M/s. AUTOMANN INDIA P. LTD., MUMBAI v. ITO Wd. - 9(1)(1), MUMBAI

ITA 6956/MUM/2008 | 2004-2005
Pronouncement Date: 31-05-2010 | Result: Partly Allowed

Appeal Details

RSA Number 695619914 RSA 2008
Assessee PAN TJULY2008T
Bench Mumbai
Appeal Number ITA 6956/MUM/2008
Duration Of Justice 1 year(s) 5 month(s) 26 day(s)
Appellant M/s. AUTOMANN INDIA P. LTD., MUMBAI
Respondent ITO Wd. - 9(1)(1), MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 31-05-2010
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted A
Date Of Final Hearing 31-12-2009
Next Hearing Date 31-12-2009
Assessment Year 2004-2005
Appeal Filed On 05-12-2008
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES A : MUMBAI BEFORE SHRI D.MANMOHAN HONBLE VICE PRESIDENT AND SHRI J.SUDHAKAR REDDY ACCOUNTANT MEMBER ITA. NO. 6956/MUM/2008 ASSESSMENT YEAR 2004-2005 AUTOMANN INDIA PVT. LTD. MUMBAI 400 062. PAN AACCA-8410-B VS. ITO WARD 9 (1) (1) MUMBAI (APPELLANT) (RESPONDENT) FOR APPELLANT : SHRI JITENDRA SANGHAVI FOR RESPONDENT : SHRI PEEYUSH JAIN ORDER PER D.MANMOHAN V.P. 1. THIS APPEAL FILED AT THE INSTANCE OF THE ASSES SEE-COMPANY IS DIRECTED AGAINST THE ORDER DATED 18-9-2008 PASSED B Y THE CIT(A)-IX MUMBAI AND IT PERTAINS TO THE ASSESSMENT YEAR 2004- 2005. 2. AT THE TIME OF HEARING LEARNED COUNSEL APPEAR ING ON BEHALF OF THE ASSESSEE SUBMITTED THAT THOUGH SEVERAL GROUN DS WERE URGED BEFORE THE TRIBUNAL ASSESSEE IS NOT INTERESTED IN PRESSIN G GROUND NOS. 1 AND 4 AND GROUND NO. 7 IS GENERAL IN NATURE. WE THEREFORE REJECT THE AFOREMENTIONED GROUNDS AND PROCEED TO DISPOSE OF TH E OTHER GROUNDS IN SERIATIM. 3. VIDE GROUND NO.2 ASSESSEE CONTENDS THAT THE LE ARNED CIT(A) ERRED IN CONFIRMING THE ASSESSMENT OF CONDUCTION R OYALTY AMOUNT OF RS.40 80 000/- AND OTHER INCOME OF RS.1 63 310/- AS INCOME FROM OTHER SOURCES. IT WAS CONTENDED THAT IT HAS TO BE CONSID ERED UNDER THE HEAD PROFITS AND GAINS FROM BUSINESS. 2 4. FACTS IN SHORT ARE THAT THE ASSESSEE-COMPANY IS ENGAGED IN THE BUSINESS OF RUNNING HYUNDAI AUTHORIZED SERVICE STATION IN WHICH ITS MAIN ACTIVITY IS OF REPAIRS AND SERVICE OF VEHICLES AND SALE OF ACCESSORIES SPARES AND RELATED AUTOMOBILE SERVICES. THE ASSESSE E-COMPANY IS ALSO HAVING A SHOWROOM WHERE THEY ARE HAVING MULTI MALL FOR SALE OF CARS OF DIFFERENT BRANDS UNDER ONE ROOF. CASE OF THE ASSESS EE IS THAT THE DIRECTORS HAVING GONE OUT OF COUNTRY TO TEMPORARILY LOOKAFTER THEIR PETROL PUMPS IN USA BUSINESS OPERATIONS IN INDIA WERE TEM PORARILY SUSPENDED. BUSINESS PREMISES WAS LET OUT TO M/S. SA I SERVICE STATION LTD. AND M/S. SAI AUTOMOBILE SALES & SERVICES PVT. LTD. AND AS PER THE AGREEMENTS ENTERED INTO ON 24-6-2002 ROYALTY WAS PA YABLE TO THE ASSESSEE-COMPANY @ RS.1 70 000/- PER MONTH FROM EAC H OF THE ABOVE TWO COMPANIES AND THE PERIOD OF AGREEMENT WAS 3 YEA RS FROM 24-6-2002. UNDER THE SAID AGREEMENT ASSESSEE HAD GIVEN ITS PRE MISES ALONG WITH INFRASTRUCTURE LOCATED AT GOREGAON (WEST) TO THE AF OREMENTIONED TWO COMPANIES PERMITTING THEM TO CONDUCT BUSINESS IN TH E SAID PREMISES ALONG WITH INFRASTRUCTURE AVAILABLE THEREIN. 