE OBJECTIVE BEING THAT STATE GETS CORRECT TAX FROM T HE TAX-PAYER. PROCEEDINGS BEFORE TRIBUNAL ARE MERELY EXTENSION OF AN ASSESSMENT PROCEEDINGS TO BRING TO TAX CORRECT INCOME OF THE C ORRECT TAX-PAYER CHARGEABLE TO INCOME-TAX IN CORRECT HANDS FOR CORR ECT ASSESSMENT YEAR UNDER CORRECT HEAD OF INCOME SPECIFIED UNDER SECTIO N 14 OF THE 1961 ACT , SO THAT REVENUE GETS ITS LEGITIMATE SHARE OF CORREC T TAXES DUE FROM TAX- PAYER FOR EVERY ASSESSMENT YEAR. SINCE, WE HAVE H ELD THAT RENTAL INCOME FROM THE SAID FACTORY LAND , BUILDING CONSTRUCTED T HEREON AND 2 GENERATORS INSTALLED THEREON SHALL BE CHARGEABLE TO INCOME-TAX UNDER THE HEAD INCOME FROM HOUSE PROPERTY AND HENCE AS FALL OUT /CONSEQUENCE OF THE SAME , THE DEPRECIATION CLAIMED BY ASSESSEE ON SUCH ASSETS SHALL NOT BE ALLOWED KEEPING IN VIEW THE FACT THAT ASSESSEE HAS NOT USED SUCH ASSETS FOR THE PURPOSES OF BUSINESS OR PROFESSION OF THE A SSESSEE DURING THE YEAR UNDER CONSIDERATION . IT IS ADMITTED POSITION THAT BUSINESS OF THE ASSESSEE STOOD DISCONTINUED/CLOSED SINCE 2001. THE DECISION OF MUMBAI-TRIBUNAL IN THE CASE OF EMCO DYESTUFF PRIVATE LIMITED V. DCIT R EPORTED IN (2019) 108 TAXMANN.COM 206(MUM-TRIB.) IS RELEVANT. WE ORDER A CCORDINGLY. ITA NOS.2172 & 2263/CHNY/2018 :- 14 -: 8. WITH REGARD TO GROUND NO.5 RAISED BY ASSESSEE IN MEMO OF APPEAL FILED WITH TRIBUNAL FOR AY: 2006-07 WHICH IS WITH RESPECT TO DISALLOWANCE OF FOLLOWING EXPENDITURE INCURRED BY THE ASSESSEE. T HE ASSESSEE HAS INCURRED FOLLOWING EXPENSES WHICH WERE CLAIMED AS B USINESS EXPENSES BY THE ASSESSEE IN RETURN OF INCOME FILED WITH REVENUE , THE DETAILS OF WHICH ARE AS UNDER: S.NO. EXPENDITURE AMOUNT (RS.) 1 RENT 2,40,000 2 SALARIES AND WAGES 2,58,000 3 TELEPHONE CHARGES 36,298 4 AUDIT FEE 15,000 5 DIRECTOR REMUNERATION 4,45,000 6 OTHER EXPENDITURE 1,12,215 TOTAL 11,06,513 IT IS ADMITTED POSITION BETWEEN RIVAL PARTIES THAT BUSINESS OF THE ASSESSEE WAS DISCONTINUED AND STOOD CLOSED SINCE 2001 AND A DMITTEDLY THERE WAS NO BUSINESS ACTIVITIES CARRIED ON BY THE ASSESSEE D URING THE PREVIOUS YEAR RELEVANT TO IMPUGNED AY. THE AO DISALLOWED AFORESA ID EXPENSES EXCEPT AN AUDIT FEE OF RS. 15,000/- WHICH ONLY STOOD ALLOWED BY THE AO . ONE OF THE PREDOMINANT CONDITIONS FOR ALLOWING THE CLAIM O F BUSINESS EXPENSES UNDER THE HEAD PROFITS AND GAINS OF BUSINESS OR PR OFESSION IS THAT THE ASSESSEE HAS CARRIED OUT BUSINESS OR PROFESSION DUR ING THE YEAR UNDER CONSIDERATION. BUT, IN THIS CASE, THERE IS NO BUSI NESS ADMITTEDLY CARRIED ON BY THE ASSESSEE DURING THE ENTIRE YEAR UNDER CONSID ERATION AS IT STOOD CLOSED/DISCONTINUED