New Horizon Logiware (P) Ltd., New Delhi V. ITO, Ward- 18(2), New Delhi

ITA 474/DEL/2018

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 2912 (ITAT-DELHI)
• Duration Of Justice: 9 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-11-2018
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2014-2015
• Appeal Filed On: 18-01-2018
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: AGAINST DATED PASSED
• Keywords: Business income; Depreciation; Business expenditure; Unabsorbed depreciation

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: SMC, NEW DELHI BEFORE SH. H.S. SIDHU, JUDICIAL MEMBER ITA NO. 474/DEL/2018 ASSESSMENT YEAR: 2014-15 NEW HORIZON LOGIWARE (P) LTD., RESHAM HOUSE, FARM NO. 9/1, AMALTAS AVENUES, WESTEND GREEN, FARM SOCIETY SAMALAKHA, NEW DELHI 110 037 (PAN: AAECN1331Q) VS. ITO, WARD 18(2), NEW DELHI (APPELLANT) (RESPONDENT) ORDER THIS APPEAL IS FILED BY THE ASSESSEE AGAINST THE OR DER DATED 09.11.2017 PASSED BY THE LD. CIT(A), 28, NEW DELHI RELATING TO ASSESSMENT YEAR 2014-15 ON THE FOLLOWING GROUNDS:- 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND THE LAW, THE ORDER PASSED BY CIT(A) UPHOLDING THE ASSESSMENT MAD E BY LD. AO FOR ASSESSMENT YEAR 2014-15 IS BAD AND ILLEG AL IN LAW. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND THE LAW, THE LD. CIT(A) HAS ERRED IN UPHOLDING THE ORDER PASSED BY ID. AO TREATING INCOME FROM LEASING OF WAREHOUSE TAXABLE U NDER THE HEAD 'INCOME FROM HOUSE PROPERTY', INSTEAD OF 'INCO ME FROM BUSINESS' AS CLAIMED BY APPELLANT, ON THE BASIS OF DOMINANT ASSESSEE BY SH. PRABHAT KUMAR, A.R. DEPARTMENT BY SH. B.S. ANANT, SR. DR. 2 OBJECT OF THE RENT AGREEMENT IGNORING THE FACT THE APPELLANT'S IS PRIMARILY ENGAGED IN THE BUSINESS OF LEASING OF WAREHOUSES. 3. THE LD. CIT(A) HAS ERRED, WHILE DISPOSING OFF T HE APPEAL, IN DISTINGUISHING THE HON'BLE SUPREME COURT JUDGEMENT IN CASE OF CHENNAI PROPERTIES & INVESTMENT LIMITED VS. COMM ISSIONER OF INCOME TAX (2015) 313 ITR 0673 (SC) AND M/S RAYA LA CORPORATION PVT LTD., VS ACIT AND APPLYING THE LAW LAID DOWN IN CASE OF RAJ DADARAKAR AND ASSOCIATES VS ACIT 394 ITR 592 WITHOUT UNDERSTANDING RATIO OF JUDGEMENT IN CASE OF RAJ DADARAKAR AND ASSOCIATES (SUPRA) CORRECTLY AND WITH OUT APPRECIATING THAT HON'BLE APEX COURT HAS NEITHER DI SSENTED WITH THE RATIO OF JUDGEMENT IN CASE OF CHENNAI PROP ERTIES AND INVESTMENT LTD. AND RAYALA CORPORATION PVT LTD. NOR IT HAS OVERRULED SUCH RATIO IN CASE OF RAJ DADARAKAR AND A SSOCIATES (SUPRA). 