DCIT Circle-31 (1), New Delhi V. Bharat Udyog, New Delhi

ITA 2857/DEL/2008

• Counselvise Citation: [2011] 119 COUNSELVISE.COM (IT) 7025 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 2 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-11-2011
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 21-11-2011
• Assessment Year: 2004-2005
• Appeal Filed On: 05-09-2008
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: MRS ANUSHA KHURANA
• Keywords: Business income; Depreciation

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI A BENC H BEFORE SHRI I.P. BANSAL, JM & SHRI A.N. PAHUJA, AM ITA NO.2857/DEL/2008 ASSESSMENT YEAR:2004-05 D.C.I.T.,CIRCLE-31(1), C.R. BUILDING, I.P. ESTATE, NEW DELHI V/S . M/S BHARAT UDYOG, 8, TOLSTOY MARG, NEW DELHI [PAN : AAAFB 4330 N] APPELLANT (RESPONDENT) ASSESSEE BY NONE REVENUE BY MRS. ANUSHA KHURANA, DR DATE OF HEARING 21-11-2011 DATE OF PRONOUNCEMENT 25-11-2011 O R D E R A.N.PAHUJA:- THIS APPEAL FILED ON 5.9.2008 BY THE REVENUE AGAINS T AN ORDER DATED 16 TH JUNE, 2008 OF THE LEARNED CIT(A)-XXVI, NEW DELHI, RAISES THE FOLLOWING GROUNDS:- 1..THE LEARNED CIT(A) HAS ERRED ON FACTS BY DECIDI NG THAT A PORTION OF THE EXPENSES INCURRED BY THE ASSESSEE IN CONNECT ION WITH A PROPERTY LET OUT ON RENT, IS TO BE ALLOWED AS BUSIN ESS EXPENSES. 2.THE DECISION OF THE LEARNED CIT(A) IS ALSO ERRONE OUS IN LAW BEING CONTRARY TO THE DECISION OF THE HONBLE SUPREME COU RT IN THE CASE OF SAMBHU INVESTMENT (P) LTD. VS. CIT (2003) 263 IT R 143 (SUPREME COURT) WHEREIN IT WAS HELD THAT WHERE THE PRIMARY OBJECT WAS TO LET OUT PORTION OF PROPERTY WITH ADDITIONAL RIGHT OF USING FURNITURE AND FIXTURES AND OTHER COMMON FACILITIES, INCOME DERIVED FROM SAID PROPERTY WAS INCOME FROM PROPERTY SHOULD BE ASSESSED AS SUCH. 2. AT THE OUTSET, WE FIND THAT HEARING OF THIS APP EAL WAS INITIALLY FIXED FOR 18.8.2009, WHEN THE LD. AR ON BEHALF OF THE ASSESSE E SOUGHT ADJOURNMENT . EVEN ON THE ADJOURNED DATE OF HEARING I.E. 29.9.2009, AN D AGAIN ON 12.11.2009, ADJOURNMENT WAS SOUGHT TO 6.1.2010 SINCE THE LD. A R WAS BUSY IN ANOTHER ITA N O.2857 /DEL./2008 2 BENCH. ON 6.1.2010, THE BENCH DID NOT FUNCTION. WHE N APPEAL WAS FIXED FOR HEARING ON 23.2.2010, THE LD. DR SOUGHT ADJOURNMENT TO 24.2.2010, ON WHICH DATE THE LD. AR SOUGHT ADJOURNMENT TO 21.4.2010, WH EN THE BENCH DID NOT FUNCTION. CONSEQUENTLY, APPEAL WAS FIXED FOR HEARIN G ON 30.8.2010, WHEN THE LD. AR AGAIN SOUGHT ADJOURNMENT TO 30.11.2010. ON THAT DATE AGAIN, THE LD. AR SOUGHT ADJOURNMENT TO 9.3.2011. ON THIS DATE, THE L D. AR WAS SPECIFICALLY DIRECTED TO SUBMIT ALL THE PAPERS FILED BEFORE THE LD. CIT(A) AND THE MATTER WAS ADJOURNED TO 5.7.2011, WHEN THE BENCH DID NOT FUNCT ION. AT THE TIME OF HEARING ON 21.11.2011, NONE APPEARED ON BEHALF OF THE