The Commissioner Of Income Tax – I,Chennai v. M/S.g.v.foundations Pvt. Ltd.,New

IN THE HIGH COURT OF JUDICATURE AT MADRAS CORAM: THE HONOURABLE MR. JUSTICE R. MAHADEVAN ANDTHE HONOURABLE MR. JUSTICE J.SATHYA NARAYANA PRASAD T.C.A.Nos.58 to 63 of 2012and M.P.Nos.1,1,1,1 and 1 of 2012 The Commissioner of Income Tax – I,Chennai. Versus M/s.G.V.Foundations Pvt. Ltd.,New No.101, Old No.48,1[st] Avenue,Indira Nagar, Adyar,Chennai 20. ...Respondent in allT.C.As Tax Case Appeals filed under Section 260A of the IncomeTax Act, 1961, against the common order of the Income TaxAppellate Tribunal 'C' Bench, Chennai dated 08.06.2011 inITA.Nos.236/Mds/2010, 237/Mds/2010, 238/Mds/2010, 239/Mds/2010,240/Mds/2010 and 241/Mds/2010 for the assessment years 2001-02,2002-03, 2003-04, 2004-05, 2005-06 and 2006-07.In all T.C.As. Preferred against two separate orders passed by TheCommissioner of Income Tax (Appeals)-III Chennai 600 034 dated22/12/2009 made in ITA.Nos.322,323,324/07-08 & 941/06-07 andITA.Nos.325/07-08 & 53/08-09 A-III preferred against the orderspassed by the The Income Tax officer, Company Ward -II(1)Chennai – 600 034 dated 30/11/2006, 26/11/2007 and 02/07/2008respectively for the assessment years 2001-02, 2002-03, 2003-04,2004-05, 2005-06 and 2006-07. For Respondents: Mr.Subbaraya Aiyar Padmanabhan COMMON JUDGMENT (Judgment of the court was delivered by R.MAHADEVAN, J.) Assailing the common order dated 08.06.2011 passed by theIncome Tax Appellate Tribunal in the respective ITA Nos.236 to241/Mds/2010 relating to the assessment years 2001-02, 2002-03,2003-04, 2004-05, 2005-06 and 2006-07, the Revenue haspreferred these tax case appeals. 2.According to the appellant / Revenue, the respondent /assessee had received rental income from M/s.SBI Home FinanceLtd and claimed the same as business income in their returnsfiled for the assessment years in question. The returns wereoriginally processed under section 143(1) of the Income-tax Act.After scrutiny of the returns, notices under section 148 came tobe issued, on the premise that the income from letting out theproperty owned by the respondent / assessee had to be assessedunder the head 'income from house property', based on thedecision of the High Court of Madras in the case of CIT v.Chennai Properties and Investments Ltd [(2004) 266 ITR 685(Mad)]. The respondent / assessee filed its objections statingthat the letting of building along with tables and chairs couldnot be treated as 'income from house property', but as 'businessincome'. Being dissatisfied with the same, the assessing officerpassed the assessment orders, assessing the rental income underthe head 'income from house property'. Challenging the same, therespondent / assessee filed appeals before the CIT(A), whoplaced reliance on the decision of the Hon'ble Supreme Court inthe case of Shambu Investments P. Ltd v. CIT (263 ITR 143) anddismissed the appeals. Aggrieved by the same, the respondent /assessee went on further appeals before the ITAT, which acceptedthe plea of the respondent / assessee that they had given thecommercial space only on licence basis and therefore, the incomehad to be assessed under the head 'business income' and allowedthe appeals. Therefore, the Revenue is before this court withthese appeals. 3.By order dated 06.07.2012, this court admitted theaforesaid tax case appeals on the following substantial questionof law:“Whether on the facts and in thecircumstances of the case, the Income TaxAppellate Tribunal was right in holding that therent received by the assessee from letting outbusiness premises should be assessed as businessincome even though as per the classification ofheads of income under the Income Tax Act, theincome was assessable under the head 'Income fromHouse property?” 4.Heard the learned counsel appearing on either side andalso perused the materials placed before this court. 3.By order dated 06.07.2012, this court admitted theaforesaid tax case appeals on the following substantial questionof law:“Whether on the facts and in thecircumstances of the case, the Income TaxAppellate Tribunal was right in holding that therent received by the assessee from letting outbusiness premises should be assessed as businessincome even though as per the classification ofheads of income under the Income Tax Act, theincome was assessable under the head 'Income fromHouse property?” 4.Heard the learned counsel appearing on either side andalso perused the materials placed before this court. 5.Admittedly, the respondent / assessee had let out thecommercial premises together with amenities on lease to M/s.SBIHome Finance Limited. The claim of the assessee treating theincome received from lease/licencing the business centre as'business income', was disallowed by the assessing officer byobserving that the income received from the house property hasto be assessed under the head 'income from house property'. Theorders of the assessing officer passed under section 143(3) r/w147, were also confirmed by the appellate authority. On theother hand, the Tribunal placed reliance on the decision of thiscourt in CIT v. VST Motors Pvt Ltd, [226 ITR 155] and allowedthe appeals filed by the respondent / assessee, after havingheld that the income received from commercial asset is to betreated as 'business income' and not 'income from houseproperty'. The relevant findings of the Tribunal are quotedbelow for ready reference: “...The Hon'ble Jurisdictional High Court in thecase of CIT vs. VST Motors Pvt. Ltd (supra) has heldas under: Held, (i) that inasmuch as the buildingin question on Mount Road was a commercialasset, the assessee could exploit it eitherby itself or by letting it to others.Therefore, in a matter like this thefundamental position that had to beascertained was whether a particular buildingor premises was a commercial asset or a houseproperty. If the premises were a commercialasset, then the income derived therefromwould amount to business income, otherwise itwould be income derived from propertyassessable under the head “Property income”.On the facts, the Tribunal had found in thepresent case that the property in questionwas a commercial asset, which was used by theassessee as such in the beginning and lateron after shifting its branches to outsidestations, the second floor had become surplusand was exploited by the assessee by lettingit out to others. Therefore, the rentalincome derived therefrom was rightlyassessable under the head “Business income”. 