DCIT 1(3)(2), MUMBAI V. TILERRA LANDPRO LLP, MUMBAI

ITA 5534/MUM/2016

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 5639 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 9 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-07-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2009-2010
• Appeal Filed On: 12-09-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VIRENDRA SINGHDR
• Assessee Lawyers: RAKESH JOSHIAR
• Keywords: Business income; Business expenditure; Revised return
• Section: 143(3)

Judgement Text

, INCOME-TAX APPELLATE TRIBUNAL -JBENCH MUMBAI , , BEFORE S/SH.RAJENDRA,ACCOUNTANT MEMBER AND AMARJIT SINGH,JUDICIAL MEMBER ./I.T.A./5534/MUM/2016, / ASSESSMENT YEAR: 2009-10 ./I.T.A./5536/MUM/2016, / ASSESSMENT YEAR: 2011-12 ./I.T.A./5535/MUM/2016, / ASSESSMENT YEAR: 2012-13 ./I.T.A./6005/MUM/2016, / ASSESSMENT YEAR: 2013-14 DCIT-1(3)(2) ROOM NO.540, 5TH FLOOR AAYAKAR BHAWAN, M.K. ROAD MUMBAI-400 020. VS. M/S. TIERRA LANDPRO LLP (NOW CONVERTED FROM M/S. TIERRA LANDPRO PVT.LTD. WH ICH WAS FORMERLY KNOWN AS M/S. YAKSH TRADING CO. PVT.LTD.) 506, SHARDA CHAMBERS, 15 NEW MARINE LINES, MUMBAI-400 020. PAN:AAACY 0185 B ( /APPELLANT ) ( / RESPONDENT) / REVENUE BY: SHRI VIRENDRA SINGH-DR /ASSESSEE BY: SHRI RAKESH JOSHI-AR / DATE OF HEARING: 23/05/2018 / DATE OF PRONOUNCEMENT: 04/07/2018 /ORDER , - PER RAJENDRA, AM - CHALLENGING THE ORDERS DATED 20/06/2018 OF THE CIT( A)-3,MUMBAI,THE ASSESSING OFFICER(AO) HAS FILED PRESENT APPEALS FOR THE ABOVE MENTIONED A SSESSMENT YEARS (AY.S).ASSESSEE- COMPANY IS ENGAGED IN THE BUSINESS OF TEXTILE TRAD ING.THE DETAILS WITH REGARD TO RETURNS FILED , RETURNED INCOMES,DATES OF ASSESSMENT,ASSESSED INCOM ES ETC. IS TABULATED BELOW:- A.Y. ROI FILED ON RETURNED INCOME ASSESSMENT DT. AS SESSED INCOME 2009-10 21/09/2009 RS.49,79,860/- 18/11/2011 RS.1.0 3 CRORES 2011-12 23/09/2011 RS.50,04,030/- 07/01/2014 RS.1.2 5 CRORES 2012-13 24/09/2012 RS.73,44,401/- 29/01/2015 RS.1.3 1 CRORES 2013-14 (REVISED ROI 30/09/2013) REVISED ROI. RS. 80,07,200/- 16/03/2016 RS.1.41 CRORES ITA./5534/MUM/2016,AY. 2009-10 2. FIRST EFFECTIVE GROUND OF APPEAL ABOUT TREATING LIC ENSE FEE OF RS. 1,45,67,300/- AS INCOME FROM BUSINESS AS AGAINST INCOME FROM HOUSE PROPERTY .DURING THE ASSESSMENT PROCEEDINGS, THE AO OBSERVED THAT THE RETURNED INCOME COMPRISED OF I NCOME FROM LEAVE & LICENSE OF RS. 1, 45,67,300/-AND OTHER INCOME OF RS. 9,99,783/-,THAT THE APPELLANT HAD CLAIMED ADMINISTRATIVE AND GENERAL EXPENDITURE OF RS.1,06,91,783/-.HE TREA TED THE ENTIRE RENT RECEIPT AS INCOME FROM HOUSE PROPERTY,AFTER ALLOWING STANDARD DEDUCTION U/ S 24(A)OF THE ACT.HE ALSO DID NOT ALLOW ITA NO.5534-36/M/16;6005/M/16 M/S. TIERRA LANDPRO LLP 2 THE ADMINISTRATIVE EXPENSES AS CLAIMED BY THE APPEL LANT.HE MADE REFERENCE TO THE PROVISIONS OF SECTION 269UA(F)READ WITH SECTION 27(IIIB) OF TH E ACT AS WELL AS TO THE CASE OF M/S SHAMBHU INVESTMENT LTD. 3. AGGRIEVED BY THE ORDER OF THE AO,THE ASSESSEE PREFE RRED AN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY(FAA) AND RAISED ADDITIONAL GROU NDS.HE CALLED FOR A REMAND REPORT FROM THE AO.AFTER CONSIDERING THE AVAILABLE MATERIAL,HE HELD THAT THE ASSESSEE HAD TAKEN PROPERTY ON LEASE FROM R.J. WOOD FOR OFFICE PURPOSES MEASURI NG 1770SQFT IN THE 7TH FLOOR OF NEW MAKER CHAMBER, MUMBAI,THAT SIMILAR PORTION OF THE SAID PREMISES WAS ACQUIRED BY ANOTHER TENANT M/S BHUVAN LEASING & INFRASTRUCTURE PVT. LTD.