4. WITHOUT PREJUDICE TO GROUND NO. 2 & 3 ABOVE, TH E LD. CIT(A) HAS ERRED IN NOT ADJUDICATING UPON DISALLOWANCE OF EXPENSES AMOUNTING TO RS. 1,65,22,093 CLAIMED IN THE PROFIT & LOSS ACCOUNT CONTESTED IN SECOND PARA OF GROUND NO. 1 OF THE APPEAL IN AS MUCH AS THE SAID EXPENSE CONSIST OF EX PENSES AMOUNTING TO RS. 3,33,663/- INCURRED FOR BUSINESS P URPOSE AND AN AMOUNT OF RS. 43,553/- BEING DEPRECIATION ON THE ASSETS OTHER THAN BUILDING, RENT FROM WHICH HAS BEE N ORDERED TO BE TAXED UNDER THE HEAD INCOME FROM HOUSE PROPE RTY. 5. THE APPELLANT CRAVES LEAVE TO ADD, MODIFY, ALTE R, WITHDRAW ANY OF THE GROUND IN COURSE OF APPELLANT PROCEEDINGS. 2. THE BRIEF FACTS OF THE CASE ARE THAT ASSESSEE FILED ITS RETURN OF INCOME DECLARING NIL INCOME ON 23.09.2014 AFTER CLA IMING CARRY FORWARD UNABSORBED DEPRECIATION/BUSINESS LOSS OF RS. 51,77, 506/-. THE INCOME OF ASSESSEE COMPRISED OF RENTAL INCOME AND CONSULTANCY . DURING THE 3 ASSESSMENT PROCEEDINGS, IT WAS OBSERVED BY AO THAT THE ASSESSEE HAS PURCHASED A ALREADY RENTED WAREHOUSE IN DEHRADUN FR OM M/S. A.S. CARGO MOVERS PVT. LTD AND DECLARED THE RENTAL INCOME OF R S. 1,36,33,375/- AGAINST THE SAID PROPERTY. HOWEVER, WHILE COMPUTING THE INCOME, ASSESSEE TREATED THE SAME AS BUSINESS INCOME AND CL AIMED EXPENSES UNDER THE HEADS FINANCE COSTS, DEPRECIATION AND OTH ER EXPENSES AGGREGATING TO RS. 1,65,13,151/-. THE AO PROPOSED T HE ASSESSEE TO ASSESS THE SAID BUSINESS INCOME AS RENTAL INCOME ON THE GROUND THAT THE DOMINANT INTENTION OF LETTING OUT THE SAID WAREHOUS E IS RECEIVING RENTAL INCOME IN VIEW OF THE LEASE EXECUTED BETWEEN BOTH T HE PARTIES. THE AO DISCUSSED THE VARIOUS CLAUSES OF THE LEASE DEED AND ARRIVED AT THE CONCLUSION THAT LETTING OUT THE WAREHOUSE BY ASSESS EE WAS COVERED BY THE PROVISIONS OF SECTION 22 OF THE ACT AND INCOME RECEIVED OUT OF IT, HAS TO BE ASSESSED AS INCOME FROM HOUSE PROPERTY. CONSE QUENTLY, HE COMPUTED THE INCOME FROM WAREHOUSE AT RS. (-) 1,51, 524/- UNDER THIS HEAD AFTER ALLOWING THE STATUTORY DEDUCTION US/ 24( A) AND INTEREST EXPENSES U/S 24(B) OF THE ACT. SINCE THE RECEIPTS F ROM WAREHOUSE WAS COMPUTED BY AO UNDER THE HEAD OF INCOME FROM HOUSE PROPERTY, THE BUSINESS EXPENSES CLAIMED BY THE ASSESSEE WERE FURT HER DISALLOWED BY HIM AND NET INCOME UNDER THE HEAD BUSINESS WAS COMP UTED AT RS. 30,72,890/- AND ASSESSMENT WAS COMPLETED U/S. 143(3 ) OF THE I.T. ACT, 1961 VIDE ORDER DATED 26.09.2016. AGAINST THE SAI D ASSESSMENT ORDER DATED 26.9.2016, ASSESSEE APPEALED BEFORE THE LD. CIT(A), WHO VIDE HIS IMPUGNED ORDER DATED 09.11.2017 HAS DISMISSED TH E APPEAL OF THE ASSESSEE. AGGRIEVED BY THE IMPUGNED ORDER, ASSES SEE IS IN APPEAL BEFORE THE TRIBUNAL. 3. LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT RE VENUE AUTHORITIES ERRED IN TREATING INCOME FROM LEASING OF WAREHOUSE TAXABLE UNDER THE HEAD 'INCOME FROM HOUSE PROPERTY', INSTEAD OF 'INCO ME FROM BUSINESS' AS CLAIMED BY ASSESSEE, ON THE BASIS OF DOMINANT OB JECT OF THE RENT AGREEMENT IGNORING THE FACT THE APPELLANT'S IS PRIM ARILY ENGAGED IN THE BUSINESS OF LEASING OF WAREHOUSES. HE FURTHER SUBMI TTED THAT THE LD. 4 CIT(A) HAS ERRED, WHILE DISPOSING OFF THE APPEAL, I N DISTINGUISHING THE HON'BLE SUPREME COURT JUDGEMENT IN CASE OF CHENNAI PROPERTIES & INVESTMENT LIMITED VS. COMMISSIONER OF INCOME TAX ( 2015) 313 ITR 0673 (SC) AND M/S RAYALA CORPORATION PVT LTD., VS A CIT AND APPLYING THE LAW LAID DOWN IN CASE OF RAJ DADARAKAR AND ASSOCIAT ES VS ACIT 394 ITR 592 WITHOUT UNDERSTANDING RATIO OF JUDGEMENT IN CAS E OF RAJ DADARAKAR AND ASSOCIATES (SUPRA) CORRECTLY AND WITHOUT APPREC IATING THAT HON'BLE APEX COURT HAS NEITHER DISSENTED WITH THE RATIO OF JUDGEMENT IN CASE OF CHENNAI PROPERTIES AND INVESTMENT LTD. AND RAYALA C ORPORATION PVT LTD. NOR IT HAS OVERRULED SUCH RATIO IN CASE OF RAJ DADA RAKAR AND ASSOCIATES (SUPRA). IT WAS FURTHER SUBMITTED THAT LD. CIT(A) H AS ALSO ERRED IN NOT ADJUDICATING UPON DISALLOWANCE OF EXPENSES AMOUNTIN G TO RS. 1,65,22,093 CLAIMED IN THE PROFIT & LOSS ACCOUNT CONTESTED IN S ECOND PARA OF GROUND NO. 1 OF THE APPEAL IN AS MUCH AS THE SAID EXPENSE CONSIST OF EXPENSES AMOUNTING TO RS. 3,33,663/- INCURRED FOR BUSINESS P URPOSE AND AN AMOUNT OF RS. 43,553/- BEING DEPRECIATION ON THE AS SETS OTHER THAN BUILDING, RENT FROM WHICH HAS BEEN ORDERED TO BE TA XED UNDER THE HEAD INCOME FROM HOUSE PROPERTY. IN VIEW OF ABOVE, HE REQUESTED THAT THE APPEAL OF THE ASSESSEE MAY BE ALLOWED. 4. ON THE OTHER HAND, LD. DR RELIED UPON THE ORDER OF THE LD. CIT(A) AND STATED HE HAS PASSED A WELL REASONED ORDER, WHI CH DOES NOT NEED ANY INTERFERENCE ON OUR PART. 5. I HAVE HEARD BOTH THE PARTIES AND PERUSED THE RE CORDS ESPECIALLY THE IMPUGNED ORDER. I NOTE THAT AO HAS DISCUSSED THE F ACTS IN DETAIL AND THE RELEVANT CLAUSES OF THE LEASE DEED AND ALSO MENTION ED THAT THE SAID WAREHOUSE WAS ALREADY RENTED TO PRESENT TENANT (TUP PERWARE) BY EARLIER OWNER FROM WHOM ASSESSEE HAS PURCHASED THIS BUILDIN G IN THIS YEAR. AS PER AO, THE DOMINANT OBJECT OF THE RENT AGREEMENT I S ONLY TO ENJOY RENT- AND NOTHING MORE. ON THE OTHER HAND, THE ASSESSEE H AS PLEADED THAT THE MAIN OBJECT CLAUSE OF THE MEMORANDUM OF ASSOCIATION CLEARLY MENTIONS THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF WAR EHOUSING, TRANSPORTING 5 AND CARRIAGE OF GOODS AND TO PROVIDE STORAGE AND PR OTECTION OF GOODS. I FURTHER NOTE THAT BOTH AO AS WELL AS ASSESSEE RELIE D ON THE DECISIONS OF DIFFERENT COURTS INCLUDING APEX COURT, IN SUPPORT O F THEIR CONTENTIONS. THE ASSESSEE HAS RELIED ON THE JUDGMENT OF HON'BLE SUPR EME COURT IN THE CASE OF M/S. CHENNAI PROPERTIES AND INVESTMENT LTD CHENNAI VS CIT AND M/S. RAYALA CORPORATION