Itta/62/2001 Of The Commissioner Of Income Tax v. M/S.elite Engineers

HON'BLE SRI JUSTICE G.CHANDRAIAH&HON’BLE SRI JUSTICE CHALLA KODANDA RAMI.T.T.A. No. 62 of 2001 O R D E R:- (per Hon’ble Sri Justice Challa Kodanda Ram) This Appeal arising out of the order dated 12.09.2000 of the Income Tax Appellate Tribunal inI.T.A.No. 397/Hyd/1995 is at the instance of the Revenue. The following question of law is raised for the opinion ofthis Court. i)Whether on the facts and in the circumstances of thecase, the Appellate Tribunal is justified in holding that therental income earned by the assessee can be treated asincome from business and not from property? Sri S.R. Ashok, learned senior Standing Counsel for Income-tax Department, has urged that the Tribunal haserred in construing the asset as “business asset” and inthat view of the matter it had erred in assessing theincome of the assessee as “income from business”instead of “income from the house property” as held bythe Assessing Officer. We have gone through the order of the Tribunal aswell as the order of the Appellate Commissioner. The Appellate Commissioner, in his order dated 28.12.1994, recorded in paragraph No.1.2 as under: “After considering the rival submissions by the learnedrepresentative and the A.O. on the issue, I find that the buildingin question is a factory building. This is evidenced by a copy ofthe proposed plan submitted before me, which was shown as M/s.Sunshine Cosmetics (P) Ltd. in plot No.5 at Kukatpalli. Amemorandum of understanding entered into by SriP.Veereswara Rao and M/s.Sunshine Cosmetics Ltd. refers tothe building as the factory building and the plan of the proposedfactory building shall be approved by the lessees i.e.M/s.Sunshine Cosmetics Ltd. before commencement of theproduction. The memorandum of understanding was executedon 21.10.1989. The letter written by the Branch Manager,Vysya Bank, Patancheru dated 16.10.1990 addressed toM/s.Elite Engineers, the present appellant, refers to theconstruction of the factory building for the manufacturing unit ofToothpaste. In a letter dated 16.10.1990 written by the DeputyGeneral Manager to the Manager, Vysya Bank, Patancheru, it isclarified that an amount of Rs.25.00 lakhs has been sanctionedas Term Loan for construction of the factory building. All thesefacts were also brought to the notice of the A.O. at the time ofAssessment proceedings. It appears that though the A.O.referred to the building as factory building in his assessmentorder, yet, in his order, he concentrated more on case laws citedby him to arrive at his conclusion that the building in question isnot a factory building. He treated accordingly 60% of the leaseamount as income from House property and 40% of the leaseamount as income from Other Sources. In so doing, he seemsto have carried on by the decision by the Hon’ble SupremeCourt in the case of Karnani Properties Ltd. V CIT 82 ITR page547. The facts quoted above, however points to the conclusionthat the building is a factory building, as evidenced from theintention of the parties, from the Bank papers and Memorandumof Understanding executed between the lessor and lessee.Thecircumstances of the present case including the intention of theparties point to the conclusion that the building in the instantcase is a factory building and the A.O. could not bring anymaterial on record to prove the contrary, either in his”assessment order or at the time of hearing before me. Further, in Paragraph No.1.6 of the order, it is recorded asfollows: “In the instant case, as discussed above, there is sufficientmaterial including the memorandum of understanding betweenthe lessor and lessee, the bank papers produced before me, thedrawing plant and the intention on the part of the parties. Allthese material were also laid before the Assessing Officer at the Further, in Paragraph No.1.6 of the order, it is recorded asfollows: “In the instant case, as discussed above, there is sufficientmaterial including the memorandum of understanding betweenthe lessor and lessee, the bank papers produced before me, thedrawing plant and the intention on the part of the parties. Allthese material were also laid before the Assessing Officer at the time of assessment proceedings. This material along with lawas propounded above, points to the conclusion that the buildingin the present case is a factory building. Accordingly, theAssessing Officer is directed to treat the same as a factorybuilding and to take consequential action.” The Tribunal, having upheld the finding of theAppellate Commissioner, found that it had no reason tointerfere with the order of Appellate Commissioner. Inasmuch as the finding of the Tribunal is to the effect thatthe asset is a business asset and exploitation of the sameis for the purpose of the business, and the same being aquestion of fact, we are not inclined to take a contra view. In that view of the matter, the questions raised areanswered in favour of the assessee and against theRevenue. Accordingly, this Appeal is dismissed. No order asto costs. As a sequel to the dismissal of the Appeal,Miscellaneous Petitions, if any pending, shall standdisposed of as infructuous. _________________ G. CHANDRAIAH, J 23.01.2014 bcj ______________________ CHALLA KODANDA RAM,J