DCIT, Circle-6(1), V. Mayar India Ld.,

ITA 4123/DEL/2005

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 7158 (ITAT-DELHI)
• Duration Of Justice: 10 year(s) 8 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-07-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 30-05-2016
• Assessment Year: 2001-2002
• Appeal Filed On: 24-10-2005
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P DAM KANUNJNA
• Assessee Lawyers: MUKESH KUMAR BANSAL
• Keywords: Capital asset; Business income; Question of law
• Section: 260A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH E, NEW DELHI BEFORE SHRI N. K. SAINI, ACCOUNTANT MEMBER AND SMT. BEENA A. PILLAI, JUDICIAL MEMBER I.T.A. NO.4123/DEL/2005 (ASSESSMENT YEAR 2002-03) DCIT. CIRCLE 6(1), VS. MAYAR INDIA LTD., NEW DELHI 12 YAMUNA MARG, CIVIL LINES, DELHI GIR / PAN :AAACM8246P (APPELLANT) (RESPONDENT) APPELLANT BY :SHRI P. DAM KANUNJNA, SR. DR RESPONDENT BY :SHRI MUKESH KUMAR BANSAL, CA DATE OF HEARING: 02.06.2016 DATE OF PRONOUNCEMENT: 13.07.2016 ORDER PER BEENA A. PILLAI, JM: THE PRESENT APPEAL RAISED BY THE REVENUE, HAS BEEN TAKEN UP WITH THE DIRECTIONS OF HON'BLE HIGH COURT IN I.T.A.NO. 1117/2008 VIE ORDER DATED 02.04.2008. TH E HON'BLE HIGH COURT OBSERVED AS UNDER: 16. IT IS CLEAR FROM THE AFORESAID PARAGRAPH THAT TO ARRIVE AT A LEGAL CONCLUSION, FACTUAL ASPECTS HAVE TO BE ASCERTAINED. WITHOUT NOTICING THE FACTUAL ASPECTS INCLUDING THE CONTENTIONS, CLAUSES OF THE LEASE AGREEMENT AND MAINTENANCE AGREEMENT, THE TRIBUNAL HAS ERRED IN REACHING AND GIVING ITS CONCLUSIONS WITHOUT ANY DISCUSSION. INFERENCES HAVE BEEN DRAWN WITHOUT REFERRING TO THE MATERIAL/EVIDENCE. THEREFO RE, AN ERRONEOUS ORDER HAS BEEN PASSED. 17. IN VIEW OF THE AFORESAID DISCUSSION, WE ANSWER THE SECOND SUBSTANTIAL QUESTION OF LAW QUOTED ABOVE IN NEGATIVE I.E. IN FAVOUR OF THE APPELLANT-REVENUE AND 2 I.T.A.NO.4123/DEL/2005 AGAINST THE ASSESSEE AND AN ORDER OF REMIT IS PASSE D TO THE TRIBUNAL TO DECIDE THE ISSUE IN QUESTION AFR ESH AND GIVE A FINDING ON THE NATURE, CHARACTER AND TYP E OF LETTING, EXAMINE THE CONTENTIONS OF THE PARTIES WITH REFERENCE TO THE MATERIAL ON RECORD INCLUDING THE WRITTEN SUBMISSIONS MADE BY THE ASSESSEE AS WELL AS THE LEASE AND MAINTENANCE AGREEMENT DATED 25 TH AUGUST, 2000. THEREAFTER, THE TRIBUNAL SHOULD APPL Y THE LEGAL RATIO, AS EXPOUNDED BY THE SUPREME COURT IN THE CASE 'OF UNIVERSAL PLAST. LTD. (SUPRA). THE FIR ST QUESTION IS THEREFORE NOT REQUIRED TO BE ANSWERED. 