ACIT, CHENNAI v. M/s. Saiyana Warehouse Pvt. LTd., CHENNAI

ITA 266/CHNY/2010 | 2004-2005
Pronouncement Date: 21-07-2011 | Result: Allowed

Appeal Details

RSA Number 26621714 RSA 2010
Assessee PAN AAFCS1964D
Bench Chennai
Appeal Number ITA 266/CHNY/2010
Duration Of Justice 1 year(s) 4 month(s) 18 day(s)
Appellant ACIT, CHENNAI
Respondent M/s. Saiyana Warehouse Pvt. LTd., CHENNAI
Appeal Type Income Tax Appeal
Pronouncement Date 21-07-2011
Appeal Filed By Department
Order Result Allowed
Bench Allotted B
Tribunal Order Date 21-07-2011
Date Of Final Hearing 21-07-2011
Next Hearing Date 21-07-2011
Assessment Year 2004-2005
Appeal Filed On 04-03-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL BENCH B CHENNAI (BEFORE SHRI U.B.S. BEDI JUDICIAL MEMBER AND SHRI ABRAHAM P. GEORGE ACCOUNTANT MEMBER) .. I.T.A. NO. 266/MDS/2010 ASSESSMENT YEAR : 2004-05 THE ASSISTANT COMMISSIONER OF INCOME TAX COMPANY CIRCLE VI(1) CHENNAI 600 034. (APPELLANT) V. M/S SAIYANA WAREHOUSE PVT. LTD. T-40B 16 TH CROSS STREET BESANT NAGAR CHENNAI 600 090. PAN : AAFCS1964D (RESPONDENT) APPELLANT BY : SHRI P.B. SEKARAN CIT - DR RESPONDENT BY : NONE O R D E R PER ABRAHAM P. GEORGE ACCOUNTANT MEMBER : IN THIS APPEAL FILED BY THE REVENUE ITS GRIEVANC E IS THAT THE CIT(APPEALS) DIRECTED THE A.O. TO CONSIDER WAREHOUS ING INCOME OF THE ASSESSEE UNDER THE HEAD INCOME FROM BUSINESS. 2. SHORT FACTS APROPOS ARE THAT ASSESSEE-COMPANY WA S ENGAGED IN THE BUSINESS OF WAREHOUSING AND TRANSPORTATION. WAREHOUSING ACTIVITY INVOLVED LETTING OUT OF WAREHOUSES AND GOD OWNS OWNED BY THE I.T.A. NO. 266/MDS/10 2 ASSESSEE TO VARIOUS PARTIES. THOUGH THE RECEIPTS FROM THE CONCERNED PARTIES WERE SHOWN AS RENT ASSESSEE TREA TED THE SAME AS BUSINESS INCOME. A.O. WAS OF THE OPINION THAT LETT ING OUT OF WAREHOUSES HAD TO BE TREATED AS ACTIVITY THE RENT FROM WHICH WOULD FALL UNDER INCOME FROM HOUSE PROPERTY. RELYING O N THE DECISION OF HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CI T V. INDIA WAREHOUSING INDUSTRIES LTD. (258 ITR 93) AND IN THE CASE OF CHENNAI PROPERTIES & INVESTMENTS LTD. (266 ITR 685) AND THA T OF HON'BLE APEX COURT IN THE CASE OF SHAMBU INVESTMENTS LTD. (236 I TR 143) A.O. DECLINED TO CONSIDER THE INCOME FROM LETTING OUT OF WAREHOUSES AS INCOME FROM BUSINESS. HE TREATED SUCH INCOME AS INCOME FROM HOUSE PROPERTY AND ALLOWED THE ASSESSEE DEDUCTION UNDER SECTION 24 OF INCOME-TAX ACT 1961 (IN SHORT THE ACT). 