(BHUVAN),THAT BHUVAN HAD SH OWN THE INCOME FROM SUBLETTING INCOME AS INCOME FROM PROFIT S AND GAINS OF BUSINESS,THAT THE TRIBUNAL WHILE DECIDING THE ISSUE IN THEIR CASE FOR AY 2006- 07 AND 2007-08 HAD HELD THAT RENTAL INCOME SHOULD BE ASSESSED AS BUSINESS INCOME,THAT T HE TRIBUNAL HAD ALSO HELD THAT THE RELATED EXPENDITURE HAS TO BE ALLOWED.FOLLOWING THE DECISIO N OF THE TRIBUNAL IN THE CASE OF BHUVAN, HE HELD THAT INCOME FROM THE SAID PROPERTY WAS TO B E TREATED AS INCOME FROM PROFITS AND GAINS OF BUSINESS INSTEAD OF INCOME FROM HOUSE PROPERTY O R INCOME FROM OTHER SOURCES,THAT EXPENSES WERE TO BE ALLOWED,THAT SAME WERE INCURRED WHOLLY AND EXCLUSIVELY FOR BUSINESS PURPOSES. 4. BEFORE US,THE DEPARTMENTAL.REPRESNETATIVE(DR)ARGUED THAT IN THE EARLIER ASSESSMENT YEARS THE CASE WAS ASSESSED TWICE U/S.143(3)OF THE ACT,TH AT IN ALL EARLIER YEARS INTIMATION U/S.143(1) WAS ISSUED,THAT AFTER AY.2003-04 NO SCRUTINY OF FAC TS WAS DONE,THAT FACTS HAVE CHANGED IN THE YEAR UNDER CONSIDERATION,THAT THE AO HAD RIGHTLY AS SESSED THE DISPUTED AMOUNT UNDER THE HEAD INCOME FROM HOUSE PROPERTY,THAT THE FACTS OF BHUVAN WERE DIFFERENT.THE AUTHORISED REPRESENTATIVE(AR)STATED THAT THERE WAS NO DIFFEREN CE IN THE FACTS OF BHUVAN AND THE ASSESSEE, THAT IN THAT MATTER WHILE DECIDING THE AP PEALS FOR THE AY.S.2006-07 AND 2007-08, THE TRIBUNAL HAD HELD THAT LEASE RENT WAS TO BE ASSESSE D AS BUSINESS INCOME. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US.WE HAVE COMPARED THE MEMORANDUM OF ARTICLES OF BOTH THE COMPANIES AN D THE FACTS OF THE CASE.WE FIND THAT THE AO HAS FAILED TO POINT OUT THE DIFFERENCES BETWEEN BOTH THE MATTERS.THE TRIBUNAL ON SIMILAR FACTS,IN THE CASE OF BHUVAN,HAS TAKEN AN INFORMED D ECISION.WE ARE REPRODUCING THE ORDER OF M/S BHUVAN LEASING & INFRASTRUCTURE PVT. LTD.(ITA/2 1/MUM/2012 AY.2006-07,DTD.30/06/ 2015)AND IT READS AS UNDER: ITA NO.5534-36/M/16;6005/M/16 M/S. TIERRA LANDPRO LLP 3 THE ASSESSEE IS IN APPEAL FOR ASSESSMENT YEAR 2006- 07 (ITA NO.21/MUM/2012) AGGRIEVED BY THE IMPUGNED ORDER DATED 09/11/2011 OF THE LD. FIRST AP PELLATE AUTHORITY, MUMBAI, WHEREAS, THE REVENUE IS IN APPEAL FOR APPEAL FOR AY 2007-08 (ITA NO.6423 /MUM/2012). 2. FIRST, WE SHALL TAKE UP APPEAL OF THE ASSESSEE ( AY. 2006-07), WHEREIN, FIRST GROUND PERTAINS TO CONFIRMING THE ASSESSMENT ORDER IN TREATING THE LIC ENCE FEE AS INCOME FROM OTHER SOURCES INSTEAD OF BUSINESS INCOME, WITHOUT APPRECIATING THE FACT . AT THE OUTSET, THE LD. COUNSEL FOR THE ASSESSEE, SHRI RAKESH JOSHI, CLAIMED THAT THE IMPUGNED ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE ORDER OF THE TRIBUNAL FOR AY 2003-04 AND 2005-06, O RDER DATED 10/06/2015. THE LD. COUNSEL PRODUCED THE PHOTOCOPY OF THE ORDER OF THE TRIBUNAL . HOWEVER, MS. RADHA K.NARANG, LD. DR, DEFENDED THE CONCLUSION ARRIVED AT IN THE IMPUGNED ORDER. 2.1. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND P ERUSED THE MATERIAL AVAILABLE ON RECORD. IN VIEW OF THE ABOVE, WE ARE REPRODUCING HEREUNDER THE RELEVANT PORTION FROM THE AFORESAID ORDER OF THE TRIBUNAL, DATED 10/06/2015, FOR READY REFERENCE :- 4. THE ISSUE ARISING IN THE PRESENT APPEAL IS IN RELATION TO ASSESSABILITY OF LEAVE AND LICENCE INCOME RECEIVED BY ASSESSEE AND WHETHER THE SAME HA S TO BE ASSESSED AS PROFIT AND GAINS OF BUSINESS OR AS INCOME FROM OTHER SOURCES. THE TRIBU NAL, IN THE