Madhavi Gujjula, Karimnagar, Hyderabad v. ITO, Ward-4, Karimnagar, Karimnagar

ITA 52/HYD/2017 | 2012-2013
Pronouncement Date: 30-11-2017 | Result: Allowed

Appeal Details

RSA Number 5222514 RSA 2017
Assessee PAN AIBPG6255G
Bench Hyderabad
Appeal Number ITA 52/HYD/2017
Duration Of Justice 10 month(s) 21 day(s)
Appellant Madhavi Gujjula, Karimnagar, Hyderabad
Respondent ITO, Ward-4, Karimnagar, Karimnagar
Appeal Type Income Tax Appeal
Pronouncement Date 30-11-2017
Appeal Filed By Assessee
Tags No record found
Order Result Allowed
Bench Allotted A
Tribunal Order Date 30-11-2017
Last Hearing Date 27-11-2017
First Hearing Date 27-11-2017
Assessment Year 2012-2013
Appeal Filed On 09-01-2017
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES A (SMC) HYDERABAD BEFORE SHRI B. RAMAKOTAIAH ACCOUNTANT MEMBER I.T.A. NO. 52/HYD/2017 ASSESSMENT YEAR: 2012-13 MADHAVI GUJJULA PEDDAPALLY [PAN: AIBPG6255G] VS INCOME TAX OFFICER WARD-4 KARIMNAGAR (APPELLANT) (RESPONDENT) FOR ASSESSEE : SHRI S. RAMA RAO AR FOR REVENUE : SMT. SUMAN MALIK DR DATE OF HEARING : 27-11-2017 DATE OF PRONOUNCEMENT : 30-11-2017 O R D E R THIS IS AN APPEAL BY ASSESSEE AGAINST THE ORDER OF TH E COMMISSIONER OF INCOME TAX (APPEALS)-2 HYDERABAD DATED 30-09-2016 FOR THE AY. 2012-13. THE ISSUE IN THIS A PPEAL IS WHETHER THE ASSESSING OFFICER (AO) IS CORRECT IN TREATIN G THE WAREHOUSING RECEIPTS AS INCOME FROM HOUSE PROPERTY . 2. BRIEFLY STATED ASSESSEE IS AN INDIVIDUAL AND HAS FILED RETURN OF INCOME OFFERING INCOMES FROM RECEIPTS OF WA REHOUSING WHICH WAS GIVEN ON LEASE TO FOOD CORPORATION OF INDIA (FCI) THROUGH AP STATE WAREHOUSING CORPORATION (APSWC). ASSE SSEE HAS COMPUTED THE INCOME ON THE BASIS OF P&L A/C BUT ADM ITTED IN THE RETURN OF INCOME UNDER THE HEAD HOUSE PROPERTY. AO IN THE COURSE OF ASSESSMENT WAS OF THE OPINION THAT THE RECEIP TS FROM I.T.A. NO. 52/HYD/2017 :- 2 - : WAREHOUSING ARE TO BE CONSIDERED UNDER THE HEAD HOU SE PROPERTY AND NOT UNDER THE HEAD INCOME FROM BUSINESS. ASSES SEE RELIED ON THE DECISION OF HON'BLE MADRAS HIGH COURT IN THE CASE OF CIT VS. M/S. NDR WAREHOUSING PVT. LTD BUT AO DISTINGUISHED THE SAID DECISION STATING THAT THE COMPANY WAS INCORPORATED WITH A N OBJECT OF CARRYING ON THE BUSINESS OF WAREHOUSING AND LETTIN G/RENTING OF GODOWNS AND PROVIDING FACILITIES FOR STORAGE OF ARTIC LES OR THINGS. HE WAS OF THE OPINION THAT THE FACTS ARE DIFFERENT AND ACCORDINGLY THE INCOME FROM LETTING OUT OF GODOWN WAS COMPUTED UNDER THE HEAD INCOME FROM HOUSE PROPERTY. 