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

ITA 7703/MUM/2011

• Counselvise Citation: 770319914 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: 2005-2006
• 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; Corroborative evidences; Commercial expediency
• Section: 263

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/M UM / 20 11 (AY 2001 - 02) ITA NO.7703/M UM /2011 (AY 2005 - 06) ITA NO.777/M UM /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) A PPELLANT BY : SHRI S C TIWARI R ESPONDENT BY : SHRI RAVI PRAKASH DATE OF HEARING : 0 4 .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 ASSESSEE, TWO APPEALS BEARING ITA NOS. 7702 & 7703/MUM/2011 ARE QUANTUM APPEALS FOR ASSESSMENT YEARS 2001 - 02 & 2005 - 06 RESPECTIVELY . THEY ARISE OUT OF THE CONSOLIDATED ORDER OF THE CIT(A) DATED 29.7.2011 . T HE THIRD APPEAL IN ITA NO. 777/MUM2012 IS AN APPEAL AGAINST THE PENALTY LEVIED U/S. 271(1)(C) OF THE ACT FOR A.Y. 20 05 - 06. SINCE THE ISSUE INVOLVE D THEREIN IS IDENTICAL , RELATING TO THE C ASE OF THE SAME ASSESSEE, THESE WERE HEARD TOGETHER AN D ARE BEING DISPOSED OF BY THIS COMMON ORDER FOR THE SAKE OF CONVE NIENCE . 2. FACTS OF THE CASE , FOR THE SAKE OF CONVENIENCE , ARE DISCUSSED FROM ITA 7702/MUM/2011 FOR A.Y. 20 0 1 - 02. THIS IS THE SECOND ROUND 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 A SSESSING O FFICER AND L EARNED 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 CLAIME D BY THE ASSESSEE. 3 . THE ASSESSEE CLAIMED THAT SAID GALAS ALONG WITH INFRASTRUCTURAL FACILITIES HAD BEEN L ET OUT TO M/S BIG VISION PVT. LTD., A SISTER CONCE RN OF THE AS S ESSEE FOR RUNNING ITS DIGITAL PRINTING BUSINESS. THE A SS ESSING OFFICER, HOWEVER , NOTED THAT THE AGREEMENT DATED 10.1.1998 , VIDE WHICH THE PREMISES WAS LET OUT, DID NOT TALK ABOUT PROVIDING OF INFRASTRUCTURAL FACILITIES OR MACHINES. HE DID NOT ACCEPT THE SUBMISSION OF THE ASSESSEE THAT IT WAS NOT IN A POSITION TO UTILIZE THE CAPACITY T O THE FULLEST EXTENT POSS IBLE AND THEREFORE THE PREMISE 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 THEREFORE INCOME WAS ASSESSABLE UNDER THE HEAD I NCOME FROM HOUSE PROPERTY . HE PLACED RE LIANCE ON THE JUDG MENT OF THE H ONBLE SUPREME COURT IN THE CASE OF S HAMBU INVESTMENT S P VT. LTD. 263 ITR37. THE A SSESSING O FFICER ACCORDINGLY ASSESSED THE ABOVE SAID RENTAL INCOME AS I NCOME FROM HOUSE PROPERTY . THE L EARNE D CIT(A) UPHELD THE ORDER OF THE A SSESSING O FFICER . 