Ita/757/2009 Of The Commissioner Of Income Tax v. M/S.premier Tyres Ltd

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE MR.JUSTICE S.V.BHATTI & THE HONOURABLE MR. JUSTICE BECHU KURIAN THOMAS MONDAY, THE 19 DAY OF JULY 2021 / 28TH ASHADHA, 1943 ITA NO. 757 OF 2009 AGAINST THE ORDER IN ITA 346/Coch/2003 DATED 14.12.2004 OF I.T.A.TRIBUNAL,COCHIN BENCH, ERNAKULAM APPELLANT: RESPONDENT: THE COMMISSIONER OF INCOME TAX,COCHIN.BY ADVS.SRI.P.K.R.MENON,SR.COUNSEL, GOI(TAXES)SRI.JOSE JOSEPH, SC, FOR INCOME TAXM/S.PREMIER TYRES LTD.,7TH FLOOR, CHERUPUZHAM BUILDING, SHANMUGHAM ROAD, COCHIN-31.BY ADVS.SRI.K.P.ABDUL AZEESSRI.V.ABRAHAM MARKOSSRI.BINU MATHEWSRI.JOSEPH MARKOSE SR.SRI.B.J.JOHN PRAKASHSRI.MATHEWS K.UTHUPPACHANSRI.TERRY V.JAMESSRI.TOM THOMAS KAKKUZHIYIL THIS INCOME TAX APPEAL HAVING COME UP FOR ADMISSION ON19.07.2021, ALONG WITH ITA.483/2009, 758/2009 AND CONNECTED CASES,THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: ITA Nos.757/2009 and batch cases 2 IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE MR.JUSTICE S.V.BHATTI & THE HONOURABLE MR. JUSTICE BECHU KURIAN THOMAS MONDAY, THE 19 DAY OF JULY 2021 / 28TH ASHADHA, 1943 ITA NO. 483 OF 2009 AGAINST THE ORDER IN ITA 315/COCH/2006 DATED 18.1.2007 OFI.T.A.TRIBUNAL,COCHIN BENCH, ERNAKULAM APPELLANT/APPELLANT: THE COMMISSIONER OF INCOME TAX,COCHIN.BY ADVS.SRI.JOSE JOSEPH, SC, FOR INCOME TAXSRI.CHRISTOPHER ABRAHAM, INCOME TAX DEPARTMENTSRI.K.M.V.PANDALAI, INCOME TAX DEPARTMENT RESPONDENT/RESPONDENT: PTL ENTERPRISES LIMITED,(FORMERLY PREMIER TYRES LTD.), CHERUPUZHPAM BUILDING,SHANMUGHAM ROAD, COCHIN-682031.BY ADVS.SRI.V. ABRAHAM MARKOSSRI. BINU MATHEWSRI. JOSEPH MARKOSE SR.SRI.B.J. JOHN PRAKASHSRI. MATHEWS K.UTHUPPACHANSRI. TERRY V.JAMESSRI. TOM THOMAS KAKKUZHIYIL THIS INCOME TAX APPEAL HAVING COME UP FOR ADMISSION ON ITA Nos.757/2009 and batch cases 3 19.07.2021, ALONG WITH ITA.757/2009 AND CONNECTED CASES, THE COURT ONTHE SAME DAY DELIVERED THE FOLLOWING: ITA Nos.757/2009 and batch cases 4 IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE MR.JUSTICE S.V.BHATTI & THE HONOURABLE MR. JUSTICE BECHU KURIAN THOMAS MONDAY, THE 19 DAY OF JULY 2021 / 28TH ASHADHA, 1943ITA NO. 758 OF 2009 AGAINST THE ORDER IN ITA 1153/COCH/2004 DATED 14.12.2004 OFI.T.A.TRIBUNAL,COCHIN BENCH, ERNAKULAMAPPELLANT: THE COMMISSIONER OF INCOME TAXCOCHIN.BY ADV SRI.JOSE JOSEPH, SC, FOR INCOME TAX RESPONDENT: M/S PREMIER TYRES LTD.7TH FOOR, CHERUPUZHAM BUILDING, SHANMUGHAM ROAD, COCHIN-31.BY ADVS.SRI.K.P.ABDUL AZEESSRI.V. ABRAHAM MARKOSSRI. BINU MATHEWSRI. JOSEPH MARKOSE SR.SRI.B.J. JOHN PRAKASHSRI. MATHEWS K.UTHUPPACHANSRI. TERRY V.JAMESSRI. TOM THOMAS KAKKUZHIYIL THIS INCOME TAX APPEAL HAVING COME UP FOR ADMISSION ON19.07.2021, ALONG WITH ITA.757/2009 AND CONNECTED CASES, THE COURT ONTHE SAME DAY DELIVERED THE FOLLOWING: ITA Nos.757/2009 and batch cases 5 IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE MR.JUSTICE S.V.BHATTI & THE HONOURABLE MR. JUSTICE BECHU KURIAN THOMAS MONDAY, THE 19 DAY OF JULY 2021 / 28TH ASHADHA, 1943 ITA NO. 860 OF 2009 AGAINST THE ORDER IN ITA 347/COCH/2003 OF I.T.A.TRIBUNAL,COCHINBENCH, ERNAKULAM APPELLANT/RESPONDENT: THE COMMISSIONER OF INCOME TAXCOCHIN.BY ADVS.SRI.JOSE JOSEPH, SC, FOR INCOME TAXSRI.P.K.R.MENONSR.COUNSEL GOITAXES RESPONDENT/APPELLANT: M/S PREMIER TYRES LTD.7TH FLOOR, CHERUPUZHPAM BUILDING,, SHANMUGHAM ROAD,COCHIN-31.BY ADVS.SRI.V. ABRAHAM MARKOSSRI. BINU MATHEWSRI. JOSEPH MARKOSE SR.SRI.B.J. JOHN PRAKASHSRI. TERRY V.JAMESSRI. TOM THOMAS KAKKUZHIYIL THIS INCOME TAX APPEAL HAVING COME UP FOR ADMISSION ON19.07.2021, ALONG WITH ITA.757/2009 AND CONNECTED CASES, THE COURT ONTHE SAME DAY DELIVERED THE FOLLOWING: ITA Nos.757/2009 and batch cases 6 IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE MR.JUSTICE S.V.BHATTI & AGAINST THE ORDER IN ITA 347/COCH/2003 OF I.T.A.TRIBUNAL,COCHINBENCH, ERNAKULAM APPELLANT/RESPONDENT: THE COMMISSIONER OF INCOME TAXCOCHIN.BY ADVS.SRI.JOSE JOSEPH, SC, FOR INCOME TAXSRI.P.K.R.MENONSR.COUNSEL GOITAXES RESPONDENT/APPELLANT: M/S PREMIER TYRES LTD.7TH FLOOR, CHERUPUZHPAM BUILDING,, SHANMUGHAM ROAD,COCHIN-31.BY ADVS.SRI.V. ABRAHAM MARKOSSRI. BINU MATHEWSRI. JOSEPH MARKOSE SR.SRI.B.J. JOHN PRAKASHSRI. TERRY V.JAMESSRI. TOM THOMAS KAKKUZHIYIL THIS INCOME TAX APPEAL HAVING COME UP FOR ADMISSION ON19.07.2021, ALONG WITH ITA.757/2009 AND CONNECTED CASES, THE COURT ONTHE SAME DAY DELIVERED THE FOLLOWING: ITA Nos.757/2009 and batch cases 6 IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE MR.JUSTICE S.V.BHATTI & THE HONOURABLE MR. JUSTICE BECHU KURIAN THOMAS MONDAY, THE 19 DAY OF JULY 2021 / 28TH ASHADHA, 1943 ITA NO. 903 OF 2009 AGAINST THE ORDER IN ITA 1154/COCH/2004 OF I.T.A.TRIBUNAL,COCHINBENCH, ERNAKULAM APPELLANT/RESPONDENT: THE COMMISSIONER OF INCOME TAXCOCHIN.BY ADVS.SRI.P.K.R.MENON,SR.COUNSEL, GOI(TAXES)SRI.JOSE JOSEPH, SC, FOR INCOME TAX RESPONDENT/APPELLANT: M/S REMIER TYRES LTD.7TH FLOOR, CHERUPUZHPAM BUILDING, SHANMUGHAM ROAD, COCHIN- 31.BY ADVS.SRI.V.ABRAHAM MARKOSSRI.BINU MATHEWSRI.JOSEPH MARKOSE SR.SRI.B.J.JOHN PRAKASHSRI.MATHEWS K.UTHUPPACHANSRI.TERRY V.JAMESSRI.TOM THOMAS KAKKUZHIYIL THIS INCOME TAX APPEAL HAVING COME UP FOR ADMISSION ON19.07.2021, ALONG WITH ITA.757/2009 AND CONNECTED CASES, THE COURT ONTHE SAME DAY DELIVERED THE FOLLOWING: ITA Nos.757/2009 and batch cases 7 IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE MR.JUSTICE S.V.BHATTI & THE HONOURABLE