2. THE ONLY ISSUE THAT NEEDS TO BE CONSIDER IS IN R ESPECT OF FACTUAL ASPECT OF LEASE AGREEMENT, AND THE NATUR E OF INCOME DERIVED FROM SUCH AGREEMENT. ON PERUSAL OF THE JUDGEMENT OF HON'BLE HIGH COURT IN ASSESSEES CASE, IT IS OBSERVED THAT HON'BLE HIGH COURT HAS DIRECTED THE I SSUE TO BE CONSIDERED IN THE LIGHT OF RATIO EXPOUNDED BY HO N'BLE SUPREME COURT IN THE CASE OF UNIVERSAL PLAST LTD. V S CIT REPORTED IN 237 ITR 454. 3. IT IS OBSERVED FORM THE RECORDS PLACED BEFORE US THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF INDENTIN G AND TRADING OF IMPORT AND SALES OF TIMBER. THE ASSESSE E WAS USING PROPERTY AT OKHLA INDUSTRIAL AREA AS COMMERCI AL ASSET. THE ASSESSEE THEN SHIFTED ITS BRANCH OFFICE AT MAYAR TOWER, 12, YAMUNA MARG, DELHI FROM F-83, OKHL A INDUSTRIAL AREA PHASE I, NEW DELHI. IT THEREFORE, L ET OUT THE INDUSTRIAL PROPERTY FOR A TEMPORARY PERIOD OF THREE YEARS TO ASL LTD. THE RENT RECEIVED FROM THE LEASE AGREEMEN T DATED 25.08.2002 WAS SHOWN UNDER THE HEAD INCOME FROM BUSINESS. THE ASSESSING OFFICER DID NOT A GREE 3 I.T.A.NO.4123/DEL/2005 WITH ASSESSEES CONTENTION AND CONSIDERED THE RENTA L INCOME UNDER THE HEAD INCOME FROM HOUSE PROPERTY. THE CONTENTION OF THE ASSESSEE BEFORE THE AUTHORITI ES BELOW WAS THAT, AS THE ASSESSEE HAS SHIFTED ITS BRA NCH OFFICE TO MAYAR TOWER, THE INDUSTRIAL PROPERTY AT O KHLA INDUSTRIAL AREA HAD BECOME SURPLUS WHICH WAS EXPLOI TED BY THE ASSESSEE, SUBJECTING IT TO LEASE AGREEMENT. THE ASSESSEE WAS ALSO GETTING MAINTENANCE CHARGES FROM THE TENANT FOR PROPER UPKEEP OF THE BUILDING AS PER THE MAINTENANCE AGREEMENT ENTERED INTO BETWEEN THE PART IES. 3.1 LD. CIT(A) AGREED WITH THE SUBMISSIONS MADE BY THE ASSESSEE AND DIRECTED THE ASSESSING OFFICER TO CONS IDER THE RENTAL INCOME UNDER THE HEAD INCOME FROM BUSIN ESS. THE COORDINATE BENCH OF THIS TRIBUNAL IN AN APPEAL BY REVENUE IN I.T.A. NO. 4123/DEL/2005, UPHELD THE FIN DINGS OF LD. CIT(A) VIDE ORDER DATED 31.10.2007. 3.2 AGGRIEVED BY THE ORDER OF THIS TRIBUNAL, THE RE VENUE PREFERRED AN APPEAL U/S 260A OF THE ACT BEFORE THE HON'BLE HIGH COURT. ON CONSIDERING THE ARGUMENTS ADVANC ED BY THE REVENUE, THE HON'BLE HIGH COURT SENT BACK THE I SSUE TO THIS TRIBUNAL FOR RE-VERIFICATION OF THE FACTS I N THE LIGHT OF DECISION PASSED BY HON'BLE SUPREME COURT IN THE CASE OF UNIVERSAL PLAST LTD. (SUPRA). 