Case Law Details
New Horizon Logiware (P) LTD Vs ITO (ITAT Delhi)
AO has discussed the facts in detail and the relevant clauses of the lease deed and also mentioned that the said warehouse was already rented to present tenant (Tupperware) by earlier owner from whom assessee has purchased this building in this year. As per AO, the dominant object of the rent agreement is only to enjoy rent-and nothing more. On the other hand, the assessee has pleaded that the main object clause of the memorandum of association clearly mentions that the assessee is engaged in the business of warehousing, transporting and carriage of goods and to provide storage and protection of goods. I further note that both AO as well as assessee relied on the decisions of different Courts including Apex Court, in support of their contentions. The assessee has relied on the judgment of Hon’ble Supreme Court in the case of M/s. Chennai Properties and Investment Ltd Chennai vs CIT and M/s. Rayala Corporation Pvt. Ltd vs ACIT mentioning that the Hon’ble Court decided the issue keeping in view the main object clause of the assessee as per MOA and the rental income earned by assessee was treated as business income not income from house property.
However, now the Hon’ble Supreme Court has settled the issue by considering these two cases alongwith other cases decided by them, as also referred by AO in the assessment order, in the case Raj Dadarakar and Associates vs ACIT 394 ITR 592. In this case, Hon’ble Court, after discussing its earlier decisions, has held that there may be instances where a particular income may fall under more than one head but where ever this is income from leasing out of premises and collecting rent, normally such an income is to be treated as income from house property, in case provisions of section 22 of the Act are satisfied with the primary ingredient that the assessee is the owner of the building or land appurtenant thereto. It has been further held by Hon’ble Court that merely because there is an entry in the objects clause of the business showing a particular object that would not be the determinative factor to arrive at a conclusion that the income is to be treated as income from business.
In the case of the assesseee, after purchasing the warehouse from earlier owner, it has become the sole owner of the property. Though the ownership has been changed on record but the nature of usage of the warehouse remains the same. Before purchasing the warehouse by assessee, the earlier owner was receiving the income from warehouse as rental income and after change of ownership, the nature of payments made by occupier (Tupperware) remains the same. Thus, the nature of transactions or income generated through this warehouse did not change. The basis taken by assessee regarding the clauses of memorandum of association also holds no force now after the aforesaid decision of Hon’ble Supreme Court. In view of this, Ld. CIT(A) has rightly held that income from warehouse has to be assessed under the head income from house property not under the head income from business and profession.
FULL TEXT OF THE ITAT JUDGMENT
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