M/S Improvement Trust v. Commissioner Of Income Tax, Panchkula

ITA No. 70 of 2011 IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH M/s Improvement Trust Versus Commissioner of Income Tax, Panchkula ITA No. 70 of 2011Date of Decision: 28.4.2011 ....Appellant. ...Respondent. CORAM:-HON'BLE MR. JUSTICE ADARSH KUMAR GOEL.HON'BLE MR. JUSTICE AJAY KUMAR MITTAL. PRESENT: Mr. Rajiv Sharma, Advocate for the appellant. AJAY KUMAR MITTAL, J. 1.This appeal has been preferred by the assessee underSection 260A of the Income Tax Act, 1961 (in short “the Act”) againstthe order dated 24.4.2010 passed by the Income Tax AppellateTribunal, Chandigarh Bench “A”, Chandigarh (hereinafter referred to as“the Tribunal”) in ITA No. 1222/CHD/2009, relating to the assessmentyear 2006-07, claiming the following substantial questions of law:- “I.Whether the ITAT was justified in confirming theorders of Authorities below without appreciating thecorrect facts of the case, provisions of law, evidenceand written submissions filed while treating theappellant as not a local Authority? II.Whether the ITAT was justified in confirming the orders of Authorities below in upholding theassessment of 'rental income' as income from 'HouseProperty' instead of income from business andprofession despite the fact that in the immediatelypreceding year the same rental income wasassessed as income from 'business & profession'and the same position could not be altered as held inITA No. 567 of 2009 holding: “once a similar positionis accepted by the department it is not permissible todeviate from the earlier stand?” 2.Put succinctly, the facts necessary for disposal as narratedin the appeal are that the assessee filed its return for the assessmentyear 2006-07 on 7.7.2006 declaring loss at Rs.6,83,633/-. The saidreturn was selected for scrutiny. The Assessing Officer vide orderdated 26.11.2008 rejected the claim of the assessee on account ofdepreciation and treated the rent from letting out of shops as incomefrom 'house-property' instead of income from 'business or profession'.Feeling aggrieved, the assessee took the matter in appeal before theCommissioner of Income Tax (Appeals) [in short “the CIT(A)”]. The CIT(A) vide order dated 1.10.2009 dismissed the appeal. On further appealby the assessee, the Tribunal vide order dated 24.4.2010 affirmed thefindings recorded by the Assessing Officer as well as the CIT(A) anddismissed the appeal. Hence, the present appeal by the assessee. 3.We have heard learned counsel for the appellant. 4.At the outset, it is noticed that in view of insertion ofExplanation to Section 10(20) by Finance Act, 2002 effective from 1.4.2003 the assessee-Improvement Trust could not be treated to be alocal authority, learned counsel for the assessee did not challenge thefindings of the Tribunal and, therefore, question No.I cannot be said tobe a substantial question of law. 5.The point that arises for determination in this appeal relatesto the nature of income in respect of rental received on letting ofgodowns by the assessee. The question is whether the amount soreceived by the assessee was income from 'house property' or wasincome from 'business or profession'. 6.The assessee had treated the receipt of rental on letting ofgodowns as income from 'business or profession' and claimeddepreciation thereon. The Tribunal on consideration of the matter hadconcluded the same to be income from house property. The finding asrecorded by the Tribunal in para 10 of its order reads thus:- 5.The point that arises for determination in this appeal relatesto the nature of income in respect of rental received on letting ofgodowns by the assessee. The question is whether the amount soreceived by the assessee was income from 'house property' or wasincome from 'business or profession'. 6.The assessee had treated the receipt of rental on letting ofgodowns as income from 'business or profession' and claimeddepreciation thereon. The Tribunal on consideration of the matter hadconcluded the same to be income from house property. The finding asrecorded by the Tribunal in para 10 of its order reads thus:- “10.Before us, learned counsel for the assesseehas merely reiterated the submissions that suchincome is liable to be treated as business income ofthe assessee. In the course of hearing, learnedcounsel has referred to the judgment of the Hon'bleSupreme Court in the case of Commissioner ofExcess Profits Tax v. Shri Lakshmi Silk Mills Ltd., 20ITR 451 (SC). The facts in the case of Shri LakshmiSilk Mills Ltd. (supra) are that assessee was engagedin the manufacture of silk cloth and dyeing of silkyarn. It was unable to operate its dyeing plant onaccount of difficulty in obtaining silk yarn and, therefore, it temporarily let out the dyeing plant andearned rental income. Income earned from suchletting out was treated as business income by theassessee whereas the Assessing Officer sought totax it as income under the head 'House Property'.The Hon'ble Supreme Court treated such income asbusiness income for the reason that letting out seenas a part of the usual activities of business and asper the Hon'ble Court, temporary letting out of plantdid not result in the plant ceasing to be a commercialassets. In the present case, there is no material toshow that the assessee is engaged in the business ofletting out of properties. The facts in the presentcase are quite different and the judgment of theSupreme Court in the case of Shri Lakshmi Silk Mills(supra) does not help the case of the assessee. As aresult thereof, we find no error in the approach of thelower authorities in treating the rental income underthe head 'income from house property' andconsequently the depreciation on buildings is notallowable and the lower authorities are justified indenying the claim of depreciation on buildings. Onthis ground, the assessee fails.” 7.The submission of learned counsel for the assessee wasthat on the principle of consistency, it should have been treated asincome from 'business or profession' as had been treated in the earlier years. 8.We do not find any substance in the said argument.Learned counsel for the assessee was unable to show that in the earlieryears the returns were scrutinized by the department and such incomewas accepted to be an income from 'business or profession'. Once itwas not so, in the light of the finding, noticed above, wherein no faulthas been pointed out by the learned counsel for the assessee, it is heldthat no substantial question of law arises in this appeal. 9.Accordingly, the appeal is dismissed. (AJAY KUMAR MITTAL) JUDGE April 28, 2011gbs (ADARSH KUMAR GOEL)JUDGE