ASSES SEE NOR ANY REQUEST FOR ADJOURNMENT WAS FILED AND NOR EVEN THE PAPERS SUBMI TTED BEFORE THE LD. CIT(A) WERE FILED. SINCE THE MATTER WAS QUITE OLD, THE B ENCH DECIDED TO DISPOSE OF THE APPEAL AFTER HEARING THE LD. DR. 3. FACTS, IN BRIEF, AS PER RELEVANT ORDERS A RE THAT THE RETURN DECLARING INCOME OF ` ` 30,82,520/- FILED ON 01.11.2004 BY THE ASSESSEE , A FTER BEING PROCESSED ON 01.07.2005 U/S 143(1) OF THE INCOME-TAX ACT, 1961 ( HEREINAFTER REFERRED TO AS THE ACT) WAS SELECTED FOR SCRUTINY WITH THE SERVICE OF A NOTICE U/S 143(2) OF THE ACT ON 5 TH AUGUST, 2005. DURING THE COURSE OF ASSESSMENT PRO CEEDINGS, THE ASSESSING OFFICER (IN A.O. IN SHORT) NOTICED THAT THE ASSESSE E REFLECTED INCOME FROM HOUSE PROPERTY BESIDES INCOME FROM HIRING CHARGES FOR REN TING OUT INTERIOR WORK AS ALSO FURNITURE& FITTINGS UNDER THE HEAD BUSINESS INCOM E. THE ASSESSEE WAS HAVING ONLY A THREE STOREY BUILDING WITH BASEMENT AT E-27, BLOCK B-1, MOHAN CO- OPERATIVE INDL. ESTATE, NEW DELHI, ADMEASURING 1351 SQUARE YARDS. THE BUILDING HAD BEEN RENTED OUT TO FOLLOWING THREE PARTIES ; NAME OF THE TENANT RENT PAID AS PER FORM 16A[IN ` ] TDS DEDUCTED [IN ` ] ROLEX LOGISTICS INTERNATIONAL SERVICES 12,00,000 2,47,500 LEA ASSOCIATES SOUTH ASIA PVT. LTD. 47,10,000 9,65,544 ITA N O.2857 /DEL./2008 3 ROSE IT SOLUTIONS PVT. LTD 9,73,000 2,00,130 3.1 SINCE FORM 16A REVEALED RENTAL INCOME OF ` 68,83,000/- WHILE THE ASSESSEE REFLECTED GROSS RENTAL INCOME OF ONLY ` `51,46,000/- BESIDES HIRE CHARGES OF ` ` 17,37,000/-, THE AO SHOWCAUSED THE ASSESSEE TO EXP LAIN THE BASIS FOR TREATING AN AMOUNT OF ` 17,37,000/- AS BUSINESS INCOME. IN RESPONSE , THE ASSESSEE REPLIED THAT HIRE CHARGES RECEIPTS WERE FOR PROVIDI NG INTERIOR WORK, FURNITURE AND FITTINGS AND HAVE BEEN TREATED AS BUSINESS INCOME. INTER ALIA, THE ASSESSEE SUBMITTED COPY OF RENT DEED. SINCE THE ASSESSEE DID NOT FURNISH ANY EVIDENCE OF INTERIOR WORK CARRIED OUT NOR FURNISHED ANY EVIDENC E OF PURCHASE OF RAW MATERIAL FOR THE WORK DONE OR FOR PURCHASE OF FURNITURE, FI TTINGS ETC., THE AO TREATED THESE HIRE CHARGES RECEIPTS AS PART OF RENTAL INCOME . 3.2 THE AO FURTHER NOTICED THAT THE ASSESSEE CL AIMED MAINTENANCE EXPENSES OF ` `1,80,804/- BESIDES OTHER EXPENSES AGAINST HIRE CHA RGES RECEIPTS. THE MAINTENANCE EXPENSES WERE FOUND TO BE PERSONAL IN N ATURE OR CAPITAL IN NATURE NOR WERE THESE RELATED TO RENTAL INCOME RECEIVED BY THE ASSESSEE. SINCE THE ASSESSEE DID NOT SUBMIT ANY EVIDENCE OF CARRYING ON OF BUSINESS ACTIVITIES, THE AO TREATED THE HIRE CHARGES RECEIPTS OF ` `17,37,000/- AS RENTAL INCOME AND ALLOWED DEDUCTION @ 30% IN TERMS OF PROVISIONS OF SEC. 24 OF THE ACT AND DISALLOWED THE REMAINING EXPENSES.. 