ITO 2(2)(3), MUMBAI V. MADHU SNAP FASTNERS MFG CO. P.LTD, MUMBAI

ITA 5763/MUM/2016

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 9694 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 6 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-03-2018
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2013-2014
• Appeal Filed On: 26-09-2016
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: AARJU GARODIA
• Keywords: Business income; Rule of consistency; Tax effect

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL J BENCH, MUMBAI BEFORE SHRI SAKTIJIT DEY , JUDICIAL MEMBER AND SHRI MANOJ KUMAR AGGARWAL , ACCOUNTANT MEMBER ITA NO .5763/MUM./2016 ( ASSESSMENT YEAR : 2013 14 ) INCOME TAX OFFICER WARD 2(2)(3), MUMBAI . APPELLANT V/S MADHU SNAP FASTNERS MFG. CO. PVT. LTD. SANGHVI CHAMBERS, 3 RD FLOOR 27, JANMABHOOMI MARG, FORT MUMBAI 400 001 AAACM4024B . RESPONDENT REVENUE BY : MS. AARJU GARODIA ASSESSEE BY : SHRI PRAKASH JHUNJHUNWALA DATE OF HEARING 28.02.2018 DATE OF ORDER 28.03.2018 O R D E R PER SAKTIJIT DEY, J.M. THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST ORDER DATED 21 ST JUNE 2016, PASSED BY THE LEARNED COMMISSIONER (APPEALS) 5, MUMBAI, FOR THE ASSESSMENT YEAR 2013 14. 2 . THE ONLY EFFECTIVE GROUND RAISED BY THE REVENUE READS AS UNDER: I) WHETHER IN THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) WAS RIGHT IN DIRECTING THE ASSESSING OFFICER TO ASSESS RENTAL INCOME FROM WAREHOUSE AND ROOF AS BUSINESS D ISREGARDING THE PROVISIONS OF I.T. ACT 1961, FOR SUCH ASSESSMENT UNDER THE HEAD INCOME FROM HOUSE PROPERTY AND THE JUDGMENT OF THE SUPREME COURT GIVEN IN THE CASE OF SHAMBHU INVESTMENT PVT. LTD., 263 ITR 143 ONLY IN THE NAME OF CONSISTENCY. 2 MADHU SNAP FASTNERS MFG. CO. PVT. LTD. 3 . BRIEF FACTS ARE, AS STATED BY THE ASSESSING OFFICER IN THE ASSESSMENT ORDER, THE ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF WAREHOUSING. FOR THE ASSESSMENT YEAR UNDER DISPUTE, THE ASSESSEE FILED ITS RETURN OF INCOME ON 12 TH SEPTEMBER 2013, DECLARING TOTAL INCOME O F ` 13,46,502. DURING THE ASSESSMENT PROCEEDING, THE ASSESSING OFFICER FOUND THAT THE ASSESSEE HAS RECEIVED WAREHOUSING CHARGES OF ` 54,46,280, FROM MADURA COATS PVT. LTD., WHICH HAS BEEN SHOWN AS INCOME UNDER THE HEAD BUSINESS AND PROFESSION AFTER DEDUCTI NG EXPENDITURE INCURRED. AFTER CALLING FOR NECESSARY DETAILS RELATING TO THE WAREHOUSING INCOME, THE ASSESSING OFFICER FOUND THAT AS PER THE TERMS OF AGREEMENT, THE SOLE INTENTION OF THE ASSESSEE APPE ARS TO BE EARNING OF INCOME BY LETT ING THE GODOWN ON MON THLY RENTAL BASIS. REFERRING TO THE DECISION OF THE HON'BLE SUPREME COURT IN SHAMBHU INVESTMENTS PVT. LTD. V/S CIT, [2003] 263 ITR 143 (SC) AND FEW OTHER DECISIONS, THE ASSESSING OFFICER ULTIMATELY HELD THAT THE WAREHOUSING INCOME RECEIVED FROM MADURA COAT S PVT. LTD. IS TO BE TREATED AS INCOME FROM HOUSE PROPERTY AND ACCORDINGLY ADDED BACK THE ENTIRE AMOUNT OF ` 54,46,280 AS INCOME UNDER THE HOUSE PROPERTY WITHOUT ALLOWING ANY DEDUCTION. FURTHER, THE ASSESSING OFFICER ALSO TREATED THE INCOME RECEIVED OF ` 1 4,78,510, FROM CELLULAR COMPANIES TOWARDS INSTALLING THEIR EQUIPMENTS IN THE OPEN TERRACE / ROOF AREA OF THE BUILDING AS INCOME FROM HOUSE PROPERTY. BEING AGGRIEVED OF THE 3 MADHU SNAP FASTNERS MFG. CO. PVT. LTD. AFORESAID DECISION OF THE ASSESSING OFFICER, THE ASSESSEE PREFERRED APPEAL BEFORE TH E FIRST APPELLATE AUTHORITY. 