5. THESE AGREEMENTS ARE REFERRED TO AS BUSINESS C ONDUCTING AGREEMENTS. UPON PERUSAL OF THE AGREEMENTS AND OTH ER DETAILS ASSESSING OFFICER WAS OF THE OPINION THAT THE AFOREMENTIONED TWO COMPANIES WERE ALLOWED TO USE THE PREMISES ALONG WITH ITS INFRASTR UCTURE FOR CONDUCTING THE BUSINESS OF WORK SHOP FOR REPAIRING ETC. OF AU TOMOBILES AND THUS IT CAN BE SAID THAT THE ASSESSEE HAD NO INTENTION OF C ARRYING ON BUSINESS OF ITS OWN. HE FURTHER OBSERVED THAT THE SO-CALLED ROY ALTY INCOME IS ASSESSABLE TO TAX AS INCOME FROM OTHER SOURCES. 5.1. ASSESSEE WAS CALLED UPON TO EXPLAIN AS TO WHY INCOME SHOULD NOT BE TAXED AS SUCH. IN RESPONSE THERETO A SSESSEE SUBMITTED THAT NO PRECISE TEST CAN BE LAID DOWN TO ASCERTAIN WHETHER AN AMOUNT RECEIVED BY ASSESSEE FROM LEASING OR LETTING OUT OF ASSETS WOULD FALL UNDER 3 THE HEAD PROFITS AND GAINS OF BUSINESS OR INCOME FROM OTHER SOURCES AND IT IS A MIXED QUESTION OF LAW AND FACT WHICH RE QUIRES TO BE DETERMINED FROM THE POINT OF VIEW OF BUSINESSMAN. I T WAS SUBMITTED THAT ASSESSEE HAD NO INTENTION TO GO OUT OF THE BUSINESS AND INTENDED TO EXPLOIT THE COMMERCIAL ASSETS AND LICENSES ATTACHED TO IT IN THE BEST POSSIBLE MANNER SO AS TO REVIVE THE BUSINESS AT A L ATER DATE. INTENTION CAN BE DISCERNED FROM THE FACT THAT THE LEASE WAS F OR A PERIOD OF THREE YEARS AND THE CONDUCTORS (LESSEES) WERE GIVEN THE R IGHT TO TERMINATE THE AGREEMENT BY GIVING THREE MONTHS NOTICE. THERE IS A LSO NO CLAUSE PERMITTING THEM TO PURCHASE THE ASSETS AND FACILITI ES. IT WAS THEREFORE CONTENDED THAT THE INCOME BY WAY OF CONDUCTION IS A SSESSABLE AS BUSINESS INCOME. 6. AGREEMENT HAVING BEEN ENTERED INTO ON 24-6-2002 ASSESSMENT YEAR 2003-2004 WAS THE FIRST YEAR IN WHI CH INCOME FROM THE EXPLOITATION OF THE AFOREMENTIONED COMMERCIAL ASSET S WAS OFFERED TO TAX UNDER THE HEAD BUSINESS INCOME WHEREAS THE ASSESS ING OFFICER SOUGHT TO TAX THE SAME AS INCOME FROM OTHER SOURCES. LEA RNED CIT(A) HAS ALSO UPHELD THE ORDER OF THE ASSESSING OFFICER FOR THE A SSESSMENT YEAR 2003- 2004. 7. FOR THE SAME REASONS THE ASSESSING OFFICER FO R THE YEAR UNDER CONSIDERATION OBSERVED THAT IT WAS A CASE OF LETTING OUT COMMERCIAL ASSETS WITHOUT ANY INTENTION TO CARRY ON THE BUSINESS OR TO REVIVE THE BUSINESS AND HENCE IT IS ASSESSABLE TO T AX UNDER THE HEAD INCOME FROM OTHER SOURCES. ON AN APPEAL FILED BY THE ASSESSEE LEARNED CIT(A) AFFIRMED THE ORDER OF THE ASSESSING OFFICER BY REFERRING TO HIS PREDECESSORS ORDER FOR THE ASSESSMENT YEAR 2003-20 04. THEREFORE ASSESSEE IS IN APPEAL BEFORE US. 4 8. AT THE TIME OF HEARING LEARNED COUNSEL SUBMITT ED THAT IN RESPECT OF ASSESSMENT YEAR 2003-2004 ORDER OF THE A SSESSING OFFICER AS WELL AS CIT(A) WAS REVERSED BY THE ITAT C BENCH MUMBAI (ITA. NO. 4794/MUM/2006 DATED 28 TH NOVEMBER 2008) AND THE HONBLE JURISDICTIONAL HIGH COURT HAVING DISMISSED THE APPE AL FILED BY THE REVENUE AGAINST THE ORDER OF THE TRIBUNAL IT HAD R EACHED FINALITY. THEREFORE ATLEAST FOR THE FIRST THREE YEARS IT HAS TO BE TREATED AS INCOME FROM BUSINESS. SINCE APPEAL WAS TAKEN-UP FOR HEARI NG BY THE ITAT IN THE YEAR 2010 AGAINST