FIRST ROUND OF APPEAL, VIDE ORDER DATED 31ST OCTOBER, 2008 HAD APPRECIATED THE FACTS OF THE CASE WHEREIN THE ASSESSEE UNDER AN AGREEMENT DATED 16.11.2000 STYLED AS LEAVE AND LICENCE AGREEMENT GRANTED LICENCE TO M/S. AMERICAN EXPRESS BANK LTD. TO USE THE PREMISES OF WHICH IT WAS THE LESSEE. THE LICENCE FEE WAS FIXED AT RS.13,66,875/- AS QUARTERLY LICENC E FEE. THE SAID PREMISES ALONG WITH FIXTURES AND FITTINGS WERE LICENSED TO THE PARTY FOR A PERIO D OF THREE YEARS COMMENCING FROM 01.01.2001 AND EXPIRING ON 31.12.2003. THE ASSESSEE HAD DECLARED THE SAID LICENCE FEE AS INCOME FROM BUSINESS AND CLAIMED CERTAIN EXPENSES A GAINST IT. ON THE OTHER HAND, THE AO HAS SHOW CAUSED THE ASSESSEE AS TO WHY THE SAME SHOULD NOT BE ASSESSED AS INCOME FROM OTHER SOURCES. THE EXPLANATION OF THE ASSESSEE IN THIS RE GARD WAS THAT UNDER CLAUSE 53, 109, 129 AND 131 OF THE OBJECT CLAUSE OF MEMORANDUM OF ASSOCIATI ON OF ASSESSEE, ASSESSEE WAS PERMITTED TO PURSUE BUSINESS OF TAKING ON LEASE AND EARN INCO ME FROM THE SAME. ANOTHER PLEA RAISED BY THE ASSESSEE WAS THAT IT HAD TAKEN ON LEASE COMMERC IAL ASSETS WHICH IN TURN WERE LEASED OUT TO DERIVE INCOME AND THE SAID INCOME WAS TO BE ASSESSE D AS BUSINESS INCOME. BOTH THE AO AND THE CIT(A) TREATED THE SAID INCOME AS INCOME FROM O THER SOURCES AS THE ASSESSEE WAS MERELY SUBLETTING THE PROPERTY AND THERE WAS NO BUSINESS A CTIVITY INVOLVED IN SUCH SUBLETTING. THE TRIBUNAL, VIDE ORDER DATED 31ST OCTOBER, 2008, UPHE LD THE ORDERS OF THE AUTHORITIES BELOW HOLDING THAT ASSESSEE HAD NOT BEEN ABLE TO DEMONSTR ATE AS TO HOW THE ACTIVITY OF SUBLETTING WAS DONE IN A SYSTEMATIC AND ORGANIZED MANNER, SO AS TO CONSTITUTE CARRYING ON OF BUSINESS. ANOTHER POINT NOTED BY THE TRIBUNAL IN ASSESSEES C ASE WAS THAT THE DIRECTORS REPORT DATED 26.08.2003 QUOTED THAT THE LICENCE AGREEMENT WITH A MERICAN EXPRESS BANK CAME TO AN END ON 31.03.2003 AFTER WHICH A NEW LICENCE AGREEMENT HAD BEEN ENTERED INTO BY THE ASSESSEE WITH THE BRITISH DEPUTY HIGH COMMISSION, MUMBAI. AS PER THE TRIBUNAL THIS WAS AN ACT OF SUBLETTING BY THE ASSESSEE AND EVEN THE LIST OF FIX TURES AND FITTINGS PROVIDED TO THE LICENSEE IN THE PREMISES DO NOT FIND PLACE IN THE LEAVE AND LIC ENCE AGREEMENT AND EVEN OTHERWISE PROVISIONS OF SUCH ITEMS WOULD NOT MAKE THE INCOME IN QUESTION AS BUSINESS INCOME. 6. THE HON'BLE HIGH COURT (SUPRA), ON AN APPEAL FILED BY T HE ASSESSEE, NOTED THAT ASSESSEE HAD RETURNED THE INCOME FROM ASSESSMENT YEAR 1993-94 TO 2000-01 TREATING RENTAL/INCENSING INCOME AS ASSESSABLE UNDER THE HEAD PROFITS AND GA INS OF BUSINESS, WHICH IN TURN WAS ACCEPTED BY THE REVENUE. IT IS ALSO NOTED BY THE HO N'BLE HIGH COURT THAT ASSESSMENT FOR ASSESSMENT YEARS 1993-94 TO 2001-02 WERE COMPLETED UNDER SECTION 143(3) OF THE ACT AND THE INCOME WAS ASSESSED IN THE HANDS OF THE ASSESSEE AS INCOME FROM BUSINESS. IN THE ABSENCE OF ANY DISTINGUISHING FEATURES BROUGHT IN THE CASE, TH E HON'BLE HIGH COURT DIRECTED THE TRIBUNAL TO RECONSIDER ITS DECISION HAVING DUE REGARD TO THE CIRCUMSTANCES OF THE CASE. THE RELEVANT FINDINGS OF THE HON'BLE HIGH COURT ARE AS UNDER: - 2. THE APPEAL PERTAINS TO ASSESSMENT YEAR 2003-04. THE ISSUE BEFORE THE TRIBUNAL ON THE FIRST QUESTION WAS WHETHER INCOME RECEIVED FROM LIC ENSING OF IMMOVABLE PROPERTY BELONGING TO THE ASSESSEE CAN BE ASSESSED AS INCOME FROM BUSINESS OR AS INCOME FROM ITA NO.5534-36/M/16;6005/M/16 