4 . THE LEARNED COMMISSIONER (APPEALS) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE FOUND THAT AS PER THE TERMS OF AGREEMENT, THE ASSESSEE WAS PROVIDING WAREHOUSING FACILITIES TO ITS CLIENT AND HAS NOT LET OUT THE PROPERTY A S A LANDLORD. FURTHER, HE FOUND THAT FOR THE PAST FIFTEEN YEARS THE WAREHOUSING CHARGES RECEIVED FROM MADURA COATS PVT. LTD. HAS BEEN SHOWN BY THE ASSESSEE AS BUSINESS INCOME AND THE DEPARTMENT HAS ACCEPTED IT . HE ALSO FOUND THAT IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2008 09, THE FIRST APPELLATE AUTHORITY HAS DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE. HE ALSO REFERRED TO THE DECISION OF THE HON'BLE JURISDICTIONAL HIGH COURT IN NUTAN WAREHOUSING CO. PVT. LTD., 326 ITR 94 (BOM.). T HEREFORE, APPLYIN G THE RULE OF CONSISTENCY AS WELL AS THE RATIO OF THE DECISION OF THE HON'BLE JURISDICTIONAL HIGH COURT AS WELL AS THE ORDER PASSED BY THE FIRST APPELLATE AUTHORITY IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2008 09, HE DIRECTED THE ASSESSING OFFICER TO AS SESSEE THE INCOME RECEIVED FROM WAREHOUSING AND TELECOM COMPANIES UNDER THE HEAD INCOME FROM BUSINESS AND PROFESSION. 5 . LEARNED DEPARTMENTAL REPRESENTATIVE RELIED UPON THE OBSERVATIONS OF THE ASSESSING OFFICER AS WELL AS GROUND RAISED. 4 MADHU SNAP FASTNERS MFG. CO. PVT. LTD. 6 . LEARNED AUTHORISED R EPRESENTATIVE STRONGLY SUPPORTING THE DECISION OF THE FIRST APPELLATE AUTHORITY SUBMITTED THAT AS FAR AS RECEIPT OF WAREHOUSING CHARGES FROM MADURA COATS PVT. LTD. IS CONCERNED, THE ASSESSEE IS IN WAREHOUSING BUSINESS AND THE AMOUNT RECEIVED TOWARDS WAREHOUSING CHARGES IS IN THE COURSE OF CARRYING ON SUCH BUSINESS. THE LEARNED AUTHORISED REPRESENTATIVE DRAWING OUR ATTENTION TO DIFFERENT CLAUSES OF THE AGREEMENT WITH MADURA COATS PVT. LTD. , SUBMITTED THAT IT IS NOT AN AGREEMENT FOR SIMPLY LETTING OUT OF THE WAREHOUSE . H E SUBMITTED, AS PER THE SCOPE OF WORK FORMING PART OF THE AGREEMENT, THE ASSESSEE HAS TO UNDERTAKE AND PROVIDE VARIOUS OTHER SERVICES INCLUDING LOADING AND UNLOADING OF GOODS, TRANSPORTATION AND SECURITY AS WELL. HE SUBMITTED, AS PER THE TERMS OF THE AGREEMENT POS SESS ION OF THE WAREHOUSE ALWAYS REMAINED IN EXCLUSIVE CONTROL OF THE ASSESSEE AND IT WAS NEVER HANDED OVER TO MADURA COATS PVT. LTD. HE, THEREF ORE SUBMITTED, SINCE THE WAREHOUSING CHARGES WERE RECEIVED FOR PROVIDING WAREHOUSING FACILITIES WHICH IS THE MAIN BUSINESS OF THE ASSESSEE, THE INCOME HAS TO BE ASSESSED UNDER THE HEAD INCOME FROM BUSINESS. IN THIS CONTEXT, HE RELIED UPON THE FOLLOWING DEC ISIONS: I ) CIT V/S NDR WAREHOUSING PVT. LTD., 372 ITR 690; II ) RAYALA CORPORATION PVT. LTD. V/S ACIT, 386 ITR 500; AND III ) NUTUN WAREHOUSING CO. PVT. LTD. V/S DCIT, 326 ITR 94. 