Commissioner Of Income Tax Iiichennai v. M/S.ndr Warehousing Pvt. Ltd.old

IN THE HIGH COURT OF JUDICATURE AT MADRAS CORAM THE HONOURABLE MR. JUSTICE R.SUDHAKARANDTHE HONOURABLE MR. JUSTICE R.KARUPPIAH T.C.A. NOS. 303 TO 305 & 812 OF 2013 Commissioner of Income Tax IIIChennai... Appellant in all the appeals- Vs - M/s.NDR Warehousing Pvt. Ltd.Old No.5, New No., Errabalu Chetty StreetChennai 600 001. .. Respondent in all the appeals Appeals filed under Section 260-A of the Income Tax Act againstthe order dated 02.05.2013 passed by the Income Tax AppellateTribunal, Madras 'C' Bench, in ITA No.182/Mds/2013 and ITANo.1039/Mds/2011 to ITA No.1041/Mds/2011 dated 31.10.2012 against thecommon order of the Commissioner of Income Tax (Appeals) V 121 M.G.Road, Nungambakkam, Chennai 600 034 dated 18.2.2011 in ITANos.296/2006-07, 267/2007-08 & 271/2009-10 against the Assessmentorder of A.C.I.T Co. Circle IV(4) Chennai 34 Assessment Year 2004-05,2005-2006 and 2007-08 (Asst. Commissioner of Income Tax) inP.A.N/G.R.N.AAACN2816J/ND-1 order dated 31.8.2006 & 20.12.2007 and7.12.2009 respectively TCA 812/2013 against the order of theCommissioner of Income Tax (Appeals) V 121 M.G. Road NungambakkamChennai 600 034 in ITA No.205/2011-12 dated 30.10.2012 against theorder of the Joint Commissioner of Income Tax Company Range IVChennai and Assistant Commissioner of Income Tax Company Circle (VI(4) Chennai 600 034 Assessment order dated 24.11.2011 inPANNo.AAACN2816J/2009-10. Aggrieved against the order of the Income Tax Appellate Tribunalin dismissing the appeals filed by it, the Revenue is before thisCourt challenging the said order by filing the present appeals. Thishttps://hcservices.ecourts.gov.in/hcservices/ Court, vide order dated 13.8.13 admitted the appeals on the followingsubstantial question of law :- “Whether under the facts and circumstances of thecase, the Income Tax Appellate Tribunal was right inholding that the income of the assessee from lettingout its warehouse is chargeable under the head 'Incomefrom Business' and not under the head 'Income fromHouse Property'? 2. The brief facts of the case, as could be culled out from thepleadings and other documents is as under :- Aggrieved against the order of the Income Tax Appellate Tribunalin dismissing the appeals filed by it, the Revenue is before thisCourt challenging the said order by filing the present appeals. Thishttps://hcservices.ecourts.gov.in/hcservices/ Court, vide order dated 13.8.13 admitted the appeals on the followingsubstantial question of law :- “Whether under the facts and circumstances of thecase, the Income Tax Appellate Tribunal was right inholding that the income of the assessee from lettingout its warehouse is chargeable under the head 'Incomefrom Business' and not under the head 'Income fromHouse Property'? 2. The brief facts of the case, as could be culled out from thepleadings and other documents is as under :- The assessee is engaged in the business of warehousing, handlingand transport business. The assessee filed return of income for theassessment years, viz., 2004-2005, 2005-2006, 2007-2008 and 2009-2010showing the income earned from letting out of building and godown asincome from business. The Assessing Officer, however, rejected theview of the assessee treating the income from letting out of buildingand godown as business income and treated the income as income fromhouse property. Aggrieved against the said assessment order for allthe four assessment years, the assessee preferred appeals to the CIT(Appeals), who allowed all the appeals holding that income fromwarehousing and letting out the godown and building will be incomefrom business and not income from house property. For betterclarity, the finding of the CIT (Appeals), is extracted hereunder :-“11. In pursuance of its objects, the appellantcarried on the business of warehousing in its owngodowns and rented premises. The appellant derivedincome also from transporting business. The basicissue for adjudication in this appeal is whetherincome from warehousing is assessable as income fromhouse property or business.*********13. The appellant's case is that the assessee'sactivity is not merely letting out of the warehouses,but storage of goods with provision of severalauxiliary services such as pest control, rodentcontrol and preventive measures against decay ofgoods stored due to vagaries of moisture/temperature,fungus formation, etc., besides security/protectionof the goods stored. There is therefore no disputethat the appellant carries on the activity in anorganized business manner. These activities are morethan mere letting out of the godown for tenancy. TheDepartment itself has accepted in the past that theincome from warehousing was asssessable as incomefrom business. The appellant has cited severaljudgments in its favour.” 