3. BEFORE THE LD.CIT(A) ASSESSEE SUBMITTED THAT SHE WAS DERIVING INCOME FROM BUSINESS OF PROVIDING STORAGE F ACILITY OF FOOD GRAIN STOCKS IN THE WAREHOUSE. IT WAS SUBMITTED THAT THE A MOUNT RECEIVED FROM APSWC REPRESENTS THE WAREHOUSING CHARGE S WHICH INCLUDES COST OF PRESERVATION AND MAINTENANCE OF FOOD GRAIN STOCKS ETC. AND THE AMOUNT OF RS. 1.15 PAISA PER BAG IS A CO MPOSITE RATE FOR PROVIDING STORAGE PRICE PRESERVATION AND MAINTE NANCE OF FOOD GRAIN STOCKS IN THE GODOWN. IT WAS CONTENDED THAT THE AM OUNT WAS SHOWN AS INCOME FROM BUSINESS AND RELIED ON THE AG REEMENTS EXECUTED BETWEEN ASSESSEE AND APSWC. 3.1. LD.CIT(A) WHILE ACCEPTING THAT THE RECEIPTS OF RS . 20 03 928/- FROM APSWC WERE TOWARDS HIRING OF STORAG E SPACE AND PRESERVATION CONFIRMED THE ACTION OF AO BY STATING AS UNDER: 5.2. I HAVE CONSIDERED THE ABOVE AND I FIND THAT T HE AO HAS BROUGHT TO TAX THE AMOUNT OF RS.20 03 928/- RECEIVED BY THE ASSESSEE FROM ANDHRA PRADESH STATE WAREHOUSING CORPORATION TOWARD S HIRING OF STORAGE SPACE AND PRESERVATION AND MAINTENANCE OF THE FOOD GRAIN STOCKS UNDER I.T.A. NO. 52/HYD/2017 :- 3 - : THE HEAD 'INCOME FROM HOUSE PROPERTY' AS AGAINST TH E INCOME UNDER THE HEAD 'INCOME FROM BUSINESS' AS CLAIMED BY THE ASSES SEE. 5.1. ON THE OTHER HAND THE AR CONTENDS THE ASSESSE E IS RESPONSIBLE FOR PRESERVATION AND MAINTENANCE OF FOOD GRAIN STOCKS S TORED BY FCI THROUGH A.P. STATE WAREHOUSING CORPORATION. THE ASSESSEE HA S TO INCUR EXPENDITURE TOWARDS MAINTENANCE OF STOCKS BY UNDERT AKING SPRAYING AND FUMIGATION WITH THE PRESCRIBED CHEMICALS AND THE CO ST OF SUCH CHEMICALS INCURRED BY THE ASSESSEE IS DEBITED TO THE PROFIT A ND LOSS ACCOUNT (PAGE NO.3 OF THE ANNEXURES). 5.2. ON PERUSAL OF THE ABOVE I AM OF THE CONSIDERE D VIEW THAT THE AO'S TREATMENT OF RS.20 03 928/- UNDER THE HEAD 'INCOME FROM HOUSE PROPERTY' IS JUSTIFIED AS IT CAN BE SEEN FROM THE FACTS THAT THE ASSESSEE IS NOT ENGAGED IN THE ACTIVITY OF CONSTRICTING AND RENTING OUT THE GODOWNS/STORAGE SPACES. THE ASSESSEE HAS A WARE HOU SE WHICH WAS GIVEN TO ANDHRA PRADESH STATE WARE HOUSING CORPORAT ION (APSWC) FOR RENT AND HENCE THE INCOME SO DERIVED IS NOTHING BUT 'IN COME' FROM HOUSE PROPERTY. AR CONTENDS THAT THE ASSESSEE HAD TO INCU R EXPENDITURE FOR THE MAINTENANCE OF FOOD GRAIN STORED IN THE WARE HOUSE AND HENCE THE COMPOSITE RENTAL INCOME IS NOTHING BUT BUSINESS INC OME. THIS CONTENTION OF THE AR IS NOT ACCEPTABLE AS THE TERMS AND CONDITIO NS IN THE RENT/HIRE AGREEMENT WITH APSWC WILL NOT DETERMINE THE NATURE OF THE INCOME DERIVED FROM LETTING OF WARE HOUSE AND INCURRING OF EXPENDITURE TOWARDS MAINTENANCE BY THE LESSOR FOR LESEE IS A NORMAL PRA CTICE IN THE SCHEME OF LETTING OF WARE HOUSES. 5.3. SINCE THE ASSESSEE DOES NOT ENGAGE IN CONSTRU CTING AND LETTING OF WARE HOUSES OTHER THAN THE ONE WHICH IS LET OUT TO APSWC THE AO IS JUSTIFIED IN TREATING THE SAME AS INCOME FROM HOUSE PROPERTY AS AGAINST ASSESSEE'S TREATMENT OF THE SAME UNDER INCOME FROM BUSINESS. FURTHER AR POINTED OUT THAT RENT TAXABLE FOR THE YEAR UNDER APPEAL IS 17 39 928 INSTEAD OF RS. 20 03 928/- AS ADOPTED BY THE AO. IN THIS REGARD AO IS DIRECTED TO VERIFY THE ASSESSEES CLAIM AND ADOPT T HE CORRECT AMOUNT. AS A RESULT THE GROUNDS RAISED ARE DISMISSED. 