M/S. TIERRA LANDPRO LLP 4 OTHER SOURCES. THE ASSESSEE SUBMITTED THAT FROM ASS ESSMENT YEARS 1993-94 TO 2000-01 THE RETURNED INCOME TREATING THE RENTAL/LICENSING INCOM E AS ASSESSABLE UNDER THE HEAD OF PROFIT AND GAINS OF BUSINESS WAS ACCEPTED BY THE RE VENUE. FOR ASSESSMENT YEARS 1993-04 AND 2001-02 THE ASSESSMENTS WERE COMPLETED UNDER SE CTION 143(3) WHEREBY THE ASSESSING OFFICER HAD ACCEPTED THE SUBMISSION THAT THE LICENC E FEES RECEIVED AS INCOME FROM OTHER SOURCES AS IT IS INCOME FROM BUSINESS ASSESSED IN T HE HANDS OF THE ASSESSEE FROM YEAR TO YEAR. IT WAS FURTHER POINTED OUT BY THE LEARNED A.R . FOR THE ASSESSEE THAT IN ASSESSMENT YEARS 1993-94 AND 2001-02, ASSESSMENT WAS COMPLETED UNDER SECTION 143(3) OF THE ACT WHEREIN SIMILAR INCOME FROM LEAVE AND LICENCE AGREE MENT WAS ASSESSED AS INCOME FROM BUSINESS. THE LEARNED A.R. FOR THE ASSESSEE BROUGHT TO OUR ATTENTION COPY OF ASSESSMENT ORDER RELATING TO ASSESSMENT YEAR 1993-94 ALONG WIT H ASSESSMENT ORDER RELATING TO ASSESSMENT YEAR 2001-02 PLACED AT PAGES 32 TO 49 OF THE PAPER BOOK. THE LEARNED A.R. FOR THE ASSESSEE FURTHER REFERRED TO THE OBSERVATION OF THE TRIBUNAL IN PARA 4 IN WHICH IT WAS ACCEPTED THAT AS PER THE OBJECT CLAUSE OF MEMORANDU M ASSOCIATION OF THE ASSESSEE, THE ASSESSEE, IN ORDER TO ITS BUSINESS ACTIVITIES CAN T AKE ON LEASE AND EARN INCOME ON RELEASING THE SAME.IT WAS FURTHER POINTED BY HIM TH AT THE HON'BLE SUPREME COURT IN THE CASE OF CHENNAI PROPERTIES & INVESTMENT LTD. VS. CI T REPORTED IN 56 TAXMANN.COM 456 ON SIMILAR FACTS, LAID DOWN THE PROPOSITION THAT WHERE AS PER THE OBJECT CLAUSE IN THE MEMORANDUM OF ASSOCIATION, WAS TO ACQUIRE AND HOLD PROPERTIES WHICH IN TURN WERE LET OUT, THEN THE INCOME ARISING FROM SUCH LETTING OUT WAS ASSESSABLE IN THE HANDS OF THE ASSESSEE AS INCOME FROM BUSINESS. 9. ON THE OTHER HAND, THE LEARNED D.R. FOR THE REVE NUE PLACED RELIANCE ON THE ORDER PASSED BY THE CIT(A). 10. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. IN THE FACTS OF THE PRESENT CASE ASSESSEE, AS PER ITS OBJECT CLAUSE IN THE MEMO RANDUM OF ASSOCIATION, WAS PERMITTED TO PERFORM BUSINESS OF TAKING ON LEASE AND EARNING INC OME FROM THE SAME. IT HAD TAKEN PREMISES ON LEASE WHICH IN TURN WAS SUBLET TO M/S. AMERICAN EXPRESS BANK. THE ISSUE ARISING BEFORE US IS IN RELATION TO ASSESSABILITY OF SUCH LEASE INCOM E EARNED BY THE ASSESSEE. THE CLAIM OF THE ASSESSEE BEFORE THE AUTHORITIES BELOW AND EVEN BEFO RE US IS THAT SUCH INCOME BEING IN CONTINUATION OF ITS OBJECT AS PER THE MEMORANDUM OF ASSOCIATION, IS TO BE ASSESSED AS BUSINESS INCOME IN ITS HANDS. WHEREAS THE CASE OF T HE REVENUE IS THAT ASSESSEE WAS ENGAGED IN SUBLETTING OF THE PROPERTY, WHICH IN TURN IT HAD OBTAINED ON LEASE AND HENCE THE INCOME ARISING THERE FROM IS ASSESSABLE IN THE HANDS OF TH E ASSESSEE AS INCOME FROM OTHER SOURCES, SINCE THE ASSESSEE WAS NOT THE OWNER OF THE PROPERT Y. THE ASSESSEE HAD ENTERED INTO LEASE AGREEMENT WITH AMERICAN EXPRESS BANK IN THE EARLIER YEAR AND ADMITTEDLY THE RENTAL INCOME DECLARED BY THE ASSESSEE WAS ASSESSED AS BUSINESS I NCOME IN THE HANDS OF THE ASSESSEE AFTER ALLOWING THE RELATED BUSINESS EXPENDITURE CLAIMED. THE SAID DECISION WAS ACCEPTED BY THE AUTHORITIES BELOW FROM ASSESSMENT YEAR 1993-94 ONWA RDS FOR WHICH THE ASSESSMENT WAS COMPLETED UNDER SECTION 143(3) OF THE ACT AND COPY OF THE ASSESSMENT ORDER IS FILED AT PAGES 32-42 OF