SINCE 2001. THE LEARNED CIT(A) AFTER CONSIDERING THE ENTIRE FACTUAL MATRIX HAS RIGHTLY UPHELD ASSESSMENT ORDER PASSED BY THE ITA NOS.2172 & 2263/CHNY/2018 :- 15 -: AO CONFIRMING DISALLOWANCE OF THESE BUSINESS EXPENS ES EXCEPT AUDIT FEES. WE DO NOT FIND ANY INFIRMITY IN THE APPELLATE ORDE R PASSED BY LD.CIT(A) CONFIRMING DISALLOWANCE OF AFORESAID EXPENSES EXCEP T AUDIT FEE OF RS. 15,000/- WHICH ORDER OF LEARNED CIT(A) WE CONFIRM/U PHOLD AND ACCORDINGLY GROUND NO.5 RAISED BY ASSESSEE IN MEMO OF APPEAL FI LED WITH TRIBUNAL FOR AY: 2006-07 STAND DISMISSED. THE DECISION OF MUMBAI -TRIBUNAL IN THE CASE OF DCIT V. ASHIK WOOLEN MILLS PRIVATE LIMITED REPOR TED IN (2017) 164 ITD 331(MUM-TRIB.) IS RELEVANT. WE ORDER ACCORDINGLY. 9. WITH REGARD TO GROUND NO.6 FOR AY: 2006-07, WHIC H CONCERNS ITSELF WITH DISALLOWING OF INTEREST EXPENSES TO THE TUNE OF RS . 12,82,880/- BY AO WHICH DISALLOWANCE STOOD CONFIRMED BY LEARNED CIT(A ). IT IS STATED BY LEARNED COUNSEL FOR THE ASSESSEE BEFORE US THAT LOA NS WERE RAISED BY ASSESSEE FROM SIPCOT FOR ACQUIRING PROPERTY CONSIST ING OF FACTORY LAND AND BUILDING THEREON SITUATED AT 9 INDUSTRIAL AREA II, MARAIMALAI NAGAR, INDUSTRIAL COMPLEX, MARAIMALAI NAGAR-603209 . IT IS CLAIMED BY LEARNED COUNSEL FOR THE ASSESSEE THAT THIS LOAN RAISED BY A SSESSEE FROM SIPCOT WAS REPAID BY AVAILING FRESH LOAN FROM KARUR VYSYA BANK AND PROCEEDS OF FRESH LOANS RAISED FROM KARUR VYSYA BANK WERE USED TO REPAY LOAN EARLIER RAISED FROM SIPCOT AND THUS A CLAIM IS MADE BEFORE THE BENCH THAT INTEREST PAID WAS W.R.T. BORROWINGS MADE FOR ACQUIS ITION FACTORY LAND AND BUILDING OWNED BY ASSESSEE WHICH WAS LET OUT DURING THE YEAR UNDER CONSIDERATION AND HENCE INTEREST PAID ON SUCH BORR OWINGS USED FOR ACQUIRING FACTORY LAND AND BUILDING THEREON IS TO B E ALLOWED AS DEDUCTION WHILE COMPUTING RENTAL INCOME ARISEN FROM LETTING O UT AFORESAID FACTORY ITA NOS.2172 & 2263/CHNY/2018 :- 16 -: AND BUILDING THEREON CHARGEABLE TO TAX. THE AUTHORI TIES BELOW DISALLOWED SAID INTEREST EXPENSES AS THE ASSESSEE COULD NOT PR OVE NEXUS OF BORROWING WITH THE AMOUNT SPENT FOR ACQUISITION OF FACTORY L AND AND BUILDING THEREON. THE LD.COUNSEL FOR THE ASSESSEE PLEADED B EFORE THE BENCH THAT ONE MORE OPPORTUNITY BE GRANTED TO THE ASSESSEE AND ASSESSEE WILL ESTABLISH WITH COGENT EVIDENCES THAT INTEREST BEARI NG LOANS BORROWED FROM KARUR VYSYA BANK WERE USED TO REPAY EARLIER LOANS R AISED BY ASSESSEE FROM SIPCOT AND HENCE DIRECT NEXUS CAN BE PROVED WH ICH LINK COST OF ACQUISITION OF FACTORY LAND AND BUILDING SITUATED AT 9 INDUSTRIAL AREA II, MARAIMALAI