MR. JUSTICE BECHU KURIAN THOMAS MONDAY, THE 19 DAY OF JULY 2021 / 28TH ASHADHA, 1943 ITA NO. 929 OF 2009 AGAINST THE ORDER IN ITA 659/COCH/2005 DATED 28.11.2007 OFI.T.A.TRIBUNAL,COCHIN BENCH, ERNAKULAM APPELLANT/APPELLANT: THE COMMISSIONER OF INCOME TAXCOCHIN.BY ADVS.SRI.P.K.R.MENON,SR.COUNSEL, GOI(TAXES)SRI.JOSE JOSEPH, SC, FOR INCOME TAXM/S PREMIER TYRES LTD.7TH FLOOR, CHERUPUZHPAM BUILDING, SHANMUGHAM ROAD, KOCHI-31.BY ADVS.SRI.V.ABRAHAM MARKOSSRI.BINU MATHEWSRI.JOSEPH MARKOSE SR.SRI.B.J.JOHN PRAKASHSRI.MATHEWS K.UTHUPPACHANSRI.TERRY V.JAMESSRI.TOM THOMAS KAKKUZHIYIL RESPONDENT/RESPONDENT: THIS INCOME TAX APPEAL HAVING COME UP FOR ADMISSION ON19.07.2021, ALONG WITH ITA.757/2009 AND CONNECTED CASES, THE COURT ONTHE SAME DAY DELIVERED THE FOLLOWING: ITA Nos.757/2009 and batch cases 8 IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE MR.JUSTICE S.V.BHATTI & THE HONOURABLE MR. JUSTICE BECHU KURIAN THOMAS MONDAY, THE 19 DAY OF JULY 2021 / 28TH ASHADHA, 1943 ITA NO. 1046 OF 2009 AGAINST THE ORDER IN ITA 660/COCH/2005 DTED 28.11.2007 OFI.T.A.TRIBUNAL,COCHIN BENCH, ERNAKULAM APPELLANT/APPELLANT: THE COMMISSIONER OF INCOME TAX.COCHIN.BY ADVS.SRI.P.K.R.MENON,SR.COUNSEL, GOI(TAXES)SRI.JOSE JOSEPH, SC, FOR INCOME TAXRESPONDENT/RESPONDENT:PREMIER TYRES LTD.,7TH FLOOR, CHERUPUSHPAM BUILDING,, SHANMUGHAM ROAD, KOCHI-31.BY ADVS.SRI.K.P.ABDUL AZEESSRI.V. ABRAHAM MARKOSSRI. BINU MATHEWSRI. JOSEPH MARKOSE SR.SRI.B.J. JOHN PRAKASHSRI. MATHEWS K.UTHUPPACHANSRI. TERRY V.JAMESSRI. TOM THOMAS KAKKUZHIYILTHIS INCOME TAX APPEAL HAVING COME UP FOR ADMISSION ON19.07.2021, ALONG WITH ITA.757/2009 AND CONNECTED CASES, THE COURT ONTHE SAME DAY DELIVERED THE FOLLOWING: ITA Nos.757/2009 and batch cases 9 IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE MR.JUSTICE S.V.BHATTI & THE HONOURABLE MR. JUSTICE BECHU KURIAN THOMAS MONDAY, THE 19 DAY OF JULY 2021 / 28TH ASHADHA, 1943 ITA NO. 1482 OF 2009 AGAINST THE ORDER IN ITA 658/COCH/2005 OF I.T.A.TRIBUNAL,COCHINBENCH, ERNAKULAM APPELLANT/APPELLANT: THE COMMISSIONER OF INCOME TAX, COCHINCOCHIN.BY ADV SRI.JOSE JOSEPH, SC, FOR INCOME TAX RESPONDENT/RESPONDENT: ITA Nos.757/2009 and batch cases 9 IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE MR.JUSTICE S.V.BHATTI & THE HONOURABLE MR. JUSTICE BECHU KURIAN THOMAS MONDAY, THE 19 DAY OF JULY 2021 / 28TH ASHADHA, 1943 ITA NO. 1482 OF 2009 AGAINST THE ORDER IN ITA 658/COCH/2005 OF I.T.A.TRIBUNAL,COCHINBENCH, ERNAKULAM APPELLANT/APPELLANT: THE COMMISSIONER OF INCOME TAX, COCHINCOCHIN.BY ADV SRI.JOSE JOSEPH, SC, FOR INCOME TAX RESPONDENT/RESPONDENT: PREMIER TYRES LTD., KOCHI7TH FLOOR, CHERUPUZHPAM BUILDING,, SHANMUGHAM ROAD, KOCHI-31.BY ADVS.SRI.V.ABRAHAM MARKOSSMT.A.S.BEENUSRI.BINU MATHEWSRI.JOSEPH MARKOSE SR.SRI.B.J.JOHN PRAKASHSRI.MATHEWS K.UTHUPPACHANSRI.TERRY V.JAMESSRI.TOM THOMAS KAKKUZHIYIL THIS INCOME TAX APPEAL HAVING COME UP FOR ADMISSION ON19.07.2021, ALONG WITH ITA.757/2009 AND CONNECTED CASES, THE COURT ONTHE SAME DAY DELIVERED THE FOLLOWING: ITA Nos.757/2009 and batch cases 10 JUDGMENT [ITA Nos.757/2009, 483/2009, 758/2009, 860/2009, 903/2009,929/2009, 1046/2009, 1482/2009] S.V.Bhatti, J. Heard learned Standing Counsel Mr.Jose Joseph for theappellant and learned Senior Counsel Mr.Joseph Markose forthe respondent. 2. Revenue is the appellant in the instant batch of TaxAppeals. M/s Premier Tyres Ltd. Cochin/Assessee is therespondent. The Tax Appeals arise from the orders of theIncome Tax Appellate Tribunal (Cochin Bench) fromindependent orders made in Tax Appeals preferred by theassessee. The details of the appeals, the assessment yearsetc. are stated thus: ITA Nos.757/2009 and batch cases 11 3. The substantial questions of law raised in the batch of appeals deal with the exercise of jurisdiction by theAssessing Officer (AO) under Section 147 of the IncomeTax Act (for short 'the Act') and the rental income receivedby the assessee from Apollo Tyres Ltd. (for short 'ATL')whether constitutes business income or income from othersources. The background circumstances relevant for ITA Nos.757/2009 and batch cases 12 disposing of the batch cases are substantially similar.Hence the learned counsel appearing for both the partieshave treated ITA No.757 of 2009 as the leading case formaking their submissions and have further stated that theconsideration of circumstances and questions of law inthis appeal would have bearing on the disposal of theother appeals since the questions of law formulated by theappellant are same in the other appeals as well. A fewadmitted circumstances occasioning prior to the previousyear for the assessment year 1996-1997 are adverted to,before considering the controversy between the revenueand the assessee on the re-opening of the assessment andupon such re-opening, treating the lease rental receivedby the assessee from ATL as income from other sourcesinstead of income from business. 