THE PAPER BOOK. SIMILARLY, FOR ASSESSMENT YEAR 2001-02 THE ASSESSMENT WAS COMPLETED UNDER THE HEAD INCOME FROM BUSINESS IN TH E ASSESSMENT ORDER PASSED UNDER SECTION 143(3) OF THE ACT, WHICH IN TURN IS PLACED AT PAGES 43 TO 49 OF THE PAPER BOOK. THE ASSESSEE CONTINUES TO EARN INCOME FROM SAME LEASE AGREEMENT AS IN THE PAST AND THE INCOME DECLARED DURING THE YEAR UNDER CONSIDERATION WAS RECEIVED FR OM AMERICAN EXPRESS BANK, WHICH WILL ALSO BE SUB-LESSEE IN THE EARLIER YEARS. THE HON'BL E HIGH COURT, WHILE ADJUDICATING THE APPEAL OF THE ASSESSEE, HAD NOTED ALL THE ABOVE SAID FACTS AND ALSO NOTED THAT THERE WERE NO DISTINGUISHING FEATURES BEFORE THE TRIBUNAL TO JUST IFY IN GIVING A DIFFERENT TREATMENT FOR THE ASSESSMENT YEAR IN QUESTION, WHEREAS SIMILAR INCOME WAS ASSESSED AS INCOME FROM BUSINESS IN THE HANDS OF THE ASSESSEE IN THE PRIOR YEARS. ON VE RIFICATION OF THE RECORDS AVAILABLE WE FIND THAT IN ASSESSMENT YEARS 1993-94 AND 2001-02 THE IN COME HAD BEEN ASSESSED UNDER THE HEAD INCOME FROM BUSINESS. THOUGH THE HON'BLE HIGH COURT HAD RESTORED THE ISSUE BACK TO THE FILE OF THE TRIBUNAL BUT WITH THE DIRECTION THAT THE SAI D ISSUE BE DECIDED WITH REGARD TO THE CIRCUMSTANCES OF THE CASE. 11. IN THE FACTS OF THE PRESENT CASE ASSESSEE HAD L EASED OUT THE PREMISES TO AMERICAN EXPRESS BANK LTD. W.E.F. OCTOBER 1992. THE SAID LEASE AGREE MENT CONTINUED UPTO 31.03.2003 AND WAS ITA NO.5534-36/M/16;6005/M/16 M/S. TIERRA LANDPRO LLP 5 IN APPLICATION DURING THE FINANCIAL YEAR 2002- 03, I.E. IN THE YEAR WHICH IS IN APPEAL BEFORE US. THE SAID LEASING OF THE PREMISES BY THE ASSESSEE WA S AS PER THE OBJECTS PROVIDED IN MEMORANDUM OF ASSOCIATION. A PERUSAL OF THE EARLIER ORDER PASSED BY THE TRIBUNAL IN ASSESSEES OWN CASE REFLECTS THAT THE TRIBUNAL, VID E PARA 4 OF ITS ORDER HAD ACKNOWLEDGED THAT UNDER CLAUSE 53, 109, 129 AND 131 OF THE OBJECT CLA USE (OTHER OBJECTS) OF MEMORANDUM OF ASSOCIATION OF THE ASSESSEE, ASSESSEE WAS PERMITTED TO PURSUE THE BUSINESS OF TAKING ON LEASE AND EARNING INCOME FROM THE SAME. WHERE IT IS THE I NTENTION OF THE ASSESSEE TO LEASE OUT VARIOUS PREMISES AND THEN SUBLET THE SAME ON LEAVE AND LICENCE BASIS TO DIFFERENT PARTIES, THEN SUCH ACTIVITY CARRIED ON BY THE ASSESSEE IN LINE WI TH ITS OBJECTS IS BUSINESS ACTIVITY UNDERTAKEN BY THE ASSESSEE. THE INCOME ARISING FROM SUCH EXPLO ITATION OF THE ASSETS WHICH HAD BEEN TAKEN BY THE ASSESSEE ON LEASE AND HAD BEEN FURTHER SUBLE T BY IT IS A SYSTEMATIC AND ORGANIZED ACTIVITY OF CARRYING ON ITS BUSINESS. UNDOUBTEDLY, ASSESSEE WAS NOT THE OWNER OF THE PREMISES BUT WAS ONLY A LESSEE OF THE PREMISES, WHICH IN TUR N HAD BEEN SUBLET BY THE ASSESSEE WITH THE INTENTION OF EXPLOITING THE SAME AND THE RECEIPTS A RISING THERE FROM ARE ASSESSABLE IN THE HANDS OF THE ASSESSEE AS INCOME FROM BUSINESS AND THE NEC ESSARY RELATED EXPENDITURE HAS TO BE ALLOWED AS DEDUCTION IN THE HANDS OF THE ASSESSEE. 