4. WE HAVE PERUSED THE ORDERS OF AUTHORITIES BELOW AS WELL AS THE ARGUMENTS PRESENTED BY BOTH THE SIDES. HON'BLE SUPREME COURT IN THE CASE OF UNIVERSAL PLAS T LTD. (SUPRA) HAS LAID THE FOLLOWING PROPOSITIONS: 4 I.T.A.NO.4123/DEL/2005 (I)NO GENERAL PRINCIPLE COULD BE LAID DOWN WHICH I S APPLICABLE TO ALL CASES AND EACH CASE HAS TO BE DECIDED ON ITS OWN FACTS AND CIRCUMSTANCES. (II)WHETHER AN INCOME FALLS UNDER ONE HEAD OR ANOTH ER HAS TO BE DECIDED ACCORDING TO THE COMMON NOTIONS O F A PRACTICAL AND REASONABLE MAN, FOR THE ACT DOES NO T PROVIDE ANY GUIDANCE IN THE MATTER. (III) IN EACH CASE, WHAT HAS TO BE SEEN IS WHETHER THE ASSET IS BEING EXPLOITED COMMERCIALLY BY THE LETTIN G OUT OR WHETHER IT IS BEING LET OUT FOR THE PURPOSE OF ENJOYING THE RENT. THE DISTINCTION BETWEEN THE TWO IN A NARROW ONE HAND HAS TO DEPEND ON CERTAIN FACTS PECULIAR TO EACH CASES. PURE AND SIMPLE. COMMERCIAL , ASSET LIKE MACHINERY, PLANT, TOOLS, INDUSTRIAL SHED S ON GODOWNS HAVING HIGH BUSINESS POTENTIAL STAND ON A DIFFERENT FOOLING FROM ASSETS LIKE LAND OR BUILDING . IV) IF AN ASSESSEE DERIVED INCOME FROM A COMMERCIAL ASSETS WHICH IS CAPABLE OF BEING USED AS A COMMERCIAL ASSET, THEN IT IS INCOME FROM HIS BUSINE SS. WHETHER HE USES THAT COMMERCIAL ASSET HIMSELF FOR LETS IT OUT TO SOMEBODY ELSE TO BE USED. THE ASSET WOULD NOT CEASE TO BE COMMERCIAL ASSET SIMPLY BECAUSE TEMPORARILY IT WAS PUT OUT OF USE OR IT WAS LET OUT TO ANOTHER PERSON FOR HIS USE. V) SO LONG AS THE COMMERCIAL ASSET IS CAPABLE OF BEING EXPLOITED AS SUCH, ITS INCOME IS BUSINESS INC OME IRRESPECTIVE OF THE MANNER IN WHICH THE ASSET IS EXPLOITED BY THE OWNER OF THE BUSINESS. HE ENTITLED TO EXPLOIT IT TO HIS BEST ADVANTAGE AND BE MAY DO SO EITHER BY USING IT HIMSELF PERSONALLY OR BY LETTING IT OUT TO SOMEBODY ELSE. (VI) IF THE COMMERCIAL ASSET IS NOT CAPABLE OF BEIN G USED AS SUCH OR AS A COMMERCIAL ASSET, THEN ITS BEI NG LET OUT TO OTHER DOES NOT RESULT IN THE ACCRUAL OF BUSINESS INCOME. 