4. ON APPEAL, THE LEARNED CIT(A) OBSERVED THAT THE ASSESSEE ENTERED INTO VARIOUS CONTRACTS AND AGREEMENTS, WHEREUNDER FURNIT URE AND FIXTURES ETC. AND CERTAIN SERVICES RELATING TO MAINTENANCE OF INFRAST RUCTURE AND AMENITIES MENTIONED THEREIN ARE STATED TO HAVE BEEN PROVIDED BY THE ASSESSEE FOR WHICH THE THREE PARTIES PAID A FIXED AMOUNT TO THE ASSESS EE EVERY MONTH . FOR PROVIDING MAINTENANCE AND UPKEEP OF THE PREMISES, THE ASSESSE E INCURRED EXPENDITURE LIKE SALARIES TO STAFF AND OTHER MAINTENANCE RELATE D EXPENSES. ACCORDINGLY TO THE LD. CIT(A),THE AO HAS NOWHERE GIVEN THE FINDING THAT THE EXPENDITURE ON PROVIDING CERTAIN SERVICES AND FACILITIES AS PER THE TERMS OF AGREEMENT OF HIRE CHARGES HAS, ITA N O.2857 /DEL./2008 4 IN FACT, NOT BEEN INCURRED BY THE ASSESSEE. THE LD. CIT(A) POINTED OUT THAT THE RENTED PREMISES WAS COMMERCIAL PROPERTY LET OUT FOR MORE THAN 2 YEARS . WHILE REFERRING TO DECISIONS IN KARMANI PROPERTIES LTD V S. CIT (1971) 82 ITR 547 (SC), AND CIT VS. RUSSEL PROPERTIES PVT LTD. (1982) 137 ITR 473(CAL.) AND ATTUKAL SHOPPING COMPLEX (P) LTD VS CIT (2003) 259 ITR 567 (KER) , THE LD. CIT(A) OBSERVED THAT IN THE PRESENT CASE THE ASSESSEE STAT ED THAT RENTAL INCOME AND BUSINESS INCOME HAS BEEN CONSISTENTLY SHOWN OVER A NUMBER OF YEARS AND HAVE BEEN ACCEPTED BY THE DEPARTMENT AS SUCH AND MOST OF THE EXPENSES WERE ON ACCOUNT OF PROVIDING MAINTENANCE OF INFRASTRUCTURE AND PROVIDING CERTAIN FACILITIES IN TERMS OF THE AGREEMENTS ENTERED IN TO WITH THE R ESPECTIVE PARTIES. WHILE OBSERVING THAT THE AO DID NOT EXAMINE THESE EXPENSE S INDIVIDUALLY NOR FOUND ANY FALSITY IN THE ASSESSEE'S CLAIM OF THESE EXPENS ES AND REACHED THE CONCLUSION THAT THE ASSESSEE HAD NOT DONE ANY BUSINESS ACTIVIT IES DURING THE YEAR UNDER CONSIDERATION, EVEN WHEN IN THE LAST TWO YEARS SU CH INCOME HAS BEEN ASSESSED AS BUSINESS INCOME, THE LD. CIT(A) CONCLUD ED THAT THE AFORESAID DECISIONS SUPPORTED THE CLAIM OF THE ASSESSEE. IN VIEW THEREOF, THE LD. CIT(A) HELD AS UNDER: AFTER HAVING CONSIDERED ALL THE FACTS AND CIRCUMST ANCES OF THE CASE AS DISCUSSED ABOVE. IT IS SEEN THAT THE IN COME CLAIMED BY THE APPELLANT TO BE BUSINESS INCOME COMPRISES BA SICALLY OF TW O COMPONENTS; ONE RELATING TO LETTING OUT OF FURNITUR E AND FIXTURES AND, THE SECOND RELATING TO PROVIDING OF I NFRA STRUCTURE AND ITS MAINTENANCE. WITH REGARD TO FURNITURE AND FIXTU RES THE ASSESSING OFFICER HAS REJECTED THE CLAIM OF THE APP ELLANT ON THE GROUND THAT AS PER THE BALANCE SHEET THERE ARE NO S UBSTANTIAL ASSETS.WHICH COULD POSSIBLY HAVE BEEN LET OUT. THIS OBSERVATION OF THE AO IS NOT ENTIRELY CORRECT. IT IS SEEN THAT WHEREAS THE EARLIER ASSETS SHOWN IN THE BALANCE SHEET ARE COMPUTERS, EL ECTRICITY FITTINGS, FURNITURE AND FIXTURES, GENERATORS AND OT HER OFFICE EQUIPMENTS, ADDITIONS TO ASSETS HAVE BEEN MADE ON A CCOUNT OF AIR-CONDITIONER