THE ORDER OF THE CIT(A) DATED 18 -9-2008 LEARNED COUNSEL WAS CALLED UPON TO EXPLAIN THE PRESENT STAT E OF AFFAIRS TO APPRECIATE AS TO WHETHER THE INTENTION OF THE ASSES SEE WAS TO REVIVE THE BUSINESS OR TO MERELY LET OUT THE ASSETS ALONG WITH ITS LICENSES ETC. IN RESPONSE THERETO LEARNED COUNSEL SUBMITTED THAT TH OUGH THE INITIAL AGREEMENT WAS FOR THREE YEARS IT WAS LATER REVIVED FOR SOME MORE YEARS BUT QUICKLY ADDED THAT IN ORDER TO CONSIDER AS TO W HETHER INTENTION OF THE ASSESSEE WAS TO REVIVE THE BUSINESS OR NOT ONE HAS TO TAKE INTO ACCOUNT THE CIRCUMSTANCES THAT WERE EXISTING AT THE TIME OF ENTERING INTO AGREEMENT AND SUBSEQUENT EVENTS SHOULD NOT BE TAKEN INTO CONSIDERATION. 9. ON THE OTHER HAND LEARNED DR STRONGLY RELIED UP ON THE ORDERS PASSED BY THE ASSESSING OFFICER AS WELL AS T HE CIT(A) AND FURTHER SUBMITTED THAT DIRECTORS OF THE ASSESSEE-COMPANY W ERE NOT NON- RESIDENTS AND HAD GONE OUT OF COUNTRY DURING THE YE ARS UNDER CONSIDERATION AND THE OVERALL CIRCUMSTANCES LEND SU PPORT TO THE CONCLUSION REACHED BY THE TAX AUTHORITIES THAT THE COMPANY HAD NO INTENTION TO REVIVE THE BUSINESS IN WHICH EVENT INC OME EARNED FROM LEASE OF SAID PROPERTIES IS ASSESSABLE TO TAX UNDER THE H EAD INCOME FROM OTHER SOURCES. HE FURTHER SUBMITTED THAT WHILE DECIDING THE INTENTION OF THE ASSESSEE THE ITAT C BENCH MUMBAI (WHILE DISPOS ING OF THE APPEAL FOR THE ASSESSMENT YEAR 2003-2004) OVERLOOKED CERTAIN VITAL FACTS WHICH 5 WERE NOT BROUGHT TO THE NOTICE OF THE BENCH AND THU S THE SAID DECISION IS DISTINGUISHABLE ON FACTS. AS DIRECTED BY THE BENCH LEARNED COUNSEL APPEARING ON BEHALF OF THE ASSESSEE FILED COPIES O F THE CONDUCTION AGREEMENTS AND CONSENT TERMS SIGNED BY THE PARTIES ALONG WITH BOMBAY HIGH COURT ORDER DATED 10-10-2002. 10. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSE D THE RECORD. THE ISSUE AS TO WHETHER PERMITTING AN OUTSI DER TO CARRY ON THE BUSINESS ACTIVITIES ON THEIR OWN WITH AN AGREEMENT TO PAY A FIXED MONTHLY CONSIDERATION BY WHATEVER NAME CALLED HAS TO BE CONSIDERED AS INCOME FROM HOUSE PROPERTY/BUSINESS INCOME/INCOME F ROM OTHER SOURCES HAS TO BE DECIDED ON THE WELL ESTABLISHED P RINCIPLES LAID DOWN BY THE APEX COURT FROM TIME TO TIME. IN THE CASE OF SH RI LAXMI SILK MILLS LTD. 20 ITR 451 APEX COURT OBSERVED THAT NO GENERA L PRINCIPLE COULD BE LAID DOWN WHICH WOULD BE APPLICABLE TO ALL CASES AN D THAT EACH CASE MUST BE DECIDED ON ITS OWN CIRCUMSTANCES ACCORDING TO THE ORDINARY COMMONSENSE PRINCIPLES. SIMILARLY IN THE CASE OF N EW SAVAN SUGAR AND GUR REFINING CO. LTD. VS. CIT CALCUTTA (1969) 74 I TR 7 THE HONBLE COURT WAS CONCERNED WITH A CASE OF LEASING OUT THE COMPAN Y AS A RUNNING CONCERN FOR A PERIOD OF 5 YEARS WITH THREE OPTIONS TO RENEW BY SIMILAR PERIODS WITH AN OPTION TO THE ASSESSEE-COMPANY TO T ERMINATE IT IN ANY YEAR AFTER THE FIRST TWO YEARS. THE LEASE PROVIDED THAT THE EXISTING MACHINERY COULD NOT BE REMOVED BY THE LESSEE AND TH E LESSEE WOULD BE ENTITLED TO SET UP ADDITIONAL MACHINERY WITHOUT INT ERFERENCE FROM THE LESSOR AND TO REMOVE THEM ON THE TERMINATION OF THE LEASE. THE