4. LD. COUNSEL REFERRING TO THE AGREEMENTS PLACED ON RECORD SUBMITTED THAT ASSESSEE HAS RECEIVED THE CONSIDE RATION FOR STORAGE OF FOOD GRAIN STOCKS AND PROVIDING PRESERVATI ON AND MAINTENANCE SERVICES AND REFERRED TO THE AGREEMENTS IN THIS REGARD. IT WAS SUBMITTED THAT IT WAS ASSESSEES BUSINESS AND THE AMOUNTS WERE CORRECTLY OFFERED UNDER THE HEAD BUSINES S. HE RELIED ON THE JUDGMENT OF HON'BLE MADRAS HIGH COURT AS STATED B EFORE THE I.T.A. NO. 52/HYD/2017 :- 4 - : AO BUT ALSO HON'BLE JURISDICTIONAL HIGH COURT IN THE C ASE OF PR.CIT VS. SRI BHARATHI WAREHOUSING CORPORATION [392 ITR 16 0] (T&AP). 5. LD.DR HOWEVER RELIED ON THE ORDERS OF THE AUTHOR ITIES. 6. I HAVE CONSIDERED THE RIVAL CONTENTIONS. THE QUES TION OF ASSESSING THE LEASE RENTS UNDER THE HOUSE PROPERTY WOU LD ARISE ONLY WHEN THERE IS A FINDING THAT THE PROPERTY IS NOT U SED FOR THE PURPOSE OF BUSINESS. SECTION 22 IS VERY CLEAR IN THI S REGARD. THE ANNUAL VALUE OF PROPERTY CONSISTING OF ANY BUI LDINGS OR LANDS APPURTENANT THERETO OF WHICH THE ASSESSEE IS THE OW NER OTHER THAN SUCH PORTIONS OF SUCH PROPERTY AS HE MAY OCCUPY FOR THE PURPOSES OF ANY BUSINESS OR PROFESSION CARRIED ON BY HIM THE PROFITS OF WHICH A RE CHARGEABLE TO INCOME-TAX SHALL BE CHARGEABLE TO INCOME-TAX UNDER THE HEAD 'I NCOME FROM HOUSE PROPERTY'. 6.1. THE ANNUAL VALUE OF THE PROPERTY CONSISTING OF ANY BUILDINGS OR LANDS PERTINENT THERETO CAN BE BROUGHT TO TA X UNDER THE HEAD INCOME FROM HOUSE PROPERTY ONLY IF SUCH PO RTION OF PROPERTY ARE NOT OCCUPIED FOR THE PURPOSE OF ANY BUSI NESS OR PROFESSION CARRIED ON THE PROFITS OF WHICH ARE CHAR GEABLE TO INCOME TAX. THUS IF THE PROPERTY USED IS FOR THE PURPOSE O F BUSINESS THEN THE QUESTION OF ASSESSING THE SAME UNDER THE HEAD HOUSE PROPERTY DOES NOT ARISE. AS SEEN FROM THE AGREEMENT ASSESSEE HAD INDEED CONSTRUCTED THE WAREHOUSES AND GAVE IT ON LEASE TO FCI TH ROUGH APSWC. THE RENEWAL AGREEMENT FOR THE PERIOD 25-06-2 011 TO 24- 06-2012 DO INDICATE THAT ASSESSEE HAS RENTED OUT THE SPACE TO THE EXTENT OF 5 000 METRIC TONNES AND THE PAYMENTS ARE BEIN G MADE AT RS. 1.15 PAISA PER BAG. THE SPECIFICATION FOR RATES RECEIVED ARE AS UNDER: I.T.A. NO. 52/HYD/2017 :- 5 - : I/WE AM/ARE WILLING TO RENT OUT THE GODOWNS UNDER TAKE THE PRESERVATION AND MAINTENANCE WORK AT THE RATE OF RS . 1.15 PS PER BAG AND AS PER THE TERMS AND CONDITIONS GIVEN IN PART-I AND II OF THIS AGREEMENT AS AGAINST THE STORAGE CHARGES OF RS. 1.79 PS PER BAG/ MONTH PAID BY FCI TO APSWC AND ANY ENHANCEMENT IN STORAGE CHARGES BY FOO D CORPORATION OF INDIA IN FUTURE TO BE SHARED AS PER THE DECISION OF THE GOVERNMENT OF ANDHRA PRADESH. 