SHREENATHJI BALAJI COMPUTECH P.LTD, MUMBAI V. ASST CIT 7(2), MUMBAI

ITA 6253/MUM/2012

• Counselvise Citation: 625319914 RSA 2012
• Duration Of Justice: 2 year(s) 8 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-06-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Next Hearing Date: 04-06-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 11-10-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NEIL PHILIP
• Assessee Lawyers: S C TIWARI MS P RIYANKA J MARU
• Keywords: Business income; Depreciation; Opportunity of being heard
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH E, MUMBAI BEFORE SHRI R. C. SHARMA, ACCOUNTANT MEMBER AND MS. SUSHMA CHOWLA, JUDICIAL MEMBER ITA NOS. 6251/MUM/2012 6253/MUM/2012 ASSESSMENT YEARS: 2006-07 & 2008-09 SHREENATHJI BALAJI COMPUTECH PVT. LTD. MAHALAXMI INDUSTRIAL ESTATE, GROUND FLOOR L.J. ROAD NO.L MAHIM (W) MUMBAI 400 016 PAN:AAECS 7702 C ` .(APPELLANT) VS. ACIT-7(2) M.K. ROAD MARINE LINES MUMBAI 400 020 (RESPONDENT) APPELLANT BY : SHRI S.C. TIWARI MS. P RIYANKA J. MARU RESPONDENT BY : SHRI NEIL PHILIP DATE OF HEARING : 04.06.2015 DATE OF PRONOUNCEMENT : 17.06.2015 O R D E R PER SUSHMA CHOWLA, JM: BOTH THESE APPEALS FILED BY THE ASSESSEE ARE AGAINS T SEPARATE ORDERS OF THE CIT(A)-13, MUMBAI DATED 12.07.2012 AND 10.01.2011 RELATING TO ASSESSMENT YEARS 2006-07 & 2008-09 RESPECTIVELY AGAINST ORDER PASSED UNDER SECTION 143(3) OF THE I.T. ACT. ITA NOS. 6251/MUM/2012 6253/MUM/2012 2 2. BOTH THE APPEALS RELATING TO THE SAME ASSESSEE O N SIMILAR ISSUE WERE HEARD TOGETHER AND ARE BEING DISPOSED BY THIS CONSOLIDATE D ORDER FOR THE SAKE OF CONVENIENCE. THE ASSESSEE HAS RAISED FOLLOWING GROU NDS OF APPEAL AS PER ITA NO. 6251/MUM/2012:- I) UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LEARNED COMMISSIONER (APPEALS) [FOR SHORT LD CIT(A )] HAS ERRED IN CONFIRMING THE ACTION OF LEARNED ASSESSING OFFICER [FOR SHORT LD. AO] IN TREATING THE LEGITIMATE BUSINESS INCOME IN THE F ORM OF LEAVE & LICENSE FEES AND MAINTENCE & AMENITIES CHARGES REC EIVED AS INCOME FROM OTHER SOURCES, INSTEAD OF PROFIT AND GAINS OF BUSINESS OR PROFESSION. 3. THE ASSESSEE HAS FURTHER RAISED ADDITIONAL GROUN D OF APPEAL IN ASSESSMENT YEAR 2006-07 WHICH READ AS UNDER:- 1. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE OF THE APPELLANT AND IN LAW LEARNED CIT(APPEALS) HAS ERRED IN UPHOLDING THE DISALLOWANCE OF RS. 13,56,776/ - OUT OF PERSONNEL E XPENDITURE INCURRED BY THE APPELLANT. 2. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE OF THE APPELLANT AND IN LAW LEARNED CIT(APPEALS) HAS ERRED IN NOT AL LOWING DEPRECIATION AMOUNTING TO RS.2,12.204/ - AS CLAIMED BY THE APPEL LANT. 3. THAT THE ORDER OF LEARNED CIT( APPEALS) BEING CO NTRARY TO THE FACTS OF THE CASE, EVIDENCE AND MATERIAL ON RECORD AND LAW A PPLICABLE THERETO SHOULD BE SET ASIDE, AMENDED OR MODIFIED IN ACCORDA NCE WITH THE GROUNDS OF APPEAL DEDUCED ABOVE. 