NAGAR, INDUSTRIAL COMPLEX, MARAIMALAI NA GAR-603209 WITH ULTIMATE BORROWINGS FROM KARUR VYSYA BANK ON WHICH INTEREST EXPENDITURE WAS INCURRED. IT WAS SUBMITTED THAT COGENT AND CRE DIBLE EVIDENCES WILL BE SUBMITTED BEFORE THE AO TO PROVE THAT PROCEEDS OF KARUR VYSYA BANK LOANS WERE USED FOR RE-PAYING EARLIER BORROWING FR OM SIPCOT FOR ACQUIRING FACTORY LAND AND BUILDING. OUR ATTENTIO N WAS DRAWN TO PARA 12- 15 OF APPELLATE ORDER PASSED BY LEARNED CIT(A) WHER EIN DETAILS WERE MENTIONED ABOUT THESE CONTENTIONS OF THE ASSESSEE. THE LD.DR DID NOT RAISE OBJECTION IF THE MATTER IS RESTORED TO THE FI LE OF AO FOR FRESH ADJUDICATION. UNDER THESE CIRCUMSTANCES AND KEEPIN G IN VIEW ENTIRE FACTUAL MATRIX OF THE CASE , WE RESTORE THIS ISSUE BACK TO THE FILE OF THE ASSESSING OFFICER FOR FRESH ADJUDICATION ON MERITS IN ACCORDANCE WITH LAW. WE HAVE ALREADY HELD IN PRECEDING PARAS OF THIS OR DER THAT RENTAL INCOME FROM SAID FACTORY LAND AND BUILDING LEASED OUT BY A SSESSEE ALONG WITH TWO GENERATORS SHALL BE BROUGHT TO TAX UNDER THE HEAD INCOME FROM HOUSE ITA NOS.2172 & 2263/CHNY/2018 :- 17 -: PROPERTY AND IN THAT CASE INTEREST EXPENDITURE ALL OWABILITY SHALL BE GOVERNED BY PROVISIONS OF SECTION 24(B) OF THE 1961 ACT . WE CLARIFY THAT ONUS IS NOW ENTIRELY ON THE ASSESSEE TO PROVE WITH COGENT AND CREDIBLE EVIDENCES THAT INTEREST BEARING FUNDS WERE BORROWED FROM BANKS/FI FOR THE PURPOSE OF ACQUIRING FACTORY LAND AND FACTORY BUILD ING AND DIRECT NEXUS IS TO BE PROVES, WHICH ASSETS WERE LET OUT BY THE AS SESSEE DURING THE YEAR UNDER CONSIDERATION . NEEDLESS TO SAY THAT AO SHAL L GIVE PROPER AND ADEQUATE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE IN DENOVO ADJUDICATION OF THE ISSUE AND EVIDENCES/EXPLANATION SUBMITTED BY ASSESSEE IN ITS DEFENSE SHALL BE ADMITTED BY THE AO AND THEREAFTER ADJUDICATED ON MERITS IN ACCORDANCE WITH LAW. WE CL ARIFY THAT WE HAVE NOT COMMENTED ON THE MERITS OF THIS ISSUE AND AO SHALL BE FREE TO ADJUDICATE THIS ISSUE IN DENOVO PROCEEDINGS ON MERITS IN ACCOR DANCE WITH LAW UNINFLUENCED BY ANY OF OUR OBSERVATIONS IN THIS ORD ER. THUS, GROUND NO.6 IS ALLOWED FOR STATISTICAL PURPOSES.WE ORDER ACCORD INGLY. 10. WITH RESPECT TO GROUND NO.7 RAISED BY ASSESSEE IN MEMO OF APPEAL FILED WITH TRIBUNAL FOR AY: 2006-07, THE ASSESSEE I S AGGRIEVED BY RESTRICTING OF ALLOWABILITY OF PROPERTY TAX PAYMENT TO RS. 8, 09,545/- AS AGAINST CLAIM FOR ALLOWABILITY OF PROPERTY TAX OF RS.1 2,94,380/- FILED BY ASSESSEE IN RETURN OF INCOME FILED WITH REVENUE . ON PERUSAL OF THE APPELLATE ORDER PASSED BY LEARNED CIT(A) , IT IS OBSERVED THAT THE