PARADISE MULTIMEDIA P. LTD, MUMBAI V. ITO 5(2)4, MUMBAI

ITA 7702/MUM/2011

• Counselvise Citation: 770219914 RSA 2011
• Duration Of Justice: 2 year(s) 3 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-02-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 04-02-2014
• Assessment Year: 2001-2002
• Appeal Filed On: 14-11-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: S C TIWARI
• Keywords: Business income; Depreciation; Question of law

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH C, MUMBAI BEFORE SHRI N. K. SAINI, ACCOUNTANT MEMBER AND SHRI SANJAY GARG, JUDICIAL MEMBER ITA NO.7702/MUM/2011 (AY 2001-02) ITA NO.7703/MUM/2011 (AY 2005-06) ITA NO.777/MUM/2012 (AY 2005-06) M/S PARADISE MULTIMEDIA P. LTD., 201, JAYWANT INDUSTRIAL ESTATE, 63, TARDEO RAOD, OPP SOBO CENTRAL MUMBAI- 400034 PAN: AAACP2948P VS. THE ITO 5(2)(4), MUMBAI (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI S C TIWARI RESPONDENT BY : SHRI RAVI PRAKASH DATE OF HEARING : 04.02.2014 DATE OF PRONOUNCEMENT : 14.02.2014 O R D E R PER SANJAY GARG, JUDICIAL MEMBER: OUT OF THE ABOVE NOTED THREE APPEALS FILED BY THE A SSESSEE, TWO APPEALS BEARING ITA NOS. 7702 & 7703/MUM/2011 ARE QUANTUM APPEALS F OR ASSESSMENT YEARS 2001-02 & 2005-06 RESPECTIVELY. THEY ARISE OUT OF THE CONSOLIDATED ORDER OF THE CIT(A) DATED 29.7.2011. THE THIRD APPEAL IN I TA NO. 777/MUM2012 IS AN APPEAL AGAINST THE PENALTY LEVIED U/S. 271(1)(C) OF THE ACT FOR A.Y. 2005-06. SINCE THE ISSUE INVOLVED THEREIN IS IDENTICAL, RELA TING TO THE CASE OF THE SAME ASSESSEE, THESE WERE HEARD TOGETHER AND ARE BEING D ISPOSED OF BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. 2. FACTS OF THE CASE, FOR THE SAKE OF CONVENIENCE, ARE DISCUSSED FROM ITA 7702/MUM/2011 FOR A.Y. 2001-02.THIS IS THE SECOND R OUND OF APPEAL BEFORE THE ITA NO.7702/M/11 ITA NO.7703/M/11 & ITA NO.777/M/12 2 TRIBUNAL. THE ASSESSEE THROUGH ITS SOLE GROUND OF APPEAL HAS CHALLENGED THE ACTION OF THE ASSESSING OFFICER AND LEARNED CIT(A) IN TREATING THE RENTAL INCOME FROM LETTING OUT OF THE INDUSTRIAL GALAS TO SISTER CONCERN AS INCOME FROM HOUSE PROPERTY AS AGAINST BUSINESS INCOME CLAIMED BY THE ASSESSEE. 3. THE ASSESSEE CLAIMED THAT SAID GALAS ALONG WITH INFRASTRUCTURAL FACILITIES HAD BEEN LET OUT TO M/S BIG VISION PVT. LTD., A SIS TER CONCERN OF THE ASSESSEE FOR RUNNING ITS DIGITAL PRINTING BUSINESS. THE ASSESSIN G OFFICER, HOWEVER, NOTED THAT THE AGREEMENT DATED 10.1.1998, VIDE WHICH THE PREMI SES WAS LET OUT, DID NOT TALK ABOUT PROVIDING OF INFRASTRUCTURAL FACILITIES OR MA CHINES. HE DID NOT ACCEPT THE SUBMISSION OF THE ASSESSEE THAT IT WAS NOT IN A POS ITION TO UTILIZE THE CAPACITY TO THE FULLEST EXTENT POSSIBLE AND THEREFORE THE