Case Law Details
RELEVANT PARAGRAPH
6. We have heard learned counsel for the assessee. Learned counsel for the assessee drew our attention to various clauses in leave and license agreement and submitted that the premises were given purely on license basis with fixtures and fittings. It was also pointed out that under the license agreement, the assessee also retained duplicate key of the main entrance door, which indicates that the control and possession of the premises was always with the assessee.
It was therefore submitted by him that it was not a case of sub-letting by the assessee; but mere license granted for use of the premises. It was queried by the Bench as to how this will make a difference regarding treatment of head of income under which income in question has to be assessed. Learned counsel for the assessee could not give answer to the query of the Bench; Learned counsel for the assessee, however, relied on the decision of Hon’ble Supreme Court in the case of S.G. Mercantile Corporation Pvt. Ltd., 83 Supreme Court was as to whether the income from sub-letting of the property was to be construed as income business or as income from other sources. Hon’ble Supreme Court noticed that the assessee was a company formed with object of taking on lease properties and dealing with the same commercially. Court further found that the assessee was doing the said activity systematically and in an organized manner with the object of doing the same as business. In those circumstances, Hon’ble Supreme Court held that income was to be assessed under the head income from other sources’. In the present case; we, find that except for relying upon the terms in ‘object clauses’ of Memorandum of. Association, the assessee has not been able to demonstrate as to how the activity of sub-leasing was done in systematic and organized manner, so as to constitute carrying of on a business. We further notice from the director’s report dated 26.8.2003 that the license agreement with American Express Bank came to an end on 31.3.2003 itself and new license agreement had been entered into by the assessee with the British Deputy High Commission, Mumbai. This again shows only an act of subletting by the assessee. Learned counsel for the assessee filed before us a list of fixtures and fittings and other things, that it had provided to licensee in the premises which was given on license. These items do not find place in the leave and license agreement. In any event providing these items to the licencee would not make the income in question as business income without proof of intention to carry on systematic and organized activity. For the reasons stated above, we are of the view that the orders of the revenue authorities on this issue have to be upheld. Consequently, Ground No. 1 raised by the assessee is dismissed.