7 . FURTHER, THE LEARNED AUTHORISED REPRESENTATIVE SUBMITTED, THOUGH, THE WAREHOUSING CHARGES HAVE BEEN SHOWN AS BUSINESS 5 MADHU SNAP FASTNERS MFG. CO. PVT. LTD. INCOME FOR THE PAST SO MANY YEARS, THE ASSESSING OFFICER HAS NEVER TREATED IT AS INCOME FROM HOUSE PROPERTY , EXCEPT , THE IMPUGNED ASSESSME NT YEAR. THEREFORE, HE SUBMITTED, APPLYING THE RULE OF CONSISTENCY ALSO THE INCOME HAS TO BE ASSESSED UNDER THE HEAD INCOME FROM BUSINESS AND PROFESSION. IN RESPECT OF AMOUNT RECEIVED FROM TELECOM COMPANIES, IT IS SUBMITTED THAT IN ALL OTHER ASSESSMENT YEA RS, PAST AS WELL AS SUBSEQUENT , INCOME HAS BEEN ASSESSED AS INCOME FROM BUSINESS. THEREFORE, IN THE ABSENCE OF ANY DIFFERENCE IN FACT A DIFFERENT VIEW CANNOT BE TAKEN IN THE IMPUGNED ASSESSMENT YEAR WITH REGARD TO THE HEAD OF INCOME. 8 . WE HAVE HEARD RIVAL SUBMISSIONS AND PERUSED MATERIAL ON RECORD. SO FAR AS WAREHOUSING CHARGES IS CONCERNED, UNDISPUTEDLY, THE ASSESSEE HAS ENTERED INTO AN AGREEMENT WITH MADURA COATS PVT. LTD. FOR PROVIDING WAREHOUSING FACILITIES. AS OBSERVED BY THE LEARNE D COMMISSIONER (APPEALS), THE AFORESAID AGREEMENT IS SUBSISTING BETWEEN THE PARTIES FOR MORE THAN 15 YEARS AND IS BEING RENEWED FORM TIME TO TIME. ON A PERUSAL OF THE AGREEMENT , A COPY OF WHICH IS AT PAGE 16 OF THE PAPER BOOK , IT IS EVIDENT THAT AS PER THE TERMS OF AGREEMENT, THE ASSESSEE APART FROM PROVIDING FACILITIES FOR STORAGE OF GOODS OF MADURA COATS PVT. LTD. IS ALSO REQUIRED TO PROVIDE CERTAIN OTHER SERVICES LIKE PROVIDING FACILITIES FOR LOADING AND UNLOADING OF GOODS, TRANSPORTATION AND SECURITIES, ETC. FOR THAT PURPOSE THE ASSESSEE IS REQUIRED TO ENGAGE / APPOINT CONTRACTOR TO CARRY OUT THE 6 MADHU SNAP FASTNERS MFG. CO. PVT. LTD. WORK OF CARRYING OUT LOADING AND UNLOADING OF GOODS. THE ASSESSEE IS ALSO REQUIRED TO CERTIFY THE QUANTITY, WEIGHT AND QUALITY OF GOODS DELIVERED AT THE TIME OF TAKING DELIVERY. FURTHER, THE ASSESSEE IS ALSO RESPONSIBLE FOR STORING AND HANDLING THE GOODS WITH DUE CARE AND SHALL ALSO ENSURE THAT THE GOODS ARE NOT EXPOSED TO ANY DANGER INCLUDING THEFT OR PILFERAGE. FOR THAT PURPOSE, THE ASSESSEE IS REQUIRED TO DEPU TE SECURITY GUARD AND SHALL KEEP THE FACILITY LOCKED AT ALL TIME . AGREEMENT FURTHER PROVIDE S THAT THE ASSESSEE WILL BE IN EXCLUSIVE POSSESSION OF THE WAREHOUSING FACILITY AT ALL POINT OF TIME AND THE POSSESSION WILL NOT BE HANDED OVER TO MADURA COATS PVT. LTD. THUS, FROM THE READING OF THE TERMS OF AGREEMENT AS A WHOLE IT IS CLEAR THAT THE AGREEMENT ENTERED INTO BY THE ASSESSEE WITH MADURA COATS PVT. LTD. IS NOT AN AGREEMENT FOR LEASE BETWEEN A LANDLORD AND TENANT SIMPLICIT E R , BUT , IT IS AN AGREEMENT FOR ST ORAGE OF GOODS ALONG WITH THE OTHER INCIDENTAL AND ANCILLARY SERVICES AS REQUIRED IN WAREHOUSING BUSINESS. THUS, THE MATERIAL ON RECORD CLEARLY ESTABLISHES THAT THE WAREHOUSING CHARGES RECEIVED BY THE ASSESSEE W ERE FOR PROVIDING WAREHOUSING FACILITIES WHIC H IS THE MAIN BUSINESS OF THE ASSESSEE. THAT BEING THE CASE, THE AMOUNT RECEIVED TOWARDS WAREHOUSING CHARGES HAS TO BE ASSESSED AS INCOME UNDER THE HEAD INCOME FROM