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 LEASE OF INDUSTRIAL GALAS, FURNITURE AND FIXTURES, PLANT AND MACHINERY AND THE LEASE WAS T EMPORARY TO EXPLOIT THE UNUTILIZED FACILITIES AVAILABLE WITH THE ASSESSEE COMPANY. THE TRIBUNAL AFTER HEARING THE PART IES, VIDE ORDER DATED 22.5.2009 (ITA NO.209/M/2005 FOR AY 2001 - 02 ) SET ASIDE THE ISSUE TO 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 TERMS OF VARIOUS JUDICIAL PRONOUNCEMENTS AND THE PROVISI ONS OF THE LAW MENTIONED ABOVE. IN THIS CASE THE CLAIM OF THE ASSESSE IS THAT IT HAD LET OUT THE PREMISES ALONG WITH CERTAIN INFRASTRUCTURAL FACILITIES INCLUDING MACHINES TO THE SISTER CONCERN FOR RUNNING A DIGITAL PRINTING PRESS. BUT THE AO HAS GIVEN A FI NDING THAT THE AGREEMENT DATED 10.1.1998 DID NOT TALK ABOUT PROVIDING ANY FACILITIES SUCH AS TELEPHONE, MACHINERY ETC. CIT(A) HAS ALSO OBSERVED THAT BARRING THE PREAMBLE, THERE IS NO MENTION ANYWHERE REGARDING DETAILS OF FURNITURE, FIXTURE OR ANY MACHINERY PROVIDED TO THE LESSEE NOR THERE IS ANY SCHEDULE ATTACHED TO THE AGREEMENT GIVING THE DETAILS OF SUCH ASSETS. IT IS THEREFORE NOT VERY CLEAR WITH SUPPORTING EVIDENCE THAT THE ASSESSEE HAD LET OUT THE PREMISES WITH ANY INFRASTRUCTURAL FACILITIES. SECONDLY, IT IS ALSO NOT CLEAR NOR IT HAS BEEN EXAMINED BY THE LOWER AUTHORITIES WHETHER THE PREMISES WITH THE SAID FACILITIES HAD BEEN EVER USED BY THE ASSESSEE IN THE BUSINESS. IN CA SE THE PREMISES/FACILITIES HAD NOT BEEN USED IN THE BUSINESS AND HAD BEEN ACQUIRE D ONLY TO LET OUT TO THE SISTER CONCERN, RENTAL 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 EARLIER USED IN BUSI NESS, IT HAS TO BE SEEN WHETHER SUBSEQUENTLY IT BECOME SURPLUS AND LETTING OUT WAS TEMPORARY. WE ALSO NOTE THAT THIS IS NOT THE FIRST YEAR OF LETTING OUT OF PREMISES. IN FACT THE PREMISES 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 NOT BEEN LOOKED INTO WHETHER THE CASE HAD BEEN EXAMINED IN THE ASSESSMENT OF EARLIER YEARS BY THE ASSESSING AUTHORITIES. THE ISSUE IN OUR VIEW REQUIRES FRESH EXAMINATION IN THE LIGHT OF LEGA L POSITION DISCUSSED IN THE PRECEDING PARAS. THE LEARNED AR HAS ALSO RAISED A FRE S H PLEA BEFORE US THAT THE PREMISES HAD BEEN LET OUT TO 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 THEREFORE SETASIDE THE ORDER OF CIT(A) AND RESTORE THE MATTER TO THE FILE OF AO FOR PASSING A FRESH ORDER AFTER NECESSARY EXAMINATION IN THE LIGHT OF OBSERVATIONS MADE EARLIER AND AFTER ALLOWING OPPORTUNITY OF HEARING TO THE ASSESSEE. 5. IN THE SECOND ROUND, THE AO OBSERVED FROM THE AGREEMENT DATED 10.1.1998 THAT THE ASSESSEE COMPANY HAD NO INTENTION TO EXPLOIT THE BUSINESS ASSETS BUT ONLY TO EARN RENTAL INCOME . THOUGH IT WAS 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 FINANCIAL 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 AGAIN ASSESSED THE IN COME 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 SUB MISSIONS. BUT THE L EARNE D CIT(A) DID NOT AGREE 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 L EARNE D AR FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE LOWER AUTHORITIES THAT THE PREMISES WITH INFRASTRUCTURAL FACILITIES HAD BEEN