4. EACH OF THE GROUNDS OF APPEAL ENUMERATED ABOVE A RE INDEPENDENT OF AND WITHOUT PREJUDICE TO ONE ANOTHER. 5. THAT THE APPELLANT CRAVES LEAVE TO RESERVE TO HI MSELF THE RIGHT TO ADD TO, ALTER OR AMEND ANY OF THE AFORESAID GROUNDS OF APPEAL AT OR BEFORE THE TIME OF HEARING AND TO PRODUCE SUCH FURTHER EVI DENCE, DOCUMENTS AND PAPERS IN SUPPORT OF ITS CLAIM AS MAY BE NECESS ARY. ITA NOS. 6251/MUM/2012 6253/MUM/2012 3 4. THE APPEAL HAS RAISED FOLLOWING GROUND OF APPEAL IN ITA NO. 6253/MUM/2012 I) UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LEARNED COMMISSIONER (APPEALS) [FOR SHORT LD CIT(A )] HAS ERRED IN CONFIRMING THE ACTION OF LEARNED ASSESSING OFFICER [FOR SHORT LD. AO] IN TREATING THE LEGITIMATE BUSINESS INCOME IN THE F ORM OF LEAVE & LICENSE FEES AND MAINTENCE & AMENITIES CHARGES REC EIVED AS INCOME FROM OTHER SOURCES, INSTEAD OF PROFIT AND GAINS OF BUSINESS OR PROFESSION. II) UNDER THE FACTS AND CIRCUMSTANCE OF THE CASE AN D IN LAW, THE LEARNED CIT(A) HAS ERRED IN ENHANCING ASSESSMENT BY DISALLO WING DEPRECIATION ALLOWED BY LD. ASO OF RS.3,43,935/- WITHOUT AFFORDI NG REAL OPPORTUNITY OF BEING HEARD IN THE MATTER. 5. THE ASSESSEE POINTED OUT THAT THE ADDITIONAL GRO UND OF APPEAL RAISED IN ASSESSMENT YEAR 2006-07 WERE IN RELATION TO THE ALL OWANCE OF EXPENDITURE UNDER THE RESPECTIVE HEAD OF INCOME, UNDER WHICH TH E INCOME IS ASSESSED IN THE HANDS OF THE ASSESSEE. 6. THE SAID ADDITIONAL GROUND OF APPEAL BEING RELAT ABLE TO THE ORIGINAL GROUND OF APPEAL RAISED BY THE ASSESSEE IS ADMITTED FOR ADJUDICATION. 7. THE ISSUE ARISING IN THE PRESENT APPEAL IS IN RE LATION TO THE ASSESSMENT OF THE BUSINESS INCOME RECEIVED BY THE ASSESSEE ON ACC OUNT OF LEAVE AND LICENSE FEES AND WHETHER THE SAME IS TO BE ASSESSED AS INCO ME FROM BUSINESS OR AS INCOME FROM OTHER SOURCES. WE TAKE UP APPEAL IN ITA NO. 6253/MUM/2012 FOR ADJUDICATING THE ISSUE. 8. BRIEFLY IN THE FACTS OF THE PRESENT CASE THE ASS ESSEE HAD TAKEN THE PROPERTY ON LEASE WHICH IN TURN WAS SUB-LEASED TO M/S. REDIF F.COM INDIA LTD. THE ASSESSEE RECEIVED LEAVE AND LICENSE FEE OF RS.80,61 ,097/- AND MAINTENANCE CHARGES OF RS.51,52,529/- WHICH WAS DECLARED AS INC OME FROM BUSINESS. THE ITA NOS. 6251/MUM/2012 6253/MUM/2012 4 ASSESSEE WAS SHOW CAUSED TO EXPLAIN AS TO WHY THE S AID INCOME SHOULD NOT BE TREATED AS INCOME FROM OTHER SOURCES. THE CONTENTIO N OF THE ASSESSEE WAS THAT IT WAS THE ONLY ACTIVITY CARRIED OUT BY THE ASSESSEE U NDER WHICH THE LEASED PREMISES WERE IN TURN SUB-LEASED TO THE LESSEE AND ALSO SERVICES OF PROVIDING ELECTRICITY, USE OF LIFT, UNINTERRUPTED SUPPLY, SER VICES OF WATER, MAINTENANCE OF STAIRCASE AND COMMON AREAS, AND WATCH AND WARD FACI LITIES WERE ALSO PROVIDED WHICH CONSTITUTED COMPLEX BUSINESS ACTIVITY. THE AO REJECTING THE PLEA OF THE ASSESSEE HELD THAT THE RECEIPT WAS