5 I.T.A.NO.4123/DEL/2005 (VII) WHEN THE ASSESSEE HAS STOPPED DOING BUSINESS ALTOGETHER AND WHEN THE ASSET CEASES TO HAVE THE CHARACTER OF BUSINESS OR COMMERCIAL ASSET'S, IT BECOMES A CAPITAL ASSET. QUA SUCH ASSET, THE ASSESSEE IS NOT CARRYING ON ANY BUSINESS. AS THE OWNER OF THE ASSET, HE MAY EXPLOIT SUCH ASSET BUT, IN SUCH CIRCUMSTANCES, INCOME WHICH HE RECEIVES IS NO LONGER BUSINESS INCOME BUT INCOME FROM PROPERTY OWNED BY HIM AND, HENCE, 'INCOME FROM HOUSE PROPERTY'. (VIII) WHEN THE ASSET IS IN THE NATURE OF LAND OR BUILDING CAPABLE OF BEING USED FOR ANY OTHER PURPOS E AND WHEN THE ASSESSEE CEASES TO USE IT IS AS A COMMERCIAL ASSET EITHER HIMSELF OR EVEN THROUGH OTHERS, THE INCOME DERIVED BY HIM BY RENTING OUT TH E SAME WOULD MADE APPROPRIATELY FALL UNDER THE HEAD 'INCOME FROM HOUSE PROPERTY' AS, LIKE ANY OTHER OWN ER OF PROPERTY, HE GETS INCOME FROM THAT PROPERTY AS OWNER. IN SUCH CASES, IT IS NOT THE FACTOTUM OF HIS BUSINESS OR COMMERCIAL ACTIVITY WHICH BRINGS INCOME TO HIM BUT IT IS HIS INVESTMENT IN PROPERTY OR HIS OWNERSHIP OF PROPERTY WHICH BRINGS INCOME TO HIM. I N SUCH CASES, LEASING OF PROPERTY ITSELF IS THE ACTIV ITY. IT IS LEASED WITH A VIEW TO PRODUCE INCOME, A TRANSACT ION QUITE APART FROM THE ORDINARY BUSINESS ACTIVITIES O F THE ASSESSEE. (IX) IN THE DESCENDING WHETHER AN ASSESSEE DEALT WI TH ITS PROPERTY AS OWNER OR AS A BUSINESSMAN OR AS A PRUDENT MAN OF COMMERCE. ONE MUST SEE NOT THE FORM WHICH IT GAVE TO THE TRANSACTION BUT TO THE SUBSTAN CE OF THE MATTER. IN WHICH THAT PROPERTY IS USED, OWNERSHIP OF PROPERTY AND LEASING IT OUT MAY BE DON E AS A PART OF BUSINESS OR IT MAY BE DONE AS A LANDOWNER. WHETHER IT IS THE ONE OR THE OTHER MUST NECESSARILY DEPEND UPON THE OBJECT WITH WHICH THE A CT IS DONE. IF THE DOMINANT OBJECT OF LEASING OUT IS INCIDENTAL TO AND FOR THE PURPOSE OF THE ASSESSEE'S BUSINESS, THE INCOME WOULD BE BUSINESS INCOME. WHAT 6 I.T.A.NO.4123/DEL/2005 HAS TO BE DISCOVERED IS WHETHER THE PROPERTY IS SUBSERVIENT TO THE MAIN BUSINESS OF THE ASSESSEE.' 4.1 IT HAS BEEN SUBMITTED BY THE LD. A.R. THAT THE INDUSTRIAL PROPERTY AT F-83, OKHLA WAS USED BY ASSE SSEE FOR ITS PRINTING PRESS BUSINESS SINCE 1986. THE LD . A.R. SUBMITTED THAT ASSESSEE HAD TEMPORARILY SHUT DOWN T HE ACTIVITY OF PRINTING PRESS AS IT HAD SHIFTED ITS BR ANCH OFFICE TO MAYAR TOWER. LD. A.R. SUBMITTED THAT THE ASSESS EE HAD LET OUT THE INDUSTRIAL PROPERTY TEMPORARILY FOR A P ERIOD OF 3 YEARS, EXCEPT FOR ONE ROOM ON THE FIRST FLOOR WHICH WAS RETAINED BY THE ASSESSEE, WHICH CONTAINED THE MACHI NERY USED FOR PRINTING PRESS ACTIVITY. 