Under section 22 of the Act the charge to tax of income from house property is based on the ownership of such property. The admitted position in the present case is that the assessee is only a tenant and not the owner of the property. It is also not the case of the revenue that the tenancy is for a period of more than 12 years which could be construed as ownership rights u/s 27(iiib) of the Act. Therefore the income in question cannot be assessed as income from house property.
The mere fact of attachment of income to any immovable properly cannot be the sole factor for assessment of such income as income from house property. It is necessary to find out the primary object of assessee while exploiting the property. If it is found that the main intention is for letting out the property or any portion thereof the same must be considered as rental income or income from house property. In case, it is found that the main intention is to exploit the immovable property by way of complex commercial activities, in that event it must be held as business income.
FULL TEXT OF THE ITAT JUDGMENT
This appeal by the assessee against the order dated 28.10.2016 passed by the Commissioner of Income Tax (Appeals)-11, Kolkata for the assessment year 2010-11.
2. The only issue is to be decided is as to whether the licence fees received from tenants is to be considered as income from business or income from house property. The Assessing Officer and CIT(A) held that is an income from house property.
3. The ld. AR submits that the present issue is covered by the order dated 12.01.2018 in assessee’s own case for Assessment Year 2011-12 and referred to Para No.7 of the said order. The ld. DR submits that the assessee changed its stand what was initially submitted before Assessing Officer and referred to Para 4.3 of CIT(A). The ld. AR submits that the Revenue did not prefer any appeal against the order dated 12.01.2018 for Assessment Year 2011-12 passed by this Tribunal. After hearing both the parties, we find that the issue is covered by the order of Coordinate Bench of this Tribunal wherein the Coordinate Bench placed reliance in the case of M/s. Konark Furniture Pvt. Ltd. which is sister concern of assessee, on identical facts held that the income in question is to be treated as income from business. The relevant portion of which is reproduced hereinbelow:
“8. We have carefully considered the rival submissions. Under section 22 of the Act the charge to tax of income from house property is based on the ownership of such property. The admitted position in the present case is that the assessee is only a tenant and not the owner of the property. It is also not the case of the revenue that the tenancy is for a period of more than 12 years which could be construed as ownership rights u/s 27(iiib) of the Act. Therefore the income in question cannot be assessed as income from house property. This Tribunal on an identical facts in respect of the very same property a portion of which on lease to a sister concern M/s Konark Furniture Pvt. Ltd dealt with the income from letting has to be assessed in ITA No. 1042/Kol/2012by order dated 12.12.2014. The Tribunal held as follows :-
“5. We have heard the rival contentions and gone through the facts and circumstances of the case, We find that the assessee is a registered limited company deriving its income from licence fees from different sub-tenants, The assessee is a tenant of Dalhousie Properties Ltd. under Tenancy Agreement dated 01-04-2001 in respect of ground floor space at Stephen House-63 & 58 of Hemanta Basu Sarani, Kolkata- 700 001. The assessee was given right to, “assigned, sub-let. under-let or part with any possession of the room or any part ,of room or permit any person to occupy even in case of temporary absence of assessee “. By virtue of this agreement assessee collected licence fees and other charges from sub-tenants and the Revenue all along has accepted the income declared by the assessee under the head “profits and gains of business or profession”. Ld. counsel before us argued on the concept of consistency on the given facts of the case. In this case also the terms of the lease of business assets, the intention of the lessor is that the asset leased out must remain and be treated as commercial asset and there is an exploitation of the commercial asset during the lease period and lease received is assessable as business income, In view of the above facts of the case that the assessee is consistently declaring the receipt of income from sub tenants under the head, “profits and gains of business or profession”, we are of the view that principle of consistency will apply in this case as the issue stand covered by the decision of coordinate bench in the case of M/s. Banwarilal Goel & Sons Vs. ITO in ITA No. 374/K/2009 for AY 2005-06 dated 13.02,2014, wherein it is held as under:-