TO BE ASSESSED A S INCOME FROM OTHER SOURCES AND THE EXPENSES CLAIMED BY THE ASSESSEE WERE HELD TO BE NOT ALLOWABLE UNDER SECTION 57(III) OF THE ACT. 9. THE CIT(A) UPHELD THE ORDER OF AO AS THERE WAS N O EVIDENCE THAT THE ASSESSEE WAS IN THE BUSINESS OF LETTING OUT OF PREM ISES ON COMMERCIAL BASIS. THE CIT(A) DISALLOWED, THE CLAIM OF EXPENDITURE AND ALS O DISALLOWED THE DEPRECIATION CLAIMED BY THE ASSESSEE. THE ASSESSEE IS IN APPEAL AGAINST THE AFORESAID ORDER OF THE CIT(A). 10. THE LD. A.R. FOR THE ASSESSEE POINTED OUT THAT WHERE THE ASSESSEE HAD TAKEN THE PREMISES ON LEASE AND FURTHER PROVIDED TH E SAME ON LEAVE AND LICENSE BASIS AND THIS BEING ONLY TRANSACTION CARRIED ON BY THE ASSESSEE, THE INCOME GENERATING FROM THE SAID ACTIVITY IS ASSESSABLE AS INCOME FROM BUSINESS. IT WAS FURTHER CLARIFIED BY THE LD. A.R. FOR THE ASSESSEE THAT THERE WAS NO DISPUTE BETWEEN THE HEAD OF INCOME THAT IS INCOME FROM PROP ERTY OR BUSINESS INCOME ONLY DISPUTE WAS BETWEEN BUSINESS INCOME OR INCOME FROM OTHER SOURCES. THE LD. A.R. FOR THE ASSESSEE FURTHER POINTED OUT THAT IN ALL THE YEARS UPTO ASSESSMENT YEAR 2005-06, THE SAID INCOME WAS TREATED AS BUSINE SS INCOME. FURTHER THE LD. AR FOR THE ASSESSEE PLACED RELIANCE ON THE RATIO LA ID DOWN BY THE HONBLE SUPREME COURT IN CHENNAI PROPERTIES AND INVESTMENT LTD. VS. CIT REPORTED IN 56 TAXMAN.COM 456 (SC). ITA NOS. 6251/MUM/2012 6253/MUM/2012 5 11. THE LD. D.R. FOR THE REVENUE PLACED RELIANCE ON THE ORDERS OF THE AUTHORITIES BELOW. 12. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE ASSESSEE IN THE YEAR UNDER CONSIDERATION HAD DECLARED INCOME FROM BUSINESS ON ACCOUNT OF LEASING OF ITS LEASED ASSET. THE ASSESSEE HAD TA KEN THE PREMISES ON LEASE AND HAD LEASED OUT THE SAME TO M/S. REDIFF.COM ON LEAV E AND LICENSE BASIS. THE ONLY ACTIVITY CARRIED OUT BY THE ASSESSEE COMPANY W AS THE SAID TRANSACTION OF FIRST LEASING THE PROPERTY AND THEN SUB-LEASING TH E SAME TO EARN LEASE CHARGES. FOR THE YEAR UNDER CONSIDERATION THE ASSESSEE HAD D ECLARED MAINTENANCE CHARGES OF RS.51,52,529/- AND LEAVE AND LICENSE FEES OF RS. 80,61,097/-. AFTER CLAIMING EXPENDITURE FOR RUNNING ITS ACTIVITY, THE ASSESSEE HAD DECLARED INCOME OF RS.62,41,920/- RELATING TO ASSESSMENT YEAR 2008-09 . 13. THE ISSUE ARISING BEFORE US IS WHETHER IN THE C IRCUMSTANCES WHERE THE SOLE ACTIVITY OF THE ASSESSEE WAS TO TAKE A PROPERTY ON LEASE AND THEN SUB-LEASE THE SAME, ON LEAVE AND LICENSE FEES, THE INCOME ARISING THERE FROM IS ASSESSABLE UNDER THE HEAD INCOME FROM BUSINESS OR INCOME FROM OTHER SOURCES. WE FIND THAT SIMILAR ISSUE OF ASSESSMENT OF LEASE INCOME IN THE HANDS OF COMPANY AROSE BEFORE THE TRIBUNAL IN BHUVAN LEASING & INFRASTRUCT URES LLP VS. ITO IN ITA NO. 4977/MUM/2006 AND 3033/MUM/2010 RELATING TO ASS ESSMENT YEARS 2003- 04 AND 2005-06. THE TRIBUNAL VIDE JUDGMENT DATED 10 .06.2015 AFTER CONSIDERING