RS.23,000/-, GENERATOR SET RS.28,600/- AND BUILDING RS1L.80.000/-. THE ASSETS SHOWN TO HAVE BEEN CARRIED FORWARD FROM EARLIER YEARS ARE SHOWN AT THEIR WRITTEN DOWN VALUE [WDV] AFTER THE CLAIM OF DEPRECIATION. FROM THE DETAILS SUBMITTED BY THE APPELLANT IT IS S EEN THAT THE NET PROFIT RATIO TAKEN AS AN AGGREGATE OF RENT RECEIVED AND HIRE ITA N O.2857 /DEL./2008 5 CHARGES RECEIVED AND TAKING INTO ACCOUNT THE EXPENS ES CLAIMED AGAINST SUCH INCOME HAVE SHOWN A RISING TREND. WHER EAS THE NET PROFIT RATIO IN THE ASSESSMENT 2002-03 WAS 25.18%. FOR THE ASSESSMENT 2003--04 IT HAS BEEN SHOWN AT 39.82% AND FOR THE PRESENT YEAR UNDER CONSIDERATION, THE NET PROFIT RA TIO HAS BEEN SHOWN AT 50.63%. THE SECOND PART OF THE BUSINESS INCOME COMPRISES OF THE SERVICES PROVIDED BY THE APPELLANT TO ITS TENANTS O N ACCOUNT OF MAINTENANCE OF INFRASTRUCTURE AND PROVISION OF COMM ON AMENITIES FOR WHICH REGULAR STAFF HAS BEEN PAID SALARIES AND WAGES AND OTHER INCIDENTAL EXPENSES HAVE BEEN INCURRED. CERTA IN EXPENSES ON ACCOUNT OF SALARY AND WAGES (RS.2.16.900/-). GEN ERATOR MAINTENANCE [RS.35.090 -]. INSURANCE [RS.56331/-BUI LDING MAINTENANCE [RS.25,420/-] AND OTHER MISCELLANEOUS EXPENSES HAVE BEEN INCURRED BY THE APPELLANT IN CONNECTION W ITH THE HIRE CHARGES INCOME RECEIVED BY THE APPELLANT APART FROM DEPRECIATION AMOUNTING TO RS.5.29 LACS AND PROPERTY TAX. CONSIDERING THE ABOVE FACTS AND CIRCUMSTANCES. IT I S HELD THAT THE AO WAS NOT CORRECT IN HOLDING THAT THERE W AS NO BUSINESS INCOME IN THE APPELLANT'S CASE AND THAT THE ENTIRE INCOME WAS ON ACCOUNT OF RENT RECEIVED. IT IS HELD THAT THE INCOM E FROM HIRE CHARGES INCLUDING MAINTENANCE ETC HAS TO BE ASSESSE D AS BUSINESS INCOME OF THE APPELLANT. HOWEVER. THE EXPENSES CLAI MED BY THE APPELLANT WERE REQUIRED TO BE EXAMINED SO AS TO ASC ERTAIN WHETHER THEY WERE INCURRED WHOLLY AND EXCLUSIVELY FOR BUSIN ESS PURPOSES. FOR EXAMPLE. THE PROPERTY TAX CLAIMED BY THE APPELL ANT AT RS.1,16,304/- IN THE PROFIT AND LOSS ACCOUNT HAS BE EN ALREADY ADDED BACK BY THE APPELLANT IN THEIR COMPUTATION OF INCOME. OTHER MAIN ITEMS IN THE P & L AC ARE DEPRECIATION[5,29,08 8/-], WHICH IS ALLOWABLE. INTEREST TO PARTNERS [RS.9.00,477/-] WHI CH IS STATEDLY ASSESSED TO TAX IN THE PARTNER'S HANDS. INCOME TAX PROVISIONS [RS.11.06.900/ -] WHICH HAS ALSO BEEN ADDED BACK BY THE APPELLANT IN THE COMPUTATION OF INCOME. APART FROM THE ABOVE, GENERAL INSURANCE EXPENSES OF RS.56,331/- AND INTEREST ON C AR FINANCE AT RS.23.610/- ARE FULLY ALLOWABLE EXPENSES AGAINST BU SINESS INCOME. HOWEVER, THE AO WAS NOT JUSTIFIED IN DISALLOWING TH E ENTIRE CLAIM OF THE APPELLANT BY DISALLOWING 100% OF THE EXPENSES C LAIMED. WHEREAS THE APPELLANT HAS SHOWN RS.17.37 LACS AS RE CEIPT OF HIRE CHARGES. AS PER THE AO THE EXPENSES CLAIMED ARE APP