4.The facts of the above Hon'ble JurisdictionalHigh Court's decision and the case in hand are sameand similar to each other. The decisions on which the Department has relied on are in fact on differentfooting. In that case, the property was actually letout and in one of the case, the assessee had receivedrent in advance. The perusal of the record revealsthat the commercial complex of the assessee has notbeen let out in the same manner as it is envisaged insection 22 of the Act..... 4.The facts of the above Hon'ble JurisdictionalHigh Court's decision and the case in hand are sameand similar to each other. The decisions on which the Department has relied on are in fact on differentfooting. In that case, the property was actually letout and in one of the case, the assessee had receivedrent in advance. The perusal of the record revealsthat the commercial complex of the assessee has notbeen let out in the same manner as it is envisaged insection 22 of the Act..... 5.A plain reading of the above section show thatthere has to be a relation between the owner of theproperty and the occupier of the property as that ofowner and tenant. In the given case, the assessee hasnot given the property on rent, but has given thecommercial complex on licence for three yearsinstantaneous user, hence, the income from thiscommercial asset is to be treated as 'business income'and not 'income from house property'. The decision ofthe Hon'ble Jurisdictional High Court rendered in thecase of CIT vs. VST Motors Pvt Ltd (supra) is directlyon the issue. So, we are bound to follow. Such casesare to be decided on the basis of facts of aparticular case and cannot be generalized. We haverendered this decision in the given facts andcircumstances of this case alone. Therefore, onmerits, the assessee succeeds and we set aside thefinding of the ld. CIT(A) in all these years on meritsof the case and order that this receipt is to beaccepted under the head 'income from business' in allthese years.” 6.We are of the view that the Tribunal being fact findingauthority, has passed the well considered order after anlaysingthe entire facts and circumstances of the case, in the light ofthe material evidence placed before it and hence, the same doesnot call for any interference. 7.It is also to be noted that in similar circumstances, inTCA Nos.468 to 470 of 2008 in the case of CIT v. M/s.S.S.M.Estates Ltd, a Co-ordinate Bench of this court by a commonjudgment dated 24.02.2015, has answered the issue involvedherein in favour of the assessee and against the revenue. Theoperative portion of the same is profitably extracted below: "7.It is seen that the findings of fact arrivedat by the Tribunal is not in dispute. The decision ofthe Supreme Court in the case of Commissioner ofIncome Tax v. Indian Warehousing Industries Ltd.,reported in 258 ITR 93 and that of the jurisdictionalHigh Court in the case of Chennai properties andInvestments Ltd. reported in (2004) 266 ITR 685 (Mad) are distinguishable on facts. In those cases, thereceipts itself are rental receipts. Whereas, in thepresent case, the assessee itself has retained thepossession and there is no fiduciary relationship oflandlord and tenant. 8.The Tribunal, by going into the individualaspects of the business to come to the conclusion thatit is a case of warehousing business and, therefore,would fall only under the head 'business Income'. 9.In view of the well considered reasoning givenby the Tribunal, we find no reason to differ with thefindings of fact recorded by the Tribunal, whichreasoning is fully justified in the facts of thepresent case. This Court finds no good reason todiffer with the said findings of fact. Accordingly,the substantial question of law is answered in favourof the assessee and against the Revenue.” 8.Therefore, we dismiss the present tax case appeals filedby the Revenue, answering the substantial question of law raisedherein in favour of the respondent/ assessee. Consequently,connected miscellaneous petitions are closed. Sd/- Assistant Registrar(CS VII) //True Copy// vkr Sub Assistant Registrar To 1. The Commissioner of Income Tax – I, Chennai. 2. The Income Tax Appellate Tribunal, Chennai, “C” Bench 3. The Commissioner of Income Tax (Appeals)-III Chennai 600 034. 4. The Income Tax officer, Company Ward -II(1) Chennai – 600 034. 8.Therefore, we dismiss the present tax case appeals filedby the Revenue, answering the substantial question of law raisedherein in favour of the respondent/ assessee. Consequently,connected miscellaneous petitions are closed. Sd/- Assistant Registrar(CS VII) //True Copy// vkr Sub Assistant Registrar To 1. The Commissioner of Income Tax – I, Chennai. 2. The Income Tax Appellate Tribunal, Chennai, “C” Bench 3. The Commissioner of Income Tax (Appeals)-III Chennai 600 034. 4. The Income Tax officer, Company Ward -II(1) Chennai – 600 034. +1cc to Mr.Subbaraya Aiyar Padmanabhan, Advocate, S.R.No.11836 PM(CO)CT 22/03/2022