PVT. LTD VS ACIT MENTIONING THAT THE HON'BLE COURT DECIDED THE ISSUE KEEPING IN VIEW THE MAIN OB JECT CLAUSE OF THE ASSESSEE AS PER MOA AND THE RENTAL INCOME EARNED BY ASSESSEE WAS TREATED AS BUSINESS INCOME NOT INCOME FROM HOUSE PR OPERTY. HOWEVER, NOW THE HON'BLE SUPREME COURT HAS SETTLED THE ISSUE BY CONSIDERING THESE TWO CASES ALONGWITH OTHER CASES DECIDED BY THEM, AS ALSO REFERRED BY AO IN THE ASSESSMENT ORDER, IN THE CASE RAJ DADARAKAR AND ASSOCIATES VS ACIT 394 ITR 592. IN THIS CASE, HON'BLE COURT, AFTE R DISCUSSING ITS EARLIER DECISIONS, HAS HELD THAT THERE MAY BE INSTANCES WHE RE A PARTICULAR INCOME MAY FALL UNDER MORE THAN ONE HEAD BUT WHERE EVER TH IS IS 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 P ROVISIONS OF SECTION 22 OF THE ACT ARE SATISFIED WITH THE PRIMARY INGRED IENT THAT THE ASSESSEE IS THE OWNER OF THE BUILDING OR LAND APPURTENANT THERE TO. IT HAS BEEN FURTHER HELD BY HON'BLE COURT THAT MERELY BECAUSE THERE IS AN ENTRY IN THE OBJECTS CLAUSE OF THE BUSINESS SHOWING A PARTICULAR OBJECT THAT WOULD NOT BE THE DETERMINATIVE FACTOR TO ARRIVE AT A CONCLUSION THAT THE INCOME IS TO BE TREATED AS INCOME FROM BUSINESS. IN THE CASE OF THE ASSESSEEE, AFTER PURCHASING THE WAREHOUSE FROM EARLIER OWNER, IT HAS BECOME THE SOLE OWNER OF THE PROPERTY. THOUGH THE OWNERSHIP HAS BEE N CHANGED ON RECORD BUT THE NATURE OF USAGE OF THE WAREHOUSE REMAINS TH E SAME. BEFORE PURCHASING THE WAREHOUSE BY ASSESSEE, THE EARLIER O WNER WAS RECEIVING THE INCOME FROM WAREHOUSE AS RENTAL INCOME AND AFTE R CHANGE OF OWNERSHIP, THE NATURE OF PAYMENTS MADE BY OCCUPIER (TUPPERWARE) REMAINS THE SAME. THUS, THE NATURE OF TRANSACTIONS OR INCOME GENERATED THROUGH THIS WAREHOUSE DID NOT CHANGE. THE BASIS TA KEN BY ASSESSEE REGARDING THE CLAUSES OF MEMORANDUM OF ASSOCIATION ALSO HOLDS NO FORCE 6 NOW AFTER THE AFORESAID DECISION OF HON'BLE SUPREME COURT. IN VIEW OF THIS, LD. CIT(A) HAS RIGHTLY HELD THAT INCOME FROM WAREHOUSE HAS TO BE ASSESSED UNDER THE HEAD INCOME FROM HOUSE PROPERTY NOT UNDER THE HEAD INCOME FROM BUSINESS AND PROFESSION. THE COMPUTATIO N MADE BY AO UNDER THE HEAD INCOME FROM HOUSE PROPERTY DETERMINI NG THE NET LOSS OF RS. 1,51,524/- WAS, THEREFORE, RIGHTLY UPHELD AND C ONFIRMED BY LD. CIT(A), WHICH DOES NOT NEED ANY INTERFERENCE ON MY PART, HENCE, I UPHOLD THE ACTION OF THE LD. CIT(A) ON THE ISSUE IN DISPUT E AND REJECT THE GROUNDS RAISED BY THE ASSESSEE. 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS DISMISSED. ORDER PRONOUNCED ON 05-11-2018. SD/- [H.S. SIDHU] JUDICIAL MEMBER DATE:05/11/2018 SRBHATNAGAR COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4.CIT (A) 5. D R, ITAT TRUE COPY BY ORDER, ASSISTANT REGISTRAR, ITAT, DELHI BENCHES 7