M/s. Empire Chemicals Pvt.Ltd., CHENNAI V. ACIT, Pondicherry

ITA 862/CHNY/2012

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 64225 (ITAT-CHENNAI)
• Duration Of Justice: 4 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-08-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 24-07-2012
• Assessment Year: 2002-2003
• Appeal Filed On: 19-04-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VI KRAMADITYA
• Assessee Lawyers: K V RAJAGOPALAN
• Keywords: Reopening of assessment; Business income; Depreciation; Difference of opinion; Reason to believe; Change of opinion
• Section: 143(3); 147; 148; 56; 144

Judgement Text

IN THE INCOME-TAX APPELLATE TRIBUNAL CHENNAI B BENCH, CHENNAI. BEFORE DR. O.K. NARAYANAN, VICE-PRESIDENT & SHRI CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER I.T.A. NOS. 861 AND 862/MDS/2012 ASSESSMENT YEAR: 2001-02 AND 02-03 M/S. EMPIRE CHEMICALS PVT. LTD., C/O K.V. RAJAGOPALAN, ADVOCATE, NO. 27/11, BAZAAR ROAD, SAIDAPET, CHENNAI 600 015. [PAN:AAACE1726G] VS. THE ASSISTANT COMMISSIONER OF INCOME TAX, COMPANY CIRCLE I (1), COIMBATORE. (APPELLANT) (RESPONDENT) A PPELLANT BY : SHRI K.V, RAJAGOPALAN, AD VOCATE RESPONDENT BY : SHRI VIKRAMADITYA, JCIT DATE OF HEARING : 24.07.2012 DATE OF PRONOUNCEMENT : 30.08.2012 ORDER PER CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER THESE TWO APPEALS FILED BY THE ASSESSEE AGAINST DIF FERENT ORDERS OF THE COMMISSIONER OF INCOME TAX (APPEALS) XII, CHENN AI BOTH DATED 26.07.2011 IN ITA NO. 177/2007-08 FOR THE ASSESSMEN T YEAR 2001-02 AND ITA NO. 353/2008-09 FOR THE ASSESSMENT YEAR 2002-03 . SHRI K.V. RAJAGOPALAN, ADVOCATE, REPRESENTED ON BEHALF OF THE ASSESSEE AND SHRI VIKRAMADITYA, JCIT REPRESENTED ON BEHALF OF THE REV ENUE. 2. BOTH THESE APPEALS OF THE ASSESSEE WERE FOUND T O HAVE BEEN FILED LATE I.T.A. I.T.A. I.T.A. I.T.A. NO NONO NOS SS S. .. . 861 & 862/M/12 861 & 862/M/12 861 & 862/M/12 861 & 862/M/12 2 BY 173 DAYS AND THE ASSESSEE FILED CONDONATION PETI TION FOR THE DELAY. IN SUPPORT, AN AFFIDAVIT IS FILED TO CONDONE THE DELAY BY TAKING THE PLEA THAT THE MANAGING DIRECTOR OF THE ASSESSEE COMPANY LOST HIS LIFE PARTNER ON 08.04.2011 AND WAS IN SHOCK RESULTED IN PREVENTING HIM FROM ATTENDING TO HIS NORMAL DUTIES AND TO GET OVER FROM THIS IRREPAR ABLE LOSS AND SHOCK HE WAS ASKED BY HIS SON WHO IS IN CHICAGO US TO GO OVE R THERE AND WAS THERE TILL THE EXPIRATION OF VISA AND HE RETURNED TO INDI A ON 03.10.2011. BECAUSE OF JET-LOG COUPLED WITH HIS ILLNESS, HE WAS BED RIDDEN WHICH PREVENTED HIM EVEN TO ATTEND TO HIS NORMAL DUTIES. IT WAS SUBMITTED TH AT THE ASSESSEE WAS ASKED BY HIS ADVOCATE TO TRACE OUT THE OLD DOCUMENTS