ASSESSEE HAS EXPRESSED INABILITY TO PROVIDE EVIDENCES IN SUPPORT OF ITS CL AIM FOR PROPERTY TAX PAYMENTS AND HENCE GROUND OF APPEAL RAISED BY ASSES SEE BEFORE LEARNED CIT(A) STOOD DISMISSED BY LEARNED CIT(A) FOR AY: 20 06-07. THE LEARNED ITA NOS.2172 & 2263/CHNY/2018 :- 18 -: COUNSEL FOR THE ASSESSEE HAS ALSO EXPRESSED EVEN BE FORE US INABILITY TO PROVIDE EVIDENCES IN SUPPORT OF ITS CLAIM FOR PROPE RTY TAX PAID BY IT AND PRAYERS WERE MADE BY LEARNED COUNSEL FOR ASSESSEE F OR DISMISSAL OF THIS GROUND OF APPEAL. THE LD.DR DID NOT OBJECT FOR DISM ISSAL OF THIS GROUND OF APPEAL. AFTER HEARING BOTH THE PARTIES AND PERUSING MATERIAL ON RECORD, WE DISMISS THIS GROUND OF APPEAL NUMBER 7 FILED BY ASS ESSEE IN MEMO OF APPEAL FILED WITH THE TRIBUNAL FOR AY: 2006-07. IT IS THE ASSESSEE WHO IS CLAIMING DEDUCTION TOWARDS PROPERTY TAX PAYMENTS FR OM LEASE RENT RECEIVED BY IT ON LEASING OF THE PROPERTY AND HENC E ONUS IS SQUARELY ON THE ASSESSEE TO PROVE WITH COGENT EVIDENCES AS TO P AYMENT OF PROPERTY TAXES CLAIMED AS DEDUCTION IN ACCORDANCE WITH LAW. THE ASSESSEE MISERABLY FAILED TO FURNISH COGENT EVIDENCES CONCUR RENTLY BEFORE ALL THE AUTHORITIES INCLUDING US AND HENCE WE ARE INCLINED TO DISMISS THIS GROUND OF APPEAL . THUS, GROUND NO.7 STANDS DISMISSED.WE O RDER ACCORDINGLY. 11. IN THE RESULT, THE APPEAL FILED BY ASSESSEE IN ITA NOS.2172/CHNY/2018 FOR AY: 2006-07 STAND PARTLY AL LOWED. APPEAL OF THE ASSESSEEITA NO. 2263/CHNY/2018 FOR A Y: 2009-10 12. SINCE SIMILAR ISSUES ARE INVOLVED IN APPEAL FIL ED BY ASSESSEE FOR AY: 2009-10 AS WERE THERE IN APPEAL FILED BY ASSESSEE F OR AY: 2006-07( GROUND NUMBER 1 TO 4 AND 6 OF APPEAL FOR AY: 2006-0 7 ARE COMMON ISSUES IN AY: 2009-10) , OUR DECISION IN ITA NO. 2172/CHNY /2018 FOR AY: 2006-07 FOR AFORESAID RELEVANT GROUNDS THEREIN SHALL APPLY MUTATIS MUTANDIS TO ITA NOS.2172 & 2263/CHNY/2018 :- 19 -: APPEAL FILED BY ASSESSEE IN ITA NO. 2263/CHNY/2018 FOR AY: 2009-10.WE ORDER ACCORDINGLY. 13. IN THE RESULT, THE APPEAL FILED BY ASSESSEE IN ITA NOS.2263/CHNY/2018 FOR AY: 2009-10 STAND PARTLY AL LOWED. 14. IN THE RESULT, BOTH THE APPEAL(S) FILED BY ASS ESSEE IN ITA NOS.2172/CHNY/2018 FOR AY: 2006-07 AND ITA NO. 226 3/CHNY/2018 FOR AY: 2009-10 STAND PARTLY ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON THIS 21ST DAY O F NOVEMBER, 2019 IN CHENNAI. SD/- SD/- ( $ % . . ' ) ( DUVVURU R.L.REDDY ) ) /JUDICIAL MEMBER ( ) ( RAMIT KOCHAR ) /ACCOUNTANT MEMBER /CHENNAI, 5 /DATED: 21 ST NOVEMBER, 2019. TLN 1 /)6 76 /COPY TO: 1. . /APPELLANT 4. 8 /CIT 2. /0. /RESPONDENT 5. 6 /)) /DR 3. 8 ( ) /CIT(A) 6. + /GF