PREMI SE WAS TEMPORARILY LEASED OUT TO THE SISTER CONCERN. IT WAS OBSERVED BY HIM THAT THE ASSESSEE WAS OWNER OF THE PREMISES WHICH HAD BEEN LET OUT ON RENT AND THEREFO RE INCOME WAS ASSESSABLE UNDER THE HEAD INCOME FROM HOUSE PROPERTY. HE PLA CED RELIANCE ON THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE O F SHAMBU INVESTMENTS PVT. LTD. 263 ITR37. THE ASSESSING OFFICER ACCORDI NGLY ASSESSED THE ABOVE SAID RENTAL INCOME AS INCOME FROM HOUSE PROPERTY. THE LEARNED CIT(A) UPHELD THE ORDER OF THE ASSESSI NG OFFICER. THE ASSESSEE THUS PREFERRED APPEAL BEFORE THE TRIBUNAL. 4. BEFORE THE TRIBUNAL, THE ASSESSEE SUBMITTED THAT IT HAD ENTERED INTO A COMPOSITE AGREEMENT WITH THE SISTER CONCERN FOR LEA SE OF INDUSTRIAL GALAS, FURNITURE AND FIXTURES, PLANT AND MACHINERY AND THE LEASE WAS TEMPORARY TO EXPLOIT THE UNUTILIZED FACILITIES AVAILABLE WITH TH E ASSESSEE COMPANY. THE TRIBUNAL AFTER HEARING THE PARTIES, VIDE ORDER DATE D 22.5.2009 (ITA NO.209/M/2005 FOR AY 2001-02) SET ASIDE THE ISSUE T O THE FILE OF THE AO FOR FRESH EXAMINATION DIRECTING AS UNDER: ITA NO.7702/M/11 ITA NO.7703/M/11 & ITA NO.777/M/12 3 THE CASE OF THE ASSESSEE HAS TO BE EVALUATED IN TE RMS OF VARIOUS JUDICIAL PRONOUNCEMENTS AND THE PROVISIONS OF THE L AW MENTIONED ABOVE. IN THIS CASE THE CLAIM OF THE ASSESSE IS THA T IT HAD LET OUT THE PREMISES ALONG WITH CERTAIN INFRASTRUCTURAL FACILIT IES INCLUDING MACHINES TO THE SISTER CONCERN FOR RUNNING A DIGITA L PRINTING PRESS. BUT THE AO HAS GIVEN A FINDING THAT THE AGREEMENT D ATED 10.1.1998 DID NOT TALK ABOUT PROVIDING ANY FACILITIES SUCH AS TELEPHONE, MACHINERY ETC. CIT(A) HAS ALSO OBSERVED THAT BARRIN G THE PREAMBLE, THERE IS NO MENTION ANYWHERE REGARDING DE TAILS OF FURNITURE, FIXTURE OR ANY MACHINERY PROVIDED TO THE LESSEE NOR THERE IS ANY SCHEDULE ATTACHED TO THE AGREEMENT GIVING TH E DETAILS OF SUCH ASSETS. IT IS THEREFORE NOT VERY CLEAR WITH SUPPORT ING EVIDENCE THAT THE ASSESSEE HAD LET OUT THE PREMISES WITH ANY INFR ASTRUCTURAL FACILITIES. SECONDLY, IT IS ALSO NOT CLEAR NOR IT H AS BEEN EXAMINED BY THE LOWER AUTHORITIES WHETHER THE PREMISES WITH THE SAID FACILITIES HAD BEEN EVER USED BY THE ASSESSEE IN THE BUSINESS. IN CASE THE PREMISES/FACILITIES HAD NOT BEEN USED IN THE BUSINE SS AND HAD BEEN ACQUIRED ONLY TO LET OUT TO THE SISTER CONCERN, REN TAL INCOME FROM THE SAME CANNOT BE ASSESSED AS BUSINESS INCOME AND WOULD BE OF THE NATURE OF HOUSE PROPERTY INCOME OR INCOME FROM OTHER SOURCES UNDER SECTION 57 (III). IN CASE, THESE HAD BEEN EAR LIER USED IN BUSINESS, IT HAS TO BE SEEN WHETHER SUBSEQUENTLY IT BECOME SURPLUS AND LETTING OUT WAS TEMPORARY. WE ALSO NOTE THAT TH IS IS NOT THE FIRST YEAR OF LETTING OUT OF PREMISES. IN FACT