LESSEE WAS ENTITLED TO USE THE RAILWAY SIDING DURING THE P ERIOD OF LEASE. THE LESSEE WAS ALSO RESPONSIBLE FOR ALL THE RUNNING EXP ENSES OF THE SUGAR CANE CRUSHING AND GUR REFINING FACTORY. CUMULATIVE EFFECT OF VARIOUS CLAUSES OF THE DEED WAS TAKEN INTO CONSIDERATION TO COME TO THE CONCLUSION THAT THE ASSESSEE THEREIN IS NOT CONCERN ED WITH THE PRODUCTION OF THE FACTORY AND THE INTENTION OF THE ASSESSEE WAS TO GO OUT 6 OF THE BUSINESS ALTOGETHER AND THUS LEASE INCOME CO ULD NOT BE ASSESSED AS INCOME FROM BUSINESS BUT AS INCOME FROM OTHER SOURCES. THESE DECISIONS WERE APPLIED BY THE HONBLE BOMBAY HIGH C OURT IN THE CASE OF DAMODAR MANGALJI & CO. PVT. LTD. VS. CIT (1994) 206 ITR 524. IN THE AFOREMENTIONED CASES THE ASSESSEE-COMPANY WAS ENGAG ED IN THE BUSINESS OF MINING HIRING OF BARGES ETC. SINCE AS SESSEE COULD NOT MAKE MUCH PROFIT IN THE BUSINESS HE DECIDED TO CHANGE TH E MODE OF OPERATION OF THE BUSINESS OF THE BARGES BY GIVING THE BARGES ON HIRE WITHOUT CREW AND STAFF. CONSIDERING THE CIRCUMSTANCES OF THE CAS E THE HONBLE HIGH COURT OBSERVED THAT THE INTENTION OF THE ASSESSEE W AS TO PART WITH THE BARGES AND THE WORKSHOP WITH THE OBVIOUS PURPOSE OF EARNING RENTAL INCOME AND NOT TO TREAT THE BARGES AS COMMERCIAL AS SET DURING THE SUBSISTENCE OF THE LEASE OR THE CHARTER AGREEMENT A ND THUS CONCLUDED THAT HIRE CHARGES ARE ASSESSABLE TO TAX AS INCOME FROM OTHER SOURCES. 11. REVERTING TO THE FACTS OF THE CASE IT MAY BE N OTICED THAT THE ASSESSEE-COMPANY ENTERED INTO A TENANCY AGREEMENT D ATED 31-12-1999 WHEREBY THE PROPERTY KNOWN AS MADINA MANZIL WAS TAKEN ON RENT AND BUSINESS OF AUTOMOBILE DISPLAY SHOWROOM AND AUTOMOB ILE WORKSHOP WAS ESTABLISHED IN THE SAID PREMISES. WITHIN A SHORT SP AN OF TIME I.E. 21 ST JUNE 2002 ASSESSEE ENTERED INTO SEPARATE AGREEMENT S WITH SAI AUTOMOBILE SALES AND SERVICES PVT. LTD. AND SAI SER VICE STATION LIMITED AND HANDED-OVER THE BUSINESS FOR A FIXED MONTHLY CO NSIDERATION. THE AGREEMENTS WERE STATED TO BE CONDUCTION ROYALTY AG REEMENTS. AGREEMENTS WERE FOR A PERIOD OF THREE YEARS. IN CON SIDERATION OF ASSESSEE APPOINTING THE AFOREMENTIONED COMPANIES (HEREINAFTE R REFERRED TO AS CONDUCTORS) FOR CONDUCTING BUSINESS A SUM OF RS. 1 70 000/- PER MONTH IS PAYABLE BY EACH CONDUCTOR BY WAY OF ROYALTY. THE FIRST OF SUCH PAYMENT HAS BEEN PAID FOR THE PERIOD COMMENCING FROM 24 TH JUNE TO 31 ST JULY 2002 AMOUNTING TO RS.2 09 666/- EACH. MONTHLY ROYA LTY OF RS.1 70 000/- EACH IS PAYABLE ON OR BEFORE 7 TH DAY OF EACH AND EVERY 7 SUCCEEDING MONTH THEREAFTER. CLAUSES IN BOTH THE AG REEMENTS ARE IDENTICAL. CONDUCTOR IS ENTITLED TO EMPLOY THE PRESENT EMPLOYE ES AUTOMAN OR DISPENSE WITH THEIR SERVICES AND TO EM PLOY NEW EMPLOYEES. CONDUCTOR HAS TO PAY SALARY WAGES AND OTHER STATU TORY DUES TO THE STAFF EMPLOYED BY THEM INCLUDING PAYMEN T OF TERMINAL BENEFITS AS AND WHEN THE SAME BECOMES DUE. CONDUCTO RS ARE ALSO ENTITLED TO OBTAIN REGISTRATION CERTIFICATES IN RES PECT OF ESIC PROFESSIONAL TAX ETC. BUT SUCH CERTIFICATES SHOULD SPECIFY THAT CONDUCTOR IS CONDUCTING THE BUSINESS OF AUTOMAN. 