IN S UPPORT OF THE CLAIM OF THE ASSESSEE AND HE HAD TO COLLECT THE DOCUMENTS FROM T HE YEAR 1995 ONWARDS. SINCE HE DOES NOT HAVE ANYBODY IN HELPING TO TRACE THE SAID DOCUMENTS AND BEING ALONE HAD TO DO THIS BY HIMSELF, THE SAID PAP ERS WERE TRACED AND HANDED OVER TO THE COUNSEL FOR PREPARATION OF THE A PPEAL PAPERS AND THIS HAS RESULTED IN THE DELAY OF 173 DAYS IN FILING THE APPEAL. SINCE THE DELAY WAS NEITHER WILLFUL NOR MALAFIDE, THE ASSESSEES CO UNSEL HAS REQUESTED TO CONDONE THE DELAY AND ADMIT BOTH THE APPEALS FOR HE ARING AS THE ASSESSEE WAS PREVENTED BY SUFFICIENT CAUSE IN FILING OF THE APPEAL BEYOND STIPULATED TIME. 2.1 TO THIS PLEA OF THE CONDONATION OF DELAY, THE C OUNSEL FOR THE REVENUE DID NOT STRONGLY OBJECT. I.T.A. I.T.A. I.T.A. I.T.A. NO NONO NOS SS S. .. . 861 & 862/M/12 861 & 862/M/12 861 & 862/M/12 861 & 862/M/12 3 2.2 AFTER HEARING BOTH THE SIDES AND CONSIDERING TH E MATERIAL ON RECORD WITH REGARD TO LIMITATION ISSUE, WE ARE SATISFIED T HAT THE ASSESSEE WAS PREVENTED BY SUFFICIENT CAUSE FROM NOT FILING THE A PPEAL WITHIN THE STIPULATED TIME AND ACCEPTING THE PLEA OF THE ASSESSEE, WE CON DONE THE DELAY AND ADMIT THE APPEAL FOR HEARING. 3. THE FIRST ISSUE IN THE GROUNDS OF APPEAL OF THE ASSESSEE IN BOTH THE APPEALS IS THAT THE COMMISSIONER OF INCOME (APPEALS ) OUGHT TO HAVE HELD THAT THE ASSESSMENT MADE UNDER SECTION 144 READ WIT H SECTION 147 IS BAD IN LAW. 4. THE SECOND ISSUE IN THE GROUNDS OF APPEAL OF TH E ASSESSEE IN BOTH THE APPEALS IS THAT THE COMMISSIONER OF INCOME (APPEALS ) ERRED IN HOLDING THAT SUB-LEASE INCOME IS ASSESSABLE UNDER THE HEAD INCOM E FROM HOUSE PROPERTY INSTEAD OF INCOME FROM BUSINESS. 5. IN THE ALTERNATIVE, IF THE SUB-LEASE INCOME IS NOT ASSESSABLE AS INCOME FROM BUSINESS, IT SHOULD BE ASSESSED AS INCOME FROM OTHER SOURCES. 6. FACTS OF THE CASE ARE THAT THE ASSESSEE IS A PR IVATE LIMITED COMPANY WAS ENGAGED IN THE BUSINESS OF MANUFACTURE AND SALE OF PATHALOGEN BRILLIANT BLUE. ASSESSEE ENTERED INTO A LEASE DEED ON 05.12.1 985 WITH PONDICHERY INDUSTRIAL PROMOTION DEVELOPMENT AND INVESTMENT COR PORATION LTD. [FOR SHORT I.T.A. I.T.A. I.T.A. I.T.A. NO NONO NOS SS S. .. . 861 & 862/M/12 861 & 862/M/12 861 & 862/M/12 861 & 862/M/12 4 PIPDIC] AND TOOK INDUSTRIAL PLOT NO. A-9 & A-10 O N LEASE FOR 99 YEARS ON CERTAIN TERMS AND CONDITIONS. THE ASSESSEE CONSTRUC TED FACTORY BUILDING, INSTALLED PLANT AND MACHINERY FOR MANUFACTURING PAT HALOGEN BRILLIANT BLUE. HOWEVER, THE ASSESSEE COLD NOT MANUFACTURE PATHALOG EN BRILLIANT BLUE SINCE ONE OF THE REQUIRED RAW MATERIALS I.E. METHANOL COU LD NOT BE PURCHASED AS THE REVENUE DEPARTMENT OF PONDICHERY REFUSED PERMIS SION