4. The assessee is a company engaged in themanufacture and sale of tyres. The assessee since hadbusiness loss in excess to the paid up capital, moved anapplication under Sec.15 of the Sick Industries (Special ITA Nos.757/2009 and batch cases 13 4. The assessee is a company engaged in themanufacture and sale of tyres. The assessee since hadbusiness loss in excess to the paid up capital, moved anapplication under Sec.15 of the Sick Industries (Special ITA Nos.757/2009 and batch cases 13 Provisions) Act 1985 (for short 'Act 1985') before theBoard for Industrial and Financial Reconstruction (BIFR)for framing scheme under Act 1985. The applicationmoved by the assessee was registered as Case No.023/91(39/87). For disposal of appeals it is sufficient to note thatthe BIFR through its order dated 17.4.1995 has approveda scheme for the rehabilitation and revival of the assesseecompany and thus enabling the assessee to come backinto the business which the assessee was doing prior tomoving the application before BIFR. Through the orderdated 17.4.1995, while sanctioning rehabilitation schemefor the assessee, BIFR approved/sanctioned thearrangement between the assessee and ATL, viz. that ATLunder an irrevocable lease of 8 years will operate theplant and pay a total lease rental of Rs.45.5 crores as perthe profitability statement at Annexure-II appended to thescheme over the period of rehabilitation to the sickindustrial company i.e. the assessee and that ATL will takeover the production made from the assessee plant. The ITA Nos.757/2009 and batch cases 14 assessee made over the plant operation to ATL formanufacturing tyres. Thus the plant and machinery etc.were given in lease by assessee to ATL for the eight yearsstipulated in scheme. In the instant batch of appeals, thisCourt is considering the circumstances, clauses betweenthe assessee and ATL, consequences/conclusion thereoffor a period of eight years ending with 31.3.2004.5. On 29.11.1996, the assessee filed return of incomefor the assessment year 1996-97, declaring taxableincome as 'nil'. The assessee arrived at taxable income as'nil' by setting off the brought forward unabsorbed lossesof the preceding assessment years against the currentyears by computing income of Rs.6,61,75,914/- receivedfrom ATL as income from business. On 30.12.1998, theassessment was completed under section 143(3). Theassessment was completed by treating the lease rentreceived from Apollo Tyres Ltd. amounting toRs.6,61,75,914/- as income from business of the assessee.Thereafter the AO issued notice dated 23.3.2001 and ITA Nos.757/2009 and batch cases 15 reopened the assessment under Section 148 of the Act.The proposed re-assessment principally was on the groundthat the income received as lease rent from ATL could nothave been treated as business income, and the leaserental amount qualifies as income from other sources.The case of assessee and the department in this behalfhas been stated in sufficient detail by all the threeauthorities who have considered this controversy andrecorded their findings which finally resulted in the appealon hand. For brevity and also on account of the fact thatthere is not much of controversy on the tenor of respectiveversions and the arguments have been put forward, webear in view the narrative considered by the authoritiesunder the Act in the orders made by them and do notpropose to state these circumstances in detail. Therevenue categorized the receipt of lease rental as incomefrom other sources, because the assessee was not actuallymanufacturing the tyres and selling the manufacturedtyres in the market, but lent the existing facilities to ATL ITA Nos.757/2009 and batch cases 16 and merely received lease rental amount from ATL. Percontra, the assessee claims the arrangement asexploitation of commercial asset for earning profits undera scheme approved by BIFR, a statutory scheme, thereforein isolation the activity authorised by BIFR is notunderstood for deciding whether the lease rental receivedis business income of the assessee or income from othersources. ITA Nos.757/2009 and batch cases 16 and merely received lease rental amount from ATL. Percontra, the assessee claims the arrangement asexploitation of commercial asset for earning profits undera scheme approved by BIFR, a statutory scheme, thereforein isolation the activity authorised by BIFR is notunderstood for deciding whether the lease rental receivedis business income of the assessee or income from othersources. 6. The AO through re-assessment order in Annexure-A dated 28.3.2002 treated the receipt from ATL as incomefrom other sources, finally added the said income to thegross income of the assessee and refused theallowances/expenditure claimed by the assessee. The AOdemanded Rs.2,99,20,093/- together with interest fromthe assessee. The assessee aggrieved by order dated28.3.2002 filed appeal before CIT (Appeals) and throughthe order in Annexure-B dated 28.8.2003 the appeal filedby the assessee was allowed in part. To the extent of thedisallowance confirmed by the CIT (Appeals) and treating ITA Nos.757/2009 and batch cases 17 the receipts from ATL as income from other sources, theassessee filed IT Appeal No.346/Coch/2003. Through the order in Annexure-C the appeal filed by the assessee was allowed and the Tribunal held that the lease rentalreceived by the assessee from ATL under rehabilitation scheme comes within the meaning of business income, particularly, in the circumstances of the case. Hence theinstant Income Tax Appeal at the instance of revenue. The following substantial questions of law are raised fordecision. 1. Whether, on the facts and in the circumstances of the case, isnot the reassessment completed under the main provisionwithin four years, in accordance with law. 2. Whether on the facts and in the circumstances of the caseshould not the Tribunal have applied the ratio of the decisionof the Supreme Court reported in 129 taxmann 72 in CIT vForainer France. 