12. THE HON'BLE SUPREME COURT IN THE CASE OF CHENNA I PROPERTIES AND INVESTMENT LTD. (SUPRA) HAS APPRECIATED THE FACTS BEFORE IT, WHEREIN THE AS SESSEE HAD ACQUIRED PROPERTIES IN THE CITY OF MADRAS AND IN TURN LET OUT THOSE PROPERTIES AND THE RENTAL INCOME RECEIVED BY IT WAS SHOWN AS INCOME FROM BUSINESS, IT WAS HELD THAT WHERE MAIN O BJECT OF THE ASSESSEE COMPANY AS PER ITS MEMORANDUM OF ASSOCIATION WAS TO ACQUIRE PROPERTIES AND TO LET OUT THOSE PROPERTIES AS WELL AS MAKE ADVANCES UPON THE SECURITY OF LAND AND BUIL DING, THEN IT WAS HELD THAT WHAT WE EMPHASIS IS THAT HOLDING THE AFORESAID PROPERTIES A ND EARNING INCOME BY LETTING OUT THESE PROPERTIES IS THE MAIN OBJECTIVE OF THE COMPANY. THE HON'BLE SUPREME COURT, HOWEVER, NOTED THAT IN T HE RETURN OF INCOME THE ENTIRE INCOME WHICH HAD ACCRUED AND ASSESSED IN THE HANDS OF THE ASSESSEE WAS FROM LETTING OUT OF THE SAID PROPERTY AND THERE WAS NO OTHER INCOME ARISING TO THE ASSESSEE. THE HON'BLE SUPREME COURT MADE REFERENCE TO THE RATIO LAID DOWN BY THE CONSTITUTION BENCH OF THE APEX COURT IN THE CASE OF SULTAN BROTHERS (P) LTD. VS. CIT [(1964) (5) SCR 807] AND THE RATIO LAID DOWN IN THE CASE OF KARANPURA DEVELOPMEN T CO. LTD. VS. CIT REPORTED IN 44 ITR 362 (SC) AND OBSERVED AS UNDER: - 8.BEFORE WE REFER TO THE CONSTITUTION BENCH JUDGME NT IN THE CASE OF SULTAN BROTHERS (P) LTD., WE WOULD BE WELL ADVISED TO DISCUSS THE LAW LAID DO WN AUTHORITATIVELY AND SUCCINCTLY BY THIS COURT IN 'KARANPURA DEVELOPMENT CO. LTD. V. COMMISS IONER OF INCOME TAX, WEST BENGAL' [44 ITR 362 (SC)]. THAT WAS ALSO A CASE WHERE THE COMPA NY, WHICH WAS THE ASSESSEE, WAS FORMED WITH THE OBJECT, INTER ALIA, OF ACQUIRING AND DISPO SING OF THE UNDERGROUND COAL MINING RIGHTS IN CERTAIN COAL FIELDS AND IT HAD RESTRICTED ITS AC TIVITIES TO ACQUIRING COAL MINING LEASES OVER LARGE AREAS, DEVELOPING THEM AS COAL FIELDS AND THE N SUB-LEASING THEM TO COLLIERIES AND OTHER COMPANIES. THUS, IN THE SAID CASE, THE LEASING OUT OF THE COAL FIELDS TO THE COLLIERIES AND OTHER COMPANIES WAS THE BUSINESS OF THE ASSESSEE. THE INC OME WHICH WAS RECEIVED FROM LETTING OUT OF THOSE MINING C.A. NO. 4494/2004 ETC. 5 PAGE 6 LE ASES WAS SHOWN AS BUSINESS INCOME. DEPARTMENT TOOK THE POSITION THAT IT IS TO BE TREAT ED AS INCOME FROM THE HOUSE PROPERTY. IT WOULD BE THUS, CLEAR THAT IN SIMILAR CIRCUMSTANCES, IDENTICAL ISSUE AROSE BEFORE THE COURT. THIS COURT FIRST DISCUSSED THE SCHEME OF THE INCOME TAX ACT AND PARTICULARLY SIX HEADS UNDER WHICH INCOME CAN BE CATEGORISED / CLASSIFIED. IT WA S POINTED OUT THAT BEFORE INCOME, PROFITS OR GAINS CAN BE BROUGHT TO COMPUTATION, THEY HAVE TO B E ASSIGNED TO ONE OR THE OTHER HEAD. THESE HEADS ARE IN A SENSE EXCLUSIVE OF ONE ANOTHER AND I NCOME WHICH FALLS WITHIN ONE HEAD CANNOT BE ASSIGNED TO, OR TAXED UNDER, ANOTHER HEAD. THERE AFTER, THE COURT POINTED OUT THAT THE DECIDING FACTOR IS NOT THE OWNERSHIP OF LAND OR LEA SES BUT THE NATURE OF THE ACTIVITY OF THE ASSESSEE AND THE NATURE OF THE OPERATIONS IN RELATI ON TO THEM. IT WAS HIGHLIGHTED AND STRESSED THAT THE OBJECTS OF THE COMPANY MUST ALSO BE KEPT I N VIEW TO INTERPRET THE ACTIVITIES. IN SUPPORT OF THE AFORESAID PROPOSITION, NUMBER OF JUDGMENTS O F OTHER JURISDICTIONS, I.E. PRIVY COUNSEL, HOUSE OF LORDS IN ENGLAND AND US COURTS WERE TAKEN NOTE OF. THE POSITION IN LAW, ULTIMATELY, IS SUMMED UP IN THE FOLLOWING WORDS: - ITA NO.5534-36/M/16;6005/M/16 M/S. TIERRA LANDPRO LLP 6 AS HAS BEEN ALREADY POINTED OUT IN CONNECTION WITH THE OTHER TWO CASES WHERE THERE IS A LETTING OUT OF PREMISES AND COLLECTION OF RENTS THE ASSESSMENT ON PROPERTY BASIS MAY BE CORRECT BUT NOT SO, WHERE THE LETTING OR SUB-LETTIN G IS PART OF A TRADING OPERATION. THE DIVING LINE IS DIFFICULT TO FIND; BUT IN THE CASE O F A COMPANY WITH ITS PROFESSED OBJECTS AND THE MANNER OF ITS ACTIVITIES AND THE NATURE OF ITS DEALINGS WITH ITS PROPERTY, IT IS POSSIBLE TO SAY ON WHICH SIDE THE OPERATIONS FALL AND TO WHAT H EAD THE INCOME IS TO BE ASSIGNED. 