THE PREMIS ES HAD BEEN LET OUT INITIALLY BY AGREEMENT DATED 10.1.1998 WHEREAS THE PRESENT DISPUTE IS IN RELATION TO ASSESSMENT YEAR 2001-02. IT HAS N OT BEEN LOOKED INTO WHETHER THE CASE HAD BEEN EXAMINED IN THE ASSE SSMENT OF EARLIER YEARS BY THE ASSESSING AUTHORITIES. THE ISS UE IN OUR VIEW REQUIRES FRESH EXAMINATION IN THE LIGHT OF LEGAL PO SITION DISCUSSED IN THE PRECEDING PARAS. THE LEARNED AR HAS ALSO RA ISED A FRESH PLEA BEFORE US THAT THE PREMISES HAD BEEN LET OUT T O SISTER CONCERN ON BUSINESS EXPEDIENCY. IT IS ALSO THEREFORE TO BE EXAMINED WHETHER THE CLAIM IS FACTUALLY CORRECT AND WHETHER ON THIS GROUND RENTAL INCOME CAN BE ASSESSED AS BUSINESS INCOME. WE THERE FORE SETASIDE THE ORDER OF CIT(A) AND RESTORE THE MATTER TO THE F ILE OF AO FOR PASSING A FRESH ORDER AFTER NECESSARY EXAMINATION I N THE LIGHT OF OBSERVATIONS MADE EARLIER AND AFTER ALLOWING OPPORT UNITY OF HEARING TO THE ASSESSEE. 5. IN THE SECOND ROUND, THE AO OBSERVED FROM THE AG REEMENT DATED 10.1.1998 THAT THE ASSESSEE COMPANY HAD NO INTENTIO N TO EXPLOIT THE BUSINESS ASSETS BUT ONLY TO EARN RENTAL INCOME. THOUGH IT WA S STATED BEFORE THE AO THAT ITA NO.7702/M/11 ITA NO.7703/M/11 & ITA NO.777/M/12 4 THE LETTING OUT WAS DISCONTINUED FROM THE FINANCIA L YEAR 2009-10, SHE OBSERVED THAT THE ARRANGEMENT CONTINUED FOR 11 YEARS, WHICH WAS A LONG PERIOD AND COULD NOT BE TREATED AS TEMPORARY PERIOD. SHE THEREFORE A GAIN ASSESSED THE INCOME AS INCOME FROM HOUSE PROPERTY. THE AO HOWEVER DID NOT GIVE ANY FINDING IN RESPECT OF THE NEWLY PRODUCED AND RELIED UPON LEASE AGREEMENT DT.30.3.2000 BY THE ASSESSEE. 6. IN THE SECOND ROUND OF APPEAL BEFORE THE CIT(A), THE ASSESSEE REITERATED ITS SUBMISSIONS. BUT THE LEARNED CIT(A) DID NOT AGR EE WITH THE CONTENTIONS OF THE ASSESSEE. HE THEREFORE UPHELD THE ORDER OF THE AO. THE ASSESSEE IS THUS IN SECOND ROUND OF APPEAL BEFORE THIS TRIBUNAL. 7. BEFORE US, THE LEARNED AR FOR THE ASSESSEE REITE RATED THE SUBMISSIONS MADE BEFORE THE LOWER AUTHORITIES THAT THE PREMISES WITH INFRASTRUCTURAL FACILITIES HAD BEEN LET OUT FOR A TEMPORARY PERIOD FOR FULL UT ILIZATION OF BUSINESS ASSETS. THE LEARNED AR FURTHER SUBMITTED THAT ASSESSEE HAD REGULAR BUSINESS DEALINGS WITH ITS SISTER CONCERN. HE REFERRED TO THE COPY OF THE ACCOUNT OF THE PARTY (AT PAGE 58 OF THE PAPER BOOK FILED BEFORE US) TO POINT OUT THAT A SUM OF RS.1,37,71,961/- WAS THE RECEIPT FROM SISTER CONCER N AS JOB WORK CHARGES AND THE ASSESSEE WAS ALSO PAYING JOB WORK CHARGES TO SI STER CONCERN. IT WAS THEREFORE IN THE MUTUAL INTEREST AND BUSINESS EXPEDIENCY FOR LETTING OUT PART OF THE PREMISES SO THAT THE SISTER CONCERN SHOULD OPERATE FROM SAME PREMISES. HE HAS FURTHER CONTENDED THAT THE INCOME WAS REQUIRED TO B E ASSESSED AS BUSINESS INCOME AS LETTING OUT WAS DONE FOR COMMERCIAL EXPED IENCY. 