TO USE METHANOL FOR MANUFACTURE OF PATHALOGEN BRILLIANT BLUE. THERE FORE, THE ASSESSEE WAS MANUFACTURING INTERMEDIATE PRODUCT OF THE ORIGINAL CHEMICAL FOR SOME TIME AND SUBSEQUENTLY IT WAS MANUFACTURING HERBAL SHIKKA I SHAMPOO. IN THE YEAR 1995, THE ASSESSEE STOPPED ITS BUSINESS OF MANUFACT URE AND SALE OF SHIKKAI SHAMPOO DUE TO ADVERSE MARKET CONDITIONS AN D SUB-LET THE FACTORY BUILDINGS AND MACHINERY ON A MONTHLY RENT TO G.M. P ENS (INTERNATIONAL) PVT. LTD. THE ASSESSEE OFFERED THIS MONTHLY RENT UNDER T HE HEAD INCOME FROM BUSINESS IN THE RETURN OF INCOME FILED. FOR THE ASS ESSMENT YEAR 2001-02, THE ASSESSEE FILED ITS RETURN OF INCOME ON 18.09.2001 D ECLARING LOSS OF ` .8,080/-. THE RETURN WAS PROCESSED UNDER SECTION 143(1) OF TH E ACT AND SUBSEQUENTLY A NOTICE UNDER SECTION 148 OF THE ACT WAS ISSUED ON 19.08.2004 REQUIRING THE ASSESSEE TO FILE RETURN OF INCOME AS THE INCOME ESC APED ASSESSMENT WITHIN THE MEANING OF SECTION 147 OF THE ACT. IN RESPONSE TO THE SAID NOTICE, THE ASSESSEE NEITHER FILED RETURN OF INCOME NOR ANY OBJ ECTIONS TO THE LETTERS ISSUED BY THE ASSESSING OFFICER AS TO WHY THE RENTA L INCOME RECEIVED FROM LETTING OF FACTORY BUILDING SHOULD NOT BE TREATED A S INCOME FROM HOUSE I.T.A. I.T.A. I.T.A. I.T.A. NO NONO NOS SS S. .. . 861 & 862/M/12 861 & 862/M/12 861 & 862/M/12 861 & 862/M/12 5 PROPERTY. THE ASSESSING OFFICER COMPLETED THE ASSES SMENTS UNDER SECTION 144 READ WITH SECTION 147 OF THE ACT ON 28.02.2006 DETERMINING THE INCOME OF THE ASSESSEE AT ` .1,13,880/- FOR THE ASSESSMENT YEAR 2001-02 AND INCOME AT ` .1,03,373/- FOR THE ASSESSMENT YEAR 2002-03. WHILE DOING SO, THE ASSESSING OFFICER ASSESSED THE RENTAL INCOME UNDER THE HEAD INCOME FROM HOUSE PROPERTY AND ALLOWED DEDUCTION UNDER SECTION 24(I) OF THE ACT. 7. THE ASSESSEE FILED APPEALS BEFORE THE COMMISSIO NER OF INCOME (APPEALS) FOR BOTH THE ASSESSMENT YEARS CHALLENGING THE REOPENING OF ASSESSMENT UNDER SECTION 144 READ WITH SECTION 147 OF THE ACT AND ALSO ASSESSING THE RENTAL INCOME TO TAX UNDER THE HEAD INCOME FROM HOUSE PROPERTY AS AGAINST INCOME FROM BUSINESS. 8. THE COMMISSIONER OF INCOME (APPEALS), UPHOLD TH E REOPENING OF ASSESSMENT UNDER SECTION 144 READ WITH SECTION 147 OF THE ACT. THE COMMISSIONER OF INCOME (APPEALS) HELD THAT PRIOR TO ASSESSMENT YEAR 2001- 02, NONE OF THE ASSESSMENTS WERE TAKEN UP FOR SCRUT INY AND THE ASSESSEE HAD STOPPED ITS MANUFACTURING BUSINESS AND CONTINUE D TO OFFER THE RENTAL INCOME AS BUSINESS INCOME AND CLAIMED VARIOUS EXPEN SES. THE COMMISSIONER OF INCOME (APPEALS) OBSERVED THAT ANY INCOME DERIVED BY AN ASSESSEE FROM PROPERTY CONSISTING OF ANY BUILDINGS OR LANDS APPURTENANT THERETO OF WHICH THE ASSESSEE IS THE OWNER IS ASSE SSABLE UNDER THE HEAD INCOME FROM HOUSE PROPERTY AS PER THE PROVISIONS OF SECTION 22 OF THE I.T.A. I.T.A. I.T.A. I.T.A. NO NONO NOS SS S. .. . 