THE COMMISSIONER OF INCOME TAX V. M/S KARNATAKA STATE WAREHOUSING CORPORATION

ITA/419/2013

AI Insights

The case involves the Commissioner of Income Tax and the Assistant Commissioner of Income Tax as appellants against the Karnataka State Warehousing Corporation, the respondent. The core issue was whether the rental income received by the Karnataka State Warehousing Corporation from its warehouses should be classified under 'income from business' or 'income from house property'. The High Court of Karnataka referenced a similar case, Commissioner of Income-tax-III vs. Velankani Information Systems (P) Ltd., to determine the classification of the rental income. The court concluded that the income should be classified as 'income from business' based on the intention behind the lease and the nature of the facilities provided.

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 742779 (HC-KARNATAKA)
• Appeal Type: Others
• Pronouncement Date: 17-03-2014
• Assessment Year: misc
• Other Referred Cases: Commissioner of Income-tax-III \\u2013vs- Velankani Information Systems (P) Ltd.[2013] 35 taxmann.com 1 (Karnataka)
• Laws Referred To: Income Tax Act, 1961, Warehousing Corporation Act, 1962
• Result in Favour of: Others
• Court: HIGH COURT
• Assessee Lawyers: K V ARAVIND
• Keywords: Assessment Year 2008-09; Income from Business; Income from house property; Warehousing rental charges
• Section: 260-A

Judgement Text

" - 1 - IN THE HIGH COURT OF KARNATAKA AT BANGALORE DATED THIS THE 17TH DAY OF MARCH 2014 PRESENT THE HON’BLE MR.JUSTICE DILIP B.BHOSALE AND THE HON’BLE MR.JUSTICE B.MANOHAR I.T.A.NO.419/2013 BETWEEN: 1. The Commissioner of Income Tax, C R Building, Queens Road Bangalore. 2. The Asst. Commissioner of Income Tax Circle – 11(5), Rashtrothana Bhavan Nrupathunga Road Bangalore. …APPELLANTS (By Sri.K.V.Aravind, Adv.) AND: M/s.Karnataka State Warehousing Corporation No.43, Primrose Road Bangalore-560 025. ...RESPONDENT This appeal is filed under Section 260-A of I.T.Act, 1961, arising out of order dated 19.04.2013 passed in ITA No.580/Bang/2012 for the Assessment year 2008- 09 praying to formulate the substantial questions of law stated therein and allow the appeal and set aside the order passed by the ITAT, Bangalore, in ITA No.580/Bang/2012 dated 19.04.2013 and confirm the order of the Appellate Commissioner and confirm the - 2 - order passed by the Assistant Commissioner of Income Tax, Circle-11(5), Bangalore. This appeal coming on for orders this day, DILIP B.BHOSALE J, delivered the following:- PC: Heard. 2. Admit. By consent, heard for final disposal at the stage of admission. 3. The substantial questions of law raised in the present appeal reads thus: Whether on the facts and in the circumstances of the case and in law the Tribunal was correct in holding that the warehousing rental charges received by the assessee is assessable under the head income from business and not under the head income from house property? 4. The assessee - M/s.Karnataka State Warehousing Corporation is the government undertaking. It was established under the Warehousing Corporation Act, 1962. It had primarily been set up for the purpose of acquiring and building go-downs and warehouses and letting them out for storage of certain notified commodities. Admittedly, the Assessee – Company has numerous warehouses spread across the State of Karnataka. Some of the warehouses have been - 3 - taken on rent and let out to the companies/farmers for storage purposes. It is in this backdrop, we have examined the substantial questions of law in the light of the judgment of this Court in Commissioner of Income-tax-III –vs- Velankani Information Systems (P) Ltd.[2013] 35 taxmann.com 1 (Karnataka). In this case, some what similar facts and circumstances had arisen for consideration. The Division Bench of this Court observed that “if the intention is to exploit commercial property by putting up construction and letting it out for the purpose of getting rental income, then notwithstanding the fact that the furniture and fittings are provided to the lessee, the income from the building fall under the head `income from house property’. But if the assessee is in the business of taking land, putting up commercial buildings thereon and letting out such buildings with all furniture as his profession or business, then notwithstanding the fact that he has constructed a building and he has also provided other facilities and even if there are two separate rental deeds, it does not fall within the heading - 4 - of income from house property. Therefore, firstly what is the intention behind the lease and secondly what are the facilities given along with the buildings and documents executed in respect of each of them is to be seen. Thirdly it is to be found out whether it is inseparable or not. If they are inseparable and the intention is to carry on the business of letting out the commercial property and carrying at complex commercial activity and getting rental income therefrom, then such a rental income falls under the heading of profits and gains of business or profession. In fact, any other interpretation would defeat the very object of introduction of Section 80-IA as well as the scheme which is framed by the Government for development of industrial parks in the country.” It is, thus, clear that the rental charges received by the assessee are assessable under the head income from business and not under home property. In the circumstances, no substantial questions of law, as raised by the Revenue, in the present case arise for our consideration. - 5 - The appeal is accordingly dismissed. Sd/- JUDGE Sd/- JUDGE Bkm. "