8. ON THE OTHER HAND, THE LEARNED DR HAS RELIED UPO N THE FINDINGS OF THE LOWER AUTHORITIES. 9. WE HAVE CONSIDERED THE RESPECTIVE SUBMISSIONS OF THE PARTIES AND HAVE ALSO GONE THROUGH THE RECORDS. WE MAY OBSERVE THAT IN THE FIRST ROUND, THE TRIBUNAL AFTER DETAILED DISCUSSION OF THE MATTER HA D RESTORED THE MATTER TO THE FILE ITA NO.7702/M/11 ITA NO.7703/M/11 & ITA NO.777/M/12 5 OF THE AO DIRECTING TO EXAMINE THE CLAIM OF THE ASS ESSEE IN THE LIGHT OF OBSERVATIONS MADE BY THE TRIBUNAL AS REPRODUCED ABO VE. HOWEVER, A PERUSAL OF THE ASSESSMENT ORDER IN QUESTION REVEALS THAT THE A O HAS MISERABLY FAILED TO COMPLY WITH THE DIRECTIONS GIVEN BY THE TRIBUNAL. T HE AO DID NOT EXAMINE AS TO WHETHER THE PREMISES, WITH THE FACILITIES AS CLAIME D, HAD BEEN EVER USED BY THE ASSESSEE IN THE BUSINESS AND WHETHER SUBSEQUENTLY I T BECOME SURPLUS AND LETTING OUT WAS TEMPORARY OR THAT THE SAME HAD BEEN ACQUIRE D BY THE ASSESSEE ONLY TO LET OUT TO THE SISTER CONCERN; WHETHER THE CASE HAD BEE N EXAMINED IN THE ASSESSMENT OF EARLIER YEARS BY THE ASSESSING AUTHORITIES AND F URTHER WHETHER THE PREMISES HAD BEEN LET OUT TO SISTER CONCERN ON BUSINESS EXPE DIENCY. THE ASSESSMENT ORDER IS SILENT ON ALL THESE ASPECTS IN CLEAR VIOLATIONS OF THE DIRECTIONS OF THE TRIBUNAL GIVEN VIDE ORDER DATED 22.5.2009. THE AO ONLY REEXA MINED THE CONTENTS OF THE AGREEMENT DATED 10.1.1998 AND HELD THAT THE INTENTI ON WAS TO LET OUT THE PREMISES AND FURTHER THAT ARRANGEMENT CONTINUED FOR 11 YEARS AND SUCH AN ARRANGEMENT COULD NOT BE SAID TO BE TEMPORARY. THE AO ALSO DID NOT MAKE ANY OBSERVATION ABOUT THE SECOND AGREEMENT DT.30.3.2000 RELIED UPON BY THE ASSESSEE. 10. THOUGH THE LEARNED CIT(A) DISCUSSED IN THE IMPU GNED ORDER ABOUT THE VARIOUS DIRECTIONS GIVEN BY THE TRIBUNAL REQUIRED T O BE FOLLOWED BY THE AO TO EXAMINE THE ISSUE, HE ALSO FAILED TO CONSIDER THE A SPECT OF PROSPECTS FOR BUSINESS EXPEDIENCY EXPLANATION GIVEN BY THE ASSESSEE . HE F URTHER OBSERVED FROM THE AGREEMENT DATED 10.1.1998 THAT THERE WAS NO MENTION OF ANY FACILITY TO BE USED OR PROVIDED ALONG WITH PREMISES. HE ALSO DID NOT DI SCUSS ABOUT THE SECOND AGREEMENT DATED 30.3.2000 RELIED UPON BY THE ASSESS EE. 11. AFTER GOING THROUGH THE RECORD, IT IS OBSERVED THAT THE SECOND AGREEMENT DATED 30.03.2000 WAS NEITHER PRODUCED BEFORE THE AO , NOR BEFORE THE CIT(A) AND EVEN NOT BEFORE THE TRIBUNAL IN THE FIRST ROUND OF APPEALS. IF THE SAID AGREEMENT HAD BEEN IN POSSESSION OF THE ASSESSEE, T HEN WHAT PREVENTED IT FROM ITA NO.7702/M/11 ITA NO.7703/M/11 & ITA NO.777/M/12 6 PRODUCING THE SAME BEFORE THE AUTHORITIES AT THAT T IME ESPECIALLY WHEN