“6. We have heard the rival contentions, perused the material on record and gone through facts and circumstances of the case, We find that the Hon ‘ble Calcutta High Court in the case of Shambhu Investment held that “the mere fact of attachment of income to any immovable properly cannot be the sole factor for assessment of such income as income from house property. It is necessary to find out the primary object of assessee while exploiting the property. If it is found that the main intention is for letting out the property or any portion thereof the same must be considered as rental income or income from house property. In case, it is found that the main intention is to exploit the immovable property by way of complex commercial activities, in that event it must be held as business income “, The view was expressed by Hon ‘ble Calcutta High Court and approved by Hon ‘ble Supreme Court in case of Shambhu Investment (P) Ltd. (Supra) In this view of the matter, it is clear that what is to be really seen is whether the property is exploited by way of complex commercial activity or not. In this backdrop, it is quite’ appropriate to refer to the observations made by the Hon ‘ble Supreme Court in the landmark judgment of Radhasoamy Satsang (supra), referring to the case law of Hoystead V Commissioner of Taxation  AC 155 (PC), wherein if is observed as under :-
Parties are not permitted to begin fresh litigations because of new views they may entertain of the law of the case, or new versions which they present as to what Should be a proper apprehension by the court of the legal result either of the Construction of the documents or the weight of certain circumstances. If this were permitted litigation would have no end, except when legal ingenuity is exhausted. It is a principle of law that this cannot be permitted, and there is abundant authority reiterating that principle. Thirdly, the same principle – namely, that of a setting to rest rights of litigants, applies to the case where a point, fundamental to the decision, taken or assumed by the plaintiff and traversable by the defendant has not been traversed. In that case also a defendant is bound by the judgment although it may be true enough that subsequent light or ingenuity might suggest some traverse which had not been taken”.
Hon ‘ble Supreme Court also referred to their own judgment in the case of Parash uram Pottery Works Co , Ltd. V ITO  106 ITR 1 (SC), wherein at page 10 it was stated that “01 the same time, we have to bear in mind that the policy of law is that there must be a point of finality in all legal proceedings, that stale issues should not be reactivated beyond a particular stage and that lapse of time must induce repose in and set at rest judicial and quasi-judicial controversies as it must in other spheres of human activity “, Hon ‘ble Supreme Court was of the view that the assessments are certainly quasi-judicial and observations so made in the case of Parashuram Pottery Works Co. Ltd. (supra) would apply to the assessment proceedings. In the case of Parashuram Pottery Works Co. Ltd. it was observed that “res judicata does not apply la income tax proceedings and each assessment year being a unit, what is decided in one year may not apply in the following year but where a fundamental aspect permeating through the different assessment years has been found as a fact one way or the other and parties have all owe d that position to’ be sustained by not challenging the order, it would not be at all appropriate to allow the position to be changed in a subsequent year”.
This principle has been upheld and re-stated by Hon ‘ble Supreme Court recently in the case of PFH Mall & Retail Mangt. P. Ltd. dated 04.09.2012, wherein reiterated the Rule of Consistency and applied the same on the very issue, that is whether the income in question is to be treated as income from business or as income from house property. In view of these discussions and bearing in mind the fact that it, was a case of rental or commercial utilization of properties, which has been accepted, we are of the considered view that there is no reason to uphold this deviation. In view of the above discussions, we uphold the grievance of the assessee and direct the Assessing Officer to treat the income in question as income from business as has been in preceding and subsequent assessment year. This issue of assessee’s appeal is allowed.
6. In view of above facts and circumstances, we confirm the order of CIT(A) and this issue of revenue’s appeal is dismissed.”
4. In view of aforementioned decision of the Coordinate Bench in assessee’s own case, we set aside the order of CIT(A) and direct the Assessing Officer to treat the licence fee derived from tenants as income from business.
5. Ground No.3 is relating to confirmation of disallowance of interest paid on loan against property. On perusal of the record and hearing both the parties, we note that a similar issue was decided by the CIT(A) in favour of assessee in assessee’s own case for Assessment Year 2011-12 and the Department has accepted the said view taken by the CIT(A). Accordingly, we follow the rule of consistency and delete the disallowance made on account of interest
6. In the result, the appeal of the assessee is allowed.
Order pronounced in the open court on 04.07.2018.