861 & 862/M/12 861 & 862/M/12 861 & 862/M/12 861 & 862/M/12 6 INCOME TAX ACT. IN THE ASSESSEES CASE THE INCOME I S RECEIVED BY LETTING OUT THE FACTORY BUILDINGS OWNED BY IT AND DEPRECIATION WAS CLAIMED BY THE ASSESSEE ON SUCH BUILDINGS ALL ALONG IN THE EARLIER YEARS AND ALSO IN THE ASSESSMENT YEARS 2001-02 AND 2002-03. THEREFORE, TH E COMMISSIONER OF INCOME (APPEALS) HELD THAT SUCH RENTAL INCOME IS AS SESSABLE UNDER THE HEAD INCOME FROM HOUSE PROPERTY. THUS, THE COMMISSIONER OF INCOME (APPEALS) WAS OF THE VIEW THAT THE ASSESSING OFFICER HAS ALL THE REASON TO BELIEVE THAT THE INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT AND ACCORDINGLY, THE ASSESSING OFFICERS ACTION IN REOPENING THE ASSESSM ENT WAS HELD TO BE VALID AND IS IN ACCORDANCE WITH LAW. 9. ON MERITS, THE COMMISSIONER OF INCOME (APPEALS) RELYING ON THE DECISIONS IN THE CASE OF CIT VS. MADRAS CRICKET CLU B [2 ITR 209 (MAD)] AND D.R. PUTTANNA & SONS PVT. LTD. VS. CIT [162 ITR 468 (KARN.)] HELD THAT THE INCOME FROM LETTING OF THE FACTORY BUILDING IS ASSE SSABLE AS INCOME FROM HOUSE PROPERTY AND NOT AS INCOME FROM BUSINESS. 10. AGAINST THIS ORDER OF THE COMMISSIONER OF INCO ME (APPEALS), THE ASSESSEE HAS COME UP IN APPEAL BEFORE US. 11. THE COUNSEL FOR THE ASSESSEE SUBMITS THAT THE ASSESSING OFFICER ERRED IN REOPENING THE ASSESSMENT UNDER SECTION 147. THE COUNSEL SUBMITS THAT THE REASSESSMENT IS BAD IN LAW AND IT IS ONLY A MER E CHANGE OF OPINION AND I.T.A. I.T.A. I.T.A. I.T.A. NO NONO NOS SS S. .. . 861 & 862/M/12 861 & 862/M/12 861 & 862/M/12 861 & 862/M/12 7 IN THE ABSENCE OF ANY NEW MATERIAL, THE REASSESSMEN T MADE UNDER SECTION 147 IS BAD IN LAW. 12. THE COUNSEL FOR THE ASSESSEE ON MERITS SUBMITS THAT THE ASSESSEE COMPANY WAS SET UP FOR THE PURPOSE OF MANUFACTURE O F PATHALOGEN BRILLIANT BLUE ON INDUSTRIAL PLOT NOS. A-9 AND A-10 IN INDUST RIAL ESTATE, SEDARAPET OWNED BY PIPDIC. THE INDUSTRIAL PLOTS WERE TAKEN ON LEASE FOR A PERIOD OF 99 YEARS BY LEASE DEED DATED 05.12.1985. THE COUNSEL S UBMITS THAT THE ASSESSEE COMPANY COULD NOT COMMENCE THE PRODUCTION OF PATHALOGEN BRILLIANT BLUE AS ONE OF THE RAW MATERIALS VIZ., ME THANOL COULD NOT BE PURCHASED SINCE THE REVENUE DEPARTMENT OF PONDICHER Y REFUSED PERMISSION TO USE METHANOL AND THE ASSESSEE COMPANY HAD BEEN M ANUFACTURING INTERMEDIATE PRODUCT OF THE ORIGINAL CHEMICAL AND S ELLING THE SAME FOR SOME TIME. THE COUNSEL SUBMITS THAT BECAUSE THE DEMAND W AS POOR AND DUE TO ADVERSE MARKET CONDITION, THE