LET OUT FOR A TEMPORARY PERI O D FOR FULL UTILIZATION OF BUSINESS ASSETS. THE L EARNE D AR FURTHER SUBMITTED THAT ASSESSEE HAD REGULAR BUSINESS DEALINGS W ITH 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 CONCERN AS JOB WORK CHARGES AND THE ASSESSEE WAS ALSO PAYING JOB WORK CHARGES TO SISTER 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 T HE INCOME WAS REQUIRED TO BE ASSESSED AS BUSINESS INCOME AS LETTING OUT WAS DONE FOR COMMERCIAL EXPEDIENCY. 8 . ON THE OTHER HAND , THE L EARNE D DR HAS RELIED UPON 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 HAD 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 ASSESSEE IN THE LIGHT OF OBSERVATIONS MADE BY THE TRIBUN AL AS REPRODUCED ABOVE. HOWEVER , A PERUSAL OF THE ASSESSMENT ORDER IN QUESTION REVEALS THAT THE AO HAS MISERABLY FAILED TO COMPLY WITH THE DIRECTIONS GIVE N BY THE TRIBUNAL. THE AO DID NOT EXAMINE AS TO WHETHER THE PREMISES, WITH THE FACILITIES AS CLAIMED, HAD BEEN EVER USED BY THE ASSESSEE IN THE BUSINESS AND WHETHER SUBSEQUENTLY IT BECOME SURPLUS AND LETTING OUT WAS TEMPORARY OR THAT THE SAME HAD BEEN ACQUIRED BY THE ASSESSEE ONLY TO LET OUT TO THE SISTER CONCERN; W HETHER THE CASE HAD BEEN EXAMINED IN THE ASSESSMENT OF EARLIER YEARS BY THE ASSESSING AUTHORITIES AND FURTHER WHETHER THE PREMISES HAD BEEN LET OUT TO SISTER CONCERN ON BUSINESS EXPEDIENCY. THE ASSESSMENT ORDER IS SILENT ON ALL THESE ASPECTS IN CLEAR VIOLATIONS OF THE DIRECTIONS OF THE T RIBUNAL G IVEN VIDE ORDER DATED 22.5.2009. THE AO ONLY REEXAMINED THE CONTENTS OF THE AGREEMENT DATED 10.1.1998 AND HELD THAT THE INTENTION 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. 1 0 . THOUGH THE L EARNE D CIT(A) DISCUSSED IN THE IMPUGNED ORDER ABOUT THE VARIOUS DIRECTIONS GIVEN BY THE T RIBUNA L REQUIRED TO BE FOLLOWED BY THE AO TO EXAMINE THE ISSUE , HE ALSO FAILED TO CONSIDER THE ASPECT OF PROSPECTS FOR BUSINESS EXPEDIENCY EXPLANATION GIVEN BY THE ASSESSEE . HE FURTHER 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 DISCUSS ABOUT THE SECOND AGREEMENT DATED 30.3.2000 RELIED UPON BY THE ASSESSEE. 1 1 . AFTER GOING THROUGH THE REC ORD, IT IS OBSERVED THAT THE SECOND AGREEMENT DATED 30. 0 3.2000 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, THEN 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 TIME E SPECIALLY WHEN THE CLAIM OF THE ASSESSEE WAS DENIED BY THE AUTHORITIES RELYING UPON THE PREVIOUS AGREEMENT OF THE YEAR 1998. UNDER SUCH CIRCUMSTANCES, THE SECOND AGREEMENT, IN OUR VIEW, CAN BE SAID TO BE A SUSPICIOUS DOCUMENT AND WE ARE NOT INCLINED TO REL Y UPON OR CONSIDER THE SAME. HOWEVER , FROM THE OTHER FACTS AND CIRCUMSTANCES, AS EXPLAINED BY THE L EARNE D COUNSEL FOR THE ASSESSEE, IT CAN BE GATHERED THAT THERE WAS MUTUAL EXCHANGE OF BUSINESS BETWEEN THE ASSESSEE AND ITS SISTER