12. THIS AGREEMENT WAS PLACED BEFORE THE ITAT C BENCH MUMBAI WHILE PROSECUTING THE APPEAL FOR THE ASSESSM ENT YEAR 2003-2004 AND IT WAS MAINLY HIGHLIGHTED THAT ASSESSEE WAS UND ER AN OBLIGATION TO RETAIN THE TENANCY AGREEMENT AND TO PAY RENT TO THE LANDLORD APART FROM BEARING A PORTION OF ELECTRICITY AND WATER BILL. IT WAS ALSO SUBMITTED THAT ALL THE LICENSES WERE IN ASSESSEES NAME AND SINCE DIRECTORS WERE GOING ABROAD BUSINESS WAS GIVEN FOR A TEMPORARY PERIOD O N RENT. IT WAS ALSO CONTENDED THAT THE INTENTION AS TO WHETHER ASSESSEE HAS TO REVIVE ITS BUSINESS OR NOT CAN BE DECIDED ONLY BY REFERRING T O VARIOUS CLAUSES OF AGREEMENT. IN THE INSTANT CASE THE AGREEMENT WAS F OR A PERIOD OF THREE YEARS ONLY. HAVING REGARD TO THE FACTS PLACED BEFOR E THE TRIBUNAL THE ITAT C BENCH MUMBAI OBSERVED THAT INTENTION OF T HE ASSESSEE WAS NEVER TO CLOSE DOWN ITS BUSINESS WHICH CAN BE GATHE RED FROM THE FACT THAT IT ENSURED THOROUGH CONTROL OVER THE BUSINESS BY RETAINING THE LICENSES ETC. IN ITS NAME. FURTHER THE DURATION O F THE AGREEMENT BEING ONLY FOR THREE YEARS IT WAS INFERRED THAT THE INTE NTION OF THE ASSESSEE WAS NOT TO CLOSE DOWN ITS BUSINESS. ON AN APPEAL FILED BY THE REVENUE UNDER SECTION 260A OF THE I.T. ACT 1961 THE HONBLE HIGH COURT OF JUDICATURE AT BOMBAY (INCOME TAX APPEAL NO. 2342/2009 DATED 5 TH JANUARY 2010) REJECTED THE ADMISSION OF THE APPEAL ON THE GROUND THAT NO SUBSTANTIAL QUESTION OF LAW ARISES AND IN THIS REGARD OBSERVED AS UNDER : 8 THE TRIBUNAL ARRIVED AT A FINDING OF FACT AFTER C ONSIDERING THE TERMS OF THE AGREEMENT ENTERED INTO BETWEEN THE ASSESSEE AND THE THIRD PARTY THAT THE ASSESSEE HAD EFFECTIVELY KEPT CONTROL OF THE BUSINESS TO ITSELF. THE TERM OF THE AGREEMENT WAS THREE YEARS. THE LICENSES AND PERMITS STOOD IN THE NAME OF THE ASSESSEE. THE CONDUCTOR AG REED THAT ON TERMINATION OF THE AGREEMENT OR UPON THE EX PIRY THEREOF HE WOULD VACATE THE PREMISES AND REMOVE HI MSELF AND THE EQUIPMENT FROM THE PREMISES. IN THESE CIRCUMSTANCES THE TRIBUNAL CAME TO THE CONCLUSION THAT THE ROYALTY INCOME FROM THE CONDUCTING AGREEMENT WAS ASSESSABLE AS INCOME FROM BUSINESS. THE FINDING OF FACT IS BASED ON A CORRECT INTERPRETATION OF THE TERMS OF T HE AGREEMENT. NO SUBSTANTIAL QUESTION OF LAW ARISES IN THE APPEAL. (UNDERLINING IS OURS) 13. IT COULD THUS BE SEEN THAT ITAT C BENCH MU MBAI AS WELL AS HONBLE HIGH COURT OF BOMBAY WAS UNDER THE IMPRE SSION THAT AGREEMENTS WERE ONLY FOR THREE YEARS. AS COULD BE N OTICED FROM THE MATERIAL PAPERS FILED BY THE ASSESSEE IT IS NOTICE D THAT SOON-AFTER ENTERING INTO AN AGREEMENT WITH M/S. SAI SERVICE ST ATION LTD. AND M/S. SAI AUTOMOBILE SALES & SERVICES PVT. LTD. ASSESSEE APPEARS TO HAVE FILED SUITS UNDER THE ORIGINAL JURISDICTION OF THE HONB LE BOMBAY HIGH COURT WHICH WERE NUMBERED AS SUIT NOS. 3146 AND 3147 OF 2 002. THOUGH DATE OF FILING OF SUITS IS NOT KNOWN BUT WITHIN A SHORT SPAN THEREON IT APPEARS THAT THE PARTIES HAVE ENTERED INTO CONSENT TERMS BE CAUSE OF WHICH SUITS AND NOTICES OF MOTION WERE DISPOSED OF BY THE HONB LE BOMBAY HIGH COURT ON 10-10-2002 WHEREBY DEFENDANTS ADMITTED TO HAVE COMMITTED BREACHES OF CONDUCTING AGREEMENT AND SECURITY DEPOS IT AGREEMENT AND AGREED TO HANDOVER THE CHARGE OF THE SUIT PREMISES TO THE ASSESSEE THOUGH HOWEVER IT WAS ULTIMATELY AGREED BETWEEN THE PARTIES AND ACCORDINGLY ORDERED BY THE HONBLE COURT THAT SUBJE CT TO ACCEPTING SOME MODIFIED TERMS OF PAYMENT M/S. SAI SERVICE STATION LTD. AND M/S. SAI AUTOMOBILE SALES & SERVICES PVT. LTD. SHALL BE ALLO WED TO CONTINUE TO CARRY ON THE BUSINESS UPTO 30 TH JUNE 2011. SINCE CONSENT TERMS ARE COMMON IN BOTH THE CASES FOLLOWING CONSENT TERMS A RE EXTRACTED FOR 9 IMMEDIATE REFERENCE SO AS TO APPRECIATE AS TO WHETH ER FACTS WERE IDENTICAL IN THIS YEAR OR NOT : 4) AT THE REQUEST OF THE DEFENDANTS AND AS AND BY WA Y OF CONCESSION IT IS AGREED BETWEEN THE PARTIES AND ACCORDINGLY ORDERED BY THIS HONBLE COURT THAT ON T HE DEFENDANTS STRICTLY OBSERVING THE FOLLOWING TERMS A ND CONDITIONS THE DECREE BE STAYED UPTO 30 TH JUNE 2011. A) THE DEFENDANT WILL PAY TO THE PLAINTIFF A SUM OF RS.5 00 000/- WITHIN 3 DAYS OF FILING THESE CONSENT TERMS. B) THE DEFENDANT PAYS TO THE PLAINTIFF A SUM OF RS.1 70 000/- (RS. ONE LAKH SEVENTY THOUSAND ONLY) PER MONTH UP TO 30 TH JUNE 2005 A SUM OF RS.1 95 000/- (RS. ONE LAKH NINETY FIVE THOUSAND ONLY) PER MONTH FROM 1 ST JULY 2005 TO 30 TH JUNE 2008 AND A SUM OF RS.2 24 825/- (RS. TWO LAKH TWENTY FOUR THOUSAND EIGHT HUNDRED AND TWENTY FIVE ONLY) PER MONTH FROM 1 ST JULY 2008 TO 30 TH JUNE 2011. IT IS CLEARLY AGREED THAT IN THE EVENT OF THE DEFENDANT COMMITTING ANY TWO DEFAULTS IN PAYMENT OF THE AMOUNTS THE PLAINTIFF SHALL HAVE A RIGHT TO ADJUST SUCH PAYMENTS OUT OF THE AMOUNT OF SECURITY DEPOSIT AND RETURN THE BALANCE UNADJUSTED SECURITY DEPOSIT EXECUTE THE DECREE PASSED IN PURSUANCE OF THESE CONSENT TERMS PROVIDED THAT ONE MONTHS NOTICE 10 IS GIVEN BY THE PLAINTIFF TO THE DEFENDANT AFTER TH E DEFAULT. C) PAY THE ELECTRICITY BILLS WATER BILLS TELEPHONE BILLS TAXES LICENSE FEES AND ALL OTHER AMOUNTS THAT THE DEFENDANT IS LIABLE TO PAY UNDER THE SAID BUSINESS CONDUCTING AGREEMENT. D) ABIDE BY THE TERMS CONDITIONS AND UNDERTAKINGS GIVEN HEREUNDER. . . . .. . . . . 6) IN THE EVENT OF DEFENDANTS WISHING TO TERMINATE THI S ARRANGEMENT PRIOR TO 24 TH DECEMBER 2003 THE PLAINTIFFS SHALL BE ENTITLED TO DEDUCT FROM THE AMOUNT OF THE SECURITY DEPOSIT THE ROYALTY AT THE RATE OF RS.1 70 000/- (RS. ONE LAKH SEVENTY THOUSAND ONLY) PER MONTH FROM DATE OF TERMINATION TILL 24 TH DECEMBER 2003. 7) THE PLAINTIFF UNDERTAKES TO PAY THE AMOUNT OF THE SECURITY DEPOSIT AFTER DEDUCTING THE AMOUNTS DUE I F ANY SIMULTANEOUSLY WITH THE DEFENDANTS HAVING OVER CHARGE OF THE SUIT PREMISES. 8) IN THE EVENT OF THE DEFENDANTS BEING READY AND WILL ING TO HAND OVER TO THE PLAINTIFF QUIET VACANT AND PEA CEFUL CHARGE OF THE SUIT PREMISES UPON TERMINATION OF THI S ARRANGEMENT AND IF THE PLAINTIFFS FAILS REFUSES O R IS UNABLE TO REFUND THE INTEREST FREE SECURITY DEPOSIT AMOUNT LYING WITH THE PLAINTIFFS THEN IN THAT EVEN T THE DEFENDANTS SHALL NOT BE BOUND OR LIABLE TO VACATE O R GIVE CHARGE OF THE SUIT PREMISES TO THE PLAINTIFFS AND T HE DEFENDANTS SHALL BE ENTITLED TO CONTINUE TO OCCUPY THE SUIT PREMISES FOR A MONTHLY ROYALTY OF RS.1/- TILL SUCH TIME THE PLAINTIFFS REFUND TO THE DEFENDANTS THE SA ID SECURITY DEPOSIT AMOUNT AFTER DEDUCTING VARIOUS DUE S 11 FROM THE REMAINING BALANCE AMOUNT FROM THE SECURITY DEPOSIT WITH INTEREST THEREON AT THE RATE OF 12% PE R ANNUM FROM THE DATE OF DEFAULT IN REFUNDING THE SEC URITY DEPOSIT TILL THE DATE OF THE ACTUAL PAYMENT. 14. TO OUR MIND THESE FACTS WERE NOT BROUGHT TO T HE NOTICE OF ITAT C BENCH MUMBAI AS WELL AS HONBLE HIGH COUR T OF JUDICATURE AT BOMBAY WHILE PLEADING THE CASE OF THE ASSESSEE FOR THE ASSESSMENT YEAR 2003-2004 AND HENCE THE TRIBUNAL AS WELL AS THE HO NBLE HIGH COURT HAS LAID GREAT STRESS ON THE FACT THAT THE AGREEMEN T WAS ONLY FOR 3 YEARS. 15. DURING THE COURSE OF HEARING THE BENCH CALLED UPON THE COUNSEL TO STATE THE PRESENT STATE OF AFFAIRS TO WH ICH IT WAS SUBMITTED THAT THE DIRECTORS OF AUTOMAN INDIA PVT. LTD. ARE N ON-RESIDENTS AND THEY ARE IN FACT RUNNING SOME PETROL PUMPS IN USA AND TH OUGH THEY VISIT INDIA REGULARLY TILL DATE BUSINESS IS RUN BY M/S. SAI SERVICE STATION LTD. AND M/S. SAI AUTOMOBILE SALES & SERVICES PVT. LTD. 16. IT MAY BE NOTICED THAT IN RESPECT OF THE ASSES SMENT YEAR 2003-2004 PREVIOUS YEAR ENDS ON 31-3-2003 BUT SURPR ISINGLY FACTS CONCERNING THE CONSENT TERMS DATED 10-10-2002 WERE NOT BROUGHT TO THE NOTICE OF ITAT C BENCH AS WELL AS THE HONBLE H IGH COURT AND HENCE DECISION WAS RENDERED ON THE PREMISE THAT THE AGREE MENT WAS ONLY FOR THREE YEARS WHEREAS IMPLIEDLY THE ASSESSEE INTENDED TO DISCONTINUE CARRYING ON BUSINESS ON ITS OWN AND HENCE AGREED ON THE CONSENT TERMS SO AS TO PERMIT THE PARTIES TO RUN THE BUSINESS FOR 9 LONG YEARS WITH SOME CONDITIONS WHICH MAY ENABLE THE PARTIES (CONDUCTORS ) TO RUN THE BUSINESS EVEN THEREAFTER. THE ORDER OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. MOHIDDIN HOTELS PVT. LTD. 284 I TR 229 WAS RELIED UPON BY ITAT C BENCH MUMBAI WHEREIN THE NARROW ISSUE WAS AS TO WHETHER IT WAS PROPERTY INCOME OR BUSINESS INCOME. IT WAS NOT THE PLEA OF THE REVENUE THAT IT IS INCOME FROM OTHER SOURCES . SINCE THE HONBLE 12 COURT WAS OF THE OPINION THAT IT WAS CERTAINLY NOT THE PROPERTY INCOME ALTERNATIVE CONTENTION OF THE ASSESSEE THAT IT WAS BUSINESS INCOME WAS ACCEPTED. HOWEVER IN THIS CASE OVERALL CIRCUMSTANC ES LEND SUPPORT TO THE PLEA OF THE REVENUE THAT THE ASSESSEE-COMPANY HANDE DOVER THE BUSINESS TO THE AFOREMENTIONED TWO CONCERNS WITH A VIEW TO E ARN FIXED MONTHLY INCOME AND THE INTENTION OF REVIVING THE BUSINESS I S NOT DOMINANT. IN FACT ASSESSEE ENTERED INTO TENANCY AGREEMENT ON THE LAST DATE OF THE YEAR 1999 (31-12-1999) WHICH IMPLIES THAT THE BUSINESS IF ANY WAS CARRIED ON BY THE ASSESSEE FROM THE SAID PREMISES FROM THE YEAR 2000 ONWARDS AND WITHIN A SHORT SPAN OF TWO YEARS THE ASSESSEE-C OMPANY ENTERED INTO TWO DIFFERENT AGREEMENTS PERMITTING OTHERS TO CONDU CT THE BUSINESS HITHERTO CARRIED ON BY THE ASSESSEE AND IN RETURN SETTLED FOR RECEIPT OF MONTHLY ROYALTY. IT COULD THUS BE SEEN THAT IN THE IMMEDIATE FUTURE RECKONED FROM THE DATE OF CONSENT TERMS AGREED UPON BETWEEN THE PARTIES THERE WAS NO INTENTION TO REVIVE THE BUSIN ESS. HAD THE ITAT C BENCH MUMBAI OR THE HONBLE HIGH COURT OF JUDICATU RE WHILE DISPOSING OF THIS ISSUE FOR THE ASSESSMENT YEAR 2003-2004 WA S APPRAISED OF THE ADDITIONAL FACTS IT MIGHT HAVE ARRIVED AT A DIFFER ENT CONCLUSION. UNDER THE PECULIAR CIRCUMSTANCES OF THE CASE. THE RULE O F CONSISTENCY OR RESJUDICATA CANNOT BE APPLIED TO THE FACTS ON HAN D AND THE ISSUE HAS TO BE DECIDED INDEPENDENTLY. SINCE IT IS ADMITTED NOW THAT THE ASSESSEE HAS STILL NOT REVIVED THE BUSINESS AND WITHIN A SHORT G AP AFTER THE DATES OF RELEVANT AGREEMENTS ASSESSEE AGREED VIDE CONSENT T ERMS DATED 10/10/2002 TO EXTEND THE CONDUCTION ROYALTY AGREE MENTS UPTO 30 TH JUNE 2011 WE ARE OF THE VIEW THAT THE CASE LAW RE LIED UPON BY THE ASSESSEE HAVE NO APPLICATION TO THE FACTS OF THE CA SE WHEREAS ON THE STRENGTH OF SETTLED PRINCIPLES OF LAW ON THIS ISSUE IT HAS TO BE HELD THAT THE INCOME EARNED BY THE ASSESSEE IS ASSESSABLE TO TAX UNDER THE HEAD INCOME FROM OTHER SOURCES AND NOT AS BUSINESS IN COME. WE THEREFORE UPHOLD THE ORDER OF THE LEARNED CIT(A) ON THIS ISSU E. 13 17. THIS LEAVES US WITH GROUND NOS. 5 AND 6. THE C ASE OF THE ASSESSEE IS THAT THE LEARNED CIT(A) ERRED IN CONFIR MING THE ASSESSMENT ON RECEIPT OF LOAN OF RS.11 10 000/- AS DEEMED DIVIDEN D UNDER SECTION 2 (22) (E) OF THE ACT. LEARNED COUNSEL SUBMITTED THAT AN IDENTICAL ISSUE WAS DECIDED IN FAVOUR OF TAX PAYER BY THE HONBLE BOMBA Y HIGH COURT IN THE CASE OF UNIVERSAL MEDICARE PRIVATE LTD. (INCOME TAX APPEAL NO. 2264/2009 DATED 22 ND MARCH 2010) AS WELL AS THE DECISION OF THE ITAT MUMBAI SPECIAL BENCH IN THE CASE OF ACIT VS. BHAUM IK COLOUR P. LTD. (2009) 313 ITR 146. 18. LEARNED DR ADMITTED THAT THE AFORECITED CASE L AW ARE APPLICABLE TO THE FACTS OF THE INSTANT CASE. UNDER THESE CIRCUMSTANCES WE ACCEPT THE PLEA OF THE ASSESSEE AND DIRECT THE A SSESSING OFFICER TO DELETE THE ADDITION OF RS.11 10 000/-. 19. IN THE RESULT APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED ON THIS THE 31 ST DAY OF MAY 2010 SD/- SD/- (J.SUDHAKAR REDDY) (D.MANMOHAN) ACCOUNTANT MEMBER VICE PRESIDENT MUMBAI DATE 31 ST MAY 2010. VBP/- COPY TO 1. AUTOMANN INDIA PVT. LTD. STRUCTURE NO.7 OPP. A .K. TOWERS VEER SAVARKAR FLYOVER S.V. ROAD GOREGAON (WEST) MUM BAI 400 062. PAN AACCA-8410-B 2. ITO WARD 9 (1) (1) AAYAKAR BHAVAN M.K. ROAD CHURCHGATE MUMBAI 400 020. 3. CIT (A)-IX MUMBAI. 4. CIT-IX MUMBAI. 5. D.R. A BENCH 6. GUARD FILE. (TRUE COPY) BY ORDER ASST. REGISTRAR ITAT MUMBAI BENCHES MUMBAI. 14 SNO DATE INITIALS 1 DRAFT DICTATED ON 26-05-2010 SR.P.S. 2. DRAFT PLACED BEFORE AUTHOR 26-05-2010 SR.P.S. 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER -05-2010 V.P. 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER - 05-2010 A.M 5. APPROVED DRAFT COMES TO THE SR.PS/PS 31-05-2010 SR.P.S. 6. KEPT FOR PRONOUNCEMENT ON 31-05-2010 SR.P.S. 7. FILE SENT TO THE BENCH CLERK 31-05-2010 SR.P.S. 8. DATE ON WHICH FILE GOES TO THE HEAD CLERK 9. DATE OF DISPATCH OF ORDER