3. Whether, on the facts and in the circumstances of the caseand also for the factual reasons highlighted in paragraph 5(a)to (f) of the statement of the case, the Tribunal is right in lawand fact in holding that the assessee “is existing”, “it continuesto exist” and the leave for a limited period of 8 years?” and arenot the above findings wrong, baseless, unsupported bymaterial evidence against facts and perverse? 4. Whether, on the facts and in the circumstances of the caseand also for the reasons highlighted in paragraph 5(a) to (f) of ITA Nos.757/2009 and batch cases 18 the statement of the case the Tribunal is right in law and fact inholding that “there is nothing on record to show that theassessee had no present intention to revive its business at anappropriate time” and is not the finding wrong, perverse,quixotic and perverse? 5. Whether, on the facts and in the circumstances of the case,the Tribunal is right in law and fact in holding rental incomeas business income? 7. Substantial Question Nos. 1 and 2 refer to the controversy in reopening the assessment and whether thecircumstances now stated by the AO come withinjurisdiction of AO for reopening the assessmentcompleted under Section 143(3) of the Act. SubstantialQuestion Nos.3 to 5 relate to whether the lease rentalreceived by the assessee for the subject assessment years,constitutes income from business or income from othersources. 8. The counsel made submissions principally on substantial question Nos.3 to 5 and a decision on thesequestions would render consideration of other questionseither unnecessary or academic. Hence we first consider question Nos.3 to 5. ITA Nos.757/2009 and batch cases 19 7. Substantial Question Nos. 1 and 2 refer to the controversy in reopening the assessment and whether thecircumstances now stated by the AO come withinjurisdiction of AO for reopening the assessmentcompleted under Section 143(3) of the Act. SubstantialQuestion Nos.3 to 5 relate to whether the lease rentalreceived by the assessee for the subject assessment years,constitutes income from business or income from othersources. 8. The counsel made submissions principally on substantial question Nos.3 to 5 and a decision on thesequestions would render consideration of other questionseither unnecessary or academic. Hence we first consider question Nos.3 to 5. ITA Nos.757/2009 and batch cases 19 9. Learned Standing Counsel Mr.Jose Joseph contendsthat the Tribunal fell in serious error of law and fact, byignoring a few antecedent circumstances and/orcontemporaneous circumstances applicable to theassessment years in question while treating the leaserental receipt as income from business. To wit theassessee moved application in 1987 and by the time theassessee moved BIFR under Act 1985, the assessee eitherwas unable to do business or networth had diminishedsubstantially. The arrangement made by BIFR through itsorder dated 17.4.1995 sanctioning rehabilitation schemefor the assessee company substantially substitutes orreplaces the assessee from driver's seat of business andATL is kept in charge of the affairs of the assesse'smanufacturing process facilities at Kalamassery. Theagreement between the assessee and ATL is for a definiteperiod of 8 years, and an intention of coming back tobusiness after the lease period, is an importantconsideration and it is established by the assessee, for ITA Nos.757/2009 and batch cases 20 treating the lease rental receipt as income from business.These crucial aspects are looked at from assessee'sperspective, but not from objective viewing of thecontroversy. The Tribunal failed to appreciate and applythe broad tests laid down by the Supreme Court inUniversal Plast Limited and Ors. v Commissioner ofIncome Tax, Calcutta (237 ITR 454 SC) to the admittedsituation of the case. According to him, the arrangementbetween the assessee and ATL, in effect and substance, isnot an attempt to exploit the commercial asset for thebusiness purpose of the assessee but the income receivedby way of lease/rent, is a passive receipt received by theassessee for substantially letting the land, buildings,available plant etc. of the assessee in favour of ATL.Inability to do the business by the assessee is projected byinviting our attention to additional investment agreed to bemadeby ATL for modernising the then existing plant andmachinery in the premises of the assessee. Section 14deals with the heads of income and income derived by the ITA Nos.757/2009 and batch cases 21 assessee is profit and gain of business or profession of theassessee. The permissible deductions or expensesavailable while computation of income from the businessare covered by Sections 28 to 44 of the Act. Without doingbusiness or any activity, passive receipt recognised in thebooks of accounts of assessee, cannot be treated as incomeby way of profit and gains of business/profession of theassessee. The acceptance of case of assessee wouldfacilitate deductions under Sections 28 to 44 of the Actirrespective of doing business. He prays for answeringsubstantial question Nos. 3 to 5 in favour of revenue andagainst the assessee. 