3. Aggrieved by the said order of the CIT (Appeals), theDepartment preferred appeal before the Tribunal. The AppellateTribunal concurred with the findings of the CIT (Appeals) and morespecifically in para-9 of its order, went into the Objects Clauses ofthe company and came to hold that the primary source of income of theassessee was letting out godowns and warehouses to the manufacturers,traders and other companies carrying on warehousing business. TheTribunal also distinguished the judgment in Keyaram Hotels (P) Ltd. -Vs – ACIT (173 Taxman 262 (Mad)) on facts. The Tribunal furtheraccepted the assessee's plea of business income based on the profitand loss account, Object Clauses of the Memorandum of Association andthe nature of business activity undertaken. The said portion of thefinding of the Tribunal is extracted hereunder for useful reference :- “In the instant case, a perusal of the profit andloss account of the assessee company and the ObjectClause of the Memorandum of Association of the companyclearly sho that the assessee company was incorporatedwith an object of carrying on the business ofwarehousing and letting/renting of godowns andproviding facilities for storage of articles or thingsand descriptions whatsoever. The profit and lossaccount of the assessee company shows that its mainsource of income is storage charges and maintenance oruser charges. Even substantial part of the expensesalso relate to the salaries of the employees engagedin the maintenance and upkeep of the godowns andwarehouses. Therefore, in our considered opinion, theincome of the assessee from letting out of warehousesand godowns is chargeable under the head “BusinessIncome” and not “Income from House Property”.Accordingly, we uphold the findings of the CIT (A) anddismiss this ground of appeal of the Revenue.” 4. Heard Mr.Senthil Kumar, learned standing counsel appearing forthe appellant and Ms.Pushya Sitaraman, learned senior counselappearing for the respondent/assessee. 5. From a perusal of the above orders of the CIT (Appeals) aswell as the Tribunal, it is evident that the CIT (Appeals) and theTribunal, on facts, have clearly come to the conclusion that it is acase of business income and not income from house property. ThisCourt also finds that the Tribunal was justified in distinguishingthe case of the Bombay High Court in Nutan Warehousing Company P.Ltd. - Vs – DCIT (326 ITR 94 (Bom)) with regard to the nature ofbusiness conducted by the assessee in that case in relation to thenature of business conducted by the assessee in the present case. Inthe instant case, we find that the CIT (Appeals) as well as theTribunal have not only gone into the Object Clauses of the Memorandumof Association of the Company, but also on individual aspects of thebusiness to come to the conclusion that it is a case of warehousingbusiness and, therefore, would fall only under the head “BusinessIncome”. https://hcservices.ecourts.gov.in/hcservices/ 6. In view of the above well considered and concurrent reasoninggiven by the CIT (Appeals) as well as the Appellate Tribunal, we findno reason to differ with the findings of fact recorded by the CIT(Appeals) as confirmed by the Appellate Tribunal, which reasoning isfully justified in the facts of the present case. This Court findsno good reason to differ with the said findings of fact.Accordingly, the substantial question of law is answered in favour ofthe assessee and against the Revenue. 7. In the result, finding no merit in the present appeals, thesame are dismissed. However, there shall be no order as to costs. Sd/-Assistant Registrar//True Copy//Sub Assistant RegistrarGLNTo1. The Commissioner of Income Tax III, Chennai.2. The Assistant Registrar, Income Tax Appellate Tribunal Bench 'C' Besant Nagar, Chennai.3. The Commissioner of Income Tax (Appeal) V 121 M.G. Road, Nungambakkam, Chennai 600 034.4. The Assistant Commissioner of Income Tax Company Circle IV (4)Chennai 600 034.5. The Joint Commissioner Income Tax Company Range IV Chennai.+ 1 cc to Ms.J. Sree Vidya SR.58222 T.C.A. NOS. 303 TO 305 & 812 OF 2013 TEJ(CO)Eu 05.1.15