ARENTLY TO THE TUNE OF RS.21.75 LACS AS THE AO HAS OBSERVED THAT T HIS HAS RESULTED IN A LOSS OF RS.4.38 LACS. A PERUSAL OF THE APPELLA NT'S PROFIT AND LOSS ACCOUNT, HOWEVER, REVEALS THAT THIS OBSERVATION OF THE AO IS NOT CORRECT AS THE APPELLANT HAS MADE CONSOLIDATED PROF IT AND LOSS ACCOUNT WHEREIN THE TOTAL RECEIPTS HAVE BEEN SHOWN AT ITA N O.2857 /DEL./2008 6 RS.68,83,000/- AND AFTER DEDUCTING THE EXPENSES IN CURRED, A NET PROFIT OF RS.34.84 LACS HAS BEEN SHOWN. THE ACTION OF THE AO IN MAKING A SWEEPING DISALLOWANCE OF 100% OF THE EXPEN SES CLAIMED AGAINST BUSINESS INCOME CANNOT BE UPHELD BECAUSE TH E SAME APPEARS TO BE EXCESSIVE AND BASED ON INCORRECT APPR ECIATION OF FACTS. AFTER CONSIDERATION OF ALL THE FACTS AND CIR CUMSTANCES OF THE CASE THE DISALLOWANCE IS RESTRICTED TO 50% OF THE REMAINING EXPENSES (AS LISTED ON PAGE 23-24 OF THE IMPUGNED O RDER]AFTER ALLOWING DEPRECIATION, INTEREST TO PARTNERS. PROVIS ION FOR INCOME-TAX, PROPERTY TAX. INTEREST ON CAR FINANCE AND GENERAL I NSURANCE. OTHER EXPENSES ARE GENERAL IN NATURE AND WOULD HAVE BEEN NECESSARY TO BE INCURRED EVEN IF THE APPELLANT WAS NOT CARRYING ON THE BUSINESS OF PROVIDING INFRASTRUCTURAL FACILITIES. ... 4.1 ACCORDINGLY, THE LD. CIT(A) WHILE TREATING TH E HIRE CHARGES RECEIPTS AS BUSINESS INCOME, DISALLOWED 50 % OF THE EXPENSES UN DER VARIOUS HEADS AS NARRATED ON PAGE 23-24 OF THE IMPUGNED ORDER, TOTAL LING TO 6,10,750/- AND ALLOWED THE REMAINING. 5 THE REVENUE IS NOW IN APPEAL BEFORE US AGAINST TH E AFORESAID FINDINGS OF LEARNED CIT(A).THE LEARNED DR SUPPORTED THE FINDING S OF AO WHILE CONTENDING THAT THE LD. CIT(A) WITHOUT ANALYZING THE TERMS A ND CONDITIONS OF THE RELEVANT AGREEMENTS TREATED THE HIRE CHARGES RECEIPTS AS BUS INESS INCOME AND ALLOWED VARIOUS EXPENSES EVEN WHEN IN THE RELEVANT TDS CER TIFICATES AMOUNTS HAVE BEEN SHOWN AS RENTAL INCOME FROM PROPERTY. ON THE O THER HAND , AS ALREADY STATED, NONE APPEARED ON BEHALF OF THE ASSESSEE. 6. WE HAVE HEARD THE LEARNED DR AND GONE THROUGH TH E FACTS OF THE CASE. AS IS APPARENT FROM THE AFORECITED FACTS, THE ASSES SEE FIRM, HAVING A THREE STOREYED BUILDING WITH BASEMENT AT E-27, BLOCK B-1, MOHAN CO-OPERATIVE INDL. ESTATE, NEW DELHI, ADMEASURING 1351 SQUARE YARDS, R ENTED OUT THE PREMISES TO AFORESAID THREE PARTIES. THE NATURE OF BUSINESS CA RRIED ON BY THE FIRM IN TERMS OF THE RELEVANT PARTNERSHIP DEED IS NOT KNOWN, SINCE COPY OF THE PARTNERSHIP DEED IS NOT BEFORE US .IN THE RETURN OF INCOME, THE ASSESSE E BIFURCATED THE TOTAL RENTAL INCOME OF ` 68,83,000/- REFLECTED IN FORM NO. 16A AN AMOUNT OF ` `51,46,000/- WAS SHOWN UNDER THE HEAD INCOME FROM HOUSE PROPERT Y WHILE THE REMAINING ITA N O.2857 /DEL./2008 7 AMOUNT OF ` ` 17,37,000/- UNDER THE HEAD PROFITS AND GAINS OF BU SINESS OF