BUSINESS OR PROFESSION. THE DECISIONS RELIED UPON BY THE LEARNED AUTHORISED REPRESENTATIVE ALSO SUPPORT THIS VIEW. MOREOVER, AS BROUGHT TO OUR NOTICE BY THE LEARNED AUTHORISED REPRESENTATIVE , THOUGH , THE AGREEMENT WITH MADURA COATS 7 MADHU SNAP FASTNERS MFG. CO. PVT. LTD. PVT. LTD. , SUBSISTING FOR PAST SEVERAL YEARS, THE WAREHOUSING CHARGES RECEIVED BY THE ASSESSEE H AS ALWAYS BEING ASS ESSED AS INCOME FROM BUSINESS EVEN IN SCRUTINY ASSESSMENTS. IN FACT, IN ASSESSMENT YEAR 2008 09, WHEN FOR THE FIRST TIME, WAREHOUSING CHARGES WERE TREATED AS HOUSE PROPERTY INCOME THE LEARNED COMMISSIONER (APPEALS) REVERSED THE DECISION OF THE ASSESSING OF FICER A ND TREATED IT AS BUSINESS INCOME. IT HAS ALSO BEEN BROUGHT TO OUR NOTICE BY THE LEARNED AUTHORISED REPRESENTATIVE THAT THE DECISION OF THE LEARNED COMMISSIONER (APPEALS) IN ASSESSMENT YEAR 2008 09 HAS ATTAINED FINALITY , SINCE , THE REVENUES APPEAL H AS BEEN DISMISSED BY THE TRIBUNAL DUE TO LOW TAX EFFECT. THOUGH, THE PRINCIPLE O F RES JUDICATA DO NOT STRICTLY APPLY TO INCOME TAX PROCEEDINGS AS EACH ASSESSMENT YEAR I S AN INDEPENDENT UNIT, HOWEVER, RULE OF CONSIST ENCY STILL APPLY. T HE LEARNED DEPARTMENTA L REPRESENTATIVE HAS NOT BROUGHT TO OUR NOTICE ANY DIFFERENCE IN FACTS IN THIS YEAR WHICH COULD HAVE ENABLED THE ASSESSING OFFICER TO MAKE A DEPARTURE FROM THE VIEW TAKEN BY HIM IN THE EARLIER ASSESSMENT YEARS WITH REGARD TO NATURE OF WAREHOUSING CHARGES. THAT BEING THE CASE, WE DO NOT FIND ANY REASON TO INTERFERE WITH IN THE DECISION OF THE LEARNED COMMISSIONER (APPEALS) ON THIS ISSUE. INSOFAR AS THE INCOME RECEIVED FROM TELECOMMUNICATION COMPANIES FOR INSTALLING THEIR EQUIPMENT, IT IS A FACT ON RECORD THA T INCOME RECEIVED IN THIS REGARD ALL ALONG BEEN TREATED AS INCOME FROM BUSINESS IN THE PAST AND SUBSEQUENT ASSESSMENT YEARS. THERE BEING NO 8 MADHU SNAP FASTNERS MFG. CO. PVT. LTD. MATERIAL DIFFERENCE I N FACTS BROUGHT ON RECORD BY THE ASSESSING OFFICER IN THE IMPUGNED ASSESSMENT YEAR, APPLYING RULE OF CONSIST ENCY , THE INCOME RECEIVED FROM TELECOM COMPANIES HAS TO BE ASSESSED AS INCOME FROM BUSINESS AND PROFESSION. THE DECISION OF THE LEARNED COMMISSIONER (APPEALS) IS, THEREFORE, UPHELD. AS REGARDS DECISION OF THE HON'BLE SUPREME COURT IN CASE OF SHAMBHU IN VESTMENTS PVT. LTD. (SUPRA) ON A CAREFUL READING, WE FIND IT TO BE FACTUALLY DISTINGUISHABLE AS IN THAT CASE, THE ASSESSEE WAS PROVIDING OFFICE SPACE, WHEREAS, IN THE PRESENT CASE, THE ASSESSEE HAS PROVIDED WAREHOUSING FACILITIES AND HAS NOT SIM PLY RENTED OUT THE WAREHOUS E . IN VIEW OF THE AFORESAID , GROUND RAISED IS DISMISSED. 9 . IN THE RESULT, REVENUES APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT O N 28.03.2018 SD/ - MANOJ KUMAR AGGARWAL ACCOUNTANT MEMBER SD/ - SAKTIJIT DEY JUDICIAL MEMBER MUMBAI, DATED : 28.03.2018 COPY OF THE ORDER FORWARDED TO : ( 1 ) THE ASSESSEE; ( 2 ) THE REVENUE; ( 3 ) THE CIT(A); ( 4 ) THE CIT, MUMBAI CITY CONCERNED; ( 5 ) THE DR, ITAT, MUMBAI; ( 6 ) GUARD FILE . TRUE COPY BY ORDER PRADEEP J. CHOWDHURY SR. PRIVATE SECRETARY (DY./ASSTT. REGISTRAR) ITAT, MUMBAI