3. IN ITS APPEAL BEFORE LD. CIT(APPEALS) ARGUMENT OF THE ASSESSEE WAS THAT WAREHOUSES AND GODOWNS REMAINED IN ITS POS SESSION AND IT HAD PERMITTED ONLY USAGE OF THE PREMISES TO OTHERS. AS PER THE ASSESSEE ITS BUSINESS WAS WAREHOUSING AND IN THE D ECISIONS RELIED ON BY THE A.O. WAREHOUSES CONCERNED WERE NOT OPERA TED BY THE CONCERNED ASSESSEES. RELIANCE WAS ALSO PLACED ON T HE DECISION OF I.T.A. NO. 266/MDS/10 3 A CO-ORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF SSM ESTATES LIMITED IN I.T.A. NOS. 1189 1190 & 1191/MDS/2005. LD. CIT(APPEALS) WAS APPRECIATIVE OF THIS CONTENTION. RELYING ON THE ABOVE DECISION LD. CIT(APPEALS) CAME TO A CONCLUSI ON THAT THE WAREHOUSING RENTAL HAD TO BE CONSIDERED UNDER THE H EAD INCOME FROM BUSINESS AND DIRECTIONS WERE GIVEN TO THE ASS ESSING OFFICER TO THIS EFFECT. 4. NOW BEFORE US LEARNED D.R. ASSAILING THE ORDER OF LD. CIT(APPEALS) SUBMITTED THAT HON'BLE BOMBAY HIGH CO URT IN THE CASE OF NUTAN WAREHOUSING COMPANY PVT. LTD. V. DCIT (326 ITR 94) HAD HELD INCOME FROM WAREHOUSING TO BE INCOME FROM BUS INESS ONLY IF DOMINANT PURPOSE WAS COMMERCIAL ACTIVITY. AS PER T HE LEARNED D.R. IN THE CASE OF THE ASSESSEE ITS MAJOR INCOME WAS F ROM TRANSPORTATION. THE TRANSPORT RECEIPTS OF THE ASSE SSEE WERE MORE THAN ` 2 CRORES WHEREAS THE INCOME FROM LETTING OUT OF W AREHOUSES CAME TO ` 81.71 LAKHS ONLY. HENCE ACCORDING TO HIM THE DO MINANT BUSINESS PURPOSE OF THE ASSESSEE WAS NOT LETTING OU T WAREHOUSES ON RENT. THEREFORE IT WAS SUBMITTED THAT RELIANCE PL ACED BY THE LD. I.T.A. NO. 266/MDS/10 4 CIT(APPEALS) ON THE DECISION OF CO-ORDINATE BENCH O F THIS TRIBUNAL IN THE CASE OF SSM ESTATES LIMITED (SUPRA) WAS INCORRE CT. 5. NOBODY APPEARED ON BEHALF OF THE ASSESSEE. 6. WE HAVE PERUSED THE ORDERS AND HEARD THE CONTENT ION OF LEARNED D.R. NO DOUBT IN THE CASE OF SSM ESTATES LIMITED (SUPRA) IT WAS HELD BY THE TRIBUNAL AS UNDER:- ON THE SURROUNDING SET OF FACTS AND CIRCUMSTANCES IT IS WELL ESTABLISHED BEYOND DOUBT THAT THE ASSESSEE COMPANY CA RRIED OUT AN ORGANIZED SYSTEMATIC ACTIVITY OF PROVIDING LOGIS TIC SERVICE WHICH ARE COMPLEX IN NATURE TO ITS CLIENTS AND PROF IT EARNING IS THE MOTIVE OF THE ASSESSEE. HENCE IT IS THE BUSIN ESS ACTIVITY OF THE ASSESSEE. THE WAREHOUSE CHARGES RECEIVED BY THE ASSESSEE COMPANY ARISE OUT OF COMMERCIAL ASSETS AND THEY ARE B USINESS RECEIPTS. THEY HAVE TO BE CHARGED UNDER THE HEAD B USINESS ONLY.. THE GOODS ARE ENTRUSTED WITH THE CUSTODY OF THE ASSESSEE AND THEY REMAIN UNDER THE CUSTODY AND SUPERV ISION TILL IT WAS ALLOWED TO BE TAKEN AWAY BY THE CLIENTS OR THEIR NOMINEE.. THE VITAL FACT IS THAT IN ALL THE TRANSACTIONS ASS ESSEE NEVER PARTED POSSESSION WITH ITS CLIENTS. THE ENTIRE PRE MISES AND GOODS STORED ARE UNDER DIRECT CONTROL AND POSSESSION OF T HE ASSESSEE COMPANY ALONE WHICH AMPLY PROVES THAT THE RECEIPTS C ANNOT