6.2. ACCORDINGLY IT IS VERY CLEAR THAT WHAT ASSESSEE HAS LEASED OUT IS NOT THE GODOWN AS SUCH BUT THE SPACE IN THE GODOWN AND PRESERVATION AND MAINTENANCE WORK IS ON ASSESSEE ITSELF. CERTAIN CHARGES WERE ALSO RECOVERED BY APSWC WHICH A RE CLAIMED IN THE P&L A/C. THIS INDICATES THAT THE RECEIPTS ARE NOT PURE LEASING OF GODOWN BUT LEASING OF SPACE WITHIN THE GOD OWN AND PAYMENTS ARE ON THE BASIS OF PER BAG CHARGES. THUS I IS NOT A LEASE OF PROPERTY BUT LEASE OF SPACE IN THE COURSE OF BUSI NESS ACTIVITY AND THE PAYMENTS ARE RECEIVED FOR STORAGE PRESERVATIO N AND MAINTENANCE AND NOT FOR BUILDING EXCLUSIVELY. THE IN COMES CANNOT BE BROUGHT TO TAX UNDER THE HEAD HOUSE PROPERTY AS TH E BUILDING AS SUCH WAS NOT LEASED OUT. THE INCOME AT BEST BE ASSES SED EITHER UNDER THE HEAD INCOME FROM BUSINESS OR UNDER THE HE AD OTHER SOURCES. SINCE ASSESSEE HAS ALREADY OFFERED THE SA ME AS BUSINESS INCOME THE RECEIPTS FROM APSWC CAN ONLY BE CONSIDER ED AS BUSINESS RECEIPTS. THE AO AND CIT(A) ERRED IN FACTS AND CONSIDERED THE AGREEMENT WITH APSWC AS LEASE OF GODOWN S WHEREAS AGREEMENT IS FOR LEASE OF THE SPACE AND THE MA INTENANCE AND PRESERVATION IS THE RESPONSIBILITY OF ASSESSEE. IN VIEW OF THAT FOLLOWING THE PRINCIPLES LAID DOWN BY THE HON'BLE J URISDICTIONAL HIGH COURT IN THE CASE OF PR.CIT VS. SRI BHARATHI WAR EHOUSING CORPORATION [392 ITR 160] (T&AP). IT IS TO BE CONSIDE RED THAT INCOME IS TO BE ASSESSED UNDER THE HEAD BUSINESS ON LY. THE HON'BLE HIGH COURT HAS HELD THE SIMILAR FACTS AS UNDE R: I.T.A. NO. 52/HYD/2017 :- 6 - : HELD DISMISSING THE APPEAL THAT THE MAIN OBJECTI VE OF THE ASSESSEE AS MANIFEST FROM THE PARTNERSHIP DEED WAS TO CARRY ON BUSINESS IN CONSTRUCTION OF DIFFERENT TYPES OF BUILDINGS SUC H AS GODOWNS RESIDENTIAL OR COMMERCIAL BUILDINGS FLATS AND SHOPS AND LEASE THEM OUT AS A PART OF ITS BUSINESS ACTIVITY BUT NOT AS EXPLOITATION OF TH E PROPERTY AS AN OWNER. THE ASSESSEE WAS RIGHT IN SHOWING ITS INCOME UNDER THE HEAD INCOME FROM BUSINESS. 6.3. RESPECTFULLY FOLLOWING THE SAME I DIRECT THE AO TO ASSESS THE INCOME UNDER THE HEAD BUSINESS ONLY. GR OUNDS ARE ALLOWED. 7. IN THE RESULT APPEAL OF ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 30 TH NOVEMBER 2017 SD/- (B. RAMAKOTAIAH) ACCOUNTANT MEMBER HYDERABAD DATED 30 TH NOVEMBER 2017 TNMM I.T.A. NO. 52/HYD/2017 :- 7 - : COPY TO : 1. MADHAVI GUJJULA C/O. SRI S. RAMA RAO ADVOCATE FLAT NO. 102 SHRIYAS ELEGANCE 3-6-643 HIMAYAT NAGAR HYDERABAD. 2. THE INCOME TAX OFFICER WARD-4 KARIMNAGAR. 3. CIT (APPEALS)-2 HYDERABAD. 4. PR.CIT-2 HYDERABAD. 5. D.R. ITAT HYDERABAD. 6. GUARD FILE.