10. Senior Adv.Mr.Joseph Markose argues that theassessee moved BIFR in 1987 and the case of assessee hasbeen taken up for enquiry in 1991, BIFR found that theassessee could be subjected to a relief and rehabilitationscheme since the assessee was capable of reviving thebusiness of manufacture of tyres. The arrangement ofmanufacture of tyres for the subject eight assessment 10. Senior Adv.Mr.Joseph Markose argues that theassessee moved BIFR in 1987 and the case of assessee hasbeen taken up for enquiry in 1991, BIFR found that theassessee could be subjected to a relief and rehabilitationscheme since the assessee was capable of reviving thebusiness of manufacture of tyres. The arrangement ofmanufacture of tyres for the subject eight assessment ITA Nos.757/2009 and batch cases 22 years is in terms of the rehabilitation scheme approved byBIFR. While accepting the relief and rehabilitation scheme,BIFR examines the viability of the proposals given by theapplicant before it, the remedial measures proposed,deferred payment of dues etc. and conditions incorporatedin the scheme. It is, with considerable force, argued byhim that the subject eight assessment years are regulatedby the arrangement sanctioned by BIFR and the assesseeto survive the storms must conduct its affairs as per thescheme. The sanctioned rehabilitation schemeacknowledges the arrangement, the assessee had with ATLviz. ATL shall lift the entire production of M/s PTL and willsell the products under their brand name i.e. ATL. It maybe that under the scheme manufacturing expenses arecompletely reimbursed by ATL but the labour of PTL, plantand machinery of PTL are utilised for exploiting capitalassets of the assessee for deriving the receipt in disputei.e. lease rental. The Tribunal applied the parametres laiddown by the Apex Court in Universal Plast Ltd. No ITA Nos.757/2009 and batch cases 23 exception to the findings of fact recorded by the Tribunalcould be pointed out by the revenue. He explains, byinviting our attention to the scheme approved by BIFR, thatthe scheme envisages the assessee remaining in business,attains positive net worth within the period granted by theapproved scheme and survives the impact of losses byturning positive net worth. The positive net worth couldarrive only when unaccounted balances are suitablyadjusted from the income now received as businessincome. He does not dispute the proposition viz. whetherin a particular case, the receipt of income irrespective ofits nomenclature used by the assessee constitutes profitsor gains of business or falls under any other head butwould depend on the facts and circumstances of each case.He relies on the judgments reported in Commissioner ofExcess Profits Tax, Bombay City v Shri Lakshmi SilkMills Ltd. (1951 20 ITR 451), Commissioner of IncomeTax, Lucknow v Vikram Cotton Mills Ltd. [(1988) 169ITR 597)], Rayala Corporation Pvt. Ltd. v Asst. ITA Nos.757/2009 and batch cases 24 Commissioner of Income Tax (2016) 386 ITR 500(SC)],vChennai Properties and Investments Ltd.Commissioner of Income Tax (2015) 373 ITR 673 (SC)],Commr. of Income Tax, Thiruvananthapuram v M/sOberon Edifices and Estates (P) Ltd. (2019 KHC 279),CIT & Anr. v Mysore Wine Products Ltd. (2015) 373ITR 102]. He concludes by arguing that the Tribunal forrecording a finding in favour of assessee has taken over allview of the admitted circumstances, statutory scheme towhich the assessee was a party, the conditions in theagreement between the assessee and ATL. Therefore thefindings of fact recorded by the Tribunal that the income oflease rental from ATL to assessee qualifies the meaning ofprofit or gain of business of the assessee are tenable. Inother words, the argument points out the limitation in factand law in the appeal filed by the revenue under Sec.260Aof the Act. 11. Let us before examining the rival contentions statethe gist of consideration in the subject orders by the ITA Nos.757/2009 and batch cases 25 11. Let us before examining the rival contentions statethe gist of consideration in the subject orders by the ITA Nos.757/2009 and batch cases 25 authorities under the Act. Firstly the Assessing Officeradverted to the judgment of the Supreme Court inUniversal Plast Limited (supra) and decided the nature ofreceipt from lease/ rent as income from business or othersources. Then AO considered whether there is possibilityof assessee reviving its earlier business, as per the terms ofthe lease agreement entered between the assessee andATL. The AO then held that there is no lease agreement,i.e. for restarting the business as such. We are, at theoutset, constrained to observe that the AO preferred todecide the contemporaneous activity undertaken by theassessee by referring to the lease agreement and absenceof a clause in the lease agreement about the revival ofbusiness of assessee. This consideration throughoutweighed with AO for reaching the final conclusion. Thefallacy in this behalf is further evident that the AO, inspiteof noticing that all the terms and conditions are governedby the scheme sanctioned by the BIFR, declines to giveeffect to the working of scheme by observing that the ITA Nos.757/2009 and batch cases 26 scheme is not clear on what would happen after the expiryor completion of lease period. 