BE TERMED AS RENTAL RECEIPT OR FEE OF SUCH NATURE SO A S TO BRING IT UNDER THE HEAD INCOME FROM PROPERTY THE HONOURAB LE SUPREME COURTS DECISION IN THE CASE OF M/S EAST IN DIA HOUSING & LAND DEVELOPMENT [42 ITR 49] AND THE HONOURABLE MAD RAS HIGH COURTS DECISIONS IN THE CHENNAI PROPERTIES CASE [2 66 ITR 685] AND M/S INDIA WAREHOUSING CASE [258 ITR 93] ARE DISTINGUISHABLE UNDER THE GIVEN SET OF FACTS. IN THOSE CASE I.T.A. NO. 266/MDS/10 5 WHICH ARE HEAVILY RELIED UPON BY THE DEPARTMENT THE RECEIPTS ARE UNDOUBTEDLY RENTAL RECEIPTS. IN THE INSTANT CAS E THE POSSESSION ITSELF RETAINED BY THE ASSESSEE COMPANY ON LY AND THERE IS NO FIDUCIARY RELATIONSHIP OF LANDLORD AND TENANT. FOR THE ABOVE FOREGOING REASONS WE SET ASIDE THE ORDER OF THE AUTHORITIES BELOW AND ALLOW THE CLAIM OF THE ASSESS EE. VARIOUS DECISIONS RELIED ON BY THE ASSESSING OFFICE R FOR TREATING THE INCOME FROM LETTING OUT OF WAREHOUSES AS INCOME FR OM HOUSE PROPERTY WERE ALSO CONSIDERED BY THE TRIBUNAL IN THE ABOVE DECISION. NEVERTHELESS WE FIND THAT NO VERIFICATION HAS BEEN DONE WITH REGARD TO THE CUSTODY OF THE GOODS WHICH WERE STORED IN TH E WAREHOUSES OWNED BY THE ASSESSEE HERE. IN THE CASE BEFORE THE CO-ORDINATE BENCH OF THIS TRIBUNAL THERE WAS A CLEAR FINDING T HAT THE ENTIRE PREMISES AND GOODS WERE STORED UNDER DIRECT CONTROL AND WAS IN THE POSSESSION OF THE ASSESSEE-COMPANY. FURTHER NO VE RIFICATION HAS BEEN DONE OF THE VARIOUS WAREHOUSING AGREEMENTS EN TERED INTO BY THE ASSESSEE WITH THE CLIENTS BY ANY OF THE AUTHOR ITIES BELOW. HON'BLE BOMBAY HIGH COURT IN THE CASE OF NUTAN WARE HOUSING COMPANY P. LTD. (SUPRA) HELD THAT MERE STYLING OF A N AGREEMENT AS A WAREHOUSING AGREEMENT WOULD NOT BE CONCLUSIVE OF TH E NATURE OF THE TRANSACTION. IT HAS TO BE SEEN THAT IN THE ACTIVIT Y OF LETTING OUT I.T.A. NO. 266/MDS/10 6 ASSESSEE WAS CARRYING ON A COMMERCIAL ACTIVITY INVO LVING WAREHOUSING OPERATIONS. HENCE WE ARE OF THE OPINI ON THAT THE MATTER REQUIRES RE-VISIT BY THE ASSESSING OFFICER. WE THEREFORE SET ASIDE THE ORDERS OF THE AUTHORITIES BELOW AND REMIT THE ISSUE BACK TO THE ASSESSING OFFICER FOR FRESH CONSIDERATION DE NOVO . HE SHALL PROCEED IN ACCORDANCE WITH LAW AFTER GIVING PROPER OPPORTUNITY TO THE ASSESSEE. 7. IN THE RESULT THE APPEAL FILED BY THE REVENUE I S ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT AFTER CONCLUSION OF HEARING ON THE TWENTY FIRST DAY OF JULY 2011. SD/- SD/- (U.B.S. BEDI) (ABRAHAM P. GEORGE) JUDICIAL MEMBER ACCOUNTANT MEMBER CHENNAI DATED THE 21 ST JULY 2011. KRI. COPY TO: (1) APPELLANT (2) RESPONDENT (3) CIT(A)-V CHENNAI-34 (4) CIT CHENNAI-III CHENNAI (5) D.R. (6) GUARD FILE