THE CLAIM OF THE ASSESSEE WAS DENIED BY THE AUTHORITIES RELYI NG UPON THE PREVIOUS AGREEMENT OF THE YEAR 1998. UNDER SUCH CIRCUMSTANCE S, THE SECOND AGREEMENT, IN OUR VIEW, CAN BE SAID TO BE A SUSPICIOUS DOCUMEN T AND WE ARE NOT INCLINED TO RELY UPON OR CONSIDER THE SAME. HOWEVER, FROM THE O THER FACTS AND CIRCUMSTANCES, AS EXPLAINED BY THE LEARNED COUNSEL FOR THE ASSESSEE, IT CAN BE GATHERED THAT THERE WAS MUTUAL EXCHANGE OF BUSINESS BETWEEN THE ASSESSEE AND ITS SISTER CONCERN. THE LEARNED AR EXPLAINED THAT THE ASSESSEE EARNED SUBSTANTIAL AMOUNT FROM THE CO-RELATING BUSINESS ACTIVITY ACQUI RED FROM THE SISTER CONCERN AND AT THE SAME TIME THE SISTER CONCERN OF THE ASSE SSEE ALSO PERFORMED VARIOUS JOB WORKS RELATED TO THE BUSINESS WORK OF DIGITAL P RINTING OF THE ASSESSEE. HE HAS RELIED UPON THE LEDGER ACCOUNTS, AS DISCUSSED ABOVE , IN THIS RESPECT. FURTHER IT HAS BEEN STATED THAT THE LETTING OUT HAS BEEN DISCO NTINUED W.E.F. FINANCIAL YEAR 2009-10. IT HAS BEEN FURTHER EXPLAINED THAT NOT THE ENTIRE PREMISES BUT ONLY THE SURPLUS PREMISES ALONG WITH FACILITIES WAS LET OUT FOR TEMPORARY PERIOD OUT OF BUSINESS EXPEDIENCY. MOREOVER, IT IS NOT DENIED BY THE REVENUE THAT THE ASSESSEE HAD BEEN CARRYING OUT ITS BUSINESS ACTIVITIES FROM THE SAME PREMISES. SO FAR THE NON-MENTIONING OF THE PROVISION OF FACIL ITIES IN THE AGREEMENT DATED 10.01.1998 IS CONCERNED, IT MAY BE OBSERVED F ROM THE PREVIOUS ASSESSMENT ORDER DATED 20.2.2004 THAT THE AGREEMENT DOES TALK ABOUT PROVIDING THE FACILITIES SUCH AS TELEPHONE, FAX AND OTHER ADM INISTRATIVE SERVICES FOR TEMPORARY USE OF THEIR BUSINESS ACTIVITY. HOWEVER, THE OBSERVED THAT THE AGREEMENT DID NOT BIFURCATE THE COST OF SERVICES AN D RENT OF PREMISES. EVEN THE LEARNED CIT(A), IN HIS ORDER DATED 19.10.2004 (IN T HE FIRST ROUND OF APPEAL) HAS REPRODUCED THE VARIOUS CLAUSES OF THE AGREEMENT DAT ED 10.1.1998. FROM THE PERUSAL OF THOSE CLAUSES, AS REPRODUCED IN THE ORDE R OF THE CIT(A) DATED 19.10.2004, IT MAY BE OBSERVED THAT THE AGREEMENT W AS PRIMARILY FOR PROVIDING OF VARIOUS FACILITIES FOR BUSINESS ACTIVITIES OF TH E SISTER CONCERN AND THE LETTING OF ITA NO.7702/M/11 ITA NO.7703/M/11 & ITA NO.777/M/12 7 THE PREMISES WAS INCIDENTAL. EVEN THE CONSIDERATION WAS SETTLED FOR THE SERVICES AND FACILITIES ALONGWITH USE OF THE 3000 SQ. FEET. PREMISES, WHICH WAS A PART OF THE PREMISES USED AND OWNED BY THE ASSESSEE. THOUGH THE CLAUSES OF THE AGREEMENT CANNOT BE SAID TO BE CONCLUSIVE PROOF OF THE ACTUAL ARRANGEMENT BETWEEN THE PARTIES, FROM THE OTHER CIRCUMSTANTIAL EVIDENCE SUCH AS LETTING OUT OF ONLY PART OF THE PREMISES, CARRYING OUT OF MUTUALLY RELATED BUSINESS FROM THE SAME/REMAINING PORTION OF THE PREMISES BY THE ASSES SEE, MUTUAL