11.1. The next reason stated by AO is that under the scheme, the assessee has reduced its overhead expenditureby closing down the head office, sales and marketingoffices. With the closure of these divisions, there is nochance of revival of business of the assessee as Tyremanufacturer. These observations are very centric orinfluenced the conclusion. We are, prima facie, of the viewthat there is no objective consideration of the modusoperandi or working of the scheme, the statutory obligationunder which the assessee had come by filing an applicationbefore BIFR. The subtle difference between a voluntaryarrangement between parties and arrangement approvedas part of a statutory consideration for revival is notnoticed by the AO, while concluding that the lease rentalincome shall be computed under the head income fromother sources. The Appellate Authority has confirmed theorder of AO and the dismissal of first appeal resulted in ITA Nos.757/2009 and batch cases 27 filing of appeal before the Tribunal. 12.The Tribunal in the impugned order first appreciatedthe scheme approved by BIFR, agreement between partiesfor irrevocable lease for 8 years of assessee's plant,machinery, land etc. and held that inspite of theagreement with ATL the assessee continues to exist as acorporate entity. The additional investment of 110 croresby ATL for eight years is to modernise the plant and againto make the manufacturing viable, the induction of a fewdirectors from ATL in Board of the assessee is merelychange in administration and of administrative officers,such changes could not be understood as the existence ofassessee as corporate entity has disappeared or theassessee ceases to exist. The taking over of themanufacturing activity by ATL is not to take over theassessee company. The consideration of future happeningof reviving the business by assessee is not a circumstancein the facts of the case. Finding is recorded that the leaserental receipt is income of business of the assessee. ITA Nos.757/2009 and batch cases 28 Substantial Question Nos.3 to 5: 13. From a reading of the decisions of Supreme Court in vCommissioner of Excess Profits Tax, Bombay City Shri Lakshmi Silk Mills Ltd. [1951] 20 ITR 451 (SC)],Commissioner of Income Tax, Lucknow v Vikram Cotton Mills Ltd. [1988] 169 ITR 597 (SC)]andUniversal Plast Limited v Commissioner of IncomeTax, Calcutta [1999] 237 ITR 454 (SC)] the followingparametres or criterion could be noted as follows: ITA Nos.757/2009 and batch cases 28 Substantial Question Nos.3 to 5: 13. From a reading of the decisions of Supreme Court in vCommissioner of Excess Profits Tax, Bombay City Shri Lakshmi Silk Mills Ltd. [1951] 20 ITR 451 (SC)],Commissioner of Income Tax, Lucknow v Vikram Cotton Mills Ltd. [1988] 169 ITR 597 (SC)]andUniversal Plast Limited v Commissioner of IncomeTax, Calcutta [1999] 237 ITR 454 (SC)] the followingparametres or criterion could be noted as follows: 1) Shri Lakshmi Silk Mills Ltd. i)“It makes no difference what an assessee does with acommercial asset belonging to him. The assessee may use itas assessee likes it and so long as the asset yields income, it isthe income of his business”. ii) “The ratio of all these cases, to my mind, is that if thereis a commercial asset which is capable of being worked by theassessee himself for the purpose of earning profits and theassessee instead of doing so, either voluntarily allows someoneelse to use it on payment of a certain sum or is compelled bylaw to allow it to be used in such manner, then what hereceives is income from business. But if the commercial assethas ceased to be a commercial asset in the hands of theassessee and thereafter he gets what he can out of it by lettingit out to be used by others, then the rent he receives is not ITA Nos.757/2009 and batch cases 29 income from any business that he carries on”. iii) “That no general principle can be laid down which isapplicable to all cases and each case has to be decided on itsown circumstances”. (iv)“In Sutherland v Commissioners of Inland Revenue, it isheld that a commercial asset susceptible of being put to avariety of different uses in which gain might be acquired andwhichever of these uses it was put to by the appellant, theprofit earned was a user of the asset of the same business. Amere substituted use of the commercial asset does not changeor alter the nature of that asset. Whatever the commercialasset produces is income of the business of which it is anasset, the process by which the asset makes the income beingimmaterial”. 2) Vikram Cotton Mills Ltd. (i) The assets of the company were exploited and therewas no intention of the assessee to discontinue the businessactivities. (ii) Whether a particular income received by theassessee as a result of activities carried on by the assessee isbusiness income or rental income depends upon the manner ofexploitation of the assets of the assessee. It only varies on thefacts and circumstances of each case. (iii) In each case the intention has to be gathered as towhether the commercial asset was intended to be exploited bythe assessee or whether it was intended to be used by lettingout for a temporary period. It depends upon the facts andcircumstances of each case. (iv) Whether it constitutes business income or otherwise ITA Nos.757/2009 and batch cases 30 is predominantly a matter of intention. Intention is aninference to be drawn from the relevant facts. All the factsare appreciated from the correct stand point, i.e. an ordinaryprudent businessman or as in England, it used to be “man onthe top of the platform omnibus” or “director's arm chair.”