4.2 IF WE APPLY THE TESTS LAID DOWN BY THE SUPREME COURT IN UNIVERSAL PLAST LTD.'S CASE (SUPRA), TO THE FACT S OF THE PRESENT CASE, WE FIND THAT ALL THE ASSETS OF THE BU SINESS WERE NOT RENTED OUT BY THE ASSESSEE-COMPANY. IT WAS DOING THE BUSINESS OF TRADING OF IMPORT AND SALE OF TIMBER DURING THE PERIOD WHEN THE BRANCH OFFICE WAS BEING SHIFTED. IN THE INTEREST OF THE COMPANY, IT DECIDE D TO LET OUT THE PROPERTY TO M/S. ALS LTD., BY WAY OF EXPLOI TATION OF BUSINESS ASSETS, FOR MAKING PROFIT. THE ASSET WA S LET OUT, WHILE CARRYING OUT OTHER BUSINESS ACTIVITY. TH ERE WAS NOTHING ON RECORD TO SHOW THAT THE ASSESSEE HAD SOL D AWAY THE PROPERTIES OR ABANDONED ITS BUSINESS. IN T HE CIRCUMSTANCES, IN ORDER TO EXPLOIT BUSINESS ASSETS, ASSESSEE SHIFTED ITS BRANCH OFFICE. IN THIS COMMERC IAL VENTURE, THE ASSESSEE RECEIVED A HIGHER INCOME REGU LARLY 7 I.T.A.NO.4123/DEL/2005 FROM ITS COMMERCIAL ASSETS, WHICH WAS USED TO MAINT AIN THE PREMISES. THERE IS NO DISPUTE THAT THE PROPER TY UNDER CONSIDERATION, IS NOT CAPABLE OF BEING USED O NLY AS A COMMERCIAL ASSET. 4.3 IN THE JUDICIAL CITATION CITED ABOVE, IT HAS BE EN LAID DOWN THAT IN SUCH SITUATIONS THE PROPERTY UNDER CONSIDERATION WOULD NOT LOSE ITS CHARACTER OF BEING A 'COMMERCIAL PROPERTY' ONLY BECAUSE IT WAS LET OUT. THUS, IT HAS BEEN LAID DOWN THAT INCOME EARNED FROM LETTING OUT OF SUCH COMMERCIAL ASSET WOULD SQUARELY FALL IN THE DO MAIN OF BUSINESS INCOME. 4.4 THE ASSET WAS RETAINED THE CHARACTER OF PRODUCTIVE/COMMERCIAL/INDUSTRIAL ASSETS SINCE THEIR INCEPTION. THE ASSETS INCLUDED FACTORY BUILDINGS, L AND APPURTENANT THERETO ALONG WITH FUNCTIONAL PLANT AND MACHINERIES. THEREFORE, THERE CANNOT BE ANY CASE TH AT THE NATURE OF THE ASSETS HAS BEEN CHANGED. THE COMMERCI AL ASSETS EXPLOITED BY THE ASSESSEE FOR THE PURPOSE OF ITS BUSINESS REMAINED THE SAME AND ITS CHARACTER HAS NO T BEEN CONVERTED INTO A HOUSE PROPERTY OR NON COMMERC IAL ASSET. 4.5 FURTHER, ON PERUSAL OF THE LEASE AGREEMENT, PLA CED AT PAGE 105 OF THE PAPER BOOK, IT IS OBSERVED THAT THE ASSESSEE HAD GIVEN THE COMMERCIAL PROPERTY FOR A SH ORT PERIOD OF 3 YEARS ON RENTAL BASIS. THIS IS EVIDENT FROM CLAUSE 2 OF THE AGREEMENT WHICH IS REPRODUCED BELOW : 8 I.T.A.NO.4123/DEL/2005 2. THE PERIOD OF THE LEASE SHALL BE FOR A TERM OF 36 MONTHS COMMENCING FORM THE 25 TH DAY OF AUGUST, 2000 AND EXPIRING ON 24H DAY OF AUGUSTS, 2003. THE LEASE HAS AN OPTION TO RENEW THE AGREEMENT FOR A FURTHER PERIOD OF 36 MONTHS ON THE SAME TERMS AND CONDITIONS AS LAID DOWN IN THIS AGREEMENT. SUCH