ASSESSEE BECAME SICK AND STOPPED ITS PRODUCTION. SUBSEQUENTLY, THE ASSESSEE COMPANY AFTE R OBTAINING PERMISSION FROM THE LESSOR I.E. PIPDIC STARTED MANUFACTURING O F HERBAL SHIKKAI SHAMPOO AND WERE SUPPLYING TO M/S. VELVETTE INTERNA TIONAL. HOWEVER, THE ASSESSEE COMPANY FAILED IN THIS VENTURE ALSO. THE C OUNSEL SUBMITS THAT IN ORDER TO AVOID RECURRING LOSSES, THE ASSESSEE COMPA NY DECIDED TO SUB-LEASE THE FACTORY PREMISES SITUATED AT PLOT NOS. A-9 AND A-10, INDUSTRIAL ESTATE, SEDARAPET, PONDICHERY TO ANOTHER MANUFACTURING COMP ANY M/S. G.M. PENS I.T.A. I.T.A. I.T.A. I.T.A. NO NONO NOS SS S. .. . 861 & 862/M/12 861 & 862/M/12 861 & 862/M/12 861 & 862/M/12 8 (INTERNATIONAL) PVT. LTD., WHO IS THE MANUFACTURER OF BALL PENS, REFILLS AND OTHER ALLIED ITEMS. THE COUNSEL SUBMITS THAT AS THE ASSESSEE COMPANY IS NOT THE OWNER OF THE SUBJECTED PROPERTY IT HAD SOUGHT APPROVAL OF THE OWNER PIPDIC IN TERMS OF CLAUSES MENTIONED IN THE LEASE DEED AND TOOK APPROVAL FROM PIPDIC VIDE ITS LETTER DATED 19.04.1995 TO SUB -LEASE THE FACTORY PREMISES TO M/S. G.M. PENS (INTERNATIONAL) PVT. LTD . FOR A PERIOD OF 11 MONTHS. THE PERIOD OF SUB-LEASE WAS EXTENDED LATER BY THE LESSOR. 13. THE COUNSEL SUBMITS THAT THE INCOME FROM LETTI NG OF FACTORY PREMISES IS TO BE ASSESSED AS BUSINESS INCOME ONLY SINCE THE ASSESSEE COULD NOT CONTINUE THE PRODUCTION DUE TO ADVERSE MARKET CONDI TION AND THEREFORE, IT IS ONLY A TEMPORARY LULL IN THE BUSINESS OF THE ASSESS EE. DISCONTINUANCE OF PRODUCTION IS ONLY TEMPORARY AND THEREFORE THE INCO ME EARNED ON SUB-LETTING OF THE FACILITIES OF MANUFACTURE TO G.M. PENS (INTE RNATIONAL) PVT. LTD. IS TO BE ASSESSED AS INCOME FROM BUSINESS. THE COUNSEL FOR T HE ASSESSEE SUBMITS THAT THE INCOME FROM SUB-LETTING OF FACTORY PREMISE S CANNOT BE ASSESSED AS INCOME FROM HOUSE PROPERTY AS THE ASSESSEE COMPANY IS NOT THE OWNER OF THE PROPERTY AS THE PROVISIONS OF SECTION 22 OF THE ACT CONTEMPLATES THAT IN ORDER TO ASSESS THE INCOME UNDER THE HEAD INCOME F ROM HOUSE PROPERTY, THE ASSESSEE SHOULD BE THE OWNER OF THE PROPERTY. T HE COUNSEL SUBMITS THAT THE ASSESSEE HAS ONLY TAKEN THE LAND I.E. THE INDUS TRIAL PLOTS ON LEASE AND THEREFORE, THE ASSESSEE IS NOT THE OWNER OF THE PRO PERTY. THE COUNSEL FOR THE I.T.A. I.T.A. I.T.A. I.T.A. NO NONO NOS SS S. .. . 