. If,on that test, a plausibleconclusion has been drawn, noobjection can be taken. (emphasis supplied) 3) Universal Plast Limited and others “In the light of the above discussion, the propositionsmay be summarised as follows: (i) No precise test can be laid down to ascertain whetherincome (referred to by whatever nomenclature, lease amount,rents, licence fee) received by an assessee from leasing orletting out of assets would fall under the head 'Profits andGains of business or profession'; is predominantly a matter of intention. Intention is aninference to be drawn from the relevant facts. All the factsare appreciated from the correct stand point, i.e. an ordinaryprudent businessman or as in England, it used to be “man onthe top of the platform omnibus” or “director's arm chair.”. If,on that test, a plausibleconclusion has been drawn, noobjection can be taken. (emphasis supplied) 3) Universal Plast Limited and others “In the light of the above discussion, the propositionsmay be summarised as follows: (i) No precise test can be laid down to ascertain whetherincome (referred to by whatever nomenclature, lease amount,rents, licence fee) received by an assessee from leasing orletting out of assets would fall under the head 'Profits andGains of business or profession'; (ii) It is a mixed question of law and fact and has to bedetermined from the point of view of a businessman in thatbusiness on the facts and in the circumstances of each caseincluding true interpretation of the agreement under whichthe assets are let out; (iii) Where all the assets of the business are let out, theperiod for which the assets are let out is a relevant factor tofind out whether the intention of the assessee is to go out ofbusiness altogether or to come back and restart the same. (iv) If only or a few of the business assets are let outtemporarily while the assessee is carrying out his otherbusiness activities then it is a case of exploiting the businessassets otherwise than employing them for his own use formaking profit for that business; but if the business neverstarted or has started but ceased with no intention to beresumed, the assets also will cease to be business assets and ITA Nos.757/2009 and batch cases 31 the transaction will only be exploitation of property by anowner thereof, but not exploitation of business assets. 14. The other decisions relied on by the assessee, firstly, are specific to the controversy in fact in those casesand secondly, for what is noted supra the controversy isdetermined on case to case basis, hence we are notdiscussing other judgments relied on by the assessee. 15. Let us take up the admitted circumstances of theappeals on hand. In hindsight from the details available onrecord it is appreciated that the assessee in theAssessment year 1986-1987 due to mounting loses andliabilities had realized the inability to carry on thebusiness of manufacturing tyres. The assessee presented acase for revival and rehabilitation of its business beforeBIFR. The feasibility of options given by the assessee wereconsidered by BIFR and as recorded in the order dated17.4.1995 of BIFR, the relief scheme was accepted forrehabilitation of the assessee. The workings and themodus operandi of the scheme are intrinsic to the revival ITA Nos.757/2009 and batch cases 32 of the company, therefore, an arrangement was made forutilization by the assessee of its business assets albeit withadditional investment by ATL. The operation of schemeenvisages ATL lifting the total production made by theassessee. The approved scheme of BIFR aims at revival ofa sick company and the revival is expected in a time span,however subject to other adjustments approved by BIFR.Therefore the premise i.e. there is no clause for revival ofunit in the agreement, in the orders of A.O. etc. is beggingthe question. The efficacy of workings of a draft scheme isunsatisfactory, the relief rehabilitation would not havebeen considered or granted by BIFR. Further, the schemeis operated as agreed, then the assessee is automaticallyback into business or is on its own to manufacture tyres.The stipulation in the approved scheme is that the periodof lease is for eight years. In other words, twoeventualities are anticipated, firstly, that the assessee isrevived and rehabilitated and alternatively inspite ofworking of the scheme, the affairs are not improving then ITA Nos.757/2009 and batch cases 33 the assessee considers other options. As held in VikramCotton Mills case these considerations or options areexamined through the optics of an ordinary prudentbusinessman, a man on the top of the platform omnibus;directors arm chair. And from such optics a conclusion isarrived at to implement the business plan, then noobjection to such a conclusion and computation of receiptas income from business could be taken. The word‘business’ in Sec.14 of the Act is not a word of art, but aword of commercial implication. Therefore in any givenyear or situation, the activity claimed by the assessee isneither accepted through interpretative or expressivenarrative of the activity claimed by the assessee, nor theclaim for business income is refused through the prism ofthe revenue. The bottom line is the availability of assets,activities carried for exploiting the assets, that theassessee is not a mere onlooker at the activities in thecompany or a passive recipient of rent for utilization offacilities other than business assets. It is kept in view that ITA Nos.757/2009 and batch cases 34 net income of business pre-supposes computation ofincome after allowing permissible expenses anddeductions in accordance with the Act. Therefore denyingeligible deduction/expense by treating business activity asany other activity and on the other hand allowingdeduction/expense without just eligibility is equally illegal.The circumstances therefore are weighed in an evenscaleby the authority/court while deciding the activity stated bythe assessee merits inclusion as income from business orother sources. 