OPTION SHALL BE EXERCISED BY THE LESSEE 60 DAYS BEF ORE THE DATE OF THE EXPIRY OF THE AGREEMENT. THE LESSE E ALSO UNDERTAKES TO HAND-OVER VACANT AND PEACEFUL POSSESSION OF THE SAID PREMISES AFTER EXPIRY OF 6 YEARS FROM THE DATE OF THE AGREEMENT I.E. 24 TH DAY OF AUGUST, 2006. AFTER THE INITIAL PERIOD OF 3 YEAS A FRESH LEASE DEED WILL BE EXECUTED. 4.6 IT HAS BEEN SUBMITTED BY THE LD. A.R. THAT ON E XPIRY OF THIS AGREEMENT THE ASSESSEE HAS NEITHER EXTENDED LEASE WITH THE SAME PARTY NOR HAS GIVEN IT ON LEASE TO AN Y OTHER PARTY THEREAFTER. 4.7 LD. A.R. HAS SUBMITTED THAT COMMERCIAL PROPERTY WAS SUBJECTED TO LEASE TEMPORARILY DUE TO SHIFTING OF BRANCH OFFICE TO MAYAR TOWER, YAMUNA MARG, DELHI. IT HAS BEEN CATEGORICALLY RECORDED BY LD. CIT(A) THAT THE PROPERTY IS A COMMERCIAL PROPERTY AND THE ASSESSEE HAS NOT CLOSED DOWN ITS BUSINESS ACTIVITIES PERTAINING TO PRINTING PRESS. LD. A.R. HAS RELIED UPON THE DECIS ION OF COORDINATE BENCH OF THIS TRIBUNAL IN I.T.A.NO. 337/RJT/2013 IN THE CASE OF ITO VS ULTRA VISION ASSOCIATES, FOR THE ASSESSMENT YEAR 1010-11 NEW DEL HI 2011-12. THIS TRIBUNAL VIDE ORDER DATED 09.03.2016 , ON SIMILAR FACTS, HAS ALLOWED THE CLAIM OF RENTAL INCO ME TO BE TAXED UNDER T HE HEAD INCOME FROM BUSINESS BY REL YING UPON THE DECISION OF HON'BLE SUPREME COURT IN THE C ASE OF 9 I.T.A.NO.4123/DEL/2005 UNIVERSAL PLAST LTD. (SUPRA). THE HON'BLE SUPREME COURT IN UNIVERSAL PLAST LTD. (SUPRA), HAS HELD THAT IF B USINESS ASSETS ARE LET OUT TEMPORARILY WHILE ASSESSEE IS CA RRYING OUT OTHER BUSINESS ACTIVITIES, THEN IT IS THE CASE OF EXPLOITING OF BUSINESS ASSET OTHERWISE THAN EMPLOYM ENT OF THEM FOR HIS OWN USE FOR MAKING PROFITS FOR THEIR B USINESS. THE RATIO HAS BEEN FOLLOWED IN VARIOUS DECISIONS WH ICH ARE AS UNDER: I) SCIENTIFIC INSTRUMENT CO. LTD. VS CIT 14 TAXMAN.COM 157 (2011) (ALLD.) II) CIT VS NEW INDIA INDUSTSRIES LTD. 201 ITR 208 ( GUJ.) III) VYLINE GLASS WORKS LTD. 20 TAXMAN.COM 32 IV) NARAYAN MAKET COMPLEX VS ITO 21 TAXMAN.COM 325. 5. WE FIND THAT ONE OF THE ACTIVITIES OF THE ASSESS EE WAS OF PRINTING PRESS AND THE ASSETS LET OUT BY THE ASS ESSEE WERE USED TO CARRY ON THE ACTIVITY OF PRINTING PRES S. THE PROPERTY HAS BEEN TEMPORARILY LEASED TO M/S. AFL LT D. FOR A PERIOD OF 3 YEARS ONLY. 5.1 HON'BLE SUPREME COURT IN UNIVERSAL PLAST LTD. (SUPRA) HAS LAID DOWN VARIOUS TESTS TO DETERMINE TH E HEAD OF INCOME