THE FACTUAL ASPECT AND IN TURN RELYING ON THE RATIO LAID DOWN BY THE HONBLE SUPRME COURT IN CHENNAI PROPERTIES AND INVESTMENTS LTD. (SUPRA) HELD AS UNDER:- 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 MEMORANDUM OF ASSOCIATION, WAS PERMITTED TO PERFORM BUSINESS OF TAKING ON LEASE AND EARNING INCOME FROM THE SAME. I T 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 INCOME EARNED BY THE ASSESSEE. THE CLAIM OF T HE ASSESSEE BEFORE THE AUTHORITIES BELOW AND EVEN BEFORE US IS THAT SU CH INCOME BEING IN CONTINUATION OF ITS OBJECT AS PER THE MEMORANDUM OF ASSOCIATION, IS TO BE ASSESSED AS BUSINESS INCOME IN ITS HANDS. WHEREA S THE CASE OF THE ITA NOS. 6251/MUM/2012 6253/MUM/2012 6 REVENUE IS THAT ASSESSEE WAS ENGAGED IN SUBLETTING OF THE PROPERTY, WHICH IN TURN IT HAD OBTAINED ON LEASE AND HENCE TH E INCOME ARISING THERE FROM IS ASSESSABLE IN THE HANDS OF THE ASSESS EE AS INCOME FROM OTHER SOURCES, SINCE THE ASSESSEE WAS NOT THE OWNER OF THE PROPERTY. 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 INCOME IN THE HANDS OF THE ASSESSEE AFTER ALLOWING THE RELATED BUSINESS EXPEND ITURE CLAIMED. THE SAID DECISION WAS ACCEPTED BY THE AUTHORITIES BELOW FROM ASSESSMENT YEAR 1993-94 ONWARDS FOR WHICH THE ASSESSMENT WAS C OMPLETED UNDER SECTION 143(3) OF THE ACT AND COPY OF THE ASSESSMEN T ORDER IS FILED AT PAGES 32-42 OF THE PAPER BOOK. SIMILARLY, FOR ASSES SMENT YEAR 2001-02 THE ASSESSMENT WAS COMPLETED UNDER THE HEAD INCOME FROM BUSINESS IN THE ASSESSMENT ORDER PASSED UNDER SECTION 143(3) OF THE ACT, WHICH IN TURN IS PLACED AT PAGES 43 TO 49 OF THE PAPER BO OK. THE ASSESSEE CONTINUES TO EARN INCOME FROM SAME LEASE AGREEMENT AS IN THE PAST AND THE INCOME DECLARED DURING THE YEAR UNDER CONSIDERA TION WAS RECEIVED FROM AMERICAN EXPRESS BANK, WHICH WILL ALSO BE SUB- LESSEE IN THE EARLIER YEARS. THE HON'BLE HIGH COURT, WHILE ADJUDI CATING THE APPEAL OF THE ASSESSEE, HAD NOTED ALL THE ABOVE SAID FACTS AN D ALSO NOTED THAT THERE WERE NO DISTINGUISHING FEATURES BEFORE THE TR IBUNAL TO JUSTIFY IN GIVING A DIFFERENT TREATMENT FOR THE ASSESSMENT YEA R IN QUESTION, WHEREAS SIMILAR INCOME WAS ASSESSED AS INCOME FROM BUSINESS IN THE HANDS OF THE ASSESSEE IN THE PRIOR YEARS. ON VERIFI CATION OF THE RECORDS AVAILABLE WE FIND THAT IN ASSESSMENT YEARS 1993-94 AND 2001-02 THE INCOME HAD BEEN ASSESSED UNDER THE HEAD INCOME FROM BUSINESS. THOUGH THE HON'BLE HIGH COURT HAD RESTORED THE ISSU E BACK TO THE FILE OF THE TRIBUNAL BUT WITH THE DIRECTION THAT THE SAID I SSUE 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. OCTOB ER 1992. THE SAID LEASE AGREEMENT CONTINUED UPTO 31.03.2003 AND WAS I N 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 WAS 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, VIDE PARA 4 OF ITS ORDER HAD ACK NOWLEDGED THAT UNDER CLAUSE 53, 109, 129 AND 131 OF THE OBJECT