13. THE APEX COURT ALSO NOTED THE FACT THAT IN SULT AN BROTHERS (P) LTD. (SUPRA) THE CONSTITUTION BENCH HAD CLARIFIED THAT MERELY AN ENT RY IN THE OBJECT CLAUSE SHOWING A PARTICULAR OBJECT WOULD NOT BE DETERMINATIVE FACTOR TO ARRIVE AT A CONCLUSION WHETHER THE INCOME HAS TO BE TREATED AS INCOME FROM BUSINESS AN D SUCH QUESTION WOULD DEPEND UPON THE CIRCUMSTANCES OF EACH CASE, I.E. WHETHER A PARTICUL AR BUSINESS IS LETTING OUT OR NOT. AFTER NOTING DOWN THE ABOVE SAID DECISIONS THE HON'BLE AP EX COURT HELD THAT THE CIRCUMSTANCES OF THE CASE HAVE TO BE CONSIDERED AND IN VIEW OF THE F ACTS BEFORE IT AND ITS CIRCUMSTANCES THE HON'BLE SUPREME COURT HELD THAT LETTING OF THE PROP ERTIES WAS THE BUSINESS OF THE ASSESSEE AND ASSESSEE, THEREFORE, RIGHTLY DISCLOSED THE INCOME U NDER THE HEAD INCOME FROM BUSINESS. 14. THE FACTS BEFORE US ARE SIMILAR TO THE FACTS BE FORE THE HON'BLE SUPREME COURT IN CHENNAI PROPERTIES & INVESTMENT LTD. AS POINTED OUT BY US H EREIN ABOVE ASSESSEE, IN FURTHERANCE OF ITS OBJECT OF MEMORANDUM OF ASSOCIATION, HAD LEASED OUT THE PREMISES, WHICH IN TURN WAS SUBLEASED ON LEAVE AND LICENCE BASIS, THUS THE INTE NTION OF THE ASSESSEE WAS TO EXPLOIT THE ASSET LEASED BY IT, BY WAY OF LETTING OUT THE SAME, THEN SUCH LETTING OUT ACTIVITY IS IN FURTHERANCE OF ASSESSEES INTENTION TO CARRY OUT TH E BUSINESS IN A SYSTEMATIC AND ORGANIZED MANNER. CONSEQUENTLY WE HOLD THAT THE RENTAL INCOME DECLARED BY THE ASSESSEE IS TO BE ASSESSED AS INCOME FROM HOUSE PROPERTY. ANOTHER ASP ECT TO BE KEPT IN MIND IS THAT SIMILAR INCOME OFFERED BY THE ASSESSEE ON ACCOUNT OF SIMILA R RENT RECEIVED FROM SAME TENANT IN EARLIER YEARS WERE ASSESSED AS INCOME FROM BUSINESS IN THE HANDS OF THE ASSESSEE. ANOTHER ASPECT TO BE KEPT IN MIND IS THAT DURING THE YEAR UNDER CONSI DERATION, I.E. AT THE CLOSE OF THE YEAR ON 31.03.2003 THE AGREEMENT WITH AMERICAN EXPRESS BANK HAD COME TO AN END AND THE ASSESSEE ENTERED INTO A FRESH AGREEMENT WITH BRITISH HIGH CO MMISSION AGAIN ESTABLISHES THE CASE OF THE ASSESSEE, THAT IT IS INVOLVED IN A SYSTEMATIC A ND ORGANIZED ACTIVITY OF LEASING OUT ITS PREMISES, WHICH IN TURN ARE NOT OWNED BY THE ASSESS EE. IN THE TOTALITY OF THE ABOVE FACTS AND CIRCUMSTANCES WE HOLD THAT THE LEASE RENT RECEIVED BY THE ASSESSEE IS ASSESSABLE AS INCOME FROM BUSINESS IN THE HANDS OF THE ASSESSEE AND THE RELATED EXPENDITURE HAS TO BE ALLOWED IN THE HANDS OF THE ASSESSEE. THE AO SHALL ACCORDINGLY COMPUTE THE INCOME IN THE HANDS OF THE ASSESSEE IN LINE WITH OUR DIRECTIONS AFTER AFFORDIN G REASONABLE OPPORTUNITY OF HEARING TO THE ASSESSEE. THIS GROUND OF APPEAL, WHICH WAS RESTORED BACK TO THE FILE OF THE TRIBUNAL BY THE HON'BLE HIGH COURT IS ALLOWED. 15. THE ISSUE IN GROUND OF APPEAL NO. 1 RAISED BY T HE ASSESSEE IN ITA NO. 3033/MUM/2010 IS IDENTICAL TO THE ISSUE IN GROUND NO. 1 BEFORE THE T RIBUNAL IN ITA NO. 4977/MUM/2006 AND OUR DECISION IN ITA NO. 4977/MUM/2006 IS APPLICABLE MUT ATIS MUTANDIS TO GROUND OF APPEAL NO. 1 IN ITA 3033/MUM/2010, HENCE THE SAID GROUND IS AL LOWED. 