CONCERN. THE L EARNE D AR E XPLAINED THAT T HE ASSESSEE EARNED SUBSTANTIAL AMOUNT FROM THE CO - RELATING BUSINESS ACTIVITY ACQUIRED FROM THE SISTER CONCERN AND AT THE SAME TIME THE SISTER CONCERN OF THE ASSESSEE ALSO PERFORMED VARIOUS JOB WORKS RELATED TO THE BUSINESS WORK OF DIGITAL PR INTING 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 DISCONTINUED W.E.F. FINANCIAL YEAR 2009 - 10. IT HAS BEEN FURTHER EXPLAINED THAT NOT THE ENTIRE PREM ISES 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 NO N - MENTIONING OF THE PROVI SION OF FACILITIES IN THE AGREEMENT DATED 10. 0 1.1998 IS CONCERNED, IT MAY BE OBSERVED FROM THE PREVIOUS ASSESSMENT ORDER DATED 20.2.2004 THAT THE AGREEMENT DOES TALK AB OUT PROVIDING THE FACILITIES SUCH AS TELEPHONE, FAX AND O THER ADMINISTRATIVE SERVICES FOR TEMPORARY USE OF THEIR BUSINESS ACTIVITY. HOWEVER , T HE OBSERVED THAT THE AGREEMENT DID NOT BIFURCATE THE COST OF SERVICES AND RENT OF PREMISES. EVEN THE L EARNE D CIT(A), IN HIS ORDER D ATED 19.10.2004 ( I N THE FIRST ROUND OF A PPEAL) HAS REPRODUCED THE VARIOUS CLAUSES OF THE AGREEMENT DATED 10.1.1998. FROM THE PERUSAL OF THOSE CLAUSES, AS REPRODUCED IN THE ORDER OF THE CIT(A) DATED 19.10.2004, IT MAY BE OBSERVED THAT THE AGREEMENT WAS PRIMARILY FOR PROVIDING OF VARIOUS FACILITIE S FOR BUSINESS ACTIVITIES OF THE 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. P REMISES , 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 ASSESSEE, MUTU AL BUSINESS BENEFITS AND EARNING INCOME FROM CARRYING OUT JOB WORKS RELATED TO THE BUSINE SS ACTIVITY OF EACH OTHER AND FURTHER DISCONTINU ATION 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 C OMMERCIA L EXPLOITATION FOR A TEMPORARY PERIOD AND ALSO OUT OF COMMERCIAL EXPEDIENCY RELATING TO THE BUSINESS ACTIVITY OF THE ASSESSEE. 1 2 . THE HONBLE CALCUTTA HIGH COURT IN THE CASE OF SHAMBU INVESTMENTS ( P ) L TD . 249 ITR 47 ( C AL), WHICH CASE LAW HAS BEEN STRONGLY RELIED UPON BY THE REVENUE , HELD THAT MERELY BECAUSE INCOME IS ATTACHED TO ANY IMMOVABLE PROPERTY CANNOT BE SOLE FACTOR FOR ASSESSMENT OF SUCH INCOME AS INCOME FROM PROPERTY. W HAT HAS TO BE SEEN IS , WHAT WAS THE PRIMARY OBJECT OF THE ASSESSEE WHILE EXPLOITING THE PROPERTY. IF IT IS FOUND APPLYING SUCH TEST THAT THE MAIN INTENTION IS FOR LETTING OUT THE PROPERTY OR ANY PORTION THEREOF THE SAME MUST BE CONSIDERED AS RENTAL INCOME OR INCOME FROM PROPERT Y. 