INCOME TAX ACT, 1961

Section 14 Section 22 Section 28(i)

Head of income - Income from business and income from house property - Addendum agreement not taken into account by AO - Bifurcation done by assessee under two heads, income from letting of property

Assessee offered to tax Rs. 13,68,88,726 as income under the head 'house property' from M/s. PACL Ltd. and the AO treated this income as taxable under the head 'business income' on the ground that the assessee was not engaged in mere letting out of space with a view to earn rental income therefrom but was engaged in complex activities of undertaking services like scanning, indexing, auditing and digitisation of records, etc., for which consideration was received on a composite basis. CIT(A) while deciding the appeal filed by the assessee had relied upon his own order pertaining to the assessment year 2012-13 and allowed appeal of the assessee. The main dispute in this case was whether the assessee was justified in bifurcating the receipts from M/s. PACL Ltd. as income under two heads, i.e., 'income from house property' and 'income from business'.Held: The addendum agreement as the same was not registered. Whereas it was also a factual position that even the agreement dated 31-12-2010 was also an unregistered document, therefore, in such a situation, the AO was not expected to adopt the pick and choose method. When once both the documents were presented by the assessee to the AO during the course of assessment proceedings, thus, in that circumstances, it was incumbent upon the AO to verify the genuineness and veracity of the said document. The AO was not expected to adopt the short method and simply reach to the conclusion that the said addendum dated 12-4-2011 was an afterthought without recording any reasons or basis for reaching to the said conclusion. The agreements were for two independent activities, i.e., first, letting out the premises for storage of documents and second for providing services like scanning, digitisation, etc. The dominant object of the agreement was storage of documents and providing of services like scanning, digitisation, etc., was ancillary. The income arising out of letting out of premises for storage of records had to be assessed under the head 'income from house property' and therefore, income arising out of providing services had to be assessed under the head 'business income'. Accordingly, the CIT(A) had also rightly bifurcated the consideration received from PACL Ltd. under the two heads of income, i.e., 'income from house property' and 'income from business'. No new facts or circumstances have been brought before Tribunal in order to controvert or rebut the well reasoned finding, so recorded by the CIT(A), thus, there was no reasons to interfere into or deviate from the findings so recorded by the CIT(A).

Relied:Sultan Brothers (P.) Ltd. v. CIT (1964) 51 ITR 353 (SC) : 1964 TaxPub(DT) 0259 (SC); Raj Dadarkar and Associates v. Asst. CIT (2017) 394 ITR 592 (SC) : (2017) 81 taxmann.com 193 (SC) : 2017 TaxPub(DT) 1173 (SC); Shambhu Investment (P.) Ltd. v. CIT (2003) 263 ITR 143 (SC) : (2003) 129 Taxman 70 (SC) : 2003 TaxPub(DT) 0948 (SC); CIT v. Indian Warehousing Industries Ltd. (2002) 258 ITR 93 (Mad) : (2003) 133 Taxman 293 (Mad) : 2002 TaxPub(DT) 1640 (Mad-HC); Atma Ram Properties (P.) Ltd. v. Jt. CIT (2006) 102 TTJ 345 (ITAT-Delhi) : 2006 TaxPub(DT) 1567 (Del-Trib); ITO v. Bhagwat Marcom (P.) Ltd. (2019) 109 taxmann.com 330 (Kolkata-Trib) : 2019 TaxPub(DT) 5402 (Kol-Trib); Nutan Warehousing Co. (P.) Ltd. v. ITO on 31-8-2006, (2007) 106 TTJ 137 (Pune) : 2007 TaxPub(DT) 0528 (Pune-Trib); Continental Construction Ltd. v. CIT (1992) 195 ITR 81 (SC) : 1992 TaxPub(DT) 1016 (SC); Karnani Properties Ltd. v. CIT (1971) 82 ITR 547 (SC) : 1971 TaxPub(DT) 0378 (SC); CIT v. Kanak Investments (P.) Ltd. (1974) 95 ITR 419 (Cal) : 1974 TaxPub(DT) 0205 (Cal-HC) and CIT v. Shankaranarayana Hotels (P.) Ltd. (1993) 201 ITR 138 (Karn) : 1993 TaxPub(DT) 0756 (Karn-HC); Indian City Properties Ltd. v. CIT (1978) 111 ITR 19 (Cal) : 1978 TaxPub(DT) 0497 (Cal-HC), Dr. P.A. Varghese v. CIT (1971) 80 ITR 180 (Ker) : 1971 TaxPub(DT) 0278 (Ker-HC) and CIT v. Tamil Nadu Small Industries Development Corpn. Ltd. (1995) 211 ITR 550 (Mad) : 1995 TaxPub(DT) 0378 (Mad-HC). Distinguished:Chennai Properties and Investments Ltd. v. CIT (2015) 373 ITR 673 (SC) : 2015 TaxPub(DT) 2180 (SC) and Rayala Corporation (P.) Ltd. v. Asst. CIT (2016) 386 ITR 500 (SC) : 2016 TaxPub(DT) 3682 (SC); Karanpura Development Co. Ltd. v. CIT (1962) 44 ITR 362 (SC) : 1962 TaxPub(DT) 0177 (SC).

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