861 & 862/M/12 861 & 862/M/12 861 & 862/M/12 861 & 862/M/12 9 ASSESSEE FURTHER SUBMITS THAT THE LAND TAKEN BY THE ASSESSEE CANNOT BE USED FOR ANY OTHER PURPOSE OTHER THAN THE INDUSTRIA L PURPOSE AS PER THE TERMS OF THE LEASE DEED. THE COUNSEL FOR THE ASSESS EE SUBMITS THAT IF DURING THE LEASE PERIOD, THE WHOLE OR ANY PORTION OF ALLOT TED LAND IS KEPT UNUTILIZED BY THE ASSESSEE, THE OWNER OF THE PLOT PIPDIC SHALL HAVE THE RIGHT TO TERMINATE THE LEASE FORTHWITH IN RESPECT OF THE WHO LE OR ANY PORTION OF THE LAND AND RESUME POSSESSION WITH ALL CONSEQUENCES. T HE COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE CANNOT SUB-LET THE SAID PROPERTY FOR ANY OTHER PURPOSE OTHER THAN THE INDUSTRIAL PURPOSE AND THAT TOO ONLY WITH THE PRIOR PERMISSION OF THE OWNER PIPDIC. IN OTHER WORDS, THE COUNSEL SUBMITS THAT THE ASSESSEE CANNOT SUB-LEASE ANY PART OF THE PROPERTY TO THE THIRD PARTY. THE COUNSEL THEREFORE SUBMITS THAT IN VIEW OF ALL THESE FACTOR AND VARIOUS RESTRICTIVE COVENANTS IN THE LEASE DEED, TH E ASSESSEE CANNOT BE SAID THAT IT HAS ABSOLUTE RIGHTS OVER THE PROPERTY. THER EFORE, THE COUNSEL SUBMITS THAT SINCE THE ASSESSEE IS NOT THE OWNER OF THE PRO PERTY, THE INCOME FROM LETTING OF FACTORY PREMISES CANNOT BE ASSESSED UNDE R THE HEAD INCOME FROM HOUSE PROPERTY. IN THE ALTERNATIVE, THE COUNSEL SU BMITS THAT THE INCOME FROM LETTING OF PROPERTY SHOULD BE ASSESSED UNDER THE HE AD INCOME FROM OTHER SOURCES AND NOT UNDER THE HEAD INCOME FROM HOUSE PROPERTY, IF NOT UNDER THE HEAD INCOME FROM BUSINESS. I.T.A. I.T.A. I.T.A. I.T.A. NO NONO NOS SS S. .. . 861 & 862/M/12 861 & 862/M/12 861 & 862/M/12 861 & 862/M/12 10 14. THE COUNSEL FOR THE REVENUE SUPPORTED THE ORDE RS OF LOWER AUTHORITIES AND SUBMITTED THAT INCOME FROM SUB-LETTING OF PROPE RTY WAS CORRECTLY ASSESSED UNDER THE HEAD INCOME FROM HOUSE PROPERTY . 15. WE HAVE HEARD BOTH SIDES, PERUSED THE MATERIAL S AVAILABLE ON RECORD AND ORDERS OF LOWER AUTHORITIES. WITH REGARD TO REO PENING OF ASSESSMENT UNDER SECTION 147, WE ARE NOT INCLINED TO ACCEPT TH E SUBMISSIONS OF THE COUNSEL THAT IT IS ONLY A MERE CHANGE OF OPINION OF THE ASSESSING OFFICER AND NO NEW MATERIALS FACTS HAVE COME ON RECORD FOR REOP ENING OF THE ASSESSMENT. THE ASSESSEE HAS BEEN FILING RETURNS SH OWING THE INCOME FROM BUSINESS OF MANUFACTURE OF HERBAL SHIKKAI SHAMPOO T ILL ITS FACTORY PREMISES WAS SUB-LET TO G.M. PENS (INTERNATIONAL) PVT. LTD. THE ASSESSEE ON SUB- LETTING OF FACTORY PREMISES IN 1995, THE INCOME FRO M SUB-LETTING WAS SHOWN AS INCOME FROM BUSINESS. ALL THESE FACTS GO TO SHOW THAT THERE IS A CHANGE IN MATERIAL FACTS. THE ASSESSEE WAS REOPENED WITHIN 4 YEARS AT THE END OF THE ASSESSMENT YEAR. THE RETURN OF INCOME WAS NOT SUBJE CTED TO SCRUTINY UNDER SECTION 143(3) IN EARLIER ASSESSMENT YEARS. IN THE CIRCUMSTANCES, WE HOLD THAT REOPENING UNDER SECTION 147 IS IN ACCORDANCE W ITH LAW. 16. THE INDUSTRIAL PLOTS WERE TAKEN ON LEASE BY TH E ASSESSEE FROM PIPDIC FOR A PERIOD OF 99 YEARS. THE ASSESSEE CONTINUED MA NUFACTURING OF HERBAL SHIKKAI SHAMPOO TILL 1995 WHEN THE FACTORY PREMISES WAS SUB-LET TO G.M. I.T.A. I.T.A. I.T.A. I.T.A. NO NONO NOS SS S. .. . 