PROFESSION. SINCE THE ASSESSEE DID NOT FURNISH ANY EVIDENCE OF CARRYING ON OF BUSINESS , THE AO TREATED THE ENTIRE AMOUNT SHOWN IN FORM NO. 16A AS INCOME UNDER THE HEAD INCOME FROM HOUSE PROPERTY AND ACC ORDING, ALLOWED THE DEDUCTIONS UNDER THAT HEAD WHILE THE REMAINING EXPE NSES WERE DISALLOWED. ON APPEAL, THE LD. CIT(A) WITHOUT ANALYZING THE TERMS AND CONDITIONS OF RELEVANT RENT AGREEMENTS OR THE PARTNERSHIP DEED , SIMPLY A CCEPTED THE SUBMISSIONS OF THE ASSESSEE THAT HIRE CHARGES OF ` 17,37,000/- IS TO BE ASSESSED AS BUSINESS INCOME AND RESTRICTED THE DISALLOWANCE TO 50% OF T HE EXPENSES OF ` 6,10,750/- DETAILED ON PAGE 23-24 OF THE IMPUGNED ORDER. WHET HER OR NOT ANY RECEIPT IN RELATION TO IMMOVABLE PROPERTY IS TO BE ASSESSED UN DER THE HEAD PROFITS AND GAINS OF BUSINESS OF PROFESSION, HONBLE APEX COUR T IN SULTAN BROTHERS PVT. LTD. V. CIT [1964] 51 ITR 353 CONSIDERED A CASE WHEREIN TH E ASSESSEE CONSTRUCTED A BUILDING AND FILLED IT UP WITH FURNIT URE AND FIXTURES AND LET IT OUT ON LEASE FULLY EQUIPPED AND FURNISHED FOR THE PURPOSE OF RUNNING A HOTEL. THE LEASE PROVIDED FOR A MONTHLY RENT FOR THE BUILDING AND A HIRE CHARGE FOR THE FURNITURE AND FIXTURES. DEALING WITH THE SAID CASE, THE HONBLE A PEX COURT HELD THAT THE LETTING OUT OF THE SAID BUILDING DID NOT AMOUNT TO THE CARR YING ON OF A BUSINESS AND THE INCOME UNDER THE LEASE WOULD NOT, THEREFORE, BE ASS ESSED AS INCOME FROM BUSINESS. TO DECIDE SUCH AN ISSUE, THE HONBLE COUR T GAVE A GUIDELINE THAT TO COME TO A CONCLUSION ONE HAS TO FIND OUT THE ANSWER ON THREE ISSUES, NAMELY : (A) WAS IT THE INTENTION IN MAKING THE LEASE--AND IT MA TTERS NOT WHETHER THERE IS ONE LEASE OR TWO, I.E., SEPARATE LEASES IN RESPECT OF T HE FURNITURE AND THE BUILDING--THAT THE TWO SHOULD BE ENJOYED TOGETHER ? (B) WAS IT THE INTENTION TO MAKE THE LETTING OF THE TWO PRACTICALLY ONE LETTING ? (C) WOULD ONE HAVE BEEN LET ALONE, AND A LEASE OF IT ACCEPTED, WITHOUT THE OTHER ?.IF THE AN SWERS TO THE FIRST TWO QUESTIONS ARE IN THE AFFIRMATIVE AND THE LAST IN THE NEGATIVE , THEN IT HAS TO BE HELD THAT THE LETTINGS WOULD BE INSEPARABLE. 6.1 IN INDER VIJAY SINGH V. NDMC [1995] 1 AD (DEL HI) 1389, IS A DIVISION BENCH DECISION DEALING WITH DETERMINATION OF RATEABLE VAL UE FOR THE PURPOSE OF ITA N O.2857 /DEL./2008 8 ASSESSMENT OF PROPERTY TAX UNDER SECTION 3 OF THE P UNJAB MUNICIPAL ACT, 1911. BY TWO AGREEMENTS EXECUTED ON THE SAME DAY, THE PRO PERTY, FITTINGS AND FIXTURES WERE LET OUT TO THE TENANT DETERMINING TWO SEPARATE SETS OF MONTHLY RENT. BOTH THE AGREEMENTS WERE TO RUN CONCURRENTLY AND THE AGREEME NT FOR HIRE OF FITTINGS AND FIXTURES WAS TO STAND AUTOMATICALLY TERMINATED ONCE THE LEASE AGREEMENT FOR THE PROPERTY WAS TERMINATED. SECTION 3(1)(B) OF THE PUN JAB MUNICIPAL ACT, 1911, DEFINED 