CLAUSE (O THER OBJECTS) OF MEMORANDUM OF ASSOCIATION OF THE ASSESSEE, ASSESSEE WAS PERMITTED TO PURSUE THE BUSINESS OF TAKING ON LEASE AND EARNI NG INCOME FROM THE SAME. WHERE IT IS THE INTENTION OF THE ASSESSEE TO LEASE OUT VARIOUS PREMISES AND THEN SUBLET THE SAME ON LEAVE AND LICE NCE BASIS TO DIFFERENT PARTIES, THEN SUCH ACTIVITY CARRIED ON BY THE ASSESSEE IN LINE WITH ITS OBJECTS IS BUSINESS ACTIVITY UNDERTAKEN BY THE ASSESSEE. THE INCOME ARISING FROM SUCH EXPLOITATION OF THE ASSETS WHICH HAD BEEN TAKEN BY THE ASSESSEE ON LEASE AND HAD BEEN FURTHER SUBLET BY IT IS A SYSTEMATIC AND ORGANIZED ACTIVITY OF CARRYING ON IT S BUSINESS. UNDOUBTEDLY, ASSESSEE WAS NOT THE OWNER OF THE PREM ISES BUT WAS ONLY A LESSEE OF THE PREMISES, WHICH IN TURN HAD BE EN SUBLET BY THE ASSESSEE WITH THE INTENTION OF EXPLOITING THE SAME AND THE RECEIPTS ARISING THERE FROM ARE ASSESSABLE IN THE HANDS OF T HE ASSESSEE AS INCOME FROM BUSINESS AND THE NECESSARY RELATED EXPE NDITURE HAS TO BE ALLOWED AS DEDUCTION IN THE HANDS OF THE ASSESSEE. ITA NOS. 6251/MUM/2012 6253/MUM/2012 7 12. THE HON'BLE SUPREME COURT IN THE CASE OF CHENNA I PROPERTIES AND INVESTMENT LTD. (SUPRA) HAS APPRECIATED THE FAC TS BEFORE IT, WHEREIN THE ASSESSEE HAD ACQUIRED PROPERTIES IN THE CITY OF MADRAS AND IN TURN LET OUT THOSE PROPERTIES AND THE RENTAL INCOME RECE IVED BY IT WAS SHOWN AS INCOME FROM BUSINESS, IT WAS HELD THAT WHERE MAI N OBJECT OF THE ASSESSEE COMPANY AS PER ITS MEMORANDUM OF ASSOCIATI ON WAS TO ACQUIRE PROPERTIES AND TO LET OUT THOSE PROPERTIES AS WELL AS MAKE ADVANCES UPON THE SECURITY OF LAND AND BUILDING, TH EN IT WAS HELD THAT WHAT WE EMPHASIS IS THAT HOLDING THE AFORESAID PRO PERTIES AND EARNING INCOME BY LETTING OUT THESE PROPERTIES IS T HE MAIN OBJECTIVE OF THE COMPANY. THE HON'BLE SUPREME COURT, HOWEVER, N OTED THAT IN THE RETURN OF INCOME THE ENTIRE INCOME WHICH HAD ACCRUE D AND ASSESSED IN THE HANDS OF THE ASSESSEE WAS FROM LETTING OUT OF T HE 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 LAI D DOWN IN THE CASE OF KARANPURA DEVELOPMENT CO. LTD. VS. CIT REPORTED IN 44 ITR 362 (SC) AND OBSERVED AS UNDER: - 8. BEFORE WE REFER TO THE CONSTITUTION BENCH JUDGM ENT IN THE CASE OF SULTAN BROTHERS (P) LTD., WE WOULD BE WELL ADVISED TO DISCUSS THE LAW LAID DOWN AUTHORITATIVELY AND SUCCI NCTLY BY THIS COURT IN 'KARANPURA DEVELOPMENT CO. LTD. V. COMMISS IONER OF INCOME TAX, WEST BENGAL' [44 ITR 362 (SC)]. THAT WA S ALSO A CASE WHERE THE COMPANY, WHICH WAS THE ASSESSEE, WAS FORM ED WITH THE OBJECT, INTER ALIA, OF ACQUIRING AND DISPOSING OF T HE UNDERGROUND COAL MINING RIGHTS IN CERTAIN COAL FIELDS AND IT HA D RESTRICTED ITS ACTIVITIES TO ACQUIRING COAL MINING LEASES OVER LAR GE AREAS, DEVELOPING THEM AS COAL FIELDS AND THEN SUB-LEASING THEM TO COLLIERIES AND OTHER COMPANIES. THUS, IN THE SAID C ASE, THE LEASING OUT OF THE COAL