861 & 862/M/12 861 & 862/M/12 861 & 862/M/12 861 & 862/M/12 11 PENS (INTERNATIONAL) PVT. LTD. ON A QUERY BY THE BE NCH, THE COUNSEL SUBMITS THAT EVEN TODAY, THE ASSESSEE COULD NOT REVIVE ITS MANUFACTURING ACTIVITY AND STILL THE FACTORY PREMISES WAS UNDER SUB-LEASE. WE ARE NOT ABLE TO ACCEPT THE CONTENTION THAT DISCONTINUANCE OF MANUFACTURING ACT IVITY OF THE ASSESSEE IS TEMPORARY IN NATURE AND ONLY A LULL IN ITS BUSINESS . IN THE CIRCUMSTANCES, WE HOLD THAT THE INCOME ON SUB-LEASE OF FACTORY PREMIS ES CANNOT BE ASSESSED AS INCOME FROM BUSINESS OF THE ASSESSEE. HOWEVER, W E ACCEPT THE ALTERNATIVE CONTENTION OF THE ASSESSEE THAT THE INC OME FROM SUB-LETTING OF THE FACTORY PREMISES SHOULD BE ASSESSED AS INCOME FROM OTHER SOURCES IN VIEW OF THE FACT THAT THE ASSESSEE IS NOT THE ABSOLUTE O WNER OF THE PROPERTY. THE INDUSTRIAL PLOTS WERE TAKEN ON LEASE AND THE PROPER TY CANNOT BE USED WITHOUT THE PRIOR PERMISSION OF THE OWNER PIPDIC FOR ANY US E OTHER THAN THE INDUSTRIAL USE. THE PROPERTY CANNOT BE SUB-LET TO T HE THIRD PARTY WITHOUT PRIOR PERMISSION OF THE OWNER AND IT IS ONLY THE PIPDIC, WHICH HAS TO GRANT PERMISSION TO SUB-LET AND IT IS ONLY THE PIPDIC, WH ICH CAN TERMINATE THE SUB- LEASE AT ANY TIME IN THE ABSENCE OF ANY ACTIVITY OF MANUFACTURE BY THE ASSESSEE IN THE INDUSTRIAL PLOT AND TAKE OVER POSSE SSION OF ALL THE FACTORY PREMISES SITUATED ON THE INDUSTRIAL PLOTS. IN VIEW OF ALL THE RESTRICTIVE COVENANTS, THE ASSESSEE CANNOT BE SAID TO HAVE ABSO LUTE RIGHT OVER THE PROPERTY AND THE ASSESSEE CANNOT BE CONSIDERED TO B E ENJOYING ALL THE PROPERTY AS ABSOLUTE OWNER. THE TERMS AND CONDITION S OF LEASE DEED SHOWS THAT THIS IS NOT A SIMPLE CASE OF LEASING OUT OF LA ND BY THE LESSOR TO THE LESSEE I.T.A. I.T.A. I.T.A. I.T.A. NO NONO NOS SS S. .. . 861 & 862/M/12 861 & 862/M/12 861 & 862/M/12 861 & 862/M/12 12 AND ALLOWING THE LESSEE TO HAVE A COMPLETE FREE HAN D THEREON. IN THE CIRCUMSTANCES, WE HOLD THAT THE INCOME FROM SUB-LET TING THE FACTORY PREMISES IS TO BE ASSESSED UNDER THE HEAD INCOME FROM OTHER SOURCES AND THE ASSESSEE WILL BE ENTITLED FOR DEDUCTION AS PROVIDED IN SECTION 56 OF THE ACT FROM THE RENTAL INCOME FROM SUB-LETTING OF THE FACT ORY PREMISES. 17. IN THE RESULT, BOTH THE APPEALS OF THE ASSESSE E ARE ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED ON THURSDAY, THE 30 TH OF AUGUST, 2012 AT CHENNAI. SD/- SD/- (DR. O.K. NARAYANAN) VICE-PRESIDENT (CHALLA NAGENDRA PRASAD) JUDICIAL MEMBER CHENNAI, DATED, THE 30.08.2012 VM/- TO: THE ASSESSEE//A.O./CIT(A)/CIT/D.R.