'ANNUAL VALUE' IN THE CASE OF ANY HOUSE OR BUILDING TO MEAN THE GROSS ANNUAL RENT WHICH SUCH HOUSE OR BUILDING TOGETHER W ITH ITS APPURTENANCES AND ANY FURNITURE THAT MAY BE LET FOR ENJOYMENT THEREWI TH. THE TERM 'RENT' WAS NOT DEFINED IN THE ACT. THE COURT TOOK JUDICIAL NOTICE OF THE PREVAILING PRACTICE OF THE PARTIES ENTERING INTO SUCH AGREEMENTS SHOWING A PAR T AS RENT FOR THE PREMISES AND PART AS RENT FOR FURNITURE AND FIXTURES WITH A VIEW TO CIRCUMVENT THE LAW RELATING TO ASSESSMENT OF HOUSE TAX. THE COURT ALSO FOUND THE TWO AGREEMENTS INTER-CONNECTED AND 'ON THE FACTS OF THE CASE' HELD THE RENT APPOINTED BY BOTH THE DEEDS TAKEN TOGETHER AVAILABLE FOR DETERMINING THE ANNUAL VALUE OF THE PREMISES. 6.2 HONBLE APEX COURT IN SHAMBHU INVESTMENT PVT. LTD VS. CIT,263 ITR 143(SC) APPROVED THE DECISION OF HONBLE CALCUTTA H IGH COURT IN CIT VS. SHAMBHU INVESTMENT PVT. LTD.,249 ITR 47(CAL.), WHER EIN IT WAS HELD : TAKING A SUM TOTAL OF AFORESAID DISCUSSIONS, IT CLEARLY APPEARS THAT MERELY BECAUSE INCOME IS ATTACHED TO ANY IMMOVABLE PROPERT Y CANNOT BE THE SOLE FACTOR FOR ASSESSMENT OF SUCH INCOME AS INCOME FROM PROPE RTY; WHAT HAS TO BE SEEN IS WHAT WAS THE PRIMARY OBJECT OF THE ASSESSEE WHILE E XPLOITING THE PROPERTY. IF IT IS FOUND, APPLYING SUCH TEST, THAT MAIN INTENTION IS F OR LETTING OUT THE PROPERTY, OR ANY PART THEREOF, THE SAME MUST BE CONSIDERED AS RENTAL INCOME OR INCOME FROM PROPERTY. IN CASE, IT IS FOUND THAT THE MAIN INTENT ION IS TO EXPLOIT THE IMMOVABLE PROPERTY BY WAY OF COMPLEX COMMERCIAL ACTIVITIES, I N THAT EVENT, IT MUST BE HELD AS BUSINESS INCOME. 6.3 IN THE LIGHT OF VIEW TAKEN IN THE AFORESA ID DECISIONS, AS IS APPARENT FROM A MERE GLANCE AT THE IMPUGNED ORDER THAT THE LD. CIT( A) DID NOT APPROACH THE ISSUE IN ITS PROPER PERSPECTIVE NOR ANALYSED THE TE RMS AND CONDITIONS OF THE RELEVANT AGREEMENTS OR PARTNERSHIP DEED IN ORDER T O ASCERTAIN THE INTENTION OF THE ASSESSEE AS TO WHETHER OR NOT THE ONLY INTENTIO N WAS TO LET OUT THE PORTION OF ITA N O.2857 /DEL./2008 9 THE PREMISES TO THE RESPECTIVE OCCUPANTS TO ENJOY T HE SPACE TOGETHER WITH THE INTERIOR WORK ,FURNITURE AND FIXTURES AND OTHER AME NITIES AND WHETHER THE PRIME OBJECT OF THE ASSESSEE UNDER THE SAID AGREEMENTS WA S TO LET OUT THE PORTION OF THE SAID PROPERTY TO VARIOUS OCCUPANTS BY GIVING TH EM ADDITIONAL RIGHT OF USING THE FURNITURE AND FIXTURES AND OTHER COMMON FACILITIES FOR WHICH RENT AS REFLECTED IN THE AGREEMENTS AND FORM NO. 16A WAS BEING PAID BY T HEM ON MONTH TO MONTH BASIS. EVEN THOUGH THE LD. CIT(A) OBSERVED THAT R ELEVANT CASE LAWS RELIED UPON BY THE ASSESSEE SUPPORT THE CASE THE ASSESSEE AND I N THE EARLIER YEARS CLAIM OF THE ASSESSEE HAS BEEN ACCEPTED, THE LD. CIT(A) DID NOT ADVERT TO THE RELEVANT FACTS AND CIRCUMSTANCES