UNDER WHICH THE RENTAL INCOME IS TO BE ASSESSED. THESE TESTS INTER ALIA LAYS DOWN THE PRI NCIPLE THAT WHEN AN ASSESSEE DERIVES INCOME FROM A COMMERC IAL ASSET AND THE ASSET WOULD NOW CEASE TO BE COMMERCIA L ASSET SIMPLY BECAUE TEMPORARILY IT WAS NOT PUT TO U SE OR WAS LET OUT TO OTHER PERSON FOR HIS USE. HONBLE C OURT HELD THAT THE INCOME DERIVED WOULD BE BUSINESS INCO ME 10 I.T.A.NO.4123/DEL/2005 IRRESPECTIVE OF THE MANNER IN WHICH IT IS EXPLOITED BY THE OWNER OF BUSINESS. 5.2 IN THE PRESENT CASE, THE ASSET IS A COMMERCIAL ASSET, HAS NOT BEEN CONTROVERTED BY THE REVENUE. RESPECTF ULLY FOLLOWING THE JUDICIAL PRONOUNCEMENTS DISCUSSED ABO VE, IT IS CONCLUDED THAT THE PROPERTY UNDER CONSIDERATION LET OUT BY THE ASSESSEE IS A COMMERCIAL PROPERTY, WHICH CAN ONLY BE EXPLOITED COMMERCIALLY, THE INCOME EARNED THEREF ORE, ON ACCOUNT OF LETTING, DESERVES TO BE TAXED AS INCO ME FROM BUSINESS AND NOT AS INCOME FROM HOUSE PROPERTY. 5.3 IF AN ASSESSEE DERIVED INCOME FORM A COMMERCIAL ASSETS WHICH IS CAPABLE OF BEING USE AS A COMMERCIA L ASSET, THEN IT IS INCOME FROM HIS BUSINESS. WHETHE R HE USES THAT COMMERCIAL ASSET HIMSELF FOR LETS IT OUT TO SOMEBODY ELSE TO BE USED. THE ASSET WOULD NOT CEAS E TO BE COMMERCIAL ASSET SIMPLY BECAUSE TEMPORARILY IT W AS PUT OUT OF USE OR IT WAS LET OUT TO ANOTHER PERSON FOR HIS USE. 5.4 THE COORDINATE BENCH OF RAJKOT TRIBUNAL IN I.T. A.NO. 337/RJT/2003 AND C.O. NO.3/RJT/2004, IN CASE OF ITO VS M/S. ULTRAVISION ASSOCIATES HAS HELD AS UNDER: IF WE APPLY THE TESTS LAID DOWN BY THE SUPREME COU RT IN UNIVERSAL PLAST LTD.'S CASE (SUPRA), TO THE FACT S OF THE PRESENT CASE, WE FIND THAT ALL THE ASSETS OF TH E BUSINESS WERE NOT RENTED OUT BY THE ASSESSEE- COMPANY. IT WAS DOING THE MAIN BUSINESS OF MANUFACTURES, IMPORTS, PURCHASES AND DEALING IN SCIENTIFIC APPARATUS, CHEMICALS, CHEMICAL PRODUCTS, ARTICLES OF GLASS, METAL, WOOD, PAPER ETC., MORE OR LESS CONNECTED WITH SCIENCE, AS GIVEN IN CLAUSE 3(A) OF THE 11 I.T.A.NO.4123/DEL/2005 MEMORANDUM OF ASSOCIATION. OUT OF THE THREE PROPERTIES IN MUMBAI, THE PROPERTY IN DISPUTE WAS BEING USED FOR ITS REGIONAL OFFICE. IN THE INTEREST OF THE COMPANY, IT DECIDED TO LET OUT ONE OF ITS PROPERTIE S, TO THE CITY BANK, BY WAY OF EXPLOITATION OF BUSINESS ASSETS, FOR MAKING PROFIT. THE ASSETS WERE LET OUT, WHILE CARRYING OUT OTHER BUSINESS ACTIVITIES. THERE WAS NOTHING ON RECORD