FIELDS TO THE COLLIERIES AND OTHER COMPANIES WAS THE BUSINESS OF THE ASSESSEE. THE INCOME WHICH WAS RECE IVED FROM LETTING OUT OF THOSE MINING C.A. NO. 4494/2004 ETC. 5 PAGE 6 LEASES WAS SHOWN AS BUSINESS INCOME. DEPARTMENT TOOK THE P OSITION THAT IT IS TO BE TREATED AS INCOME FROM THE HOUSE PROPER TY. IT WOULD BE THUS, CLEAR THAT IN SIMILAR CIRCUMSTANCES, IDENTICA L ISSUE AROSE BEFORE THE COURT. THIS COURT FIRST DISCUSSED THE SC HEME OF THE INCOME TAX ACT AND PARTICULARLY SIX HEADS UNDER WHI CH INCOME CAN BE CATEGORISED / CLASSIFIED. IT WAS POINTED OUT THA T BEFORE INCOME, PROFITS OR GAINS CAN BE BROUGHT TO COMPUTATION, THE Y HAVE TO BE ASSIGNED TO ONE OR THE OTHER HEAD. THESE HEADS ARE IN A SENSE EXCLUSIVE OF ONE ANOTHER AND INCOME WHICH FALLS WIT HIN ONE HEAD CANNOT BE ASSIGNED TO, OR TAXED UNDER, ANOTHER HEAD . THEREAFTER, THE COURT POINTED OUT THAT THE DECIDING FACTOR IS N OT THE OWNERSHIP OF LAND OR LEASES BUT THE NATURE OF THE ACTIVITY OF THE ASSESSEE AND THE NATURE OF THE OPERATIONS IN RELATION TO THEM. I T WAS HIGHLIGHTED AND STRESSED THAT THE OBJECTS OF THE COMPANY MUST A LSO BE KEPT IN VIEW TO INTERPRET THE ACTIVITIES. IN SUPPORT OF THE AFORESAID PROPOSITION, NUMBER OF JUDGMENTS OF OTHER JURISDICT IONS, I.E. PRIVY COUNSEL, HOUSE OF LORDS IN ENGLAND AND US COURTS WE RE TAKEN NOTE OF. THE POSITION IN LAW, ULTIMATELY, IS SUMMED UP I N THE FOLLOWING WORDS: - ITA NOS. 6251/MUM/2012 6253/MUM/2012 8 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 CO RRECT BUT NOT SO, WHERE THE LETTING OR SUB-LETTING IS PART OF A T RADING OPERATION. THE DIVING LINE IS DIFFICULT TO FIND; BUT IN THE CA SE OF A COMPANY WITH ITS PROFESSED OBJECTS AND THE MANNER OF ITS AC TIVITIES AND THE NATURE OF ITS DEALINGS WITH ITS PROPERTY, IT IS POSSIBLE TO SAY ON WHICH SIDE THE OPERATIONS FALL AND TO WHAT HEAD 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 M ERELY AN ENTRY 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 AND 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 DECISI ONS THE HON'BLE APEX COURT HELD THAT THE CIRCUMSTANCES OF THE CASE HAVE TO BE CONSIDERED AND IN VIEW OF THE FACTS BEFORE IT AND ITS CIRCUMST ANCES THE HON'BLE SUPREME COURT HELD THAT LETTING OF THE PROPERTIES W AS THE BUSINESS OF THE ASSESSEE AND ASSESSEE, THEREFORE, RIGHTLY DISCL OSED THE INCOME UNDER 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 LT D. AS POINTED OUT BY US HEREIN ABOVE ASSESSEE, IN FURTHERANCE OF ITS OBJECT OF MEMORANDUM OF ASSOCIATION, HAD LEASED OUT THE PREMI SES, WHICH IN TURN WAS SUBLEASED ON LEAVE AND LICENCE BASIS, THUS THE INTENTION 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 FURTHERA NCE OF ASSESSEES INTENTION TO CARRY OUT THE 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 PRO PERTY. ANOTHER ASPECT TO BE KEPT IN MIND IS THAT SIMILAR INCOME OF FERED BY THE ASSESSEE ON ACCOUNT OF SIMILAR RENT RECEIVED FROM SAME TENAN T 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 TH E YEAR UNDER CONSIDERATION, I.E. AT THE CLOSE OF THE YEAR ON 31. 