IN THOSE DECISIONS VIS--VI S FACTS AND CIRCUMSTANCES IN THE INSTANT CASE, ESPECIALLY WHEN THE AGREEMENT FO R HIRE CHARGES IS STATED TO BE CO-EXISTENT AND CO-TERMINUS WITH THE LEASE OF THE P REMISES. IT IS NOT EVIDENT AS TO WHETHER OR NOT CLAIM HAS BEEN ACCEPTED IN THE PREC EDING YEARS AFTER ANALYZING THE FACTS AND CIRCUMSTANCES OBTAINING IN THOSE YEAR S IN A SCRUTINY ASSESSMENT OR WAS ACCEPTED IN A SUMMARY MANNER, ESPECIALLY WHEN T HE ASSESSEE DID NOT PLACE BEFORE US THE RELEVANT PAPERS SUBMITTED BEFORE THE LD. CIT(A) DESPITE SPECIFIC REQUEST. 6.4 IN VIEW OF THE FOREGOING, ESPECIALLY WHEN THE LD. CIT(A) DID NOT ANALYSE THE ISSUE IN THE LIGHT OF GUIDELINES LAID DOWN BY T HE HONBLE APEX COURT IN THEIR AFORESAID DECISIONS IN SULTAN BROTHERS PVT. LTD.(SU PRA) AND SHAMBHU INVESTMENT PVT. LTD (SUPRA) NOR RECORDED ANY FINDINGS AS TO WHETHER O R NOT THE TRANSACTIONS OF LETTING OUT THE PREMISES AND THAT OF LETTING OUT THE FURNITURE AND FIXTURES AND PROVIDING OTHER AMENITIES TO THE TENANT WERE SEVERA BLE TRANSACTIONS OR THAT THE TWO TRANSACTIONS THOUGH EVIDENCED BY DIFFERENT DOC UMENTS WERE IN SUBSTANCE PART AND PARCEL OF THE SAME TRANSACTION AND WHETHE R OR NOT PROPERTY IS EXPLOITED BY WAY OF COMPLEX COMMERCIAL ACTIVITIES, WHILE THE RELEVANT AGREEMENTS AND PARTNERSHIP DEED AS ALSO FACTS AND CIRCUMSTANCES OB TAINING IN THE PRECEDING YEARS HAVE NOT BEEN PLACED BEFORE US , WE CONSIDER IT FAIR AND APPROPRIATE TO SET ASIDE THE ORDER OF THE LD. CIT(A) AND RESTORE THE M ATTER TO HIS FILE FOR DECIDING THE ISSUE RAISED IN THE GROUND NOS. 1 & 2 IN THE APPE AL BEFORE US, AFRESH IN ITA N O.2857 /DEL./2008 10 ACCORDANCE WITH LAW AFTER ANALYZING THE TERMS AND C ONDITIONS OF VARIOUS AGREEMENTS IN THE LIGHT OF VARIOUS JUDICIAL PRONOUN CEMENTS AND OF COURSE AFTER ALLOWING SUFFICIENT OPPORTUNITY TO BOTH THE PARTIES . NEEDLESS TO SAY THAT WHILE REDECIDING THE APPEAL, THE LEARNED CIT(A) SHALL PAS S A SPEAKING ORDER, KEEPING IN MIND, INTER ALIA, THE MANDATE OF PROVISIONS OF SEC. 250(6) OF THE ACT, BRINGING OUT CLEARLY AS TO WHETHER OR NOT THE TRANSACTIONS OF LETTING OUT THE PREMISES AND THAT OF LETTING OUT THE INTERIOR WORK, FURNITURE AND FIX TURES AND PROVIDING OTHER AMENITIES TO THE TENANT WERE SEVERABLE TRANSACTIONS . WITH THESE OBSERVATIONS, GROUND NOS. 1&2 IN THE APPEAL ARE DISPOSED OF. 7. IN THE RESULT, APPEAL IS ALLOWED BUT FOR STAT ISTICAL PURPOSES. SD/- SD/- (I.P. BANSAL) (A.N. PAHUJA) (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) NS COPY OF THE ORDER FORWARDED TO :- 1. DY..C.I.T., CIRCLE-31(1), NEW DELHI 2. M/S BHARAT UDYOG, 8, TOLSTOY MARG, NEW DELHI. 3. CIT(A)-XXVI, NEW DELHI. 4. CIT CONCERNED. 5. DR, ITAT,A BENCH, NEW DELHI 6. GUARD FILE. BY ORDER, DEPUTY / ASSTT.REGISTRAR ITAT, DELHI ORDER PRONOUNCED IN OPEN COURT