Asstt. Commissioner Of Income-Tax, Circle -2, Patna v. P R E S E N T

Miscellaneous Appeal No. No.240 OF 2006 ----------- Against the order dated 28.2.2006 passed by Single Bench of Income-tax Appellate Tribunal, Patna in I.T.A. No. 133/Pat/04 for assessment year 1996-97. --------------- 1. Commissioner of Income Tax-1, Central Revenue Building, Birchand Patel Marg, Patna. 2. Asstt. Commissioner of Income-Tax, Circle -2, Patna ----Assessing Officer/Appellants. Versus M/s Saran Holdings Pvt. Ltd., Kumar Tower, Boring Road, Patna. --- Assessee/Respondent. ----------- For the Appellants : Mr. Harshwardhan Prasad, Sr. Standing Counsel, & Mrs. Archana Sinha. For the Respondent: None. ---------- P R E S E N T THE HON'BLE MR. JUSTICE SUDHIR KUMAR KATRIAR THE HON'BLE MR.JUSTICE SAMARENDRA PRATAP SINGH S. K. Katriar, J. The Department of Income Tax has preferred this appeal under Section 260A of the Income Tax Act, 1961 (hereinafter referred to as „the Act‟), and is directed against the order dated 28.2.2006, passed by the learned Income Tax Appellate Tribunal, Patna, in I.T.A. No. 133/Pat/04. The learned Tribunal reversed the order of the learned Commissioner of Income-tax (Appeals)-II, Patna, and has held that the income from rent of the assessee‟sproperty in question should be treated as business income. 2. Before we proceed further, we would like to state that the matter was earlier taken up on 3.2.2011, and it was adjourned in the presence of the learned counsel for the parties. It was taken up on 11.4.2011, and was heard in part, and has been taken up again today. Learned counsel for the respondent has been absent on both these occasions. 3. The appellants have framed the following substantial questions of law: (1) Whether on the facts and circumstances of the case the tribunal has erred in law in reversing the order of CIT (A) and holding rental income from letting out commercial space in the building known as “Kumar Towers” is taxable as income from business relying on a decision of another bench of the tribunal in the case of Mamta properties? (2) Whether in absence of any finding regarding any activity of business carried on the tribunal should have held that the rental income from property owned by the respondent is taxable as income from property under section 22 of the Income Tax Act, 1961 ? (3). Whether the tribunal failed to appreciate that the decisions of the tribunal relied is distinguishable on facts in so much so the respondent is deriving rental income from commercial space let out and not from godown? (4) Whether the tribunal’s order is contrary to the decision of Supreme Court and various High Courts on identical facts. The Hon’ble Supreme Court in the case of East India Housing and Land Development Trust Ltd. exactly identical facts had held that the income realized from tenant of the shop and stall are income received from property as distinct from business which has been followed in 132 Taxman page 146? (5) Whether the decision of the tribunal is contrary to the view expressed by Hon’ble Supreme Court and is fit to be set aside? 4. A brief statement of facts essential for the disposal (4) Whether the tribunal’s order is contrary to the decision of Supreme Court and various High Courts on identical facts. The Hon’ble Supreme Court in the case of East India Housing and Land Development Trust Ltd. exactly identical facts had held that the income realized from tenant of the shop and stall are income received from property as distinct from business which has been followed in 132 Taxman page 146? (5) Whether the decision of the tribunal is contrary to the view expressed by Hon’ble Supreme Court and is fit to be set aside? 4. A brief statement of facts essential for the disposal of the appeal may be indicated. The present appeal is with respect to the assessment year 1996-97. The assessee is a company and owns flats in a multi-storied complex known „‟as Kumar Tower, Boring Canal Road, in the township of Patna. The assessee let out the same to others on monthly rental. It submitted returns showing the rental income from business. Learned assessing officer did not accept the returns, and assessed the same as income from house property within the meaning of Section 22 of the Act, by order dated 4.8.2003, passed by the learned Assistant Commissioner of Income Tax, Circle II, Patna. Aggrieved by the order, the assessee preferred appeal which was dismissed by the learned Commissioner of Income-Tax (Appeals)-II, Patna, by order dated 7.12.2004, and held that the assessee‟s income has to be treated from house property. Aggrieved by the order of the learned Commissioner, the assessee preferred appeal before the learned Tribunal which has been allowed, and it has been held that income from rent of the property in question be treated as business income. The learned Tribunal has relied on its earlier order dated 31.1.2002, passed by it in I.T.A. No.112 (Pat)/02, Mamta Properties P.Ltd. Hence this appeal at the instance of the Revenue. 5. We have perused the materials on record and considered the submissions of learned counsel for the appellants. The admitted position is that the assessee is the owner of the property, and has let out the same to different persons on rent. On the own showing of the assessee, he is not in possession of the property and is not doing any business there. In our view, such a situation is covered by Section 22 of the Act which is headed “Income from house property”. The same is to the effect that the annual value of the property consisting of any buildings or lands appurtenant thereto of which the assessee is the owner shall be chargeable to income-tax under the head “Income from house property”, except such portions of such property as the assessee may itself occupy for the purpose of any business or profession carried by it the profits of which are chargeable to income-tax. In other words, the income from all house property shall be treated as income from house property, except those which are in occupation of the assessee itself for the purpose and is being used for business or profession. In the present case, admittedly the property is not in the possession of the assessee, let alone the question of doing any business there, and has let out the same to others for rent. We are clearly of the view that income from the property in question has to be taxed under the head „Income from house property‟. We are, therefore, of the view that the learned Tribunal has erred in holding the income from the property in question has to be treated as income from business. We agree with the orders of the learned Assessing Officer, which has been rightly upheld by the learned Commissioner. 6. Before we part with the records, we must record our feeling of displeasure in the manner in which the learned Tribunal has dealt with the issue. Paragraph 4 of the order of the learned Tribunal decides the issue mainly by placing undue reliance on its earlier orders in the case of Mamta Properties P. Ltd. The learned Tribunal has made no attempt to find out the similarities between the two cases, and the circumstances in which issues in Mamta Properties was adjudicated. 6. Before we part with the records, we must record our feeling of displeasure in the manner in which the learned Tribunal has dealt with the issue. Paragraph 4 of the order of the learned Tribunal decides the issue mainly by placing undue reliance on its earlier orders in the case of Mamta Properties P. Ltd. The learned Tribunal has made no attempt to find out the similarities between the two cases, and the circumstances in which issues in Mamta Properties was adjudicated. 7. In the result, this appeal is allowed. The order dated 28.2.2006, passed by the learned Tribunal is hereby set aside, and that of the learned Commissioner of Income-Tax (Appeals) II, is hereby restored. The substantial questions of law are answered in favour of the Revenue, and against the assessee. In the facts and circumstances of the case, there shall be no order as to costs. ( S. K. Katriar, J.) S. P. Singh, J.I agree. ( S. P. Singh, J.) High Court Patna, Dated, 13[th] April, 2011. Vinay/A.F.R.