BUSINESS BENEFITS AND EARNING INCOME FROM CARRYING OUT JOB W ORKS RELATED TO THE BUSINESS ACTIVITY OF EACH OTHER AND FURTHER DISCONTINUATION OF ARRANGEMENT W.E.F. FINANCIAL YEAR 2009-10, PROVES BEYOND DOUBT THAT THE SURPLUS BUSINESS ASSETS WERE LEASED OUT BY THE ASSESSEE TO ITS SISTER CONCERN FOR COMME RCIAL EXPLOITATION FOR A TEMPORARY PERIOD AND ALSO OUT OF COMMERCIAL EXPEDIE NCY RELATING TO THE BUSINESS ACTIVITY OF THE ASSESSEE. 12. THE HONBLE CALCUTTA HIGH COURT IN THE CASE OF SHAMBU INVESTMENTS (P) LTD. 249 ITR 47 (CAL), WHICH CASE LAW HAS BEEN STR ONGLY RELIED UPON BY THE REVENUE, HELD THAT MERELY BECAUSE INCOME IS ATTACHE D TO ANY IMMOVABLE PROPERTY CANNOT BE SOLE FACTOR FOR ASSESSMENT OF SU CH INCOME AS INCOME FROM PROPERTY. WHAT HAS TO BE SEEN IS, WHAT WAS THE PRIM ARY OBJECT OF THE ASSESSEE WHILE EXPLOITING THE PROPERTY. IF IT IS FOUND APPLY ING SUCH TEST THAT THE MAIN INTENTION IS FOR LETTING OUT THE PROPERTY OR ANY PO RTION THEREOF THE SAME MUST BE CONSIDERED AS RENTAL INCOME OR INCOME FROM PROPERTY . IN CASE IT IS FOUND THAT THE MAIN INTENTION IS TO EXPLOIT THE IMMOVABLE PROPERTY BY WAY OF COMPLEX COMMERCIAL ACTIVITIES, IN THAT EVENT IT MUST BE HEL D AS BUSINESS INCOME. THE HONBLE HIGH COURT, FROM THE FACTS OF THE CASE BEFO RE IT, HOWEVER, HELD THAT THE INTENTION OF THE ASSESSEE IN THAT CASE WAS LETTING OUT OF PROPERTY FOR RENT. THE SAID JUDGMENT OF THE HONBLE CALCUTTA HIGH COURT WA S UPHELD BY THE HONBLE SUPREME COURT WITHOUT ANY FURTHER DISCUSSION OF THE MATTER. SO THE PROPOSITION OF LAW THAT EMERGES IS THAT IT IS THE INTENTION OF THE ASSESSEE THAT IS TO BE LOOKED ITA NO.7702/M/11 ITA NO.7703/M/11 & ITA NO.777/M/12 8 INTO WHILE ASSESSING THE INCOME AS TO UNDER WHICH H EAD IT WOULD FALL. ALMOST SIMILAR PROPOSITION OF LAW HAS BEEN LAID DOWN BY TH E HONBLE SUPREME COURT IN THE CASE OF UNIVERSAL PLAST LTD. (1999) 237 ITR 4 54(SC) WHEREIN IT HAS BEEN HELD THAT NO PRECISE TEST CAN BE LAID DOWN TO ASCER TAIN WHETHER INCOME (REFERRED TO BY WHATEVER NOMENCLATURE, LEASE AMOUNT, RENTS, L ICENSE FEE) RECEIVED BY AN ASSESSEE FROM LEASING OR LETTING OUT OF ASSETS WOU LD FALL UNDER THE HEAD PROFITS AND GAINS OF THE BUSINESS OR PROFESSION; IT IS A M IXED QUESTION OF LAW AND FACT HAS TO BE DETERMINED FROM THE POINT OF VIEW OF A BU SINESSMAN IN THAT BUSINESS ON THE FACTS AND IN THE CIRCUMSTANCES OF EACH CASE INCLUDING TRUE INTERPRETATION OF THE AGREEMENT UNDER WHICH THE ASSETS ARE LET OUT . IF A PART OF THE ASSETS IS LET OUT TEMPORARILY WHILE THE ASSESSEE CARRIES OUT ITS OTHER BUSINESS ACTIVITIES, THEN IT WOULD BE A CASE OF EXPLOITING THE ASSETS FOR THE PU RPOSE OF BUSINESS. AS OBSERVED ABOVE, IN OUR VIEW, THE INTENTION OF THE A SSESSEE IN THIS CASE WAS TO COMMERCIALLY EXPLOIT THE SURPLUS PORTION OF THE PRO PERTY AND ALSO OUT OF BUSINESS EXIGENCIES. 