TO SHOW THAT THE ASSESSEE HAD SOLD AWAY THE PROPERTIES OR ABANDONED ITS BUSINESS ACTIVITIES. IN THE CIRCUMSTANCES, IN ORDER TO EXPLO IT BUSINESS ASSETS, AS A PRUDENT BUSINESS DECISION, TH E ASSESSEE TOOK INTEREST FREE LOAN FROM THE CITY BANK , RENTED OUT, ONE OF ITS PROPERTIES TO IT, AND SHIFTE D ITS REGIONAL OFFICE. IN THIS COMMERCIAL VENTURE, THE ASSESSEE RECEIVED A HIGHER INCOME REGULARLY FROM IT S COMMERCIAL ASSETS .... '. 5.5 SUBSEQUENTLY, HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT VS NEW INDIA INDUSTRIES LTD. REPORTED I N 201 ITR 208 HAS HELD THAT THE PROPERTY LET OUT BY ASSES SEE WAS A COMMERCIAL ASSET WHICH COULD ONLY BE EXPLOITED COMMERCIALLY AND THEREFORE, THE INCOME EARNED WAS TREATED AS BUSINESS INCOME. FURTHER, HONBLE CALCU TTA HIGH COURT IN THE CASE OF SHYAM BURLAP CO. LTD. VS CIT REPORTED IN (2016) 280 ITR 151 HAS TAKEN A VIEW THA T WHEN THE OBJECT IN MEMORANDUM PERMITTED THE ASSESSE E TO CARRY ON BUSINESS IN LETTING OUT PROPERTIES AND WHEN 85% OF THE INCOME WAS BY WAY OF DERIVING RENT FROM LEASE, THE INCOME FROM LETTING WAS CONSIDERED AS BUSINESS INCOME OF THE ASSESSEE. 5.6 RESPECTFULLY FOLLOWING THE JUDICIAL DECISIONS DISCUSSED ABOVE AND APPLYING THE TESTS LAID DOWN TH EREIN, 12 I.T.A.NO.4123/DEL/2005 IT IS CONCLUDED THAT AS THE PROPERTY UNDER CONSIDER ATION BEFORE US LET OUT BY THE ASSESSEE BEING A COMMERCIA L PROPERTY, CAN ONLY BE EXPLOITED COMMERCIALLY AND TH E INCOME EARNED THERE FROM, ON ACCOUNT OF LETTING, DE SERVES TO BE TAXED AS INCOME FROM BUSINESS. 6. IN THE RESULT, ISSUE STANDS ANSWERED IN FAVOUR O F THE ASSESSEE. ORDER PRONOUNCED IN THE OPEN COURT ON 13 TH JULY, 2016. SD./- SD./- (N. K. SAINI) (BEENA A. PILLAI) ACCOUNTANT MEMBER JUDICIAL MEMBER DATE: 13.07.2016 SP. COPY FORWARDED TO:- 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT (A)-, NEW DELHI. 5. THE DR, ITAT, LOKNAYAK BHAWAN, KHAN MARKET, NEW DELHI. TRUE COPY. BY ORDER (ITAT, NEW DELHI) 13 I.T.A.NO.4123/DEL/2005 S.NO. DETAILS DATE INITIALS DESIGNATION 1 DRAFT DICTATED ON SR. PS/PS 2 DRAFT PLACED BEFORE AUTHOR SR. PS/PS 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER AM/AM 5 APPROVED DRAFT COMES TO THE SR. PS/PS 13/7 SR. PS/PS 6 KEPT FOR PRONOUNCEMENT 13/7 SR. PS/PS 7 FILE SENT TO BENCH CLERK 18/7 SR. PS/PS 8 DATE ON WHICH THE FILE GOES TO HEAD CLERK 9 DATE ON WHICH FILE GOES TO A.R. 10 DATE OF DISPATCH OF ORDER