16. We hasten to add that these controversies aredetermined not only on case to case basis, but also on yearto year basis as well. In other words, the presumption ofdoing business, while implementing the scheme isunavailable automatically to the assessee and aftercompletion of eight years or attaining positive net worthcircumstances are verified for accepting the claim ofassessee. The view taken by us in this judgment isconfined to eight years i.e. the implementation of scheme ITA Nos.757/2009 and batch cases 35 and the subsequent assessment years are examined on thedetails of those cases. 17. The assessee, under approved scheme isobligated to exploit the business assets, earn income,adjust/get off accumulated losses/unadjusted depreciation,and turn as a positive company. Any other view in asituation as the present is unavailable and againcounterproductive to an approved scheme under Act,1985. Sequentially enquired, it transpires that theassessee was obligated to work under a statutoryapproved scheme; the lease of eight years is to ATL, whichis into the same business and lease was for utilising thePlant, Machinery etc. for manufacturing tyres; theactualsare reimbursed to assessee by ATL; the work force ofassessee has been deployed for manufacturing tyres; thetotal production from the assessee unit is taken over byATL; over all affairs of assessee company are made viableby entering into settlement etc; at this juncture, we areconvinced that coupled with all otherprimary ITA Nos.757/2009 and batch cases 36 ITA Nos.757/2009 and batch cases 36 circumstances, the assessee employed commercial assetsto earn income. Unless and until the income is treated asbusiness income, the scheme does not result on expectedlines for losses; unavailed depreciation etc. will continueto be present in the accounts of assessee. The scheme isappreciated as one providing a solution to businessproblem of the assessee. From the above discussion weare convinced that the claim of lease rental receipt asincome of business is justifiable for the subject assessmentyears and the findings of the Tribunal even if treated asmixed question of law and fact, we hold that the findingsare justifiable and warranted in the circumstances of thecase. Hence substantial question Nos.3 to 5 are answeredin favour of the assessee and against the revenue. In viewof the conclusion reached on substantial question Nos.3 to5, we are of the opinion that, having regard to abovediscussion, question Nos.1 and 2 need not be answered.Hence ITA No.757/2009 is dismissed. For the samereasoning and conclusions all other ITA's are dismissed by ITA Nos.757/2009 and batch cases 37 answering the questions against the revenue and in favour of assessee. CSS/ sd/-S.V.BHATTIJUDGEsd/- BECHU KURIAN THOMASJUDGE ITA Nos.757/2009 and batch cases 38 APPENDIX OF ITA 483/2009 PETITIONER'S ANNEXURE ANNEXURE ACOPY OF ORDER U/S. 143(3) DATED 28/07/2005 FORTHE ASST. YEAR 2003-04. ANNEXURE BCOPY OF THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) DATED 07/02/2006. ANNEXURE CCOPY OF THE ORDER DATED 18/01/2007 OF THE INCOME TAX APPELLATE TRIBUNAL, COCHIN BENCH INITA NO.315/COCH/2006. ITA Nos.757/2009 and batch cases 39 APPENDIX OF ITA 758/2009 PETITIONER ANNEXURE ANNEXURE ACOPY OF ASSESSMENT ORDER DATED 29.12.2003 U/S.143(3) R.W.S 147 OF THE INCOME TAX ACT FOR THEASST. YEAR 1998-99. ANNEXURE BCOPYOF THE ORDER DATED 3.9.2004 OF THE COMMISSIONER OF INCOME TAX (APPEALS). ANNEXURE CCOPY OF THE ORDER DATED 14.12.2004 OF THE INCOME TAX APPELLATE TRIBUNAL, COCHIN BENCH, COCHIN IN ITA NO.1153/COCH/2004 FOR THE ASST. YEAR 1998-99. ITA Nos.757/2009 and batch cases 40 APPENDIX OF ITA 860/2009 PETITIONER ANNEXURE ANNEXURE ACOPY OF ASSESSMENT ORDER DATED 17.3.2003 U/S. 143(3) R.W.S 147 OF THE INCOME TAX ACT FOR THEASST. YEAR 1997-98. ANNEXURE BCOPY OF THE ORDER DATED 28.8.2003 OF THE COMMISSIONER OF INCOME TAX (APPEALS). ANNEXURE CCOPY OF THE ORDER DATED 14.12.2004 OF THE INCOME TAX APPELLATE TRIBUNAL, COCHIN BENCH, COCHIN IN ITA NO.347/COCH/2003 FOR THE ASST. YEAR 1997-98. ITA Nos.757/2009 and batch cases 41 APPENDIX OF ITA 903/2009 PETITIONER ANNEXURE ANNEXURE ACOY OF ASSESSMENT ORDER DATED 16.1.2004 U/S. 143(3) OF THE INCOME TAX ACT FOR THE ASST. YEAR 2001-02. ANNEXURE B COPY OF THE ORDER DATED 3.9.2004 OF THE COMMISSIONER OF INCOME TAX (APPEALS). ANNEXURE CCOPY OF THE ORDER DATED 14.12.2004 OF THE INCOME TAX APPELLATE TRIBUNAL, COCHIN BENCH, COCHIN IN ITA NO.1154/COCH/2004 FOR THE ASST. YEAR 2001-02. ITA Nos.757/2009 and batch cases 42 APPENDIX OF ITA 929/2009 ITA Nos.757/2009 and batch cases 43 APPENDIX OF ITA 1046/2009 PETITIONER'S ANNEXURE ANNEXURE ACOPY OF ORDER U/S. 143(3) R.W.S.147 DATED 17/12/2004 FOR THE ASSISTANT YEAR 2002-03. ANNEXURE B COPY OF ORDER DATED 11/02/2005 OF THE COMMISSIONER OF INCOME TAX (APPEALS). ANNEXURE C COPY OF THE ORDER DATED 28/11/2007 OF THE INCOME TAX APPELLATE TRIBUN