03.2003 THE AGREEMENT WITH AMERICAN EXPRESS BANK HAD COME TO AN END AND T HE ASSESSEE ENTERED INTO A FRESH AGREEMENT WITH BRITISH HIGH CO MMISSION AGAIN ESTABLISHES THE CASE OF THE ASSESSEE, THAT IT IS IN VOLVED IN A SYSTEMATIC AND ORGANIZED ACTIVITY OF LEASING OUT ITS PREMISES, WHICH IN TURN ARE NOT OWNED BY THE ASSESSEE. 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 HA NDS 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 TH E HON'BLE HIGH COURT IS ALLOWED. ITA NOS. 6251/MUM/2012 6253/MUM/2012 9 14. IN THE FACTS OF THE PRESENT CASE BEFORE US, THO UGH IN THE OBJECTS OF MEMORANDUM OF ASSOCIATION IT IS NOT MENTIONED THAT THE ASSESSEE WOULD TAKE ANY PREMISES ON LEASE AND WOULD IN TURN SUBLEASE TH E SAME ON LEAVE AND LICENSE BASIS, BUT THE INTENTION OF THE ASSESSEE TO EXPLOIT THE ASSET LEASED BY IT IS CLEAR FROM THE ACTIVITY CARRIED ON BY THE ASSESSEE. AS RE FERRED TO BY US IN PARAS HEREINABOVE, THE ASSESSEE HAD TAKEN PREMISES ON LEA SE FROM M/S. MAHALAXMI ENGINEERING COMPANY PVT. LTD AND HAD SUBLEASED SAM E TO M/S. REDIFF.COM INDIA LTD. AND IN ADDITION TO THE LEAVE AND LICENSE FEE, HAD RECEIVED MAINTENANCE CHARGES. THE SAID MAINTENANCE CHARGES WERE FOR PROV IDING ADDITIONAL SERVICES TO THE SUB LESSEE, WHICH WAS IN ADDITION TO THE LEASE CHARGES RECEIVED FOR THE OCCUPATION OF THE SAID PREMISES. THE ASSESSEE BEING ENGAGED IN A SYSTEMIC ACTIVITY OF EXPLOITING ITS ASSET, WHICH IN TURN IT HAD TAKEN ON LEASE, IS THUS INVOLVED IN CARRYING ON BUSINESS ACTIVITY. THE INCO ME ARISING FROM SUCH BUSINESS ACTIVITY IS ASSESSABLE IN THE HANDS OF THE ASSESSEE UNDER THE HEAD INCOME FROM BUSINESS. THE ASSESSEE IS ENTITLED TO T HE CLAIM OF EXPENDITURE INCLUDING THE DEPRECIATION OF ASSETS BUT NOT THE BU ILDING, AS THE BUILDING WAS LEASED OUT, AS DEDUCTION AGAINST SUCH BUSINESS INCO ME. ACCORDINGLY, WE DIRECT THE AO TO ASSESS THE INCOME IN THE HANDS OF THE ASS ESSEE UNDER THE HEAD INCOME FROM BUSINESS AFTER ALLOWING THE CLAIM OF EXPENDITU RE IN RESPECT OF THE EXPENSES AND DEPRECIATION ON ASSETS. THE GROUND OF APPEAL RA ISED BY THE ASSESSEE ARE THUS ALLOWED. 15. THE FACTS AND ISSUE IN ITA NO.6251/MUM/2012 ARE IDENTICAL TO THE FACTS AND ISSUE IN ITA NO. 6253/MUM/2012 OUR DECISION IN I.T.A. NO. 6251/MUM/2012 SHALL APPLY MUTATIS MUTANDIS TO ITA N O. 6251/MUM/2012. ITA NOS. 6251/MUM/2012 6253/MUM/2012 10 16. IN THE RESULT, BOTH THE APPEALS FILED BY THE AS SESSEE ARE ALLOWED. SD/- SD/- (R. C. SHARMA) (SUSHMA CHOWLA) ACCOUNTANT MEMBER J UDICIAL MEMBER MUMBAI, DATED: 17.06.2015 *SRIVASTAVA COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT(A) CONCERNED, MUMBAI THE DR E BENCH //TRUE COPY// BY ORDER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.