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 HELD AS BUSINESS INCOME. THE H ONBLE HIGH COURT, FROM THE FACTS OF THE CASE BEFORE 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 WAS UPHELD BY THE HONBLE SUPREME COURT WITHOUT ANY FURTHER DISCUSSION OF THE MATTER. SO THE PROPOSITION OF LAW THAT EMERG ES IS THAT IT IS THE INTENTION OF THE AS S ESSEE 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 HEAD IT WOULD FALL. ALMOST SIMILAR PROPOSITION OF LAW HAS BEEN LAID DOWN BY THE H ONBLE SUPREME COURT IN THE CASE OF UNIVERSAL PLAST LTD . (1999) 237 ITR 454(SC) WHEREIN IT HAS BEEN HELD THAT NO PRECISE TEST CAN BE LAID DOWN TO ASCERTAIN WHETHER INCOME (REFERRED TO BY WHATEVER NOMENCLATURE, LEASE AMOUNT, RENTS, LICENSE 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 MIXED QUESTION OF LAW AND FACT HAS TO BE DETERMINED FROM THE POINT OF VIEW OF A BUSINESSMAN IN THAT BUSINESS ON THE FACTS AND IN THE CIRCUMSTANCES OF EACH CASE INCLUDING TRU E INTERPRETATION OF THE AGREEMENT UNDER WHICH THE ASSETS ARE LET OUT. I F A PART OF THE ASSETS IS LET OUT TEMPORARILY WHILE THE ASSESSEE CARRIES OUT ITS OTHER BUSINESS ACTIVITIES, TH EN IT WOULD BE A CASE OF EXPLOI TING THE ASSETS FOR THE PURPOSE OF BUSINESS. AS OBSERVED ABOVE, IN OUR VIEW, THE INTENTION OF THE ASSESSEE IN THIS CASE WAS TO COMMERCIALLY EXPLOIT THE SURPLUS PORTION OF THE PROPER T Y AND ALSO OUT OF BUSINESS EXIGENCIES. 1 3 . IN VIEW OF ABOVE DISCUSSION OF THE MATTER, THE ISSUE IS DECIDED IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE. TH E IMPUGNED ORDER OF THE CIT(A) IS THEREFORE SET ASIDE AND THIS APPEAL OF THE ASSESSEE IS HEREBY ALLOWED. 1 4 . ITA NO 7703/MUM/2011 FOR AY. 2005 - 06: THE FACTS AS WELL THE ISSUE RELATING TO TREATMENT OF RENTAL INCOME OF RS.21 LAKHS RAISED IN THIS APPEAL IS IDENTICAL TO THAT OF ITA 7702/MUM/2011 FOR 2001 - 02 EXCEPT THAT THE ASSESSEE IN THIS APPEAL HAS ALSO CONTESTED THE DISALLOWANCE OF SOCIETY CHARGES OF RS. 2 , 34 , 089/ - AND DEPREC IATION ON GALAS AT RS. 5 , 22 , 738/ - . IN VIEW OF OUR FINDINGS GIVEN ABOVE, THE RENTAL INCOME IS ORDERED TO BE TREATED AS BUSINESS INCOME. THEREFORE THE CONSEQUENTIAL CLAIM OF SOCIETY CHARGES AND DEPRECIATION ON GALAS IS ALSO HEREBY ALLOWED. TH IS APPEAL OF TH E 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 GAINS OF BUSINESS OR PROFESSION AND HE ASSESSED THE INCOME UNDER THE HEAD 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 ASSESSEE IS THUS IN APPEAL BEFORE US. 17 . IT MAY BE OBSERVE D THAT THE ASSESSEE HAD BEEN TREATING THE SAID RENTAL INCOME AS BUSINESS INCOME SINCE 1998 WITHOUT ANY OBJECTION BEING RAISED BY THE REVENUE. MERELY BECAUSE THE AO FOR TH E YEAR UNDER CONSIDERATION DID NOT AGREE REGARDING THE HEAD OF THE INCOME UNDER WHICH THE INCOME WAS RETURNED BY THE ASSESSEE, THAT ITSELF CANNOT BE SAID TO BE A CASE OF FURNISHING OF INACCURATE PARTICULARS OF INCOME. MORE OVER, AS OBSERVED ABOVE, W E HAVE ALLOWED THE CLAIM OF THE ASSESSEE IN THE QUA NTUM APPEAL FOR TREATMENT OF INCOME AS BUS INESS INCOME. HENCE , THE VERY BASIS UPON WHICH THE PENALTY WAS LEVIED BY THE AO HAS CEASED TO EXIST. HENCE THE PENALTY IS HEREBY ORDERED 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 -