13. IN VIEW OF ABOVE DISCUSSION OF THE MATTER, THE ISSUE IS DECIDED IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE. THE IMPUG NED ORDER OF THE CIT(A) IS THEREFORE SET ASIDE AND THIS APPEAL OF THE ASSESSEE IS HEREBY ALLOWED. 14. ITA NO 7703/MUM/2011 FOR AY. 2005-06: THE FACTS AS WELL THE ISSUE RELATING TO TREATMENT O F RENTAL INCOME OF RS.21 LAKHS RAISED IN THIS APPEAL IS IDENTICAL TO THAT OF ITA 7 702/MUM/2011 FOR 2001-02 EXCEPT THAT THE ASSESSEE IN THIS APPEAL HAS ALSO CO NTESTED THE DISALLOWANCE OF SOCIETY CHARGES OF RS. 2,34,089/- AND DEPRECIATI ON ON GALAS AT RS. 5,22,738/-. IN VIEW OF OUR FINDINGS GIVEN ABOVE, THE RENTAL INC OME IS ORDERED TO BE TREATED AS BUSINESS INCOME. THEREFORE THE CONSEQUENTIAL CLA IM OF SOCIETY CHARGES AND DEPRECIATION ON GALAS IS ALSO HEREBY ALLOWED. THIS APPEAL OF THE ASSESSEE IS ALSO ALLOWED. ITA NO.7702/M/11 ITA NO.7703/M/11 & ITA NO.777/M/12 9 15. ITA NO 777/MUM/2012 ( FOR A.Y. 2005-06): SINCE THE CLAIM OF THE ASSESSE WAS NOT ADMITTED BY THE AO AS TO THE ASSESSMENT OF INCOME UNDER THE HEAD PROFITS AND GA INS OF BUSINESS OR PROFESSION AND HE ASSESSED THE INCOME UNDER THE HE AD INCOME FROM HOUSE PROPERTY HENCE HE TREATED IT A CASE OF FURNISHING OF WRONG PARTICULARS OF INCOME AND LEVIED PENALTY OF RS.537910/- 16. THE CIT(A) CONFIRMED THE SAID PENALTY. THE ASSE SSEE IS THUS IN APPEAL BEFORE US. 17. IT MAY BE OBSERVED THAT THE ASSESSEE HAD BEEN T REATING THE SAID RENTAL INCOME AS BUSINESS INCOME SINCE 1998 WITHOUT ANY OB JECTION BEING RAISED BY THE REVENUE. MERELY BECAUSE THE AO FOR THE YEAR UNDER C ONSIDERATION DID NOT AGREE REGARDING THE HEAD OF THE INCOME UNDER WHICH THE IN COME WAS RETURNED BY THE ASSESSEE, THAT ITSELF CANNOT BE SAID TO BE A CASE O F FURNISHING OF INACCURATE PARTICULARS OF INCOME. MOREOVER, AS OBSERVED ABOVE, WE HAVE ALLOWED THE CLAIM OF THE ASSESSEE IN THE QUANTUM APPEAL FOR TREATMENT OF INCOME AS BUSINESS INCOME. HENCE, THE VERY BASIS UPON WHICH THE PENALT Y WAS LEVIED BY THE AO HAS CEASED TO EXIST. HENCE THE PENALTY IS HEREBY ORDERE D TO BE DELETED. 18. IN THE RESULT, ALL THE THREE APPEALS PREFERRED BY THE ASSESSEE ARE HEREBY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 14.02.2014 SD/- SD/- (N K SAINI) (SANJAY GARG) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DT : 14 TH FEBRUARY, 2014 SA ITA NO.7702/M/11 ITA NO.7703/M/11 & ITA NO.777/M/12 10 COPY FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE C.I.T. CONCERNED MUMBAI 4. THE CIT (A) CONCERNED MUMBAI 5. THE DR, C - BENCH, ITAT, MUMBAI //TRUE COPY// BY ORDER ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI -