Neminath Industries Pvt Ltd., New Delhi V. ITO, New Delhi

ITA 2795/DEL/2009

• Counselvise Citation: [2009] 114 COUNSELVISE.COM (IT) 9694 (ITAT-DELHI)
• Duration Of Justice: 2 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-09-2009
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 27-08-2009
• Assessment Year: 2005-2006
• Appeal Filed On: 09-06-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R R PRASAD
• Assessee Lawyers: RAKESH GUPTA
• Keywords: Business income; Set aside

Judgement Text

ITA NO. 2795/DEL/2009 A.Y. 2005-06 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH A NEW DELHI BEFORE SHRI C.L. SETHI, JUDICIAL MEMBER AND SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER I.T.A. NO. 2795/DEL/2009 A.Y. 2005-06 M/S NEMINATH INDUSTRIES PVT. LTD. VS. ITO WARD 13(2), 1-G, 1 ST FLOOR, BHARAT NAGAR, C.R. BUILDING, IP ESTATE , NEW FRIENDS COLONY, NEW DELHI 110 002 NEW DELHI 110 025 [APPELLANT] (RESPONDENT) APPELLANT BY : SHRI RAKESH GUPTA, CA RESPONDENT BY : SHRI R.R. PRASAD, SR. DR ORDER PER SHAMIM YAHYA, AM THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDERS OF THE CIT(A) DATED 13.3.2009 AND PERTAINS TO ASSESSMENT YEAR 2005-06. 2. THE ISSUE RAISED IS THAT CIT(A) ERRED IN TREATIN G THE INCOME FROM SUB LICENSING OF THE COMMERCIAL SPACE VIZ. OFFICE PREMISES, AS INCOM E FROM BUSINESS AND PROFESSION INSTEAD OF INCOME FROM HOUSE PROPERTY. 3. IN THIS CASE THE ASSESSEE IS A COMPANY AND T WA S SET UP FOR DEALING IN CHEMICALS . DURING THE CURRENT ASSESSMENT YEAR THE ASSESSEE HAS TAKEN OFFICE PREMISES SPACE AT LE- ITA NO. 2795/DEL/2009 A.Y. 2005-06 2 MERIDIAN COMMERCIAL TOWER. THE ASSESSEE HAD RIGH T TO SUB-LEASE THE SPACE. THE ASSESSEE HAS SUB-LEASED THE SPACE AND EARNED INCOME THEREFROM. THE ASSESSEE TREATED THIS INCOME AS INCOME FROM HOUSE PROPERTY, BUT THE SAME WAS DENIED BY THE ASSESSING OFFICER. THE ASSESSING OFFICER WAS OF TH E OPINION THAT IT WAS ONE OF THE OBJECTS OF THE ASSESSEE TO TAKE ON LEASE AND TO DEAL THE SAME COMMERCIALLY OR SUB-LEASE THE SAME, HENCE HE TREATED THE INCOME AS BUSINESS I NCOME AND DENIED THE ASSESSEES CLAIM OF STANDARD DEDUCTION. 4. UPON ASSESSES APPEAL THE LD. CIT(A) NOTED THAT FOR CLAIMING INCOME FROM HOUSE PROPERTY, THE ASSESSEE MUST BE THE OWNER OF THE PRO PERTY AND IN THIS CASE THE ASSESSEE WAS NOT THE REGISTERED OWNER. FURTHER THE CIT(A) R EFERRED TO THE ASSESSES OBJECT AND CAME TO THE CONCLUSION THAT IT WAS THE INCOME FRO M BUSINESS. 5. AGAINST THIS ORDER THE ASSESSEE IS AN APPEAL BEF ORE US. LEARNED COUNSEL OF THE ASSESSEE SUBMITTED THAT ASSESSEE HAD OBTAINED OFFIC E PREMISES FOR ITS USE. BUT FINDING THE SAME EXCESSIVE IN THE INITIAL PERIODS IT HAS SU B LET THE SAME TO EARN RENTAL INCOME. LD. DR ON THE OTHER HAND RELIED UPON THE ORDER OF T HE AUTHORITIES BELOW. 6. WE HAVE HEARD THE BOTH THE COUNSELS AND PERUSED THE RECORDS. WE FIND THAT IT IS AN ADMITTED FACT OF THE CASE THAT THE ASSESSEE HAS OBTAINED OFFICE PREMISES ON LEASE AND SUB-LET THE SAME AND DERIVED INCOME THEREFROM. IN THE VIEW OF THE AUTHORITIES BELOW, IN ORDER TO DERIVE INCOME FROM HOUSE PROPERT Y, THE ASSESSEE HAS TO BE REGISTERED OWNER THEREOF. IN OUR OPINION THIS VIEW IS NOT SUSTAINABLE ON THE ANVIL OF APEX COURT DECISION DELIVERED IN THE CASE OF CIT VS . PODDAR CEMENT PVT. LTD. IN 226 ITR ITA NO. 2795/DEL/2009 A.Y. 2005-06 3 625. FURTHER THE CONTENTION THAT LETTING OUT OF O FFICE SPACE WHEN NOT REQUIRED CAN BE THE BUSINESS INCOME IS NOT SUSTAINABLE ON THE ANVIL OF DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF SMARTS (P ) LTD. VS. CIT (2008) 166 TAXMAN 53 (DELHI). IN THIS CASE IT WAS HELD THAT WHERE THE ASSESSEE IN OCCUPATION OF RENTED PREMISES SUB-LET A PORTION THEREOF AND CLAIMED THAT INCOME FROM SUCH SUB-LETTING WAS ASSESSABLE AS BUSINESS INCOME, THE DEPARTMENT WAS J USTIFIED IN ASSESSING THE SAID INCOME UNDER INCOME FROM HOUSE PROPERTY, IN VIEW OF THE FACT THAT THE ASSESSEE WAS IN FULL CONTROL IN HIS CAPACITY AS A TENANT, AND HAD EARNED INCOME BY SUB-LETTING OF THE PROPERTY. IN SITUATIONS OF THIS TYPE, THERE IS NOTHING TO SUG GEST THAT OWNERSHIP OF THE PREMISES IS ESSENTIAL FOR LEVYING TAX UNDER THE HEAD INCOME FR OM HOUSE PROPERTY. 7. IN THE BACKGROUND OF THESE AFORESAID DISCUSSION AND PRECEDENT, WE SET ASIDE THE ORDERS OF THE AUTHORITIES BELOW AND DECIDE THE ISSU E IN FAVOUR OF THE ASSESSEE. 8. IN THE RESULT, THE APPEAL FILED BY THE ASSES SEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 4 TH SEPTEMBER, 2009. SD/- SD/- [C.L. SETHI] [SHAMIM YAHYA] JUDICIAL MEMBER ACCOUNTANT MEMBER DATE: 4 TH SEPTEMBER, 2009 SRB COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR, ITAT TRUE COPY BY ORDER, DEPUTY REGISTRAR, ITAT, DELHI BENCHES ITA NO. 2795/DEL/2009 A.Y. 2005-06 4