2.2. IF THE OBSERVATION MADE IN THE ASSESSMENT ORDE R, LEADING TO ADDITION MADE TO THE TOTAL INCOME, CONCLUSION DRAWN IN THE IMPUGNED ORDER, MAT ERIAL AVAILABLE ON RECORD, ASSERTIONS MADE BY THE LD. RESPECTIVE COUNSEL AND THE CONCLUSI ON DRAWN IN THE ORDER OF THE TRIBUNAL, IF KEPT IN JUXTAPOSITION AND ANALYZED, WE FIND THAT VI DE PARA-4 ONWARDS OF THE ORDER, THE TRIBUNAL HAS DELIBERATED UPON LEAVE & LICENCE INCOM E, RECEIVED BY THE ASSESSEE, IS WHETHER TO BE ASSESSED AS PROFIT & GAINS OF BUSINESS OR FROM O THER SOURCES. WHILE COMING TO A PARTICULAR CONCLUSION, THE TRIBUNAL HAS DISCUSSED THE DIRECTOR S REPORT DATED 26/08/2003 WITH RESPECT TO LICENCE FEE WITH AMERICAN EXPRESS BANK, WHICH CAME TO AN END ON 31/03/2003 AFTER WHICH A NEW LICENCE AGREEMENT WAS ENTERED INTO BY THE ASSES SEE WITH BRITISH DEPUTY HIGH COMMISSION, RATIO LAID DOWN IN SULTAN BROTHER PVT. LTD. (1964) (5) SCR 807 (SC), KARANPURA DEVELOPMENT COMPANY LTD. VS CIT (44 ITR 362) (SC), IDENTICAL FACT IN THE CASE OF CHENNAI PROPERTIES, DECIDED BY HONBLE APEX COURT AND BY FO LLOWING THE DECISION IN ITA NO.3033/MUM/2010 ALONG WITH ITA NOS.4977/MUM/2006 D ECIDED IN FAVOUR OF THE ASSESSEE. NO CONTRARY DECISION, ON IDENTICAL FACT, WAS NOT BR OUGHT TO OUR NOTICE, SPECIFICALLY BY THE ITA NO.5534-36/M/16;6005/M/16 M/S. TIERRA LANDPRO LLP 7 REVENUE, THEREFORE, FOLLOWING THE ORDER OF THE COOR DINATE BENCH THAT TOO IN THE CASE OF ASSESSEE ITSELF, WE DECIDE THIS ISSUE IN FAVOUR OF THE ASSESSEE. CONSIDERING THE ABOVE AND RESPECTFULLY FOLLOWING TH E ORDER OF THE TRIBUNAL DELIVERED IN THE CASE OF BHUVAN FOR THE AY.2006-07(SUPRA),WE DECIDE THE FIRST EFFECTIVE GROUND OF APPEAL AGAINST THE AO,AS THE FACTS OF BOTH THE CASES ARE S IMILAR. 6. SECOND EFFECTIVE GROUND OF APPEAL IS ABOUT ALLOWING THE EXPENDITURE FOR CARRYING OUT THE BUSINESS.AS STATED EARLIER,THE AO HAD HELD THAT INC OME ARISING TO THE ASSESSEE WAS TO BE ASSESSED UNDER THE HEAD INCOME FROM HOUSE PROPERTY AND THAT NO EXPENSE WAS TO BE ALLOWED IN THAT REGARD.THE FAA HAD ALLOWED THE APPEAL FILED BY THE ASSESSEE. 6.1. WHILE DECIDING THE FIRST EFFECTIVE GROUND OF APPEAL ,WE HAVE HELD THAT THE ASSESSEE WAS CARRYING ON BUSINESS.THEREFORE,WE HOLD THAT THE ORD ER OF THE FAA NEEDS NO INTERFERENCE FROM OUR SIDE.THE EXPENSE INCURRED BY THE ASSESSEE UNDER VARIOUS HEADS WERE INCURRED WHOLLY AND EXCLUSIVELY FOR ITS BUSINESS.WE DECIDE SECOND EFFEC TIVE GROUND OF APPEAL AGAINST THE AO. ITA./5536/MUM/2016,AY. 2011-12 7. FOLLOWING OUR ORDER FOR THE AY.2009-10,WE DISMISS BOTH THE EFFECTIVE GROUNDS OF APPEAL RAISED BY THE AO,AS THE FACTS FOR THE YEAR UNDER CO NSIDERATION ARE IDENTICAL TO THE FACTS OF THAT AY. ITA.S/5535 AND 6005/MUM/2016,AY. S.2012-13 AND 2013 -14. 8. FOR BOTH THE YEARS THE AO HAS RAISED THE SIMILAR GR OUND OF APPEAL I.E. COMPUTATION OF INCOME UNDER THE HEAD BUSINESS INCOME; AND ALLOWIN G THE EXPENDITURE INCURRED BY THE ASSEESEE.FOLLOWING OUR ORDERS FOR THE EARLIER YEARS ,WE DISMISS THE BOTH THE EFFECTIVE GROUNDS OF APPEAL RAISED BY THE AO FOR THE AY.2012-13 AND 2 013-14. AS A RESULT, APPEALS FILED BY AO FOR ALL THE FOUR A Y.S. STAND DISMISSED. !'#$% .. &'()* . ORDER PRONOUNCED IN THE OPEN COURT ON 4 TH JULY, 2018. '& + ( 4 , 2018 SD/- SD/ - ( / AMARJIT SINGH ) ( / RAJENDRA ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; /DATED :04.07.2018 JV.SR.PS. / COPY OF THE ORDER FORWARDED TO : 1. APPELLANT / 2. RESPONDENT / 3. THE CONCERNED CIT(A)/ , 4. THE CONCERNED CIT / ITA NO.5534-36/M/16;6005/M/16 M/S. TIERRA LANDPRO LLP 8 5. DR J BENCH, ITAT, MUMBAI / , , . . . 6. GUARD FILE/ //TRUE COPY// / BY ORDER, / DY./ASST. REGISTRAR , /ITAT, MUMBAI.